Se HK 23013000146

The Stock Exchange of Hong Kong Limited and the Securities and Futures Commission take no responsibility for
the
contents of this Application Proof, make no representation as to its accuracy or completeness and expressly disclaim any
liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this
Application Proof.
Application Proof of
Deshengtang Pharmaceutical Co., Ltd.*

德生堂醫藥股份有限公司
(the “Company”)
(a joint stock company incorporated in the People’s Republic of China 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 of providing
information to the public in Hong Kong.
This Application Proof is in draft form. The information contained in it is incomplete and is subject to change
which can be material. By viewing this document, you acknowledge, accept and agree with the Company, its
sponsor, overall coordinator, 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 in Hong
Kong and not for any other purposes. No investment decision should be based on the information contained
in this document;
(b) the publication of this document or supplemental, revised or replacement pages on the Stock Exchange’s
website does not give rise to any obligation of the Company, its sponsor, overall coordinator, advisors or
members of the underwriting syndicate to proceed with an offering in Hong Kong or any other jurisdiction.
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 be replicated 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 Company from
time to time in accordance with the Rules Governing the Listing of Securities on The Stock Exchange of
Hong Kong Limited;
(e) this document does not constitute a prospectus, offering circular, notice, circular, brochure or advertisement
offering to sell any securities to the public in any jurisdiction, nor is it an invitation to the public to make
offers to subscribe for or purchase any securities, nor is it calculated to invite offers 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, advisors or members of its underwriting syndicate is offering,
or is soliciting offers to buy, any securities in any jurisdiction through the publication of this document;
(h) no application for the securities mentioned in this document should be made by any person nor would such
application be accepted;
(i) the Company has not and will not register the securities referred to in this document under the United States
Securities Act of 1933, as amended, or any state securities laws of the United States;
(j) as there may be legal restrictions on the distribution of this document or dissemination of any information
contained in this document, you agree to inform yourself about and observe any such restrictions applicable
to you; and
(k) the application to which this document relates has not been approved for listing and the Stock Exchange and
the Commission may accept, return or reject the application for the subject public offering and/or listing.
If an offer or an invitation is made to the public in Hong Kong in due course, prospective investors are
reminded to make their investment decisions solely based on the Company’s prospectus registered with the
Registrar of Companies in Hong Kong, copies of which will be made available to the public during the offer
period.
THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE
READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.
IMPORTANT
If you are in any doubt about any of the contents of this Document, you should obtain independent professional advice.
DESHENGTANG PHARMACEUTICAL CO., LTD.*

德生堂醫藥股份有限公司
(a joint stock company incorporated in the People’s Republic of China with limited liability)
[REDACTED]
Number of [REDACTED] under the [REDACTED] : [REDACTED] H Shares (subject to the
[REDACTED])
Number of [REDACTED] : [REDACTED] H Shares (subject to reallocation)
Number of [REDACTED] : [REDACTED] H Shares (subject to reallocation
and the [REDACTED])
Maximum [REDACTED] : [REDACTED]
Nominal value : RMB1.00 per H Share
[REDACTED] : [REDACTED]
Sole Sponsor, [REDACTED], [REDACTED], [REDACTED] and [REDACTED]
Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no
responsibility for the contents of this Document, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for
any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Document. A copy of this Document, having attached thereto
the documents specified in “Appendix VII — Documents Delivered to the Registrar of Companies and Available on Display” has been registered by the
Registrar of Companies in Hong Kong as required by Section 342C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of
the Laws of Hong Kong). The Securities and Futures Commission and the Registrar of Companies in Hong Kong take no responsibility for the contents of this
Document or any other documents referred to above.
The [REDACTED] is expected to be fixed by agreement between the [REDACTED] (for itself and on behalf of the [REDACTED]) and our Company on the
[REDACTED], which is expected to be on or around [REDACTED] or such later date as may be agreed by the [REDACTED] (for itself and on behalf of the
[REDACTED]) and our Company but in any event no later than [REDACTED]. The [REDACTED] will be not more than HK$[REDACTED] per H Share
and is currently expected to be not less than HK$[REDACTED] per H Share. If, for any reason, the [REDACTED] is not agreed between the [REDACTED]
(for itself and on behalf of the [REDACTED]) and our Company on or before [REDACTED], the [REDACTED] (including the [REDACTED]) will not
proceed and will lapse.
The [REDACTED] (for itself and on behalf of the [REDACTED]) may, with our consent, reduce the number of [REDACTED] being [REDACTED] under
the [REDACTED] and/or the indicative [REDACTED] below as stated in this Document at any time on or prior to the morning of the last day for lodging
applications under the [REDACTED]. In such a case, an announcement will be published on the websites of our Company at www.dst111.com and the Stock
Exchange at www.hkexnews.hk not later than the morning of the day which is the last day for lodging applications under the [REDACTED]. Details of the
arrangement will then be announced by us as soon as practicable. For further information, see “Structure of the [REDACTED]” and “How to Apply for
[REDACTED].”
We are incorporated, and substantially all of our businesses are located, in the PRC. Potential [REDACTED] should be aware of the differences in legal,
economic and financial systems between the PRC and Hong Kong and that there are different risk factors relating to [REDACTED] in PRC-incorporated
companies. Potential [REDACTED] should also be aware that the regulatory framework in the PRC is different from the regulatory framework in Hong Kong
and should take into consideration the different market nature of our H Shares. Such differences and risk factors are set out in “Risk Factors”, “Regulatory
Overview”, “Appendix IV — Summary of Principal PRC and Hong Kong Legal and Regulatory Provisions” and “Appendix V — Summary of the Articles of
Association of the Company.” Prior to making an [REDACTED] decision, potential [REDACTED] should consider carefully all of the information set out in
this Document, including the risk factors set out in “Risk Factors”.
The obligations of the [REDACTED] under the [REDACTED] are subject to termination by the [REDACTED] (for itself and on behalf of the
[REDACTED]) if certain grounds arise prior to 8:00 a.m. on the [REDACTED]. Further details of such circumstances are set out in “[REDACTED]”.
The [REDACTED] have not been and will not be registered under the U.S. Securities Act or any state securities laws in the United States, and may not be
[REDACTED], [REDACTED], pledged or transferred within the United States or to, or for the account or benefit of U.S. persons (as defined in Regulation S),
except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and applicable U.S. state
securities laws. The [REDACTED] are being [REDACTED] and [REDACTED] only outside the United States in offshore transactions in accordance with
Regulation S.
[REDACTED]
* For identification purpose only [REDACTED]

IMPORTANT
[REDACTED]
IMPORTANT
[REDACTED]
EXPECTED TIMETABLE(1)
[REDACTED]
–i–
[REDACTED]
– ii –
[REDACTED]
– iii –
CONTENTS
This Document is issued by our Company solely in connection with the [REDACTED] and
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
marketing, 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] in any jurisdiction other than Hong Kong and no action has been taken to
permit the distribution of this Document in any jurisdiction other than Hong Kong. The
distribution of this Document 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 securities laws of such jurisdictions pursuant to registration with or authorization by
the relevant securities regulatory authorities or an exemption therefrom.
You should rely only on the information contained in this Document to make your
[REDACTED] decision. We have 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 us, the Sole
Sponsor, the [REDACTED], the [REDACTED], the [REDACTED], the [REDACTED], the
[REDACTED], any of their respective directors or any other person or party involved in the
[REDACTED].
Page
Expected Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Glossary of Technical Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Forward-looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Risk Factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Waivers from Strict Compliance with the Listing Rules . . . . . . . . . . . . . . . . . . . . . . . . 98
Information about this Document and the [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . 102
Directors, Supervisors and Parties Involved in the [REDACTED] . . . . . . . . . . . . . . . . 107
Corporate Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Industry Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Regulatory Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
History, Development and Corporate Structure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
– iv –
CONTENTS
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181
Relationship with Our Controlling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269
Directors, Supervisors and Senior Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 277
Substantial Shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292
Share Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 295
Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 299
Future Plans and Use of [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 356
[REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360
Structure of the [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 371
How to Apply for [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 380
Appendix I — Accountant’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
Appendix II — Unaudited [REDACTED] Financial Information . . . . . . . . . . . . . . . II-1
Appendix III — Taxation and Foreign Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-1
Appendix IV — Summary of Principal PRC and Hong Kong Legal and

Regulatory Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV-1
Appendix V — Summary of the Articles of Association of the Company . . . . . . . . V-1
Appendix VI — Statutory and General Information . . . . . . . . . . . . . . . . . . . . . . . . . VI-1
Appendix VII — Documents Delivered to the Registrar of Companies and

Available on Display . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VII-1
–v–
SUMMARY
This summary aims to give you an overview of the information contained in this Document
and should be read in conjunction with the full text of this Document. As this is only a
summary, it does not contain all the information that may be important to you. You should read
this Document in its entirety before you decide to [REDACTED] in the [REDACTED]. There
are risks associated with any [REDACTED]. Some of the particular risks in [REDACTED] in
the [REDACTED] are set out in “Risk Factors.” You should read that section carefully before
you decide to [REDACTED] in the [REDACTED]. Various expressions used in this section are
defined or explained in “Definitions” and “Glossary of Technical Terms” in this Document.
OVERVIEW
We are a leading health management and healthcare solutions provider in China specializing
in pharmaceutical and medical services, equipped with both western and traditional Chinese
medical diagnostic and medicinal capabilities. We envision to be our customers’ trusted neighbor
for health by being a go-to health management partner within reach, equipped with an all-round
healthcare solutions infrastructure.
Living out our mission to “serve health with technology”, we have set out on a quest to
revolutionize our brick-and-mortar pharmacies, clinics and wellness centers with our
Internet-enabled product and service offerings, and reconstruct them into a proximate first line of
defense for health management to bring healthcare solutions to each and every household in China,
striving to not only treat but also preempt illness. We offer full-suite products and services with
comprehensive coverage encompassing customers’ entire purchasing cycle through our
omni-channel retail network, comprising (i) offline retail mode, under which customers access our
product offerings via our network of self-operated offline pharmacies, (ii) O2O retail mode, under
which products are delivered by express delivery riders from our offline pharmacies located in
proximity to customers’ address upon orders placed online, catering to customers’ immediate
needs, and (iii) B2C retail mode, under which products are delivered via courier services reaching
customers across China upon orders placed on online pharmacies operated by us and dispatched
utilizing our centralized dispatching system primarily supported by our warehousing capabilities,
catering to customer requests that are less time-sensitive. Our products and services are assembled
to cater to the all-round health management needs of our customers that span the medical,
pharmaceutical, wellness and safeguarding elements along the entire healthcare value chain. The
following diagram illustrates our business model and capabilities:
Health management and healthcare solutions
with full-suite product and service offerings
Across-the-board service coverage

in the entire purchasing cycle
Offline Omni-channel operations via Internet

retail online and offline presence hospital
Medical Health Pharmaceutical

consultations awareness Medical
na
seminars h ma gemen Health
Healthcare alt
He
management
t
products O2O Medical

retail clinics services
Access Solutions All-round
Health health
Fam
profiles Customers management

ng
needs
ily
Fa
do
cto ty
r with quali
Health Medication Safeguarding Wellness

check-up records
Online tests In and out
and offline of hospital
B2C Wellness
retail centers
In and out
of store
–1–
SUMMARY
Our product offerings (including our branded products) comprise prescription and OTC drugs,
TCM decoction pieces, medical devices, wellness products and other products, with more than
20,000 SKUs of products of which we had initiated sales as of September 30, 2022. Our service
offerings entail medical consultation services, wellness management services and other
value-adding health management services, through which we build relationships with customers
and design scenario-specific healthcare solutions to address their diverse healthcare needs in the
entire purchasing cycle, (i.e., before, during and after their purchase). Through our customer
management system, we understand customer pain points and formulate retention strategies around
customers’ needs.
We believe our continuous growth and development have been catalyzed by our core business
strategy of “family doctor with quality Fang (家庭醫生有好方).” Fang is our designated term
inspired by the transliteration of the Chinese character “方” under TCM discipline that refers to
standardized medicinal combinations primarily based on medications and supplemented by
wellness products. Our Fang strategy anchors on our capability to develop Fang, which we have
accumulated from more than two decades of experience with prescriptions, formulas and methods
based on western and TCM pharmacology and medical science. As of September 30, 2022, our
Fang anthology comprised 1,429 sets of Fang, covering 340 diseases and other health issues across
10 medical disciplines. For the years ended December 31, 2020 and 2021 and the nine months
ended September 30, 2022, we recorded Fang-directed revenue, referring to the revenue generated
from our sales of products to customers pursuant to customer purchases under the Fang
recommended by us, in the amount of RMB236.0 million, RMB252.1 million and RMB218.1
million, respectively. Our “family doctor” approach is executed through our Internet hospital
capabilities. We offer personalized healthcare solutions online on a 24/7 basis and offline
whenever our customers visit any of our brick-and-mortar operations, just like having their own
family doctor on standby at all times. During the Track Record Period, we provided approximately
29.1 million online medical consultations in aggregate through our Internet hospital operation.
According to CIC, in 2021, we ranked:
• first among all pharmaceutical retailers operating in Gansu Province in terms of offline
pharmaceutical retail revenue generated in the province;
• third among all pharmaceutical retailers operating in Northwestern China in terms of
offline pharmaceutical retail revenue generated in the region;
• 15 th among pharmaceutical retailers nationwide operating offline and online through
O2O and B2C modes, in terms of our omni-channel pharmaceutical retail revenue;
• 16th among pharmaceutical retailers nationwide in terms of offline pharmaceutical retail
revenue;
• first among all pharmaceutical retailers in China in terms of the number of available
standardized medicinal combinations (i.e., our Fang); and
• first among all pharmaceutical retailers in China in terms of the revenue generated from
the sales of standardized medicinal combinations (i.e., our Fang-directed revenue).
As of September 30, 2022, our business footprint encompassed (i) an aggregate of 1,047
pharmacies (including 931 self-operated pharmacies and 116 franchised pharmacies), under our
Deshengtang Pharmacy (德生堂大藥房), 111 Pharmacy (111醫藥館) and Longgui Pharmacy (龍歸
大藥房) brands, across 65 cities and 22 provinces, (ii) an O2O retail network reaching all the
cities and provinces covered in our offline pharmacy network, (iii) a B2C retail network with
–2–
SUMMARY
nationwide delivery coverage, (iv) an Internet hospital supporting our provision of online medical
consultation services, (v) 50 offline medical clinics comprising 49 TCM clinics and one general
outpatient clinic, and (vi) 24 offline wellness centers.
We witnessed stable revenue growth during the Track Record Period, despite the impact of
the COVID-19 outbreak on our operations. For the years ended December 31, 2020 and 2021, we
recorded total revenue of RMB1,754.0 million and RMB2,014.3 million, representing an increase
of 14.8%. Furthermore, our total revenue increased by 16.4% from RMB1,467.4 million in the
nine months ended September 30, 2021 to RMB1,707.5 million in the same period of 2022. Our
gross profit increased from RMB634.8 million in 2020 to RMB694.7 million in 2021, representing
an increase of 9.4%. For the nine months ended September 30, 2022, we recorded gross profit of
RMB596.9 million compared to RMB492.7 million in the same period in 2021, representing an
increase of 21.1%.
COMPETITIVE STRENGTHS
We believe the following competitive strengths have led to our continued success, contributed
to our industry position and distinguished us from our competitors:
• Leading health management and healthcare solutions provider in China backed by a full
suite of product and service offerings;
• Superior customer experience empowered by our “family doctor” approach and
comprehensive product and service coverage across the entire customer purchasing
cycle;
• Effective sales approach supported by our Fang strategy and our versatile marketing
strategies;
• Effective and efficient supply chain management supported by in-depth connections with
participants along the healthcare value chain;
• Digitalized and technology-driven operations with enhanced management and operating
efficiency; and
• Dedicated and experienced management team with a resilient corporate culture and
robust pipeline of talents.
OUR STRATEGIES
We aspire to building an all-round and accessible health management and healthcare solutions
infrastructure for a wide coverage of individuals in different communities. Set forth below are our
key growth strategies:
• Continue to optimize the delivery of health management services and healthcare
solutions with enriched products and service offerings;
• Further solidify our existing market coverage, strengthen our sales channels and
augment our customer base;
• Enhance our pharmaceutical warehousing and logistics capabilities to meet our growing
business demand;
• Selectively pursue strategic alliances, investments and acquisitions along the healthcare
value chain; and
–3–
SUMMARY
• Further reinforce our technological capabilities by continuously applying new

technologies and digitalization tools.
SUMMARY OF HISTORICAL FINANCIAL INFORMATION
The following tables present our summary of consolidated financial information as of and for
the two years ended December 31, 2020 and 2021 and the nine months ended September 30, 2022.
We have derived this summary from our audited financial information set forth in the Accountant’s
Report set out in Appendix I to this Document. The summary financial data set forth below should
be read together with our consolidated financial statements and the related notes, as well as the
section headed “Financial Information.”
Summary of Consolidated Statements of Comprehensive Income
The following table sets forth a summary of our consolidated statements of comprehensive
income with line items in actual terms and as a percentage of our total revenue for the periods
indicated derived from our consolidated statements of comprehensive income set out in the
Accountant’s Report included in Appendix I to this Document:
For the year ended December 31, For the nine months ended September 30,
2020 2021 2021 2022
RMB’000 % RMB’000 % RMB’000 % RMB’000 %
(Unaudited) (Unaudited)
REVENUE . . . . . . . . . . . . . . . . . 1,753,961 100.0 2,014,349 100.0 1,467,375 100.0 1,707,527 100.0
Cost of revenue . . . . . . . . . . . . . . (1,119,157) (63.8) (1,319,617) (65.5) (974,662) (66.4) (1,110,677) (65.0)
GROSS PROFIT. . . . . . . . . . . . . . 634,804 36.2 694,732 34.5 492,713 33.6 596,850 35.0
Selling and marketing expenses . . . . . . . (452,897) (25.8) (526,585) (26.1) (381,412) (26.1) (422,882) (24.7)
General and administrative expenses . . . . (97,270) (5.6) (102,105) (5.1) (73,354) (5.0) (85,053) (5.0)
R&D expenses . . . . . . . . . . . . . . . (3,276) (0.2) (9,529) (0.5) (6,024) (0.4) (6,963) (0.4)
Other income . . . . . . . . . . . . . . . . 1,139 0.1 1,484 0.1 1,203 0.1 236 0.0
Other losses . . . . . . . . . . . . . . . . (1,239) (0.1) (3,341) (0.2) (507) (0.0) (1,117) (0.1)
Net impairment losses on financial assets . . (33) (0.0) (605) (0.0) (558) (0.0) (3,257) (0.2)
Operating profit . . . . . . . . . . . . . . 81,228 4.6 54,051 2.7 32,061 2.2 77,814 4.6
Finance income . . . . . . . . . . . . . . . 3,311 0.2 3,121 0.2 2,356 0.2 3,064 0.2
Finance cost . . . . . . . . . . . . . . . . (66,649) (3.8) (72,899) (3.7) (54,517) (3.8) (53,305) (3.1)
Finance costs, net. . . . . . . . . . . . . . (63,338) (3.6) (69,778) (3.5) (52,161) (3.6) (50,241) (2.9)
PROFIT/(LOSS) BEFORE INCOME
TAX . . . . . . . . . . . . . . . . . . . 17,890 1.0 (15,727) (0.8) (20,100) (1.4) 27,573 1.6
Income tax expenses . . . . . . . . . . . . (25,734) (1.4) (25,412) (1.2) (20,761) (1.4) (26,801) (1.6)
(LOSS)/PROFIT FOR THE YEAR/
PERIOD . . . . . . . . . . . . . . . . . (7,844) (0.4) (41,139) (2.0) (40,861) (2.8) 772 0.0
–4–
SUMMARY
Non-IFRS Measures
To supplement our consolidated financial statements, which are presented in accordance with
IFRS, we also use adjusted profit/loss (non-IFRS measure) and adjusted EBITDA (non-IFRS
measure) as additional financial measures, which are not required by, or presented in accordance
with, IFRS. We believe these non-IFRS measures facilitate comparisons of operating performance
from period to period and company to company by eliminating potential impacts of items which
our management considers non-indicative of our operating performance.
We believe adjusted profit/loss (non-IFRS measure) and adjusted EBITDA (non-IFRS
measure) provide useful information to [REDACTED] and others in understanding and evaluating
our consolidated statements of comprehensive income in the same manner as they help our
management. However, our presentation of adjusted profit/loss (non-IFRS measure) and adjusted
EBITDA (non-IFRS measure) may not be comparable to similarly titled measures presented by
other companies. The use of adjusted profit/loss (non-IFRS measure) and adjusted EBITDA
(non-IFRS measure) has limitations as an analytical tool, and you should not consider it in
isolation from, or as a substitute for an analysis of, our consolidated statements of comprehensive
income or financial condition as reported under IFRS.
We define adjusted profit/loss (non-IFRS measure) as profit/loss for the year/period, adjusted
by adding back share-based payment expenses, interest expenses on redemption liabilities and
[REDACTED] expenses. We define adjusted EBITDA (non-IFRS measure) as EBITDA excluding
share-based payment expenses, interest expenses on redemption liabilities and [REDACTED]
expenses. We exclude these items because they are not expected to result in future cash payments
that are recurring in nature and they are not indicative of our core operating results and business
outlook.
The following table reconciles our adjusted profit/loss for the year/period (non-IFRS
measure) and adjusted EBITDA (non-IFRS measure) presented to the most directly comparable
financial measure calculated and presented in accordance with IFRS, which is profit/loss for the
year/period:
For the year ended For the nine months ended
December 31, September 30,
2020 2021 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Reconciliation of profit/(loss) to
adjusted profit/(loss) (non-IFRS
measure):
(Loss)/profit for the year/period: . . . .... (7,844) (41,139) (40,861) 772
Add back:
Share-based payment expenses(1) . . . .... 1,171 1,171 878 (87)
Interest expenses on redemption
liabilities(2) . . . . . . . . . . . . . . . . . .... 36,360 40,782 30,587 30,495
[REDACTED] expenses(3) . . . . . . . . . . . [REDACTED] [REDACTED] [REDACTED] [REDACTED]
Adjusted profit/(loss) for the
year/period (non-IFRS measure) . . . . 29,687 814 (9,396) 35,151
–5–
SUMMARY

2020 2021 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
EBITDA and adjusted EBITDA
(non-IFRS measure) for the
year/period
Add back:
Net finance costs(4) . . . . . . . . . . . . . .... 63,338 69,778 52,161 50,241
Income tax expenses . . . . . . . . . . . . .... 25,734 25,412 20,761 26,801
Depreciation of right-of-use assets. . .... 187,545 195,478 144,017 156,706
Depreciation of property, plant and
equipment . . . . . . . . . . . . . . . . . . .... 30,814 39,552 29,406 30,400
Amortization of intangible assets. . . .... 1,544 2,652 2,732 1,713
EBITDA (Unaudited) . . . . . . . . . . . . . . . 301,131 291,733 208,216 266,633
Add back:
Share-based payment expenses(1) . . . . . . . 1,171 1,171 878 (87)
Adjusted EBITDA (non-IFRS
measure) . . . . . . . . . . . . . . . . . . . . . . . 302,302 292,904 209,094 270,517
Notes:
(1) Share-based payment expenses mainly represent the arrangement that we receive services from employees as
consideration for our equity instruments and were non-cash in nature. For the nine months ended September 30,
2022, we recorded a net reversal of share-based payment expenses of RMB87,000, due to the forfeiture of the
awards granted to an employee upon termination of employment.
(2) Interest expenses on redemption liabilities represent the interest on our Angel Round [REDACTED] Financing and
Series A [REDACTED] Financing which are recognized as financial liabilities initially at the present value of the
redemption amount and subsequently measured at amortized cost with interest charged to finance costs. On August
31, 2022, upon termination of certain preferred rights of the Angel Round [REDACTED] Investors and the Series
A [REDACTED] Investors, the balance of all redemption liabilities were reclassified to equity and no interest was
accrued subsequently. In addition, interest expenses on redemption liabilities were non-cash in nature.
(3) [REDACTED] expenses represent expenses relating to this [REDACTED] and were non-recurring in nature.
(4) Net finance cost includes interest expenses on redemption liabilities. As such, interest expenses on redemption
liabilities were not added back again for the reconciliation of EBITDA to adjusted EBITDA (non-IFRS measure) for
the year/period. See Note (2) for details on interest expenses on redemption liabilities.
In 2020 and 2021, we recorded a net loss for the year of RMB7.8 million and RMB41.1
million, respectively. For the nine months ended September 30, 2021 and 2022, we recorded a net
loss for the period of RMB40.9 million and a net profit for the period of RMB0.8 million,
respectively. The net losses for the year in 2020 and 2021 and the net loss for the period for the
nine months ended September 30, 2021 were primarily due to the interest expenses on redemption
liabilities and share-based payments, which are not expected to result in future cash payments that
are recurring in nature and they are not indicative of our core operating results and business
outlook. For details on reasons pertaining to the changes of our net profit/loss during the Track
Record Period, see “— Our Historical Performance and Outlook.”
–6–
SUMMARY
Summary of Consolidated Balance Sheets

The table below sets forth a summary of our financial position as of the dates indicated:
As of
As of December 31, September 30,
2020 2021 2022
RMB’000 RMB’000 RMB’000
(Unaudited)
Total non-current assets. . . . . . . . . . . . . . . . 858,951 916,037 838,041
Total current assets . . . . . . . . . . . . . . . . . . . 918,060 1,091,846 1,088,178
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . 1,777,011 2,007,883 1,926,219
Total non-current liabilities . . . . . . . . . . . . . 809,985 886,538 443,896
Total current liabilities . . . . . . . . . . . . . . . . 917,777 1,112,064 1,071,203
Total liabilities . . . . . . . . . . . . . . . . . . . . . . 1,727,762 1,998,602 1,515,099
Total equity . . . . . . . . . . . . . . . . . . . . . . . . 49,249 9,281 411,120
Net current assets/(liabilities) . . . . . . . . . . 283 (20,218) 16,975
As of September 30, 2022, we had net current assets of RMB17.0 million, as compared to the
net current liabilities of RMB20.2 million as of December 31, 2021, primarily due to (i) the
decrease in trade and notes payables mainly driven by the decrease in our notes payables from our
procurement of goods and (ii) the increase in cash and cash equivalents primarily driven by the
repayment of medical insurance receivables and the increase in our total revenue for the nine
months ended September 30, 2022 as compared to the same period in 2021, partially offset by the
decrease in restricted cash mainly due to our higher demand for bills to settle our payment to
suppliers approaching the year end in 2021.
As of December 31, 2021, we had net current liabilities of RMB20.2 million, as compared to
the net current assets of RMB0.3 million as of December 31, 2020, primarily due to the increase in
trade and notes payables mainly driven by the increase in our procurement of products from
third-party suppliers which was in line with our growth in product sales and pharmacy network
expansion in 2021, partially offset by the increase in inventories mainly attributable to the increase
in inventories of products which was in line with the our business growth and the expansion of our
pharmacy network.
–7–
SUMMARY
Summary of Consolidated Statements of Cash Flows

The following table sets forth a summary of our cash flow data from our consolidated
statements of cash flows for the periods indicated:
For the nine
months ended
For the year ended December 31, September 30,
2020 2021 2022
RMB’000 RMB’000 RMB’000
(Unaudited)
Net cash generated from operating
activities . . . . . . . . . . . . . . . . . . . . . . ... 132,327 244,625 251,825
Net cash used in investing activities . . . ... (45,821) (51,236) (26,123)
Net cash used in financing activities . . . ... (91,185) (223,309) (178,846)
Net increase/(decrease) in cash and
cash equivalents. . . . . . . . . . . . . . . . . ... (4,679) (29,920) 46,856
Cash and cash equivalents at beginning
of year/period . . . . . . . . . . . . . . . . . . ... 59,501 54,822 24,902
Cash and cash equivalents at end of
the year/period . . . . . . . . . . . . . . . . . . . . 54,822 24,902 71,758
Key Financial Ratios

The following table sets forth our key financial ratios as of the dates or for the periods
indicated:
For the nine
months ended/As
For the year ended/As of December 31, of September 30,
2020 2021 2022
Profitability ratios
Gross profit margin(1) . . . . . . . . . . . . . . . . . 36.2% 34.5% 35.0%
Net (loss)/profit margin(2) . . . . . . . . . . . . . . (0.4)% (2.0)% 0.0%
Return on equity (3) . . . . . . . . . . . . . . . . . . . (4.6)% (140.6)% 0.4%
Return on total assets (4) . . . . . . . . . . . . . . . . (0.4)% (2.2)% 0.0%
Adjusted net profit margin
(non-IFRS measure) (5) . . ............. 1.7% 0.0% 2.1%
Adjusted EBITDA margin
(non-IFRS measure)(6) . . ............. 17.2% 14.5% 15.8%
Liquidity ratios
Current ratio(7) . . . . . . . . . ............. 1.0 1.0 1.0
Quick ratio (8). . . . . . . . . . . ............. 0.6 0.5 0.5
Capital adequacy ratio
Gearing ratio (9) . . . . . . . . . ............. 12.9 74.7 1.6
Notes:
(1) Gross profit margin is calculated using gross profit divided by revenue and multiplied by 100%.
(2) Net (loss)/profit margin is calculated using (loss)/profit for the year/period divided by revenue and multiplied by
100%.
(3) Return on equity ratio is (loss)/profit for the year/period as a percentage of the average balance of total equity at
the beginning and the end of the year/period and multiplied by 100%.
(4) Return on total assets ratio is (loss)/profit for the year/period as a percentage of the average balance of total assets
at the beginning and the end of the year/period and multiplied by 100%.
–8–
SUMMARY
(5) Adjusted net profit margin (non-IFRS measure) represents adjusted profit for the year/period (non-IFRS measure)
divided by revenue and multiplied by 100%. For details of the adjusted profit/loss of the year/period (non-IFRS
measure), see “— Non-IFRS Measures”.
(6) Adjusted EBITDA margin (non-IFRS measure) represents adjusted EBITDA (non-IFRS measure) divided by
revenue and multiplied by 100%. For details of the adjusted EBITDA (non-IFRS measure), see “— Non-IFRS
Measures”.
(7) Current ratio is calculated using total current assets divided by total current liabilities.
(8) Quick ratio is calculated using total current assets less inventories divided by total current liabilities.
(9) Gearing ratio is calculated using total debt (being interest-bearing borrowings and lease liabilities) divided by total
equity.
OUR HISTORICAL PERFORMANCE AND OUTLOOK

Our Operational and Financial Growth
Beginning with our journey which started over 20 years ago with an aspiration to build an
all-round and accessible healthcare solutions infrastructure serving different communities, and
having transcended beyond operating traditional chain pharmacies and clinics to become a versatile
health management and healthcare solutions provider, we achieved stable operational and revenue
growth during the Track Record Period. For our key financial metrics during the Track Record
Period, see “— Summary of Historical Financial Information.”
Our growth was primarily attributable to the growth of our omni-channel pharmaceutical
retail business as well as the continuous improvement of our comprehensive health management
service offerings. For the years ended December 31, 2020 and 2021 and the nine months ended
September 30, 2021 and 2022, revenue from our omni-channel pharmaceutical retail business
accounted for 97.7%, 97.6%, 97.7% and 97.5% of our total revenue, respectively.
The following table sets forth a breakdown of our revenue generated from our omni-channel
pharmaceutical retail business by sales channels for the periods indicated:
Year-to-year Period-to-period
growth rate growth rate
2020 2021 (%) 2021 2022 (%)
RMB’000 RMB’000 RMB’000 RMB’000
Omni-channel pharmaceutical retail . . . 1,714,177 1,966,579 14.7% 1,434,088 1,664,958 16.1%
Offline retail . . . . . . . . . . . . . . . . 1,408,852 1,501,719 6.6% 1,089,661 1,264,437 16.0%
O2O retail. . . . . . . . . . . . . . . . . . 43,282 101,173 133.8% 69,780 150,204 115.3%
B2C retail . . . . . . . . . . . . . . . . . . 262,043 363,687 38.8% 274,647 250,317 (8.9%)
–9–
SUMMARY
The following table sets forth key operational metrics of our omni-channel pharmaceutical
retail business for the periods indicated:
growth rate growth rate
2020 2021 (%) 2021 2022 (%)
(1)
Omni-channel across offline , O2O and
B2C sales channels
Total number of purchase orders by
customers (in millions) . . . . . . . . . 31.5 33.9 7.6% 25.5 26.7 4.4%
Average purchase amount per purchase
order by customers(2) (in RMB) . . . . 60.9 64.8 6.3% 62.9 69.8 11.0%
Offline retail(1)
customers (in millions) . . . . . . . . . 26.8 26.1 (2.5%)(3) 19.7 19.8 0.5%
order by customers(2) (in RMB) . . . . 59.1 64.5 9.1% 61.9 71.5 15.4%
O2O retail
customers (in millions) . . . . . . . . . 1.1 2.6 147.2% 1.8 3.8 105.6%
order by customers(2) (in RMB) . . . . 44.3 41.8 (5.8%)(4) 41.3 43.1 4.5%
B2C retail
customers (in millions) . . . . . . . . . 3.7 5.2 40.7% 4.0 3.1 (22.9%)(5)
order by customers(2) (in RMB) . . . . 79.0 78.0 (1.3%)(4) 77.7 91.9 18.3%
Notes:
(1) Takes into account purchase amounts and orders for medical consultation services (which accounted for
approximately 0.1% of our total revenue during each year/period of the Track Record Period) at certain of our
offline TCM clinics that share the same location with our self-operated offline pharmacies, where patients can pay
for their medical consultation service purchases and product purchases at the same time at check-out.
(2) Average purchase amount per purchase order by customers represents the total purchase amount from purchases by
customers (including express delivery service fees or courier service fees incurred in the purchase orders under our
O2O or B2C retail business, as applicable) divided by the total number of purchase orders by customers in the
relevant year or period.
(3) The total number of purchase orders by customers in our offline pharmaceutical retail business in 2021 decreased
slightly from 2020 primarily because of the reduced customer traffic to our offline self-operated pharmacies,
primarily in Gansu Province, due to the adverse impact of the COVID-19 pandemic. For more details, see
“Financial Information — Impact of the COVID-19 Outbreak on Our Operations.”
(4) The average purchase amount per purchase order by customers in our O2O retail business in 2021 decreased from
2020 primarily because we adopted a more competitive pricing approach of our products as part of our overall
marketing strategies to increase our sales volume and enhance our online presence, as we increasingly expanded our
O2O operations into more regions in 2021, which is in line with industry practice for pharmaceutical retailers with
O2O retail business in expanding their O2O operations into new areas, according to CIC. The average purchase
amount per purchase order by customers in our B2C retail business in 2021 decreased slightly from 2020 primarily
because we adjusted our product offering structures to include more high-demand products with lower average
prices to adjust to the then prevailing market conditions for B2C retail business.
(5) The total number of purchase orders by customers in our B2C retail mode for the nine months ended September 30,
2022 decreased from the previous period in 2021 primarily because of the restrictions on inter-region logistics and
courier delivery services pertaining to B2C retail imposed from time to time in China due to the COVID-19
outbreak. For more details, see “Financial Information — Impact of the COVID-19 Outbreak on Our Operations.”
For the years ended December 31, 2020 and 2021, we recorded a net loss of RMB7.8 million
and RMB41.1 million, respectively. The increase in our net loss in 2021 was primarily due to
expenses associated with the expansion of our self-operated offline pharmacy network in 2021
with an increase of 113 new self-operated offline pharmacies as compared to 2020, while our
revenue growth did not sufficiently offset such expenses as a result of the impact of COVID-19,
– 10 –
SUMMARY
particularly that in Gansu Province where the majority of our newly opened pharmacies were
situated. We also recorded an increase in interest expenses on redemption liabilities of RMB4.4
million in 2021 as compared to that in 2020, in relation to our Angel Round [REDACTED]
Financing and Series A [REDACTED] Financing. In 2021, our self-operated offline pharmacies
were subject to substantially more temporary closure days due to COVID-19 as compared to those
in 2020. Set forth below are the number of self-operated offline pharmacies as of the dates
indicated and the number of our self-operated offline pharmacies subject to temporary closures due
to COVID-19 during the periods indicated:
Gansu Shaanxi Beijing Others Total
Number of self-operated offline pharmacies
As of December 31, 2020 . . . . . . . . . . . . . . . . 710 59 20 13 802
As of December 31, 2021 . . . . . . . . . . . . . . . . 781 62 51 21 915
As of September 30, 2021 . . . . . . . . . . . . . . . . 771 62 37 21 891
As of September 30, 2022 . . . . . . . . . . . . . . . . 794 62 52 23 931
Number of self-operated offline pharmacies
temporarily closed due to COVID-19(1)
For the year ended December 31, 2020 . . . . .. 103 22 2 3 130
For the year ended December 31, 2021 . . . . .. 283 32 7 5 327
For the year ended September 30, 2021 . . . .. 83 8 1 2 94
For the nine months ended September 30,
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 500 39 18 17 574
Note:
(1) See “Financial Information — Impact of COVID-19 on our Operations” for more details of the ranges of temporary
closure days for our self-operated pharmacies during the Track Record Period.
Having proactively and continuously observed and reflected on the persistent and uncertain
development of the pandemic, we timely adjusted our operational and expansion strategy to further
optimize the performance of our self-operated offline pharmacies. We decelerated the expansion of
our self-operated offline pharmacies with an increase of only 40 new self-operated offline
pharmacies for the nine months ended September 30, 2022 as compared to the total number of
self-operated offline pharmacies for the same period in the preceding year. As COVID-19
continued in 2022, it caused further pressure on our offline pharmacy operations as a substantially
larger number of our self-operated offline pharmacies was temporarily closed under the impact of
the pandemic, and the total number of temporary closure days of these pharmacies increased
significantly. Notwithstanding that, we achieved a 16.1% revenue growth of our omni-channel
retail operations as compared to the same period in 2021 and turned profitable with a net profit of
RMB0.8 million for the nine months ended September 30, 2022, primarily attributable to the
following reasons:
• Robust same store growth: We achieved robust same store revenue growth during the
Track Record Period, particularly for the nine months ended September 30, 2022. The
following table illustrates our same store revenue performance by newly-established
pharmacies, developing pharmacies and matured pharmacies, for the periods indicated:
2020 2021 2021 2022
(1)
Number of same stores
Newly-established
pharmacies(3) . . . . . . . . . . 94 80
Developing pharmacies(3) . . . . 388 414
Matured pharmacies(3) . . . . . . 215 245
– 11 –
SUMMARY

2020 2021 2021 2022
(2)(5)
Same store revenue
(RMB’000)
Newly-established
pharmacies(3) . . . . . . . . . . 105,838 130,305 145,643 195,450
Developing pharmacies(3) . . . . 654,248 698,795 501,323 587,023
Matured pharmacies(3) . . . . . . 648,254 637,937 467,411 500,308
Same store revenue
period-to-period growth (%)
Newly-established
pharmacies(3) . . . . . . . . . . 23.1% 34.2%
Developing pharmacies(3) . . . . 6.8% 17.1%
Matured pharmacies(3) . . . . . . (1.6)%(4) 7.0%
Notes:
(1) Our same stores are defined as those self-operated offline retail pharmacies that remained open for at
least 300 days in both 2020 and 2021, or at least 225 days in both the nine months ended September
30, 2021 and the nine months ended September 30, 2022, as applicable.
(2) Revenue from our same stores entails offline retail revenue generated from the relevant offline
pharmacies, as well as from our O2O retail revenue generated from our O2O operations supported by
the same offline pharmacies.
(3) The development stage of each same store during the years under comparison was its development
stage as of the end of the first year or period, as applicable.
(4) The slight decline of same store revenue for our same stores at the matured stage in 2021 from the
previous year was primarily due to the impact of the COVID-19 pandemic on our offline operations.
(5) Takes into account revenue from medical consultation services (which accounted for approximately
0.1% of our total revenue during each year/period of the Track Record Period) at certain of our offline
TCM clinics that share the same location with our self-operated offline pharmacies, where patients can
pay for their medical consultation service purchases and product purchases at the same time at
check-out.
• Enhanced sales and marketing efforts: We devoted enhanced efforts in 2022 to our
internal training and evaluation of our employees in further improving their performance
in sales and marketing, pharmacy operation and customer services, which resulted in an
improvement in the average purchase amount per purchase order by customers and the
average purchase amount per purchase order by members generated from our offline
pharmaceutical retail operations, as indicated by the table below:
2020 2021 growth rate (%) 2021 2022 growth rate (%)
Average purchase amount
per purchase order by
customers(1) (in RMB) . . 59.1 64.5 9.1% 61.9 71.5 15.4%
Average purchase amount
per purchase order by
members(1)(2) (in RMB) . 65.0 72.0 10.9% 69.2 79.3 14.6%
Notes:
(1) The calculation of which takes into account purchase amounts and orders for medical consultation
services (which accounted for approximately 0.1% of our total revenue during each year/period of the
Track Record Period) at certain of our offline TCM clinics that share the same location with our
self-operated offline pharmacies, where patients can pay for their medical consultation service
purchases and product purchases at the same time at check-out.
(2) Members are our customers who have registered their phone numbers in our membership program. For
more information on our membership program, see “Business — Our Customer Support System — Our
Membership Program.” Our customers may make purchases with us without registering for our
membership program. Our system does not keep any unique identification information for non-member
customers.
– 12 –
SUMMARY
• Improved operational efficiency and cost control measures: In 2022, we implemented

initiatives at the corporate level to enhance operational efficiency, through the
optimization of our management structures, increased digitalization of our self-operated
pharmacies as well as our operational systems, and further-improved supervision and
resource sharing mechanisms in our pharmacy network. We also enhanced our cost
control measures, through optimizing the location of our pharmacies and improving our
supply chain management, as evidenced by the increase in our overall gross profit
margin from 33.6% for the nine months ended September 30, 2021 to 35.0% for the nine
months ended September 30, 2022.
Our Outlook
Based on our historical operational and financial achievements during the Track Record
Period, as well as our development strategies, we believe we are well positioned to continue to
grow our market share as well as maintain our competitiveness in China’s health management and
healthcare solutions market. We seek to further scale up our omni-channel pharmaceutical retail
business by continuously adopting rigorous measures in evaluating the expansion plan of our
pharmacy network. In doing so, we take into consideration our existing market coverage in
different regions, local demands for our product and service offerings, shifting market conditions
and changing governmental policies, among others. We will also continue to evaluate the
performance of our existing self-operated pharmacies in different regions from time to time, and
factor such historical performance into our plans of expanding into new regions where we do not
yet have business footprints and establishing or acquiring additional self-operated pharmacies in
order to increase our profitability. We will also seek to broaden our product offerings by expanding
our SKUs, and expand our service offerings by enhancing our western and TCM consultation
capabilities as well as our wellness management service capabilities, which we believe will elevate
our customers’ experience with us and further drive customers’ demand for our offerings. See
“Business — Our Strategies” for more details on our future strategies.
OUR CUSTOMERS AND SUPPLIERS
Our Customers
Our customers comprise individual customers from our omni-channel pharmaceutical retail
operations through offline, O2O and B2C sales channels and our offerings of healthcare services
including medical consultation services and wellness management services, as well as corporate
customers from our pharmaceutical wholesale business. Due to the nature of our omni-channel
pharmaceutical retail business which accounted for a substantial portion of our revenue, individual
customers account for a substantial majority of our customer base, whereas revenue contributions
from each individual customer during the Track Record Period were nominal. Our corporate
customers comprise primarily our franchisees who purchase from our pharmaceutical wholesale
business and also, to a much smaller extent, certain other third-party pharmaceutical retailers, with
immaterial revenue contribution from any single corporate customer.
In light of the foregoing, during the Track Record Period, our top five customers were
customers from our pharmaceutical wholesale business category, who were all independent third
parties. None of our top five customers accounted for more than 0.5% of our total revenue during
the Track Record Period. For the years ended December 31, 2020 and 2021 and the nine months
ended September 30, 2022, revenue from our top five customers accounted for 0.8%, 0.7% and
0.7% of our total revenue, respectively, and revenue from our largest customer accounted for 0.3%,
0.3% and 0.3% of our total revenue for each respective year or period. As of the Latest Practicable
Date, none of our Directors, their close associates or any Shareholders who, to the best knowledge
of our Directors, owned more than 5% of our issued share capital or had any interest in any of our
five largest customers. During the Track Record Period, there was no overlap between our five
largest customers and our suppliers.
– 13 –
SUMMARY
Our Suppliers
We procure a wide variety of products, primarily pharmaceutical products, and to a lesser
extent, medical device products we sell in our omni-channel pharmaceutical retail business. During
the Track Record Period, we made purchases from more than 700 suppliers, primarily comprising
large, medium and small pharmaceutical and medical device manufacturers and distribution
companies. For the years ended December 31, 2020 and 2021 and the nine months ended
September 30, 2022, purchases from our five largest suppliers collectively amounted to RMB638.1
million, RMB867.0 million, and RMB682.4 million, representing 48.2%, 52.8% and 53.9% of our
total purchases for the respective year or period.
As of the Latest Practicable Date, none of our Directors, their close associates or any
Shareholders who, to the best knowledge of our Directors, owned more than 5% of our issued
share capital or had any interest in any of our five largest suppliers.
COMPETITION
We compete with market players in China’s health management and healthcare solutions
market, which is highly competitive, according to CIC. The health management and healthcare
solutions market in China is also dispersed among different regions and fragmented in terms of the
types of products and services offered by market players, as they have different business focuses
along the healthcare value chain, according to CIC. Key factors affecting our ongoing
competitiveness in China’s health management and healthcare solutions market include: market
recognition of our brand, quality of our product and service offerings, execution of our operational
and sales strategies, our supply chain capabilities, acquisition and retention of our professionals,
progress on our digitalization efforts and pricing. For more details on the industries in which we
operate and compete, see “Industry Overview.” However, some of our current and potential
competitors may have greater financial, industry, business or technology resources than we do, and
their product or service portfolios may outperform ours. See “Risk Factors — Risks Related to Our
Business and Industry — Our success is dependent on our ability to compete effectively and
successfully against current and future industry and market competitors.”
[REDACTED]
– 14 –
SUMMARY
OUR CONTROLLING SHAREHOLDERS

As of the Latest Practicable Date, our Company was held by Mr. Long Yan, Mr. Long Yun,
Zhejiang Changqi and Zhejiang Yixue as to approximately 70.56%, 1.44%, 4.50% and 4.50%,
respectively. Mr. Long Yan and Mr. Long Yun entered into the Concert Party Agreement in
December 2022 to confirm and acknowledge their acting-in-concert relationship. For details of the
Concert Party Agreement, see “History, Development and Corporate Structure — Concert Party
Agreement.” Mr. Long Yan is the general partner of each of Zhejiang Changqi and Zhejiang Yixue.
As such, Mr. Long Yan, Mr. Long Yun, Zhejiang Changqi and Zhejiang Yixue are regarded as a
group of Controlling Shareholders of our Company according to the Concert Party Agreement and
the Guidance Letter HKEX-GL89-16 issued by the Stock Exchange.
Immediately upon the completion of the [REDACTED] (assuming the [REDACTED] is not
exercised), our Company will be held by Mr. Long Yan, Mr. Long Yun, Zhejiang Changqi and
Zhejiang Yixue as to approximately [REDACTED]%, [REDACTED]%, [REDACTED]% and
[REDACTED]%, respectively, of the enlarged total issued share capital. Accordingly, Mr. Long
Yan, Mr. Long Yun, Zhejiang Changqi and Zhejiang Yixue will remain as our Controlling
Shareholders upon completion of the [REDACTED].
As of the Latest Practicable Date, none of our Controlling Shareholders and their respective
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, which requires
disclosure pursuant to Rule 8.10 of the Listing Rules.
OUR [REDACTED] INVESTORS
We have entered into two rounds of [REDACTED] Investments. Shares issued by the
Company, including Shares held by our [REDACTED] Investors, prior to the [REDACTED] will
be restricted from trading for 12 months from the [REDACTED]. For further details regarding the
identities of the [REDACTED] Investors, key terms of these [REDACTED] Investments and the
[REDACTED] Investors’ rights, see the section headed “History, Development and Corporate
Structure — Details of the [REDACTED] Investments.”
DIVIDEND
No dividend has been paid or declared by our Company or other companies comprising our
Group during the Track Record Period.
Our Company currently does not have any dividend policy. Our Board of Directors may
declare dividends in the future after taking into account our results of operations, financial
condition, cash requirements and availability and other factors as it may deem relevant at such
time. Any declaration and payment of dividends will be subject to our constitutional documents
and applicable laws. Our shareholders at a general meeting must approve any declaration of
dividends, which must not exceed the amount recommended by our Board of Directors. In
addition, our Directors may from time to time pay such interim dividends as our Board of
Directors considers to be justified by our profits and overall financial requirements, or special
dividends of such amounts and on such dates as they think appropriate. No dividend shall be
declared or payable except out of our profits and reserves lawfully available for distribution. Our
future declaration of dividends may or may not reflect our historical declarations of dividends and
will be at the absolute discretion of our Board of Directors.
– 15 –
SUMMARY
RISK FACTORS
Our operations and the [REDACTED] involve certain risks and uncertainties, which are set
out in the section headed “Risk Factors” in this Document. You should read that section in its
entirety carefully before you decide to [REDACTED] in our H Shares. Some of the major risks
we face include, among others:
• Our business, financial condition and results of operations are dependent on our ability
to continue to retain and attract customers with our product and service offerings and
maintain customers’ trust in our business model;
• Our historical growth may not be indicative of our future performance, and we may not
be able to manage the growth of our business and operations or implement our business
or growth strategies successfully;
• We are subject to domestic and global pandemics, such as the COVID-19 outbreak, as
well as other force majeures, the occurrence of which could significantly disrupt our
operations;
• Our success is dependent on our ability to compete effectively and successfully against
current and future industry and market competitors;
• Our business, financial condition and results of operations are subject to risks of failure
in opening new retail pharmacies or other types of storefronts or expanding into new
regions;
• Any failure on our part to navigate and abide by the complex and constantly evolving
legal and regulatory requirements in China, may have a material and adverse effect on
our results of operations and growth prospects;
• A large amount of data is collected and processed in our daily business operations. We
are subject to risks relating to improper use or disclosure of such data, security breaches
or attacks against our platform, and any potential reach or failure to protect confidential
and proprietary information; and
• We rely on our suppliers for the procurement of various medicinal, healthcare and
wellness products and we may have limited control over them, and our revenue and
results of operations will be adversely affected if we fail to maintain and manage these
relationships properly.
APPLICATION FOR [REDACTED] ON THE STOCK EXCHANGE
We have applied to the Stock Exchange for the granting of the [REDACTED], and
permission to [REDACTED], the H Shares to be [REDACTED] pursuant to the [REDACTED]
(including the H Shares which may be [REDACTED] pursuant to the exercise of the
[REDACTED]) and the H Shares to be converted from Domestic Shares, on the basis that, among
others, we expect to [satisfy]:
[REDACTED]
– 16 –
SUMMARY
[REDACTED]
[REDACTED] EXPENSES
Assuming an [REDACTED] of HK$[REDACTED] per [REDACTED] (being the mid-point
of the indicative [REDACTED] range stated in this Document), the [REDACTED] fees,
[REDACTED], together with the [REDACTED], legal and other professional fees, printing and
other expenses relating to the [REDACTED], which are payable by us are estimated to be
RMB[REDACTED] (equivalent to HK$[REDACTED]) in aggregate. For the nine months ended
September 30, 2022, [REDACTED] expenses charged to our consolidated statements of
comprehensive income were RMB[REDACTED]. The estimated remaining [REDACTED]
expenses of RMB[REDACTED] are expected to be charged to our consolidated statements of
comprehensive income for the three months ended December 31, 2022 and for the year ending
December 31, 2023 and RMB[REDACTED] are expected to be deducted from equity following
the [REDACTED]. The [REDACTED] expenses above are the latest practicable estimate and are
provided for reference only, and actual amounts may differ.
USE OF [REDACTED]
Our Company intends to use the net [REDACTED] of HK$[REDACTED], assuming an
[REDACTED] of HK$[REDACTED] (being the mid-point of the [REDACTED] range), from the
[REDACTED] (assuming the [REDACTED] is not exercised) for the following purposes:
• approximately [REDACTED]% of the net [REDACTED] (approximately
HK$[REDACTED]) will be used to scale up our business operations through
strengthening our omni-channel pharmaceutical retail capabilities, in order to reach
wider market coverage in China and further cement our leading position in the health
management and healthcare solutions industry in China;
HK$[REDACTED]) will be used to enrich and broaden our product and service
offerings, in order to further strengthen our market position as a provider of western and
TCM medical services as well as enhancing our capabilities of providing all-round
healthcare services;
HK$[REDACTED]) will be used to establish additional digitalized warehouses,
supporting procurement needs of our omni-channel pharmaceutical retail business and
increasing the efficiency of our product distribution and circulation processes;
HK$[REDACTED]) will be used to further strengthen our digital infrastructures;
HK$[REDACTED]) will be used to cover our sale and marketing activities; and
HK$[REDACTED]) will be used for our working capital and other general corporate
purposes.
– 17 –
SUMMARY
RECENT DEVELOPMENTS
Our business model remained unchanged subsequent to the Track Record Period. Since the
end of the Track Record Period and up to the Latest Practicable Date, our business continued to
grow.
As of the Latest Practicable Date, there were 937 self-operated pharmacies and 120
franchised pharmacies in our offline pharmacy network. As of the Latest Practicable Date, we
operated 50 TCM clinics, one general outpatient clinic and 24 wellness centers. In January 2023,
we were the first in Gansu Province to launch a further upgraded pharmacy that could offer a
comprehensive set of 28 types of pharmaceutical and healthcare services, according to the official
guidelines issued by the Gansu Food and Drug Administration (甘肅省食品藥品監督管理局).
Impact of the COVID-19 Outbreak on Our Operations
The COVID-19 outbreak has been affecting the Chinese economy at various levels since the
end of 2019, particularly in Northwestern China where most of our self-operated offline
pharmacies, medical clinics and wellness centers are located. Public and governmental efforts to
contain the pandemic, such as lockdowns, quarantines and travel restrictions, have resulted in
different impacts to enterprises. In China, the COVID-19 outbreak has cultivated long term
consumer habit of purchasing pharmaceutical products through online channels and obtaining
online healthcare services, according to CIC. While the pandemic was largely under control by the
second half of 2020 in China, regional resurgences of the pandemic due to different variants of the
COVID-19 virus in 2021 and 2022 across different areas in China, including but not limited to
Beijing, Gansu Province and other parts of Northwestern China, have resulted in extended
pandemic control measures in the affected areas. Since early December, 2022, the Chinese
government announced ten new measures for dealing with COVID-19 which eased the restrictions
previously imposed with respect to pandemic control. As a result, regional lockdowns, quarantine
requirements and inter-region travel restrictions have been gradually lifted. While the relaxation of
COVID-19-related pandemic control measures has allowed many offline business operations across
China to resume, a surge in infection of the Chinese population also ensued, which has placed a
high demand on public and private medical resources in China.
We have closely monitored the development of the pandemic and flexibly adjusted our
operational and sales strategies. The COVID-19 outbreak has not materially adversely affected our
overall results of operations or financial condition. We currently do not anticipate material
deviation from our development and business scaling-up plans. However, we may not be able to
reasonably or accurately assess or predict the future development of the COVID-19 pandemic,
together with its impact on our business, our industry and the broader Chinese economy. We will
continue to monitor the development of the COVID-19 pandemic and adjust our action plans
accordingly to maintain normal business operations. We cannot guarantee you, however, that the
COVID-19 pandemic will not further escalate or have a material adverse effect on our results of
operations, financial position or business prospects. For more details, see “Risk Factors — Risks
Related to Our Business and Industry — We are subject to domestic and global pandemics, such as
the COVID-19 outbreak, as well as other force majeures, the occurrence of which could
significantly disrupt our operations.”
Responding to the recently surging public’s need for online medical consultations in light of
the emerging COVID-19 infections, we launched a dedicated online specialty center to provide
COVID-19 related consultations supported by our Internet hospital operations on December 16,
2022 to provide customers with more tailored solutions to their COVID-19-related inquiries and
health concerns. As a result of the relaxation of COVID-19-related pandemic control measures in
December 2022 pursuant to the ten new measures announced by the Chinese government, our
– 18 –
SUMMARY
omni-channel pharmaceutical retail business experienced overall strong growth in terms of sales
volume, particularly in our offline pharmaceutical retail business. On the other hand, similar to
other pharmaceutical retailers in China, we experienced a temporary supply shortage of
prescription and OTC drugs relating to COVID-19’s prevention and treatment in December 2022.
We have nonetheless actively leveraged our supply chain resources to continuously procure such
products from our suppliers. We have also experienced delays in fulfilling some of our O2O orders
in light of surging purchase orders by customers and insufficient third-party express delivery
riders. As of the Latest Practicable Date, such temporary supply shortage and delays in the
delivery of O2O orders had been significantly alleviated. However, as these relaxations of
COVID-19-related pandemic control measures occurred recently, it is difficult for us to completely
assess the impact of such relaxations on our business and financial condition. For the impact of
COVID-19 on our business operations and financial conditions during the Track Record Period,
see “Financial Information — Impact of the COVID-19 Outbreak on Our Operations.”
Regulatory Development on Cybersecurity and Data Security
On December 28, 2021, the CAC, together with 12 other departments, promulgated the
Cybersecurity Review Measures 《 ( 網絡安全審查辦法》, or the “New CAC Measures”), which
came into effect on February 15, 2022 and repealed the previous version, the Measures for
Cybersecurity Review (the “CAC Measures”), promulgated on April 13, 2020. According to the
New CAC Measures, critical information infrastructure operators purchasing network products and
services and Internet platform operators carrying out data processing activities that affect or may
affect national security shall apply for a cybersecurity review. Under the New CAC Measures,
Internet platform operators holding personal information of more than one million users seeking to
be listed in foreign countries must apply for a cybersecurity review as well. On November 14,
2021, the CAC promulgated the Network Data Security Management Regulations 《 ( 網絡數據安全
管理條例(徵求意見稿)》) (the “Draft Regulations”), which provides that data processors listing in
Hong Kong which affects or may affect national security shall apply for cybersecurity review. The
deadline for comments for the Draft Regulations was December 13, 2021. As of the Latest
Practicable Date, the Draft Regulations had not been officially approved and there is no clear
timeline for the Draft Regulations to be approved.
On June 10, 2021, the Standing Committee of the National People’s Congress of China (全國
人民代表大會常務委員會) promulgated the PRC Data Security Law 《 ( 中華人民共和國數據安全
法》), which became effective in September 2021. The PRC Data Security Law provides for data
security obligations on entities and individuals carrying out data processing activities, introduces a
data classification and hierarchical protection system based on the importance of data in economic
and social development, as well as the degree of harm it will cause to national security, public
interests, or legitimate rights and interests of individuals or entities when such data is tampered
with, destroyed, leaked, or illegally acquired or used, and provides for a national security review
procedure for those data activities which affect or may affect national security and imposes export
restrictions on certain data and information.
Our Directors and our PRC Legal Advisors are of the view that the New CAC Measures and
the Draft Regulations (as implemented in its current form) would not have a material adverse
impact on our business operations or the [REDACTED], considering that (i) we have implemented
a comprehensive set of internal control policies in place for our compliance practice related to
cybersecurity and data security, (ii) we had not been subject to any investigations, inquiries,
claims, proceedings, orders, penalties or sanctions related to non-compliance with cybersecurity or
data security laws or regulations during the Track Record Period and up to the Latest Practicable
Date, (iii) “Hong Kong” does not fall within the definition of “foreign countries” in the New CAC
Measures, (iv) we are not recognized as a critical information infrastructure operator by any
competent authority according to the Cybersecurity Law, and the data we are processing does not
– 19 –
SUMMARY
belong to any effective catalog of important data published by relevant authority according to the
Data Security Law as of the Latest Practicable Date, (v) as of the Latest Practicable Date, we had
not been involved in any investigations or inquiries by the CAC, we had not received any relevant
notice, warning, or sanctions relating to cybersecurity review, and (vi) we will closely monitor and
assess future regulatory developments in relation to cybersecurity and data security and comply
with the latest regulatory requirements.
Regulatory Development on Overseas Listing
On December 24, 2021, the CSRC released the Administrative Provisions of the State
Council Regarding the Overseas Issuance and Listing of Securities by Domestic Enterprises (Draft
for Comments) 《 ( 國務院關於境內企業境外發行證券和上市的管理規定》(草案徵求意見稿)) (the
“Administrative Provisions”), together with the Measures for the Overseas Issuance of Securities
and Listing Record-Filings by Domestic Enterprises (Draft for Comments) 《 ( 境內企業境外發行證
券和上市備案管理辦法》(徵求意見稿)) (the “Filing Measures”), both of which expired on
January 23, 2022. Pursuant to the Administrative Provisions and the Filing Measures, PRC
domestic companies that directly or indirectly offer or list their securities in an overseas market,
which include (i) any PRC company limited by shares, and (ii) any offshore company that
conducts its business operations primarily in China and contemplates to offer or list its securities
in an overseas market based on its onshore equities, assets or similar interests, are required to file
with the CSRC within three business days after submitting their listing application documents to
the relevant regulator in the place of intended listing. The Administrative Provisions and the Filing
Measures were released for public comments only and the final version and effective date of such
regulations are subject to substantial uncertainties. As of the Latest Practicable Date, the
Administrative Provisions and the Filing Measures had not been implemented.
As advised by our PRC Legal Advisors, we do not foresee any material impediment to the
compliance with the Administrative Provisions and the Filing Measures in all material aspects as
of the Latest Practicable Date, considering that (i) we do not fall within any of the circumstances
specified in Article 7 of the Administrative Provisions in which overseas [REDACTED] are
prohibited, (ii) as of the Latest Practicable Date, we had not received any inquiry, notice, warning,
or sanctions with respect to the filing requirement under the Administrative Provisions and the
Filing Measures, and (iii) we have been in compliance with applicable PRC laws and regulations
in all material aspects. In light of the above, if the Administrative Provisions and the Filing
Measures became effective in their current form, other than the uncertainties of the filing
procedures which may be further clarified in the final version of the Administrative Provisions and
the Filing Measures and/or their implementation rules, our Directors and our PRC Legal Advisors
are of the view that the Administrative Provisions and the Filing Measures will not have an impact
on our business operations, our financial condition and our proposed [REDACTED] in Hong
Kong.
No Material Adverse Change
After performing sufficient due diligence work which our Directors consider appropriate and
after due and careful consideration, our Directors confirm that, up to the date of this Document,
there had been no material adverse change in our financial or trading position or prospects since
September 30, 2022, which is the end date of the periods reported in the Accountant’s Report
included in Appendix I to this Document, and there had been no event since September 30, 2022
that would materially affect the information as set out in the Accountant’s Report included in
Appendix I to this Document.
– 20 –
DEFINITIONS
In this Document, unless the context otherwise requires, the following terms shall have the
following meanings. Certain technical terms are explained in “Glossary of Technical Terms.”
“111Yao App” our independently developed and self-operated mobile app

downloadable on personal mobile devices from iOS or
Android systems
“affiliate” with respect to any specified person, any other person,

directly or indirectly, controlling or controlled by or under
direct or indirect common control with such specified
person
“AFRC” the Accounting and Financial Reporting Council of Hong

Kong
“Ali Health” Alibaba Health Technology (China) Co., Ltd.* (阿里健康科

技(中國)有限公司), a limited liability company established
under the laws of the PRC on August 3, 2015 and one of
our [REDACTED] Investors
“Angel Round [REDACTED] the subscription of the registered capital of the Company
Financing” by the Angel Round [REDACTED] Investors, particulars
of which are set out in “History, Development and
Corporate Structure — Major Shareholding Changes of Our
Group — 2. Angel Round [REDACTED] Financing”
“Angel Round [REDACTED] Jiangsu Yanhai, Suzhou Bangsheng Yingxin, Jiangsu

Investors” Jiequan, Nanjing Bangsheng Juyuan, and each an “Angel
Round [REDACTED] Investor”
[REDACTED]
“Articles” or “Articles of the amended and restated articles of association of our

Association” Company, conditionally adopted on December 16, 2022
with effect from the [REDACTED], and as amended from
time to time, a summary of which is set out in “Appendix
V — Summary of the Articles of Association of the
Company”
“associate(s)” has the meaning ascribed thereto under the Listing Rules
“Audit Committee” the audit committee of our Board of Directors
“Baidu Health” 百度健康, an Internet-based healthcare services platform in

China
“Baoji 111” Baoji 111 Pharmaceutical Co., Ltd.* (寶雞壹壹壹醫藥有限

公司), a limited liability company established under the
laws of the PRC on November 22, 2017 and an indirect
wholly-owned subsidiary of our Company
– 21 –
DEFINITIONS
“Beijing 111” Beijing One Hundred and Eleven Pharmaceutical

Technology Co., Ltd.* (北京壹佰壹拾壹醫藥科技有限公
司), a limited liability company established under the laws
of the PRC on October 26, 2012 and a direct wholly-owned
subsidiary of our Company
“Beijing 111 Chain” Beijing 111 Commercial Chain Co., Ltd.* (北京壹壹壹商業
連鎖有限公司), a limited liability company established
under the laws of the PRC on March 11, 2015 and an
indirect wholly-owned subsidiary of our Company
“Beijing 111 Clinic” Beijing 111 Wangjing Traditional Chinese Medicine Clinic
Co., Ltd.* (北京壹壹壹望京中醫診所有限公司), a limited
liability company established under the laws of the PRC on
March 11, 2022 and an indirect wholly-owned subsidiary of
our Company
“Board of Directors” the board of directors of our Company
“Board of Supervisors” the board of supervisors of our Company
“business day” any day (other than a Saturday, Sunday or public holiday in
Hong Kong) on which banks in Hong Kong are generally
open for normal banking business
“CAC” the Cybersecurity Administration of China (中華人民共和

國國家互聯網信息辦公室)
[REDACTED]
– 22 –
DEFINITIONS
[REDACTED]
“CFDA” the China Food and Drug Administration (國家食品藥品監

督管理總局), currently known as the NMPA
“chain pharmacy” pharmacies operating with multiple pharmacy stores under

the same brand(s)
“China” or “PRC” the People’s Republic of China and for the purposes of this
Document only, except where the context requires
otherwise, excluding Hong Kong, Macau and Taiwan
“CIC” China Insights Industry Consultancy Limited, a market

research and consulting company, which is an independent
third party
“CIC Report” an independent market research report commissioned by us

and prepared by CIC for the purpose of this Document
“Civil Code” the Civil Code of the PRC 《

( 中華人民共和國民法典》)
“Companies Ordinance” the Companies Ordinance (Chapter 622 of the Laws of

Hong Kong), as amended, supplemented or otherwise
modified from time to time
– 23 –
DEFINITIONS
“Companies (Winding Up and the Companies (Winding Up and Miscellaneous Provisions)

Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong), as
Ordinance” amended, supplemented or otherwise modified from time to
time
“Company”, or “our Company” Deshengtang Pharmaceutical Co., Ltd.* (德生堂醫藥股份有

限公司), formerly known as Gansu Deshengtang
Pharmaceutical Technology Group Co., Ltd.* (甘肅德生堂
醫藥科技集團有限公司), a limited liability company
established in the PRC on September 22, 2009 and
registered as a joint-stock company with limited liability on
December 10, 2022
“Company Law” the Company Law of the PRC 《 ( 中華人民共和國公司法》),

as amended, supplemented or otherwise modified from time
to time
“Concert Party Agreement” the concert party agreement entered into between Mr. Long
Yan and Mr. Long Yun on December 1, 2022
“connected person(s)” has the meaning ascribed to it under the Listing Rules
“connected transaction(s)” has the meaning ascribed to it under the Listing Rules
“Controlling Shareholders” has the meaning ascribed to it under the Listing Rules and
unless the context otherwise requires, refers to Mr. Long
Yan, Mr. Long Yun, Zhejiang Changqi and Zhejiang Yixue.
For further details, see “Relationship with Our Controlling
Shareholders”
[REDACTED]
“COVID-19” coronavirus disease 2019, a coronavirus known to cause

contagious respiratory illness
“CSDC” the China Securities Depository and Clearing Corporation

(中國證券登記結算有限責任公司)
“CSDC (Hong Kong)” the China Securities Depository and Clearing (Hong Kong)
“CSRC” the China Securities Regulatory Commission (中國證券監

督管理委員會)
“DADA” 達達, an O2O delivery service provider in China
– 24 –
DEFINITIONS
“Deed of Indemnity” the deed of indemnity dated January 18, 2023 entered into
by Mr. Long Yan and Mr. Long Yun with and in favor of
our Company to provide certain indemnities, particulars of
which are set out in “Appendix VI — Statutory and
General Information — E. Other Information — 11.
Indemnities”
“Deshengtang Baiyin” Gansu Deshengtang Pharmaceutical Technology Group

Baiyin Co., Ltd.* (甘肅德生堂醫藥科技集團白銀有限公
of the PRC on June 23, 2016 and a direct wholly-owned
“Deshengtang Culture” Gansu Deshengtang Traditional Chinese Medicine Culture

Development Co., Ltd.* (甘肅德生堂中醫文化發展有限公
of the PRC on June 22, 2018 and an indirect wholly-owned
“Deshengtang Day” September 9 of every year
“Deshengtang Dingxi” Gansu Deshengtang Medical Technology Group Dingxi Co.,

Ltd.* (甘肅德生堂醫藥科技集團定西有限公司), a limited
May 16, 2013 and a direct wholly-owned subsidiary of our
Company
“Deshengtang Inner Mongolia” Inner Mongolia Deshengtang Pharmaceutical Technology

Co., Ltd.* (內蒙古德生堂醫藥科技有限公司), a limited
October 25, 2017 and a direct wholly-owned subsidiary of
our Company
“Deshengtang Jinchang” Gansu Deshengtang Medical Technology Group Jinchang

Co., Ltd.* (甘肅德生堂醫藥科技集團金昌有限公司), a
limited liability company established under the laws of the
PRC on April 26, 2002 and a direct wholly-owned
“Deshengtang Jinchang Health” Jinchang Deshengtang Health Service Co., Ltd.* (金昌市德
生堂健康服務有限責任公司), a limited liability company
established under the laws of the PRC on September 9,
1999 and a direct wholly-owned subsidiary of our Company
“Deshengtang Jiuquan” Gansu Deshengtang Medical Technology Group Jiuquan

Co., Ltd.* (甘肅德生堂醫藥科技集團酒泉有限公司), a
PRC on May 27, 2016 and a direct wholly-owned
– 25 –
DEFINITIONS
“Deshengtang Lintao” Gansu Deshengtang Pharmaceutical Technology Group

Lintao Co., Ltd.* (甘肅德生堂醫藥科技集團臨洮有限公
of the PRC on July 23, 2020 and a direct wholly-owned
“Deshengtang Linze” Gansu Deshengtang Pharmaceutical Technology Group

Linze Co., Ltd.* (甘肅德生堂醫藥科技集團臨澤有限公司),
a limited liability company established under the laws of
the PRC on May 10, 2022 and a direct wholly-owned
“Deshengtang Ningxia” Ningxia Deshengtang Pharmaceutical Technology Co.,

Ltd.* (寧夏德生堂醫藥科技有限責任公司), a limited
July 28, 2022 and a direct wholly-owned subsidiary of our
Company
“Deshengtang Qinghai” Qinghai Deshengtang Pharmacy Co., Ltd.* (青海德生堂大

藥房有限公司), a limited liability company established
under the laws of the PRC on May 17, 2021 and a direct
“Deshengtang Wholesale” Gansu Deshengtang Pharmaceutical Wholesale Co., Ltd.*

(甘肅德生堂醫藥批發有限公司), a limited liability
company established under the laws of the PRC on
February 4, 2005 and a direct wholly-owned subsidiary of
our Company
“Deshengtang Wuwei” Gansu Deshengtang Medical Technology Group Wuwei Co.,

Ltd.* (甘肅德生堂醫藥科技集團武威有限公司), a limited
May 26, 2016 and a direct wholly-owned subsidiary of our
Company
“Deshengtang Zhangye” Gansu Deshengtang Medical Technology Group Zhangye

Co., Ltd.* (甘肅德生堂醫藥科技集團張掖有限公司), a
PRC on May 12, 2016 and a direct wholly-owned
“Director(s)” the director(s) of our Company
“Domestic Share(s)” ordinary Share(s) in the share capital of the Company with
a nominal value of RMB1.00 each, which are subscribed
for and paid up in Renminbi
“EIT Law” the Enterprise Income Tax Law of the PRC 《

( 中華人民共
和國企業所得稅法》)
“EMS” 中國郵政, an express mail company in China that provides

courier delivery services in China
– 26 –
DEFINITIONS
[REDACTED]
“Extreme Conditions” extreme conditions caused by a super typhoon as

announced by the government of Hong Kong
“Fangdao Academy” 方道書院, a department at our Company that specializes in

the continuous development of Fang and conducting
internal academic trainings for our employees
“Gansu 111” Gansu 111 Medical Technology Co., Ltd.* (甘肅壹壹壹醫

藥科技有限公司), a limited liability company established
under the laws of the PRC on June 16, 2016 and an indirect
“Gansu 111 Health” Gansu 111 Health Management Service Co., Ltd.* (甘肅壹
壹壹大健康管理服務有限公司), a limited liability company
established under the laws of the PRC on February 16,
[REDACTED]
“GFA” gross floor area
[REDACTED]
“GMP” Good Manufacturing Practice of the PRC 《

( 藥品生產質量
管理規範》)
“Group”, “our Group”, “we”, or the Company and its subsidiaries from time to time or,
“us” where the context so requires, in respect of the period prior
to our Company becoming the holding company of its
present subsidiaries, such subsidiaries as if they were
subsidiaries of our Company at the relevant time
“GSP” Good Supply Practice 《

( 藥品經營質量管理規範》)
“H Share(s)” overseas [REDACTED] foreign share(s) in our ordinary

share capital, with nominal value of RMB1.00 each in the
share capital of our Company, which are to be
[REDACTED] for and [REDACTED] in HK dollars and
for which an application has been made for [REDACTED]
and permission to [REDACTED] on the Stock Exchange
[REDACTED]
– 27 –
DEFINITIONS
[REDACTED]
“Hong Kong” or “HK” the Hong Kong Special Administrative Region of the
People’s Republic of China
“Hong Kong dollars” or “HK Hong Kong dollars, the lawful currency of Hong Kong
dollars” or “HK$” or “HKD”
[REDACTED]
“ICP License” a value-added telecommunications service license 《

( 增值電
信業務經營許可證》) for the provision of the internet
information service
“ID” identification
– 28 –
DEFINITIONS
“IFRS” International Financial Reporting Standards, as issued from

time to time by the International Accounting Standards
Board
“independent third party(ies)” any entity or person who is not a connected person of our
Company within the meaning ascribed thereto under the
Listing Rules
[REDACTED]
“IT” information technology
“JD” 京東, a corporate conglomerate in China operating online

retail platforms, including JD.com and JD Health, among
others. Both the O2O and the B2C retail modes are
available at JD
“Jiangsu Coastal Capital” Jiangsu Coastal Capital Co., Ltd.* (江蘇沿海創新資本管理

有限公司), a limited liability company incorporated in the
PRC on February 9, 2015
“Jiangsu Jiequan” Jiangsu Jiequan Xingong Bangsheng Venture Capital Fund

Partnership (Limited Partnership)* (江蘇疌泉新工邦盛創業
投資基金合夥企業(有限合夥)), a limited liability
partnership established under the laws of the PRC on May
23, 2017 and one of our [REDACTED] Investors
– 29 –
DEFINITIONS
“Jiangsu Yanhai” Jiangsu Yanhai Industry Investment Fund (Limited

Partnership)* (江蘇沿海產業投資基金(有限合夥)), a
limited liability partnership established under the laws of
the PRC on April 22, 2015 and one of our [REDACTED]
Investors
“Jiangsu Zijin Hongyun” Jiangsu Zijin Hongyun Health Industry Investment

Partnership (Limited Partnership)* (江蘇紫金弘雲健康產業
投資合夥企業(有限合夥)), a limited liability partnership
established under the laws of the PRC on March 29, 2019
and one of our [REDACTED] Investors
“Jinchang Deshengtang Hospital” Jinchang Deshengtang Hospital Co., Ltd.* (金昌德生堂醫

院有限公司), a limited liability company established under
the laws of the PRC on December 2, 2016 and an indirect
“Latest Practicable Date” January 24, 2023, being the latest practicable date for
ascertaining certain information in this Document before its
publication
[REDACTED]
“Listing Rules” the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited, as amended,
supplemented or otherwise modified from time to time
“Longgui” Longgui Traditional Chinese Medicine Culture

Development (Gansu) Co., Ltd.* (龍歸中醫藥文化發展(甘
肅)有限公司), a limited liability company established under
the laws of the PRC on March 12, 2019 and a direct
“Main Board” the stock exchange (excluding the option market) operated
by the Stock Exchange which is independent from and
operates in parallel with GEM of the Stock Exchange
“Mandatory Provisions” the Mandatory Provisions for Articles of Association of

Companies to be Listed Overseas 《
( 到境外上市公司章程必
備條款》), as amended, supplemented or otherwise modified
from time to time, for inclusion in the articles of
association of companies incorporated in the PRC to be
listed overseas (including Hong Kong), which were
promulgated by the former Securities Commission of the
State Council (國務院證券委員會) and the former State
Commission for Restructuring the Economic Systems (國家
經濟體制改革委員會) on August 27, 1994
– 30 –
DEFINITIONS
“Meituan” 美團, an online platform primarily providing on-demand

product express delivery services in the O2O retail mode in
China
“MHRSS” the Ministry of Human Resources and Social Security of

the PRC (中華人民共和國人力資源和社會保障部)
“MIIT” the Ministry of Industry and Information Technology of the

PRC (中華人民共和國工業和信息化部)
“Ministry of Commerce” the Ministry of Commerce of the PRC (中華人民共和國商

務部)
“MOF” the Ministry of Finance of the PRC (中華人民共和國財政

部)
“MPS” the Ministry of Public Security of the PRC (中華人民共和

國公安部)
“Mr. Long Yan” Mr. LONG Yan (龍岩), our founder, executive Director, the
chairman of our Board of Directors and general manager of
our Company, and one of our Controlling Shareholders
“Mr. Long Yun” Mr. LONG Yun (龍雲), our executive Director, vice
chairman of the Board of Directors and vice president of
our Company, and one of our Controlling Shareholders
“Nanjing Bangsheng Investment Nanjing Bangsheng Investment Management Partnership

Management” (Limited Partnership)* (南京邦盛投資管理合夥企業(有限
合夥)), a limited liability partnership established under the
laws of the PRC on December 10, 2014
“Nanjing Bangsheng Juhong” Nanjing Bangsheng Juhong Venture Capital Partnership

(Limited Partnership)* (南京邦盛聚鴻創業投資合夥企
業(有限合夥)), a limited liability partnership established
under the laws of the PRC on January 29, 2022
“Nanjing Bangsheng Jurun” Nanjing Bangsheng Jurun Enterprise Management

Partnership (Limited Partnership)* (南京邦盛聚潤企業管理
合夥企業(有限合夥)), a limited liability partnership
established under the laws of the PRC on March 19, 2020
“Nanjing Bangsheng Juyuan” Nanjing Bangsheng Juyuan Investment Management

Partnership (Limited Partnership)* (南京邦盛聚源投資管理
合夥企業(有限合夥)), a limited liability partnership
established under the laws of the PRC on September 12,
2014 and one of our [REDACTED] Investors
“Nanjing Bangsheng Xingong” Nanjing Bangsheng Xingong Equity Investment Fund

Management Co., Ltd.* (南京邦盛新工股權投資基金管理
有限公司), a limited liability company incorporated under
the laws of the PRC on October 18, 2016
– 31 –
DEFINITIONS
“Nanjing CCI Capital” Nanjing CCI Capital Ltd. (南京邦盛投資管理有限公司), a

limited liability company incorporated under the laws of
the PRC on January 29, 2014
“NDRC” the National Development and Reform Commission of the

PRC (中華人民共和國國家發展和改革委員會)
“NHC” the National Health Commission of the PRC (中華人民共

和國國家衛生健康委員會)
“NHFPC” the National Health and Family Planning Commission of

the PRC (中華人民共和國衛生和計劃生育委員會),
currently known as National Health Commission of the
PRC (中華人民共和國國家衛生健康委員會)
“NMPA” the National Medical Products Administration of the PRC

(國家藥品監督管理局), formerly known as the China Food
and Drug Administration (the CFDA)
“Northwestern China” the five provinces in northwestern China, including

Shaanxi, Gansu, Qinghai, Ningxia Autonomous Region and
Xinjiang Autonomous Region
[REDACTED]
“PBOC” the People’s Bank of China (中國人民銀行), the central

bank of the PRC
“PRC Legal Advisors” AllBright Law Offices, our legal advisors as to PRC laws
– 32 –
DEFINITIONS
“[REDACTED] Investments” the [REDACTED] investments in our Company undertaken

by the [REDACTED] Investors, details of which are set
out in “History, Development and Corporate Structure”
“[REDACTED] Investors” the [REDACTED] investors, namely Ali Health, Jiangsu

Yanhai, Jiangsu Zijin Hongyun, Suzhou Bangsheng
Yingxin, Jiangsu Jiequan and Nanjing Bangsheng Juyuan,
details of which are set out in “History, Development and
Corporate Structure”
“[REDACTED] Share Incentive the share incentive scheme adopted by our Company in
Scheme” May 2018, the principal terms of which are summarized in
“Appendix VI — Statutory and General Information — D.
[REDACTED] Share Incentive Scheme”
[REDACTED]
“Promoters” the promoters for the purpose of the conversion of our

Company into a joint stock limited liability company,
namely Mr. Long Yan, Mr. Long Yun, Zhejiang Changqi,
Zhejiang Yixue, Jiangsu Yanhai, Suzhou Bangsheng
Yingxin, Jiangsu Jiequan, Nanjing Bangsheng Juyuan, Ali
Health and Jiangsu Zijin Hongyun
[REDACTED]
“province” a province or, where the context requires, a provincial level

autonomous region or municipality, under the direct
supervision of the central government of the PRC
“purchase amount” referring to the amount of purchases generated from

customers’ purchases of our products or services, as
recorded in our operational system and before deducting
VAT
“R&D” research and development
“Regulation S” Regulation S under the U.S. Securities Act
“RMB” or “Renminbi” Renminbi, the lawful currency of the PRC
“SAFE” the State Administration of Foreign Exchange of the PRC

(中華人民共和國國家外匯管理局)
“SAMR” the State Administration for Market Regulation of the PRC

(中華人民共和國國家市場監督管理總局)
– 33 –
DEFINITIONS
“Series A [REDACTED] the subscription of the registered capital of the Company

Financing” by the Series A [REDACTED] Investors, particulars of
which are set out in “History, Development and Corporate
Structure — Major Shareholding Changes of Our Group —
4. Series A [REDACTED] Financing”
“Series A [REDACTED] Investors” Ali Health and Jiangsu Zijin Hongyun, and each a “Series
A [REDACTED] Investor”
“SF Intra-city” 順豐同城, an O2O express delivery service company in

China
“SFC” the Securities and Futures Commission of Hong Kong
“SFO” or “Securities and Futures the Securities and Futures Ordinance (Chapter 571 of the
Ordinance” Laws of Hong Kong), as amended, supplemented, or
otherwise modified from time to time
“Shaanxi 111” Shaanxi 111 Pharmaceutical Co., Ltd.* (陝西壹壹壹醫藥有

限公司), a limited liability company established under the
laws of the PRC on July 12, 2011 and an indirect
“Shanxi 111” Shanxi 111 Pharmacy Co., Ltd.* (山西壹壹壹大藥房有限公

of the PRC on May 12, 2016 and an indirect wholly-owned
“Shaanxi Yaojipi” Shaanxi Yaojipi Pharmaceutical Wholesale Co., Ltd.* (陝西

藥急批醫藥批發有限公司), a limited liability company
established under the laws of the PRC on December 30,
“Share(s)” ordinary share(s) in the share capital of our Company with

a par value of RMB1.00 each
“Shareholders’ Agreement” the shareholders’ agreement of our Company entered into

among Mr. Long Yan, Mr. Long Yun, Jiangsu Yanhai,
Suzhou Bangsheng Yingxin, Jiangsu Jiequan, Nanjing
Bangsheng Juyuan, Ali Health, Jiangsu Zijin Hongyun,
Zhejiang Changqi, Zhejiang Yixue and our Company dated
December 24, 2018
“Shareholder(s)” holder(s) of our Share(s)
[REDACTED]
– 34 –
DEFINITIONS
[REDACTED]
“Sole Sponsor” or “Sponsor” Huatai Financial Holdings (Hong Kong) Limited
“sq.m.” square meter
“STA” State Taxation Administration of the PRC (中華人民共和國

國家稅務總局)
[REDACTED]
“State Council” The State Council of the PRC (中華人民共和國國務院)
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“subsidiary(ies)” has the meaning ascribed thereto in section 15 of the

Companies Ordinance
“substantial shareholders” has the meaning ascribed to it in the Listing Rules
“Supervisor(s)” the supervisor(s) of our Company
“Suzhou Bangsheng Yingxin” Suzhou Bangsheng Yingxin Venture Investment Enterprises

(Limited Partnership)* (蘇州邦盛贏新創業投資企業(有限
合夥)), a limited liability partnership established under the
laws of the PRC on May 10, 2016 and one of our
[REDACTED] Investors
“Takeovers Code” The Code on Takeovers and Mergers issued by the SFC, as
amended, supplemented or otherwise modified from time to
time
“Tmall” 天貓, an e-commerce platform for B2C online retail in

China
“Track Record Period” the period comprising the financial years ended December
31, 2020 and 2021 and the nine months ended September
30, 2022
“U.S. dollars” or “US$” or “USD” United States dollars, the lawful currency of the United
States
“U.S. Securities Act” United States Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder
[REDACTED]
“United States” or the “U.S.” the United States of America, its territories, its possessions
and all areas subject to its jurisdiction
– 35 –
DEFINITIONS
“VAT” value-added tax
“WeChat” 微信, a chat app for smartphones that offers free video and
voice calls, videos, photos, games, stickers, and text
messages to help people that use the app to stay connected
with other people
“WeCom” 企業微信, an app for enterprise business management that

can interconnect with WeChat for key functions such as
chat, payment and mini program, and is developed by the
WeChat team primarily for use by enterprises
“Weinan 111” Weinan 111 Pharmaceutical Co., Ltd.* (渭南壹壹壹醫藥有

laws of the PRC on August 7, 2017 and an indirect
“Weinan Zhixinren” Weinan Zhixinren Pharmaceutical Co., Ltd.* (渭南市知心

人大藥房有限公司), a limited liability company established
under the laws of the PRC on June 3, 2015 and an indirect
“Xi’an 111” Xi’an 111 Pharmaceutical Co., Ltd.* (西安壹壹壹醫藥有限

公司), a limited liability company established under the
laws of the PRC on October 18, 2016 and an indirect
“Xi’an Baolun” Xi’an Baolun Pharmaceutical Co., Ltd.* (西安寶倫醫藥有

laws of the PRC on May 11, 2010 and an indirect
“Yunda” 韵達, an express mail company that provides courier

delivery services in China
“Zhejiang Changqi” Zhejiang Free Trade Zone Changqi Project Investment

Partnership (Limited Partnership)* (浙江自貿區昌啟項目投
資合夥企業(有限合夥)), a limited liability partnership
established under the laws of the PRC on August 13, 2019
and one of our Controlling Shareholders
“Zhejiang Yixue” Zhejiang Free Trade Zone Yixue Online Health

Management Partnership (Limited Partnership)* (浙江自貿
區壹學在線健康管理合夥企業(有限合夥)), a limited
liability partnership established under the laws of the PRC
on June 24, 2019 and one of our Controlling Shareholders
“%” percent
– 36 –
DEFINITIONS
Unless otherwise specified or the context otherwise requires:
1. statements contained in this Document assume no exercise of the [REDACTED];
2. all times refer to Hong Kong time;
3. references to years, months and days in this Document are to calendar years, calendar
months and calendar days, respectively; and
4. all data in this Document is as of the date of this Document.
In this Document, the terms “associate,” “close associate,” “connected person,” “core
connected person,” “connected transaction,” “controlling shareholder” and “substantial
shareholder” shall have the meanings given to such terms in the Listing Rules, unless the context
otherwise requires.
Certain amounts and percentage figures included in this Document have been subject to
rounding. Accordingly, figures shown as totals in certain tables may not be an arithmetic
aggregation of the figures preceding them. Any discrepancies in any table or chart between the
total shown and the sum of the amounts listed are due to rounding.
In this Document, “*” denotes translation of certain natural persons, legal persons,
enterprises, governmental authorities, institutions, entities, organizations, departments, facilities,
laws and regulations into Chinese or English (as the case maybe), etc., or another language
included in this Document for identification purposes only. In the event of any inconsistency, the
Chinese names or the names in their original languages prevail.
– 37 –
GLOSSARY OF TECHNICAL TERMS
This glossary contains definitions of certain terms used in this Document in connection
with our Company and our business. Some of these may not correspond to standard industry
definitions or usage of these terms.
“acupressure” application of pressure to acupuncture points to clear

blockages in the meridians
“acupuncture” a clinical method and technique that uses small needles to

stick into patients’ meridian points to prevent and treat
diseases
“AI” artificial intelligence
“app” application, a program designed to run on smartphones and

other mobile devices
“B2C” business-to-customer, referring to the online retail business

mode with customers placing purchase orders on online
pharmacies operated on B2C platforms and products are
delivered to customers via courier services
“B2C platforms” online platforms that avail customers to purchase from

online pharmacies listed on such platforms, and receive
products delivered by courier services; in our B2C retail
business mode, B2C platforms include third-party platforms
including Tmall, JD and Baidu Health, as well as our
111Yao App and our WeChat mini program
“CAGR” compound annual growth rate
“CCMG” concentrated Chinese medicine granule, traditional Chinese

herbal medicines processed in modern extraction and
concentration granular form, which is easy to dispense and
administer
“Class III hospitals” the largest regional hospitals in the PRC designated as
Class III hospitals by the NHFPC hospital classification
system, typically with more than 500 beds as for a general
hospital, providing high-quality professional healthcare
services covering a wide geographic area and undertaking
higher academic and scientific research initiatives. Class III
hospitals are divided into A, B, and C grades
“Class IIIA hospitals” Class III hospitals at the grade A level, which are the
highest ranking hospitals among Class-III hospitals
“cupping therapy” a form of alternative therapy in which a suction is created

on the skin with the application of cups
“data analytics” the application of analytical techniques against substantial

and diverse data sets to uncover hidden patterns, unknown
correlations, market trends, customer preferences, and other
useful information that can contribute to more informed
business decisions
– 38 –
“decocting” or “decoction” a method of extraction by boiling herbal or plant material

to dissolve the chemicals of the medicinal materials, such
as stems, roots, bark and rhizomes
“Designated Retail Pharmacies” retail pharmacies designated by the relevant local medical
insurance authority as ones that are permitted to sell
medicinal products covered by the national medical
insurance scheme
“DTP” direct-to-patient
“DTP pharmacies” pharmacies that mainly provide patients with new speciality
drugs directly after patients receive prescriptions in
hospitals and get professional medication services
“e-commerce” electronic commerce, which refers to the buying and selling

of goods or services using the Internet, and the transfer of
money and data to execute these transactions
“‘family doctor’ approach” our approach to provide customers with customized

services executed through our Internet hospital capabilities,
and offered by our individualized service team, which
addresses customers’ requests for effective and efficient
health management services and healthcare solutions
“Fang” our designated term inspired by the transliteration of the

Chinese character “方” under traditional Chinese medical
discipline that refers to standardized medicinal
combinations primarily based on medications and
supplemented by wellness products
“Fang-directed revenue” referring to revenue generated from our sales of products to

customers under the standardized medicinal combinations
(i.e., our Fang) recommended by us
“Fang anthology” 方道集, the collection of our 1,429 Fang as of September

30, 2022
“Fang strategy” our strategy to adopt systemized and streamlined

recommendations of standardized medicinal combinations
as well as other combined usage of wellness products as
part of our product and service offerings to tackle
customers’ specific health problems
“general outpatient clinic” a medical institution that provides outpatient diagnosis of

common and frequently-encountered diseases that are easy
to diagnose for the patients and does not set up inpatient
beds or maternity beds
“gynecology” the branch of medicine that deals with the diseases and
routine physical care of the reproductive system of women
“member retention rate” calculated by dividing the number of active members for
the same period in the previous year who remain our active
members in the current period by the total number of active
members for the same period in the previous year
– 39 –
“moxibustion” a TCM therapy which consists of burning a cone or stick

made of ground mugwort leaves on particular points of the
body to improve body condition
“national medical insurance national medical insurance programs in China, which

scheme” primarily includes the Urban Employee Basic Medical
Insurance Scheme (城鎮職工基本醫療保險制度), the Urban
Resident Basic Medical Insurance Scheme (城鎮居民基本
醫療保險制度) and the New Rural Cooperative Medical
Insurance Scheme (新型農村合作醫療保險制度)
“new specialty drug” high-tech new drugs or specialty drugs which are usually
expensive, effective and indispensable in the treatment of
certain severe diseases, with clear indications and strict
clinical treatment norms
“O2O” online-to-offline, referring to the online retail business

mode where customers place with customers placing
purchase orders for products online on O2O platforms, or
on-demand express delivery platforms, and products are
directly dispatched by our offline pharmacies, which are
typically located within a short distance from the
customer’s delivery address and delivered by third-party
express delivery riders
“O2O platforms” online platforms that avail customers to purchase products

from nearby offline pharmacies that are listed on such
platforms, and provide delivery services undertaken by
express delivery riders; in our O2O retail business mode,
O2O platforms include third-party platforms including
Meituan and JD, as well as our 111Yao App and our
WeChat mini program
“OEM” original equipment manufacturer
“OTC” over-the-counter, a term used to describe medicines that

can be sold directly to a consumer without a prescription
from a healthcare professional, as compared to prescription
drugs, which are sold only to consumers possessing a valid
prescription
“physiotherapy” therapy formulated under TCM theories to preserve,

enhance, or restore movement and physical function
impaired or threatened by disease, injury, or disability,
which includes therapeutic exercises based on TCM
appropriate techniques
“Pilates” an exercise regimen that is typically performed on a floor

mat or with the use of specialized apparatus and aims to
improve flexibility and stability by strengthening the
muscles and especially the torso-stabilizing muscles of the
abdomen and lower back
– 40 –
“SCRM” social customer relationship management, referring to

customer relationship management fostered by
communications with customers through social networking
tools
“SKU” stock keeping unit, offered in our omni-channel

pharmaceutical retail through offline, O2O and B2C
channels. The number of SKUs refers to the total types of
products, regardless of the respective supply sources or the
sales channels of such products
“Specialized Pharmacies for 門診特病定點零售藥店, referring to retail pharmacies that,

Chronic Diseases” as defined by China Association of Pharmaceutical
Commerce (中國醫藥商業協會), provide medicinal
products and services relating to patients’ chronic disease
prescription fulfillment needs, with pharmacists having at
least three years of experience, consultation area,
pharmaceutical care information system, thorough chronic
disease service management system, standard operation
process, active pharmacovigilance work and comprehensive
evaluation system of service
“specialty hospital” a hospital that primarily or exclusively provides healthcare

services on specific departments
“TCM” traditional Chinese medicine, medicines for the prevention

and treatment of diseases under the application of Chinese
medicinal theories, including medicines with herbal, animal
or mineral materials
“TCM appropriate techniques” traditional TCM treatment techniques that are usually
convenient and effective, which include acupuncture,
moxibustion, massage, external therapy, internal therapy
and decoction techniques
“TCM decoction pieces” processed Chinese medicinal slices which can be used in
prescribed formulas for preparing Chinese prescription and
OTC drugs or for making soups as a means of diet therapy
“TCM massage” a manipulation of body’s soft tissues, commonly applied

with hands, fingers, elbows, knees, forearms, feet, or a
device, for the treatment of body stress or pain
“yoga” a system of physical postures, breathing techniques, and

sometimes meditation that are practiced to promote
physical and emotional well-being
– 41 –
FORWARD-LOOKING STATEMENTS
Certain statements in this Document are forward-looking statements that are, by their nature,
subject to significant risks and uncertainties. Any statements that express, or involve discussions as
to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but
not always, through the use of words or phrases such as “will,” “expect,” “anticipate,” “estimate,”
“believe,” “going forward,” “ought to,” “may,” “seek,” “should,” “intend,” “plan,” “projection,”
“could,” “vision,” “goals,” “objective,” “target,” “schedule,” “predict,” “aim,” “intend,”
“consider,” “would,” “continue” and “outlook”) are not historical facts, but are forward-looking
and may involve estimates and assumptions and are subject to risks (including the risk factors
detailed in this Document), uncertainties and other factors some of which are beyond our control
and which are difficult to predict. Accordingly, these factors could cause actual results or outcomes
to differ materially from those expressed in the forward-looking statements.
Our forward-looking statements have been based on assumptions and factors concerning
future events that may prove to be inaccurate. Those assumptions and factors are based on
information currently available to us about the businesses that we operate. The risks, uncertainties
and other factors, many of which are beyond our control, that could influence actual results
include, but are not limited to:
• general political, market and economic conditions, including those related to the PRC;
• any changes in the laws, rules and regulations of the central and local governments in
the PRC and other relevant jurisdictions and the rules, regulations and policies of the
relevant governmental authorities relating to all aspects of our business;
• our planned projects and goals;
• our ability to control or reduce costs;
• our ability to control our risks;
• our ability to maintain good relationships with business partners;
• our business prospects and expansion plans;
• our ability to successfully implement our business plans and strategies;
• our financial condition and performance, debt levels and capital needs;
• our dividend policy;
• our capital expenditure plans;
• various business opportunities that we may pursue;
• the actions and developments of our competitors;
• changes or volatility in interest rates, foreign exchange rates, equity prices or other rates
or prices, including those pertaining to the PRC and the industry and markets in which
we operate; and
• all other risks and uncertainties described in “Risk Factors.”
– 42 –
FORWARD-LOOKING STATEMENTS
Since actual results or outcomes could differ materially from those expressed in any
forward-looking statements, we strongly caution [REDACTED] against placing undue reliance on
any such forward-looking statement. Any forward-looking statement speaks only as of the date on
which such statement is made, and, except as required by the Listing Rules, we undertake no
obligation to update any forward-looking statement or statements to reflect events or circumstances
after the date on which such statement is made or to reflect the occurrence of unanticipated events.
Statements of or references to our intentions or those of any of our Directors are made as of the
date of this Document. Any such intentions may change in light of future developments.
All forward-looking statements in this Document are expressly qualified by reference to this
cautionary statement.
– 43 –
RISK FACTORS
An [REDACTED] in our H Shares involves significant risks. You should carefully

consider all information in this Document, including the risks and uncertainties described
below, before making an [REDACTED] in our H Shares. You should pay particular attention to
the fact that we are a company incorporated in the PRC and that most of our business is
conducted within the PRC, which is governed by a legal and regulatory environment that may
differ from those in other countries. The following is a description of what we consider to be
our material risks. Any of the following risks could have a material adverse effect on our
business, financial condition and results of operations. In any such case, the [REDACTED] of
our H Shares could decline, and you may lose all or part of your [REDACTED].
These factors are contingencies that may or may not occur, and we are not in a position to
express a view on the likelihood of any such contingency occurring. Additional risks and
uncertainties not presently known to us, or not expressed or implied below, or that we deem
immaterial, could also harm our business, financial condition and results of operations. The
information given is as of the Latest Practicable Date unless otherwise stated, will not be
updated after the date hereof, and is subject to the cautionary statements in the section titled
“Forward-looking Statements” of this Document.
RISKS RELATED TO OUR BUSINESS AND INDUSTRY
Our business, financial condition and results of operations are dependent on our ability to
continue to retain and attract customers with our product and service offerings and maintain
customers’ trust in our business model.
Our business operations and financial performance rely on the stickiness and healthy growth
of our customer base of individuals purchasing our products and using our services. Our business
model, supported by our Fang strategy and our “family doctor” approach, is a step-up from the
traditional pharmaceutical retail model as we attend to our customers’ diverse healthcare needs by
providing them with convenient one-stop health management services and healthcare solutions.
According to CIC, in 2021, among all pharmaceutical retailers in China, we ranked first in terms
of the number of available standardized medicinal combinations, and first in terms of revenue
generated from the sales of standardized medicinal combinations. During the Track Record Period,
we achieved an average member retention rate of 63.4% and the retention rate of our members
with purchases made pursuant to the recommended Fang reached over 80%. As of December 31,
2020 and 2021 and as of September 30, 2022, we accumulated approximately 5.9 million, 7.4
million and 9.2 million members, respectively. However, we cannot guarantee you that customers
will continue to accept or prefer our business model, as they may have concerns over the safety
and efficacy of the products purchased from our multiple sales channels, the reliability of our
pharmacies or platforms, and the quality and effectiveness of our medical and healthcare services.
Failure to offer customers comprehensive healthcare solutions that live up to their expectations and
standards will adversely affect our ability to continue to retain and continue to attract new
customers, which may in turn materially and adversely affect our business, financial condition and
results of operations.
Furthermore, our ability to continue to provide a wide selection of quality and accessible
healthcare product and service offerings relies not only on our capability to procure such products
from reliable suppliers but also our ability to arrange for competitive value-adding services
integral to our offerings, such as on-demand and express deliveries, diverse payment options and
on-going support by medical and customer support professionals. Such ability, in turn, depends on
a variety of factors beyond our control. In particular, we rely on not only our medical
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professionals, including our licensed physicians and pharmacists, and our customer support
professionals, but also on a number of third parties in the provision of our products and services,
such as our suppliers of pharmaceutical products, third-party platforms, logistics and on-demand
express delivery services, OEM partners, and other third-party collaboration partners. If they fail
to provide high-quality business or customer experience to our customers, we may experience a
reduction in our customers’ faith and loyalty in our products and services, which may harm our
customer base and result in negative publicity for our corporate brand, materially and adversely
affecting our business, financial condition and results of operations.
Our historical growth may not be indicative of our future performance, and we may not be
able to manage the growth of our business and operations or implement our business or
growth strategies successfully.
We witnessed stable revenue growth during the Track Record Period. For the years ended
December 31, 2020 and 2021, we recorded a total revenue of RMB1,754.0 million and
RMB2,014.3 million with an increase of 14.8%. Furthermore, our total revenue increased by
16.4% from RMB1,467.4 million in the nine months ended September 30, 2021 to RMB1,707.5 in
the same period of 2022. Nevertheless, such historical growth may not be indicative of our future
performance. Over the years of our operation, we have evolved from operating traditional retail
pharmacies and clinics into a leading health management and healthcare solutions provider in
China offering a full suite of products and services over the medical, pharmaceutical, wellness and
safeguarding aspects throughout the entire cycle along the healthcare value chain. Building on our
offline pharmaceutical retail business which commenced in 2002, we have continued to explore
innovative healthcare product and service offerings that meet market demand and cater to
customers’ changing lifestyles. Our business may further develop, the complexity of our operations
may further increase, and our financial and operational costs may grow significantly. In particular,
our historical achievement may not be replicated as the market in which we operate evolves
quickly. Noticeably, the PRC pharmaceutical retail market has seen operational innovations and
has expanded in recent years from the offline retail mode to a combination with online O2O and
B2C modes. We cannot guarantee that the market trend in recent years will continue into the
future, nor can we predict if new market trends will emerge. More importantly, we cannot assure
you that we will be able to respond to new market trends timely and effectively. If we fail to
closely follow market trends or if our business fails to grow to the extent or at a pace we expect,
our business, financial condition and results of operations may be materially and adversely
affected.
In addition, we believe that our future success builds on our successful execution of new
business initiatives, strategies, development schemes and operating plans. For example, we are
dedicated to continuously streamlining our delivery of healthcare solutions with enriched product
and service offerings or by entering new business areas, such as further developing our branded
product pipeline, expanding our medical service capability, and launching home care services. We
also plan to enhance our warehousing and logistics capabilities, as well as improving our
technological capabilities. We may also need to continue to broaden the scale of our business
operations and/or entering into new regions or markets through strategic investments, acquisitions,
and collaborations. For further details on our future business initiatives and development
strategies, see “Business — Our Strategies.” These initiatives are new and evolving, some of
which are still at the inception or trial stage and may prove unsuccessful in the long run. We may
not have sufficient experience or expertise to operate in the new regions or markets as we intend.
We may also not be able to successfully complete these growth initiatives, strategies and operating
plans and realize all of the benefits that we expect to achieve or it may be more costly to do so
than we anticipate. Our ability to predict customer preference and needs to customize our product
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RISK FACTORS
and service offerings may be limited, which could impede our ability to deliver the customer
experience expected by our customers at the early stage of these business initiatives. As a result,
we cannot assure you that any of these business initiatives will achieve wide market acceptance,
increase the penetration of our addressable market or become or remain profitable in the future. If,
for any reason, the benefits we realize are less than what we estimate, or the implementation of
these growth initiatives, strategies and operating plans adversely affect our operations, or it costs
more or takes longer to effectuate than we expect, or if our assumptions prove inaccurate or
inadequate, our business, financial condition and results of operations may be materially and
adversely affected.
We are subject to domestic and global pandemics, such as the COVID-19 outbreak, as well as
other force majeures, the occurrence of which could significantly disrupt our operations.
Our operations are sensitive to domestic and global pandemics, which could affect our
customers’ consumption preference, impact the market’s receptiveness of our business model and
bring out other uncertainties on financial, business, legal and regulatory levels. The COVID-19
pandemic, since its inception at the end of 2019, has materially and adversely affected the global
and Chinese economies. In response to intensifying efforts to contain the spread of the
coronavirus, the Chinese government took a number of actions, which included quarantining
individuals in China who had contracted the COVID-19 virus, imposing regional lockdowns for
places with high numbers of suspected or confirmed cases, and requiring temporary closures of
corporate offices, storefronts, warehouses, manufacturing facilities and factories across China. The
COVID-19 pandemic has led to temporary impact on our business and financial performance,
including our omni-channel operations, our product sales, our supply chain, our employees and
other aspects of our operations. During the Track Record Period, certain of our storefronts were
temporarily closed in affected regions and we experienced a temporarily reduced customer traffic
at these storefronts. On the other hand, as COVID-19 has increased people’s health awareness and
demand for online healthcare products and services, we have seen an increase in demand for our
online healthcare services, in particular, the demand for our O2O and B2C services. For the years
ended December 31, 2020 and 2021 and the nine months ended September 30, 2022, we recorded
revenue from our O2O retail business in the amount of RMB43.3 million, RMB101.2 million and
RMB150.2 million, respectively. For the same respective period, we recorded revenue from our
B2C retail business in the amount of RMB262.0 million, RMB363.7 million and RMB250.3
million, respectively. In addition, our product sales were also affected during the COVID-19
pandemic. As the government imposed restrictions on sales of antibiotics, antipyretics and
analgesics, cold and flu products and antiviral products, our sales of such products decreased. On
the other hand, with our customers’ increased demand and preference for pandemic and
virus-preventive products, our sales of such products increased. Since the relaxation of
COVID-19-related pandemic control measures in China pursuant to the ten new measures
announced by the Chinese government in December 2022, we have experienced a strong growth of
our offline product sales at our self-operated pharmacies, while we also experienced delays in
fulfilling our O2O orders as customer purchase orders surged with insufficient riders from
third-party O2O express delivery service providers. In addition, similar to other pharmaceutical
retailers in China, we experienced a temporary supply shortage of prescription and OTC drugs
relating to COVID-19’s prevention and treatment in December 2022. Such supply shortage also
affected our capabilities of supplying to certain franchisees in our pharmaceutical wholesale
business. For more details, see “Financial Information — Impact of the COVID-19 Outbreak on
Our Operations.” While our overall business operations and financial condition have not been
materially adversely affected, we cannot guarantee that we will not have to suffer from more
severe impacts in the future. The extent to which the COVID-19 pandemic will impact us will
depend on its future development, which we may not be able to reasonably estimate or predict. We
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RISK FACTORS
cannot assure you that we will not have to go through the COVID-19 pandemic from different
variants of COVID-19 or other pandemic situations again in the future. As we have extensive
offline operations under our pharmaceutical retail network, we are also vulnerable to other
epidemics, such as H1N1 flu and avian flu, and other adverse events such as natural disasters and
calamities, in the event of which our offline operations may experience disruptions, physical
damage, suspension or forced temporary or permanent closures. If we fail to address the above
challenges, our business, financial condition, results of operations and growth prospects may be
materially and adversely affected.
Our success is dependent on our ability to compete effectively and successfully against
current and future industry and market competitors.
We operate in a highly competitive market. Our competitors primarily include market players
operating in the health management and healthcare solutions market, including without limitation,
traditional pharmaceutical retail companies, companies with online O2O and B2C retail operations,
and companies that offer medical services offline through private medical clinics and online
through Internet hospitals. According to CIC, in 2021, (i) among all pharmaceutical retailers
operating in Gansu Province, we ranked first in terms of offline pharmaceutical revenue generated
in the province, (ii) among all pharmaceutical retailers operating in Northwestern China, we
ranked third in terms of offline pharmaceutical revenue generated in the region, and (iii) among
pharmaceutical retailers nationwide, we ranked 16th in terms of offline pharmaceutical retail
revenue. According to CIC, in 2021, we ranked 15 th among pharmaceutical retailers nationwide
operating through all these three channels in terms of our omni-channel pharmaceutical retail
revenue. Our competitors may have greater access and leverage of financial, technical, R&D,
marketing, distribution, retail, talent, and other resources than us. Their customer base and/or
market position may be stronger than ours. Specifically, the omni-channel pharmaceutical retail
market in China is dominated by a number of large-size pharmaceutical enterprises while the rest
of the market remains fragmented, according to CIC. As a result, our competitors in the
omni-channel pharmaceutical retail industry may have a greater ability to respond more quickly
and effectively to new or evolving opportunities, technologies, standards or customer requirements
than us and may have a greater ability to manage significant regulatory and/or market changes.
Competition in the markets we operate may become more intense in the future and our competitive
position may be out of our control. We are not certain that our products and services will continue
to distinguish us from those of our competitors. We also cannot guarantee that we are able to
maintain and improve our relationships with our suppliers or collaboration partners that have
played important roles in our historical success, to the same extent as our competitors do. We may
lose market share if we fail to compete effectively, and our business, financial condition and
results of operations may be materially and adversely affected as a result.
Furthermore, among our self-operated offline retail pharmacies, more than 700 were in Gansu
Province and more than 50 were in each of Shaanxi Province and Beijing, as of September 30,
2022. According to CIC, branded retail pharmacies in China usually focus their operations in a few
geographical areas, as customers across different geographies may have different lifestyles,
corresponding to different spending preferences and purchase needs that can be better satisfied by
retailers with a deeper understanding of the relevant local markets. Although the distribution of
our self-operated pharmacies follows such industry practice, we are susceptible to changes in the
local regional market environment. We cannot assure you that we will continue to remain
competitive in these markets in the future. Besides, in the event that we can no longer leverage our
established market resources, such as our established supplier network and our familiarity with
local legal and regulatory requirements, to maintain our market position, our competitive position
may be adversely affected. If our competitors adopt various strategies targeting our market share,
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RISK FACTORS
such as employing low-price strategies and/or maliciously adopting similar sales approaches as us,
such as intentionally copying the standard medicinal combinations under our Fang anthology in
their pharmaceutical sales, we may be forced to lower our product prices to maintain our
competitive position, our profitability will be adversely impacted, and we may lose market share in
these areas. In addition, although we can leverage our network of franchised pharmacies to expand
our market reach to a wider geographical coverage, we cannot guarantee you that our franchise
model will always be effective in our branding efforts in new geographical areas or successful in
laying the foundation for the further opening of self-operated pharmacies or other storefronts in
these new areas. See “— We rely on third-party franchisees to operate and manage our franchised
pharmacies over which our control may be limited as compared to our self-operated pharmacies”
for further details. In any event, if we fail to compete effectively, our business, financial condition
and results of operations may be materially and adversely affected as a result.
Our business, financial condition and results of operations are subject to risks of failure in
opening new retail pharmacies or other types of storefronts or expanding into new regions.
Since we started our pharmaceutical retail operation in 2002, we have continuously expanded
into new cities and provinces in China and significantly increased the number of the
brick-and-mortar pharmacies in our pharmaceutical retail network. In our expansion efforts, we
leverage not only our Group’s financial and business resources to continuously open self-operated
pharmacies, but also our franchisees’ resources to expand into unfamiliar markets. Our pharmacy
network has grown to encompassing 1,047 pharmacies, including 931 self-operated pharmacies
across 22 cities and seven provinces, as of September 30, 2022, and 116 franchised pharmacies
across 58 cities and 20 provinces, as of the same date. See “Business — Our Physical Presence —
Our Pharmacy Network” for further details. We cannot assure you, however, that we will be able
to maintain this growth momentum in the future. In particular, our entrance and expansion into
new regions may not be as successful or rapid as in Gansu Province, if at all. Also, our historical
operating results have been, and in the future may continue to be, influenced by the timing and
extent of the expansion of our network of offline retail pharmacies, which may expose us to
additional challenges and risks, including, among other things: (i) difficulties in navigating
different, and perhaps complex, legal and regulatory requirements; (ii) difficulties to pick physical
sites suitable for opening new pharmacies according to the evolving market appetite; (iii)
difficulties with navigating local customs, market appetite and cultures; (iv) difficulties with
managing operations in new regions; (v) competition from existing or new-entrant competitors,
including existing market leaders with deeper market understanding and greater market
acknowledgement among local customers; (vi) difficulties in recruiting sufficient personnel to
support our expanded operations, including management members, medical professionals and sales
and marketing professionals, among others, in these new regions; (vii) challenges in offering
products and services that are suitable for the local customer population and locating suitable and
resourceful suppliers and other collaboration partners; and (viii) potential cannibalization of our
storefronts along with our continuous expansion in certain markets or regions.
Expansion of our business into new areas in a timely and cost-efficient manner is dependent
on our ability to adequately manage or reduce such challenges or risks. Moreover, the opening of
new pharmacies and other storefronts involves regulatory approvals and licenses and reviews by
various government authorities in the PRC. In addition, as we incur initial expenses on rent,
renovation and equipment, our new pharmacies and other storefronts generally take time to become
profitable. We may also acquire other pharmacies in such regions where we have not laid our
business footprint. See “Business — Our Strategies.” In any event, where our ability to open new
pharmacies or other types of storefronts is adversely affected due to our inability to tackle any of
the above risks or challenges or address the above requirements in the new storefront opening
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RISK FACTORS
process, we may not be able to immediately utilize or derive revenue from our newly opened
pharmacy or other type of storefront, which may adversely impact our profitability. During the
Track Record Period, we had invested selling and marketing expenses associated with establishing
new self-operated offline pharmacies, a majority of which were established in 2021 in Gansu
Province. We were not able to recover sufficient revenue to offset such marketing expenses due to
COVID-19-related lockdown measures. As a result, we experienced an increase in our net loss for
the year from 2020 to 2021. See “Financial Information — Review of Historical Results of
Operation.” For further details on opening of new storefronts, see “Business — Our Physical
Presence — Our Pharmacy Network — Our Self-operated Pharmacies — Continuous Expansion of
our Pharmacy Network.” In addition, we cannot assure you that opening new franchised
pharmacies or other storefronts by franchisees will always be as profitable as we expect. Although
we are careful in our selection of franchisees as we typically consider their business experience,
financial condition, passion for our brand, sympathy with our core values, entrepreneurial spirit
and understanding of the health management and healthcare solutions market, we cannot guarantee
that they will always remain capable of effectively operating the franchised pharmacies. In the
event that our franchisees fail to tackle such risks or address such requirements in their storefront
opening process, or if we fail to provide them with sufficient financial, operational or technical
support to open the franchised storefronts, they may also fail to successfully open and the
franchised storefronts or achieve profitability as expected. See “— We rely on third-party
franchisees to operate and manage our franchised pharmacies over which our control may be
limited as compared to our self-operated pharmacies.” If such events were to occur, our business,
financial condition and results of operations may be materially and adversely affected.
Our historical success is built on our strong brand recognition in the market. We are exposed
to risks resulting from any damage to our brand image or our corporate reputation,
including negative publicity against our Company, our medical professionals, our business
operations and our industry.
Our reputation and brand names are crucial to our business operations and financial
performance. However, we are not certain that we will be able to maintain a positive business
image or brand reputation for all or part of our businesses in the future. Negative publicity
involving our Company, our medical professionals, our platforms, our network of pharmacies,
clinics and wellness centers and the industries in which we operate may adversely affect the
market recognition of our various products and services, thereby adversely affecting our sales of
existing and new products and services. Our brand reputation may be materially and adversely
affected by a variety of factors, many of which may be beyond our control, including: (i) adverse
associations with third-party brand products we sell under our omni-channel sales model, including
with respect to their safety, quality and/or efficacy; (ii) legal proceedings, governmental
investigations, administrative and/or regulatory fines and penalties against us or otherwise relating
to the products or services that we sell in our sales channels; (iii) inappropriate, illegal or
wrongful conduct that is not authorized by us and carried out by our employees, medical
professionals, franchisees, suppliers, OEM partners and/or other business collaboration partners;
(iv) inappropriate use of our brand names or brand image by our franchisees; and (v) adverse
publicity associated with us, our Directors, officers, employees, medical professionals, franchisees,
suppliers, OEM partners and/or other collaboration partners, the products or services available in
our sales channels or our industry in general, whether founded or unfounded.
Any damage to our brand reputation as a result of these or other factors may cause our
products and services to be perceived unfavorably by customers, regulators, medical professionals
and other business partners, and our business, financial condition and results of operations may be
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Any failure on our part to navigate and abide by the complex and constantly evolving legal
and regulatory requirements in China may have a material and adverse effect on our results
of operations and growth prospects.
Our business is subject to legal and regulatory requirements on multiple levels and relating to
multiple industries in the PRC, including medical consultation, pharmaceutical circulation and
wellness management. In particular, pharmaceutical retail and online healthcare service offerings
in China are each subject to extensive and evolving government regulation and supervision as well
as monitoring by various government authorities. If unfavorable regulatory changes in these
industries occur, our compliance costs will increase, which will materially and adversely affect our
financial performance and business prospects. Certain other laws, rules and regulations may also
affect the market demand and competitive positioning of our product and service offerings, such as
those relating to the sales, dispensing, supply and prescriptions of drugs by pharmaceutical
retailers and/or pharmaceutical wholesalers, Internet hospitals, and commercial insurances and
national medical insurance schemes. During the Track Record Period, we were subject to certain
administrative penalties of insignificant amounts that concerned sales of prescription drugs,
product labeling and advertisement, etc. As of the Latest Practicable Date, all these administrative
penalties had been fully settled with the relevant authorities and the operation of the relevant
entity had not been affected by such administrative penalties. We have also strengthened
operational and regulatory trainings for our employees to help them better familiarize themselves
with relevant requirements and our compliance team is dedicated to ensuring our ongoing
compliance with relevant laws and regulations. However, we cannot guarantee that our employees
will always strictly follow our requirements, failing which may subject us to additional
administrative penalties, especially since we operate in a highly regulated industry.
Furthermore, as we seek to introduce new categories of products and services, we may need
to navigate and abide by additional laws, rules and regulations, as well as to acquire the requisite
permits, licenses or certificates. We may not be fully informed of all new requirements under
relevant laws and regulations in a timely manner, and even if we become aware of new
requirements, due to uncertainties in their interpretation and implementation, it may be difficult for
us to determine what actions or omissions would be deemed to be in violation of applicable laws
and regulations. We may also not be able to respond to evolving laws and regulations and take
appropriate action in time to adjust our business model. In order to keep up with legal and
regulatory changes in China and to ensure compliance, we may need to devote additional resources
to follow up with developments in the relevant legal or regulatory environment, such as engaging
legal counsel or appointing compliance committees at our corporate level, which can result in an
additional financial burden on us while diverting our management’s attention from our daily
operations. Actual or potential violation of the relevant laws, rules and regulations may result in
significant penalties and, under certain circumstances, lead to criminal prosecution. Failure to
adequately comply with these additional laws and regulations may delay, or possibly prevent, some
or all of our products or services from being offered, which may have a material adverse effect on
our profitability, as well as our financial performance, results of operations and business prospects.
The PRC government’s regulations on business operations based on the Internet, such as the
operation of an Internet hospital, are relatively new and still evolving, the interpretation and
enforcement of which may involve significant uncertainty. Internet hospital services are subject to
regulatory requirements relating to both general medical institutions and Internet hospitals. In
particular, according to relevant PRC laws and regulations, Internet hospitals cannot provide initial
diagnoses and may only provide follow-up diagnosis and prescription services for certain common
or chronic diseases after confirming that the patients have been diagnosed with the same at
physical medical institutions. See “Regulatory Overview — Regulations Relating to Healthcare
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RISK FACTORS
Services — Internet Hospital” for more details. As advised by our PRC Legal Advisors, we had
been generally compliant with relevant applicable laws and regulations in all material aspects
during the Track Record Period and up to the Latest Practicable Date. However, under certain
circumstances, it may be difficult to determine what actions or omissions would be deemed to be
non-compliant with or a violation of applicable laws and regulations. These uncertainties entail
risks that may materially and adversely affect our business prospects. For example, although our
self-operated Internet hospital had obtained its Medical Institution Practice License
(《醫療機構執業許可證》) with the offering of Internet hospital services among its permitted
scope of practice, it remains uncertain that our Internet hospital services will always be in
compliance with the relevant laws and regulations in the future, which are evolving and subject to
change. We also cannot guarantee that our future business partners will be able to obtain and
maintain all requisite licenses for the operation of Internet hospitals. Due to the uncertainty and
complexity of the legal and regulatory requirements relating to online medical services, we cannot
assure you that our Internet hospital operations would not be rendered non-compliant in the future.
In order to ensure compliance, we may need to adjust our business and devote significant
additional financial resources. Any failure to comply with such laws and regulations, even though
after we exert commercially reasonable caution and preventive measures, could result in
administrative penalties against us which could materially and adversely affects our business,
financial condition and results of operations.
Continuous contribution by and dedicated services from our senior management, key
employees and other talents are crucial to our historical success. Our continuous development
is dependent on our ability to retain our senior management or key employees to continue to
provide quality services, and successfully recruit additional qualified personnel as our
business grows.
Our senior management and our key employees are key to the success of our business, having
served various corporate functions and contributed significantly to our historical growth and
achievements. We have maintained a group of dedicated and loyal senior management members
and key personnel. Accordingly, we believe that our ability to attract and retain key personnel is a
critical factor in our competitiveness. Competition for these individuals could require us to offer
more attractive compensation packages and other remuneration in order to attract and retain them,
which could increase our operating expenses and, in turn, materially and adversely affect our
financial condition and results of operations. If we are unable to attract or retain the personnel
required to achieve our business objectives, our operations could be severely disrupted and our
business prospects could be adversely harmed.
We do not carry key-person insurance for our management team, which is in line with
industry practice, according to CIC. If we lose the services of any senior management, we may not
be able to identify suitable or qualified replacements and may incur extra cost to recruit and train
new personnel, which could severely disrupt our business and prospects and delay our expansion
strategies and plans. Furthermore, if any of our senior management or key employees joins a
competitor or forms a company that competes with us directly or indirectly, we may lose a
significant number of our existing pharmacy customers and consumers to such competitor and
potentially lose our substantial R&D achievements, which could have a material adverse effect on
our profitability, financial performance, results of operations and business prospects.
In addition, our future success depends, to a significant extent, on our ability to recruit, train
and retain qualified personnel, particularly the licensed physicians and licensed pharmacists on our
medical team and our key personnel for technology, management and sales. As our business grows,
we intend to hire additional qualified employees to support our business operations and planned
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RISK FACTORS
expansion. In addition, we believe that the successful execution of our Fang strategy and the
expansion of our capability of providing quality health management services and healthcare
solutions depend on our ability to maintain and expand our pool of qualified medical professionals.
However, we cannot assure you that our key personnel would be attracted to, or stay at, our Group.
For example, as our part-time physicians have responsibilities at other medical institutions, they
may not be willing to set aside additional hours from their schedule to participate in our online
healthcare services. Additionally, they may not share our vision about online healthcare services
and may still stick to their traditional practices.
Our industry is characterized by intense competition and high demand for talent and labor.
Therefore, we cannot assure you that we will be able to attract or retain qualified staff or other
highly skilled employees that we will need to achieve our strategic objectives. We have observed
an overall tightening of the labor market and an emerging trend of shortage of labor supply. Along
with China’s economic development, there has been an increase in labor costs, particularly for
highly educated talents in the top-tier cities where we conduct our business operations, such as
Beijing. Therefore, to maintain and enhance our competitiveness, we may need to adjust certain
elements of our operations in response to evolving market conditions and business needs from time
to time. In addition, our ability to train and integrate new employees into our operations may also
be limited and may not keep up with the growth of our business or the demand for maintaining our
corporate culture on a timely fashion, or at all. Particularly in our omni-channel pharmaceutical
retail business category, we depend on a significant number of staff and personnel, and failure to
retain a stable and dedicated labor force by us may result in disruption to, or delay in, products
and services provided to our customers. We have observed a generally tightening and increasingly
competitive labor market. We have experienced, and expect to continue to experience, increases in
labor costs due to increases in salary, social benefits, changing government policies and employee
headcount. We also compete with other companies in our industry and other labor-intensive
industries for labor, and we may not be able to offer competitive salary and benefit packages
compared to them. Failure to obtain stable and dedicated personnel may result in our
underperformance. Any failure to address these risks and uncertainties could materially and
adversely affect our results of operations and business prospects.
We face concentration or counterparty risks in our online pharmaceutical retail operations as

we rely on third-party O2O and B2C platforms for a substantial portion of our online
operations.
We carry out our O2O retail business and B2C retail business on leading online O2O and
B2C service platforms in China, including Meituan, Tmall, JD and Baidu Health, in addition to our
111Yao App and our WeChat mini program. During the Track Record Period, a majority of our
O2O and B2C pharmaceutical retail revenue was generated from offering our products on
third-party online platforms. As such, we may face concentration or counterparty risks from these
third-party collaboration partners. These third-party platforms enable us to effectively extend our
customer outreach and enhance our influence. To the extent that we fail to effectively cooperate
with such third-party platforms, our ability to attract or retain our customer traffic may be
adversely affected. We cannot assure you that our relationship with these third-party collaboration
partners will not deteriorate. In addition, there may be a decline in the public perception of their
reputation, particularly those platforms of relatively smaller size or with shorter operating history,
or there may be an insufficient number of other third-party online platforms in the event we need
to expand our online operations or replace current ones. In addition, certain platforms with which
we cooperate carry out their own omni-channel pharmaceutical retail business on the same
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RISK FACTORS
platforms, which may directly or indirectly compete with our business and may therefore impact,
limit or even cannibalise our sales on the respective platforms, materially and adversely affecting
our business, financial condition and results of operations.
During the Track Record Period, our online operations grew significantly as we were
dedicated to expanding our omni-channel sales network and continuously building our capability in
offering online medical consultation services. Our growth was supported by policies in China
encouraging the integration of online and offline healthcare service offerings in the form of
“Internet + healthcare” in the last decade. However, it is uncertain whether there will continue to
be policy developments in China encouraging online healthcare services. It is also unclear whether
our product and service offerings online will achieve and sustain high levels of market demand,
and consumer acceptance. Our success will depend to a substantial extent on the willingness of
customers to use, and to increase the frequency and extent of their utilization of, our omni-channel
product and service offerings, as well as on our ability to demonstrate the value of our products
and services to customers. In addition, individual and industry concerns regarding patient
confidentiality and privacy in the context of online healthcare services could limit market
acceptance of our products and services offered online and the success of our online business
operations. We also cannot assure you that we will be able to maintain the versatility and quality
of our products and services, to navigate the complex and layered regulatory requirements, to
effectively manage customers across our different sales channels and business categories in order
to achieve cross-selling, and to anticipate and keep up with changing market trends. If we fail to
address any of these risks, our business, financial condition and results of operations could be
Part of our success is built upon the sales of TCM products and provision of TCM services,
the receptiveness of which in the PRC may change.
We sell various TCM healthcare products including our branded and third-party brand TCM
medicinal products, TCM decoction pieces and other TCM healthcare and wellness products. In
addition, we offer a wide variety of TCM healthcare services including our traditional Chinese
medical consultations and TCM physiotherapy services. Therefore, our continued success depends
on the popularity of and demand for TCM products and services in China. However, customer
preferences and demand may shift away from these products and services for various reasons
including, without limitation, customers’ evolving perception about the efficiency, efficacy and
safety of TCM products and services, or negative scientific research, findings or publicity
regarding TCM products and services among our offerings. Customers may find certain alternative
products or services, including without limitation, products and services offered based on western
medical theories, to be more suitable to address their diverse health needs. In addition, we cannot
assure you that future scientific research or academic conclusions on the efficacy of TCM will be
favorable to our TCM product or service offerings, or consistent with existing scientific research
or findings that are favorable to the particular product or service offering. Scientific research
reports, academic conclusions or publications, whether accurate or not, may pose question marks
to the safety and efficacy of TCM products and services, whether provided by us or other
companies in the market. Such adverse publicity could arise even if the adverse effects associated
with such services and products resulted from customers’ failure to consume such services or
products appropriately or as directed. Any such publicity, findings or conclusions may have a
material adverse effect on the demand for TCM products and services provided by us, and our
business, financial condition and results of operations.
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We rely on our suppliers for the procurement of various medicinal, healthcare and wellness
products and we may have limited control over them, and our revenue and results of
operations will be adversely affected if we fail to maintain and manage these relationships
properly.
In our omni-channel pharmaceutical retail business, our product offerings cover prescription
and OTC drugs, TCM decoction pieces, medical devices, wellness products and other products.
The healthcare products sold in our omni-channel pharmaceutical retail business, including our
branded products, are all sourced from our suppliers, including large, medium and small
pharmaceutical and medical device manufacturers and distribution enterprises. Our business,
financial condition and results of operations could be materially and adversely impacted if (i) we
are unable to continue sourcing sufficient volumes of quality healthcare products from our current
suppliers, (ii) our suppliers fail to supply sufficient quantities of healthcare products according to
our requirements with respect to product quality or delivery time, or (iii) our suppliers breach their
terms of contract with us or cease their collaborations with us for reasons outside of our control,
as we will have limited remedies and may be unable to source alternative supplies in a timely
manner, if at all. As our business continues to develop and scale up, we cannot guarantee that we
will be able to expand our supply network to include new suppliers on reasonable prices and
terms.
During the Track Record Period, we entered into certain supply agreements with our suppliers
that contained favorable pricing terms vis-à-vis our competitors and allow certain provisions to be
adjusted for changing market conditions in our favor. We cannot assure you that we will be able to
maintain our existing relationships with these suppliers and remain able to procure products in
such quantities and prices as we used to, if at all. A termination of or modification to any of these
relationships could adversely affect our product supply and have a material adverse effect on our
business, financial condition and results of operation. Moreover, raw materials of our procured
products may be susceptible to supply shortages and price volatility, particularly during fluctuating
market conditions such as those brought about by the COVID-19 pandemic. Any supply shortages
or loss of any such source of supply could adversely affect our reputation, financials, results of our
operations and business prospects.
We may also be exposed to liabilities due to product quality issues associated with our
suppliers which are outside of our control. Although we impose stringent quality control measures
in product storage, display and maintenance at our offline pharmacies, we cannot be certain that
our supplies are always free of quality issues or that we can always protect ourselves from
procuring counterfeit products. If we put defective, counterfeit or sub-standard products on our
shelves without becoming aware of the problems in time, we may be subject to claims relating to
product liability, our reputation may also be harmed, and we may have to face investigations or
penalties by relevant authorities, any of which may adversely affect our business, financial
condition and results of operations. In the event that our products are found to be sub-standard,
defective or counterfeit, we may need to resolve such issues with our suppliers or, if necessary,
terminate our supply agreements with those suppliers, which can result in additional financial
burdens on us and divert our management’s attention from our daily operations, and we may fail to
find suitable alternative suppliers on commercially acceptable terms, if at all, which could
materially and adversely affect our financial condition, operating results and business operations.
Additionally, our suppliers are independent third parties that are subject to their own
operational and financial risks out of our control. If the supply of healthcare products is
interrupted for whatever reason, including but not limited to supply shortages, supplier quality
issues, supplier production disruption, or the closure or liquidation of our suppliers, our business,
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RISK FACTORS
financial condition, results of operations and prospects may be materially and adversely affected.
Changes in business conditions, force majeures, regulatory actions and other factors that are
beyond our control or that we do not presently anticipate could also affect our suppliers’ ability to
deliver healthcare products to us on a timely basis. In the event of supply price increases, we
cannot be certain that we can pass such cost increase to our customers, which could adversely
impact our profitability. In addition, we obtained favorable payment terms from our suppliers
during the Track Record Period. In the event that we cease to obtain such favorable procurement
terms, our requirements for working capital may increase. Any of the foregoing could materially
and adversely affect our business, financial condition and results of operations.
For our historical procurement from our major suppliers, see “Business — Suppliers and
Procurement.” In the event that we cannot continue our procurement from our key suppliers or
their business relationship with us deteriorates, particularly our five largest suppliers, our business,
The successful operation of our omni-channel pharmaceutical retail business is conditioned

on the effective management of our inventory levels.
For our omni-channel pharmaceutical retail and pharmaceutical wholesale business, we need
to manage a significant volume of inventory effectively. Therefore, it is crucial that we ensure
optimal inventory levels. We depend on our demand forecasts for various kinds of products to
make procurement decisions and to manage our inventories. Demand for products, however, may
change significantly between the time inventory is ordered and the date by which we target to sell
it. Market demand may be influenced by seasonality, introduction of new products, changes in
product life cycles and pricing, product defects, manufacturer back orders, changes in customer
spending patterns, and other issues encountered on the supply side, as well as the volatility of the
economic environment in China, and the failure of customers to order products in such quantities
as we expect.
In addition, when we begin to sell a new product, it may be difficult to establish supplier
relationships, determine appropriate product selection, and accurately forecast demand. The
acquisition of certain types of inventory may require significant lead time and prepayment, and
they may not be returnable. Besides, failure to effectively manage our inventory may subject us to
an increased risk of inventory waste and reduction in inventory values. Inventory levels in excess
of customer demand may result in inventory write-downs, expiration of products or an increase in
inventory-holding costs and a potential negative effect on our liquidity. If we are required to lower
sales prices in order to increase our sales and reduce the levels of our excessive inventory, our
gross profit margins may reduce. In addition, as we plan to continue expanding our product and
service offerings, we expect to include more products in our inventory, which will make it more
challenging for us to manage our inventory effectively and will put more pressure on our
warehousing system. High inventory levels may also require us to commit substantial financial and
capital resources, keeping us from engaging that capital for other purposes, such as to continue to
scale up our business and enhance our operational efficiency. In the event of inventory shortage
due to an underestimation of customer demand or as a result of supply interruptions or supply
failures, we may have to acquire inventories at higher costs and/or deal with disappointed
customers with unfulfilled purchase orders, leading not only to a negative impact on our customer
relationships but also our profitability. If we fail to anticipate or properly address any of the
above-mentioned risks and challenges, our business and operations may be harmed. Particularly,
we cannot assure you that we will be able to maintain proper inventory levels for our
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RISK FACTORS
omni-channel pharmaceutical retail and pharmaceutical wholesale business at all times. Any such
failure may have a material and adverse effect on our business, financial condition and results of
operations.
We have incurred net losses in the past and may not be able to maintain our revenue or
control our costs and expenses.
We incurred net losses of RMB7.8 million and RMB41.1 million for the years ended
December 31, 2020 and 2021, respectively. For the nine months ended September 30, 2022, we
recorded a net profit of RMB0.8 million. See “Financial Information — Review of Historical
Results of Operations” for more details. We may not be able to achieve and maintain profitability
if our revenue cannot continue to grow in a cost-effective way. We may also incur net losses in the
future for various reasons, many of which may be beyond our control. Additionally, we may
encounter unforeseen expenses, operating delays, or other unknown factors that may result in net
losses in the future. If our cost of revenue and expenses continuously exceed our revenue, our
business, financial condition and results of operations may be materially and adversely affected
and we may not be able to achieve or maintain profitability.
Pharmaceutical and medical products that we sell may be subject to evolving pricing
restrictions, monitoring, control and competition, which may adversely affect our
profitability.
Certain pharmaceutical products are currently subject to a relatively inflexible pricing system
adopted by medical insurance bureaus and relevant authorities. Historically, some of
pharmaceutical products have been subject to government price controls in the form of fixed retail
prices or retail price ceilings and periodic downward adjustments imposed by the NDRC and other
authorities. Prior to the lifting of government price controls on pharmaceutical products, the prices
of prescription drugs in the PRC had been determined by China’s centralized tender process, while
OTC drugs in China had been priced based on purely commercial negotiations factoring in market
elements such as brand recognition, market competition and consumer demand. According to the
“14th Five-Year Plan for National Health Protection” 《 ( 「十四五」全民醫療保障規劃》)
promulgated by the General Office of the State Council on September 23, 2021, China will extend
its implementation of a national drug price monitoring program to private medical institutions and
pharmaceutical retailers, in addition to public hospitals. We cannot guarantee that we will not be
subject to increased restrictions or monitoring on the pricing of our pharmaceutical products in the
future, which may adversely affect our profitability.
In addition, as of September 30, 2022, a substantial majority of our offline pharmacies were
qualified as Designated Retail Pharmacies, which are allowed to accept customer payments for the
sales of medicinal products directly billed to the national medical insurance scheme. See “Business
— Payment Methods — National Medical Insurance Scheme” for more details. For products billed
directly to the national medical insurance scheme, we are required to price them in accordance
with the pricing guidelines, price caps and/or markup caps set by the relevant local healthcare
authorities. We cannot predict if the PRC government will change the pricing guidelines, price
caps and/or markup caps in the future, nor can we be sure if additional products that we sell may
become subject to more stringent limits imposed by China’s national medical insurance scheme. In
the event that the pricing controls related to the national medical insurance scheme become more
stringent or applicable to a wider selection of products available in our retail network, our
business, financial condition and results of operations could be materially and adversely affected.
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Furthermore, in 2019, the State Council and other governmental authorities in China issued a
series of policies to strengthen the reform of China’s medical and healthcare system. According to
the Notice by the General Office of the State Council of Issuing the Pilot Program of the
Centralized Procurement and Use of Drugs Organized by the State 《 ( 國務院辦公廳關於印發國家
組織藥品集中採購和使用試點方案的通知》） and the Implementation Opinions on Region
Expansion of the Organization of Centralized Procurement and Use of Drugs by the State 《 ( 關於
國家組織藥品集中採購和使用試點擴大區域範圍的實施意見》), the PRC government planned to
organize centralized procurement and use certain types of pilot drugs to lower drug prices, reduce
the burden on patients of drug costs, and lower the transaction costs of pharmaceutical enterprises.
The Guidance on Improving “Internet +” Medical Service Price and Medical Insurance Payment
Policies issued by the National Healthcare Security Administration proposed to improve project
management, optimize the pricing mechanism and clarify the payment policy of
“Internet+” medical services. As a result of the above policies, even though transactional costs of
pharmaceutical enterprises may be lowered and the amounts of relevant drugs purchased may
increase, selling prices of relevant drugs may also drop and market competition within the
pharmaceutical circulation industry may increase, which may materially and adversely affect our
Any lack of requisite approvals, licenses or permits applicable to our business may have a
material and adverse effect on our business, financial condition, results of operations and
growth prospects.
Our business is subject to governmental supervision and regulation by various PRC

governmental authorities and local regulatory authorities. Such government authorities promulgate
and enforce laws and regulations that cover a variety of our business activities, such as the
omni-channel retail of pharmaceutical and healthcare products, sales of food, provision of Internet
information, online healthcare services and online advertisement, among other things. These
regulations in general regulate the entry into, the permitted scope of, as well as approvals,
licenses, permits, filings and registrations for, the relevant business activities. In addition, we are
required to obtain a series of licenses, permits, certificates or approvals for our newly commenced
or acquired businesses, such as those relating to the operation of our Internet hospital, sales of
pharmaceutical products online and offline, sales of medical devices, sales of food products,
provision of Internet information, online advertisement and fire safety, the failure to comply with
which may subject us to the corresponding administrative procedures or even penalties, including
monetary fines and the suspension of operations in the worst-case scenario. As our stores are based
and operated in the PRC, we are subject to a series of laws, rules and regulations in operating
them, in particular, the GSP. The GSP sets forth strict requirements in relation to the supply of
pharmaceutical products, the storage and display of relative inventories in the storefronts, and
penalties over non-compliance of the GSP, including a potential fine, temporary business
suspension and/or revocation of the Pharmaceutical Operation License 《 ( 藥品經營許可證》) in the
event of non-correction after a rectification order by the relevant authority. We cannot guarantee
you that our employees or franchisees will fully comply with GSP requirements or other applicable
laws, rules and regulations in relation to the operation of our retail pharmacies. We cannot assure
you that we will be able to prevent or timely detect such misconduct. In such case, we may receive
fines, warnings, or even lose relevant licenses and permits, as a result, our business operation and
reputation may be materially affected.
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RISK FACTORS
Due to the uncertainties in the regulatory environment of the industries in which we operate,
there can be no assurance that we have obtained or applied for or completed all the approvals,
permits, licenses, filings and registrations required for conducting our business and all activities in
the PRC, or that we would be able to maintain or renew or pass the annual inspections (as
applicable) for our existing approvals, permits and licenses or obtain any new approvals, permits
and licenses or complete filings and registrations in a timely manner, if required, by any future
laws or regulations. If we fail to obtain and maintain approvals, licenses or permits or complete
filings and registrations required for our business, or to comply with relevant laws and regulations,
we could be subject to liabilities, fines, penalties and operational disruptions, and could be
required to modify our business model, which could materially and adversely affect our business,
A large amount of data is collected and processed in our daily business operations. We are
subject to risks relating to improper use or disclosure of such data, security breaches or
attacks against our platform, and any potential reach or failure to protect confidential and
proprietary information.
In our omni-channel product sales and provision of medical and healthcare services, a large
amount of personal data is generated as we collect and maintain personal and medical information
of our customers with their prior consent. Our use and processing of such personal data is within
the scope of authorization granted by our customers. See “Business — Cybersecurity, Data Privacy
and Personal Information Protection.” The customer information that we collect in our daily
business operations mainly includes real names and online usernames, ID numbers, medical
records, purchase records, cell phone numbers, delivery addresses and activity records, which are
processed in our self-developed middle-office data centers and stored in our back-office cloud
servers provided by third-party cloud server service providers. We face risks inherent in handling
large volumes of data and in securing and protecting such data from leakage and/or unauthorized
or inappropriate use by us or our third-party service providers, including, in particular: (i) properly
protecting the information and data acquired from our customers and hosting such information and
data in our system without external attacks or internal breaches and leaks; (ii) adequately
addressing privacy-related concerns of customers; and (iii) sufficiently complying with the
constantly changing data protection and cybersecurity laws, rules and regulations. Regulatory
requirements regarding the protection of such data are constantly evolving and can be subject to
significant change, making the extent of our responsibility in that regard uncertain.
In recent years, privacy and data protection have become increasing regulatory focuses of
government authorities across the world. The PRC government has enacted a series of laws,
regulations and governmental policies for the protection of personal data, cybersecurity and data
security in the past few years. See “Regulatory Overview — Regulations Relating to Internet
Security”, “Regulatory Overview — Regulations Relating to Data Security”, and “Regulatory
Overview — Regulations Relating to Personal Information or Data Protection” for details. Such
regulatory requirements on cybersecurity, data security and personal information protection are
constantly evolving and can be subject to varying interpretations, or significant changes, resulting
in uncertainties about the scope of our responsibilities in that regard.
Though we have adopted various measures to ensure compliance with privacy and data
protection regulations and secure the safety of our platform as elaborated in “Business —
Cybersecurity, Data Privacy and Personal Information Protection”, we cannot assure you that we
will be able to comply with all aspects of all of the cybersecurity, data and privacy protection laws
and regulations in the PRC as they are complex and evolving and are subject to interpretation by
the relevant authorities. Any actual or perceived noncompliance with the relevant cybersecurity,
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RISK FACTORS
data security or personal information protection relating laws and regulations, may result in
administrative penalties, including fines, a shut-down of our business, suspension of our solutions
and services and revocation of requisite licenses, as well as reputational damage or legal
proceedings or actions against us, which may result in material adverse effects on our business,
financial condition or results of operations.
Furthermore, our security control measures may be insufficient to prevent the improper
leakage of personal data and confidential information. Additionally, we cannot assure you that we
will be able to address any vulnerabilities in our systems that we may become aware of in the
future. In particular, we could be subject to attacks on our systems by third parties or fraudulent or
inappropriate behaviors by our employees, third-party providers or other business partners. Third
parties may also gain access to our data using computer malware, viruses, spamming, phishing
attacks or other means. A security breach that leads to leakage of data and information of our
customers, even though anonymized, or crash of our systems, could still subject us to legal
liabilities, regulatory sanctions, reputational damage and loss of customer confidence. In addition,
any system crash due to our misconduct, data breaches or any misconduct during the process of
collection, analysis and storage of data, could result in a violation of applicable cybersecurity
protection or data privacy and protection laws and regulations in China, and subject us to
regulatory actions, investigations or litigations.
We may need to obtain the approval or satisfy other regulatory or administrative

requirements by the CAC or other regulatory authorities for this [REDACTED] under
applicable PRC laws and regulations.
The Cybersecurity Law, which became effective in June 2017, created national-level
cybersecurity protection framework for “network operators”, which may potentially include all
organizations in China that provide services over the internet or through other types of information
network. The Data Security Law, effective from September 1, 2021, provides for an overall
security review procedure for the data processing activities that affect or may affect national
security. On December 28, 2021, the CAC, together with 12 other departments, promulgated the
Cybersecurity Review Measures 《 ( 網絡安全審查辦法》, or the “New CAC Measures”), which
came into effect on February 15, 2022 and repealed the previous version, the Measures for
Cybersecurity Review (the “CAC Measures”), promulgated on April 13, 2020. According to the
New CAC Measures, critical information infrastructure operators purchasing network products and
services and Internet platform operators carrying out data processing activities that affect or may
affect national security shall apply for a cybersecurity review. Under the New CAC Measures,
Internet platform operators holding personal information of more than one million users seeking to
be listed in foreign countries must apply for a cybersecurity review as well. Hong Kong is a part
of China and does not fall within the definition of “foreign countries” in the provision. Therefore,
even though we possess more than one million users’ personal information, the requirement is not
applicable to us given that we are seeking to be [REDACTED] in Hong Kong instead of foreign
countries. Considering that (i) we are not recognized as a critical information infrastructure
operator by any competent authority according to the Cybersecurity Law, and the data we are
processing does not belong to any effective catalog of important data published by relevant
authority according to the Data Security Law; (ii) as of the Latest Practicable Date, we had not
been involved in any investigations or inquiries by the CAC, we had not received any relevant
notice, warning, or sanctions relating to cybersecurity review, and we believe that the New CAC
Measures will not materially or adversely affect our business operations. However, we cannot be
sure that we will always be found compliant under the New CAC Measures. If we are not able to
comply with the requirements under the New CAC Measures in a timely manner, or at all, we may
be subject to
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RISK FACTORS
government enforcement actions and investigations, fines, penalties, suspension of our

non-compliant operations, or removal of our app from the relevant application stores, among other
sanctions, which could materially and adversely affect our business and results of operations.
On July 7, 2022, the CAC promulgated the Measures for Data Cross-border Transfer Security
Assessment 《( 數據出境安全評估辦法》), which came into effect on September 1, 2022, specifying
the regulatory requirements on data processors to provide important data and personal information
collected and generated in the course of their operations within China to overseas. To provide data
abroad under any of the following circumstances, a data processor shall apply to the CAC for data
cross-border transfer security assessment through the local CAC at the provincial level when: (i)
the data processor transfers important data abroad, (ii) the critical information infrastructure
operator or the data processor that has processed the personal information of over one million
people transfers personal information abroad, (iii) the data processor that has provided personal
information of 100,000 persons or sensitive personal information of 10,000 persons in total to
overseas since January 1 of the previous year transfers personal information abroad, and (iv) any
other circumstance where an application for data cross-border transfer security assessment is
required by the CAC.
On November 14, 2021, the CAC issued the Draft Regulations on Network Data Security
Management 《 ( 網絡數據安全管理條例(徵求意見稿)》) (the “Draft Regulations”), which
differentiates “listing in Hong Kong” from “listing in a foreign country.” Nevertheless, data
processors seeking a listing in Hong Kong that affects or may affect national security should apply
for cybersecurity review, according to the Draft Regulations. On July 1, 2015, the Standing
Committee of the National People’s Congress issued the PRC National Security Law, which
became effective on the same date. National security refers to a status in which the regime,
sovereignty, unity, territorial integrity, welfare of the people, sustainable economic and social
development, and other vital interests of the state are not in danger and not threatened internally or
externally and the regime has the ability to maintain a sustained security status. However, the
criteria for determining “affect or may affect national security,” which is the term used in the Draft
Regulations, remains uncertain and its interpretation is still subject to further clarification by
competent authority. Due to the uncertainty on the promulgation, interpretation and application of
the Draft Regulations, there can be no assurance that our [REDACTED] on the Stock Exchange as
well as our data processing activities will not be deemed to affect or may affect national security.
If the [REDACTED] on the Stock Exchange were deemed to affect or may affect national security
and the Draft regulations came into effective as the current version, and we failed to conduct the
cybersecurity review according to the relevant laws and regulations, we could be requested to take
rectification actions, subject to disciplinary warning, and/or be subject to an administrative penalty
ranging from RMB50,000 to RMB0.5 million for any single violation. In addition, if such
violation causes serious consequences, we may be subject to more severe penalties, such as
revocation of relevant practicing licenses and permits in accordance to the Draft Regulations. In
addition, if for any reason we fail to meet relevant requirements of the Draft Regulations when it
becomes effective, we might be subject to warnings, penalties, or even order to suspension of our
business or revocation of our practicing licenses and permits, which could materially and adversely
affect our business, financial condition and results of operations.
Because the Cybersecurity Law and relevant regulations, rules and measures are relatively
new, there are uncertainties as to the interpretation and application of these laws and regulations,
and it is possible that our data protection practices are or will be inconsistent with regulatory
requirements. Any violation of the provisions and requirements under the Cybersecurity Law and
other relevant regulations, rules and measures may subject us to warnings, fines, confiscation of
illegal gains, revocation of licenses, suspension of business, shutting down of websites or,
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RISK FACTORS
ultimately, criminal liabilities. We may be obliged to incur substantial expenses or to substantially

alter or change our practice in our compliance efforts, which could materially and adversely harm
our business.
We face the risks of product liability claims, which could cause us to incur significant
expenses and be liable for significant damages outside the scope of our insurance coverage.
We face various risks and challenges in the marketing, promoting, distributing and offering of
healthcare products and services in China. If our products or services are perceived or proven to be
sub-standard, ineffective, defective, or non-compliant with laws and regulations, we may face
customer claims, proceedings, penalties or sanctions. We may also be subject to allegations of
having engaged in practices such as improper filling of prescriptions, sale of counterfeit and
sub-standard medicines or other healthcare products or providing inadequate warnings or
insufficient or misleading disclosures on side effects. In addition, if our customers misuse the
products or services we offer, even if we have attached proper instructions, we could become
subject to personal injury or product liability claims, and we may need to pay for damages or
settlement amounts or even be subject to further civil or criminal liabilities. In addition, we may
be required to suspend or cease sales of the relevant products and/or offerings of the relevant
services. If we are unable to resolve such matters quickly and efficiently or successfully defend
ourselves against such claims, if at all, our operations will be severely affected, and our financial
condition and business prospects may be materially and adversely affected.
Negative publicity could also increase product liability claims against us, impair customers’
confidence in us, cause a decrease in our sales volume and lead to fines and penalties imposed by
regulatory authorities. In addition, as we sell healthcare and wellness products in addition to our
portfolio of medicinal products, including our branded products, we cannot assure you that these
products will always be effective, if at all. The public’s negative perception of the effectiveness of
healthcare and wellness products in China may harm customers’ reception of our healthcare and
wellness products and damage our brand image. We do not carry product liability insurance, which
is in line with industry practice, according to CIC. See “Business — Insurance.” During the Track
Record Period and up to the Latest Practicable Date, we had not received any product liability
claims that would result in a material adverse effect on our business, financial condition and
results of operations. Any product liability claims made against us could be costly to defend
against, result in substantial damage awards against us and distract our management team from our
daily operations, which could materially and adversely affect our financial condition, business
prospects and results of operations. Even though sometimes such product liability claims may be
attributable to our suppliers or other collaboration partners, we might be subject to joint and
several liability as the retailer and we cannot guarantee to obtain full indemnification from them, if
at all. In such event, our reputation may be severely harmed and our financial condition, business
prospects and results of operations may be materially and adversely affected.
We face risks of medical liability claims in relation to our omni-channel sales of

pharmaceutical and healthcare products and our provision of medical consultation services,
which could cause us to incur significant expenses and be liable for significant damages
outside the scope of our insurance coverage.
We face risks of medical liability claims against us and our medical professionals, in
connection with our offering of medical consultation, prescription review and prescription renewal
services, and also other various TCM physiotherapy services in our wellness management service
business category. As of September 30, 2022, our team of medical professionals comprised 185
licensed physicians and 1,088 licensed pharmacists. Our medical team may provide sub-standard
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RISK FACTORS
services, mishandle sensitive or private patient information, or otherwise engage in certain

misconduct or commit medical malpractice outside of our control, which could in turn subject us
to medical liability or professional liability claims. In addition, there can be no assurance that our
risk management procedures will be sufficient to monitor the performance and control the quality
of the work of our physicians. As of the Latest Practicable Date, we had not received any medical
liability claim that would result in a material adverse effect on our business, financial condition
and results of operations. However, in the event that our physicians fail to comply with their
employment or contractual obligations and applicable laws in relation to the provision of our
online consultation services, our customer experience could deteriorate, and we may suffer as a
result of any actual or alleged misconduct by them, which could materially and adversely affect
our business, financial condition, results of operations and reputation.
As an essential part of our omni-channel pharmaceutical retail business operated both offline
and online, we rely on the expertise, experience and quality service of our licensed pharmacists.
Our pharmacists may, however, provide sub-standard services, mishandle sensitive information, or
engage in other misconduct, which could also subject us to medical liability claims. Our business,
financial condition, results of operations and reputation may be materially and adversely affected
if any such claims are made against us in connection with these actions.
We carry medical liability insurance covering medical liability claims against us in relation to
incidents that may occur at our Internet hospital and our medical clinics. See “Business —
Insurance” for further details on our insurance coverage. However, our current medical liability
insurance coverage may not be adequate to protect us from all possible medical liability claims,
while successful medical liability claims could result in substantial damage awards against us and
divert the attention of our management, our licensed physicians and our licensed pharmacists from
our business operations, which could have a material adverse effect on our reputation, business,
financial condition and results of operations. In the future, as we expand our offerings of products
and services, the insurance premiums may increase significantly, placing additional financial
burdens on us and may materially and adversely affect our business, financial condition and results
of operations.
We face challenges and risks associated with the expansion in our product and service
offerings.
As our offline pharmaceutical retail operations started in Gansu Province more than 20 years
ago, we have expanded our offerings from the initial medicinal products to include a full spectrum
of product and service offerings, covering prescription and OTC drugs, TCM decoction pieces,
medical devices, wellness products and other products, and service offerings including medical
consultation, prescription review and renewal and other preventive care and wellness management
services. As our business expands into such diverse product and service offering categories, we are
subject to new risks and challenges inherent in these new categories. For example, in the process
of learning and acquiring the market appetite for these products and services, we may need to
gradually accumulate customer data relating to these products and services, which may make it
difficult for us to anticipate market demand and customer preferences, which may in turn may
result in inventory build-up and/or possible inventory write-down, customer disappointment and
dissatisfaction. It may also make it more difficult for us to maintain adequate quality control
procedures and ensure the proper handling, storage and delivery of our products and the quality
and customer reception of our products and services. On certain new products or services, we may
have to deal with higher return rates, receive more customer complaints and even be involved in
product liability claims or professional liability claims in association with our product sales and
service offerings, which would harm our brand and reputation and our financial performance.
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Furthermore, we may not have much purchasing power in new categories of products and we may
not be able to negotiate favorable terms with suppliers. We may need to price aggressively to gain
market share or remain competitive in new categories of products. It may be difficult for us to
achieve profitability in the new product categories and our profit margin, if any, may be lower than
we anticipate, which would adversely affect our overall profitability and results of operations. We
may not be able to replicate our historical success in our omni-channel sales of healthcare products
to our new categories of products and services offerings, such as our decocting services or home
care services. For further details, see “Business — Our Strategies.” Our new services offering may
not succeed or generate results as we anticipate. We cannot assure you that we will be able to
recoup our investments in introducing these new product categories and service offerings.
Our prescription drugs sales are subject to stringent governmental and regulatory scrutiny,
which may expose us to risks and challenges.
Our prescription drug sales are subject to stringent scrutiny by relevant governmental and
regulatory authorities. In particular, under the Administrative Measures for the Supervision and
Administration of Circulation of Pharmaceuticals promulgated 《 ( 藥品流通監督管理辦法》) by the
NMPA (then CFDA) in 2007, a company is prohibited from either selling prescription drugs to
consumers without prescription or selling prescription drugs via Internet or by post. A company in
violation of such prohibitions will be instructed to rectify the violation, and may receive a
disciplinary warning, and/or be subject to an administrative penalty of no more than RMB30,000
per violation. The newly revised Drug Administration Law of the People’s Republic of China, or
the Drug Administration Law, abolishes the restriction on online sale of prescription drugs and
adopts the principle of keeping online and offline sales consistent. In November 2020, the NMPA
published for public comment the Draft Measures for the Supervision and Administration of
Online Pharmaceuticals Sales 《 ( 藥品網絡銷售監督管理辦法(徵求意見稿)》), aiming to enhance
the supervision of online pharmaceutical sales and related platform services. On August 3, 2022,
the NMPA issued the Measures for the Supervision and Administration of Online Pharmaceutical
Sales (the “2022 Measures”) 《 ( 藥品網絡銷售監督管理辦法》), which took effect on December 1,
2022, aiming to enhance the supervision of online pharmaceutical sales and related platform
services. The 2022 Measures provide specific and explicit rules for the online sales of prescription
drugs, which are considered to be more conducive to online prescription drug sellers including us,
but also impose additional requirements for us to maintain compliance. The 2022 Measures
provide that, among others, online prescription drug sellers shall (i) ensure the accuracy and
reliability of the source of e-prescription, (ii) keep records of any e-prescription for at least five
years and no less than one year after the expiration date of the prescription drugs, and (iii) disclose
safety warnings including “prescription drugs should only be purchased and used with
prescriptions and guidance of licensed pharmacists” when displaying information of prescription
drugs. As advised by our PRC Legal Advisors, during the Track Record Period and up to the
Latest Practicable Date, we complied with the 2022 Measures in all material respects, and the 2022
Measures would not have a significant impact on our business operations or financial performance.
It remains uncertain that our offline and online sales of prescription drugs are and will be in
full compliance with the relevant laws and regulations or any new laws and regulations that may
be promulgated in the future, which are evolving and subject to changes. In particular, as we
generate a large volume of medical consultations through the operation of our Internet hospital and
offline medical clinics, we may fail to effectively detect prescription-related problems, such as
faulty prescription and over-prescription, especially when our physicians conduct medical
consultations on third-party platforms. While physicians at Internet hospitals are not allowed to
issue initial prescriptions and may only issue follow-up prescriptions for patients suffering
common and chronic disease who have already obtained initial prescriptions from an offline
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medical institution, we cannot assure you that our physicians will strictly follow such
requirements. In addition, as relevant PRC laws and regulations require pharmacists to review and
confirm a prescription issued by a physician before releasing the relevant medications to the
patient, we cannot guarantee that our pharmacists will strictly follow such requirements. Although
we adopt strict internal policies aiming to prevent prescription-related problems arising, we cannot
be certain that our physicians and pharmacists will always comply with such policies. Any failure
to comply with such laws and regulations could subject us to disciplinary warnings and
administrative penalties, which may in turn harm our reputation as a reliable medical service
provider and materially and adversely affect our business, results of operations, financial condition
and prospects. Additionally, we cannot assure you that our strict measures and mechanisms will be
effective or sufficient. There may be loopholes in our strict measures and such measures may not
be able to detect prescriptions abuse or fraudulent orders effectively and in a timely manner. As
the methods used to bypass or cheat our strict measures may change frequently and may not be
recognized until they succeed, we may be unable to anticipate these methods or to implement
adequate preventative measures. Failure to effectively screen the sale of prescription drugs could
expose us to liability under PRC laws and regulations, which may result in significant liability and
our business, financial condition and results of operations could be materially and adversely
affected.
Our warehouses and the logistics and courier services provided by our suppliers and other
third-party service providers are sensitive to disruptions to their operations, which could
have a material adverse effect on our business, financial condition and results of operations.
As of September 30, 2022, we operated three warehousing facilities, one of which was
operated on our own properties and two of which were operated on leased properties. Natural
disasters or other unanticipated catastrophic events, including power interruptions, water shortage,
storms, fires, earthquakes, terrorist attacks and wars, changes in government planning for the land
underlying these warehouses, as well as challenges from third parties or government authorities to
our right to use such warehouses, could interrupt the operation of these warehouses, destroy any
inventory located therein, and significantly impair our business operations. Furthermore, the leases
we have agreed for our warehousing and logistics facilities that we use could be challenged by
third parties or government authorities. If any of the foregoing were to occur, we may not be able
to find suitable replacement sites on terms acceptable to us on a timely basis, or at all, and our
business, financial condition and results of operations could be materially and adversely affected.
In addition, we rely on third party logistics service providers and courier services to deliver
healthcare products to our customers in our O2O and B2C retail businesses. Logistics services that
meet our requirements for guaranteed storage safety, optimal and flexible space utilization and
high operating efficiency are in short supply. In addition, our logistics and courier delivery service
providers may run into service interruptions due to events that are beyond our control or their
control, such as inclement weather, natural disasters, virus outbreaks, transportation disruptions or
labor unrest. Further, if the couriers we collaborate with fail to comply with applicable rules and
regulations in China, their services may be materially and adversely affected, which in turn will
materially and adversely affect our business. We cannot assure you that we will be able to identify
substitute logistics service providers on terms acceptable to us on a timely basis, or to renew our
agreements with logistics service providers when they terminate for whatever reason, failing which
our business, financial condition and results of operations will be adversely affected.
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We rely on the proper functioning of our platforms and technologies and we face risks
associated with malfunctioning or any failure in timely updating of such platforms and
technologies.
The proper functioning, adequate and stable performance, convenient accessibility and
continuous updating of our technology and our platforms are critical to our success and our ability
to attract and retain customers and provide superior customer experience. For example, we depend
on our technology infrastructure to make available our medical consultation services on our
111Yao App and our WeChat mini program as well as other third-party O2O and B2C platforms on
which we operate. We also rely on our technologies to ensure our overall effective operations and
management, such as the tracking and allocation of our inventories, monitoring our warehousing
capabilities, management of our membership program and management of our widespread retail
pharmacy network. Any system interruptions caused by telecommunications failures, breaches,
viruses, computer hacking or other attempts to harm our systems that result in the unavailability or
slowdown of our platform or reduced order fulfillment performance may reduce the volume of
products sold and the attractiveness of product offerings on our platform. As we depend on
third-party cloud servers that are not operated by us or within our control, we are vulnerable to
computer viruses, physical or electronic break-ins and similar disruptions that could lead to
temporary or long-time system interruptions to the third-party cloud servers. As we are
experiencing the digital transformation of our business model, we have noticed that security
breaches, computer viruses and hacking attacks may have become more prevalent in our industry.
Material performance problems, defects or errors in our existing or new software and
applications and services may arise in the future and may result from interface issues between our
systems and data that we did not develop and the function of which is beyond our control or
undetected in our testing. These defects and errors, and our failure or inability to identify and
address them, could harm our revenue, profitability or competitive market position, diversion of
development resources, harm our reputation and increase service and maintenance costs. Defects or
errors may discourage existing or potential customers from utilizing our online products and
service offerings. Correction of defects or errors could prove to be impossible or impracticable.
The costs incurred in correcting any defects or errors may be substantial and could have a material
adverse effect on our business, financial condition and results of operations. In addition, we
depend on third-party server hosts and technology companies for the proper operation of our
information system. We cannot assure you that our IT service providers will have sufficient
measures to shield themselves from negativities brought about by force majeures, including fire,
typhoons, floods, energy shortage, earthquakes, war, riots, terrorist attacks or other unfortunate
events. Any of the foregoing events may give rise to server interruptions, breakdowns, system
failures, technology platform failures or Internet failures, which could cause the loss or corruption
of data or malfunctions of software or hardware and harming our ability to provide services on our
111Yao App, WeChat mini program and third-party platforms where we conduct our O2O and B2C
operations, as well as our ability for operating and managing our business effectively, materially
and adversely affecting our financial condition, results of operations and growth prospects.
To remain competitive, we must continue to enhance and improve the responsiveness,

functionality and features of our platform. We rely on our current IT systems to provide healthcare
products and services among our multiple pharmaceutical retail sales channels. As the health
management and healthcare solutions market is experiencing constant and gradual digital
transformations, we may need to continue to innovate our technologies and upgrade our systems in
order to adapt to new industry standards and practices and maintain our competitive edge in the
market. Our success will depend, in part, on our ability to identify, develop, acquire or license
leading technologies useful in our business, and respond to technological advances and emerging
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RISK FACTORS
industry standards and practices, such as mobile Internet, in a cost-effective and timely manner.
However, the development of websites, mobile apps and other technologies entails significant
technical and business risks. We cannot assure you that we will be able to successfully develop or
effectively use new technologies, recoup the costs of developing new technologies or adapt the
websites and mobile apps that we operate, and our technologies and systems to meet customer
requirements or emerging industry standards. Failure to improve our IT systems accordingly may
materially affect our capability to provide comprehensive healthcare products and services across
our different sales channels or bring live new types of products or services, and could lead to
system disruptions and response delays. If we are unable to develop technologies successfully or
adapt in a cost-effective and timely manner to changing market conditions or customer
requirements, whether for technical, legal, financial or other reasons, our business, prospects,
As our business grows, we expect to continue investing in our IT systems and may
potentially increase our investment, especially as we seek to enhance the digital transformation of
our operational systems and increase the number of our offline pharmacies with optimized digital
capabilities. We may recognize costs associated with these investments earlier than some of the
anticipated benefits and the return on these investments may be lower, or may develop more
slowly, than our expectation. We may fail to recover our capital expenditures or investments, in
part or in full, if at all, or the recovery of these capital expenditures or investments may take
longer than we expected. As a result, the carrying value of the related assets may be subject to an
impairment charge, which may materially and adversely affect our business, financial condition
and results of operations.
Our omni-channel pharmaceutical retail operations are subject to consumer protection

requirements in China.
We are subject to consumer protection requirements in China. Pursuant to the Consumer

Protection Law and relevant regulations and rules, consumers are generally entitled to return
products purchased within seven days upon receipt without reason when they purchase the
products from business operators on the Internet with certain exceptions, such as drug products,
which can only be returned or exchanged for quality issues. We have adopted shipping policies
that do not necessarily pass the full cost of shipping on to our customers. We have also adopted
policies that permit the return and exchange of certain of our products in certain circumstances for
specified reasons. See “Business — Our Business — Our Product Sales — Our B2C Retail
Business.” We may also be required by law to adopt new or amend existing return and exchange
policies from time to time. These policies subject us to additional costs and expenses which we
may not recoup through increased revenue. We cannot guarantee that we will always have the
capacity to handle a large volume of returns without significantly interrupting our business
operations. If our product return rates increase or are higher than expected, our revenue and costs
can be negatively impacted. Furthermore, if we cannot ask our suppliers to take back the products
pursuant to our contracts with the suppliers, or if return rates for such products increase above the
cost of us stocking such products, we may have to manage an increase in our inventory balance,
impair certain of our inventory and cover any fulfillment cost on our own, which may materially
and adversely affect our working capital. As a result, our business, financial condition and results
of operations may be materially and adversely affected. If we revise these delivery, return and
exchange policies to reduce our costs and expenses, our customers may be dissatisfied, which may
result in loss of existing customers or failure to acquire customers at a desirable pace, which may
materially and adversely affect our results of operations.
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In addition, consumers whose interests have been damaged due to their purchase of goods or
acceptance of services online, either in the O2O or B2C mode, may claim damages from us as the
online retailer, pursuant to the Consumer Protection Law. Moreover, under the Consumer
Protection Law, if a business operator purposefully misleads or deceives consumers or knowingly
sells sub-standard or defective products, an amount of damages equal to three times the price of
the goods or services will be imposed in addition to compensating consumers for their losses
caused by the purchase of such defective or sub-standard products or services. Legal requirements
are frequently changing and subject to interpretation, and we are unable to predict the ultimate
cost of compliance with these requirements or their effect on our operations. We may be required
to make significant expenditures or modify our business practices to comply with existing or
future laws and regulations, which may increase our costs and materially limit our ability to
operate our business.
If we fail to manage our medical professionals, we may be subject to penalties or susceptible

to legal disputes, which will adversely affect our business, financial condition and results of
operations.
Physician practice is strictly regulated under PRC laws, rules and regulations. Physicians who
practice at medical institutions must hold practicing licenses and may only practice within the
scope of their licenses and at the specific medical institutions as stated in their licenses. As
advised by our PRC Legal Advisors, under applicable PRC regulations, a physician is required to
register the medical institutions at which he or she practices in his or her license. If a physician is
found practicing at a medical institution not registered in his or her license, the physician would
be subject to regulatory penalties, ranging from a warning to suspension of practice and, in the
worst-case scenario, revocation of license. A physician practicing in multiple institutions must
apply to register or file with competent in-charge administrative authorities and can only have the
right to prescribe medicine at the registered or filed practicing institution. In the event a physician
issues a prescription at a medical institution not registered in his or her license, the relevant
medical institution would also be subject to regulatory penalties, including a fine of up to
RMB5,000 and, in the worst-case scenario, revocation of the medical institution’s Medical
Institution Practicing License 《( 醫療機構執業許可證》).
We cannot assure you that our physicians will complete the registration and relevant
government procedures in a timely manner, or at all, or that they will not practice outside the
permitted scope of their respective licenses or strictly take their individual responsibilities under
the applicable laws and regulations as prescribed in our contracts with them. If we fail to properly
manage or check the registration of our physicians, although incautiously or inadvertently, we may
be subject to administrative penalties against our medical institution, including fines, or, in the
worst-case scenario, revocation of our Medical Institution《醫療機構執業許可證》), which could
materially and adversely affect our business. Meanwhile, if our physicians are found to have
deficient registration or found to be practicing beyond the scope permitted by relevant authorities,
they may be disciplined and lose their practicing licenses. In the event that the multi-institution
practices of our physicians are in breach of their contractual obligations owed to other institutions,
we may be exposed to indemnity or other legal liabilities if we are deemed to have aided in these
breaches, and are therefore susceptible to legal disputes and potential damages. As a result, we
may no longer be able to employ them, or find suitable alternatives for them, in offering our
medical consultation services and prescription review and renewal services, which could materially
and adversely affect our business, financial condition and results of operations.
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In addition to physicians, our medical team also comprises licensed pharmacists, who are
responsible for checking if sufficient and accurate information is included on the prescriptions
before the prescription drugs are released to customers. We rely on our pharmacists for the
provision of a quality pharmaceutical service as an essential part of our omni-channel
pharmaceutical retail business as customers make purchases from us. Therefore, we believe the
effective management of our pharmacists is key to the success of our business. Under PRC laws
and regulations, licensed pharmacists are required to obtain requisite licenses and meet
qualification requirements to offer patients pharmaceutical and medication advice. In addition, the
Notice on Promulgating Five Specifications Including the Specifications for Pharmaceutical
Outpatient Service of Medical Institutions 《 ( 關於印發醫療機構藥學門診服務規範等5項規範的通
知》, or the “Specifications”), was issued by the National Health Commission on October 9, 2021,
which sets out to standardize the development of pharmaceutical services, improve the level of
pharmaceutical services, and promote rational drug use in medical treatment. Since the release of
the Specifications, we have been taking measures to ensure our compliance with the requirements
set forth in this notice in material respects to the extent applicable, including adopting and
implementing several compliance requirements for our pharmacists comply with the relevant
requirements. We have also adopted a stringent evaluation and selection procedure of licensed
pharmacists, which includes verifying their qualifications and experiences and closely monitoring
and recording the scope and quality of services provided by them. However, we cannot guarantee
you that our management and supervision of our pharmacists will always be sufficient and that our
pharmacists’ offering of pharmaceutical services would not be rendered non-compliant by relevant
laws and regulations. If we fail to address such risks, our business, financial condition and results
of operations may be materially and adversely affected.
If we are unable to continuously optimizing our marketing activities, our financial condition
and business operations will be negatively impacted.
We believe it is vital for the success of our business that we engage in versatile marketing
and brand promotion efforts designed to enhance our brand recognition and increase sales of our
products and services. Nonetheless, our brand promotion and marketing activities may not be well
received and may not result in the levels of sales that we anticipate. Meanwhile, marketing
approaches and tools in the PRC Internet healthcare market are continuously evolving, which may
further require us to enhance our marketing approaches and experiment with new marketing
methods to keep up with industry developments and customer preferences. If we fail to refine our
existing marketing approaches in a cost-effective manner, we could reduce our market share and
materially and adversely affect our financial condition, results of operations and profitability. In
addition, we are subject to certain limitations in promoting services and products. Our medical
team and other relevant parties in the provision of our medical and wellness management services
have to comply with rules and regulations that restrict the promotion or dissemination of
information about the professional healthcare services and practice provided by licensed
physicians, and the publication or marketing efforts for the predominant purpose of promoting the
products or services of physicians to consumers or potential consumers. Such restrictions may
affect our ability to further enhance our brand recognition or secure new business opportunities in
the future.
Under PRC laws and regulations, all advertisements published online containing drug names,
applicable symptoms treated by such drugs, major functions of the drugs or other content or
information associated with the drugs, and advertisements published online containing medical
device names and the applicable scope, performance, product structure, working mechanism,
functions and other content or information relevant to medical devices are subject to examination
by relevant government authorities. Under applicable laws and regulations, we cannot publish
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advertisements of prescription drugs on the websites that we operate and must ensure that any
advertisement of medical treatments, drugs or medical devices does not include any assertion or
guarantee as to the function and safety or any statement of curative rate and effectiveness of such
medical treatment, drugs or medical devices. Any violation of advertisement-related laws and
regulations may subject us to fine, or even suspension of our business or revocation of our
business license. Although we have implemented internal procedures to examine the content of
advertisements displayed on the websites that we operate, we cannot assure you that all such
content meets the requirements under PRC advertising-related laws and regulations at all times.
We cannot guarantee you that our existing practices of monitoring our information
dissemination process and publication would continue to be effective and would fully comply with
relevant laws and regulations. If there is any change in the relevant laws, rules and regulations, or
change of interpretation thereof, we, our medical team and other relevant third parties may be
regarded as failing to comply with the relevant laws, rules and regulations, which may cause us,
our medical team and other relevant third parties to be subject to regulatory penalties or
disciplinary actions, which may in turn materially and adversely affect our business and reputation.
We face risks associated with any failure to renew our current lease agreements or identify
suitable alternatives for our premises.
We lease properties for our offline storefronts, our warehouses, our headquarters and other
corporate offices, dormitories for our employees and other corporate facilities. We may not be able
to successfully extend or renew such leases upon expiration of the current term on commercially
reasonable terms or at all, and may therefore be forced to relocate our affected operations. This
could disrupt our operations and result in relocation spending, which could materially and
adversely affect our business, financial condition and results of operations. Moreover, as we may
compete with other businesses for premises at specific locations or of desirable layouts or sizes,
such as popular spots in proximity to well-known hospitals for the establishment of our pharmacies
with DTP capabilities, rental payments may significantly increase due to high market demand,
even though we are able to renew or obtain such leases. In addition, in the event we need to
relocate due to various business, financial or other reasons, we may not be able to locate to
desirable alternative sites for our storefronts or facilities as our business continues to grow. If we
fail to address any of the above risks, our financial performance, business prospects and results of
operations could be adversely affected.
We rely on third-party franchisees to operate and manage our franchised pharmacies over
which our control may be limited as compared to our self-operated pharmacies.
As of September 30, 2022, there were 116 franchised pharmacies in our offline
pharmaceutical retail network of offline pharmacies. Our franchised pharmacies complement our
self-operated pharmacies in terms of expanding our network and geographical market coverage
faster and achieving greater recognition of our brand in China. Through our engagement with
franchisees, we provide them with access to our products and services in our pharmaceutical
wholesale business while simultaneously promoting our own brands. Although we impose a series
of inventory control requirements on our franchisees, we may not have as much control over the
procurement, storage and delivery of products sold by, or the quality of services provided by, our
franchisees as we do over the products and services that we sell or provide directly, which makes
it more difficult for us to ensure that our customers get the same and consistent high-quality
products as sold from our self-operated offline pharmacies.
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Our franchisees may fail to maintain the quality of the products they sell (such as selling
expired or near-to-expiry products that should not be displayed on the shelf), or sell counterfeit
products or products out of their lawfully permitted scope of operations. Their product sales may
infringe upon the intellectual property rights of third parties. They may sell sub-standard products
or provide sub-standard services, which may cause serious physical harm or property damage to
customers in extreme cases. We may not have sufficient control over our franchisees and cannot
guarantee that we can adequately address any of the aforementioned challenges, in which event our
brand reputation and our corporate image may be materially and adversely affected.
In addition, we could face claims and lawsuits for the losses, and may also be subject to
administrative inquiries, inspections, investigations and proceedings by relevant regulatory and
other governmental agencies for misconduct by any of our franchisees. Actions brought against us
may result in settlements, injunctions, fines, penalties or other results adverse to us that could
harm our business, financial condition, results of operations and reputation. Even if we are
successful in defending ourselves against these actions, the costs of such defense may be
significant to us. A significant judgment or regulatory action against us or a material disruption in
our business arising from adverse adjudications in proceedings against our Directors, officers or
employees would have a material adverse effect on our liquidity, business, financial condition,
results of operations, reputation and prospects.
A significant portion of our offline pharmaceutical retail revenue is generated from payments
of customers’ medicine purchase by the PRC national medical insurance scheme. Any delayed
or disputed payments under the PRC national medical insurance scheme could adversely
affect our business, financial condition and results of operations.
As of September 30, 2022, approximately 91.8% of our 931 self-operated offline pharmacies
were covered by the PRC national medical insurance scheme as Designated Retail Pharmacy, from
which eligible customers may purchase certain medicinal products directly billed to the PRC
national medical insurance scheme. Local practice with respect to the national medical insurance
scheme may vary and we cannot assure you that we will not be subject to any restriction or
limitation on our capability of seeking national medical insurance scheme reimbursement.
As our business continues to grow in scale, if the local medical insurance bureaus fail to
settle payments with us, our financial condition may be adversely impacted. For the years ended
December 31, 2020 and 2021 and the nine months ended September 30, 2022, we generated
revenue from our product sales paid through the national medical insurance scheme in the amount
of RMB662.0 million, RMB750.5 million and RMB706.6 million, respectively. We cannot
guarantee that we will be able to recover our current or future medical insurance receivables in
time and in full, in part or at all, which may materially and adversely affect our business, financial
condition and results of operations.
Furthermore, we cannot assure you that our pharmacies will always be able to qualify as
Designated Retail Pharmacies or our applications for such status for our newly established
pharmacies will always be successful. Policies related to the national medical insurance
reimbursement may change, and certain products currently covered under the PRC national
medical insurance scheme may no longer be covered or may be subject to more stringent
reimbursement requirements. In addition, we cannot guarantee that our staff will always
understand and properly implement the medical insurance scheme at our pharmacies in compliance
with the requirements by relevant laws and regulations. Failure to address any of these challenges
could lead to a decrease in our customer traffic, as customers may turn to other pharmacies that
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are able to process their purchases under the national medical insurance scheme, and our ability to
generate revenue and profit may be impacted, which could have a material adverse effect on our
We rely on third-party OEM partners in designing and producing our branded products. We
may not have adequate control over our OEM partners and we are subject to the risks of
their failure to supply the branded products according to our requirements.
Our branded products, including private-label and co-branded products, are produced by
third-party OEM partners and span across prescription and OTC drugs, TCM decoction pieces,
medical devices, dietary and nutritional supplements, healthy snacks and cosmetics products. For
further details on private-label and co-branded products, see “Business — Our Product Offerings
— Our Branded Products.” As of September 30, 2022, SKUs of our branded products exceeded
270. Although we provide our OEM partners with the standards of production and the final product
and we monitor the production process closely and participate in rounds of inspections and testing
during the production process, we cannot guarantee you that the products manufactured and
supplied to us by our OEM partners will always meet our requirements or be free of any defect. In
addition, we grant our OEM partners the right to use our trademarks for the limited purpose of
producing the branded products, and in the event that we become aware of their misuse of our
trademarks, we have the right to terminate the OEM agreement and seek damages from the OEM
partners for any associated harm to our brand image, our results of operations and financial
condition. However, we cannot guarantee you that we will be able to prevent the OEM partners
from using our trademarks outside the scope of our authorization, especially as our business
continues to grow in scale, or be able to successfully claim against such misuse or
misappropriation. For our private-label products, although pursuant to the relevant agreements, we
have the exclusive right to such products and the OEM partners cannot otherwise produce such
products for other similar companies or otherwise distribute the product without our authorization,
we cannot be certain that our OEM partner will abide by such terms, failing which the
competitiveness of our private-label products in the market may be severely harmed. In addition,
our collaboration with our OEM partners is subject to additional risks related to our collaboration
with and dependence on our suppliers. For further details, see “— We rely on our suppliers for the
procurement of various medicinal, healthcare and wellness products and we may have limited
control over them, and our revenue and results of operations will be adversely affected if we fail
to maintain and manage these relationships properly.” If we fail to address any of the above risks
or challenges, our business, financial condition and results of operations may be materially and
adversely affected.
We recorded net current liabilities as of December 31, 2021.
As of December 31, 2021, we had net current liabilities of RMB20.2 million. As of December
31, 2020 and September 30, 2022, we recorded net current assets of RMB0.3 million and
RMB17.0 million, respectively. See “Financial Information — Liquidity and Capital Resources”
for more details. We cannot guarantee that we will not have net current liabilities position in the
future. A net current liabilities position would expose us to liquidity risks, since we may fail to
repay our trade and notes payables or refinance our loans when they become due. There can be no
assurance that we will always be able to obtain the necessary funding to repay our trade and notes
payables or refinance our loans upon maturity. If we were unable to repay such trade and notes
payables or refinance such loans when due, and we were not otherwise able to repay such amounts
at maturity, we may be in default of such trade and notes payables or such loans, which may
trigger cross-defaults. If we fail to address the above challenge, our business, liquidity, financial
condition and results of operations could be materially and adversely affected.
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RISK FACTORS
We accept various payment methods for customers to make purchase with us, which may
subject us to risks related to third-party payment processing.
Dedicated to enhancing our customers’ purchasing experience with us, we provide customers
with multiple payment methods, including payment on delivery, online payments through various
third-party online payment platforms such as WeChat Pay and UnionPay, as well as payments
through direct billing to insurance plans offered by our insurance company collaboration partners.
We may be charged interchange and other fees for certain payment methods, which may increase
over time and raise our operating costs and lower our profit margins. We may also be subject to
fraud and other illegal activities in connection with the various payment methods we offer,
particularly online payments. If the third-party payment processing companies fail to remit the
payment collected to us in a timely fashion or at all, or if they fail to provide these services to us
for any reason, or if their service quality deteriorates, our operations could be disrupted and our
reputation could be severely damaged. We are also subject to various rules, regulations and
requirements governing electronic funds transfers in China, which could change or be reinterpreted
to make it difficult or impossible for us to comply with. If we fail to comply with these rules or
requirements, we may be subject to fines and higher transaction fees and lose our ability to accept
credit and debit card payments from our customers, process electronic funds transfers or facilitate
other types of online payments, and our business, financial condition and results of operations
could be materially and adversely affected.
Our product and service offerings are subject to seasonal fluctuations, which may impact our
Our business is subject to seasonality, reflecting a combination of online retail seasonality

patterns and new patterns associated with healthcare products in particular. For example,
third-party online O2O and B2C platforms hold special promotional campaigns from time to time,
which can affect our results for those quarters. As we launch different promotional campaigns
targeting to enhance the benefits for our members, we generally see a significantly increased
customer traffic at those times. In addition, we also generally experience more customer traffic and
increased sales volume at such times each year where special promotional campaigns take place in
our industry, such as the Chinese New Year, which have a significant impact on our results for
those quarters. Furthermore, we may experience seasonal fluctuations with different types of
products, depending on their respective efficacy. For example, we observed an increase in demand
for respiratory drugs during flu seasons. The seasonality of our business is subject to a variety of
uncertainties and may increase further in the future. As a result, our financial condition and results
of operations for future periods may continue to fluctuate.
Certain of our products sold in our omni-channel pharmaceutical retail business require
stringent storage and transportation conditions. If such conditions are not met, we may be
incapable of fulfilling customer purchase orders, which could materially and adversely affect
our operations and business prospects.
Certain pharmaceutical products in our omni-channel sales inventories, and in particular,

prescription drugs, are sensitive to their environment and must be transported, stored and
warehoused under highly controlled conditions in order to prevent damage due to adulteration,
spoilage and infection. Such damage could render our inventories defective and not saleable, or, if
left undetected, could expose us to product liability claims, legal penalties, and severely harm our
operations and reputations.
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RISK FACTORS
We rely on quality control and temperature control systems in our warehousing facilities and
any failure in these systems might expose us to risks associated with the sale of expired or
damaged products. During the Track Record Period and up to the Latest Practicable Date, although
no material losses to our inventories caused by defects in storage conditions have occurred, we
may not be able to prevent such losses from occurring in the future, which could be severe. Third
party warranties and indemnities have upper limits, if available at all, and indemnification will not
be available should losses occur at the warehousing facilities owned and operated by us. If the
controlled conditions of the warehouses we currently utilize are compromised, we cannot guarantee
that the damage caused by such a compromise will be isolated, or that such an event would not
lead to sizeable losses of inventory which could materially and adversely affect our financial
performance and results of operations.
In the event that we use third-party facilities or services, we will incur additional risks and
costs of ensuring that the actions and omissions of these third parties do not undermine or
compromise the quality control and temperature control systems of these facilities. Likewise, we
are exposed to the risk that the actions of our wholesale customers or other third parties handling
the products in our portfolio prior to delivery to the end customer may damage the products.
Failure to manage the costs of dealing in inherently sensitive products or to effectively monitor the
actions of third parties may cause damage to such sensitive products, and as a result, our business
and results of operations may be materially and adversely affected.
We are subject to risks associated with fictitious transactions or other fraudulent activities,
failure to deal with which would materially and adversely affect our business, financial
Our daily operations may not be able to run free from fraudulent conduct or other misconduct
by our customers or members, such as insurance frauds under the national medical insurance
schemes, or by our employees, such as unauthorized transactions, briberies and kickbacks and
breach of our internal policies and procedures, or by third parties with which we collaborate or
transact, such as unlawful behaviors or conduct. In particular, we may face risks with respect to
fictitious or other fraudulent activities. Any of these instances could subject us to financial loss
and sanctions imposed by regulatory authorities while seriously damaging our reputation. This may
also impair our ability to effectively attract prospective users, maintain or increase customer
stickiness, obtain financing on favorable terms or conduct other business activities.
Our internal control and risk management systems are designed to ensure systemized,
well-managed and transparent operations, across our offices, branches, storefronts and subsidiaries,
therefore improving our Group’s overall compliance. However, we may be unable to identify
non-compliance or suspicious transactions promptly, or at all. There can be no assurance that the
measures we have implemented to detect and reduce the occurrence of fraudulent activities would
be effective in combating fraudulent transactions or improving overall satisfaction among our
suppliers and customers. Moreover, it is not always possible to detect and prevent fraud or other
misconduct committed by our employees or third parties, and the preventive measures we take to
prevent and detect such activities may not be effective. Therefore, we are subject to the risk that
fraud or other misconduct may have previously occurred but remained undetected, or may occur
again in the future. Any of these may materially and adversely affect our business, financial
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RISK FACTORS
Our business may be materially and adversely affected by negative publicity or any other
adverse incidents associated with our industry.
Incidents that cast doubt as to the quality or safety of pharmaceutical and healthcare
products, sold, promoted or otherwise dispensed by other market players, including our direct or
indirect competitors, in the pharmaceutical circulation market in China, particularly the
omni-channel pharmaceutical retail industry, have been, and may continue to be, subject to
widespread public attention. Such incidents may damage the reputation of not only the immediate
parties involved, but also the general health management and healthcare solutions industry in
general, even if such parties or incidents have no relation to us, our management, our employees,
our suppliers, or our collaborating pharmacies. Such negative publicity may indirectly and
adversely affect our reputation and business operations. In addition, incidents not related to
product quality or safety, or other negative publicity or scandals implicating us or our employees,
regardless of merit, may also have an adverse impact on us and our reputation and corporate
image.
We face risks associated with malicious competition or other detrimental impact from third
parties which could damage our reputation and cause our customers to lose faith in our
brand.
We may become subject to malicious third-party activities including anti-competition

conduct, harassing, or other harmful behaviors, especially customers unsatisfied with our products
and services or third-party competitors. Such conduct includes complaints, anonymous or
otherwise, to regulatory agencies. Our brand reputation may be harmed by aggressive marketing
and communications strategies of our competitors. PRC laws and regulations also prohibit
agreements and activities which amount to unfair business competition and an abuse of a dominant
market position. Third parties may also maliciously copy or adopt our key business strategies such
as our Fang strategy, to gain an unfair competitive advantage in the market. We cannot guarantee
that we will not be exposed to such unfair business competition or dominant market position abuse
imposed by third parties in the future. In particular, we may face the risk of unfair competition or
other maliciously competitive actions by third parties whose corporate names carry the same
characters “德生堂” or carry other characters that are same as or similar to our corporate and
brand names. Disputes, litigation, regulatory actions or other negative publicity in relation to those
third parties bearing similar names could also be mistakenly perceived as relating to us. In
addition, we may become the target of government or regulatory investigation as a result of such
third-party conduct and may be required to expend significant time and incur substantial costs to
address such third-party conduct, and there is no assurance that we will be able to conclusively
refute each of the allegations within a reasonable period of time, or at all. Moreover, you may see
negative information posted on the Internet or pages embedded in various social media mobile
apps related to us or our Directors, employees, affiliates or third-party collaboration partners, even
without merit. Consumers may value readily available information concerning retailers,
manufacturers, and their goods and services and often act on such information without further
investigation or authentication and without regard to its accuracy. Social media platforms may
immediately publish the content posted by their subscribers and members, often without filters or
due diligence checks on the accuracy of such content posted. Therefore, information on social
media platforms brings impact almost immediately as it is disseminated. Information posted may
be inaccurate and adverse to us, and it may harm our financial performance, results of operations
or business prospects. The harm may be immediate without affording us an opportunity for redress
or correction, which, a result of the public dissemination of anonymous allegations or malicious
statements about us, may in turn cause us to lose market share, customers and revenue-generating
capabilities and adversely affect our business, financial condition and results of operations.
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RISK FACTORS
Failure to fully comply with certain laws, rules or regulations relating to fire safety in China
may materially and adversely affect our business, financial condition and results of
operations.
Our offline self-operated stores are subject to various laws, rules and regulations related to
fire safety in China, and the failure to comply with such laws, rules and regulations could subject
us to administrative orders, fines and penalties imposed by relevant governmental authorities in
China. Each of our offline storefronts is required to obtain various licenses and permits in
accordance with these regulations or carry out record filing procedures. See “Regulatory
Overview” for further details. As of the Latest Practicable Date, among the offline storefronts
operated by us, there were 30 storefronts that had not completed the fire safety filing (消防備案)
according to the requirements of relevant governmental authorities. As advised by our PRC Legal
Advisors, a fire safety filing should be submitted to the relevant government authority within five
business days from the date of completion of relevant construction project, and our storefronts that
failed to complete the fire safety filing may be ordered to rectify and subject to a fine of not more
than RMB5,000 for each storefront. We have been proactively rectifying such non-completion of
fire safety filings by communicating with relevant local government authorities for each of the 30
storefronts. See “Business — Licenses, Permits and Approvals — Fire Safety” for further details.
However, it is difficult to predict when and whether fire safety filing procedures will be
completed. We have engaged fire safety consultants to conduct inspections of the properties that
had not completed the fire safety filings through on-site inspection, surveys and document review.
As confirmed by the fire safety consultants, the fire safety conditions (including installation of fire
extinguishers, safety signs, emergency evacuation plan and labeling of emergency exits) at these
storefronts were in compliance with regulatory requirements and were in line with applicable
national and/or local standards. In addition, we have adopted a series of internal policies and
procedures relating to fire safety during the Track Record Period. Although the risk that we will be
penalized by relevant government authorities due to the failure to complete the relevant fire safety
filings is remote, as advised by our PRC Legal Advisors, and we have not suffered any fines or
other penalties which materially and adversely affect our businesses and results of operations due
to any violation of the fire safety-related laws and regulations as of the Latest Practicable Date, we
cannot assure you that we will not be subject to fines, confiscation of income from relevant
storefronts and even the suspension or permanent termination of the operation of such storefronts
that fail to complete the requisite procedures. If we become subject to any penalties, fines, orders
or administrative actions related to fire safety by relevant regulatory authorities, we may need to
divert operational and financial resources to address such issues, which may result in a material
and adverse effect on our business, financial condition and results of operations.
Failure to make adequate contributions to social insurance and housing provident fund for
our employees as required by the PRC regulations may subject us to penalties.
We are required to participate in various employee benefit plans sponsored by the PRC
government under applicable PRC labor laws, including basic pension insurance, medical
insurance, unemployment insurance, childbirth insurance, work-related injury insurance funds, and
housing provident fund, and contribute to the plans in amounts equal to certain percentages of
salaries, including bonuses and allowances, of our employees up to a maximum amount specified
by the local government from time to time at locations where we operate our businesses. The
requirement of employee benefit plans has not been implemented consistently by the local
governments in China given the different levels of economic development in different locations.
During the Track Record Period, we did not make social insurance and housing provident fund
contributions for certain of our employees, in full based on their actual salary or at all. The
reasons for such non-compliance included (i) unwillingness of certain employees to bear the
increased costs associated with paying for social insurance and housing provident fund strictly in
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RISK FACTORS
proportion to their salary; and (ii) voluntary choice of certain migrant worker employees not to
carry the social insurance and housing provident fund in the city where they temporarily reside, as
such payments are not transferrable among cities.
As advised by our PRC Legal Advisors, according to the relevant PRC laws and regulations:
(i) with respect to social insurance, the relevant authorities may order us to pay the outstanding
amounts within the prescribed time period with a late charge at the daily rate of 0.05% on the
outstanding amounts, and if and only if we fail to do so, they may impose a maximum fine or
penalty equivalent to three times the outstanding amounts; and (ii) with respect to housing
provident funds, the relevant authorities may order us to pay the outstanding amounts within the
prescribed time period, and they may apply to a competent court for enforcement of the
outstanding amounts if we fail to do so. As of the Latest Practicable Date, we were not aware of
any employee complaints filed against us nor involved in any material labor disputes with our
employees with respect to social insurance or housing provident fund contributions. As of the
Latest Practicable Date, we had not been subject to any material administrative action or penalty
as a result of the above non-payment or underpayment of social insurance and housing provident
fund, nor had any competent governmental authorities required us to settle the outstanding amount
of social insurance payments and housing provident fund contributions. As advised by our PRC
Legal Advisors, the likelihood that the local authorities would actively recover the payment of any
shortfall for social insurance and housing provident fund contribution from the Group overall is
remote, and the risk that relevant authorities will impose penalties on us for the above incidents is
remote. However, as we continue to grow our business operations, we cannot assure you that we
will be able to comply with all labor-related law and regulations regarding including those relating
to obligations to make social insurance payments and contribute to the housing provident fund. If
we are deemed to have violated relevant labor laws and regulations, we could be required to
provide additional compensation to our employees or be subject to administrative penalties or
fines, which could adversely affect our business, financial condition and results of operations. We
cannot assure you that we are able to make adequate contribution in a timely manner at all time. If
we are subject to late fees or fines in relation to the underpaid employee benefits, our financial
condition and results of operations may be adversely affected.
Certain leased properties used as our premises could be challenged by the respective
regulatory authorities or other third parties, which may cause interruptions to our business
operations.
As of the Latest Practicable Date, some of the lessors of our leased properties did not yet
provide us with their property ownership certificates or other appropriate documentation proving
their right to lease those properties to us. As advised by our PRC Legal Advisors, it is the lessors’
responsibility to obtain the appropriate title certificates and ensure the actual usage is consistent
with the approved usage, and we, as the tenant, will not be subject to any administrative
punishment or penalties for such title defects not caused by us and we are not obligated to pay any
rent if the obligations under the lease can no longer be performed. However, if third parties bring
claims or challenge the lease, our right to use the defective properties might be affected. In such
event, we may have to renegotiate the leases with the owners or the parties who have the right to
lease the properties, and the terms of the new leases may be less favorable to us. Also, in the event
that the actual use of our leased properties is inconsistent with the use registered on the land use
right certificate or our leased properties are on allocated land (劃撥土地), the competent
authorities may require the lessors to return the land and impose fines on the lessors, or confiscate
the proceeds from the leasing of the properties and impose fines on the lessor if such
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properties are leased without their consent, as applicable. We cannot guarantee that we will not be
subject to the aforementioned penalties as a lessee to the properties, and the relevant lease
agreements may be deemed to be in breach of the law and therefore void.
As of the Latest Practicable Date, we are not aware of any material claims or actions being
contemplated or initiated by government authorities, property owners or any other third parties
with respect to our leasehold interests in or use of such properties. However, we cannot assure you
that our use of such leased properties will not be challenged by the landowners, other third parties
or governmental authorities, with or without merits. In the event that our use of properties is
successfully challenged, we may be subject to fines and ordered to suspend our business
operations and relocate the affected operations. In addition, we may become involved in disputes
with the property owners or third parties who otherwise have rights to or interests in our leased
properties. In such event of forced relocations, we cannot assure you that we will be able to find
suitable replacement sites on terms acceptable to us on a timely basis, or at all, or that we will not
be subject to material liability resulting from third parties’ challenges on our use of such
properties. As a result, our business, financial condition and results of operations may be
Certain of our lease agreements with respect to our leased properties have not been
registered with the respective regulatory authorities as required by relevant PRC laws and
regulations, which may expose us to potential fines.
Under PRC law, all lease agreements are required to be registered with the local real estate
administration bureau. However, the enforcement of this legal requirement varies depending on the
local regulations and practices. Although failure to do so does not in itself invalidate the leases,
the lessors or lessees may be exposed to potential fines if they fail to rectify such non-compliance
within the prescribed time frame after receiving notice from the relevant PRC government
authorities. The penalty ranges from RMB1,000 to RMB10,000 on the lessors or lessees for each
unregistered lease, at the discretion of the relevant authority. As of the Latest Practicable Date, we
had leased certain properties in China that had not been registered with the relevant PRC
government authorities. During the Track Record Period and up to the Latest Practicable Date, we
had not received any notices, orders, administrative actions, claims or inquiries, nor had we been
imposed any penalties, fines or sanctions with respect to these leased properties. We have
appointed designated personnel to follow up with relevant lessors on the registration status, as well
as to oversee the lease negotiation process going forward, where we will examine if relevant lease
agreements are properly registered before we enter into new lease agreements. According to our
PRC Legal Advisors, the risk that we will be imposed any penalties, fines or sanctions with respect
to the unregistered leased properties in the future is remote. However, in the event that any fine is
imposed on us for our failure to register our lease agreements, we may not be able to recover such
losses from the lessors, which may negatively affect our business, financial condition and results
of operations.
Our internal control and risk management system may not be adequate and may fail to
detect potential risks in our business, which may cause our business, financial condition and
results of operations to be materially and adversely affected.
We have an internal control system based on an organizational framework of policies and

procedures that are designed to monitor and control potential challenges relevant to our business
operations. However, our internal control and risk management system may not be adequate in
recognizing, tackling, managing and controlling all risks if external circumstances change
substantially or extraordinary events take place, due to the inherent limitations in the design and
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implementation of our risk management system. Standardized and internally streamlined operation
systems, management systems, information systems, and internal control systems are crucial to the
effective running of our business. As our business grows in terms of scale and scope, we may
become subject to new challenges and risks that may not be known to us yet. As we continue to
expand our business scale and launch new product and service offerings, we will also need to
modify and improve our financial and managerial controls, reporting systems and procedures and
other internal controls and compliance procedures to meet our evolving business needs.
If our internal control and risk management system fails to identify potential risks in our
business as intended or is otherwise insufficient or weak, our business, financial condition and
results of operations could be materially and adversely affected. Although we find it important to
keep improving our internal control system, we may not be able to eliminate all risks and
loopholes in such process. In addition, we rely on our employees to carry out our internal control
and risk management policies. However, we cannot assure you that such implementation by our
employees will always function as intended or such implementation will not involve any human
errors, mistakes or intentional misconduct. Failure to implement our policies and procedures in a
timely manner, or to identify and eliminate or reduce risks that affect our business with sufficient
time to plan for contingencies for such events, our business, financial condition and results of
operations could be materially and adversely affected, particularly with respect to the maintenance
of our relevant approvals and licenses granted by governments.
We face risks associated with the content displayed or information provided on, linked to or
retrieved from our 111Yao App and WeChat mini program or such content and information
otherwise provided or created by us.
There are laws and regulations in the PRC governing access to and activities on the Internet,
including the offering and selling of products and services online, and the publication of
advertisements, information, audio-video programs and other content through the Internet. In
particular, our digital marketing efforts are subject to relevant laws and regulations in the PRC.
Even though we implement measures to review digital marketing materials in light of the relevant
laws and regulations as well as our internal guidelines before they are published on our platform,
such measures may not be effective and may still subject us to potential liabilities. Consequently,
our business, financial condition and results of operations may suffer. In addition, the Internet
content providers and Internet publishers are prohibited from posting or displaying over the
Internet any content that, among other things, violates PRC laws and regulations, impairs the
national dignity of China or the public interest, or is obscene, superstitious, frightening, gruesome,
offensive, fraudulent or defamatory. In November 2016, China promulgated the Cybersecurity Law,
which came into effect on June 1, 2017, to protect cyberspace security and order. The
Cybersecurity Law tightens control of cybersecurity and sets forth various security protection
obligations for network operators. If any of our online offering of products and services or other
information or advertisements published online were deemed by the PRC government to violate
any content restrictions, we would not be able to continue to display such content and could
become subject to penalties, including confiscation of income, fines, suspension of business and
revocation of required licenses, which could materially and adversely affect our business, financial
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We are vulnerable to cyber-attacks and security breaches against our system and network,
which may result in us failing to protect our customers’ private and sensitive personal
information and adversely affect our business, financial condition and results of operations.
Our technology system, particularly our computer system and the Internet, are essential to our
business operations. For details on our information and technology systems, see “Business —
Technology and R&D — Our Operating Systems.” However, these technology operations are
vulnerable to disruptions arising from human error, natural disasters, power failure, computer
viruses, spam attacks, unauthorized access and other similar events. Disruptions to, or instability
of, these technologies that support our business operations and enable the offering of our products
and services could materially harm our business and reputation.
We have devoted resources to develop security measures against breaches, yet our
cybersecurity measures may not detect or prevent all attempts to compromise our systems,
including distributed denial-of-service attacks, viruses, malicious software, break-ins, phishing
attacks, social engineering, security breaches or other attacks and similar disruptions that may
jeopardize the security of information stored in and transmitted by our systems or that we
otherwise maintain. Breaches of our cybersecurity measures could result in third party’s
unauthorized access to our systems, misappropriation of information or data, deletion or
modification of customer information, or a denial-of-service or other interruption to our business
operations. Because techniques used to obtain unauthorized access to or sabotage systems change
frequently and may not be known until launched against us, it may be difficult or even impossible
for us to anticipate, or implement adequate measures to protect against, these attacks. During the
Track Record Period, we were not subject to these types of attacks that had materially and
adversely affected our business operations. However, there can be no assurance that we would not
in the future be subject to such attacks that may result in material damages or remediation costs. If
we are unable to avert these attacks and security breaches, we could be subject to significant legal
and financial liability, our reputation would be harmed and we could sustain substantial revenue
loss from lost sales and customer dissatisfaction. Furthermore, we may not have the resources or
technical sophistication to anticipate or prevent rapidly evolving types of cyber-attacks.
Cyber-attacks may target us, our Directors, employees and affiliates, our customers, our suppliers
or other business partners, or the information infrastructure on which we depend. Actual or
anticipated attacks and risks may cause us to incur significantly higher costs, including costs to
deploy additional personnel and network protection technologies, train employees, and engage
third-party experts and consultants. Cybersecurity breaches may harm our reputation and business,
and materially and adversely affect our financial condition and results of operations.
We are vulnerable to incidents of abuse of our intellectual property by unauthorized third

parties, which could damage our brand image and adversely affect our business, financial
Our intellectual property, including our trademarks, copyrights, patents, domain names, trade
name, know-how and other knowhow or proprietary information are important to the operation and
growth of our business. In addition, we rely on legal and contractual tools to protect our
intellectual property, and we impose confidentiality and non-compete requirements on our senior
management and our employees through employment contracts. However, as these agreements may
be breached and we may not be able to navigate the complex legal and regulatory requirements
with respect to intellectual property in China, these measures may not afford us sufficient
protections of our intellectual property. Also, it can be difficult to register, maintain and enforce
intellectual property rights in China due to the lack of clear guidance and consistent judicial
interpretation or administrative implementation of relevant laws, rules and regulations. As our
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business develops and our operation network expands, we may become a lucrative target for third
parties to copy or otherwise abuse our brand, information or business results without authorization
in order to benefit from our established market position in the health management and healthcare
solutions market in China. However, despite these measures, any of our intellectual property rights
could be challenged, circumvented, invalidated, or misused, or such intellectual property may not
be adequate to afford us competitive advantages. For example, we cannot guarantee that other
companies would not blatantly copy information from the platforms we operate on, with the aid of
modern IT tools and for their own benefit. When third parties copy, publish, or aggregate content
from our published content, it may reduce the chance that customers use the platforms we operate
on find the information they seek relating to our products and services, which may in turn harm
our customer traffic. We may not be able to detect such third-party conduct in a timely manner
and, even if we could, we may not be able to effectively deal it. In addition, there can be no
assurance that our patent applications or other applications to register our intellectual property will
be approved, or even in the event of approval, we cannot assure you that that such approvals or
grants will not be challenged by third parties or found by a judicial authority to be invalid or
unenforceable. Further, because of the rapid technological change in our industry, parts of our
business rely on technologies developed or licensed by third parties, and we may not be able to
obtain or continue to obtain licenses and technologies from these third parties on reasonable terms,
or at all. In the event that we resort to litigation to enforce our intellectual property rights, such
litigation could result in substantial costs and a diversion of our managerial and financial
resources, and could put our intellectual property at risk of being invalidated or narrowed in scope.
In any of event where we fail to protect our intellectual property, our financial condition, results of
operations or business prospects may be materially and adversely affected.
We face the risk of being involved in intellectual property infringement claims, which may
incur significant legal expense and damage our brand image.
We may face third-party assertions, with or without merit, of our infringement upon or
violation of those existing or pending patents, copyrights, trademarks or other intellectual property
rights held by third parties. We cannot be certain that owners or lawful holders of these intellectual
property rights, if such holders exist, would not bring infringement claims against us in applicable
jurisdictions. Further, the application and interpretation of China’s intellectual property laws and
the procedures and standards for granting relevant applications or approvals in China are still
evolving and are uncertain, and we cannot assure you that PRC courts or regulatory authorities
would agree with our analysis. If we are found to have violated the intellectual property rights of
others, we may be subject to liability for our infringement activities or may be prohibited from
using such intellectual property, and we may incur licensing fees or be forced to develop
alternatives of our own. Our business and operations may be severely disrupted as we need to
dedicate financial and capital resources to defend against these claims, regardless of their merits,
while our management’s attention may need to be drawn from our daily business operations.
Failure to address any of the above challenges may harm our market reputation and market
recognition, materially and adversely affecting our financial condition, results of operation and
business prospects.
We have entered into and may continue to enter into agreements in the future with third
parties to provide us with rights to various third-party intellectual property rights, including rights
to use software and computer programs. Disputes may arise from such agreements and we may be
found to violate intellectual property rights of the licensor. Moreover, we use open-source software
in connection with the offering of our products and services. Since we have not obtained the
express or implicit authorization of the lawful owners of such open-source software, we could be
subject to claims of intellectual property infringement or requirement to enter into licensing
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RISK FACTORS
agreements by the lawful owners. Some open-source software licenses may require customers who
distribute open-source software as part of their software to publicly disclose all or part of the
source code to such software and make available any derivative works of the open-source code on
unfavorable terms or at no cost, in which event our performance may be harmed. If we fail to
tackle the above risks, our financial condition, results of operations and business operations could
be materially and adversely affected.
If we fail to comply with laws and regulations related to anti-corruption, or effectively

manage our employees, representatives, affiliates, suppliers and other collaboration partners,
our reputation may be harmed and our business, financial condition and results of operations
may be materially and adversely affected.
Actions taken by us, our employees, affiliates, suppliers, or third-party collaboration partners
may constitute violations of applicable anti-corruption, anti-bribery and anti-kickbacks laws and
regulations. Particularly, we operate in industries that are sensitive to such anti-corruption
instances due to the large sales volumes under transactions on a daily basis, individual customers,
and price-sensitive drug products. There have been instances of corrupt practices in the
pharmaceutical industry, including, among other things, receipt of kickbacks, bribes or other illegal
gains or benefits by pharmacies, hospitals and medical practitioners from manufacturers,
distributors and retail pharmacies in connection with the prescription of pharmaceutical products.
While we adopt strict internal procedures and work closely with relevant government agencies to
ensure compliance of our business operations with relevant laws and regulations, our efforts may
not be sufficient to ensure that we comply with relevant laws and regulations at all times. In the
event we, our employees, affiliates, suppliers, third-party collaboration partners or other business
partners violate these laws, rules or regulations, we could be subject to sanctions, penalties, fines
and/or other penalties, including civil and criminal liabilities. In the case of our pharmaceutical
retail business, the products involved may be seized by relevant authorities and our operations may
need to be suspended. We also cannot guarantee you that our interpretations of the relevant PRC
laws and regulations will always be correct and be able to afford us sufficient protection in terms
of legal compliance. Our reputation, corporate image, and business operations may be materially
and adversely affected if we fail to comply with these measures or become the target of any
negative publicity as a result of actions taken by us, our employees, affiliates, suppliers or
marketplace merchants, which may in turn have a material adverse effect on our business, financial
From time to time, we or our Directors or senior management may become the target of legal
proceedings or other administrative claims, which may materially and adversely affect our
brand image, financials, results of operations and business prospects.
We may be subject to claims and lawsuits in the ordinary course of our business. We are
subject to substantial litigation and regulatory risks, including the risk of lawsuits and other legal
actions possibly arising from or otherwise relating to customer complaints, medical disputes, fraud
and misconduct, sales of ineffective, substandard or defective products, quality deficiencies,
protection of personal and confidential information of our customers and business partners, and
operational failures, among others. In addition, we may become the target of regulatory inquiries,
administrative inspections, governmental investigations and legal or administrative proceedings by
relevant authorities or agencies. Actions brought against us may result in settlements, fines,
injunctions, penalties or other adverse consequences that could harm our financial condition,
results of operations, business prospects and reputation. Even if we are successful in defending
ourselves against these actions, the costs of such defense may be significant to us. A significant
judgment or regulatory action against us or a material disruption in our business arising from
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RISK FACTORS
adverse adjudications in proceedings against our directors, officers or employees would have a
material adverse effect on our cash position, financial condition, results of operations, business
prospects and reputation. In addition, events or activities attributed to our Directors or senior
management, and related publicity, whether or not justified, may affect their ability or willingness
to continue to serve our company or dedicate their efforts to our company and negatively affect
our brand and reputation, resulting in an adverse effect on our financial condition, results of
operations, business prospects and reputation.
If we fail to obtain additional capital as needed by the continuous growth and expansion of
our business, on favorable terms or at all, our business, financial condition and results of
operations may be materially and adversely affected.
In the event that we incur operating losses in the future as our business develops or grows,
we may require additional cash resources, including for any acquisitions or investments we may
decide to pursue. During the Track Record Period, we incurred indebtedness. As of December 31,
2020 and 2021 and September 30, 2022, we recorded borrowings in the amounts of RMB76.8
million, RMB81.5 million and RMB86.6 million, respectively, and lease liabilities in the amount
of RMB559.8 million, RMB611.6 million and RMB555.2 million, as of the same dates. In the
event of cash insufficiency to satisfy our cash requirements, we may seek to issue additional
equity or debt securities or obtain new or expanded credit facilities. Our ability to obtain external
financing in the future may involve various uncertainties, including our future financial condition
and cash flow position, results of operations, liquidity of international capital and lending markets
and the PRC governmental regulations over foreign investment in China’s healthcare service
providers. In addition, incurring indebtedness would subject us to increased debt service
obligations and could result in operating and financing covenants that would restrict our
operations. There can be no assurance that financing would be available in a timely manner or in
amounts or on terms favorable to us, or at all. Any failure to raise needed funds on terms favorable
to us, or at all, could severely restrict our liquidity as well as have a material adverse effect on our
business, financial condition and results of operations. In addition, our existing shareholders may
have to experience substantial dilution to the shares they hold if we have to issue any additional
equity or equity-linked securities.
We may not have sufficient insurance coverage and may not be able to cover part or all such
costs incurred in relation to relevant claims, which could subject us to substantial amounts of
expenses.
We have obtained or caused relevant counterparties to obtain insurance to cover certain

potential risks and liabilities, such as medical liability insurance that covers us in medical liability
claims as well as accident injury insurance for certain of our employees. However, we do not
maintain and may not be able to acquire any insurance for certain types of risks such as business
liability or service disruption insurance for our operations in the PRC. We also do not maintain
key-man life insurance. See “Business — Insurance” for further details. Any business disruption,
litigation, regulatory action, outbreak of epidemic disease or natural disaster could also expose us
to substantial costs and diversion of resources. There can be no assurance that our insurance
coverage is sufficient to prevent us from any loss or that we will be able to successfully claim our
losses under our current insurance policies on a timely basis, or at all. If we incur any loss that is
not covered by our insurance policies, or the compensated amount is significantly less than our
actual loss, our business, financial condition and results of operations could be materially and
adversely affected.
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RISK FACTORS
Our omni-channel pharmaceutical retail of products and offering of health management

services may depend upon effective use of mobile operating systems, networks and standards
that we do not control.
It has become increasingly common that customers use the mobile systems to access our
full-suite of product and service offerings and enter into transactions with us either online or
offline. We have been committed to the digitalization of our product and service offerings in our
omni-channel pharmaceutical retail business. We seek to optimize the online purchase experience
for our customers through mobiles, for which we may need to attract our customers to download
mobile apps, including our 111Yao App and other third-party e-commerce mobile apps, onto their
particular devices. As new mobile devices and platforms are released, it is difficult to predict the
problems we may encounter in developing applications for customers’ devices, and we may need
to devote significant resources to the development, support and maintenance of such mobile apps.
In addition, if we experience difficulties in the future in integrating the mobile apps that we
operate with mobile devices or if problems arise with our relationships with providers of mobile
operating systems or mobile app download stores, if the mobile apps we operate receive
unfavorable treatment compared to competing apps from our market competitors on the download
stores, or if we face increased costs to distribute or have customers use mobile apps that we
operate, our results of operations and growth prospects could suffer. Further, we also depend on
the interoperability of the sites we operate with popular mobile operating systems that we do not
control, such as iOS and Android, and any changes in such systems that degrade the functionality
of our sites or give preferential treatment to similar products from our competitors could adversely
affect the usage of our sites on mobile devices. If customers find that it is more difficult to access
our particular mobile devices, or if our customers choose not to use our mobile app, we could
experience a significant loss in our customer base, which could severely harm our customer
growth. As a result, our financial condition, operating results and growth prospects may be
adversely affected.
The performance of the Internet infrastructure and fixed telecommunications networks in

China is important to the daily operation of our business and our technology platforms,
which are out of our control and the failure of which may cause significant disruptions to our
business operations.
In China, access to mobile and the Internet is generally maintained through state-owned
telecommunication operators under the supervision, monitoring and control of the MIIT. As we
rely on third-party cloud servers for our online business operations, our third-party cloud server
service provider could rely on telecommunication service providers for the provision of data
communications capacity through local telecommunications lines and Internet data, which can be
completely outside of our control. We have limited access to alternative networks or services in
the event of disruptions, failures or other problems with China’s public communications networks,
such as mobile, Internet or the fixed telecommunications networks. With the expansion of our
business, we may be required to upgrade our technology and infrastructure to keep up with the
increasing traffic on our platform. We cannot assure you that the public communications
infrastructure in China will be able to support the demands associated with the continued growth
in usage, in the event of which our normal business operations may be adversely impacted. In
addition, we have no control over the costs of the services provided by public communications
service providers, which may in turn influence the prices we need to pay for our third-party cloud
server service provider. Furthermore, if mobile access fees or other charges to mobile customers
increase, our customer traffic may drop. If we fail to navigate any of the above-mentioned risks,
which can be completely out of our control, our business, financial condition and results of
operations can be materially and adversely affected.
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RISK FACTORS
Failure to execute plans of acquisitions, investments, strategic partnerships or joint ventures

as we expect could materially and adversely affect our business, financial condition and
results of operations.
We may evaluate and consider strategic investments and acquisitions or enter into strategic
alliances to develop new services or solutions and enhance our competitive position. Acquisitions,
investments, strategic partnerships or joint ventures involve numerous risks, including the potential
failure to achieve the expected benefits of the combination or acquisition; difficulties in, and the
cost of, integrating operations, technologies, services and personnel; potential write-offs of
acquired assets or investments; and downward effect on our operating results. These transactions
will also divert the management’s time and resources from our normal operations and we may have
to incur unexpected liabilities or expenses. These transactions may also impose other risks on us,
such as potential leakage of proprietary information, non-performance by the counterparty and an
increase in expenses incurred in establishing new strategic alliances. Our acquisition targets may
have unknown or contingent liabilities, including liabilities for failure to comply with evolving
requirements or interpretations of relevant laws, regulations and rules.
We cannot assure you that our due diligence conducted will uncover all material unknown or
contingent liabilities or other negative developments, such as bankruptcy, insolvency, liquidation
or dissolution, or that the acquisition targets will be viable. We may also suffer reputational and
financial harm for actual or alleged inferior service or product or harm that occurred at the
acquisition targets prior to our acquisition, and we may need to provide an initial response to
claims as dissatisfied customers will likely pursue their claims against the acquisition targets and
us. Moreover, we may suffer reputational and financial harm if the acquisition targets were subject
to any administrative penalties prior to our acquisition. If we suffer reputational or financial harm
caused by unknown or contingent liabilities of the acquisition targets, or if we are unable to
consummate acquisitions and successfully grow our business through any future acquisitions, our
business and prospects could be adversely affected. Furthermore, the process of pursuing and
consummating acquisitions as well as integrating and managing acquired businesses, whether or
not successful, could divert our resources and management attention from our existing business
and impair our ability to successfully manage and grow our business organically.
During the Track Record Period, we derived revenue from sales of healthcare products paid
through direct billing to commercial medical insurance policies, and our business, financial
condition and results of operations may be adversely affected if our collaborative
relationships with these insurance providers cannot be maintained or improved.
Certain of our customers may make purchases with us as covered under their commercial
medical insurances. In order to increase the accessibility and convenience of our product offerings,
we also have various collaboration arrangements with such commercial insurance institutions on
direct settlement for insured customers. For the years ended December 31, 2020 and 2021 and the
nine months ended September 30, 2022, our revenue derived from direct billing settlement through
commercial medical insurance policies represented an insignificant portion of our total revenue. As
our adoption of the insurance payment methods only began in 2019, we may not be able to
maintain or increase customer volume covered by commercial medical insurance policies and to
renew collaboration arrangements with the existing insurance providers in the future, which may
adversely affect our revenue and cash flows. In addition, any default or delayed settlement by
these commercial insurance institutions may also adversely affect our financial condition, results
of operations and business.
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RISK FACTORS
Payments that we received through pre-paid packages for wellness management service
sessions may not be recognized as revenue and may subject us to complaints, claims or
proceedings if we do not have adequate capacity to render such pre-paid services.
During the Track Record Period, we had members who purchased pre-paid service packages
for the future redemption of our wellness management services. If we fail to fulfill such services at
the time of customer redemption, our customers will be dissatisfied or even bring claims against
us. Generally, pre-paid membership package payments cannot be recognized as revenue until we
render the relevant services. During the Track Record Period, we recognized contract liabilities in
relation to the unrendered purchase or service of our pre-paid cards sold to members typically for
discounted access to wellness management service offerings, unused membership points that be
used for customers’ future purchase, and also trademark licensing fees from our franchisees. As of
December 31, 2020 and 2021 and September 30, 2022, we recognized contract liabilities in the
amount of RMB4.4 million, RMB6.9 million and RMB7.9 million, respectively. The ability of our
customers to realize their prepayments or pre-paid membership packages depends on our service
capacity at the time the customer requests relevant services, and we cannot assure you that we will
always be able to maintain sufficient service capacity. Subject to arrangements otherwise agreed
between the parties, the PRC Consumer Protection Law provides that if a business operator cannot
provide goods or services as agreed under pre-paid arrangement, they shall perform as requested
by the customer or refund the pre-paid payment and bear the interest of the pre-paid payment and
other necessary reasonable costs paid by the customer. If we fail to provide the pre-paid healthcare
products and services and need to return the prepayments we received to such customers, our
cashflow and our financial position may be adversely affected. The refunded pre-payments will be
deducted from the contract liabilities in our consolidated financial statements, and will not be
recognized as revenue, which may cause a material and adverse effect on our financial condition,
results of operations and business prospect. Moreover, any negative publicity in relation to our
customer service capability may harm our brand and reputation and, in turn, materially and
adversely affect our business, financial condition and results of operations.
We may not be able to collect part or all of our trade receivables, which may subject us to
credit risks.
During the Track Record Period, we incurred trade receivables primarily from balances due
from our corporate customers such as our franchisees and our other pharmaceutical wholesale
customers, and other third parties, including administrative entities handling reimbursements under
national medical insurance schemes and commercial insurance schemes. As of December 31, 2020
and 2021 and September 30, 2022, our trade receivables were RMB127.9 million, RMB160.5
million, and RMB183.5 million, respectively. We apply the IFRS 9 simplified approach for
measuring expected credit losses which uses a lifetime expected loss allowance for all trade
receivables. To measure the expected credit losses, trade receivables have been grouped based on
shared credit risk characteristics and the days past due. For trade receivables, management makes
periodic assessments as well as individual assessment on the recoverability based on historical
settlement records and past experience and adjusts for forward looking information. The expected
loss rates are based on payment pattern of debtors with similar risk profiles and the corresponding
historical credit losses experienced within this period. The historical loss rates are adjusted to
reflect current and forward-looking information on macroeconomic factors affecting the ability of
the customers to settle the receivables. We cannot assure you that we will be able to collect our
trade receivables from our corporate customers, the national medical insurance schemes and/or
commercial insurance schemes in full, or at all, in the future, despite our efforts to conduct credit
assessment on them.
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RISK FACTORS
Certain benefits and obligations are applicable to us under PRC tax laws, regulations and
policies. Changes to such benefits or failure to fulfill such obligations may have an adverse
effect on our financial condition and results of operations.
During the Track Record Period, we had certain subsidiaries that were deemed as “small
low-profit enterprises” under the EIT Law and subject to a preferential enterprise income tax rate
of 20% for the relevant periods. Their eligibility to receive such preferential tax treatment requires
that they continue to be qualified as “small low-profit enterprises,” and depends on the duration
and extension of the relevant government policies. We received various governmental grants for
our business expansion during the Track Record Period. See “Financial Information — Key
Components of Our Consolidated Statement of Comprehensive Income — Other Income” for more
details. In addition, we benefited from a series of COVID-19-related government policies that
reduced or exempted requirements for enterprise contribution to social insurance payments from
February 2020 to December 2020. See “Financial Information — Impact of the COVID-19
Outbreak on Our Operations” for further details. These governmental grants have been given at the
discretion of the local government authorities. There is no assurance that we would continue to
enjoy these governmental grants at the historical levels, or at all.
Furthermore, we are subject to various taxes including enterprise income tax, value-added tax
and withholding tax pursuant to applicable PRC laws and regulations, and we are also required to
withhold and remit individual income tax for our employees. Any failure to properly pay the
relevant taxes or withhold and remit the requisite amount may subject us to fines or administrative
penalties. Any change, suspension or discontinuation of the aforementioned preferential tax
treatment and financial subsidies to us or failure to fulfill the obligations under the relevant tax
laws and regulations could adversely affect our financial condition, results of operations and cash
flows.
Failure to keep up with evolving requirements or interpretations of relevant laws, regulations

and rules on occupational health and safety could subject us to investigations and
administrative penalties, which may adversely affect our business, results of operations and
financial condition.
As we engage a large number of employees in our daily business operations, we are

particularly sensitive to a series of legal and regulatory requirements in connection with
occupational health and safety, the violation of which may subject us to administrative penalties.
During the Track Record Period, we did not encounter any incident, as far as we are aware of,
resulting from our non-compliance with occupational health and safety laws and regulations that
has resulted in a material adverse effect on our financial condition and results of operations.
However, we cannot assure you that we will not be subject to regulatory actions or administrative
penalties in the future. With a view to ensuring compliance with relevant laws and regulations on
health and safety, our subsidiaries have adopted certain internal rules to enhance our compliance
with laws, regulations and rules in connection with occupational health and safety. See “Business
— Environmental, Social and Governance Matters.” However, we cannot assure you that we or our
employees, including physicians, pharmacists and other staff at our medical service network will
fully comply with relevant laws and regulations on occupational health and safety in the future. If
we cannot comply with the evolving requirements or interpretations of such laws and regulations,
we could be subject to disciplinary warnings or administrative penalties, which may in turn
adversely affect our reputation, our business, financial condition and results of operations.
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RISK FACTORS
We recorded prepayments and other receivables during the Track Record Period, which may
subject us to default risks.
As of December 31, 2020 and 2021 and September 30, 2022, we recorded prepayments and
other receivables in the amount of RMB62.8 million, RMB63.8 million and RMB51.3 million,
respectively. Our prepayments and other receivables primarily consist of prepayments for
inventories, prepayments for [REDACTED] expenses, deductible value-added tax, prepayments
for utilities expenses, prepayments for technical services, other receivables in relation to amounts
due from third-party payment platforms, other receivables in relation to deposits for our online
pharmacies, prepayments for leasehold improvements, prepayments for technical services, and
other receivables in relation to deposits for our leased properties. The increase in our prepayments
and other receivables in 2021 from 2020 was primarily attributable to (i) an increase in
prepayments for leasehold improvements, (ii) an increase in prepayments for technical services,
and (iii) an increase in deposits in relation to the increase in number of online pharmacies of our
B2C retail business and expanded coverage of our offline pharmacies. See “Financial Information
— Discussion of Selected Items from the Consolidated Balance Sheets — Prepayments and Other
Receivables” for more details.
We have adopted a series of corporate-level operational and management protocols in order to

mitigate risks associated with prepayment defaults. For example, we have specially designated
personnel to oversee the request and approval processes for prepayments. Before engaging and
deciding to collaborate with a new third-party business partner or procure from any new supplier,
we have a series of internal evaluation mechanisms in place, including evaluation of the supplier’s
historical fulfillment rate, to determine the level of risks relation to non-performance by such
supplier. We also carefully conduct reviews and evaluations of new leases, including an evaluation
of our potential landlords. However, we cannot guarantee you that we will always be able to
successfully recover our prepayments and other receivables, failing which our business, financial
condition and results of operations may be materially and adversely affected.
Our deferred income tax assets may not be recovered.
As of December 31, 2020, 2021 and September 30, 2022, our deferred income tax assets were
RMB5.9 million, RMB6.7 million and RMB4.9 million, respectively. Our deferred income tax
assets during the Track Record Period arose from the temporary differences primarily attributable
to lease liabilities, tax losses, unrealized profit and time differences of purchase rebate on unsold
inventories, partially offset by deferred tax liabilities which arise from the temporary differences
attributable to right-of-use assets and provision and time differences of purchase rebate. See
“Financial Information — Discussion of Selected Items from the Consolidated Balance Sheets —
Deferred Income Tax Assets” for more details. We regularly assess the probability of the
realization of deferred income tax assets, using accounting judgments and estimates with respect to
our historical operating results, expected future earnings and tax planning strategies, among other
things. In particular, these deferred income tax assets can only be recognized to the extent that it is
probable to generate sufficient taxable profits in the foreseeable future against which the
deductible losses can be utilized. However, we cannot guarantee that our expectation of future
earnings will materialize, due to factors beyond our control such as changing laws or regulations
related to tax or other regulatory aspects, evolving economic conditions, in which case we may not
be able to recover our deferred income tax assets which in turn could have a material adverse
effect on our business, financial condition, and results of operations.
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RISK FACTORS
Our calculation of key operating data and metrics are based on certain premises and
assumptions, and inaccuracies in such data may harm our brand image and adversely affect
our business, financial condition and results of operations.
The presentation of certain key operating metrics in this Document is made with reference to
our internal records, which we believe to be reasonable and accurate for the applicable periods of
measurement. We are using commercially reasonable efforts to ensure the reasonableness and
accuracy of these internal records. However, we cannot guarantee that these internal records are
completely accurate or free of errors, mistakes, calculation deviations, redundancies, missed
information or other instances that would undermine the trustworthiness of these records. In
addition, our key operational data are calculated based on different assumptions and estimates, and
we advise you to be cautious of such assumptions and estimates when making an assessment of
our operating performance. Our measures of our business operations and levels of growth,
including the success of our customer outreach and acquisition strategies, our customer growth and
expansions of our offline operations may differ from assumptions and estimates published by third
parties or from similarly titled data used by our competitors due to differences in data availability,
sources and methodology. If [REDACTED] do not perceive our operational data to be an accurate
representation of our operating performance, or if we discover that our operational data contain
material inaccuracies, our reputation may be harmed and third parties may be less willing to
allocate their resources or spending to us, which could adversely affect our business, financial
RISKS RELATED TO DOING BUSINESS IN CHINA
Our performance is susceptive to the general economic conditions in China. Market dips in
China that cannot be recovered in the short term could materially and adversely affect our
We conduct our business against the backdrop of the Chinese economy, which is susceptible
to global economic conditions and changes. Changes in the general economic conditions in China
and worldwide may adversely affect our financial performance and business operations. For
example, starting from the end of 2019, the COVID-19 pandemic has caused a severe and
prolonged economic downturn. Even before the outbreak of COVID-19, the global macroeconomic
environment faced numerous challenges, including tensions in intergovernmental relations and
risks embedded in other political and socioeconomic affairs. Since the last global financial crisis
starting in 2008, the Chinese economy has been volatile, and the impact of the COVID-19
pandemic on the Chinese economy is likely to persist into the next few years. Potential wars,
including the ongoing Russia-Ukraine conflict, threats of terrorist attacks in various parts of the
world, and continued unrest in the Middle East and elsewhere may increase market volatility
across the globe, also affecting the economic condition and performance of the financial market in
China. There have also been concerns about the relationship between China and other regions and
countries in geographical proximity to China, such as Taiwan and India, which may potentially
have adverse economic effects and extend such effects on our business operations and financial
performance. There also exists significant uncertainty about the future relationship between the
United States and China with respect to government regulations, trade policies, treaties, and tariffs.
Economic conditions in China are sensitive to global economic conditions, as well as changes in
domestic economic and political policies and the expected or perceived overall economic growth
rate in China. Any severe or prolonged slowdown in the global or Chinese economies may
materially and adversely affect our business, financial condition and results of operations.
– 88 –
RISK FACTORS
Uncertainties with respect to the PRC legal system could bring uncertainties to our daily
operations and overall business development, which could materially and adversely affect our
Our business is conducted through our Company and our PRC subsidiaries in China,
governed by PRC laws and regulations. The PRC legal system, different from many other countries
and regions elsewhere in the world, is a civil law system based on written statutes. Particularly,
different from the common law system, prior court decisions may be cited for reference but have
limited precedential value. As the PRC legal system is evolving rapidly, the interpretation of many
laws, regulations and rules may contain inconsistencies and enforcement of these laws, regulations
and rules involve uncertainties.
To enforce our rights or to assert meritorious claims, we may need to resort to administrative
and court proceedings in the PRC. Any administrative and court proceedings in China may
generate substantial costs and diversion of resources and management attention and also be
protracted. Since PRC 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. Furthermore, the PRC legal system is based, in part, on
government policies and internal rules, some of which are not published in a timely manner, or at
all, but which may have retroactive effect. As a result, we may not always be aware of any
potential violation of these policies and rules. Such unpredictability towards our contractual,
property and procedural rights could adversely affect our business and impede our ability to
continue our operations.
For the proposed [REDACTED], we may need to complete the filing with the CSRC and
subject to additional new legal and regulatory requirements related to overseas listings.
On December 24, 2021, the CSRC released the Administrative Provisions of the State
Council Regarding the Overseas Issuance and Listing of Securities by Domestic Enterprises (Draft
for Comments) 《 ( 國務院關於境內企業境外發行證券和上市的管理規定》(草案徵求意見稿)) (the
“Administrative Provisions”), together with the Measures for the Overseas Issuance of Securities
and Listing Record-Filings by Domestic Enterprises (Draft for Comments) 《 ( 境內企業境外發行證
券和上市備案管理辦法》(徵求意見稿)) (the “Filing Measures”), both of which had a comment
period that expired on January 23, 2022. Pursuant to the Administrative Provisions and the Filing
Measures, PRC domestic companies that directly or indirectly offer or list their securities in an
overseas market, which include (i) any PRC company limited by shares, and (ii) any offshore
company that conducts its business operations primarily in China and contemplates to offer or list
its securities in an overseas market based on its onshore equities, assets or similar interests, are
required to file with the CSRC within three business days after submitting their listing application
documents to the relevant regulator in the place of intended listing. Overseas offerings and listings
that are prohibited by specific laws and regulations, constitute a threat to or endanger national
security, involve material ownership disputes, involve PRC domestic companies in which the
controlling shareholder or actual controller is subject to certain criminal proceedings, or in which
directors, supervisors and senior management of the issuer are subject to certain criminal
proceedings or administrative penalties, among other circumstances, are explicitly forbidden.
Failure to complete the filing under the Draft Provisions may subject a PRC domestic company to
a warning or a fine of between RMB one million to RMB10 million. If the circumstances are
serious, the PRC domestic company may be ordered to suspend its business or suspend its business
until rectification, or its permits or businesses license may be revoked. If the Administrative
Provisions and the Filing Measures are implemented in their current form, by which time we have
– 89 –
RISK FACTORS
not yet completed our overseas securities [REDACTED] and [REDACTED], we may be required
by relevant authorities to conduct the filing procedures pursuant to the Administrative Provisions
and the Filing Measures, as per our PRC Legal Advisors. In addition, uncertainties exist regarding
the final form of these regulations in relation to overseas listings as well as the interpretation and
implementation thereof after promulgation. Although as of the Latest Practicable Date, we had not
received any inquiry, notice, warning, or sanctions with respect to the filing requirement under the
new regulatory regime, we are not certain that we would not do so in the future. If the
Administrative Provisions and the Filing Measures are implemented in their current form or in
another form, we are not sure that we will be able to complete the requisite filings, approvals, or
procedures in time, if at all, which may pose a material barrier to the proposed [REDACTED]. As
of the date of this Document, final version of the Administrative Provisions and the Filing
Measures had not been promulgated and the effective date of the Administrative Provisions and the
Filing Measures are subject to significant uncertainties. Any failure to comply with the rules and
regulations relating to overseas listings may subject us to fines, penalties or other sanctions which
may have a material adverse effect on our financial condition, results of operations, business
prospects as well as our ability to complete the [REDACTED].
We are subject to PRC governmental controls on currency conversion and the uncertainties
underlying constant fluctuations of the RMB exchange rate.
During the Track Record Period, we generated revenue in RMB and our accounts were
denominated in RMB. In China, conversions of the RMB into other currencies are not completely
free and are based on rates set by the PBOC. We may have foreign currency obligations in the
future, such as to use a portion of our revenue to pay the declared dividends, if any, on our H
Shares. Under current PRC laws and regulations on foreign exchange, we will be able to pay
dividends to our shareholders in foreign currencies by complying with certain procedural
requirements and without prior approval from SAFE, following the completion of the
[REDACTED]. However, we cannot guarantee that the PRC government will not take
discretionary measures to restrict access to foreign currencies for capital account and current
account transactions under certain circumstances in the future. As a result, we may not be able to
pay dividends in foreign currencies to holders of our H Shares.
We are also subject to uncertainties underlying constant fluctuations of the value of the RMB,
which can be affected by many factors such as domestic monetary policies and international
economic and political conditions. The recent trend towards the internationalization of RMB may
cause an increased fluctuation of the value of RMB as the PRC government may introduce new
rules on foreign exchange in the future. We are subject to the risk of the RMB depreciating in
value as we may need to convert foreign currencies received from the [REDACTED] of the
[REDACTED] into RMB to pay our operating expenses. In addition, there may be limited
instruments available for us to reduce our foreign currency risk exposure at reasonable costs. We
cannot assure you that RMB will not appreciate or depreciate significantly in value, which may
result in unfavorable changes against our operations by decreasing the overall value of our assets,
our transactions or our business, therefore materially and adversely affecting our revenue, profits,
cash flow earnings and overall financial condition. In such event of adverse change, the value of,
and any dividends payable on, our H Shares, will also be negatively impacted.
– 90 –
RISK FACTORS
Any failure to comply with PRC regulations regarding the registration requirements for
employee stock incentive plans may subject the plan participants or us to fines and other
legal or administrative sanctions.
We adopted the [REDACTED] Share Incentive Scheme as further elaborated in “Appendix

VI — Statutory and General Information — D. [REDACTED] Share Incentive Scheme.” Pursuant
to the Notice on Issues Concerning the Foreign Exchange Administration for Domestic Individuals
Participating in Stock Incentive Plan of Overseas Publicly Listed Company, issued by SAFE in
February 2012, employees, directors, supervisors and other senior management participating in any
stock incentive plan of an overseas publicly listed company who are PRC citizens or who are
non-PRC citizens residing in China for a continuous period of not less than one year, subject to a
few exceptions, are required to register with SAFE through a domestic qualified agent, which
could be a PRC subsidiary of such overseas listed company, and complete certain other procedures.
We and our directors, executive officers and other employees who are PRC citizens or who reside
in the PRC for a continuous period of not less than one year and who have been granted restricted
shares, restricted share units or options are subject to these regulations. Failure to complete the
SAFE registrations may subject them to fines and legal sanctions. We may also face regulatory
uncertainties that could restrict our ability to adopt additional incentive plans for our directors and
employees under PRC law.
Future granting of share-based employee stock incentive plan may cause a dilution to the
shareholding of our existing Shareholders.
We adopted the [REDACTED] Share Incentive Scheme to attract and retain a selection of
our employees who are undertaking key corporate responsibilities in various corporate-level
departments. For the years ended December 31, 2020 and 2021, we made share-based payments
under our [REDACTED] Share Incentive Scheme in the amount of RMB1.2 million and RMB1.2
million, respectively. For the nine months ended September 30, 2022, we recorded a net reversal of
share-based payment expenses of RMB87,000. For further details on the [REDACTED] Share
Incentive Scheme, see “Appendix VI — Statutory and General Information — D. [REDACTED]
Share Incentive Scheme.” To further incentivize our employees and service providers to contribute
to us, we may grant additional share-based incentive compensation in the future in accordance
with applicable Listing Rules. Issuance of additional Shares with respect to such share-based
payment may cause a dilution to the shareholding of our existing Shareholders. Expenses incurred
with respect to such share-based payment may also increase our operating expenses, materially and
adversely affecting our business, financial condition and results of operations.
You may be subject to the PRC withholding tax on dividends from us and the PRC income
tax on any gain realized on the transfer of our H Shares.
Under applicable PRC tax laws, both the dividends we pay to non-PRC resident individual
holders of H Shares (the “non-resident individual holders”), and gains realized through the sale
or transfer by other means of H Shares by such shareholders, are subject to PRC individual income
tax at a rate of 20%, unless reduced by the applicable tax treaties or arrangements.
Under applicable PRC tax laws, the dividends we pay to, and gains realized through the sale
or transfer by other means of H Shares by, non-PRC resident enterprise holders of H Shares are
both subject to PRC enterprise income tax at a rate of 10%, unless reduced by applicable tax
treaties or arrangements. Pursuant to the Arrangements between the Mainland of China and the
Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the
Prevention of Fiscal Evasion with Respect to Taxes on Incomes 《 ( 內地和香港特別行政區關於對
– 91 –
RISK FACTORS
所得避免雙重徵稅和防止偷漏稅的安排》) dated August 21, 2006, any non-resident enterprise

registered in Hong Kong that holds directly at least 25% of the shares of our Company shall pay
Enterprise Income Tax for the dividends declared and paid by us at a tax rate of 5%.
For non-resident individual holders, gains realized through the transfer of properties are
normally subject to PRC individual income tax at a rate of 20%. However, according to the
Circular of the Ministry of Finance and the STA on Issues Concerning Income of Individuals Tax
Policies 《( 財政部、國家稅務總局關於個人所得稅若干政策問題的通知》), income received by
individual foreigners from dividends and bonuses of a foreign-invested enterprise are exempt from
individual income tax for the time being. According to the Circular Declaring that Individual
Income Tax Continues to Be Exempted over Individual Income from Transfer of Shares issued by
the STA 《 ( 關於個人轉讓股票所得繼續暫免徵收個人所得稅的通知》) effective as of March 30,
1998, income from individuals’ transfer of stocks of listed companies continued to be temporarily
exempted from individual income tax. On February 3, 2013, the State Council approved and
promulgated the Notice of Suggestions to Deepen the Reform of System of Income Distribution
(《國務院轉批發展改革委等部門關於深化收入分配制度改革若干意見的通知》). On February 8,
2013, the General Office of the State Council promulgated the Circular Concerning Allocation of
Key Works to Deepen the Reform of System of Income Distribution 《 ( 國務院辦公廳關於深化收
入分配制度改革重點工作分工的通知》). According to these two documents, the PRC government
is planning to cancel foreign individuals’ tax exemption for dividends obtained from
foreign-invested enterprises, and the Ministry of Finance and the STA should be responsible for
making and implementing details of such plan. However, relevant implementation rules or
regulations have not been promulgated by the Ministry of Finance and the STA. On December 31,
2009, the Ministry of Finance, STA and CSRC jointly issued the Circular on Related Issues on
Levying Individual Income Tax over the Income Received by Individuals from the Transfer of
Listed Shares Subject to Sales Limitation 《( 關於個人轉讓上市公司限售股所得徵收個人所得稅有
關問題的通知》), which came into effect on December 31, 2009, which states that individuals’
income from the transfer of listed shares obtained from the public offering of listed companies and
transfer market on the Shanghai Stock Exchange and the Shenzhen Stock Exchange shall continue
to be exempted from individual income tax, except for the relevant shares which are subject to
sales restriction (as defined in the Supplementary Notice on Issues Concerning the Levy of
Individual Income Tax on Individuals’ Income from the Transfer of Restricted Stocks of Listed
Companies 《 ( 關於個人轉讓上市公司限售股所得徵收個人所得稅有關問題的補充通知》), jointly
issued and implemented by such departments on November 10, 2010). As of the Latest Practicable
Date, the aforesaid provision has not expressly provided that individual income tax shall be
collected from non-PRC resident individuals on the sale of shares of PRC resident enterprises
listed on overseas stock exchanges.
Pursuant to the Circular of the STA on Issues Relating to the Withholding and Remitting of
Enterprise Income Tax by PRC Resident Enterprises on Dividends Distributed to Overseas
Non-Resident Enterprise Shareholders of H Shares 《 ( 國家稅務總局關於中國居民企業向境外 H股
非居民企業股東派發股息代扣代繳企業所得稅有關問題的通知》), issued by the STA on
November 6, 2008, we intend to withhold tax at 10% from dividends payable to non-PRC resident
enterprise holders of H Shares. Such withholding tax can be reduced or waived based on
applicable tax treaties or arrangement. There are uncertainties regarding the interpretation and
implementation of the EIT Law and its implementing rules by the PRC tax authorities, including
whether and how enterprise income tax on gains derived upon sale or other disposition of H Shares
will be collected from non-PRC resident enterprise holders of H shares. If such tax is collected in
the future, the value of such non-PRC resident enterprise holders’ investments in H Shares may be
– 92 –
RISK FACTORS
Considering these uncertainties, non-resident holders of our H Shares should be aware that
they may be obligated to pay PRC income tax on the dividends and gains realized through sales or
transfers of the H Shares. See “Appendix III — Taxation and Foreign Exchange” for further
details.
You may experience difficulties in effecting service of legal process and seeking recognition
and enforcement of foreign judgments in the PRC.
Our assets and current operations are mainly located or conducted in the PRC, and our
current Directors and senior management members are all nationals of the PRC with substantially
all of their assets located in the PRC. It may not be possible for investors to effect service of
process upon us or most of those persons in the PRC for disputes brought in courts outside 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 July 14, 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 《 ( 最高人民法院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 “Arrangement”), pursuant to which a
party with an enforceable final court judgment rendered by any designated PRC court or any
designated Hong Kong court requiring payment of money in a civil and commercial case according
to a written choice of court agreement, may apply for recognition and enforcement of the judgment
in the relevant PRC court or Hong Kong court. A written choice of court agreement refers to any
agreement in writing entered into between parties after the effective date of the 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 did not agree to enter into a choice of
court agreement in writing. As a result, it may be difficult or impossible for investors to effect
service of process against us, certain of our assets, our Directors and senior management members
in the PRC in order to seek recognition and enforcement of foreign judgments in the PRC. On
January 18, 2019, 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 《 ( 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 “New Arrangement”), which seeks to establish
a mechanism with greater clarity and certainty for recognition and enforcement of judgments in
wider range of civil and commercial matters between Hong Kong and the PRC. The New
Arrangement discontinued the requirement for a choice of court agreement for bilateral recognition
and enforcement. The New Arrangement will only take effect after the promulgation of a judicial
interpretation by the Supreme People’s Court of the PRC and the completion of the relevant
legislative procedures in Hong Kong. The New Arrangement will, upon its effectiveness, supersede
the Arrangement. Therefore, before the New Arrangement becomes effective, it may be difficult or
impossible 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.
– 93 –
RISK FACTORS
RISKS RELATED TO THE [REDACTED]
There has been no previous [REDACTED] for our H Shares prior to the [REDACTED], and
you may not be able to resell our H Shares at or above the price you pay, or at all.
Prior to the completion of the [REDACTED], there has been no [REDACTED] for our H
Shares. We cannot guarantee that there will be an active [REDACTED] for our H Shares or such
market, if developed, will be sustained after completion of the [REDACTED]. The [REDACTED]
is the result of negotiations between our Company, the [REDACTED] (for itself and on behalf of
the [REDACTED]), which may not be indicative of the price at which our H Shares will be traded
following completion of the [REDACTED]. The [REDACTED] of our H Shares may drop below
the [REDACTED] at any time after completion of the [REDACTED].
The [REDACTED] volume and [REDACTED] price of our H Shares may be volatile, which
could result in substantial losses to you.
In addition, the [REDACTED] volume and [REDACTED] price of our H Shares may be
volatile and could fluctuate widely in response to factors beyond our control, including general
market conditions of the securities markets in Hong Kong, China, the United States and elsewhere
in the world. In particular, the performance and fluctuation of the market prices of other
companies with business operations located mainly in China that have listed their securities in
Hong Kong may affect the volatility in the price of and trading volumes for our H Shares. Many
companies based in China have listed their securities, and some are in the process of preparing for
listing their securities, in Hong Kong. Certain of these companies have experienced significant
volatility, including significant price declines after their initial public offerings. The trading
performances of these securities of such companies at the time of or after their initial public
offerings may influence the overall investor sentiment towards China-based companies listed in
Hong Kong, whether positively or negatively, and consequently may impact the trading
performance of our H Shares. These broad market and industry factors may significantly affect the
[REDACTED] and volatility of our H Shares, regardless of our actual operating performance, and
may result in losses on your [REDACTED] in our H Shares.
Any possible conversion of our Domestic Shares into H Shares in the future could increase
the supply of our H Shares in the market and negatively impact the price of our H Shares.
Certain of our Domestic Shares may be converted into H Shares subject to the approval by
the CSRC, and such converted Shares may be [REDACTED] and [REDACTED] on an overseas
stock exchange, including the Stock Exchange. Any [REDACTED] or [REDACTED] of the
converted Shares on an overseas [REDACTED] shall also comply with the regulatory procedures,
rules and requirements of such [REDACTED]. No class shareholder voting is required for the
[REDACTED] or [REDACTED] of the converted Shares on an overseas [REDACTED].
However, the PRC Company Law provides that in relation to the public offering of a company, the
shares of that company which are issued prior to the public offering shall not be transferred within
one year from the date of the listing. Therefore, upon obtaining the requisite approval, shares
currently held on our domestic share register may be, after the conversion, [REDACTED] on the
Stock Exchange after one year of the [REDACTED], in the form of H Shares, which could further
increase the supply of our H Shares in the [REDACTED] and could negatively impact the value
of your [REDACTED].
– 94 –
RISK FACTORS
The actual or perceived sale or availability for sale of substantial amounts of our H Shares,
especially by our Controlling Shareholders and Directors, could adversely affect the
[REDACTED] price of our H Shares.
Future sales of a substantial number of our H Shares, especially by our Controlling

Shareholders and/or Directors, or the perception or anticipation of such sales, could negatively
impact the [REDACTED] price of our H Shares in Hong Kong and our ability to raise equity
capital in the future at a time and price that we deem appropriate.
The Shares held by our Controlling Shareholders are subject to certain lock-up periods
starting from the date on which [REDACTED] in our H Shares commences on the Stock
Exchange. While we currently are not aware of any intention of such persons to dispose of
significant amounts of their Shares after the expiry of the lock-up periods, we cannot assure you
that they will not dispose of any Shares they may own now or in the future.
Purchasers of our H Shares will incur immediate and substantial dilution following the
[REDACTED] and may experience further dilution in the future.
As the [REDACTED] of our H Shares is higher than the net tangible book value per share of
our H Shares immediately prior to the [REDACTED], purchasers of our H Shares in the
[REDACTED] will experience an immediate dilution. In addition, we may issue additional Shares
in the future. [REDACTED] of our H Shares may experience dilution in the net tangible assets
value per Share of their [REDACTED] in the H Shares if we issue additional H Shares in the
future at a price which is lower than the net tangible asset value per Share prior to the issuance of
such additional H Shares.
We cannot assure you that we will declare and distribute any amount of dividends in the
future and you may not see a return on your [REDACTED] unless the price of our H Shares
increases.
We currently intend to retain most, if not all, of our available funds and any future earnings
to fund the development and growth of our business. As a result, we have not yet adopted a
dividend policy with respect to future dividends. Therefore, you should not rely on an
[REDACTED] in our H Shares as a source for any future dividend income.
Our Company have not paid or declared any dividend during the Track Record Period. Under
the applicable PRC laws, dividend payments may be subject to certain limitations. The calculation
of our profit under applicable accounting standards differs in certain respects from the calculation
under IFRS. As a result, we may not be able to pay a dividend in a given year or period even if we
were profitable as determined under IFRS. Our Board may declare dividends in the future after
taking into account our results of operations, financial condition, cash requirements and
availability and other factors as it may deem relevant at such time. Any declaration and payment
as well as the amount of dividends will be subject to our constitutional documents and the PRC
laws and regulations and requires approval at our shareholders’ meeting. No dividend shall be
declared or payable except out of our profits and reserves lawfully available for distribution.
Accordingly, the return on your [REDACTED] in our H Shares will likely depend entirely
upon any future price appreciation of our H Shares. There is no guarantee that our H Shares will
appreciate in value or even maintain the price at which you purchased the H Shares. You may not
realize a return on your [REDACTED] in our H Shares and you may even risk losing your entire
[REDACTED] in our H Shares.
– 95 –
RISK FACTORS
There can be no assurance of the accuracy or completeness of certain factual information,

forecast and other data points obtained from various government publications, market data
providers and other independent third-party sources, including the CIC Report, contained in
this Document.
This Document, particularly the section headed “Industry Overview”, contains information
and statistics relating to the health management and healthcare solutions market, which have been
derived from third-party reports, either commissioned by us or publicly accessible, and other
publicly available sources. We believe that the sources of the information are appropriate sources
for such information, and we have taken reasonable care in extracting and reproducing such
information. However, we cannot guarantee the quality or reliability of such source materials. The
information has not been independently verified by us, the Sole Sponsor, the [REDACTED], the
[REDACTED], the [REDACTED], the [REDACTED], the [REDACTED] or any other party
involved in the [REDACTED], and no representation is given as to its accuracy. Collection
methods of such information may be flawed, biased or ineffective, or there may be discrepancies
between published information and market practice, which may result in the statistics being
inaccurate or not comparable to statistics produced for other markets. You should therefore not
place undue reliance on such information. In addition, we cannot assure you that such information
is stated or compiled on the same basis or with the same degree of accuracy as similar statistics
presented elsewhere. In any event, you should consider carefully the importance placed on such
information or statistics.
You should read the entire Document carefully to make your [REDACTED] decision and
should not rely on any information contained in press articles or other media regarding us
and the [REDACTED].
We strongly caution you not to rely on any information contained in press articles or other
media regarding us and/or 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. You
should only rely on the information included in this Document to make your [REDACTED]
decision, and we strongly caution you not to rely on any information contained in press articles or
other media coverage relating to us, our H Shares or the [REDACTED].
The forward-looking statements included in this Document are based on various assumptions.
There are also uncertainties, risks and other unforeseen factors which may cause our actual
performance or achievements to be materially different from those expressed or implied by such
forward-looking statements. See “Forward-looking Statements” for details of these statements and
the associated risks.
– 96 –
RISK FACTORS
Forward-looking statements contained in this Document are based on certain assumptions

and subject to risks and uncertainties.
Certain forward-looking statements and information relating to us contained in this Document

are based on our beliefs as well as assumptions made by, and information currently available to,
us. When used in this Document, the words “believe,” “expect,” “estimate,” “predict,” “aim,”
“intend,” “will,” “may,” “plan,” “consider,” “anticipate,” “seek,” “should,” “could,” “would,”
“continue,” and similar expressions, as they relate to our Company or our Directors, are intended
to identify forward-looking statements. Such statements reflect our current view with respect to
future events, business operations, liquidity and capital resources, some of which may not
materialize or may change. These statements are subject to certain uncertainties and assumptions,
including the other risk factors as described in this Document. Subject to the ongoing disclosure
obligations of the Listing Rules or other requirements of the Stock Exchange, we do not intend to
publicly update or otherwise revise the forward-looking statements in this Document, whether as a
result of new information, future events or otherwise. You should not place undue reliance on such
forward-looking statements and information.
Our Controlling Shareholders have significant influence over our Company and their
interests may not be aligned with the interests of our other Shareholders.
Our Controlling Shareholders have substantial influence over our business and operations,
including matters relating to management and policies, decisions in relation to acquisitions,
expansion plans, business consolidation, the sale of all or substantially all of our assets, the
nomination of directors, the payment of dividends or other distributions, as well as other
significant corporate actions. Immediately following the completion of the [REDACTED], our
Controlling Shareholders will in aggregate beneficially own approximately [REDACTED]% of the
voting powers of our outstanding share capital, assuming that the [REDACTED] is not exercised.
The concentration of voting power and the substantial influence of our Controlling Shareholders
over our Company may discourage, delay or prevent a change in control of our Company, which
could deprive other shareholders of an opportunity to receive a premium for their Shares as part of
a sale of our Company and reduce the price of our H Shares. In addition, our Controlling
Shareholders’ interests may differ from those of our other Shareholders. Subject to the Listing
Rules, our Articles of Association and other applicable laws and regulations, our Controlling
Shareholders will continue to have the ability to exercise their substantial influence over us and to
cause us to enter into transactions or take, or fail to take, actions or make decisions which conflict
with the best interests of our other shareholders.
There will be a time gap of several business days between [REDACTED] and [REDACTED]
of our H Shares [REDACTED] in the [REDACTED]. Holders of our H Shares are subject to
the risk that [REDACTED] of our H Shares could fall during the period before
[REDACTED] of our H Shares begins.
The [REDACTED] of our H Shares is expected to be determined on the [REDACTED].

However, our H Shares will not commence [REDACTED] on the Stock Exchange until they are
delivered, which is expected to be several Hong Kong business days after the [REDACTED] date.
As a result, [REDACTED] may not be able to sell or [REDACTED] in our H Shares during that
period. Accordingly, holders of our H Shares are subject to the risk that the price of our H Shares
could fall before [REDACTED] begins as a result of unfavorable [REDACTED] conditions
immediately after the [REDACTED] date, or other adverse developments, that could occur
between the time of [REDACTED] and the time [REDACTED] begins.
– 97 –
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
In preparation for the [REDACTED], our Company has sought the following waivers from
strict compliance with the relevant provisions of the Listing Rules.
WAIVER IN PRESENCE OF MANAGEMENT IN HONG KONG
Pursuant to Rule 8.12 of the Listing Rules, we must have sufficient management presence in
Hong Kong. This normally means that at least two of our executive Directors must be ordinarily
resident in Hong Kong. Pursuant to Rule 19A.15 of the Listing Rules, the requirement in Rule 8.12
may be waived by having regard to, among other considerations, our arrangements for maintaining
regular communication with the Stock Exchange.
Our Group’s business operations are primarily managed and conducted outside of Hong Kong
and the Group’s head offices are located in the PRC. All of the executive Directors are based in
the PRC and are expected to continue to be based in the PRC. Our Company is of the view that as
the headquarters and overall management of the Group are based in the PRC, it is of paramount
importance for executive Directors, each of whom has a vital role in the business and operations of
the Group, to remain to be based in the PRC and physically close to the Group’s operations. For
the reasons set out above, our Company considers that it would be practically difficult and
commercially unreasonable and undesirable for our Company to arrange for two executive
Directors to be ordinarily resident in Hong Kong for the sole purpose of satisfying the
requirements of Rule 8.12 of the Listing Rules, either by means of relocation of existing executive
Directors or appointment of additional executive Directors, which is not in the best interests of our
Company and our Shareholders as a whole. Therefore, our Company does not have, and does not
contemplate in the foreseeable future that we will have sufficient management presence in Hong
Kong for the purpose of satisfying the requirements under Rule 8.12 of the Listing Rules.
Accordingly, pursuant to Rule 19A.15 of the Listing Rules, we have applied for, [and the
Stock Exchange has granted,] a waiver from strict compliance with the requirements under Rules
8.12 and 19A.15 of the Listing Rules, subject to the following conditions. We will ensure that
there is an effective channel of communication between us and the Stock Exchange by way of the
following arrangements:
(i) Authorized representatives: we have appointed Ms. Bai Yanping (白燕平) and Ms.
Liang Xiaoping (梁曉萍) as the authorized representatives (“Authorized
Representatives”) for the purpose of Rule 3.05 of the Listing Rules who will act at all
times as our principal channel of communication with the Stock Exchange. The
Authorized Representatives will be available to meet with the Stock Exchange upon
reasonable notice and would be readily contactable by phone, facsimile and email to
deal promptly with enquiries from the Stock Exchange. The Authorized Representatives
are duly authorized to communicate on behalf of the Company with the Stock Exchange
and will have all necessary means to contact all Directors (including the independent
non-executive Directors) promptly at all times as and when the Stock Exchange wishes
to contact them on any matter. In the event that a Director expects to travel, he or she
will provide (i) his or her mobile phone number, office number, email address and
facsimile number (if any) to the Authorized Representatives; and (ii) phone number of
the place of his/her accommodation to the Authorized Representatives or maintain an
open line of communication via his/her mobile phone. See “Directors, Supervisors and
Senior Management” for more information about our Authorized Representatives;
– 98 –
(ii) Joint company secretaries: The Company has appointed Ms. Bai Yanping (白燕平) and
Ms. Yeung Siu Wai Kitty (楊小慧) as our joint company secretaries. Ms. Bai and Ms.
Yeung will, among other things, act as our additional channel of communication with
the Stock Exchange and be able to answer enquiries from the Stock Exchange. Ms. Bai
and Ms. Yeung will maintain constant contact with the Directors and senior management
team members through various means, including regular meetings and telephone
discussions whenever necessary;
(iii) Directors: to the best of our knowledge and information, each Director who does not
ordinarily reside in Hong Kong possesses valid travel documents to visit Hong Kong
and would be able to meet with the Stock Exchange upon reasonable notice. Any
meeting between the Stock Exchange and the Directors can be arranged through our
Authorized Representatives or compliance advisor, or directly with the Directors within
a reasonable timeframe;
(iv) Compliance advisor: we have appointed Maxa Capital Limited as our compliance
advisor (the “Compliance Advisor”) upon [REDACTED] pursuant to Rule 3A.19 of the
Listing Rules for a period commencing on the [REDACTED] and ending on the date on
which we comply with Rule 13.46 of the Listing Rules in respect of our financial results
for the first full financial year commencing after the [REDACTED]. The Compliance
Advisor will have access at all times to our Authorized Representatives, the Directors,
the Supervisors and other senior management as prescribed by Rule 19A.05(2) of the
Listing Rules and act as the additional channel of communication with the Stock
Exchange and answer enquiries from the Stock Exchange. The Compliance Advisor will
also provide us with professional advice on continuing obligations under the Listing
Rules. The contact details of the Compliance Advisor have been provided to the Stock
Exchange. We will also inform the Stock Exchange promptly in respect of any change in
the Compliance Advisor; and
(v) Hong Kong legal advisors: in addition to the Compliance Advisor’s role and
responsibilities after the proposed [REDACTED], which includes, among other things,
to inform us on a timely basis of any amendment or supplement to the Listing Rules and
any new or amended law, regulation or code in Hong Kong applicable to us and to
provide advice to us on the continuing requirements under the Listing Rules and
applicable laws and regulations, we will retain Hong Kong legal advisors to advise us
on the on-going compliance requirements, any amendment or supplement to and other
issues arising under the Listing Rules and other applicable laws and regulations in Hong
Kong after the [REDACTED].
WAIVER IN RESPECT OF JOINT COMPANY SECRETARIES
Pursuant to Rule 8.17 of the Listing Rules, we must appoint a company secretary who
satisfies the requirements under Rule 3.28 of the Listing Rules. According to Rule 3.28 of the
Listing Rules, we must appoint as our company secretary an individual, who, by virtue of his or
her academic or professional qualifications or relevant experience, is, in the opinion of the Stock
Exchange, capable of discharging the functions of company secretary.
– 99 –
Pursuant to Note 1 to Rule 3.28 of the Listing Rules, the Stock Exchange considers the
following academic or professional qualifications to be acceptable:
(i) a Member of The Hong Kong Chartered Governance Institute;
(ii) a solicitor or barrister (as defined in the Legal Practitioners Ordinance (Chapter 159 of
the Laws of Hong Kong)); and
(iii) a certified public accountant (as defined in the Professional Accountants Ordinance
(Chapter 50 of the Laws of Hong Kong)).
In addition, pursuant to Note 2 to Rule 3.28 of the Listing Rules provides that, in assessing
“relevant experience”, the Stock Exchange will consider the individual’s:
(i) length of employment with the issuer and other issuers and the roles he/she played;
(ii) familiarity with the Listing Rules and other relevant laws and regulations including the
SFO, Companies Ordinance, the Companies (Winding Up and Miscellaneous Provisions)
Ordinance and the Takeovers Code;
(iii) relevant training taken and/or to be taken in addition to be the minimum requirement
under Rule 3.29 of the Listing Rules; and
(iv) professional qualifications in other jurisdictions.
The Company appreciates that the company secretary will play an important role in its
corporate governance following the Company’s proposed [REDACTED], particularly in assisting
the Company and its Directors in complying with the Listing Rules and other applicable company
and securities laws and regulations. The Company also understands that since its principal business
activities are primarily outside Hong Kong and its Directors and members of the senior
management do not reside in Hong Kong, it is particularly important that its company secretary
has experience relevant to the Company’s operations and close relationship with the Board of
Directors in discharging his/her function as a joint company secretary.
We have appointed Ms. Bai Yanping (白燕平) as one of our joint company secretaries. She
has extensive experience in corporate management matters, close working relationship with the
Group and knowledge of the day-to-day business operations of the Group but presently does not
possess any of the qualification required under Rules 3.28 and 8.17 of the Listing Rules. We have
appointed Ms. Yeung Siu Wai Kitty (楊小慧) as the other joint company secretary, working closely
with Ms. Bai. Ms. Yeung is a member of The Hong Kong Chartered Governance Institute, and
therefore meets the qualification requirements under Note 1 to Rule 3.28 of the Listing Rules and
is in compliance with Rule 8.17 of the Listing Rules. The Company believes that Ms. Bai, by
virtue of her knowledge and past experience in handling corporate management matters, is capable
of discharging her functions as a joint company secretary. The Company believes that it would be
in the best interests of the Company and the corporate governance of the Company to have Ms.
Bai, who has close working relationship with the Group and possesses knowledge of the
day-to-day business operations of the Group, as its joint company secretary.
– 100 –
The joint company secretaries will be jointly discharging the duties and responsibilities of a
company secretary. Ms. Yeung will be assisting Ms. Bai in gaining the relevant experience
required under Rules 3.28 and 8.17 of the Listing Rules. Also, Ms. Bai will be assisted by (i) the
Compliance Advisor of our Company for the first full financial year starting from the
[REDACTED], particularly in relation to Hong Kong corporate governance practice and
compliance matters; and (ii) the Hong Kong legal advisors of our Company, on matters regarding
our Company’s ongoing compliance with the Listing Rules and the applicable Hong Kong laws
and regulations. In addition, Ms. Bai will endeavor to attend relevant trainings and familiarize
herself with the Listing Rules and duties required of a company secretary of an issuer
[REDACTED] on the Stock Exchange. We have applied to the Stock Exchange for, [and the Stock
Exchange has granted], a waiver from strict compliance with the requirements under Rules 3.28
and 8.17 of the Listing Rules such that Ms. Bai may be appointed as a joint company secretary of
our Company, with the on-going support from Ms. Yeung who has the specific qualification and
relevant experience under Rule 3.28 of the Listing Rules, so as to enable Ms. Bai to acquire the
relevant experience (as required under Note 2 to Rule 3.28 of the Listing Rules) to duly discharge
her duties.
Pursuant to the Guidance Letter HKEX-GL108-20, the waiver will be for a fixed period of
time not exceeding three years (the “Waiver Period”) and on the following conditions: (i) the
proposed company secretary must be assisted by a person who possesses the qualifications or
experience as required under Rule 3.28 and is appointed as a joint company secretary throughout
the Waiver Period; and (ii) the waiver can be revoked if there are material breaches of the Listing
Rules by the issuer. [The waiver is valid for an initial period of a three-year period on the
condition that Ms. Yeung, as a joint company secretary of our Company, will work closely with,
and provide assistance to, Ms. Bai in the discharge of her duties as a joint company secretary and
in gaining the relevant experience as required under Rule 3.28 of the Listing Rules and to become
familiar with the requirements of the Listing Rules and other applicable Hong Kong laws and
regulations. The waiver will be revoked immediately if Ms. Yeung ceases to provide assistance to
Ms. Bai as the joint company secretary for the three-year period after [REDACTED].]
Our Company will further ensure that Ms. Bai has access to the relevant training and support
that would enhance her understanding of the Listing Rules and the duties of a company secretary
of an issuer [REDACTED] on the Stock Exchange, and to receive updates on the latest changes to
the applicable Hong Kong laws, regulations and the Listing Rules. Prior to the end of the
three-year period, the qualifications and experience of Ms. Bai and the need for on-going
assistance of Ms. Yeung will be further evaluated by our Company. We will liaise with the Stock
Exchange to enable it to assess whether Ms. Bai, having benefited from the assistance of Ms.
Yeung for the preceding three years, will have acquired the skills necessary to carry out the duties
of company secretary and the “relevant experience” within the meaning of Note 2 to Rule 3.28 of
the Listing Rules so that a further waiver will not be necessary.
See “Directors, Supervisors and Senior Management” for further information regarding Ms.
Bai and Ms. Yeung.
– 101 –
INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]
[REDACTED]
– 102 –
[REDACTED]
– 103 –
[REDACTED]
– 104 –
[REDACTED]
– 105 –
[REDACTED]
– 106 –
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE [REDACTED]
DIRECTORS
Name Address Nationality

Executive Directors
Mr. LONG Yan (龍岩) No. 251 Chinese

Grand Hills
No. 8 Heping Road
Chaoyang District
Beijing, China
Mr. LONG Yun (龍雲) Room 1409, Anxing Building Chinese

Binhe Middle Road
Chengguan District, Lanzhou
Gansu Province, China
Ms. BAI Yanping (白燕平) Room 201, Unit 2 Chinese

Building 3, District 4
Jingwang Homeland
Chaoyang District
Beijing, China
Ms. LIANG Xiaoping (梁曉萍) Room 2102, Unit 1 Chinese

Building 5
Jinhui Plaza
Non-executive Directors
Mr. LING Mingsheng (凌明聖) Room 101, Building 7, Chinese

No. 305 East Zhongshan Road
Xuanwu District, Nanjing
Jiangsu Province, China
Mr. TU Yanwu (屠燕武) Room 202, No. 10 Chinese

Lane 600, Chifeng Road
Hongkou District
Shanghai, China
Independent Non-executive Directors
Dr. ZHU Yan (朱岩) Room 2001, Unit 1 Chinese

Building 5, Phase 4
Oak Bay
Haidian District
Beijing, China
Mr. LI Yulong (李玉龍) Room 1503, Tower D2, Chinese

Piaoliang Plaza
No. 68 Anli Road
Chaoyang District
Beijing, China
– 107 –

Dr. CHAN Siu Yeung (陳兆陽) Flat E, 12/F, Tower 1 Chinese
(alias CHAN Raymond) Granville Garden (Hong Kong)
18 Pik Tin Street
Taiwai, Shatin, New Territories
Hong Kong
SUPERVISORS

Ms. SHAO Xiaxia (邵霞霞) Room 401, Unit 1, Building 19 Chinese
Jiarunyuan, District 27
Jinchuan District, Jinchang
Ms. JIAO Duorong (焦多蓉) Room 208 Chinese

Feijiacun Apartment
Feijiacun Middle Street
Cuigezhuangxiang
Chaoyang District
Beijing, China
Ms. YANG Aiping (楊愛萍) Room 206 Chinese

Feijiacun Apartment
Feijiacun Middle Street
Cuigezhuangxiang
Chaoyang District
Beijing, China
Further information is set out in “Directors, Supervisors and Senior Management.”
PARTIES INVOLVED IN THE [REDACTED]
Sole Sponsor, [REDACTED] Huatai Financial Holdings (Hong Kong) Limited

62/F, The Center
99 Queen’s Road Central
Hong Kong
Legal Advisors to the Company As to Hong Kong law:

Shearman & Sterling
21/F, Gloucester Tower
The Landmark
15 Queen’s Road Central
Central
Hong Kong
– 108 –
As to PRC law:
AllBright Law Offices
9, 11, 12/F, Shanghai Tower
501 Yincheng Middle Road
Pudong New Area
Shanghai, China
Legal Advisors to the Sole Sponsor and As to Hong Kong law:

the [REDACTED] Jun He Law Offices
Suites 3701−10, 37/F
Jardine House
1 Connaught Place
Central
Hong Kong
As to PRC law:
JunHe LLP
20/F, China Resources Building
8 Jianguomenbei Avenue
Beijing, China
Auditor and Reporting Accountant PricewaterhouseCoopers

Certified Public Accountants
Registered Public Interest Entity Auditor
22/F, Prince’s Building
Central
Hong Kong
Industry Consultant China Insights Consultancy

10/F, Block B
Jing’an International Center
88 Puji Road
Jing’an District
Shanghai, China
Compliance Advisor Maxa Capital Limited

Unit 1908, Harbour Center
25 Harbour Road, Wanchai
Hong Kong
[REDACTED]
– 109 –
CORPORATE INFORMATION
Registered Address No. 425, Langongping Road

Qilihe District
Lanzhou
Head Offices in the PRC 5/F, Tower A, Boya International Center

No. 1 Li Ze Zhong Yi Road
Chaoyang District
Beijing, China
No. 425, Langongping Road

Qilihe District
Lanzhou
Principal Place of Business in Hong 5/F, Manulife Place

Kong 348 Kwun Tong Road
Kowloon
Hong Kong
Company’s Website www.dst111.com
(the information contained on the website does not

form part of this Document)
Joint Company Secretaries Ms. BAI Yanping (白燕平)

Room 201, Unit 2
Jingwang Homeland
Chaoyang District
Beijing, China
Ms. YEUNG Siu Wai Kitty (楊小慧)

(ACG, HKACG)
5/F, Manulife Place
348 Kwun Tong Road
Kowloon
Hong Kong
Authorized Representatives Ms. BAI Yanping (白燕平)

Room 201, Unit 2
Jingwang Homeland
Chaoyang District
Beijing, China
Ms. LIANG Xiaoping (梁曉萍)

Room 2102, Unit 1
Building 5
Jinhui Plaza
Chengguan District
Lanzhou
– 110 –
CORPORATE INFORMATION
Audit Committee Dr. CHAN Siu Yeung (陳兆陽)

(alias CHAN Raymond) (Chairperson)
Dr. ZHU Yan (朱岩)
Mr. LI Yulong (李玉龍)
Remuneration Committee Dr. ZHU Yan (朱岩) (Chairperson)

Ms. BAI Yanping (白燕平)
Nomination Committee Mr. LONG Yan (龍岩) (Chairperson)

Dr. ZHU Yan (朱岩)
[REDACTED]
Principal Bank(s) Bank of Lanzhou, Qilihe Branch

No. 494 East Xijin Road
Qilihe District, Lanzhou
Bank of Communications, Dunhuang Road

Branch
Room 108
No. 260 Dunhuang Road
Qilihe District, Lanzhou
Shanghai Pudong Development Bank Co., Ltd.,

Lanzhou Branch
No. 101, Square South Road
China Construction Bank Corporation,

Gansu Branch
No. 77 Qin’an Road
– 111 –
INDUSTRY OVERVIEW
The information and statistics set out in this section and other sections of this Document
were extracted from the report prepared by CIC, which was commissioned by us, and from
various official government publications and other publicly available publications. We engaged
CIC to prepare the CIC Report, an independent industry report, in connection with the
[REDACTED]. The information from official government sources has not been independently
verified by us, the Sole Sponsor, the [REDACTED], the [REDACTED], the [REDACTED], the
[REDACTED], the [REDACTED], any of their respective directors and advisers, or any other
persons or parties involved in the [REDACTED], and no representation is given as to its
accuracy.
SOURCE OF INDUSTRY INFORMATION
We have engaged CIC, an independent global market research and consulting company, to
conduct an analysis and prepare an industry report on the health management and healthcare
solutions market in China for use in this Document (the “CIC Report”). We agreed to pay a total
of RMB720,000 in fees and expenses for the preparation of the CIC Report by CIC. CIC prepared
its report based on (i) primary research, which involved discussing the status of the industry with
certain leading industry participants, and interviews with industry experts on a best-effort basis to
collect information in aiding in-depth analysis; and (ii) secondary research, which involved
reviewing company reports, independent research reports and data based on its own research
database.
In compiling and preparing the CIC Report, CIC has adopted the following assumptions: (i)
the overall social, economic and political environment in the PRC is expected to remain stable
during the forecast period; (ii) the PRC’s economic and industrial development is likely to
maintain a steady growth trend over the next decade; (iii) related key industry drivers are likely to
continue driving the growth of the target markets during the forecast period; (iv) target markets
will grow more steadily as sizes of the target markets continue to grow and the target markets
become more mature for the forecast period; and (v) there is no force majeure or industry
regulation in which the market may be affected dramatically or fundamentally. Such forecasts and
assumptions are inherently uncertain because of events that cannot be reasonably foreseen,
including but not limited to the actions of government, individuals, third parties and competitors.
Specific factors that could cause actual results to differ materially include, without limitation,
financial risks, supply risks, regulatory risks and labor risks in the health management and
healthcare solutions market in China.
Except as otherwise noted, all of the data, statements and forecasts contained in this section
are derived from the CIC Report. Our Directors confirm that, after making reasonable enquiries,
there has been no adverse change in the market information in the CIC Report since the date of the
report issued by CIC which may materially qualify, contradict or otherwise have an impact on the
information set forth in this section.
OVERVIEW OF THE HEALTH MANAGEMENT AND HEALTHCARE SOLUTIONS

MARKET IN CHINA
The health management and healthcare solutions market in China generally consists of (i) the
medical consultation and treatment service market, (ii) the pharmaceutical circulation market and
(iii) the wellness management service market. The size of China’s health management and
healthcare solutions market has been growing significantly from RMB2,446.9 billion in 2016 to
RMB4,388.2 billion in 2021 at a CAGR of 12.4%, and is expected to reach RMB11,312.9 billion
– 112 –
INDUSTRY OVERVIEW
in 2030 at a CAGR of 11.1% from 2021 to 2030, according to CIC. Such rapid development is
driven by a number of key factors including (i) aging of the population, (ii) increase in citizen’s
disposable income, (iii) expansion of medical insurance coverage in China, and (iv) increasing
demand for online medical services and favorable policies for “Internet+” healthcare.
Market Size of China’s Health Management and Healthcare Solutions Service Market, 2016-2030E
CAGR 2016-2021 2021-2030E RMB billion
Medical consultation and treatment services 14.6% 14.5%
Pharmaceutical circulation 9.6% 8.2% 11,312.9
Wellness management services 21.2% 15.1%
10,238.6
Overall 12.4% 11.1% 2,443.5
9,274.9
2,152.3
8,398.5
1,901.1
7,594.7
1,680.2
6,857.1
1,482.5
6,172.3
1,303.4 5,511.7
5,528.3
1,139.4 5,134.5
4,934.6
988.6 4,785.1
4,388.2 849.7 4,453.9
3,863.6 722.2 4,137.0
3,542.3
3,139.1 607.9 3,836.0
2,762.6 576.9 3,544.0
2,446.9 520.4 3,253.9
449.1 2,979.0
365.9 2,719.2
2,283.4 2,449.3
2,061.1 2,951.8 3,357.7
1,719.2 1,867.4 2,588.7
1,975.2 2,264.4
1,285.8 1,488.9 1,717.7
682.0 806.4 946.8 1,105.9
361.8 446.1 557.6
2016 2017 2018 2019 2020 2021 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E
Source: CIC Report
Health management and healthcare solutions comprehensively entail the disease treatment and
long-term health management, from medical consultations to medication services and wellness
management services based on preventive care principles. Market players in the health
management and healthcare solutions market differ in terms of the level of comprehensiveness of
their product and service portfolios. Providers of one-stop health management services and
healthcare solutions monitor, analyze and evaluate customers’ health status from their health test
results to detect health abnormalities and prevent disease before it arises, while also being capable
of offering the full suite of health-related products and services through various sales channels,
both online and offline. Such one-stop health management services and healthcare solutions can
conveniently yet comprehensively address customers’ health needs at different stages in the
purchasing cycle, but there are currently only few market players in China that provide such
one-stop services covering all aspects of the entire cycle of the healthcare value chain.
Medical consultation
Purchase of
Health check-up pharmaceutical
tests & healthcare
products
Other personalized Wellness

health services (e.g.
management
health awareness
education, health report)
services
– 113 –
INDUSTRY OVERVIEW
According to CIC, the health management and healthcare solutions market will likely
experience increasing demands in the future for (i) services provided through a combination of
both online and offline channels, (ii) data-driven healthcare services leading to standardized
processes for diagnosis, prescription and dispensing of medication for common diseases, (iii)
one-stop health management services offering customers personalized healthcare solution plans
encompassing medical consultations, pharmacy services and wellness management services, and
(iv) digitalized operations such as intelligent warehousing and logistics, automatic product quality
monitoring and control, and electronic management of patient health profiles.
Impact of COVID-19 on China’s Health Management and Healthcare Solutions Market
The outbreak of the COVID-19 pandemic since the end of 2019 significantly restricted the
capability of market players to offer offline health management services and healthcare solutions
due to various regulatory restrictions, including the imposition of social distancing rules, multiple
rounds of quarantines and regional lockdowns, which limit or even inhibit customers from visiting
offline medical and health institutions, and hence result in a sharp decrease in their offline sales
volume. The growth of China’s offline pharmaceutical retail market slowed down significantly in
2020 from the previous year. In terms of pharmaceutical retail operations, the year-to-year growth
rate of China’s overall offline pharmaceutical retail dropped sharply to 0.7% in 2020, compared to
a year-to-year growth rate of 6.2% in the previous year. In terms of medical consultation services,
the number of patients treated at offline medical institutions was 7,741 million in 2020,
representing a significant decrease from 8,720 million in the previous year. In China, the overall
growth rate of offline pharmaceutical sales and the overall volume of patient visits at offline
medical institutions had generally recovered from the impact of COVID-19 pandemic as of the end
of 2021, while the COVID-19 pandemic’s regional impacts lasted. In particular, pharmaceutical
retailers with offline operations in certain parts of Northwestern China experienced extended
adverse impact by the COVID-19 pandemic, as the number of customers purchasing drug products
from offline stores decreased significantly in the region, and the PRC government imposed policies
requiring offline stores to temporarily close and the sales of certain drugs (including cold, fever,
cough-relieving and anti-inflammatory drugs) to be temporarily suspended during peaks of
infection during the pandemic. Pharmaceutical retailers operating in these regions experienced a
continued sales decline in 2021.
Meanwhile, the COVID-19 pandemic has driven a sharp increase in demand and supply of
online healthcare services such as online medical consultation and treatment services and offering
of pharmaceutical and healthcare products, along with people’s need for high-quality, convenient,
intelligent and efficient healthcare services. Since the outbreak of COVID-19, the development of
Internet hospitals (i.e., online platforms that provide medical consultation services supported by
offline hospitals) has accelerated in China and online consultations have become more important
and prominent. The number of online medical service users in China reached 298.0 million by the
end of 2021, an increase of 83.0 million from 215.0 million in 2020, accounting for 28.9% of all
Internet users in China in 2021. There has also been a significant increase in the number of online
orders for pharmaceutical and healthcare products, from 59.7 million in 2016 to 793.9 million in
2021. Moreover, the PRC government has introduced numerous policies that encourage the digital
transformation of medical services to meet people’s changing medical needs, in response to the
outbreak of the COVID-19 pandemic.
– 114 –
INDUSTRY OVERVIEW
THE PHARMACEUTICAL CIRCULATION MARKET
The pharmaceutical circulation market consists of both the pharmaceutical distribution market
and the pharmaceutical retail market. Pharmaceutical distribution companies purchase medical
products directly from manufacturers and wholesale the products to retail pharmacies or in-hospital
pharmacies. Pharmaceutical distribution companies typically include traditional pharmaceutical
wholesalers that primarily engage in product procurement, storage and delivery for wholesale
offline, as well as third-party online platforms that primarily engage in online business-to-business
wholesale. On the other hand, pharmaceutical retailers procure medical products from
pharmaceutical distribution companies and resell them to customers including both out-of-hospital
patients and other healthy people. Pharmaceutical distribution companies and pharmaceutical
retailers used to be two distinct groups that rarely overlapped in the past because pharmaceutical
retailers typically did not have the requisite warehousing capabilities to realize and manage bulk
product storage. In recent years, pharmaceutical retailers have assumed an increasingly important
role to meet customers’ growing healthcare and medical needs, as customers have gradually shifted
from relying on in-hospital prescription fulfillments to meeting their medication needs at retail
pharmacies. However, the rising demand for healthcare products and services from pharmaceutical
retailers is currently still underserved due to increasing customer demands from continuously aging
population and a rising prevalence of chronic diseases in China. The market size of the
pharmaceutical circulation market in China reached RMB2,719.2 billion in 2021 from RMB1,719.2
billion in 2016, and is expected to continue to increase to RMB5,511.7 billion in 2030, at a CAGR
of 8.2% from 2021 to 2030.
The Pharmaceutical Retail Market
A retail pharmacy, as opposed to in-hospital pharmacy, is a pharmacy where medicinal

products as well as other types of pharmaceutical, healthcare and wellness products are stored,
sold and dispensed to customers. Products at retail pharmacies in China are usually sold through
different channels, mainly including offline, O2O and B2C. Among the three sales channels, the
offline channel generates the largest sales volumes, as major market players in the pharmaceutical
retail market usually start from operating offline retail pharmacies, focusing on offering products
to customers at offline stores in close proximity to local communities. In the O2O mode,
customers can order products directly from offline pharmacy stores near them at online platforms
and the products are delivered from the pharmacy stores on an on-demand and express delivery
basis. The B2C mode is also commonly adopted by pharmaceutical retailers operating online,
where retailers sell products at third-party or self-operated online platforms, such as mobile apps
or websites, and products ordered by customers are delivered to customers via courier service
which needs generally longer time for delivery than O2O mode. The market size of the
pharmaceutical retail market in China reached RMB736.9 billion in 2021 from RMB319.8 billion
in 2016, and is expected to increase to RMB2,147.8 billion in 2030, at a CAGR of 12.6% from
2021 to 2030. In recent years, while pharmaceutical retail sales were mostly generated offline,
sales through the O2O and B2C channels grew at a higher pace as online pharmaceutical retail
became more prevalent.
– 115 –
INDUSTRY OVERVIEW
Market Size of China’s Pharmaceutical Retail Market, by Sales Channels, 2016-2030E

O2O pharmaceutical retail 61.3% 27.0%
B2C pharmaceutical retail 82.8% 23.7% 2,147.8
Offline pharmaceutical retail 12.9% 6.0% 202.0
Overall 18.2% 12.6% 1,894.9
180.5
1,677.9
158.5
1,487.2
136.0 983.2
1,318.6
797.8
1,173.2 113.6
647.1
1,043.6 91.6 524.6
921.9 70.6 425.1
820.1 51.6 344.3
736.9 35.2 278.8
23.5 225.0
625.2 181.1
531.9 14.7 145.2
483.7 94.4
405.4 32.3 4.1 54.0 7.8 916.6 962.6
319.8 15.1 3.1 826.6 872.3
737.3 779.9
7.1 2.2 645.3 694.2
568.2 603.8
447.3 470.1 516.1
310.5 387.2
2016 2017 2018 2019 2020 2021 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E
Source: CIC Report
The Omni-channel Pharmaceutical Retail Market
An omni-channel pharmaceutical retailer leverages all types of sales channels, including

offline channel, B2C channel and O2O channel, and thus it will benefit patients or customers by
comprehensively offering products and services and realize the synergy of different sales channels
by allowing customers to purchase products through any of their preferred channels. According to
CIC, the market size of the omni-channel pharmaceutical retail market in China, which comprises
pharmaceutical retailers operating all the three channels, reached RMB193.6 billion in 2021 from
RMB44.5 billion in 2016, and is expected to increase to RMB1,023.9 billion in 2030, at a CAGR
of 20.3% from 2021 to 2030. The percentage of omni-channel pharmaceutical retailers among all
pharmaceutical retailers in China increased from 13.9% in 2016 to 26.3% in 2021, and is expected
to further increase to 47.7% in 2030.
Market Size of China’s Omni-channel Pharmaceutical Retail Market, 2016-2030E

Omni-channel pharmacies 34.2% 20.3%
47.7%
Share in pharmaceutical retail market 46.1%
44.3%
42.3% 1,023.9
40.1%
37.7%
872.9
35.1%
32.3% 742.7
29.3%
628.7
26.3%
25.1%
528.4
21.3% 441.9
17.8% 366.0
15.6% 297.6
13.9%
240.6
193.6
156.7
113.1
86.1
44.5 63.2
2016 2017 2018 2019 2020 2021 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E
Source: CIC Report
– 116 –
INDUSTRY OVERVIEW
An omni-channel pharmaceutical retailer, compared with traditional pharmaceutical retailers

operating offline pharmacies only, is noticeably advantaged in the following four aspects:
• Strong capability in delivering consultation services: An omni-channel pharmaceutical

retailer could provide medical consultation and treatment services conveniently through
both its online and offline sales channels. Omni-channel pharmaceutical retailers have
stronger professional support from Internet hospital physicians in addition to on-site
pharmacists, whereas traditional pharmaceutical retailers operating offline tend to have
the medical support from on-site pharmacists only. Compared to pharmaceutical retailers
that operate purely online, omni-channel pharmaceutical retailers also have on-site
pharmacists and other customer support professionals to provide face-to-face
consultation services for medication and choice of product;
• Prescription and order fulfillment capabilities: By operating with both online and
offline sales channels, an omni-channel pharmaceutical retailer could provide a wider
range of standardized medication and other healthcare solutions, as well as other
healthcare and wellness products, based on the large SKUs carried in its diversified
sales channels;
• Efficient product delivery: Omni-channel pharmaceutical retailers can efficiently deliver

products according to customer demand. Patients requiring express delivery of products,
such as those with acute symptoms in need for immediate medication, expect to receive
their ordered products within a short time and can achieve this by purchasing from an
O2O retail pharmacy. Customers with less time-sensitive demands may choose and be
able to order from B2C online pharmacies; and
• Cross-selling capabilities: Omni-channel pharmaceutical retails tend to have stronger

market presence and brand reputation by operating through all channels, quickly
growing its customer base. With the ability to purchase to their convenience, customers
tend to make more purchases across different channels, which in turn increases
cross-selling opportunities among channels for the pharmaceutical retailer.
Entry Barriers to the Omni-channel Pharmaceutical Retail Market
New entrants to the omni-channel pharmaceutical retail market in China are confronted with
a number of barriers, including:
• Geographical barrier: New entrants may find it difficult to enter certain geographical
regions where existing pharmacies operating offline or O2O close to local communities
have already been recognized by customers. It takes a long period of time for new
entrants to cultivate the same level of customer stickiness;
• Talent barrier: Requirements for talents span across different aspects of omni-channel
pharmaceutical retail operations including those relating to IT, online business
operation, quality control, supply chain, medical services, pharmacist services,
warehousing and fulfillment, sales and marketing, and R&D. New entrants to the market
will find it difficult to quickly gather a mature team;
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INDUSTRY OVERVIEW
• Customer barrier: Developing and maintaining stable and adequate customer traffic is
important for omni-channel pharmaceutical retailers. However, it takes time and
resources for new entrants to accumulate same level of customer volume as that of
existing players in the market;
• Digitalization barrier: A substantial amount of investment will be needed to transform a

traditional offline retail pharmacy to an omni-channel retail pharmacy considering the
high technology cost of integrating online and offline operations and digitalization. New
entrants without sufficient financial resources may find it difficult to meet the same
digitalization standard of mature omni-channel pharmaceutical retailers in a short time;
• Supply chain barrier: Maintaining a stable supply chain for the operation of all three
sales channels is essential for omni-channel pharmaceutical retailers, and it requires
optimal inventory strategies, including reliable and stable product procurement sources
and mature warehouse management which are all challenges for new entrants; and
• Qualification barrier: Specific pre-requisite qualifications are required for companies to

conduct pharmaceutical retail operations both offline and online, including license
requirements (such as the Pharmaceutical Operation License 《 ( 藥品經營許可證》) for
all pharmaceutical retailers and the Qualification Certificate for Internet Drug
Information Services 《 ( 互聯網藥品信息服務資格證》) for pharmaceutical retailers
operating online pharmacies on B2C platforms), as well as requirements on qualified
facilities, professional staff, drug storage capacity and management capability. New
entrants to the market may find it difficult to obtain such qualifications in a short time.
Growth Drivers of the Omni-channel Pharmaceutical Retail Market
The following factors are expected to unleash the growth potential of the omni-channel
pharmaceutical retail market in China:
• Prescription outflow from public hospitals: China’s “zero markup” (零加價) policy,
effective from 2017, targets to eliminate the markup of medicines sold in public
hospitals and requires physicians to reduce the proportion of drug costs in the total
medical expenditure, which has reduced public hospitals’ willingness to sell prescription
drugs directly. As a result, the out-of-hospital pharmaceutical retail market has been
further promoted, and prescriptions of medicines, especially the high-value specialty
medicines targeting critical diseases, have increasingly migrated from public hospitals to
out-of-hospital retail pharmacies, triggering the boost in sales of new specialty drugs
sold in DTP pharmacies and further accelerating the development of the industry. Other
favorable policies, including the Two-Invoices System (兩票制) (which allows only one
single wholesaler to be involved between manufacturers and hospitals and thus
accelerating the scale operation of wholesalers) and the 4+7 Policy (4+7政策) (which
promotes centralized pharmacy procurement of public hospitals), have also sought to
tackle the drug overpricing problems in China and supported the growth of the
omni-channel pharmaceutical retail market;
• Expanding coverage of medical insurance: While approximately 96.6% of Chinese

citizens were enrolled in public health insurance plans as of 2021, the Chinese
government has also been promoting the adoption of commercial health insurance. The
growth of the omni-channel pharmaceutical retail market in China is expected to be
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INDUSTRY OVERVIEW
driven by the increasing proportion of the population covered by commercial health

insurance and the accessibility of national health insurance as a payment method in an
increasing number of omni-channel retail pharmacies;
• Increasing number of innovative drugs: Based on the omni-channel retail pharmacies’

development, the accelerating process of new drug approvals which results in the
potential expansion of the customer base, and the continuous investment in the R&D of
new drugs by pharmaceutical companies, the omni-channel pharmaceutical retail market
is expected to benefit from an increase in the variety of medicines available and a wider
range of potential customer base; and
• Digital intelligence empowerment: With the increasing use of digital intelligence

applications, such as big data analysis and information system, among traditional retail
pharmacies in China, the overall management efficiency of the pharmacies is expected
to be enhanced by improved stock management capability and delivery efficiency and
the customer base of the pharmacies will be further expanded by the extension of sales
channels.
Future Trends of the Omni-channel Pharmaceutical Retail Market
The following trends are important in the future development of the omni-channel
pharmaceutical retail market in China:
• Continuous expansion of online pharmaceutical retail: Along with the continuous

development of Internet facilities, the digitalization progress and also the public’s
growing preferences for online purchases, there has been a rapid increase in the number
of online retail pharmacies, which will lead to an increased omni-channel
pharmaceutical retail market size;
• Popularization of omni-channel pharmaceutical retail: Omni-channel pharmaceutical

retailers have enjoyed an increasingly competitive position in the pharmaceutical retail
market due to their comprehensive sales capabilities from synergized sales channels and
the availability of relevant facilities and information systems, which may encourage
more and more market players to expand their sales channels both online and offline;
and
• Application of data analytics tools: Along with the continuous development in

digitalized management systems, and increasing investment in digitization, an increasing
number of pharmaceutical retailers have applied technological tools such as data
analytics in their daily operations to facilitate their strategic market planning and
product portfolio designing, which increase their potential to transform into
omni-channel pharmaceutical retailers in the future.
Cost Analysis of the Pharmaceutical Retail Market
The main costs for retail pharmacies include salaries of pharmacy staff and cost of storefront
rentals. In 2021, the average monthly salary of pharmacy staff in China was RMB4,700.0. As
people’s health awareness continues to raise, the pharmaceutical retail market is expected to
continue to expand, and salaries of pharmacy staff are expected to increase to RMB5,279.0 per
month in 2026, at a CAGR of 2.4% from 2021 to 2026. In 2021, the average rental price for
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INDUSTRY OVERVIEW
commercial storefronts in China was approximately RMB24.9 per square meter per day. The
average rental prices are expected to increase to RMB25.5 per square meter in 2026, at a CAGR of
0.5% from 2021 to 2026.
THE MEDICAL CONSULTATION AND TREATMENT SERVICE MARKET IN CHINA
Medical consultation and treatment services refer to the direct communication between
patients and medical professionals, including physicians and pharmacists, for the examination of
patients’ conditions, diagnosis of diseases and formulation of treatment plans. Medical consultation
and treatment services are mainly provided by medical institutions, including public and private
hospitals and private medical clinics. However, distribution of medical resources among different
types of medical institutions in China is uneven. Public hospitals in China have been overwhelmed
as people prefer to visit public hospitals, especially high-grade hospitals such as Class IIIA
hospitals, for all types of diseases and health problems, which tend to have more advanced
equipment and better physician resources. In 2021, the 3,178 Class III hospitals accounted for only
8.7% of all hospitals in China, while handling 56.8% of all patient visits. However, due to public
hospitals’ limited resources, patients cannot have access to quality follow-up assessments or
customized medication guidance and other health management services, which are particularly
crucial for patients with common or chronic diseases as they need frequent medical and health
assessments tailored to their health conditions. In addition, high-grade public hospitals are more
concentrated in first-tier metropolitan areas compared to less economically developed regions in
China. In top provinces with the most Class IIIA hospitals, including Beijing, Shanghai,
Guangdong, Jiangsu and Zhejiang, there were 359 Class IIIA hospitals and 0.6 million practicing
licensed physicians in total in 2020, whereas in Northwestern China, there were only 138 Class
IIIA hospitals and 0.1 million practicing licensed physicians in 2020. In light of the uneven
distribution of medical resources in China, there tends to be a larger demand for medical
consultation and treatment services offered online through Internet hospitals and offline through
private hospitals and medical clinics, particularly in regions with insufficient high-grade public
hospitals and practicing physicians, such as Northwestern China.
Medical consultation and treatment services can be offered both offline, where physicians can
make initial diagnoses, issue prescriptions and provide concrete treatments to patients, and online,
where patients can obtain prompt medical advice without having to visit and queue at an offline
medical institutions. Online medical consultation and treatment services offered through Internet
hospitals focus on guiding patients, particularly chronic disease patients, to choose and purchase
suitable medicinal products or renew prescriptions through a quicker and streamlined process
compared with offline medical institutions, particularly public hospitals. Also, physicians at
Internet hospitals tend to spend more time on each individual consultation and spontaneously
contact their patients for regular health status updates, affording more attention to each patient
more frequently and efficiently, as compared with offline hospitals, allowing patients to receive
convenient and long-term health management services.
Online medical consultations by private medical institutions are usually offered without
charging a fee and as an essential complement to their all-round healthcare services and solutions
that also entail pharmaceutical retail and other health management services. The market size of the
medical consultation and treatment service market by private medical institutions in China reached
RMB722.2 billion in 2021 and is expected to increase to RMB2,443.5 billion in 2030, at a CAGR
of 14.5%. In particular, less than 5.0% of market players in the medical consultation and treatment
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INDUSTRY OVERVIEW
service market were able to provide such online services in 2021. The market size of online
medical consultations by private medical institutions reached RMB25.8 billion in 2021, and is
expected to continue to increase to RMB525.9 billion in 2030 at a CAGR of 39.8% from 2021 to
2030.
Market Size of China's Medical Consultation and Treatment Services (by private medical institutions) Market, 2016-2030E
Online consultation 70.3% 39.8% Forecast
Offline outpatient care 15.7% 12.9% 2,443.5
Offline inpatient care 12.8% 11.3%
2,152.3
Overall 14.6% 14.5% 525.9
1,901.1 380.8
1,680.2 274.9
1,482.5 197.9 774.4
1,303.4 142.0 713.5
101.6 652.6
1,139.4 592.1
988.7 72.4 532.3
849.7 51.5 473.6
722.2 36.5 416.4
607.9 25.8 361.4
520.4 576.9 308.9
9.0 20.4 259.7 1,143.2
449.1 5.2 214.1 973.6 1,058.0
366.0 3.0 174.6 203.9 890.2
1.8 150.9 728.2 808.2
125.2 575.8 650.6
436.7 504.3
295.2 340.6 364.0 373.4
239.0
2016 2017 2018 2019 2020 2021 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E
Notes:
(1) The market of offline outpatient and inpatient care services only includes services provided by private medical
institutions, including private hospitals and private clinics. Services provided by public hospitals are not included.
(2) Offline outpatient care usually includes physical examination, consultation, treatment and medication services.
Inpatient care usually includes hospitalization services, surgery, and inpatient medical care services.
Source: NMPA; CIC Report
Along with the continuous expansion of market size, the overall volume of medical
consultation in China reached 7.7 billion in 2021 from 6.1 billion in 2016, and is expected to
increase to 22.5 billion in 2030, at a CAGR of 12.7% from 2021 to 2030. The volume of online
medical consultations increased from 0.2 billion in 2016 to 1.0 billion in 2021, and is expected to
further increase to 12.1 billion in 2030 at a CAGR of 31.9% from 2021 to 2030.
Entry Barriers to the Medical Consultation and Treatment Service Market in China
New entrants to the medical consultation and treatment service market in China face a
number of barriers, including:
• Regulatory barrier: Certain licenses, certificates and approvals are required to operate a
medical institution capable of offering medical consultation and treatment services, such
as an Internet hospital. Thus, the relevant qualification requirements will pose a
significant barrier to new entrants as they may lack the knowledge or capability to
fulfill such requirements, or may not be familiar with the relevant administrative or
regulatory processes;
• Talent barrier: Efficient and competitive business operation of a medical consultation

and treatment service provider requires a team of qualified and experienced physicians
and pharmacists (especially those with expertise in specialty diseases), as well as
technology experts specializing in constructing and upgrading the online platform and
other professionals such as marketing experts, which new entrants may take
considerable time to establish; and
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INDUSTRY OVERVIEW
• Customer stickiness barrier: While new customers usually select a medical service
provider based on its reputation or referrals, existing customers choose to consult with
familiar service providers, especially chronic disease patients as their medication needs
tend to repeat and it is more convenient to stay with the same service provider. The
stable and tight relationship between patients and their existing service providers form a
natural barrier for new entrants to acquire customers.
Growth Drivers of the Medical Consultation and Treatment Service Market in China
The following factors are expected to unleash the growth potential of the medical
consultation and treatment service market in China, particularly for online medical consultation
and treatment services:
• Increase in the demand for long-term chronic disease management: The increasing size
of both an aging and chronic disease prone population is expected to generate huge
future demand for chronic disease and health management services, resulting in
increasing demand for medical consultation and treatment services, especially for
Internet hospitals as convenient channels for chronic disease patients to receive
long-term follow-ups;
• Policies encouraging patient triage and expansion of private medical institutions: To

alleviate the outpatient pressure on public hospitals, especially Class IIIA hospitals in
China, medical consultation and treatment services by private medical institutions and
Internet hospitals will increase and cover most of the chronic disease patients in China.
Moreover, favorable government policies since 2015 have been encouraging private
medical institutions to expand specialty disease service and online medical consultation
and treatment service offerings;
• Favorable environment for the development of remote medical services: Along with the
continuous increase in the number of Internet users in China, the potential customer
base for Internet hospitals has been expanded, leading to the popularization of online
medical consultations; and
• COVID-19 pandemic-driven changes in patients’ habit of seeking medical services:

Stimulated by the long-lasting COVID-19 pandemic, the Chinese government has issued
a series of policies to encourage the popularization of “Internet + healthcare” services
and there was a rapid expansion in active user scale and consultation volume of leading
online medical service platforms. In addition, citizens may continue to seek online
medical services after the pandemic recognizing the convenience of remote healthcare
services.
Future Trends of the Medical Consultation and Treatment Service Market
The following trends are important in the future development of the medical consultation and
treatment service market in China:
• Popularity of online consultation: Online consultation provided by Internet hospitals, as

a convenient way for patients to seek medical services, is becoming more popular in
China, due to the encouragement of “Internet + healthcare” service by the Chinese
government, a change in citizens’ recognition of medication consultation channels after
COVID-19 pandemic and increasing patients’ recognition of the advantages of online
medical consultation;
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INDUSTRY OVERVIEW
• Outflow of patients to private medical institutions: In terms of revenue and outpatient

volume, the market size of the private medical institutions has been steadily increasing
over the past decade. Along with the continuous investment in acquiring medical
professionals, equipment and facilities, private medical institutions, such as clinics, are
expected to receive even greater patient outflow from public hospitals in the future; and
• Differentiation in private medical institutions: As the number of newly established

private medical institutions in China increases steadily under favorable governmental
policies, the number of specialty hospitals which focus on providing medical services in
specific disease areas has been increasing and is expected to account for approximately
30% of all private medical institutions in 2021 resulting in more options for patients to
receive medical treatment for specialty diseases.
THE WELLNESS MANAGEMENT SERVICE MARKET
Wellness management service refers to all health care services based on the principle of
preventive care and targeting to address customers’ non-medical health needs. Wellness
management services in China include TCM physiotherapy services and health exercise services.
In particular, common physiotherapy services include cupping therapy, moxibustion, acupressure,
TCM massage, scrape therapy and fumigation. Common health exercise programs include yoga and
pilates, which can lessen chronic pain, such as lower back pain, arthritis, headaches and carpal
tunnel syndrome, and can also facilitate lowering of blood pressure and treating insomnia.
Currently, most of the market players in the wellness management service market do not realize
the synergy between wellness management services and other medical services such as medical
consultation and treatment services and pharmacy service which, tougher with wellness
management services, could provide more comprehensive and efficient therapeutic effect to the
patients. The market size of the wellness management service market in China increased from
RMB361.8 billion in 2016 to RMB946.8 billion in 2021 and is expected to continue to increase to
RMB3,357.7 billion in 2030, at a CAGR of 15.1% from 2021 to 2030.
China's Wellness Management Service Market Size, 2016-2030E

CAGR 2016-2021 2021-2030E RMB billions
Yoga 36.4% 17.9%
Forecast
TCM physiotherapy 25.7% 17.5%
3,357.7
Other physiotherapies 17.9% 12.1% 209.4
Others 2,951.7
18.5% 13.9%
181.6
2,588.6
Overall 21.2% 15.1%
156.8 1,389.4
2,264.3
134.7 1,198.3
1,975.2
1,717.8 115.1 1,030.7
1,488.8 97.8 884.0
1,285.8 82.5 755.9 611.4
1,105.8 69.2 644.3 553.8
946.8 57.6 547.1 499.9
806.4 462.8 449.6
47.6 389.7 402.9
682.0 40.2 326.6 359.5
557.5 32.7 268.7 319.5
446.1 26.0 219.3 248.9 282.7 1,147.5
361.8 172.9 218.0 901.2 1,018.0
104.1 10.1 133.3 17.4 140.1 166.7 191.4
616.2 701.3 796.0
115.1 409.6 471.1 539.7
95.7 218.5 263.3 306.1 354.6
151.9 180.3
2016 2017 2018 2019 2020 2021 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E
Notes:
(1) Other physiotherapies are not based on TCM appropriate techniques, with typical examples including mud therapy,
fire therapy, electrotherapy, volcanic mud therapy, etc.
(2) Typical examples of other wellness management services include Spa, massage and other services that do not apply
medical techniques.
Source: CIC Report
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INDUSTRY OVERVIEW
Entry Barriers to the Wellness Management Service Market
New entrants to the wellness management service market are confronted with a number of
barriers, including:
• Reputation barrier: Existing wellness management service providers including specialty

hospitals, public hospitals, renowned TCM institutions and wellness centers, whose
competitiveness was formed through long operating histories, established brand name
and proven customer stickiness, cannot be easily surpassed;
• Talent barrier: Provision of wellness management services calls for a team of

professionals knowledgeable in TCM and health management, and the shortage of
talents in this field creates greater difficulties to new entrants to recruit a seasoned
expert team; and
• Qualification and investment capabilities barrier: As wellness management services can

achieve enhanced effects in combination with medical diagnosis and treatment services,
market players qualified to provide medical services have more competitive advantage
while new entrants will find it difficult to obtain such qualification. In addition, a
substantial capital investment is needed for establishing an attractive wellness
management service experience to customers, while new entrants may lack such capital
resource.
Growth Drivers of the Wellness Management Service Market
The following factors are expected to unleash the growth potential of the wellness
management service market in China:
• COVID-19’s lasting impact on people’s view about wellness: The scale of the COVID-19
pandemic has elevated people’s perception of the importance of maintaining their
general health and well-being. People’s habitual pursuit of a healthier lifestyle with the
aid of wellness management services combined with medical services is expected to
drive the continuous growth of the market;
• Increase in per capita consumer spending on healthcare: With the increase in citizens’
income level and enhancement in their health awareness, it is expected that there will be
a continuous growth in citizens’ expenditure in wellness management services;
• Increase in the reliance on TCM wellness management techniques: As a substantial

percentage of people needing wellness management services belong to the working class
of people between 25 to 55 years old, whose health status are less than optimal due to
stress, wellness management services based on TCM techniques with preventive care
effects will become increasingly popular; and
• Aging population: Elderly people are more likely to suffer from diseases because of
their poor immune system and accumulated injuries. An aging population is, therefore,
expected to lead to an expansion in medical and therapeutic needs, including the
demand for wellness management services.
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INDUSTRY OVERVIEW
Future Trends of the Wellness Management Service Market
The following trends are important in the future development of the wellness management
service market in China:
• Personalized wellness management service: The development and application of AI, and
data analytics tools is expected to lead to the promotion of personalized and effective
wellness management services. Wellness management service providers who can
customize their service offerings to meet people’s needs based on their own lifestyle are
expected to gradually become the mainstream;
• Expansion of customer group to younger generation: As people’s health awareness

increases, the customer base for wellness management services has increased, extending
to the post-1990 generation who have become an important customer group for such
services; and
• Increased demand for health management services: Due to the huge population base and
the increasing aging trend in China, people’s demand for health management is
constantly increasing. As an important part of health management, people’s demand for
wellness management services, which avoids the prevalence of disease based on
preventive care theories and improves the physical fitness of people, will also increase.
COMPETITIVE LANDSCAPE AND RANKING
All-round health management and healthcare solutions include medical consultation,

omni-channel pharmaceutical retail, wellness management services, routine health check-up tests
and other personalized health services. The provision of all-round health management services and
healthcare solutions in China require versatile capabilities from market players, including medical
consultations availed by Internet hospital and medical clinics, omni-channel pharmaceutical retail
operations, and wellness management capabilities. Market players that can achieve part or all such
capabilities are usually market leaders in the omni-channel pharmaceutical retail industry. The
table below illustrates a comparison of the service coverage scopes of the top 15 omni-channel
pharmaceutical retailers in China in terms of revenue generated in 2021.
Comparison of Business Model and Services of Leading Competitors in China's Omni-channel Pharmaceutical Retail Market
Company Our Group Company A Company B Company C Company D Company E Company F Company G Company H Company I Company J Company K Company L Company M Company N
Offline
pharmaceutical √ √ √ √ √ √ √ √ √ √ √ √ √ √ √
retail
DTP
pharmacy √ √ √ √ √ √ √ √ √ √ √ √ √ √ √
O2O
retail √ √ √ √ √ √ √ √ √ √ √ √ √ √ √
B2C
retail √ √ √ √ √ √ √ √ √ √ √ √ √ √ √
Online
medical √ √ √ √ √ √ √ √ √ √ √ √ √ √ √
consultation
Clinics √ √ √ √ √ × × × × × √ √ × √ √
Health
check-up √ √ √ √ √ × √ × √ × × √ × × √
tests
TCM
products √ √ √ √ √ √ √ √ √ √ √ √ √ √ √
TCM
consultation √ × √ √ × × × × × × √ √ × √ √
Wellness
management √ × × × × × × × × × √ × × × ×
services
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INDUSTRY OVERVIEW
Notes:
(1) Company A was founded in 1999 and listed on the Shanghai Stock Exchange in July 2017. It is engaged in
pharmaceutical manufacturing, retail and wholesale, and its business footprint reaches 30 provinces in China.
(2) Company B was stablished in 2001 and listed on the Shanghai Stock Exchange in April 2015. It is one of the
largest pharmacy chains in China reaching 24 provinces and its main products include prescription and OTC drugs
and TCM and wellness products.
(3) Company C was established in 2001 and listed on the Shanghai Stock Exchange in February 2015. It is primarily
engaged in the pharmaceutical retail of prescription and OTC drugs and medical devices.
(4) Company D was established in 1981 and listed on the Shenzhen Stock Exchange in July 2014. It is primarily
engaged in pharmaceutical retail, medicinal material processing and supply, and prescription and OTC drugs
wholesale, covering 20 provinces in China.
(5) Company E was established in 2019 and listed on the Stock Exchange in December 2020. It is the largest online
healthcare platform in China and its business scope covers the marketing and sales of healthcare products,
healthcare services and solutions, etc.
(6) Company F was established in 2014 and listed on the Stock Exchange in November 2019. Its business includes
pharmaceutical e-commerce and retail of healthcare and pharmaceutical products, Internet medical services, etc.
(7) Company G was founded in 2014 and listed on the Stock Exchange in September 2022. It is an express digital
healthcare service provider in China and its main business includes pharmaceutical retail and medical consultation.
(8) Company H was established in 1995 and listed on the New York Securities Exchange in November 2007. It is a
large pharmacy chain that sells goods (such as drugs and wellness products) on its online platform.
(9) Company I was founded in 1998. It is a large pharmacy chain that operates the wholesale and retail of medicinal
products and provides related services.
(10) Company J was established in 1992 and listed on the Stock Exchange in May 2013. It focuses on TCM production
while covers many other processes in healthcare industry chain, such as herb growing, TCM sales, medical
services, healthcare, and R&D.
(11) Company K was established in 1999 and listed on the Shenzhen Stock Exchange in July 2021. It is primarily
engaged in pharmaceutical retail, chronic disease conditioning and health check-up.
(12) Company L was established in 1996. It primarily focuses on pharmaceutical retail chain operation in Northwestern
China. Its business also entails the R&D, production, sales and distribution of pharmaceutical products as well as
e-commerce.
(13) Company M was founded in 2004 and listed on the Shanghai Stock Exchange in December 2020. It is mainly
engaged in the pharmaceutical retail of drug, wellness and other healthcare products in China, with over 3,000
pharmacies in operation.
(14) Company N was established in 2001. Its healthcare services span over wellness management, chain clinics,
prescription and OTC drugs, Internet hospitals, rehabilitation medical care, etc. It has around 1,600 stores.
Source: Websites and/or annual reports of the above-mentioned companies; CIC Report
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INDUSTRY OVERVIEW
China’s pharmaceutical retail market is relatively fragmented with the top 10 market players
accounting for an aggregate of 19.2% of the market in terms of revenue in 2021. In 2021, our
Group ranked 16th among pharmaceutical retailers nationwide in terms of offline revenue,
accounting for 0.3% of the total pharmaceutical retail market share in China. Regional markets
tend to be more concentrated than the national market in the pharmaceutical retail industry because
chain pharmacies tend to attract a large number of customers from local communities. In 2021, our
Group ranked third among pharmaceutical retailers operating in Northwestern China in terms of
offline pharmaceutical retail revenue in the region, accounting for 5.5% of the Northwestern China
offline pharmaceutical retail market. In the same year, we ranked first among pharmaceutical
retailers operating in Gansu Province in terms of offline pharmaceutical retail revenue in the
province, accounting for 25.3% of the Gansu offline pharmaceutical retail market, and was one of
the top 10 pharmaceutical retailers operating in Beijing in terms of offline revenue in the city,
accounting for 1.0% of the Beijing offline pharmaceutical retail market.
As of the end of 2021, fewer than 10% of all pharmaceutical retailers in China could avail
the recommendation of standardized medicinal combinations, which are primarily based on
medications and supplemented by wellness products, as an important ancillary tool for customers
to choose a recommended portfolio of products according to their specific disease or health
problem during their product purchase. Among China’s pharmaceutical retailers in 2021, our Group
ranked first in terms of the revenue generated from product sales associated with standardized
medicinal combinations (i.e., our Fang-directed revenue).
Rankings of Pharmaceutical Retails in China, in terms of Number of Standardized Medicinal Combinations, 2021
Number of
Types of Revenue generated from
standardized
Ranking Company diseases standardized medicinal
medical
covered combinations (RMB million)
combinations
1 Our Group 1,076 340 252.1
2 Company C ~700 ~80 ~240.0
3 Company B ~540 ~40 ~220.0
4 Company H ~130 ~30 ~180.0
5 Company O ~110 ~70 ~220.0
Note:
(1) Company O was founded in 1998. It is primarily engaged in the pharmaceutical retail business, with more than
9,000 offline pharmacies that span across 20 provinces in China.
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INDUSTRY OVERVIEW
In addition, in 2021, we ranked 15th among pharmaceutical retailers operating all three sales
channels (i.e., offline, O2O and B2C) in China in terms of our omni-channel pharmaceutical retail
revenue, accounting for 1.0% of the total market share.
Rankings of Pharmaceutical Retailers Operating across Offline, O2O and B2C Channels in China, in Terms of Revenue, 2021
Total retail pharmacy offline retail pharmacy O2O revenue B2C revenue
Ranking Company revenue revenue (RMB billion) (RMB billion)
(RMB billion) (RMB billion)
1 Company E 26.2 1.0 1.0 24.1
2 Company A 15.3 13.7 1.3 0.3
3 Company B 13.8 13.1 0.5 0.2
4 Company F 13.2 0.5 0.8 11.9
5 Company C 13.1 12.0 0.8 0.3
6 Company D 12.4 12.0 0.3 0.1
7 Company H 11.5 8.1 3.1 0.3
8 Company I 7.8 7.1 0.5 0.2
9 Company J 6.0 5.5 0.1 0.3
10 Company K 4.8 4.2 0.3 0.2
11 Company L 4.6 4.4 0.1 0.1
12 Company M 4.5 3.6 0.5 0.5
13 Company N 3.6 3.1 0.2 0.3
14 Company G 3.2 0.6 1.8 0.8
15 Our Group 2.0 1.5 0.1 0.4
In the same year, we ranked fourth among all omni-channel pharmaceutical retailers operating
in Northwestern China in terms of our O2O revenue generated in the region, accounting for 4.4%
of the Northwestern China O2O retail market. We also ranked first among all omni-channel
pharmaceutical retailers operating in Gansu Province in terms of our O2O revenue generated in the
province, accounting for 28.2% of the Gansu O2O retail market. In terms of our revenue generated
from B2C sales in 2021, we ranked fifth among all omni-channel pharmaceutical retailers in
China.
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REGULATORY OVERVIEW
REGULATIONS RELATING TO HEALTHCARE SERVICES
1. General Policies
On July 1, 2015, the State Council promulgated the Guiding Opinions of the State Council on
Vigorously Advancing the “Internet Plus” Action 《 ( 國務院關於積極推進「互聯網+」行動的指導
意見》) to promote new models of online healthcare. It encourages Internet enterprises to cooperate
with medical institutions in establishing online medical information platforms, strengthen the
integration of regional medical treatment and public health service resources, make full use of the
Internet, big data and other means, and improve the capability to prevent and control major
diseases and public health emergencies. It vigorously explores the application of Internet medical
and health services such as Internet-extended medical advice and e-prescription.
On December 27, 2016, the State Council released the 13th Five-Year Plan for Health and
Wellness 《 ( 「十三五」衛生與健康規劃》), proposing to strengthen the informatization of the
population health and fully implement “Internet plus” medical and healthcare people-benefiting
service. In addition, the Plan also encourages the establishment of regional telemedicine business
platforms and enhances the flow of high-quality healthcare resources to the Midwest and the
primary level.
On April 25, 2018, the General Office of the State Council promulgated the Opinions of the
General Office of the State Council on Promoting the Development of “Internet plus Health Care”
(《國務院辦公廳關於促進「互聯網+醫療健康」發展的意見》) to develop “Internet plus”
healthcare services. It encourages medical institutions to apply the Internet and other information
technologies to expand the dimension and content of medical services, develop an online and
offline integrated medical service model that covers the whole process of medical service. It
allows Internet hospitals under the support of medical institutions. Medical institutions may use
Internet hospitals as the second name and based on physical hospitals, use Internet technology to
provide safe and appropriate medical services, allowing online subsequent visits for some common
diseases and chronic diseases.
On July 17, 2018, the NHC and the National Administration of Traditional Chinese Medicine
(the “NATCM”) jointly promulgated three documents, namely the Measures for the Administration
of Internet Diagnosis and Treatment (for Trial Implementation) 《 ( 互聯網診療管理辦法(試行)》),
the Measures for the Administration of Internet Hospitals (for Trial Implementation) 《
( 互聯網醫院
管理辦法(試行)》) and the Specifications for the Administration of Remote Medical Services (for
Trial Implementation) 《 ( 遠程醫療服務管理規範(試行)》). According to the Measures for the
Administration of Internet Hospitals (for Trial Implementation), Internet hospitals consist of: (1)
Internet hospitals as the second name of physical medical institutions, and (2) Internet hospitals
that are independently established by relying on physical medical institutions.
2. Internet Hospital
According to the Measures for the Administration of Internet Hospitals (for Trial
Implementation), the State implements the management of admission for Internet hospitals under
the Regulation on the Administration of Medical Institutions 《 ( 醫療機構管理條例》) and the
Detailed Rules for the Implementation of the Regulation on the Administration of Medical
Institutions (2017 Amendment) 《 ( 醫療機構管理條例實施細則(2017修訂)》). Before implementing
admission to Internet hospitals, provincial health administrative departments shall establish
provincial internet medical service supervision platforms to connect with information platforms of
Internet hospitals to achieve real-time supervision. Establishing an Internet hospital is governed by
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REGULATORY OVERVIEW
the administrative approval process as stipulated in the Measures for the Administration of Internet
Hospitals (for Trial Implementation). Applying for forming an internet hospital is required to
submit an application to the practice registration authority of its supporting physical medical
institution, and submit the application form, the Feasibility Study Report on the Formation, the
address of the supporting physical medical institution, and the agreement jointly signed by the
applicant and the supporting physical medical institution in relation to forming an Internet hospital
through cooperation. A physical medical institution newly formed upon application that intends to
use the Internet hospital as the second name shall indicate it in the application for the formation
and specify the relevant information of the Internet hospital formed in the Feasibility Study Report
on the Formation. To cooperate with a third-party institution to establish an Internet hospital
information platform, it shall submit a cooperation agreement.
In terms of the rules governing the practice of Internet hospitals, the Measures for the
Administration of Internet Hospitals (for Trial Implementation) 《 ( 互聯網醫院管理辦法(試行)》)
stipulates that Internet hospital information systems shall adopt information security protection
measures for Level 3 information system in accordance with relevant information security laws
and regulations, including completion of filings with local public security authorities. Information
of doctors and nurses who provide medical services in Internet hospitals shall be accessible in the
national electronic registration system of physicians and nurses. Internet hospitals shall conduct
electronic real-name verification for medical staff members. A third-party institution relying on a
physical medical institution to jointly form an Internet hospital shall provide services of
physicians, pharmacists and other professionals and information technology support services for
physical medical institutions and specify the responsibilities and rights of all parties in medical
services, information security, privacy protection, and other respects through cooperation, contract
and other methods. Internet hospitals must provide risk alerts for patients and obtain the informed
consent of patients.
Regarding the supervision and administration of Internet hospitals, the Measures for the
Administration of Internet Hospitals (for Trial Implementation) 《 ( 互聯網醫院管理辦法(試行)》)
clarifies that the provincial health administrative departments and the Internet hospital registration
authorities shall, through the provincial Internet medical service supervision platform, jointly
implement supervision over Internet hospitals, focus on the supervision over Internet hospitals’
personnel, prescriptions, diagnosis and treatment conduct, patient privacy protection and
information security of patients, and other content.
On February 8, 2022, the General Office of the NHC, together with the Office of the NATCM
officially published the Detailed Rules on the Regulation of Online Medical Consultation (for Trial
Implementation) 《 ( 互聯網診療監管細則(試行)》) (the “Detailed Rules”), which scientifically and
comprehensively clarifies the regulatory requirements for the entities involved in Internet medical
consultation sessions.
The Regulation on the Administration of Medical Institutions and the Detailed Rules for the
Implementation of the Regulation on the Administration of Medical Institutions (2017 Amendment)
(《醫療機構管理條例實施細則(2017修訂)》) set out the regulatory framework for the management
and operation of the medical institutions, and the operation of Internet hospitals shall comply with
the Regulation on the Administration of Medical Institutions and the Detailed Rules for the
Implementation of the Regulation on the Administration of Medical Institutions (2017 Amendment)
as well. Additionally, the Basic Standards for Internet Hospitals (for Trial Implementation) 《
( 互聯
網醫院基本標準(試行)》) as attached to the Measures for the Administration of Internet Hospitals
(for Trial Implementation) sets forth specific requirements for diagnosis and treatment items,
department setup, personnel, buildings and device and equipment, and rules and regulations of
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REGULATORY OVERVIEW
Internet hospitals. At the local level, on July 12, 2019, the Health Commission of Gansu Province
(甘肅省衛生健康委) issued three supporting documents, namely the Implementation Measures for
the Management of Internet Hospitals in Gansu Province (for Trial Implementation) 《 ( 甘肅省互聯
網醫院管理實施辦法(試行)》), the Measures for the Administration of Internet Diagnosis and
Treatment in Gansu Province (for Trial Implementation) 《 ( 甘肅省互聯網診療管理辦法(試行)》)
and Rules for the Supervision and Verification of Internet Hospitals in Gansu Province (for Trial
Implementation) 《 ( 甘肅省互聯網醫院監管核查細則(試行)》). In respect of access of Internet
hospitals, the Implementation Measures for the Management of Internet Hospitals in Gansu
Province (for Trial Implementation) 《 ( 甘肅省互聯網醫院管理實施辦法(試行)》) makes it clear
that before an Internet hospital applies for access, it must complete its data interface with the
Gansu Province Internet Supervision Platform developed and built by the Provincial Health
Commission to achieve full real-time supervision. In addition, Gansu Province also adopted the
Rules for the Supervision and Verification of Internet Hospitals in Gansu Province (for Trial
Implementation) 《 ( 甘肅省互聯網醫院監管核查細則(試行)》), which set out more stringent and
specific requirements and points for supervision and validation of the legal practice of Internet
hospital, Internet hospital standards, Internet hospital rules and regulations, premises and
equipment and facilities, and online medical consultation services.
Jinchang Deshengtang Hospital, one of our subsidiaries, has obtained the Medical Institution
Practicing License 《
( 醫療機構執業許可證》) on December 2, 2016 and the Medical Institution
Practicing License 《
( 醫療機構執業許可證》) under the second name of Jinchang Deshengtang
Diabetes Hospital-111 Internet Hospital on August 7, 2019. On April 6, 2022, the two aforesaid
Medical Institution Practicing License 《( 醫療機構執業許可證》) were formally combined and
renewed into a new Medical Institution Practicing License 《 ( 醫療機構執業許可證》) with
Jinchang Deshengtang Hospital as the first name of the physical hospital and Jinchang
Deshengtang Hospital-111 Internet Hospital as the second name, to provide Internet hospital
services.
It should be noted that in accordance with Article 24 of the Special Administrative Measures
on Admission to Foreign Investments (2021 Negative List) 《 ( 外商投資准入特別管理措施((負面清
單) (2021年版))》) and Article 8 of the Interim Measures for the Administration of Medical
Institutions in the Form of Chinese-Foreign Equity or Contractual Joint Venture 《 ( 中外合資、合作
醫療機構管理暫行辦法》), foreign investment in medical institutions is limited to joint ventures
and the proportion of equity or interest held by the Chinese party in a Chinese-foreign joint
venture medical institution shall not be less than 30%, i.e. the proportion of foreign investment in
a medical institution shall not exceed 70%. In addition, as of now, Gansu Province has not issued
special regulations for foreign investment in medical institutions, medical institutions in Gansu
Province shall apply the national level laws and their supporting document Detailed Rules for
Implementation of Administration of Internet Hospital of Gansu Province 《 ( 甘肅省互聯網醫院管
理實施細則》), that is, the ratio of foreign investment in online and offline medical institutions
shall not exceed 70%.
3. Medical Institutions
(1) General Medical Institutions
According to the Regulation on the Administration of Medical Institutions (2022 Amendment)

(《醫療機構管理條例(2022修訂)》), promulgated by the State Council on March 29, 2022, and
implemented on May 1, 2022, hospitals, health centers, sanatoriums, out-patient departments,
clinics, health clinics, health posts (rooms), first aid stations and other entities engaging in disease
diagnosis and treatment activities are medical institutions. If an entity or individual intends to set
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REGULATORY OVERVIEW
up a medical institution, it shall, in accordance with the relevant regulations of the State Council,
be approved in writing by the health administration department of the local People’s Government
at or above the county level. In addition, medical institutions should register and obtain the
Medical Institution Practicing License 《 ( 醫療機構執業許可證》) . If a medical institution practices
without a Medical Institution Practicing License 《 ( 醫療機構執業許可證》) , it shall be ordered to
cease its practice by the competent health administrative department of the People’s Government at
or above the county level, with its illicit profits, drugs and medical instruments confiscated, and be
subject to a fine of no less than five times or more than twenty times the amount of the illegal
income, or RMB10,000 if the proceeds of the crime are below RMB10,000.
(2) TCM medical institution
According to the Law of the PRC on Traditional Chinese Medicine 《

( 中華人民共和國中醫藥
法》) promulgated by the Standing Committee of the National People’s Congress (the “SCNPC”)
on December 25, 2016 and implemented on July 1, 2017, approval formalities shall be undergone
to establish a TCM medical institution according to the provisions of the state on the
administration of medical institutions, and the provisions on the administration of medical
institutions shall be observed.
The Basic Standards for TCM Clinics 《( 中醫診所基本標準》) and Basic Standards for TCM
(General) Clinics 《 ( 中醫(綜合)診所基本標準》) promulgated on December 1, 2017 and
implemented on December 1, 2017 specify that the Basic Standards for TCM Clinics shall apply to
TCM clinics under recordation management and are one of the prerequisites that shall be met for
the establishment of a TCM clinic under recordation management; the Basic Standards for TCM
(General) Clinics shall apply to TCM (General) clinics that provide services in both TCM and
Western medicines and do not comply with the scope of services under the Interim Measures for
the Management of the Recordation of Traditional Chinese Medicine Clinics 《
( 中醫診所備案管理
暫行辦法》) or have uncontrollable medical safety risks, and is the minimum standards that must
be met for the practice of TCM (General) clinics, and is the basis for the administrative
department of health and family planning (now the administrative department of health and
wellness) and the competent department of TCM to issue Medical Institution Practicing License
(《醫療機構執業許可證》) and validation.
4. Patient Medical Consultation Service
According to the Measures for the Administration of Internet Diagnosis and Treatment (for
Trial Implementation) 《 ( 互聯網診療管理辦法(試行)》), Internet diagnosis and treatment activities
shall be provided by the medical institutions that have obtained a Medical Institution Practicing
License 《 ( 醫療機構執業許可證》) in the first place, and the Internet-based diagnosis and treatment
services provided by a medical institution shall be consistent with its diagnosis and treatment
subjects. Information of doctors and nurses carrying out Internet diagnosis and treatment activities
shall be accessible in the national electronic registration system of doctors and nurses. A medical
institution shall conduct electronic real-name verification for the medical staff members carrying
out Internet diagnosis and treatment activities.
Second, Internet hospitals must provide risk alerts for patients and obtain the informed
consent of patients. When a patient receives medical treatment in a physical medical institution
and the physician receiving such patient invites other physicians to hold a group consultation of
physicians through the Internet hospital, the physicians attending the group consultation may issue
diagnosis opinions and a prescription; and when a patient does not receive medical treatment in a
physical medical institution, a physician may only provide subsequent visits for a patient of some
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REGULATORY OVERVIEW
common diseases and chronic diseases through the Internet hospital. Internet hospitals may provide
family doctor contracted services. When a patient’s condition changes or there are other
circumstances under which online diagnosis and treatment services are inappropriate, the physician
shall direct the patient to receive medical treatment in a physical medical institution. Internet
diagnosis and treatment activities shall not be carried out for any patient receiving an initial
diagnosis.
5. Wellness Services
Wellness services (the “Wellness Services”) in practice generally refer to health management
activities in relation to fitness and rehabilitation (such as yoga and pilates) and TCM techniques
(e.g., moxibustion, massage, and scrape therapy) that do not constitute western or TCM
consultation and treatment for consumers.
The regulatory requirements for fitness and rehabilitation services are scattered in the
relevant national documents on the protection of consumer rights and the regulation of service
safety.
For the Wellness Services with TCM techniques, they are mainly regulated by the various notices
and guidelines issued by the NATCM. First, according to the Notice of the Ministry of Health and the
NATCM on Issues Relating to the Management of TCM Massage and Other Activities 《 ( 衛生部、國家
中醫藥管理局關於中醫推拿按摩等活動管理中有關問題的通知》) promulgated and implemented by
the former Ministry of Health and the NATCM on September 5, 2005: (1) for the purpose of
treating diseases, the practice of massage, scraping, cupping and other methods in accordance with
TCM theories and norms, is a medical activity and must be carried out in a medical institution
rather than a non-medical institution; (2) in a medical institution, activities such as massage,
scraping and cupping shall be carried out by licensed healthcare technicians practicing in the
institution, and non-healthcare technicians shall not be employed to carry out such activities; and
(3) non-medical institutions carrying out activities such as massage, scraping, and cupping shall
not use medical terminologies such as “Traditional Chinese Medicine”, “medical treatment”,
“therapy” and disease names in the name of the institution and the name and description of any
business items, and shall not advertise the therapeutic effect.
Second, the Notice of the NATCM on the Issuance of the Interim Regulation on Health Care
Consultation and Conditioning Services by TCM Practitioners in Health Care Institutions 《 ( 中醫師
在養生保健機構提供保健諮詢和調理等服務的暫行規定》) (the “Notice on TCM Health Care”)
issued and implemented by the Office of the NATCM on January 13, 2016 stipulates that health
care institutions refer to institutions of a non-medical nature that apply the concepts, methods and
techniques of health care to carry out services such as maintaining the body and mind, preventing
diseases, improving physical fitness and enhancing health. At the same time, they shall obtain a
business license, a tax registration certificate, and other permits. The Guiding Opinions of the
NATCM on Promoting the Development of TCM Health Care Services 《 ( 國家中醫藥管理局關於
促進中醫養生保健服務發展的指導意見》) promulgated and implemented by the NATCM on
January 13, 2016, states that TCM health care institutions shall be reasonably compartmentalized
according to their functions and uses and equipped with corresponding TCM health care service
facilities and equipment to meet their service needs. Separate rooms shall be provided for advisory
and operational purposes. A separate sterilization room with sterilization equipment and facilities
shall be provided for the operation of such services.
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REGULATORY OVERVIEW
Finally, the documents such as the Official Reply on Combating the Illegal Practice of
Medicine in Special Actions Related to the Supervision of Chinese Medicine Issues 《 ( 關於打擊非
法行醫專項行動中有關中醫監督問題的批覆(國中醫藥辦法監發(2014)9號)》) (the “Reply”) issued
by the NATCM and the former National Health and Family Planning Commission on March 18,
2014 and implemented on March 18, 2014 and the Notice on TCM Health Care also explicitly
provide that non-medical institutions and their personnel, in the operation of Wellness Services in
the category of the TCM techniques, shall not: (1) use acupuncture, scar moxibustion, bubble
moxibustion, traction, pulling manipulation, TCM minimally invasive techniques, TCM bowel
irrigation or other traumatic, invasive or highly risky techniques; (2) prescribe of drugs; (3)
publicize therapeutic effects; (4) give orally to the clients TCM decocting pieces that do not
comply with those provided in Traditionally Both Food and Herbal Medicines Substances
Catalogue 《 ( 既是食品又是藥品的物品名單》) and Catalogue of Substances Suitable for Dietary
Supplements 《 ( 可用於保健食品的物品名單》) or those prohibited in Catalogue of Negative
Substances for Dietary Supplements 《 ( 保健食品禁用物品名單》). Violations shall be dealt with in
accordance with the Law on Licensed Physicians (superseded, now the Law of the PRC on
Medical Practitioners 《 ( 中華人民共和國醫師法》)), the Regulation on the Administration of
Medical Institutions and other relevant laws and regulations. Those suspected of committing a
crime shall be referred to the judicial authorities in accordance with the law.
6. Licensed Physicians
In accordance with the Law of the PRC on Medical Practitioners 《 ( 中華人民共和國醫師

法》), promulgated by the SCNPC on August 20, 2021 and implemented on March 1, 2022, China
implements a registration system for the practice of medical practitioners. Those who have
obtained the qualifications of medical practitioners may apply for registration with the competent
health department of the local People’s Government at or above the county level where they are
located. A person may not practice as a medical practitioner without being registered to obtain a
medical practitioner’s certificate.
On November 5, 2014, the former National Health and Family Planning Commission of PRC,
the National Development and Reform Commission (the “NDRC”), the Ministry of Human
Resources and Social Security, the NATCM, and the former China Insurance Regulatory
Commission jointly issued Several Opinions on Promoting and Standardizing Multi-Place Practice
of Physicians 《 ( 推進和規範醫師多點執業的若干意見》), which suggested simplifying the
registration procedure of multi-place practices and proposes to explore the feasibility of the
“record filing administration”.
According to the Administrative Measures for the Registration of Practicing Physicians《(醫

師執業註冊管理辦法》), promulgated by the former National Health and Family Planning
Commission on February 28, 2017, effective on April 1, 2017, practicing physicians shall obtain
Medical Practitioner Certificates 《(醫師執業證書》) upon registration before any practice. Any
physician who fails to obtain the Medical Practitioner Certificates shall not engage in medical
treatment, prevention and healthcare activities. For practicing physicians who intend to practice in
multiple institutions within the same place of practice, he/she shall determine a specific institution
as the main practicing institution, apply for registration with the competent health authority which
approved the aforesaid institution’s operation; and, for other institutions for which the physician is
to practice, he/she shall respectively file for registration with the competent health authorities.
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REGULATORY OVERVIEW
7. Licensed Pharmacists
The Notice on the Issuance of the Regulation of the Professional Qualification System for
Licensed Pharmacists and the Measures for the Implementation of the Professional Qualification
Examination for Licensed Pharmacists 《 ( 關於印發執業藥師職業資格制度規定和執業藥師職業資
格考試實施辦法的通知》) issued by the NMPA and the MHRSS on March 5, 2019 and
implemented on March 5, 2019 stipulates that a licensed pharmacist is a pharmacy technician who
has passed the national standard examination and obtained the Certificate of Professional
Qualification for Licensed Pharmacists of the PRC 《 ( 中華人民共和國執業藥師職業資格證書》)
(the “Certificate of Professional Qualification for Licensed Pharmacists”) and is registered to
practice in an entity that produces, operates and uses drugs and requires pharmacy services. A
licensed pharmacist shall be responsible for the quality management of drugs in his or her own
enterprise, supervising the implementation of laws, regulations and norms related to the
management of drugs; responsible for prescription audit and supervision of dispensing, providing
guidance and consultation services to the public on the rational use of drugs; and responsible for
pharmacological work such as collecting feedback on adverse drug reactions. A registration system
is in place for licensed pharmacists. The administrative department of drugs is responsible for the
administration of the registration of licensed pharmacists. Those who have obtained the
Professional Qualification Certificate for Licensed Pharmacists 《 ( 執業藥師職業資格證書》) shall
register with local registration authority through the national registration management information
system for licensed pharmacists. The registration allows licensed pharmacists to engage in the
corresponding practice activities. Those who are not registered are not allowed to practice as
licensed pharmacists. Those who are registered after approval shall be issued with a Registration
Certificate of Licensed Pharmacist 《 ( 執業藥師註冊證》), which is in a standard NMPA format, by
the registration management authority. A licensed pharmacist who changes his or her place of
practice or scope of practice shall complete the change of registration procedures in a timely
manner. Pretended affiliation of the Registration Certificate of Licensed Pharmacist is strictly
forbidden. If holders’ actual place of practice doesn’t match their registered place of practice, the
issuing department shall revoke their Registration Certificate of Licensed Pharmacist and the
department responsible for drug supervision shall enter a demerit record about them into the
national registration management information system for licensed pharmacists and publicize it.
8. Prescription Management
For the purpose of regulating the management of prescriptions, the Measures for the
Administration of Prescriptions 《 ( 處方管理辦法》) was promulgated by the former National Health
and Family Planning Commission on February 14, 2007 and implemented on May 1, 2007.
According to the Measures for the Administration of Prescriptions, prescriptions refer to the
medical documents that are issued by licensed physicians or certified medical assistant
practitioners (hereinafter referred to as medical practitioners), examined, dispensed and checked by
the specialized technical personnel of pharmacy who have acquired the qualification for holding
the professional and technical post of pharmacy, and are taken as the credentials of the patients’
use of drugs. Prescriptions include medical advice on drug use for the inpatient areas of medical
institutions. A certified medical practitioner shall obtain the corresponding prescription right at the
place of practice. A medical practitioner shall issue prescriptions considering the need for medical
treatment, disease prevention or health protection and in accordance with diagnosis and treatment
norms, and the indications, pharmacological actions, dosage, use directions, contraindications,
adverse reactions and precautions as prescribed in drug instructions. The prescription of poisonous
substances or radiopharmaceuticals for medical use shall strictly abide by the relevant laws, rules
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REGULATORY OVERVIEW
and regulations. A prescription shall be good for the date of issue only. Where it is necessary to
extend the validity period under a certain special circumstance, the medical practitioner issuing the
prescription shall indicate the valid period, which shall be no more than three days.
In respect of the responsibilities of medical institutions, if a medical institution has any of the
following circumstances, the administrative department of health at or above the county level
shall, in accordance with the provisions of Article 48 of the Regulation on the Administration of
Medical Institutions, order rectification within a prescribed period of time and may impose a fine
of not more than RMB5,000; if the consequences are serious, its Medical Institution Practicing
License 《 ( 醫療機構執業許可證》) shall be revoked: (1) employing any personnel without
prescription right or any medical practitioner whose prescription right has been canceled to issue
prescriptions; (2) employing any medical practitioner without the qualification for issuing the
prescriptions of narcotics and the psychotropic drugs of category I to issue such prescriptions; (3)
employing any personnel without the qualification for holding the professional and technical posts
of pharmacy to engage in the dispensing work of prescriptions. If a medical institution fails to
keep the special prescriptions on narcotic drugs and psychotropic drugs as required, or fails to
register them in special books as required, in accordance with Article 72 of the Regulation on the
Administration of Narcotic Drugs and Psychotropic Drugs 《 ( 麻醉藥品和精神藥品管理條例》), the
competent department of health of the People’s Government at the level of districted cities shall
order it to correct within a prescribed time limit, and give it warnings; if it fails to correct within
the time limit, it shall be given a fine ranging from RMB5,000 to 10,000; for serious violation, the
seal card shall be revoked; the person-in-charge who is directly responsible and other personnel
directly liable shall be given punishments of degradation, removal from post or dismissal
according to law.
On June 18, 1999, the former State Food and Drug Administration (now known as the NMPA,
hereinafter the same) promulgated the Regulation on the Classification and Management of
Prescription Drugs and OTC Drugs 《 ( 處方藥與非處方藥分類管理辦法》), which came into effect
on 1 January 2000 and stipulates that drugs are to be managed separately as prescription drugs or
OTC drugs according to their varieties, specifications, indications, dosages and routes of
administration.
9. Medical Records Management and Protection of Patients’ Information
On November 20, 2013, the former National Health and Family Planning Commission and the
NATCM promulgated the Regulation on the Administration of Medical Records in Medical
Institutions (2013 Edition) 《( 醫療機構病歷管理規定(2013年版)》), which came into effect on
January 1, 2014. It stipulates that medical institutions shall have a medical case management
department or full-time or part-time dedicated staff responsible for the management of medical
records and medical cases, and establish a system of regular inspection, evaluation and feedback
on the quality of medical records.
The General Office of the former National Health and Family Planning Commission and the
General Office of the NATCM promulgated the Measures for the Administration of the
Applications of Electronic Medical Record (for Trial Implementation) 《 ( 電子病歷應用管理規
範(試行)》), which came into effect on April 1, 2017, stipulating that medical institutions shall
have the following conditions for the application of electronic medical records: (1) have dedicated
technical support departments and personnel responsible for the development, operation and
maintenance of information systems related to electronic medical records; have dedicated
management departments and personnel responsible for the operational supervision of electronic
medical records; (2) establish and improve the relevant systems and procedures for the use of
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electronic medical records; (3) have a security management system and security mechanisms for
electronic medical records; (4) have the ability to trace the creation, modification, archiving and
other operations of electronic medical records; and (5) conditions set out in other relevant laws,
regulations, regulatory documents and by provincial health and medical administrative
departments.
According to the Opinions on Promoting the Development of “Internet plus Health Care”
(《關於促進「互聯網+醫療健康」發展的意見》) promulgated by the General Office of the State
Council on April 25, 2018, the regulations on information security and confidentiality of health
care data shall be strictly enforced, a system for protecting personal privacy information shall be
established and improved, patient information, user information and genetic data shall be strictly
managed, and illegal trading and leaking of information shall be punished in accordance with the
law. The Notice on Further Promoting the Construction for the Informationization of Medical
Institutions with Electronic Medical Records at the Core 《 ( 關於進一步推進以電子病歷為核心的
醫療機構信息化建設工作的通知》), promulgated by the NHC on 22 August 2018, requires that
medical institutions shall strengthen the security protection of their information systems, make safe
storage and disaster-tolerant backups of medical data, and prevent and control the risk of leakage
of patients’ medical information.
Specifically, the Measures for the Administration of Internet Diagnosis and Treatment (for
Trial Implementation) 《 ( 互聯網診療管理辦法(試行)》) promulgated by the NHC and the NATCM
on July 17, 2018 and implemented on July 17, 2018 stipulates that medical institutions shall
strictly enforce relevant laws and regulations on information security and confidentiality of
medical data, properly store patient information, and not illegally trade or disclose patient
information. When patients’ information and medical data are illegally or improperly disclosed, a
medical institution shall report to the competent health administrative department in a timely
manner and immediately take effective responses.
Article 1226 of the Civil Code (adopted by the National People’s Congress on May 28, 2020
and implemented on January 1, 2021) provides that medical institutions and their medical
personnel shall keep confidentiality of the privacy and personal information of their patients.
Persons who divulge the privacy and personal information of a patient or publish the medical
records of a patient without the consent of the patient shall bear tort liability.
10. Pricing of Medical Services
On August 17, 2019, the NHSA promulgated the Guiding Opinions on Improving the Policies of
“Internet Plus” Medical Service Prices and Medical Insurance Payment 《 ( 關於完善「互聯網+」醫療
服務價格和醫保支付政策的指導意見》), which requires that pricing policies for public and
non-public medical institutions shall be managed according to the categories they belong. Public
medical institutions shall provide “Internet plus” medical services with government-regulated prices.
The medical insurance departments shall give guidance to the upper limit of the charging standards,
and public medical institutions shall not charge service fees that exceed the pricing standards issued
by the medical insurance departments. Non-public medical institutions shall provide “Internet plus”
medical services with market-regulated prices. If the “Internet plus” medical services provided by a
designated medical institution are the same as offline medical services within the scope of medical
insurance payment and implement the price of the public medical institution, it shall be included in
the scope of medical insurance payment and shall be paid according to the relevant provisions after
the recordation. For basic medical services that are based on the new “Internet plus” initiative and
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implement government-regulated prices, the provincial medical insurance department shall determine
whether the basic medical services should be included in the scope of medical insurance payment by
comprehensively considering such factors as clinical value, service price, medical insurance payment
capability.
On August 25, 2021, the NHSA, the NHC and the NDRC promulgated the Pilot Program for
Deepening the Reform for Pricing of Medical Service 《 ( 深化醫療服務價格改革試點方案》),
which calls for the improvement of the regulation of pricing items nationwide. On the basis of the
views of clinical experts and others, the existing pricing items will be categorized and
consolidated, and the pricing item specifications for medical services will be improved nationwide,
with pricing item codes standardized and regional differences gradually eliminated. The
government-guided price for general medical services floats around a common benchmark; the
government-guided price for complex medical services is formed with the participation of public
medical institutions; and market-adjusted prices are applied to special medical services and new
items introduced during the pilot period. The prices of general medical services are adjusted
dynamically with reference to income and price indices, while the prices of complex medical
services are adjusted periodically upon assessment of compliance with standards, and a special
adjustment system for medical services is established to deal with major public health emergencies
among others.
11. Pricing of Pharmaceuticals
The Measures for Pricing of Medicines by Government 《 ( 藥品政府定價辦法》) promulgated

by the former National Development Planning Commission on November 21, 2000 and
implemented on December 25, 2000 requires that upon pricing the medicines, the governments
shall consider comprehensively the costs of production and operation, the profits, and the price of
similar medicines or alternative medicines, and refer to the price of same medicines in the
international market if necessary. Different prices shall be determined as per the difference
between GMP and non-GMP medicines, innovative medicines and generic medicines, new
medicines and high-quality medicines and common medicines. Higher price will be set for
higher-quality medicines. Where, for the same medicines with same forms and specifications,
concerning GMP medicines and non-GMP medicines, the price margin of injection medicines shall
not exceed 40%, and that of other forms shall not exceed 30%; concerning the originally
developed medicines beyond the protection period of patent of invention country and the generic
medicines produced by GMP enterprises, the price margin of injection medicines shall not exceed
35%, and that of other forms shall not exceed 30%. The formulation or adjustment of the pricing
of medicines by government shall be done in accordance with the reporting and approval
procedures required.
Opinions on the Good Management of Current Drug Prices 《 ( 關於做好當前藥品價格管理工

作的意見》), which is promulgated and implemented by the NHSA on 26 November 2019, states
that: (1) based on the current drug pricing policy, the decisive role of the market shall be insisted
in the allocation of resources and the role of the government shall be given better play, and the
market-led drug pricing mechanism around the overall development direction of the medical
insurance system shall be continuously improved in the new era; (2) with provincial-level drug
tender and procurement agencies, the establishment of regional and national drug alliance
procurement mechanisms, unify codes, standards and functional specifications shall be promoted,
and as well as information interconnection and interoperability, resource sharing and policy
linkage. Further “Streamline Administration, Delegate Powers and Improve Regulation” shall be
promoted. Based on respecting market patterns and the rights of the operators to set their own
prices, comprehensive use of monitoring and early warning, consultation and interview, reminder
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and warning, cost survey, credit rating and information disclosure among other measures shall be
made to establish a sound mechanism for regular monitoring of drug prices and promote operators’
self-discipline on prices and (3) in accordance with the principle of “prioritizing guaranteeing the
supply of drugs, prioritizing satisfying clinical needs”, a price procurement policy that encourages
the supply of drugs in demand and prevents malicious price increases for drugs in demand and
“hitch a ride on price hikes” for non-shortage drugs shall be adopted, and the supply and price
stability of drugs in demand in accordance with its responsibilities shall be ensured.
12. Medical Liability Insurance
According to Article 52 of the Law of the PRC on Medical Practitioners 《

( 中華人民共和國
醫師法》), medical institutions shall participate in medical liability insurance or establish and
participate in medical risk funds. Patients shall be encouraged to purchase medical accident
insurance. Medical liability insurance is an important part of China’s medical risk-sharing
mechanism and is the insurance that pays for the financial liability of medical institutions
according to the law as agreed in the contract.
The State has been promoting medical liability insurance. In the Notice on Issues Relating to
the Promotion of Medical Liability Insurance 《 ( 關於推動醫療責任保險有關問題的通知》) issued
by the Ministry of Health, the NATCM and the China Insurance Regulatory Commission on 9 July
2007 and the Opinions on Strengthening Medical Liability Insurance 《 ( 關於加強醫療責任保險工
作的意見》) issued by the National Health and Family Planning Commission, the Ministry of
Justice and the Ministry of Finance on July 9, 2014, there are clear requirements to give full play
to the role of medical liability insurance in resolving medical risks, protecting the legitimate rights
and interests of both medical practitioners and patients, building a harmonious doctor-patient
relationship and promoting the development of medical science. According to the Law on the
Promotion of Basic Medical and Health Care of the PRC 《 ( 中華人民共和國基本醫療衛生與健康
促進法》) issued by SCNPC on December 28, 2019 and implemented on June 1, 2020, medical
institutions are encouraged to participate in medical liability insurance or establish medical risk
funds.
Article 1218 of the Civil Code provides that where a patient sustains any harm during
diagnosis and treatment, if the medical institution or any of its medical staff is at fault, the medical
institution shall assume the compensatory liability. Medical liability insurance can cover medical
liability under the insurance. According to Article 65 of the Insurance Law of the PRC 《 ( 中華人民
共和國保險法》), an insurer may, in accordance with the provisions of the law or the contract,
directly compensate a third party for damage caused by the insured person in liability insurance to
that third party.
REGULATIONS RELATING TO BRICK-AND-MORTAR PHARMACEUTICAL

OPERATION
1. General Pharmaceuticals
In September 1984, the SCNPC promulgated the Drug Administration Law of the PRC 《 ( 中
華人民共和國藥品管理法》) (the “Drug Administration Law”) (amended respectively in 2001,
2013, 2015 and 2019) to regulate all corporations or individuals engaged in the research,
manufacture, operation, use and supervision and administration of pharmaceutical products in
China. Among other things, the Drug Administration Law (2019 Amendment) 《 ( 藥品管理法(2019
修訂)》) stipulates that to establish a wholesale and retail business of pharmaceutical products, a
Drug Supply License 《 ( 藥品經營許可證》) shall be obtained for the corresponding mode of
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operation. To be engaged in the distribution of medicinal products, one shall meet the following
conditions: (1) it employs qualified pharmacists or other pharmacy technicians; (2) it has the
business premises, equipment, storage facilities, and hygienic environment suitable for the
medicinal products distributed; (3) it has the quality management institutions or personnel suitable
for the medicinal products distributed; and (4) it has the rules and regulations to assure quality of
medicinal products, and complies with the requirements of the GSP for medicinal products
developed by the medicinal product regulatory department of the State Council in accordance with
this Law. The State Council promulgated in August 2002 and amended in 2016 and 2019 the
Regulation for the Implementation of the Drug Administration Law of the PRC 《 ( 中華人民共和國
藥品管理法實施條例》), specifying that the drug administrative departments of the people’s
governments of provinces, autonomous regions, or municipalities directly under the Central
Government and the drug administrative agencies at the level of a districted city shall be
responsible for organizing the certification of pharmaceutical trading enterprises. On November 17,
2017, the former State Food and Drug Administration promulgated the Measures for the
Administration of Pharmaceutical Operation License (2017 Amendment), which stipulates the
criteria for setting up a wholesale and retail business of pharmaceutical products and the
procedures for applying for and changing and renewing corresponding Pharmaceutical Operation
Licenses.
On June 18, 1999, the former State Food and Drug Administration promulgated the
Regulation on the Classification and Management of Prescription Drugs and OTC Drugs 《 ( 處方藥
與非處方藥分類管理辦法》), which came into effect on January 1, 2000 and stipulates that drugs
are to be managed separately as prescription drugs or OTC drugs according to their varieties,
specifications, indications, dosages and routes of administration. Prescription drugs must be
prescribed by a licensed physician or a certified medical assistant practitioner before they can be
dispensed, purchased and used; and OTC drugs do not require a prescription from a licensed
physician or a certified medical assistant practitioner to be assessed, purchased and used. The
former State Food and Drug Administration issued the Interim Regulation on the Administration of
the Circulation of Prescription Drugs and OTC Drugs 《 ( 處方藥與非處方藥流通管理暫行規定》),
which came into effect on January 1, 2000, stipulating that a licensed pharmacist or pharmacist
must review and sign a physician’s prescription before correctly dispensing and selling drugs in
accordance with the prescription.
The former State Food and Drug Administration promulgated on January 31, 2007 and
implemented on May 1, 2007 the Measures for the Supervision and Administration of Drug
Circulation, stipulating that a pharmaceutical manufacturing enterprise and pharmaceutical
wholesale enterprise when selling pharmaceutical products shall provide: (1) photocopies of its
“Pharmaceutical Manufacturing License” or “Pharmaceutical Operation License” and business
license, which are affixed with the original seal of the enterprise; (2) photocopies of the approval
testimonials for the pharmaceuticals on sale, which is affixed with the original seal of the
enterprise; and (3) relevant testimonials provided in accordance with relevant provisions of the
state if any imported pharmaceutical is for sale.
The “two-invoice system” refers to the system where a pharmaceutical manufacturer shall
issue one invoice to the distributor and in turn the distributor shall send one invoice to the medical
institution. According to the Notice on Opinions on Implementing the “Two-invoice System” in the
Procurement of Pharmaceutical Products in Public Healthcare Institutions 《 ( 關於在公立醫療機構
藥品採購中推行「兩票制」的實施意見(試行)的通知》) (effective on 26 December 2016) and the
Several Opinions of the General Office of the State Council on Further Reforming and Improving
the Policies on Drug Production, Circulation and Use 《 ( 國務院辦公廳關於進一步改革完善藥品生
產流通使用政策的若干意見》) (effective on January 24, 2017), a “two-invoice system” shall be
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implemented during pharmaceutical purchase and sales. Provinces (autonomous regions and
municipalities directly under the Central Government) that are included in the pilot comprehensive
medical reform and cities that are included in the pilot reform of public hospitals shall take the
lead in implementing the “two-invoice system”, while the other regions shall be encouraged to
implement the “two-invoice system”, so as to strive to roll out the said system across the country
by 2018. Pharmaceutical distributors and medical institutions shall, during the purchase and sale of
pharmaceutical products, set up purchase and sale records containing all relevant information,
ensure the consistency between documentation, accounts, goods and payments, and make sure
goods-accompanying documents are always attached to pharmaceutical products. Enterprises
selling pharmaceutical products shall issue invoices and sales vouchers as required. Efforts shall
also be made to actively promote the standardized and electronic management of documents for
pharmaceutical product purchase and sale.
According to Article 12 of the newly amended Drug Administration Law in 2019 《 ( 藥品管理
法(2019修訂)》), the State establishes a pharmacovigilance system to monitor, identify, evaluate,
and control adverse drug reactions and other harmful reactions related to the use of pharmaceutical
products. On May 7, 2021, the NMPA promulgated the Code of Quality Management for
Pharmacovigilance 《( 藥物警戒質量管理規範》), which took effect on December 1, 2021, requiring
marketing authorization holders and applicants for registration shall actively and effectively
prepare for the implementation of the Code, establish and continuously improve the
pharmacovigilance system as required, and lawfully carry out pharmacovigilance activities.
2. TCM
For the requirements on the brick-and-mortar TCM operation in relation to qualifications,

quality management, administration by category — prescription drugs and OTC drugs —
management system, two-invoice system, and pharmacovigilance system, please refer to the
regulatory rules for general pharmaceutical products, as described above for General
Pharmaceuticals.
In addition to compliance with the legal requirements for the operation of general
pharmaceuticals under the Drug Administration Law newly amended in 2019, special attention
should be paid to the special requirements on the operation of TCM therein. A manufacturer of
TCM decocting pieces shall perform the relevant obligations of a marketing authorization holder,
implement the whole process management of the manufacture and sale of decoction pieces,
establish a traceable system of decoction pieces, and ensure the safety, efficacy, and traceability of
decoction pieces. Article 55 of the Drug Administration Law stipulates that marketing
authorization holders, manufacturers and distributors of medicinal products, and medical
institutions shall purchase medicinal products from marketing authorization holders or enterprises
qualified for the manufacture or distribution of medicinal products, except for the purchase of
traditional Chinese medicinal materials which are not subject to approval management; and Article
58 stipulates that distributors of medicinal products selling traditional Chinese medicinal materials
shall mark the origin thereof.
The Good Supply Practice for Pharmaceutical Products promulgated and formally
implemented on July 13, 2016, specifically regulates the personnel management, procurement
records, acceptance, storage and maintenance, sales records, TCM prescription management, retail
practice, facilities and equipment, display and storage, and sales management of TCM-related
operation.
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The Detailed Rules on Confidentiality of Scientific and Technological Know-how for TCM
and Western Medicines and Medical Devices 《 ( 中西藥品、醫療器械科學技術保密細則》),
promulgated by the former State Pharmaceutical Administration on April 8, 1983 and implemented
on April 8, 1983, set out specific regulations on the use of confidential TCM formulas, file
management systems, radio and television promotion, reception, transfer, confidentiality training
and record keeping.
REGULATIONS RELATING TO DRUGS TRADING OVER INTERNET
1. Internet Drug Trading Services
According to Interim Provisions on the Examination and Approval of Internet Drug Trading
Services 《( 互聯網藥品交易服務審批暫行規定》), promulgated by the former State Food and Drug
Administration on September 20, 2005 and effective since December 1, 2005, the enterprises
engaging in the Internet drug trading service shall be subject to examination and admission, and
obtain the Qualification Certificate for Internet Drug Trading Service Provider. The admission
criteria for Internet drug trading service providers are standardized by the former State Food and
Drug Administration, and the Qualification Certificate for Internet Drug Trading Service Provider
(《互聯網藥品交易服務資格證書》) is produced centrally by the former State Food and Drug
Administration and is valid for five years. After obtaining the Qualification Certificate for Internet
Drug Trading Service Provider issued by the national drug administration in accordance with the
law, the applicant shall, in accordance with the provisions of the Administrative Measures for
Internet Information Services 《 ( 互聯網信息服務管理辦法》), obtain the corresponding
telecommunication business operation permit or fulfill the corresponding filing procedures.
On January 21, 2017, the State Council issued the Third Batch of Cancel the Central
Designated Place the Administrative Licensing Matters Decision 《 ( 國務院關於第三批取消中央指
定地方實施行政許可事項的決定》), cancelled the Internet drug trading service enterprise approval
(except the third party platform) (“B Certificate(1), C Certificate (2)”) of the administrative licensing
matters.
The former State Food and Drug Administration on April 7, 2017, further release on the
implementation of the Third Batch of the State Council to Cancel The Central Designated Place
The Administrative Licensing Matters Decision About Work Notice 《 ( 關於落實〈國務院第三批取
消中央指定地方實施行政許可事項的決定〉有關工作的通知》), about Internet drug trading,
Internet drug trading service qualification of enterprises, should be strictly in strict accordance
with the drug management quality management standards and related documents engaged in the
Internet drug trading services, strengthening storage, distribution and other related system, to carry
out the management responsibility, ensure the quality and safety of the drugs sold. Drug
production and wholesale enterprises may conduct Internet drug transactions through their own
websites and other enterprises of non-individual consumers; drug retail chain enterprises may
Notes:
1. B Certificate: approved by the provincial and municipal food and Drug Administration, the certificate number
includes “provincial abbreviation” + “B” + “year” + “serial number”, which is mainly applied by pharmaceutical
commercial companies, and the business scope is pharmaceutical B2B.
2. C Certificate: approved by the food and Drug administration of all provinces and cities. The certificate number
includes “provincial abbreviation” + “C” + “year” + “serial number”, which must be applied by offline chain
drugstores, and the business scope is pharmaceutical B2C.
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provide Internet drug trading services to individual consumers, but they shall not exceed the
business scope of the Drug Supply License 《 ( 藥品經營許可證》), display and sell the
nonprescription drugs on the relevant pages of the website.
On September 22, 2017, The State Council issued the Decision on The Cancellation of A
Batch of Administrative Licensing Matters 《 ( 關於取消一批行政許可事項的決定》), canceling the
approval of Internet drug trading service enterprises (third party) (“A Certificate(3)”). Since 2017,
pharmaceutical commercial companies, offline chain drugstores, and third-party pharmaceutical
platforms and other companies have conducted Internet drug trading services, which do not need to
pass the approval of provincial food and drug regulatory authorities, and have obtained the Internet
Drug Trading Service Provider 《 ( 互聯網藥品交易服務資格證書》).
Certain entities in our Group have obtained the Qualification Certificate for Internet Drug
Trading Service Provider 《 ( 互聯網藥品交易服務資格證書》) and can engage in the Internet drug
trading services accordingly.
2. Online Drug Sales over the Internet
According to the Measures for the Supervision and Administration of Online Drug Sales 《 ( 藥
品網路銷售監督管理辦法》) issued by the SAMR on September 1, 2022 and effective on
December 1, 2022, online drug sales enterprises should operate in accordance with the approved
business modes and business scope. Online drug sales enterprises that are marketing authorization
holders (“MAH”) can only sell drugs with drug registration certificate. Those without
qualifications for drug retail shall not sell drugs to individuals. Vaccines, blood products, narcotic
drugs, psychotropic substances, poisonous substances for medical use, radiopharmaceuticals,
pharmaceutical precursor chemicals, and other medicinal products under special administration of
the state shall not be sold online, and the specific lists will be made by the NMPA. Online drug
sales enterprises shall not violate the provisions to give away prescription drugs or
non-prescription drugs of Category A by such ways as tie-in sale, gifting drugs to those who buy
drugs or commodities. In addition, online drug sales enterprises should establish and implement
drug quality and safety management, risk control, drug traceability, storage and distribution
management, adverse reaction reporting, complaints and reports handling systems. Online drug
retail enterprises shall also establish an online pharmacy service system, with pharmacists or other
pharmacy technicians certified in accordance with the law carrying out prescription audits and
dispensing, giving guidance on the rational use of drugs and other work. The number of
pharmacists or other pharmacy technicians certified in accordance with the law should be
appropriate to the scale of operation. Online drug retail enterprises shall also be responsible for the
quality and safety of drug distribution.
In respect of sale of prescription drugs online, the Drug Administration Law newly amended
in 2019 repeals the restrictions on the sale of prescription drugs online and upholds the principle
of consistent regulation of the sale of prescription drugs online and offline. The Opinions of the
General Office of the State Council on Supporting Efforts to Ensure Stability on Six Fronts and
Maintain Security in Six Areas and Further Promoting the Reform of Simplification and
Decentralization 《( 關於服務「六穩」「六保」進一步做好「放管服」改革有關工作的意見》) promulgated
by the General Office of the State Council on April 7, 2021 and implemented on April 7, 2021 also
clarifies that the online sale of prescription drugs other than those under special state control is
Notes:
3. A certificate: reviewed by the State Food and Drug Administration, the certificate number includes “Country A” +
“year” + “serial number”, and the business scope is the pharmaceutical B2B third-party platform.
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allowed on the premise of ensuring the authenticity and trustworthiness of the source of electronic
prescriptions. The Measures for the Supervision and Administration of Online Drug Sales 《 ( 藥品
網路銷售監督管理辦法》) further stipulates that those who sell prescription drugs online shall
ensure that the source of electronic prescriptions is authentic and trustworthy and implement the
real name system. Online drug retail enterprises shall sign an agreement with the electronic
prescription provider, conduct prescription audits and dispensing in accordance with the relevant
requirements, and electronically mark prescriptions that have been used to avoid the repeated use
of prescriptions.
3. Internet Drug Information Service
According to the Regulation on the Administration of Internet Drug Information Services

(《互聯網藥品信息服務管理辦法》) promulgated by the former State Food and Drug
Administration on July 8, 2004 and amended on November 17, 2017, any website which intends to
provide drug information services over the Internet shall apply for a business license with the
department in charge of information industry under the State Council or the administration of
telecommunication at the provincial level or, prior to going through the procedures for recording,
file an application with the food and drug administrative department of the province, autonomous
region and municipality directly under the Central Government where the entity sponsoring the
website is located under the principle of jurisdictional supervision and, subject to the examination
and approval, obtain the qualification of providing drug information services over the Internet. The
food and drug administrative departments of all provinces, autonomous regions and municipalities
directly under the Central Government shall carry out the examination and approval of the Internet
websites that apply for providing drug information services over the Internet within their
respective jurisdiction and issue a Qualification Certificate for Drug Information Services over the
Internet 《
( 互聯網藥品信息服務資格證書》) to such websites that comply with the conditions. The
period of validity of the Qualification Certificate for Drug Information Services over the Internet
(《互聯網藥品信息服務資格證書》) shall be five years. If the certificate expires, and the certificate
holder needs to continue to provide drug information services over the Internet, the certificate
holder shall, within 6 months before the expiration of the certificate, apply to the original issuing
authority for a new Qualification Certificate for Drug Information Services over the Internet 《 ( 互
聯網藥品信息服務資格證書》). Moreover, applicants for the provision of Internet drug information
services shall meet the following conditions, in addition to the requirements stipulated in the
Administrative Measures for Internet Information Services 《 ( 互聯網資訊服務管理辦法》): (1) the
provider of drug information services over the Internet shall be an enterprise, public institution or
any other organization legally incorporated; (2) it shall have professionals, facilities and relevant
rules that suit the provisions of drug information services over the Internet; and (3) it shall have
more than two technicians in pharmaceutics and medical devices who are familiar with the laws
and regulations relating to the administration of drugs and medical devices and the professional
knowledge therein or certified according to the law.
REGULATIONS RELATING TO MEDICAL DEVICES
1. Medical Device Business
According to the Regulation on Supervision and Administration of Medical Devices 《 ( 醫療器

械監督管理條例》), amended and promulgated by the State Council on February 9, 2021 and
implemented on June 1, 2021, the medical devices of Class I shall be subject to product
recordation administration, and the medical devices of Class II and Class III shall be subject to
product registration administration. Medical device registrants and recordation entities shall
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REGULATORY OVERVIEW
strengthen the whole life-cycle quality management of medical devices and assume responsibilities
according to the law for the safety and effectiveness of medical devices in the process of R&D,
production, distribution and use thereof.
The Measures for the Supervision and Administration of Medical Device Business 《 ( 醫療器
械經營監督管理辦法》), promulgated by the former State Food and Drug Administration on July
30, 2014 and amended on May 1, 2022, stipulates that the following conditions shall be met in
order to engage in medical device business activities: (1) a quality control unit or a quality control
team in proportional with the scope and scale of business is established, and members of the
quality control team have relevant professional degrees or titles; (2) business premises
commensurate with the business scope and business scale; (3) storage conditions commensurate
with the business scope and business scale; (4) a quality control system compatible with the
medical devices involved in business activities is established; and (5) quality management
institutions or personnel are available for professional guidance, technical training and after-sales
service that are compatible with the medical devices involved in its business activities. An
enterprise engaging in Class III medical device business shall also have a computer information
management system which complies with the system requirements for quality control in medical
device business to ensure that the products involved in its business activities are traceable.
Enterprises engaging in Class I or Class II medical device business are encouraged to establish a
computer information management systems which comply with the system requirements for quality
control in medical device business. In addition, to engage in Class III medical device business, an
enterprise shall file an application with the medical products administrative department at the
districted city level of the place where it is located and obtain a Medical Device Operation Licence
(《醫療器械經營許可證》) for the corresponding mode of operation in accordance with the law.
Our Group (including the Company and its subsidiaries) holds nine Medical Device Operation
Licences 《
( 醫療器械經營許可證》) and 18 Medical Device Operation Filing Certificates 《 ( 醫療器
械經營備案證明》) in the PRC, which allow it to engage in Class II and Class III medical device
business activities, in addition to Class I medical device business activities.
2. Online Medical Device Sales over the Internet
On December 20, 2017, the former State Food and Drug Administration promulgated the
Measures for the Supervision and Administration of Online Sales of Medical Devices 《 ( 醫療器械
網絡銷售監督管理辦法》), which came into effect on March 1, 2018, stipulating that an enterprise
engaging in online sale of medical devices shall be an enterprise engaging in production and
business operation of medical devices that has obtained the production permit and business permit
for medical devices or has undergone the formalities of recordation according to the law, (except
under the circumstances of exemption from obtaining permit or undergo the formalities of
recordation as prescribed in laws and regulations), and shall not carry out business activities
beyond the business scope as specified in the license for production and operation or recorded. A
holder selling medical devices online and a medical device manufacturer entrusted by the holder to
sell medical devices manufactured upon commission online is not required to obtain any business
permit or undergo formalities of recordation, but the sales conditions shall satisfy the requirements
of the Regulation on the Supervision and Administration of Medical Devices 《 ( 醫療器械監督管理
條例》) and the Measures for the Supervision and Administration of Online Sales of Medical
Devices 《( 醫療器械網絡銷售監督管理辦法》). A holder entrusting online sale of medical devices
shall assess and confirm the legal qualification, sales conditions, technical level, and quality
management capacity of the entrusted party, direct and supervise the online sale process and
quality control and be responsible for the quality of the medical devices sold online. In addition,
an enterprise engaging in online sale of medical devices shall display its license for the production
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and operation of medical devices or recordation certificate in a predominant position on its

homepage and display the medical device registration certificate or recordation certificate of the
product on the product page. In respect of sales records, an enterprise engaging in online sale of
medical devices shall record the information on sale of medical devices and keep it for a period of
two years after the validity period of medical devices; the sales information on medical devices
without validity period shall be kept for a period of not less than five years; and the sales
information on implantable medical devices shall be kept permanently. Relevant records shall be
authentic, complete, and traceable.
REGULATIONS RELATING TO INTERNET SECURITY
The Decision on Preserving Computer Network Security 《 ( 關於維護互聯網安全的決定》)

promulgated by the SCNPC on December 28, 2000 and amended on August 27, 2009, provides for
criminal offenses such as improper intrusion into strategic computers or systems, dissemination of
information that subverts state power, leakage of state secrets, dissemination of false information
that affects the security trading or future trading or otherwise disrupts the financial order and
infringement of intellectual property rights.
On November 7, 2016, the SCNPC promulgated the Cyber Security Law of the PRC 《 ( 中華
人民共和國網絡安全法》) (the “Cybersecurity Law”), which came into effect on June 1, 2017,
stipulating that network operators shall, when conducting business operations and providing
services, abide by laws and administrative regulations, respect social morality, observe business
ethics, have a good faith, perform the cybersecurity protection obligation, accept supervision by
the government and the public, and undertake social responsibilities; technical measures and other
necessary measures shall be taken in accordance with the provisions of laws and administrative
regulations and the compulsory requirements of national standards to ensure the safe and stable
operation of the network, effectively respond to cybersecurity incidents, prevent illegal and
criminal activities committed on the network, and maintain the integrity, confidentiality and
availability of network data.
On December 28, 2021, the Cyberspace Administration of China (中華人民共和國國家互聯

網信息辦公室) and 12 other government departments jointly promulgated the Cybersecurity
Review Measures (2021) 《 ( 網絡安全審查辦法(2021)》) (the “New CAC Measures”), which
became effective on February 15, 2022. According to the New CAC Measures, in the following
cases applications for cybersecurity review shall be submitted to the Cybersecurity Review Office
(網絡安全審查辦公室): (i) if a critical information infrastructure operator purchases network
products and services, it shall anticipate the potential national security risks that may arise from
the use of such products and services. Those that affect or may affect national security shall be
reported to the Cybersecurity Review Office for cybersecurity review; and (ii) an Internet platform
operator holding more than 1 million users’ personal information must apply to the Cybersecurity
Review Office for cybersecurity review when listing in foreign country. On July 30, 2021, the
State Council promulgated the Security Protection Regulation for Critical Information
Infrastructure 《 ( 關鍵信息基礎設施安全保護條例》) (the “CII Regulation”), which became
effective on September 1, 2021. Pursuant to the CII Regulation, “critical information
infrastructures” refers to important network facilities and information systems of key industries
such as, among others, public communications and information services, energy, transportation,
irrigation, finance, public services, e-government and science, technology and industry for national
defense, as well as other important network facilities and information systems that may seriously
endanger national security, national economy and people’s livelihood and public interests if they
are damaged or suffer from malfunctions, or if any leakage of data in relation thereto occurs.
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REGULATIONS RELATING TO DATA SECURITY
On June 10, 2021, the SCNPC promulgated the Data Security Law of the PRC 《 ( 中華人民共
和國數據安全法》) (the “Data Security Law”), which came into effect on September 1, 2021,
stipulating that in conducting data processing activities, one shall, in accordance with the
provisions of laws and regulations, establish and improve a whole-process data security
management system, organize data security education and training, and take corresponding
technical measures and other necessary measures to safeguard data security. In conducting data
processing activities via the Internet or any other information network, data processors shall
perform the above data security protection obligations based on the cybersecurity classified
protection system. Processors of important data shall specify the person responsible for data
security and the data security management body and enforce the responsibility for data security
protection. The Data Security Law further stipulates that in conducting data processing activities,
one shall strengthen risk monitoring, and in case of any data security defect, vulnerability, or
detection of any risk, immediately take remedial measures; and when a data security event occurs,
data processors shall immediately take disposition measures, and notify users and report to the
appropriate department in a timely manner as required. If an organization or individual conducting
data processing activities fails to fulfill the aforementioned obligations relating to data security
protection in accordance with the law, the relevant competent authorities may order rectification,
issue warnings, impose fines and, in serious cases, order to suspend the relevant business, stop the
business for rectification, revoke the relevant business permit or business license against the
organization, and impose administrative penalties such as fines on the individual.
In addition, in order to further regulate network data processing activities, preserve data
security, protect the legitimate rights and interests of individuals and organizations in cyberspace,
and safeguard national security and public interests, the CAC promulgated the Draft Regulations
on Network Data Security Management 《 ( 網絡數據安全管理條例(徵求意見稿)》) (the “Draft
Regulations”) on November 14, 2021 (Deadline for comments: December 13, 2021), stipulating
that data processors shall strengthen the security protection of data processing systems, data
transmission networks and data storage environments in accordance with the requirements of
cybersecurity classified protection system, and systems processing important data shall, in
principle, meet the cybersecurity protection requirements of network security level 3 and security
protection requirements of critical information infrastructure, and systems processing core data
shall be strictly protected in accordance with relevant regulations. Data processors shall use
encryption to protect important and core data.
The Draft Regulations also stipulate that data processors processing personal information of
more than one million users who intend to list in foreign countries or data processors who intend
to list in Hong Kong which affects or may affect national security, are required to apply for
cybersecurity review in accordance with the relevant regulations. However, the Draft Regulations
do not set standards to define circumstances that “affect or may affect national security”. As of the
Latest Practicable Date, the Draft Regulations had not been officially approved and there is no
clear timeline for the Draft Regulations to be approved.
On August 8, 2022, the NHC, the National Administration of Traditional Chinese Medicine
(中國中醫藥管理局), and the National Bureau of Disease Control and Prevention (中國疾病控制
預防局) jointly promulgated the Administrative Measures for the Cybersecurity of Medical and
Healthcare Institution 《 ( 醫療衛生機構網絡安全管理辦法》), or the Measures, with immediate
effect. The Measures require all the medical and health institutions to set up data life-cycle
management systems and user participation-based cybersecurity management systems, including
but not limited to strengthening system construction, implementing daily network maintenance and
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monitoring, conducting annual self-inspection and rectification, and classifying and grading data
assets. Where personal information and data are leaked or major cybersecurity incidents occur in
violation of the Measures, the case shall be handled in accordance with the Cybersecurity Law, the
Cryptography Law 《 ( 中華人民共和國密碼法》), the Law on Basic Medical Care and Health
Promotion 《 ( 中華人民共和國基本醫療衛生與健康促進法》), the Data Security Law, the PRC on
the Protection of Personal Information 《 ( 中華人民共和國個人信息保護法》) (“Personal
Information Protection Law”), the Regulations for the Security Protection of Critical Information
Infrastructure 《
( 關鍵信息基礎設施安全保護條例》), cybersecurity classified protection system and
other laws and regulations.
REGULATIONS RELATING TO PERSONAL INFORMATION OR DATA PROTECTION
According to the Civil Code, the personal information of natural persons is protected by law.
Any organization or individual shall legally obtain personal information of other persons in need
and ensure the security of such information, and shall not illegally collect, use, process, or
transmit the personal information of other persons, nor illegally buy, sell, provide, or publish the
personal information of other persons.
According to the Personal Information Protection Law promulgated by the SCNPC on August
20, 2021 and implemented on November 1, 2021, personal information of natural persons is
protected by law and no organization or individual shall infringe on the rights and interests
relating to personal information of natural persons.
In respect of criminal liability, according to Article 286 of the Criminal Law of the PRC
(2020 Amendment) 《 ( 中華人民共和國刑法(2020修正)》), which was amended and promulgated by
the SCNPC on December 26, 2020 and came into effect on March 1, 2021, any network service
provider that fails to perform the information network security management obligation as
prescribed in any law or administrative regulation and refuses to make corrections after being
ordered by the regulatory authority to take correction measures shall be sentenced to imprisonment
of not more than three years, criminal detention or public surveillance in addition to a fine or be
sentenced to a fine only under any of the following circumstances: “(1) causing the spread of a
large amount of illegal information; (2) causing the leakage of users’ information, with serious
consequences; (3) causing the loss of criminal case evidence, with serious circumstances; and (4)
any other serious circumstance. Where an entity commits the crime as provided for in the
preceding paragraph, a fine shall be imposed on it, and its directly responsible person in charge
and other directly liable persons shall be penalized in accordance with the provisions of the
preceding paragraph. Whoever commits any other crime while committing a crime as mentioned in
the preceding two paragraphs shall be convicted and penalized according to the provisions of the
crime with the heavier penalty.”
In addition, according to the Cybersecurity Law promulgated on November 7, 2016 and

implemented on June 1, 2017, network operators shall strictly keep user data confidential and
establish and improve the system for the protection of user data.
According to the Decision on Strengthening the Protection of Network Information 《 ( 關於加

強網絡信息保護的決定》) promulgated by the SCNPC on December 28, 2012 and the Provisions
on Protection of Personal Information of Telecommunication and Internet Users 《 ( 電信和互聯網用
戶個人信息保護規定》) promulgated by the MIIT on July 16, 2013 and implemented on 1
September 2013, telecommunication business operators and Internet information service providers
shall, when collecting and using personal information of users in business activities, adhere to the
principles of legality, legitimacy and necessity, explicitly inform users the purposes, methods and
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scopes of collecting and using information, and obtain the consent of those from whom
information is collected, and shall not collect and use information in violation of laws and
regulations and the agreement between both sides. Telecommunication business operators and
Internet information service providers shall, when collecting and using the electronic personal
information of citizens, publish their collection and use rules.
Specifically, 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》) promulgated by the MIIT on December 29,
2011 and implemented on March 15, 2012 stipulates that without obtaining the permission of
users, an internet information service provider may not collect information which is relevant to
users and can serve to identify users solely or in combination with other information (hereinafter
referred to as the “personal information of users”), nor may it provide the personal information
of users to others, unless it is otherwise provided by laws or administrative regulations.
In addition, on January 23, 2019, the Office of the Central Cyberspace Affairs Commission
(中共中央網絡安全和信息化委員會辦公室), the MIIT, the MPS and the State Administration for
Market Regulation jointly promulgated the Announcement on Carrying out Special Campaigns
against Mobile Internet Application Programs Collecting and Using Personal Information in
Violation of Laws and Regulations 《 ( 關於開展App違法違規收集使用個人信息專項治理的公告》),
which clearly requires that App operators shall follow the principles of legality, rightfulness and
necessity, and never collect personal information irrelevant to the services provided by them; they
shall display the rules for collecting and using personal information in a simple, concise and
easy-to-understand manner, and with permission independently granted from the personal
information subjects; and they shall not coercively request user permission by means of default,
bundling, or suspension of setup or use, or violate laws and regulations or any agreement with
users when collecting and using personal information.
On August 22, 2019, the Cyberspace Administration of China promulgated the Provisions on
the Cyber Protection of Children’s Personal Information 《 ( 兒童個人信息網絡保護規定》), which
came into effect on October 1, 2019. It stipulates that the network operator shall follow the
principles of legitimacy, necessity, informed consent, clear purpose, security safeguards and lawful
use in the process of collection, storage, use, transfer or disclosure of any child’s personal
information. A network operator shall formulate specific rules and user agreements for the
protection of children’s personal information and assign dedicated personnel responsible for
protecting the children’s personal information.
For medical institutions, according to the Regulation on the Management of Medical Records
in Medical Institutions (2013 Edition) 《 ( 醫療機構病歷管理規定(2013年版)》) promulgated by the
former National Health and Family Planning Commission (NHFPC) and the NATCM on November
20, 2013 and implemented on January 1, 2014, medical institutions and their medical staff shall
strictly protect patients’ privacy and prohibit the disclosure of patients’ medical records for
non-medical, teaching and research purposes. On May 5, 2014, the NHFPC promulgated the
Measures for the Management of Population Health Information (for Trial Implementation) 《 ( 人口
健康信息管理辦法(試行)》), stipulating that population health information shall be stored by level.
Entities in charge shall, according to the uniform national planning, be responsible for storing and
managing population health information generated in the work, shall meet the conditions of data
storage, disaster recovery, and administration as required in the relevant provisions of the state,
establish a reliable disaster recovery working mechanism for population health information, and
conduct backup and recovery inspections on a regular basis so as to ensure that data can be
recovered in a timely, complete, and accurate manner and implement the long-term storage and
archival administration of historical data. In addition, according to the Administrative Measures on
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National Health Care Big Data Standards, Security and Services (for Trial Implementation) 《 ( 國家
健康醫療大數據標準、安全和服務管理辦法(試行)》) promulgated and implemented by the NHC
on 12 July 2018, healthcare institutions shall establish relevant security management systems,
operating procedures and technical specifications to safeguard the security of health care big data
generated in the course of health management services as well as disease prevention and treatment
services.
REGULATIONS RELATING TO FOREIGN INVESTMENT
On March 15, 2019, the National People’s Congress (the “NPC”) promulgated the Law of the
PRC on Foreign Investment 《 ( 中華人民共和國外商投資法》), effective from January 1, 2020,
which specifies that China applies an administrative system of pre-establishment national treatment
plus negative list to foreign investment. The pre-establishment national treatment refers to granting
to foreign investors and their investments, in the stage of investment access, the treatment no less
favorable than that granted to domestic investors and their investments; the negative list refers to
special administrative measures for access of foreign investment in specific fields as stipulated by
the State. The State will give national treatment to foreign investments outside the negative list.
Foreign investors and foreign-funded enterprises conducting investing activities within China shall
abide by the laws and regulations of China, and neither compromise China’s national security nor
cause damage to the public interest. A foreign investor or foreign-funded enterprise shall submit
investment information to the commerce department through the enterprise registration system and
the enterprise credit information publicity system. On December 26, 2019, the State Council
promulgated the Implementation Rules to the PRC Foreign Investment Law 《 ( 中華人民共和國外
商投資法實施條例》), effective on January 1, 2020, further refining the relevant regulations on
investment protection, investment promotion and investment management.
The main regulations governing the investment activities of foreign investors in the PRC are
the Catalogue of Encouraged Industries for Foreign Investment 《 ( 鼓勵外商投資產業目錄》) (the
“Catalogue”) and the Special Administrative Measures on Admission to Foreign Investments
(Negative List) 《( 外商投資准入特別管理措施(負面清單)》) (the “Negative List”) promulgated by
the Ministry of Commerce and the NDRC of the PRC and amended from time to time. The
Catalogue and the Negative List set out the basic framework for foreign investments in China,
dividing foreign-invested industries into three categories: Encouraged, Restricted and Prohibited.
Industries not listed in the Catalogue and the Negative List are generally considered as the fourth
category “Permitted”. The latest versions are the Catalogue of Encouraged Industries for Foreign
Investment (2020 Edition) 《 ( 鼓勵外商投資產業目錄(2020年版)》) and the Special Administrative
Measures for Access of Foreign Investments (Negative List) (2021 Edition) 《 ( 外商投資准入特別
管理措施(負面清單)(2021年版)》).
According to the 14th subparagraph of the Special Administrative Measures for Access of
Foreign Investment (Negative List) (2021 Edition), the foreign equity ratio in the value-added
telecommunications business of the issuer’s principal activities shall not exceed 50% (except for
e-commerce, domestic multi-party telecommunications, storage and forwarding, and call center).
Under the 24th subparagraph of the Special Administrative Measures for Access of Foreign
Investment (Negative List) (2021 Edition), medical institutions in the issuer’s principal activities
are restricted to joint ventures.
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REGULATIONS RELATING TO VALUE-ADDED TELECOMMUNICATION SERVICES
1. Value-added Telecommunications Business Operating License
Pursuant to Telecommunications Regulation of the PRC 《 ( 中華人民共和國電信條例》)

promulgated by the State Council on September 25, 2000 and amended on July 29, 2014 and
February 6, 2016, the State implements a licensing system for telecommunications business in
accordance with the categories of business. Telecommunications business shall be conducted with
a license obtained from the competent department of information industry of the State Council or
the telecommunications administrative authority of a province, autonomous region and
municipality directly under the Central Government. According to the Catalogue of
Telecommunications Businesses 《 ( 電信業務分類目錄》) issued by the Ministry of Information
Industry on February 21, 2003 and amended on 28 December 2015 and 6 June 2019, Internet
information services, online data processing and transaction processing services are value-added
telecommunications services.
The Administrative Measures for Internet Information Services 《 ( 互聯網信息服務管理辦

法》) promulgated by the State Council on September 25, 2000 and amended on January 8, 2011
stipulates that a commercial operator of Internet information services shall obtain a Value-added
Telecommunications Service Operating License 《 ( 增值電信業務經營許可證》) for the provision of
Internet information services from the appropriate telecommunications authorities of a province,
autonomous region or municipality directly under the Central Government or the competent
department of the information industry of the State Council.
In addition, the Ministry of Commerce and the MIIT promulgated the Notice on Issues
Relating to the Procedures Applicable to the Application for the Operation of Telecommunications
Business by Overseas Directly Listed Domestic Enterprises 《 ( 關於境外直接上市的境內企業申請
經營電信業務適用程序有關問題的通知》) on September 18, 2009, which stipulates that in case of
an application for the operation of telecommunication business by an overseas directly listed
enterprise, if the proportion of foreign shares exceeds 10% (inclusive), the administrative
regulations and approval procedures for foreign-invested telecommunications enterprises shall
apply; if the proportion of its foreign shares is less than 10% and the single largest shareholder is
a Chinese investor, the administrative regulations and approval procedures for the operation of
telecommunications business by domestic enterprises shall apply. In addition, the application for
the operation of telecommunications business by a subsidiary of an overseas directly listed
domestic enterprise is also subject to the aforementioned regulations.
Our Group (including the Company and the subsidiaries) effectively holds a Value-added
Telecommunications Service Operating License 《( 增值電信業務經營許可證》) in China, to engage
in the corresponding scope of commercial Internet information services.
2. Foreign Investment in Value-added Telecommunications Business
Foreign direct investment in telecommunications enterprises is subject to the Regulation for

the Administration of Foreign-Invested Telecommunications Enterprises 《 ( 外商投資電信企業管理
規定》) issued by the State Council on March 29, 2022 and implemented on May 1, 2022. It
stipulates that the ultimate proportion of the contribution of the foreign investors of a
foreign-funded telecom enterprise that is engaged in the value-added services (including the radio
paging business in the basic telecom services) shall not be more than 50%. In July 2006, the
Ministry of Information Industry released the Notice on Strengthening the Administration of
Foreign Investment in and Operation of Value-added Telecommunications Business 《 ( 信息產業部
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關於加強外商投資經營增值電信業務管理的通知》), stipulating that domestic telecommunications

enterprises are prohibited to rent, transfer or sell a telecommunications business operation license
to foreign investors in any form, or provide any resources, premises, facilities and other assistance
in any form to foreign investors for their illegal operation of any telecommunications business in
China.
REGULATIONS RELATING TO ONLINE TRANSACTIONS
On March 15, 2021, the SAMR promulgated the Measures for the Supervision and
Administration of Internet Transactions 《 ( 網絡交易監督管理辦法》), effective on May 1, 2021,
stipulating that an online business operator shall not operate without a license or permit in
violation of the provisions of laws, regulations and decisions of the State Council. Except for the
cases not requiring registration under Article 10 of the E-Commerce Law of the PRC 《 ( 中華人民
共和國電子商務法》), an online business operator shall apply for registration as a market player in
accordance with the law. An online business operator shall sell goods or provide services that
satisfy the requirements for safeguarding personal and property safety and environmental
protection requirements and shall not sell or provide any goods or services prohibited from trading
by any law or administrative regulation, which damage state interests or public interests or violate
public order and good customs. The Ministry of Commerce promulgated the Provisions on the
Procedures for Formulating Transaction Rules of Third Party Online Retail Platforms (for Trial
Implementation) 《 ( 網絡零售第三方平台交易規則制定程序規定(試行)》) on December 24, 2014
and implemented on April 1, 2015, to guide and regulate the formulation, revision and enforcement
of transaction rules by online retail third-party platforms operators.
Furthermore, the relevant governmental authorities have issued several guidelines and
implementing rules aimed at adding greater specificity to these regulations and continue to
consider and issue guidelines and implementing rules in this industry. For example, the MOF, the
General Administration of Customs and the STA issued the Notice on the Tax Policies on
Cross-Border E-Commerce Retail Imports 《 ( 關於跨境電子商務零售進口稅收政策的通知》) on
March 24, 2016, which came into effect on April 8, 2016. Pursuant to this Notice, goods imported
through the cross-border e-commerce retail are subject to the tariff, import value-added tax, or
VAT, and consumption tax based on the types of goods. Individuals purchasing any goods imported
through cross-border e-commerce retail are taxpayers, and e-commerce companies, companies
operating e-commerce transaction platforms or logistic companies are required to withhold and
remit the taxes.
On August 31, 2018, the SCNPC promulgated the E-Commerce Law of the PRC 《 ( 中華人民
共和國電子商務法》) (the “E-Commerce Law”), effective on January 1, 2019, which aims to
regulate the e-commerce activities conducted within the territory of the PRC. According to the
E-Commerce Law, an e-commerce platform operator shall (1) request a business applying for
selling commodities or providing services on its platform to submit authentic information
including its identity, address, contact information, and administrative licensing, make verification
and registration, establish registration records, and make regular updates and verification; (2)
submit the identification information of the third-party merchants on its platform to market
regulatory administrative department as required and remind the third-party merchants to complete
the registration with market regulatory administrative department; (3) submit identification
information and tax-related information to tax authorities as required in accordance with the laws
and regulations regarding the administration of tax collection and remind the individual third-party
merchants to complete the tax registration; (4) record and retain the information of the products
and services and the transaction information for no less than three years; (5) display the platform
service agreement and the transaction rules or links to such information on the homepage of the
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platform; (6) display the noticeable labels regarding the products or services provided by the
platform operator itself on its platform, and take liabilities for such products and services; (7)
establish a credit evaluation system, display the credit evaluation rules, provide consumers with
access to comment on the products and services provided on its platform, and restrain from
deleting such comments; and (8) establish intellectual property protection rules, and take necessary
measures when any intellectual property holder notify the platform operator that his intellectual
property rights have been infringed. An e-commerce platform operator shall take joint liabilities
with the relevant third-party merchants on its platform and may be subject to warnings and fines
up to RMB2,000,000 where (1) it fails to take necessary measures when it knows or should have
known that the products or services provided by the third-party merchants on its platform do not
meet the personal or property safety requirements or such third-party merchants’ other acts may
infringe on the lawful rights and interests of the consumers; or (2) it fails to take necessary
measures, such as deleting and blocking information, disconnecting, terminating transactions and
services, when it knows or should have known that the third-party merchants on its platform
infringe any intellectual property rights of any other third party. With respect to products or
services affecting the consumers’ life and health, if an e-commerce platform operator fails to
verify the third-party merchants’ qualifications or fails to fulfill its obligations to safeguard the
safety of consumers, which results in damages to the consumers, it shall take corresponding
liabilities and may be subject to warnings and fines up to RMB2,000,000.
The Measures for the Supervision and Administration of Internet Transactions 《 ( 網絡交易監
督管理辦法》) (the “Measures”), published on March 15, 2021 and effective on May 1, 2021,
cover various aspects such as the monopoly of the platform economy, unfair competition,
protection of personal information and protection of consumers’ rights and interests. Combined
with the development of the Internet economy and the current industry characteristics, the
Measures refined and implemented the E-Commerce Law 《 ( 電子商務法》), Consumer Rights
Protection Law (2013 Amendment) 《 ( 消費者權益保護法(2013修正)》), the Anti-Unfair
Competition Law of the PRC 《 ( 中華人民共和國反不正當競爭法》) and other existing laws. A
series of specific regulations have been formulated around core issues such as the identification of
the platform of network service providers around the new industry norm, the qualifications of
online business operators, the collection and use of personal information, the regulation of unfair
competition in network transactions, and the recording and retention of data by the platform, so as
to regulate the conduct of transactions, to enforce the main responsibilities of the platform and to
protect the rights and interests of consumers.
REGULATIONS RELATING TO INTERNET ADVERTISING
According to the Regulation on the Administration of Medical Advertisements (2006

Amendment) 《 ( 醫療廣告管理辦法(2006修訂)》) issued by the former State Administration for
Industry and Commerce (canceled) and the former Ministry of Health on September 27, 1993 and
amended on November 10, 2006, no medical advertisement may be published without obtaining a
Medical Advertisement Review Certificate 《( 醫療廣告審查證明》). Non-medical institution shall
not release medical advertisements, and a medical institution shall not release medical
advertisements in the name of its inside department or office. It is prohibited to make use of
special programs (columns) in the form of news or medical information services for releasing
medical advertisements or do so in a disguised form. In interview programs, special reports or
other publicity contents organized by a relevant medical institution, the name of the medical
institution may be showed, however, the address, contact method or other contents of medical
advertisements cannot be shown.
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REGULATORY OVERVIEW
According to the Interim Measures for the Administration of Internet Advertising 《

( 互聯網廣
告管理暫行辦法》) promulgated by the former State Administration for Industry and Commerce
(canceled) on July 4, 2016 and implemented on September 1, 2016, Internet advertisers are
responsible for the veracity of the content of their advertisements. The publication and
dissemination of advertisements via the Internet must not interfere with the normal use of the
Internet by users or use fraudulent means to induce users to click on the contents of
advertisements or attach advertisements or links to advertisements to emails without permission.
No advertisement for special goods or services, such as medical services, drugs, formula food for
special medical use, medical instrument, pesticides, veterinary drugs, or dietary supplements,
which shall be subject to examination by the advertisement review authority as prescribed by laws
and administrative regulations, shall be published unless it has passed the review.
According to the Interim Measures for the Administration of Censorship of Advertisements on

Drugs, Medical Devices, Dietary Supplements and Formula Foods for Special Medical Purposes 《 ( 藥
品、醫療器械、保健食品、特殊醫學用途配方食品廣告審查管理暫行辦法》), promulgated by the
State Administration for Market Regulation on December 24, 2019 and implemented on March 1,
2020, enterprises intending to promote drugs, medical devices, dietary supplements or formula
foods for special medical purposes must apply for an advertisement approval number. The validity
period of the approval number of an advertisement on drugs, medical devices, dietary supplements
or formula foods for special medical purposes shall be consistent with the minimum validity period
of the product’s registration certificate, filing certificate or production license. If the product’s
registration certificate, filing certificate or production license does not specify a validity period,
the validity period of the approval number of the advertisement shall be valid for two years. No
change to the content of the advertisement is permitted without prior approval. If it is necessary to
change the content of the advertisement, a new advertisement approval number must be obtained.
According to the Advertising Law of the PRC (2021 Amendment) 《 ( 中華人民共和國廣告

法(2021修正)》) promulgated and implemented by the SCNPC on April 29, 2021, Internet service
providers shall not publish advertisements on medical services, drugs, medical devices, or dietary
supplements in a disguised form such as introducing health or health care knowledge.
REGULATIONS RELATING TO INFORMATION SERVICES OF MOBILE INTERNET

APPS
According to the Provisions on the Administration of Information Services of Mobile Internet

Apps 《 ( 移動互聯網應用程序信息服務管理規定》) promulgated by the Cyberspace Administration
of China on June 14, 2022 and implemented on August 1, 2022, application providers shall obtain
approval or relevant license from competent authorities if necessary, establish and improve
information content review and management mechanism and management measures such as user
registration, account management, information review, daily inspection and emergency disposal.
In addition, according to the Interim Provisions on the Administration of the Pre-Installation

and Distribution of Application Software for Mobile Smart Terminals 《 ( 移動智能終端應用軟件預
置和分發管理暫行規定》) promulgated by the MIIT on December 16, 2016 and implemented on
July 1, 2017, the Internet information service providers must ensure that the content contained in
the mobile smart terminal application software is lawful, users’ right to know and right to choose
are protected, and relevant information of the application is expressed clearly, and the provided
mobile smart terminal application software, as well as its ancillary resource files, configuration
files and user data files, among others, can be uninstalled by the users on a convenient basis,
unless it is a basic functional software, which refers to a software that supports the normal
operation of hardware and operating system of a mobile smart device.
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REGULATIONS RELATING TO FOOD/COSMETICS SAFETY
In accordance with the Food Safety Law of the PRC 《 ( 中華人民共和國食品安全法》) (the
“Food Safety Law”), amended and implemented on April 29, 2021, and the Regulation on the
Implementation of the Food Safety Law of the PRC 《 ( 中華人民共和國食品安全法實施條例》)
(the “Regulation on the Implementation of the Food Safety Law”), amended on October 11,
2019 and implemented on December 1, 2019, with the purpose of guaranteeing food safety and
safeguarding the health and life safety of the public, the PRC sets up a system of the supervision,
monitoring and appraisal on the food safety risks and compulsory adoption of food safety
standards. To engage in food production, sale or catering services, the business operators shall
obtain a license in accordance with the laws and regulations. Furthermore, the State Council
implements strict supervision and administration for special categories of foods such as dietary
supplements, special formula foods for medical purposes and infant formula.
In addition to the Food Safety Law, a number of laws such as the Law of the PRC on Quality
and Safety of Agricultural Products (2018 Amendment) 《 ( 中華人民共和國農產品質量安全法(2018
修正)》), the Law of the PRC on Product Quality (2018 Amendment) 《 ( 中華人民共和國產品質量
法(2018修正)》) and the Law of the PRC on Agriculture (2012 Amendment) 《 ( 中華人民共和國農
業法(2012修正)》) are applicable to food safety behaviors and control requirements at different
levels and in different areas. However, when the provisions of these laws are inconsistent with the
Food Safety Law, the provisions of the Food Safety Law or the SCNPC’s interpretation shall be
followed.
The Administrative Measures for Dietary Supplement 《 ( 保健食品管理辦法》), promulgated

by the former Ministry of Health on March 15, 1996 and implemented on 1 June 1996, stipulates
that a food business license shall be obtained for food sales activities in China in accordance with
the law. Applications for food business licenses shall be made depending on the category of the
main form and business line of food businesses, and the business line under which dietary
supplements fall is sales of special food. At the same time, the dietary supplements sold by a
dietary supplement operator shall be qualified and compliant. Food products that have not been
examined and approved by the Ministry of Health shall not be produced and traded under the name
of dietary supplements, otherwise corresponding administrative penalties shall be imposed.
The Notice on Strengthening the Regular Supervision of Production and Operation of Dietary
Supplements 《 ( 關於加強保健食品生產經營日常監管的通知》), promulgated by the former State
Food and Drug Administration on April 27, 2010 and implemented on April 27, 2010, specifies the
key inspection points for the operation of dietary supplements cover: (1) maintenance of the
photocopy of the Dietary Supplement Approval Certificate 《 ( 保健食品批准證書》) for the product
being dealt with; (2) implementation of the system of certificate and invoice keeping, and
compliance of various record-keeping accounts, and traceability of the sourcing channels of
products; (3) contents of the labels and instructions of the product being dealt with are consistent
with the approval certificate and comply with the Dietary Supplement Labelling Regulation 《 ( 保健
食品標識規定》); and (4) dietary supplement products being sold is within the “best before”
period.
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REGULATORY OVERVIEW
REGULATIONS RELATING TO CONSUMER PROTECTION AND PRODUCT QUALITY
1. Consumers Protection
The Law on the Protection of Consumer Rights and Interests (2013 Amendment) 《 ( 消費者權
益保護法(2013修正)》) promulgated by the SCNPC on October 25, 2013 and implemented on
March 15, 2014 sets out the obligations of business operators and the rights and interests of
consumers in China. Pursuant to this law, business operators must guarantee that the commodities
they sell satisfy the requirements for personal or property safety, provide consumers with authentic
information about the commodities, and guarantee the quality, function, usage, and term of validity
of the commodities. Failure to comply with the Law on the Protection of Consumer Rights and
Interests (2013 Amendment) may subject business operators to civil liabilities such as refunding
purchase prices, replacement of commodities, repairing, ceasing damages, compensation, and
restoring reputation, and even subject the business operators to criminal penalties. In the event of
fraudulent provision of goods or services, the operator shall not only compensate the consumers
for the loss suffered but shall also pay an additional compensation which is equivalent to three
times the price of the goods or the cost of the services received. Besides, where the operators of
the online trading platforms are unable to provide the real names, addresses or valid contact details
of the sellers or service providers, the consumers may also claim damages to the operators of the
online trading platforms. Operators of online trading platforms who clearly know or should have
known that sellers or service providers use their platforms to infringe upon the legitimate rights
and interests of consumers but fail to take necessary measures shall bear joint and several
liabilities with the sellers or service providers.
2. Product Quality
The Law of the PRC on Product Quality (2018 Amendment) 《 ( 中華人民共和國產品品質

法(2018修正)》), promulgated and implemented by the SCNPC on December 29, 2018, applies to
all production and sales activities in the PRC. Pursuant to this law, products offered for sale must
satisfy relevant quality and safety standards. Enterprises may not produce or sell counterfeit
products in any fashion, including forging brand labels or giving false information regarding the
manufacturer of products. Violations of state or industrial standards for health and safety or any
other related violations may result in civil liabilities or administrative penalties, such as
compensation for damages, fines, suspension or shutdown of business, as well as confiscation of
illegally produced and sold products and the proceeds from such sales. Severe violations may
subject the responsible individual or enterprise to criminal liabilities. Where a defective product
causes physical injury or damage to property, the victim may claim compensation from the
manufacturer or from the seller of the product. If the seller pays compensation yet the liability
should be borne by the manufacturer, the seller has a right of recourse against the manufacturer.
Likewise, if the manufacturer pays compensation yet the liability should be borne by the seller, the
manufacturer has the right of recourse against the seller.
3. Regulations relating to Single-Purpose Commercial Prepaid Cards
Pursuant to the Administrative Measures on Single-Purpose Commercial Prepaid Cards (for

Trial Implementation) (2016 Amendment) 《 ( 單用途商業預付卡管理辦法(試行)2016修訂》) 1 (the
“Administrative Measures on Single Purpose Prepaid Cards”), promulgated by the Ministry of
1 The official version of the amendment has not yet been released. The passage is compiled and presented by the
editor of Wolters Kluwer (威科) according to the Ministry of Commerce Decree No. 2 of 2016 — Decision on
Repealing and Amending Some Regulations and Normative Documents.
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REGULATORY OVERVIEW
Commerce on August 18, 2016, single-purpose commercial prepaid cards are prepaid certificates
issued by an enterprise engaging in retail industry, accommodation and catering industry or
residential services industry which are limited to be used as payment for goods or services by the
enterprise or within the group to which the enterprise belongs or within the franchise system of the
same brand, including physical cards in forms of magnetic stripe cards, chip cards, and paper
coupons etc., as well as virtual cards. According to the Administrative Measures on Single Purpose
Prepaid Cards, card issuers shall apply for filing within 30 days from the date of commencement
of single-use card business. The limit for a single registered card shall not exceed RMB5,000 and
the limit for a single non-registered card shall not exceed RMB1,000. A registered card shall not
have a validity period and a validity period of a non-registered card shall not be less than three
years. Violation of the aforementioned regulations may result in an order of rectification. Where
the card issuer fails to rectify the violation within a stipulated period, a fine ranging from
RMB10,000 to RMB30,000 may be imposed.
REGULATIONS RELATING TO INSURANCE-RELATED BUSINESS
In respect of operating qualifications, according to the Notice on the Regulation of Health

Management Services of Insurance Companies 《 ( 關於規範保險公司健康管理服務的通知》) (the
“Notice”) issued by the China Banking and Insurance Regulatory Commission (the “CBIRC”) on
September 6, 2020, the health management partners an insurance company cooperates with shall be
equipped with relevant practicing licenses or operating qualifications in the fields that they provide
service for. According to the Insurance Law of the PRC (2015 Amendment) 《 ( 中華人民共和國保
險法(2015修正)》) (the “Insurance Law”) promulgated by the SCNPC on April 24, 2015,
insurance business shall be carried out by insurance companies formed according to this Law or
other insurance organizations as prescribed by laws and administrative regulations. No other entity
or individual shall carry out insurance business. A third-party health management company without
the appropriate qualification certificate may not engage in business related to those of an insurer,
insurance agent, insurance broker or insurance assessment agency other than the third-party
administration of health insurance.
In respect of the scope of operation, according to the Notice, for health management services
that an insurance company cannot independently provide for, insurance companies may cooperate
with health management institutions, medical institutions, rehabilitation institutions, and nursing
institutions as needed to enrich its health management services and meet clients’ diverse and
personalized needs for health. To a certain extent, this provision confers legal status to health
insurance third-party management businesses, but it is still subject to the legal and regulatory
requirements that may be updated or changed by the regulatory authorities from time to time.
In respect of application of specific law, the commencement of health insurance third-party

management business shall first follow the relevant special provisions of the Measures for the
Administration of Health Insurance 《 ( 健康保險管理辦法》) (the “Measures”) promulgated by the
CBIRC on October 30, 2019 and the Notice. Generally speaking, third-party health management
companies engaging in the business of third-party management of health insurance are mainly
required to comply with the requirements of the Insurance Law and its judicial interpretation as
well as the Civil Code and other laws and regulations. In addition, the Insurance Law clearly
stipulates that no entity or individual shall unlawfully interfere with the insurer’s obligation to pay
compensation or benefits, nor shall they restrict the right of the insured or beneficiary to obtain
insurance benefits. Therefore, when conducting third-party review of claims or outsourcing claims
services, third-party management companies shall also be careful to avoid any suspected
interference with the insurer’s obligations to pay benefits.
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REGULATORY OVERVIEW
REGULATIONS RELATING TO ANTI-MONOPOLY IN CHINA
According to the Anti-monopoly Law of the PRC (2022 Amendment) 《 ( 中華人民共和國反壟

斷法(2022修訂)》) (the “Anti-monopoly Law”) promulgated by the SCNPC on 24 June 2022 and
implemented on August 1, 2022, operators are prohibited from any monopolistic conduct such as
entering into monopoly agreements, abuse of dominant market position and concentration of
undertakings that have the effect of eliminating or restricting competition.
A business operator with a dominant market position may not abuse its dominant market
position by selling commodities at unfairly high prices or buying commodities at unfairly low
prices; an operator with a dominant market position shall not use data and algorithms, technology
and platform rules to engage in the abuse of a dominant market position as provided for in the
preceding paragraph; selling products at prices below cost without any justifiable cause, and
refusing to trade with a trading party without any justifiable cause. Where the business operators
reach and fulfill a monopoly agreement in violation of this Law, the Anti-monopoly Law
Enforcement Agency shall order them to stop the violations, confiscate the illegal gains and
impose a fine of 1% up to 10% of the sales revenue made in the previous year. Where there is no
sales revenue in the previous year, a fine of less than RMB5 million shall be imposed; where they
reached monopoly agreement has not been fulfilled, a fine of less than RMB3 million may be
imposed. If the legal representative, the main person in charge, or any direct liable person of an
operator is personally liable for reaching the monopoly agreement, he or she may be fined less
than RMB1 million.
REGULATIONS RELATING TO TAXATION
1. Enterprise Income Tax
Pursuant to the Enterprise Income Tax Law of the PRC (2018 Amendment) 《 ( 中華人民共和
國企業所得稅法(2018修正)》) promulgated by the SCNPC on December 29, 2018, the Regulation
on the Implementation of the Enterprise Income Tax Law (2019 Amendment) 《 ( 企業所得稅法實施
條例(2019修訂)》) promulgated by the State Council on April 23, 2019 (collectively, the “EIT
Law”), taxpayers consist of resident enterprises and non-resident enterprises. Resident enterprises
are defined as enterprises that are established in China in accordance with PRC laws, or that are
established in accordance with the laws of foreign countries (territories) but whose actual or de
facto control is administered from within the PRC. Non-resident enterprises refer to enterprises
that are legally established under foreign (territorial) laws and have set up institutions or sites in
the PRC but with no actual management body in the PRC, or enterprises that have not set up
institutions or sites in the PRC but have derived incomes from the PRC. Under the EIT Law and
relevant implementing regulations, a uniform corporate income tax rate of 25% is applicable.
However, if non-resident enterprises have not formed permanent establishments or premises in the
PRC, or if they have formed permanent establishment institutions or premises in the PRC but there
is no actual relationship between the relevant income derived in the PRC and the established
institutions or premises set up by them, the enterprise income tax is, in that case, set at the rate of
10% for their income sourced from inside the PRC.
2. Value-Added Tax
Pursuant to the Interim Regulation of the PRC on Value-Added Tax (2017 Amendment) 《
( 中
華人民共和國增值稅暫行條例(2017修訂)》), promulgated by the State Council on November 19,
2017, and the Detailed Rules for the Implementation of the Interim Regulation of the PRC on
Value-Added Tax (2011 Amendment) 《 ( 中華人民共和國增值稅暫行條例實施細則(2011修訂)》),
– 158 –
REGULATORY OVERVIEW
promulgated by the MOF on October 28, 2011, entities or individuals engaging in sale of goods,
provision of processing services, repairs and replacement services or importation of goods within
the territory of the PRC shall pay value-added tax (the “VAT”).
On March 20, 2019, the MOF, the SAT and the General Administration of Customs jointly
issued the Announcement on Policies for Deepening the VAT Reform 《 ( 關於深化增值稅改革有關
政策的公告》) (the “Announcement No. 39”), to further slash value-added tax rates. According to
the Announcement No. 39, for general VAT payers’ sales activities or imports that are subject to
VAT at an existing applicable rate of 16% or 10%, the applicable VAT rate is adjusted to 13% or
9% respectively; for the agricultural products purchased by taxpayers to which an existing 10%
deduction rate is applicable, the deduction rate is adjusted to 9%; for the agricultural products
purchased by taxpayers for production or commissioned processing, which are subject to VAT at
13%, the input VAT will be calculated at a 10% deduction rate; for the exportation of goods or
labor services that are subject to VAT at 16%, with the applicable export refund at the same rate,
the export refund rate is adjusted to 13%; and for the exportation of goods or cross-border taxable
activities that are subject to VAT at 10%, with the export refund at the same rate, the export refund
rate is adjusted to 9%.
3. Dividend Withholding Tax
Pursuant to the Enterprise Income Tax Law 《 ( 企業所得稅法》) and its implementation rules,
if a non-resident enterprise has not set up an organization or establishment in the PRC, or has set
up an organization or establishment but the income derived has no actual connection with such
organization or establishment, it will be subject to a withholding tax on its PRC-sourced income at
a rate of 10%. According to the Arrangement between China’s mainland and the Hong Kong
Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal
Evasion with respect to Taxes on Income 《 ( 內地和香港特別行政區關於對所得稅避免雙重徵稅和
防止偷漏稅的安排》)signed on August 21, 2006 and came into force from 8 December, 2006 in
mainland China, a resident living in either region who receives dividends distributed by an
enterprise from the other region may be subject to a tax of the region where the resident lives.
However, if the enterprise distributing the dividends is located in the same region of the resident,
the taxation law of that region shall apply. If the individual receiving the dividend is the resident
of the other region, the taxation amount shall not exceed 5% of the total dividend in case the
individual receiving the dividends directly owns at least 25% of the shares of the enterprise
distributing the dividends; or 10% of the total dividend in other circumstances.
According to the Notice of the SAT 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》),
promulgated by the SAT on February 20, 2009, if the relevant PRC tax authorities determine, in
their discretion, that a company benefits from preferential tax treaty dividend provisions due to a
structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust the
preferential tax treatment. The procedures for entitlement to treaty treatment were further
simplified in accordance with the Administrative Measures for Non-Resident Taxpayers’
Entitlement to Treaty Benefits 《 ( 非居民納稅人享受協定待遇管理辦法》) (the “Announcement
No. 35”) promulgated by the SAT on October 14, 2019. According to the Announcement No. 35 of
the SAT, no approvals from the tax authorities are required for a non-resident taxpayer to enjoy
treaty benefits, where a non-resident taxpayer self-assesses and concludes that it satisfies the
criteria for entitlement to treaty benefits, it may enjoy treaty benefits at the time of tax declaration
or at the time of withholding through the withholding agent, but it shall gather and retain the
relevant materials as required for future inspection, and accept follow-up administration by the tax
authorities. There are also other conditions for entitlement to the reduced withholding tax rate
– 159 –
REGULATORY OVERVIEW
according to other relevant tax rules and regulations. According to the Announcement on Issues
Concerning “Beneficial Owners” in Tax Treaties 《 ( 關於稅收協定中「受益所有人」有關問題的公
告》) (the “Announcement No. 9”), promulgated on February 3, 2018 by the SAT, when
determining the applicant’s status of the “beneficial owner” regarding tax treatments in connection
with dividends, interests or royalties in the tax treaties, several factors, including but not limited
to, whether the applicant is obligated to pay more than 50% of its income in twelve months to
residents in third country or region, whether the business operated by the applicant constitutes the
actual business activities, and whether the counterparty country or region to the tax treaties does
not levy any tax or grant tax exemption on relevant incomes or levy tax at an extremely low rate,
will be taken into account, and it will be analyzed according to the actual circumstances of the
specific cases. The Announcement No. 9 further provides that an applicant who intends to prove
his or her status of the “beneficial owner” shall submit the relevant evidence documents to the
relevant tax bureau according to the Administrative Measures for Non-Resident Taxpayers’
Entitlement to Treaty Benefits.
REGULATIONS RELATING TO INTELLECTUAL PROPERTY RIGHTS
1. Copyrights
According to the Copyright Law of the PRC (2020 Amendment) 《 ( 中華人民共和國著作權

法(2020修正)》) (the “Copyright Law”) promulgated by the SCNPC on November 11, 2020 and
implemented on June 1, 2021, copyright in the PRC is primarily protected by the Copyright Law
and its implementing regulations. Reproducing, distributing, performing, projecting, broadcasting
or compiling a work or communicating the same to the public via an information network without
permission from the owner of the copyright therein, unless otherwise provided in the Copyright
Law and related rules and regulations, shall constitute infringements of copyrights. The infringer
shall, according to the circumstances of the case, undertake responsibilities to cease the
infringement, eliminate impacts, publicly apologize, and pay damages, among others.
According to the Regulation on the Protection of Rights to Information Network

Communication 《 ( 信息網絡傳播權保護條例》) promulgated by the State Council on January 30,
2013 and implemented on March 1, 2013, provides specific rules on fair use, statutory license, and
a safe harbor for use of copyrights and copyright management technology and specifies the
liabilities of various entities for violations, including copyright holders and internet service
providers.
The Regulation on the Registration of Computer Software Copyright 《 ( 計算機軟件著作權登

記辦法》) promulgated by the National Copyright Administration on February 20, 2002 applies to
the registration of software copyright, and the registration of exclusive licensing contracts and
assignment contracts of software copyright. The Copyright Protection Centre of China should grant
registration certificates to qualified applicants of computer software copyrights.
2. Patents
According to the Patent Law of the PRC (2020 Amendment) 《 ( 中華人民共和國專利法(2020

修訂)》) (the “Patent Law”) promulgated by the SCNPC on October 17, 2020 and implemented on
June 1, 2021, patent rights are mainly protected by the Patent Law and its implementation rules in
China, which provide for three types of patents, namely “invention”, “utility model” and
“industrial design”. To be patentable, invention or utility models must meet three criteria: novelty,
inventiveness and practical applicability.
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REGULATORY OVERVIEW
3. Trademarks
Pursuant to the Trademark Law of the PRC (2019 Amendment) (《中華人民共和國商標

法(2019修訂)》) promulgated by the SCNPC on April 23, 2019 and implemented on 1 November
2019 (the “Trademark Law”), trademark rights are mainly protected by the Trademark Law and
its implementing rules in the PRC. Registered trademarks include goods trademarks, service
trademarks, collective marks, and certification marks. A trademark registrant shall have the right to
exclusively use the registered trademark, which is protected by law.
4. Domain Names
According to the Administrative Measures for Internet Domain Names 《 ( 互聯網域名管理辦

法》) promulgated by the MIIT on August 24, 2017 and implemented on November 1, 2017,
China’s Internet domain names are protected by the Administrative Measures for Internet Domain
Names. The China Internet Network Information Centre (the “CNNIC”) adopts the “first come,
first serve” principle with respect to the registration of domain names. The domain names used by
those engaging in Internet information services shall comply with laws and regulations and the
relevant provisions of telecommunications administrations, and no domain name may be used to
commit any illegal act.
According to the Notice of the MIIT on Regulating the Use of Domain Names in Internet
Information Services 《( 工業和信息化部關於規範互聯網信息服務使用域名的通知》) promulgated
by the MIIT on November 27, 2017 and implemented on January 1, 2018, a domain name used by
an Internet information service provider in the provision of Internet information services shall be
registered and owned by itself in accordance with laws and regulations. If an internet-based
information service provider is a corporation, the domain name registrant must be the corporation
(or any of the corporation’s shareholders), or the corporation’s chief executive or senior
management.
REGULATIONS RELATING TO FOREIGN EXCHANGE
According to the Regulation of the PRC on Foreign Exchange Administration (2008

Amendment) 《 ( 中華人民共和國外匯管理條例(2008修訂)》) promulgated by the State Council on
August 5, 2008 and other PRC regulations and rules on the currency conversion, Renminbi is
freely convertible for payments under the current items, such as trade and service-related foreign
exchange transactions and dividend payments, but not freely convertible under the capital items,
such as direct investment, loan or investment in securities outside China unless prior approval of
the State Administration of Foreign Exchange (the “SAFE”) or its local counterpart is obtained.
In respect of foreign exchange transactions under the current items, according to the
Guidelines on Foreign Exchange Transaction under Current Account (2020 Version) 《 ( 經常專案外
匯業務指引(2020年版)》) promulgated by the SAFE on August 28, 2020, for payments of service
fees or corporate dividends under the current items, domestic businesses can exchange RMB into
USD or other foreign currencies for remittance out of China.
In respect of foreign exchange transactions under the capital items, according to the Notice
by the SAFE of Optimizing Foreign Exchange Administration to Support Foreign Business
Development 《( 國家外匯管理局關於優化外匯管理支持涉外業務發展的通知》) (the “No. 8 of the
SAFE”) promulgated by the SAFE on April 10, 2020 and implemented on June 1, 2020, eligible
businesses are allowed to make domestic payments using the income under the capital items
generated from their capital, foreign debt and overseas listing, without providing materials
– 161 –
REGULATORY OVERVIEW
evidencing the authenticity in advance, provided that the capital usage is authentic and compliant
with the current capital items income usage management regulations. According to the Notice of
the People’s Bank of China on Matters concerning the Macro-Prudential Management of
Full-Covered Cross-Border Financing 《 ( 中國人民銀行關於全口徑跨境融資宏觀審慎管理有關事
宜的通知》) issued by the People’s Bank of China on January 11, 2017, the People’s Bank of
China and the SAFE shall not adopt advance approval, but adopt advance recordation for
enterprises and ex-post recordation for financial institutions.
According to the Notice of the SAFE on Repealing and Amending Relevant Regulatory
Documents Involving the Reform of the Registration System for Registered Capital (Partially
Invalid) 《( 國家外匯管理局關於廢止和修改涉及註冊資本登記制度改革相關規範性文件的通知》)
promulgated by the SAFE on May 4, 2015, issues such as eligibilities, source of funds, limits,
duration, application, approval and supervision, application for special accounts and inflows and
outflows of funds for offshore lending have been deliberated. The Notice on Further Simplifying
and Improving Policies for the Foreign Exchange Administration of 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》) (the “No. 13 of the SAFE”) issued by the SAFE
on February 13, 2015, the administrative approval of foreign exchange registration for direct
domestic investment and direct overseas investment was abolished and the procedures for foreign
exchange related registration were simplified. Pursuant to the No. 13 of the SAFE, investors
should register with banks for direct domestic investment and direct overseas investment.
REGULATIONS RELATING TO EMPLOYMENT
According to the Labour Contract Law of the PRC (2012 Amendment) (the “Labour
Contract Law”) promulgated by the SCNPC on December 28, 2012 and the Rules on the
Implementation of the Labour Contract Law of the PRC 《 ( 中華人民共和國勞動合同法實施條例》)
promulgated by the State Council on September 18, 2008, if an employer fails to conclude a
written labor contract with an employee within one year from the date of establishment of the
labor relationship, the employer shall conclude a written labor contract with the employee and pay
the employee double wages for the relevant period (starting from the day after the expiry of one
month from the date of employment and ending on the day before the conclusion of the
supplementary written labor contract) to rectify the non-compliance. The Labour Contract Law and
its implementation rules also require compensation to be paid upon certain terminations, which
significantly affects the cost of reducing workforce for employers. For an employee who has the
obligation of keeping confidential, the employer and the employee may stipulate non-competition
clauses in the labor contract or in the confidentiality agreement and come to an agreement that,
when the labor contract is dissolved or terminated, the employee shall be given economic
compensations within the non-competition period.
According to the Law of the PRC on Social Insurance (2018 Amendment) 《 ( 中華人民共和國
社會保險法(2018修正)》) promulgated by the SCNPC on December 29, 2018 and the Regulation
on the Administration of Housing Provident Fund (2019 Amendment) 《 ( 住房公積金管理條例(2019
修訂)》) promulgated by the State Council on March 24, 2019, enterprises in the PRC are required
to participate in certain employee benefit schemes, including social insurance funds (i.e. pension
schemes, medical insurance schemes, unemployment insurance schemes, workers’ compensation
insurance schemes and maternity insurance schemes) and housing provident funds in accordance
with Chinese laws and regulations. The enterprises shall contribute to the schemes or funds in
amounts equal to certain percentages of salaries, including bonuses and allowances, of the
employees as specified by the local government from time to time at locations where they operate
their businesses or where they are located. An employer that fails to make social insurance
contributions may be ordered to pay the required contributions within a stipulated time limit and
– 162 –
REGULATORY OVERVIEW
be subject to a late fee at the daily rate of 0.05% on the outstanding amounts. If the employer still
fails to rectify the failure to make social insurance contributions within the stipulated deadline, it
may be subject to a fine ranging from one to three times the amount overdue. An enterprise that
fails to make housing fund contributions may be ordered to rectify the noncompliance and pay the
required contributions within a stipulated time limit. Otherwise, an application may be made to a
local court for compulsory enforcement.
REGULATIONS RELATING TO ENVIRONMENTAL PROTECTION
According to the Law of the PRC on Environmental Impact Assessment (2018 Amendment)
(《中華人民共和國環境影響評價法(2018修正)》) promulgated by the SCNPC on December 29,
2018, the Regulation on the Administration of Construction Project Environmental Protection
(2017 Amendment) 《 ( 建設項目環境保護管理條例(2017修訂)》) promulgated by the State Council
on July 16, 2017, and Measures for the Administration of Recordation of Registration Forms of
Environmental Impact of Construction Projects 《 ( 建設項目環境影響登記表備案管理辦法》)
promulgated by the former Ministry of Environmental Protection (Cancelled) on November 16,
2016, the State implements categorical management of environmental protection for construction
projects according to the degree of their impact on the environment. A report on environmental
impact should be compiled for a construction project that may cause major impact on the
environment, giving comprehensive and detailed evaluation of the pollution generated and
environmental impact caused by the construction project; a statement on environmental impact
should be compiled for a construction project that may cause light impact on the environment,
giving analysis or special-purpose evaluation of the pollution generated and environmental impact
caused by the construction project; and a registration form should be filled out and submitted for a
construction project that has slight impact on the environment and necessitates no environmental
impact evaluation. The environmental impact report and environmental impact report form of a
construction project must be submitted to the competent environmental protection authorities for
review and approval, while the State maintains a record of the Environmental Impact Registration
Form.
According to the Law of the PRC on Safe Production (2021 Amendment) 《 ( 中華人民共和國
安全生產法(2021修正)》) promulgated by the National People’s Congress on June 10, 2021,
production and operation entities shall have the conditions for safe production stipulated in this
Law and relevant laws, administrative regulations and national or industry standards; Anyone
without the conditions for safe production shall not engage in production and operation activities.
The main responsible persons and work safety management personnel of a production or operation
entity must have the knowledge and management ability of safety production commensurate with
the production and operation activities engaged in by the entity. The main responsible persons and
work safety management personnel of a production, operation, storage, or loading and unloading
entity of dangerous goods shall be qualified by the competent department responsible for the
supervision and management of safe production in respect of their knowledge and management
ability in safe production.
REGULATIONS RELATING TO FIRE PROTECTION
According to the Fire Protection Law of the PRC (2021 Amendment) 《 ( 中華人民共和國消防
法(2021修正)》) promulgated by the SCNPC on April 29, 2021, in respect of fire inspection and
supervision, the fire and rescue department shall supervise and inspect the compliance of organs,
social groups, enterprises, public institutions and other entities with the laws and regulations on
fire protection. A police station may be responsible for the routine fire protection supervision and
inspection and carry out fire protection publicity and education, for which the concrete measures
– 163 –
REGULATORY OVERVIEW
shall be formulated by the public security department of the State Council. Where the fire and
rescue department find any potential fire risk during the fire protection supervision and inspection,
it shall notify the relevant entity or individual to immediately take measures for eliminating the
potential risk. If public safety may be seriously endangered as a result of a failure to timely
eliminate the potential risk, the fire and rescue department shall temporarily seal up the dangerous
spot or site according to the relevant provisions.
In respect of fire safety standards and acceptance, the fire protection design or construction
of a construction project must conform to the national fire protection technical standards for
project construction. Construction projects of which the national fire protection technical standards
for project construction require a fire protection design shall be governed by the fire protection
design review and final inspection system for construction projects. For a special construction
project as specified by the housing and urban-rural development authority under the State Council,
the construction developer shall submit fire protection design documents to the housing and
urban-rural development authority for review. For a construction project other than specified in the
preceding provisions, the construction developer shall provide fire protection design drawings and
technical information as needed for construction when applying for a construction license or
approval of the construction commencement report. Where a special construction project fails to
undergo or is nonconforming as established by the fire protection design review, neither the
construction developer nor construction contractor shall commence construction; and for any other
construction project, if the construction developer fails to provide fire protection design drawings
or technical information as needed for construction, the relevant department shall neither issue a
construction license nor approve the construction commencement report. According to the Interim
Provisions on the Administration of Examination and Acceptance of Fire Control Design in
Construction Projects 《 ( 建設工程消防設計審查驗收管理暫行規定》) promulgated by the housing
and urban-rural development, the developer shall report to the competent department of fire
control design examination and acceptance starting from June 1, 2020, within five working days
from the date of completion and acceptance of other construction projects. With respect to other
types of construction projects, a record-filing of fire prevention design and acceptance and spot
check system would be applied. If a construction developer fails to report to the housing and
urban-rural development authority for recordation as required by Fire Protection Law of the PRC
(2021 Amendment) 《 ( 中華人民共和國消防法(2021修正)》) after final inspection, the housing and
urban-rural development authority shall order the construction employer to take corrective action
and impose a fine of not more than RMB5,000 on it.
It should be further noted that, before the fire safety design examination, acceptance and
filing duties is transferred from the fire and rescue department to the housing and urban-rural
development, the fire and rescue department of the MPS issued the Eight Measures for the Public
Security Fire Department to Deepen Reform and Serve Economic and Social Development 《 ( 公安
消防部門深化改革服務經濟社會發展八項措施》) on August 12, 2015, which stipulated to cancel
the fire protection design and completion acceptance filing of construction projects with
investment less than RMB300,000 or building area less than 300 square meters (or under the quota
determined by the housing and urban-rural development authority of the provincial people’s
government). As of now, there are no law and regulations explicitly abolishing the Eight Measures
for Public Security Fire Departments to Deepen Reform and Serve Economic and Social
Development 《 ( 公安消防部門深化改革服務經濟社會發展八項措施》).
– 164 –
REGULATORY OVERVIEW
REGULATIONS RELATING TO LEASING
According to the Law of the PRC on Administration of Urban Real Estate 《 ( 中華人民共和國
城市房地產管理法》) promulgated by the SCNPC on August 26, 2019 and implemented on January
1, 2020, when leasing a real estate, the lessor and the lessee shall sign a written lease contract for
the lease term, the purpose of the lease, the lease price, the responsibility for repairs and other
terms and conditions, as well as other rights and obligations of both parties, and register it with
the real estate management department. In accordance with the Regulation on the Administrative
Measures for Commodity House Leasing 《 ( 商品房屋租賃管理辦法》) promulgated by the Ministry
of Housing and Urban-Rural Development on 1 December 2010, if the lessor and the lessee fail to
file the lease for registration, the competent department of construction (real estate) of the People’s
Government of a municipality directly under the Central Government, city or county shall order
them to make corrections within a prescribed period, and if an individual fails to do so, a fine of
not more than RMB1,000 may be imposed on him/her; and if a corporation fails to do so, a fine of
more than RMB1,000 and less than RMB10,000 may be imposed on it.
In respect of subleasing, subject to consent of the lessor, the lessee may sublease the leased
property to a third party. Where the lessee subleases the leased property, the leasing contract
between the lessee and the lessor remains valid, and if the third-party causes damage to the leased
property, the lessee shall compensate for the losses. Where the lessee subleases the leased property
without the consent of the lessor, the lessor may rescind the contract. Where a lessee subleases the
leased property to a third party with the consent of the lessor under a sublease term more than the
remaining lease term in favor of the lessee, the agreement in connection with the excess shall be
without legal binding force on the lessor, unless otherwise agreed by the lessor and the lessee.
Where a lessor knows or should have known the sublease by the lessee without raising an
objection within six months, the lessor shall be treated as giving consent to the sublease.
– 165 –
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
OVERVIEW
Our Group has been developing to actualize our long-time vision to be your trusted neighbor
for health by being your go-to health management partner within reach. Our history can be traced
back to 1999 when our founder Mr. Long Yan, a physician and our chairman, established our
subsidiary Deshengtang Jinchang Health which commenced the operation of a general outpatient
clinic still operating to-date in Jinchang, Gansu Province. Inspired by the TCM discipline that
“wise doctors preempt the disease” and to construct a proximate first line of defense for health
management accessible to the general public, we launched our first retail pharmacy in 2002 and
gradually expanded our offline pharmacy network to over 1,000 pharmacies covering 65 cities and
22 provinces as of September 30, 2022. Leveraging our nationwide offline pharmacy network, we
continuously expanded our product and service offerings over the years, including launching our
O2O and B2C retail businesses, Internet hospital-based medical consultation services and wellness
management services, thereby evolving into a leading health management and healthcare solutions
provider in China. For more information on the experience and qualifications of Mr. Long Yan, see
“Directors, Supervisors and Senior Management.”
MILESTONES OF DEVELOPMENT
The following is a summary of our major business development milestones:
Years Events
1999 Our Group was founded in September and commenced operating a general
outpatient clinic in Jinchang, Gansu Province
2002 Our first retail pharmacy was established in July in Jinchang, Gansu
Province
2005 Our business operations expanded into Lanzhou, Gansu Province in

February
2009 We opened our first offline pharmacy in Beijing in June
Our Company was established in September
2012 We commenced our B2C retail business by establishing our online

pharmacies on Tmall in July
2015 We commenced our O2O retail business by launching our 111Yao App in
September
2016 We launched our franchised pharmacy operations and our first franchised
pharmacy was opened in Lanzhou in January
2017 We completed Angel Round [REDACTED] Financing in August
2018 We launched our Fang strategy
2019 We completed Series A [REDACTED] Financing in December
We launched our Internet hospital and commenced our Internet hospital-

based service offerings in August
– 166 –
Years Events
We launched our wellness management service offerings in August
2020 Total number of pharmacies in our network (including our self-operated

and franchised pharmacies) in China exceeded 800
Total number of our members exceeded 5.5 million
We were recognized as one of the “Top 100 Pharmaceutical Products

Retail Enterprise of 2020” (2020年藥品零售企業百強) by the China
Association of Pharmaceutical Commerce (中國醫藥商業協會)
2021 We were recognized as one of the “Top 50 Most Valuable Chinese

Pharmaceutical Stores from 2020 to 2021” (2020-2021年度中國藥店價值
榜五十強) by China Drug Store (中國藥店), a magazine managed by the
NHC
2022 Pharmacies in our network (including our self-operated and franchised

pharmacies) equipped with O2O capabilities reached 900
Total number of pharmacies in our network (including our self-operated

and franchised pharmacies) in China exceeded 1,000
OUR PRINCIPAL SUBSIDIARIES
The following table sets forth the principal business activities, date and place of
establishment of our principal subsidiaries, each wholly-owned by our Company, as of the Latest
Practicable Date:
Name of entities Principal business activities Date and place of establishment

Deshengtang Jinchang Pharmaceutical retail, wellness April 2002
management services, Jinchang, Gansu Province,
operation of TCM clinics China
Deshengtang Wholesale Wholesaling of healthcare February 2005

products Lanzhou, Gansu Province,
China
Beijing 111 Management of franchised October 2012

pharmacy operations Beijing, China
Beijing 111 Chain Pharmaceutical retail, wellness March 2015

management services, Beijing, China
pharmaceutical wholesale
Deshengtang Zhangye Pharmaceutical retail, wellness May 2016

management services, Zhangye, Gansu Province,
Deshengtang Jiuquan Pharmaceutical retail, wellness May 2016

management services, Jiuquan, Gansu Province,
– 167 –
Name of entities Principal business activities Date and place of establishment

Deshengtang Wuwei Pharmaceutical retail, wellness May 2016
management services, Wuwei, Gansu Province,
Jinchang Deshengtang Hospital Medical and Internet hospital December 2016

services Jinchang, Gansu Province,
China
MAJOR SHAREHOLDING CHANGES OF OUR GROUP
1. Early development of our Company
Our Company was established as a limited liability company under the laws of the PRC in
September 2009 with an initial registered capital of RMB5.0 million. As of the date of its
establishment, our Company was owned as to 98.00% by Mr. Long Yan and 2.00% by
Deshengtang Jinchang. Prior to the establishment of the Company, Deshengtang Jinchang, one of
our principal subsidiaries, was established in April 2002 by Mr. Long Yan and Mr. Long Jizhong
(龍濟中), Mr. Long Yan’s father. The entire equity interest of Deshengtang Jinchang was
subsequently transferred to our Company in May 2016, after which Deshengtang Jinchang became
our wholly-owned subsidiary.
In April 2016, Mr. Long Yun entered into an equity transfer agreement with Deshengtang
Jinchang, pursuant to which, Deshengtang Jinchang transferred all its equity interest in the
Company to Mr. Long Yun at a consideration of RMB0.1 million. In addition, Mr. Long Yan and
Mr. Long Yun subscribed for an increase of RMB95.0 million registered capital of the Company in
proportion to their then shareholding. Upon completion of the capital increases and the equity
transfer, in April 2016, our Company was held by Mr. Long Yan and Mr. Long Yun as to 98.00%
and 2.00%, respectively.
2. Angel Round [REDACTED] Financing
Pursuant to a capital increase agreement entered into among our Company, Mr. Long Yan, Mr.
Long Yun and the Angel Round [REDACTED] Investors in August 2017, the Angel Round
[REDACTED] Investors agreed to invest in our Company by subscribing for our increased
registered capital, details of which are set out below:
Increased
registered capital Date on which consideration
Subscribers Consideration subscribed for was fully settled
(RMB) (RMB)
Angel Round [REDACTED]
Investors
Jiangsu Yanhai . . . . . . . . . . . . . . . 50,000,000 5,555,556 August 31, 2017
Suzhou Bangsheng Yingxin . . . . . . 24,430,000 2,714,444 August 31, 2017
Jiangsu Jiequan . . . . . . . . . . . . . . 24,430,000 2,714,444 August 31, 2017
Nanjing Bangsheng Juyuan . . . . . . 1,140,000 126,667 August 31, 2017
Total: . . . . . . . . . . . . . . . . . . . . . . 100,000,000 11,111,111
The relevant considerations were determined based on arm’s length negotiation among the
parties taking into account the then market conditions and valuation of our Group. For details of
the Angel Round [REDACTED] Financing, see “— Details of the [REDACTED] Investments.”
– 168 –
The shareholding structure of our Company following the completion of the Angel Round
[REDACTED] Financing is set forth below:
Approximate
percentage of
Amount of equity interest in
Name of Shareholders registered capital our Company
(RMB)
Mr. Long Yan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98,000,000 88.20%
Jiangsu Yanhai . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,555,556 5.00%
Suzhou Bangsheng Yingxin . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,714,444 2.44%
Jiangsu Jiequan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,714,444 2.44%
Mr. Long Yun . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000 1.80%
Nanjing Bangsheng Juyuan . . . . . . . . . . . . . . . . . . . . . . . . . . . 126,667 0.11%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,111,111 100.0%
3. Establishment of shareholding platforms
Jinchang Changqi Management Consulting Center (Limited Partnership)* (金昌昌管理諮詢

中心(有限合夥), “Jinchang Changqi”) was established in May 2018 as the shareholding platform
for the Group’s mid-level and senior management members and supervisors. Jinchang Yixueyuan
Management Consulting Center (Limited Partnership)* (金昌壹學院管理諮詢中心(有限合夥),
“Jinchang Yixueyuan”) was established in May 2018 as the family shareholding platform for Mr.
Long Yan and Mr. Long Yun. Mr. Long Yan had been the general partner of each of Jinchang
Changqi and Jinchang Yixueyuan since their establishment.
In May 2018, each of Jinchang Changqi and Jinchang Yixueyuan entered into a couple of
equity transfer agreements with each of Mr. Long Yan and Mr. Long Yun, pursuant to which Mr.
Long Yan transferred 4.90% of the equity interest in the Company and Mr. Long Yun transferred
0.10% of the equity interest in the Company to each of Jinchang Changqi and Jinchang Yixueyuan
at nil consideration.
The shareholding structure of our Company following the completion of the transfer of equity
interests is set forth below:
Approximate
percentage of
(RMB)
Mr. Long Yan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,111,112 78.40%
Jiangsu Yanhai . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,555,556 5.00%
Jinchang Changqi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,555,555 5.00%
Jinchang Yixueyuan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,555,555 5.00%
Jiangsu Jiequan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,714,444 2.44%
Mr. Long Yun . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,777,778 1.60%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,111,111 100.0%
– 169 –
To benefit from favorable policies in the Zhejiang Free Trade Zone, the following
shareholding adjustments were effected during 2019 and 2020:
• Zhejiang Changqi is a limited partnership established in August 2019 with Mr. Long Yan
as its general partner. Jinchang Changqi transferred its entire equity interest in our
Company to Zhejiang Changqi in September 2019 and Jinchang Changqi was
deregistered in April 2020. Since the date of its establishment, the holding structure of
Zhejiang Changqi corresponded to that of Jinchang Changqi immediately prior to its
deregistration. As of the Latest Practicable Date, these limited partners comprised Mr.
Long Yun and participants of our [REDACTED] Share Incentive Scheme, i.e., the
Group’s employees who were granted partnership interests in Zhejiang Changqi in
recognition of their contribution towards the Group. Mr. Long Yan, who held 54.00% of
the partnership interest in Zhejiang Changqi as of the Latest Practicable Date, had the
power to manage its operation, to act on its behalf externally and to exercise all voting
rights held by it in investee companies. No partnership interests in Zhejiang Changqi
will be further granted pursuant to any incentive schemes which do not comply with the
requirements under Chapter 17 of the Listing Rules after the [REDACTED]. For details
of our [REDACTED] Share Incentive Scheme, see “Appendix VI — Statutory and
General Information — D. [REDACTED] Share Incentive Scheme.”
• Subsequent to Zhejiang Yixue’s establishment as the family shareholding platform for

Mr. Long Yan and Mr. Long Yun, Jinchang Yixueyuan transferred its entire equity
interest in our Company to Zhejiang Yixue in September 2019 and Jinchang Yixueyuan
was deregistered in April 2020. As of the Latest Practicable Date, with Mr. Long Yan
holding 98.00% of the partnership interests and Mr. Long Yun holding the remaining
2.00% of the partnership interests, the holding structure of Zhejiang Yixue corresponded
to that of Jinchang Yixueyuan immediately prior to its deregistration.
4. Series A [REDACTED] Financing
Pursuant to a capital increase agreement entered into among our Company, the then
Shareholders and Ali Health in December 2018 (“Series A Capital Increase Agreement”) and an
agreement entered into among our Company, the then Shareholders, Ali Health and Jiangsu Zijin
Hongyun in December 2019, Ali Health agreed to (i) invest in our Company by subscribing for an
increase of RMB6,172,840 of the Company’s registered capital at a consideration of
RMB94,444,000 (the “First Investment”) and (ii) subscribe for or designate an affiliate of itself
to subscribe for an increase of RMB6,172,839 of the Company’s registered capital at a
consideration of RMB94,444,000 (the “Second Investment”).
The relevant considerations for the First Investment and the Second Investment were
determined based on arm’s length negotiation after taking into consideration the then market
conditions and valuation of our Group. The consideration for the First Investment was fully settled
in January 2019.
Jiangsu Zijin Hongyun, a limited liability partnership one of the general partners of which is
an entity controlled by Ali Health, was designated by Ali Health to subscribe for RMB6,172,839 of
the Company’s registered capital in the Second Investment pursuant to the Series A Capital
Increase Agreement. In December 2019, Jiangsu Zijin Hongyun executed two accession
agreements, pursuant to which Jiangsu Zijin Hongyun is deemed as an original party of each of the
Series A Capital Increase Agreement and the Shareholders’ Agreement.
– 170 –
The relevant consideration for the Second Investment was fully settled in March 2020. For
details of the Series A [REDACTED] Financing, see “— Details of the [REDACTED]
Investments.”
The shareholding structure of our Company following the completion of the Series A
[REDACTED] Financing is set forth below:
Approximate
percentage of
(RMB)
Mr. Long Yan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,111,112 70.56%
Ali Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,172,840 5.00%
Jiangsu Zijin Hongyun . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,172,839 5.00%
Jiangsu Yanhai . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,555,556 4.50%
Zhejiang Changqi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,555,555 4.50%
Zhejiang Yixue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,555,555 4.50%
Jiangsu Jiequan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,714,444 2.20%
Mr. Long Yun . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,777,778 1.44%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123,456,790 100.0%
5. Conversion into a Joint Stock Company with Limited Liability
Pursuant to the Promoters’ agreement dated December 5, 2022 and the Shareholders’
resolutions dated December 6, 2022, the then existing Shareholders of our Company agreed to
convert our Company into a joint stock company with limited liability with a registered capital of
RMB123,456,790. According to the audit report and capital verification report of our Company
upon joint stock reform, as at August 31, 2022, the net asset value of our Company amounted to
RMB336,681,497.61, of which RMB123,456,790 has been converted into 123,456,790 Shares of
RMB1.00 par value each, and issued to the then Shareholders of our Company in proportion to
their capital contribution to our Company. The remaining amount of RMB213,224,707.61 was
converted to capital reserve. The conversion was completed on December 10, 2022 and our
Company was renamed as Deshengtang Pharmaceutical Co., Ltd.* (德生堂醫藥股份有限公司).
CONCERT PARTY AGREEMENT
Mr. Long Yan and Mr. Long Yun are brothers. Mr. Long Yan and Mr. Long Yun share a
mutual understanding on the Group’s business development. Since becoming direct Shareholders
and serving as the Company’s members of senior management, they have been acting in concert to
exercise control over the Company and to make decisions relating to its business development. Mr.
Long Yan and Mr. Long Yun entered into the Concert Party Agreement in December 2022,
pursuant to which each of them confirmed and acknowledged that since becoming direct
Shareholders and serving as the Company’s members of senior management (i) they had acted and
would continue to act in concert for matters relating to business development of our Company that
require to be approved at the meetings of the Board of Directors and/or the Shareholders pursuant
to applicable laws, regulations and the constitutional documents of our Company; (ii) they would
discuss and reach consensus with each other before proposing to and voting at the meetings of the
Board of Directors and/or the Shareholders; and (iii) in the event that they are unable to reach
consensus, the decisions of Mr. Long Yan shall prevail.
– 171 –
DETAILS OF THE [REDACTED] INVESTMENTS
Principal terms of the [REDACTED] Investments
The principal terms of the [REDACTED] Investments are set out below:-
Angel Round [REDACTED] Series A [REDACTED]

Financing Financing
Date of investment agreements August 9, 2017 December 24, 2018 and
December 19, 2019
Date of full settlement August 31, 2017 March 2, 2020
Cost per Share (approximation)(1) RMB9.00 RMB15.30
Amount of registered capital RMB11,111,111 RMB12,345,679

subscribed
Funds raised by our Group RMB100,000,000 RMB188,888,000
Discount to the [REDACTED](2) [REDACTED]% [REDACTED]%
Use of proceeds and whether they As of the Latest Practicable Date, the net proceeds from
have been fully utilized the Angel Round [REDACTED] Financing and Series A
[REDACTED] Financing had been fully utilized by our
Group for the expansion of our pharmacy network, for
the construction of the Company’s technology
infrastructure and as general working capital.
Lock-up period Subject to a lock-up period of 12 months following the

[REDACTED] pursuant to the PRC Company Law.
Strategic benefits of the Our Group would benefit from the additional capital
[REDACTED] Investments injected by the [REDACTED] Investors in our Group,
brought to our Group their business resources, knowledge and experience,
potential business opportunities and benefits that may be
provided by them, and their investments demonstrate
their commitment and confidence in the business
performance and operations, strengths and long-term
prospects of our Group. Further, our non-executive
Directors represent certain of our [REDACTED]
Investors and they complement our executive Directors
to support good corporate governance.
Notes:
(1) As adjusted to reflect subsequent capital injections and the conversion of our Company from a limited liability
company to a joint stock limited liability company in December 2022, as applicable.
(2) The discount to the [REDACTED] is calculated based on the latest available foreign exchange rate published by
the PBOC for foreign exchange transactions as of the Latest Practicable Date and the assumption that the
[REDACTED] is HK$[REDACTED] per H Share (being the mid-point of the indicative [REDACTED] range).
– 172 –
Special rights granted to the [REDACTED] Investors
All the Shareholders (including the [REDACTED] Investors) are bound by the Shareholders’
Agreement which granted special rights to the [REDACTED] Investors.
Pursuant to a supplemental agreement to the Shareholders’ Agreement entered into among all
Shareholders and the Company in August 2022, the following special rights were terminated
immediately prior to the submission of the application for [REDACTED] by the Company, in
accordance with the Guidance Letter HKEX-GL43-12 issued by the Stock Exchange in October
2012 and updated in July 2013 and March 2017 (“HKEX-GL43-12”):
(i) the anti-dilution right granted by Mr. Long Yan requiring him to transfer additional
equity interests in the Company to the Series A [REDACTED] Investors in case of
capital increase at a price per registered capital lower than that in the Series A
[REDACTED] Financing;
(ii) the anti-dilution right granted by the Company pursuant to which further issuance of
capital at a price per registered capital lower than that in the Series A [REDACTED]
Financing requires the prior consent of the Series A [REDACTED] Investors;
(iii) the redemption right granted by Mr. Long Yan requiring him to purchase all or part of
the equity interests in the Company held by the [REDACTED] Investors;
(iv) the right granted by Mr. Long Yan and Mr. Long Yun requiring them to indemnify the
Series A [REDACTED] Investors for any losses arising from the performance of
obligations owed to the Angel Round [REDACTED] Investors by the Company; and
(v) all other special rights granted by the Company to the Shareholders that are required by
HKEX-GL43-12 to terminate upon the [REDACTED], including but not limited to
pre-emptive right to subscribe for newly issued Shares, performance guarantee,
protective provisions requiring prior written consent for certain corporate actions,
directors and chairman nomination right, liquidation preference right, inspection right
and the right to arrange independent auditing of the Company.
– 173 –
Information regarding the [REDACTED] Investors
The background information of our [REDACTED] Investors is set out below:
Name of the
[REDACTED]
Investors Background
Jiangsu Yanhai Jiangsu Yanhai is a limited partnership established under the laws of the PRC.
The general partner of Jiangsu Yanhai is Jiangsu Coastal Capital, which is
owned by Nanjing Bangsheng Jurun as to approximately 35.36%, Jiangsu
Coastal Development Group Co., Ltd.* (江蘇省沿海開發集團有限公司,
“Jiangsu Coastal Development”, which is ultimately controlled by Jiangsu
provincial government) as to approximately 35.26% and two remaining
shareholders each holding less than 15.00% equity interest. Nanjing Bangsheng
Jurun is controlled by Mr. Gao Chong (郜翀), an independent third party, as its
general partner. The largest limited partner of Nanjing Bangsheng Jurun is
Nanjing CCI Capital. Nanjing CCI Capital is controlled by Mr. Gao Chong as to
approximately 44.62%, and our non-executive Director, Mr. Ling Mingsheng
(凌明聖), as to approximately 33.85%. Each of Mr. Gao Chong and Mr. Ling
Mingsheng holds the Fund Practicing Qualification Certificate (基金從業資格
證) issued by the Asset Management Association of China (中國證券投資基金
業協會). Jiangsu Yanhai has four institutional limited partners, among which,
Jiangsu Coastal Development holds approximately 47.62% equity interests and
with the remaining three limited partners each holding less than 20.00% equity
interest. Jiangsu Yanhai is an equity investment fund established in April 2015
with a subscribed capital contribution of approximately RMB2.5 billion,
focusing on strategic emerging industries, state-owned enterprise reform
projects, merger and acquisition projects and coastal industries in Jiangsu
Province.
Suzhou Suzhou Bangsheng Yingxin is a limited liability partnership established under

Bangsheng the laws of the PRC. The general partner of Suzhou Bangsheng Yingxin is
Yingxin Nanjing Bangsheng Investment Management, whose general partner is Mr. Gao
Chong. Suzhou Bangsheng Yingxin has a fund size of RMB606.4 million. The
interests held by the limited partners range from approximately 1.00% to
72.62%, of which Suzhou Bondshine Chuangji Venture Investment Partnership
(Limited Partnership)* (蘇州邦盛創驥創業投資企業(有限合夥)) is the only
limited partner holding more than 30% interests in the partnership. To the best
knowledge of our Directors, Suzhou Bangsheng Yingxin mainly invests in the
industries of electronic information, semiconductor chips, biomedicine and
materials, and in companies such as Jiangsu Qina New Material Technology
Co., Ltd.* (江蘇奇納新材料科技有限公司) and Guangdong Saiwei
Microelectronics Co., Ltd.* (廣東賽微微電子股份有限公司).
Jiangsu Jiequan Jiangsu Jiequan is a limited partnership established under the laws of the PRC.
It is principally engaged in investment management, focusing on mergers and
acquisitions of listed companies, companies in the intelligent manufacturing,
biopharmaceutical and healthcare industries.
– 174 –
Name of the
[REDACTED]
Investors Background
The general partner of Jiangsu Jiequan is Nanjing Bangsheng Xingong, which is
owned as to 65.00% by Nanjing CCI Capital, a company owned as to
approximately 44.62% by Mr. Gao Chong and 33.85% by Mr. Ling Minsheng, our
non-executive Director. The single largest limited partner of Jiangsu Jiequan is
Nanjing Bangsheng Juxin Entrepreneurial Investment Fund Partnership (Limited
Partnership)* (南京邦盛聚信創業投資基金合夥企業(有限合夥)), which holds
approximately 37.14% partnership interests therein.
Nanjing Nanjing Bangsheng Juyuan is a limited partnership established under the laws
Bangsheng of the PRC. It is principally engaged in investment management.
Juyuan
The general partner of Nanjing Bangsheng Juyuan is Nanjing CCI Capital. The
single largest limited partner of Nanjing Bangsheng Juyuan is Nanjing
Bangsheng Juhong, which holds approximately 66.64% partnership interests
therein. Nanjing Bangsheng Juhong is managed by Nanjing CCI Capital as its
general partner.
Ali Health Ali Health is a limited liability company established under the laws of the PRC
and is indirectly wholly-owned by Alibaba Health Information Technology
Limited (阿里健康信息技術有限公司), a company whose shares are listed on
the Stock Exchange (stock code: 241). It is a vehicle that offers one-stop
solutions to consumers through integrating online and offline resources of the
pharmaceutical and healthcare industries. It is principally engaged in
pharmaceutical e-commerce business and Internet healthcare services.
Jiangsu Zijin Jiangsu Zijin Hongyun is a limited liability partnership established under the
Hongyun laws of the PRC. It is principally engaged in investment management.
Jiangsu Zijin Hongyun has two general partners, including (i) Huatai Zijin
Investment Co., Limited* (華泰紫金投資有限責任公司, “Huatai Zijin”), a
wholly-owned subsidiary of Huatai Securities Co., Ltd.* (華泰證券股份有限公
司), a company whose shares are dually listed on the Stock Exchange (stock
code: 6886) and the Shanghai Stock Exchange (stock code: 601688) and (ii)
Hangzhou Hongyun Kangsheng Equity Investment Co., Ltd.* (杭州弘雲康晟股
權投資有限公司), an entity controlled by Ali Health.
Compliance with Interim Guidance and Guidance Letters on [REDACTED] Investments
The Sole Sponsor is of the view that the [REDACTED] Investments are in compliance with
Guidance Letter HKEX-GL29-12 issued by the Stock Exchange in January 2012 and as updated in
March 2017, and HKEX-GL43-12 and HKEX-GL44-12 issued by the Stock Exchange in October
2012 and as updated in July 2013 and March 2017.
PUBLIC FLOAT
The [REDACTED] Domestic Shares held by Mr. Long Yan, Mr. Long Yun, Zhejiang
Changqi, Zhejiang Yixue, Jiangsu Yanhai, Suzhou Bangsheng Yingxin, Jiangsu Jiequan, Nanjing
Bangsheng Juyuan, Ali Health and Jiangsu Zijin Hongyun will not be considered as part of the
public float as the Shares held by the aforesaid Shareholders are Domestic Shares which will not
be converted into H Shares or listed following the completion of the [REDACTED].
– 175 –
Out of the [REDACTED] H Shares to be converted from Domestic Shares and

[REDACTED] on the Stock Exchange upon completion of the [REDACTED]:
(i) [REDACTED] of such H Shares held by Jiangsu Yanhai, Suzhou Bangsheng Yingxin,
Ali Health and Jiangsu Zijin Hongyun will be counted towards the public float for the
purpose of Rule 8.08 of the Listing Rules after the [REDACTED];
(ii) [REDACTED] of such H Shares held by Zhejiang Changqi and Zhejiang Yixue will not
be counted towards the public float for the purpose of Rule 8.08 of the Listing Rules
after the [REDACTED] as the aforementioned two Shareholders are close associates of
Mr. Long Yan, our executive Director; and
(iii) [REDACTED] of such H Shares held by Jiangsu Jiequan and Nanjing Bangsheng
Juyuan will not be counted towards the public float for the purpose of Rule 8.08 of the
Listing Rules after the [REDACTED] as the aforementioned two Shareholders are close
associates of Mr. Ling Mingsheng, our non-executive Director.
Immediately upon completion of the [REDACTED], at least 25% of our Company’s total
issued Shares will be held by the public upon completion of the [REDACTED] in accordance with
Rule 8.08(1)(a) of the Listing Rules.
PRC LEGAL ADVISORS’ CONFIRMATION
As advised by our PRC Legal Advisors, the above mentioned incorporation of our Company
and subsequent equity transfers, capital increase and joint-stock reform have been properly and
legally completed in all material aspects and all requisite regulatory approvals have been obtained
in accordance with the applicable PRC laws and regulations.
CAPITALIZATION
The below table is a summary of the capitalization of our Company as of the date of this
Document and the [REDACTED] (assuming the [REDACTED] is not exercised):
Approximate
shareholding Approximate
percentage in our shareholding
Number of Shares Company as of the percentage in our
held as of the date of this Company as of the
Shareholders [REDACTED] Document [REDACTED]
Our Controlling Shareholders
Mr. Long Yan . . . . . . . . . . . . . . . . . . . . . . . . [REDACTED] 70.56% [REDACTED]%
Mr. Long Yun . . . . . . . . . . . . . . . . . . . . . . . . [REDACTED] 1.44% [REDACTED]%
Zhejiang Changqi . . . . . . . . . . . . . . . . . . . . . . [REDACTED] 4.50% [REDACTED]%
Zhejiang Yixue . . . . . . . . . . . . . . . . . . . . . . . [REDACTED] 4.50% [REDACTED]%
[REDACTED] Investors
Angel Round [REDACTED] Investors
Jiangsu Yanhai. . . . . . . . . . . . . . . . . . . . . . . . [REDACTED] 4.50% [REDACTED]%
Suzhou Bangsheng Yingxin . . . . . . . . . . . . . . . [REDACTED] 2.20% [REDACTED]%
Jiangsu Jiequan . . . . . . . . . . . . . . . . . . . . . . . [REDACTED] 2.20% [REDACTED]%
Nanjing Bangsheng Juyuan . . . . . . . . . . . . . . . [REDACTED] 0.10% [REDACTED]%
– 176 –
Approximate
shareholding Approximate
percentage in our shareholding
Number of Shares Company as of the percentage in our
held as of the date of this Company as of the
Shareholders [REDACTED] Document [REDACTED]
Series A [REDACTED] Investors
Ali Health . . . . . . . . . . . . . . . . . . . . . . . . . . . [REDACTED] 5.00% [REDACTED]%
Jiangsu Zijin Hongyun . . . . . . . . . . . . . . . . . . [REDACTED] 5.00% [REDACTED]%
Public Shareholders participating in the
[REDACTED] . . . . . . . . . . . . . . . . . . . . . . [REDACTED] — [REDACTED]%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [REDACTED] 100.00% 100.00%
Notes:
(1) The percentages are rounded to two decimal places and the sum of the percentages may not sum to 100% due to
rounding.
(2) Subject to approval by the CSRC and the Stock Exchange, the following Domestic Shares will be converted into H
Shares upon [REDACTED]:
Shareholders Number of Domestic Shares

Zhejiang Changqi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [REDACTED]
Zhejiang Yixue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [REDACTED]
Jiangsu Yanhai . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [REDACTED]
Suzhou Bangsheng Yingxin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [REDACTED]
Jiangsu Jiequan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [REDACTED]
Nanjing Bangsheng Juyuan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [REDACTED]
Ali Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [REDACTED]
Jiangsu Zijin Hongyun . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [REDACTED]
As confirmed by the PRC Legal Advisors, according to the Guidelines for “Full Circulation”
Program for Domestic Unlisted Shares of H-share Listed Companies 《 ( H股公司境內未上市股份申
請「全流通」業務指引》) issued by the CSRC, the factors considered by the CSRC before the
granting of the CSRC approval to convert the Domestic Shares into H Shares include, among
others, the eligibility of the shareholders of the Domestic Shares, and whether they have undergone
adequate internal and external approval procedures.
On December 30, 2022, the Company applied to [REDACTED] for the conversion of the
relevant Domestic Shares held by eight Shareholders into H Shares. The foregoing application was
approved in [•].
– 177 –
CORPORATE STRUCTURE IMMEDIATELY PRIOR TO THE [REDACTED]
Our corporate and shareholding structure immediately prior to the completion of the [REDACTED] is as follows:
Suzhou Nanjing
Zhejiang Zhejiang Ali Jiangsu Zijin Jiangsu Jiangsu
Mr. Long Yan(1) Mr. Long Yun(1) Bangsheng Bangsheng
Changqi(1) Yixue(1) Health(2) Hongyun(2) Yanhai(2) Jiequan(2)
Yingxin(2) Juyuan(2)
70.56% 1.44% 4.50% 4.50% 5.00% 5.00% 4.50% 2.20% 2.20% 0.10%
Our Company
100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Deshengtang
Deshengtang Deshengtang Deshengtang Deshengtang Deshengtang Deshengtang Deshengtang Beijing Deshengtang Deshengtang Deshengtang Shaanxi Deshengtang Gansu 111 Deshengtang
Jinchang Longgui
Ningxia Zhangye Wuwei Baiyin Dingxi Jinchang Jiuquan 111 Wholesale Inner Mongolia Qinghai Yaojipi Lintao Health Linze
Health(3)
100% 100% 100% 100%
Jinchang
Deshengtang Beijing 111 Beijing 111
Deshengtang
Culture Chain Clinic
Hospital
– 178 –
100% 100% 100%
Shanxi Shaanxi Gansu denotes the Controlling Shareholders

111 111 111
100% 100% 100% 100% 100%
(4) (4)
Baoji Xi’an Weinan Weinan Xi’an
111 111 111 Zhixinren Baolun

Notes:
(1) Zhejiang Changqi is a limited partnership established in the PRC as the shareholding platform for our [REDACTED] Share Incentive Scheme. Zhejiang Yixue is a
limited partnership established in the PRC as the family shareholding platform for Mr. Long Yan and Mr. Long Yun. The general partner of each of Zhejiang Changqi
and Zhejiang Yixue is Mr. Long Yan, our executive Director. For further details of our Controlling Shareholders, see “Relationship with our Controlling
Shareholders.” Pursuant to the Concert Party Agreement, Mr. Long Yan and Mr. Long Yun confirmed and acknowledged their acting-in-concert relationship in our
Company since its establishment. For details of the Concert Party Agreement, please see “— Concert Party Agreement.”
(2) See “— Details of the [REDACTED] Investments — Information regarding the [REDACTED] Investors” for details.
(3) Deshengtang Jinchang Health was established in 1999 and has since then been operating a general outpatient clinic. Out of Mr. Long Yan’s intention to keep a low
profile in the public domain as an entrepreneur, the entire equity interest of Deshengtang Jinchang Health was initially held by Mr. Long Yan’s parents and was
subsequently transferred to Mr. Long Yan’s spouse and daughter, all of whom held the equity interest for the benefit and on behalf of Mr. Long Yan. In preparation of
the [REDACTED] and to streamline our corporate structure, in July 2022, (i) Ms. Long Yufeng (龍雨豐), Mr. Long Yan’s daughter, (ii) Ms. Lou Yunying (婁運英),
Mr. Long Yan’s spouse, and (iii) our Company entered into a sale and purchase agreement, pursuant to which Ms. Long and Ms. Lou transferred the entire equity
interest in Deshengtang Jinchang Health to our Company at a consideration of RMB5,724,600, which was determined with reference to the valuation of net assets
held by Deshengtang Jinchang Health as of July 31, 2022 according to a valuation report prepared by a professional valuer. Since entities now comprising the Group
and Deshengtang Jinchang Health have been under common control of Mr. Long Yan, our acquisition of Deshengtang Jinchang Health was accounted for as a
business combination under common control as if the business of Deshengtang Jinchang Health had always been carried out by the Group, including throughout the
Track Record Period.
(4) We completed the acquisition of Weinan Zhixinren (a small-scale pharmacy with one storefront) and Xi’an Baolun (a small-scale pharmacy with two storefronts)
during the Track Record Period in March 2021 and February 2021, respectively. Immediately prior to the acquisitions, each of Weinan Zhixinren and Xi’an Baolun
was held by Mr. He Qixun (何奇遜), who previously served as a supervisor of Beijing 111 Chain during March 2015 to November 2017, and Mr. Xie Yuxiang (謝宇
翔). Save for the foregoing, immediately prior to the acquisitions, Mr. He, Mr. Xie and their respective associates were third parties independent of the Group who
– 179 –
had no past or present relationships or dealings (including family, employment, business, trust, fund flow, financing or otherwise) with any member of the Group or
their respective shareholders, directors, supervisors, senior management (or any of their respective associates) as well as their customers or suppliers.
Following the completion of the acquisitions, Mr. He re-joined and Mr. Xie joined our Group as employees.
None of the applicable percentage ratios as defined under the Listing Rules in respect of any of such acquisitions exceeds 25%. Accordingly, each acquisition of
Weinan Zhixinren and Xi’an Baolun does not constitute an acquisition of a material subsidiary or business during the Track Record Period and the relevant
pre-acquisition financial information of Weinan Zhixinren and Xi’an Baolun is not required to be disclosed in this Document pursuant to Rule 4.05A of the Listing
Rules.
As confirmed by our PRC Legal Advisors, each of the foregoing acquisitions had been properly and legally completed and settled in all material respects and all
applicable regulatory approvals had been obtained.

CORPORATE STRUCTURE IMMEDIATELY AFTER THE [REDACTED]
Our corporate and shareholding structure immediately after the [REDACTED] (assuming the [REDACTED] is not exercised) is as follows:
Suzhou Nanjing
Zhejiang Zhejiang Ali Jiangsu Zijin Jiangsu Jiangsu Other public
Mr. Long Yan(1) Mr. Long Yun(1) Bangsheng Bangsheng
Changqi(1) Yixue(1) Health(2) Hongyun(2) Yanhai(2) Jiequan(2) H Shareholders
Yingxin(2) Juyuan(2)
[REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]%
Our Company
100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Deshengtang
Deshengtang Deshengtang Deshengtang Deshengtang Deshengtang Deshengtang Deshengtang Beijing Deshengtang Deshengtang Deshengtang Shaanxi Deshengtang Gansu 111 Deshengtang
Jinchang Longgui
Ningxia Zhangye Wuwei Baiyin Dingxi Jinchang Jiuquan 111 Wholesale Inner Mongolia Qinghai Yaojipi Lintao Health Linze
Health(3)
100% 100% 100% 100%
Jinchang
Deshengtang Beijing 111 Beijing 111
Deshengtang
Culture Chain Clinic
Hospital
100% 100% 100%
– 180 –
Shanxi Shaanxi Gansu denotes the Controlling Shareholders
111 111 111
100% 100% 100% 100% 100%
(4) (4)
Baoji Xi’an Weinan Weinan Xi’an
111 111 111 Zhixinren Baolun
See “— Corporate Structure Immediately Prior to the [REDACTED]” in this section for notes (1) to (4).

BUSINESS
OUR VISION AND MISSION
Our vision is to be your trusted neighbor for health by being a go-to health management
partner within reach.
We aspire to building an all-round and accessible healthcare solutions infrastructure that

provides wide coverage for individuals in different communities. Committed to serving the
Chinese population with growing and increasingly complex health needs as their health
management awareness continues to elevate and their demand for one-stop healthcare solutions
becomes more vigorous, we strive to innovate and optimize the way they seek medical
consultations, consume pharmaceuticals, engage in preventive healthcare measures, and pursue
long-term well-being. Living out our mission to “serve health with technology” and striving to not
only treat but also preempt illness, we have set out on a quest to revolutionize our
brick-and-mortar pharmacies, clinics and wellness centers with our Internet-enabled product and
service offerings, and reconstruct them into a proximate first line of defense for health
management to bring healthcare solutions to each and every household in China.
OVERVIEW
medical diagnostic and treatment and medicinal capabilities. We offer full-suite products and
services with comprehensive coverage encompassing customers’ entire purchasing cycle through
our omni-channel retail network, comprising (i) offline retail mode, under which customers access
our product offerings via our network of self-operated offline pharmacies, (ii) O2O retail mode,
under which products are delivered by express delivery riders from our offline pharmacies located
in proximity to customers’ address upon orders placed online, catering to customers’ immediate
needs, and (iii) B2C retail mode, under which products are delivered via courier services reaching
customers across China upon orders placed on online pharmacies operated by us and dispatched
utilizing our centralized dispatching system primarily supported by our warehousing capabilities,
catering to customer requests that are less time-sensitive. Our products and services are assembled
to cater to the all-round health management needs of our customers that span the medical,
pharmaceutical, wellness and safeguarding elements along the entire healthcare value chain.
According to CIC, in 2021, we ranked:
• first among all pharmaceutical retailers operating in Gansu Province in terms of offline
pharmaceutical retail revenue generated in the province;
• third among all pharmaceutical retailers operating in Northwestern China in terms of

offline pharmaceutical retail revenue generated in the region;
• 15 th among pharmaceutical retailers nationwide operating offline and online through

O2O and B2C modes, in terms of our omni-channel pharmaceutical retail revenue;
• 16th among pharmaceutical retailers nationwide in terms of offline pharmaceutical retail

revenue;
• first among all pharmaceutical retailers in China in terms of the number of available
standardized medicinal combinations (i.e., our Fang); and
• first among all pharmaceutical retailers in China in terms of revenue generated from the
sales of standardized medicinal combinations (i.e., our Fang-directed revenue).
– 181 –
BUSINESS
We started our pharmaceutical retail and general outpatient clinic operation in Jinchang,
Gansu Province over 20 years ago. Through decades of evolution and breakthroughs and
navigating policy developments in China’s health management and healthcare solutions industry,
we have transcended beyond operating traditional chain pharmacies and clinics to become a
versatile health management and healthcare solutions provider supported by our Fang strategy. Our
Fang strategy, which is deeply rooted in western and Chinese medicinal science and first-hand
industry and consumer knowledge, promotes standardized medicinal combinations designed to
yield optimal efficacy towards customers’ specific disease or health condition. Implementing our
Internet hospital-based “family doctor” approach supported by physicians, pharmacists and
customer support professionals, we deliver pharmaceutical and healthcare products and services
offline (through our brick-and-mortar pharmacy establishments) and online (through O2O and B2C
modes) that are all conveniently accessible to individuals across different communities. We also
operate DTP pharmacies to embrace popular public demands for new specialty drugs, as well as
Specialized Pharmacies for Chronic Disease to enhance patients’ access to chronic disease
medications. We also provide medical consultation services through our Internet hospital and
clinics. Beyond that, we also promote wellness management through physiotherapy and health
exercise programs and various service offerings specifically designed to enhance customers’
continuous access to our offerings and safeguard their health conditions.
We witnessed stable revenue growth during the Track Record Period, despite of the impact of
the COVID-19 outbreak on our operation. For the years ended December 31, 2020 and 2021, we
recorded total revenue of RMB1,754.0 million and RMB2,014.3 million, representing an increase
of 14.8%. Furthermore, our total revenue increased by 16.4% from RMB1,467.4 million in the
nine months ended September 30, 2021 to RMB1,707.5 million in the same period of 2022. Our
gross profit increased from RMB634.8 million in 2020 to RMB694.7 million in 2021, representing
an increase of 9.4%. For the nine months ended September 30, 2022, we recorded gross profit of
RMB596.9 million compared to RMB492.7 million in the same period in 2021, representing an
increase of 21.1%.
Our Journey
Our journey began over 20 years ago under the leadership of our founder and management
team who have been unyieldingly implementing our mission to serve health with technology. As
we continuously scale up and unlock the immense potential of China’s health management and
healthcare solutions industry that has been invigorated by governmental policies, we have
undergone three stages of development:
• Stage I (1999 to 2009): Our history can be traced back to September 1999, when we
started operating a general outpatient clinic in Jinchang, Gansu Province, offering
medical consultation, treatment and pharmacy services, which was the largest privately
operated medical institution in Jinchang in terms of the number of daily patient visits
from 1999 to 2003. Our insights gained from clinic operations allowed us to discern a
popular yet unmet demand for solutions to diverse health needs. Inspired by the TCM
discipline that “wise doctors preempt the disease (上工治未病)” and taking advantage of
national policies seeking to standardize the operation and management of pharmacies in
the early 2000s, we tapped into the pharmaceutical retail industry. We were the first
pharmaceutical retailer in Gansu Province to obtain the GSP certification in 2003,
according to CIC. We steadily expanded our offline pharmacy network from 10
pharmacies in Jinchang by the end of 2002 to 72 pharmacies covering multiple cities in
Gansu Province by the end of 2009.
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• Stage II (2009 to 2016): Supported by national policies promoting the development of

privately operated medical institutions to enhance our offline medical consultation
capability, we established our diabetes specialty hospital in Jinchang, which then
became the foundation of our Internet hospital. We also launched our online business to
take advantage of the Chinese government’s “Internet +” policy, which promoted
Internet-based healthcare services, by introducing our O2O and B2C business on our
111Yao App and our online pharmacies on third-party platforms. According to CIC, we
were among the first pharmaceutical retailers in China to obtain the Qualification
Certificate for Providing Internet Pharmaceutical Dealing Service 《
( 互聯網藥品交易服
務資格證》) in 2012. We continued to develop our offline pharmacy network, and as of
December 31, 2016, we established 243 self-operated pharmacies in 13 cities across
Gansu Province, Beijing, Shanxi Province and Shaanxi Province.
• Stage III (2016 onward): We substantially enhanced our online operations in line with
China’s “13th Five-Year Plan” starting from 2016, which increasingly promoted Internet
medical services and encouraged the integration of online and offline consumption.
While we digitalized our offline operations for enhanced integration of our
omni-channel network, we also strengthened our medical consultation capabilities by
obtaining our Internet hospital license, transforming our hospital operations from offline
to online. As we embraced the prescription outflow trend under China’s “zero markup”
policy, as of September 30, 2022, we equipped 27 of our self-operated pharmacies with
DTP capabilities and 152 of our self-operated pharmacies were qualified as Specialized
Pharmacies for Chronic Diseases. In addition, we further advanced our capabilities to
meet customers’ all-round health management needs by launching our first TCM clinic
in 2017, introducing wellness management services in 2019 and establishing
collaborations with six insurance companies and insurance solutions providers to
facilitate their payments with direct billing payment options.
As of September 30, 2022, our business footprint encompassed (i) an aggregate of 1,047
pharmacies (including 931 self-operated pharmacies and 116 franchised pharmacies), under our
大藥房) brands, across 65 cities and 22 provinces, (ii) an O2O retail network reaching all the
cities and provinces covered in our offline pharmacy network, (iii) a B2C retail network with
nationwide delivery coverage, (iv) an Internet hospital supporting our provision of online medical
consultation services, (v) 50 offline medical clinics comprising 49 TCM clinics and one general
outpatient clinic, and (vi) 24 offline wellness centers.
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Our Business Model
The following diagram illustrates our business model and capabilities.

Health management and healthcare solutions
with full-suite product and service offerings
Across-the-board service coverage

in the entire purchasing cycle
Offline Omni-channel operations via Internet

retail online and offline presence hospital
Medical Health Pharmaceutical

consultations awareness Medical
na
seminars h ma gemen Health
Healthcare alt
He
management
t
products O2O Medical
retail clinics services
Access Solutions All-round
Health health
Fam
profiles Customers management
ng
needs
ily
Fa
do
cto ty
r with quali
Health Medication Safeguarding Wellness

check-up records
Online tests In and out
and offline of hospital
B2C Wellness
retail centers
In and out
of store
Through an accessible healthcare solutions infrastructure, we offer a full suite of products

and services catering to customers’ all-round health management needs from the medical,
pharmaceutical, wellness and safeguarding perspectives, comprehensively encompassing
customers’ entire purchasing cycle through our omni-channel operations:
• Health management and healthcare solutions with full-suite product and service
offerings: We offer customers personalized healthcare solutions and multi-dimensional
product and service offerings that cater to customers’ all-round medical, pharmaceutical,
wellness and safeguarding needs along the entire healthcare value chain. Our product
offerings (including our branded products) comprise prescription and OTC drugs, TCM
decoction pieces, medical devices, wellness products and other products. Our service
offerings comprise medical consultation (including Internet hospital-based and offline
in-clinic medical services), wellness management services (including physiotherapy
applying TCM appropriate techniques and health exercise programs) and other
value-adding health management services. During the Track Record Period, we
generated a substantial majority of our revenue from omni-channel pharmaceutical retail
of products while we also generated certain revenue from our medical consultation and
wellness management service offerings. To further safeguard customers’ diverse health
needs and to cater to the all-round health management needs of our customers, we also
offer value-adding healthcare services (including insurance arrangements, as well as
health awareness seminars, post-purchase health follow-ups, health check-up tests and
periodic health reports) to customers on a complimentary basis.
• Across-the-board service coverage in the entire purchasing cycle: We design

scenario-specific healthcare solutions to address customers’ diverse healthcare needs
before, during and after their purchase. We offer on-site routine health check-up tests
and medical consultations to elevate customers’ in-store purchase experience into a
comprehensive process of ascertaining their healthcare needs. Our solutions are
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delivered to customers both offline and online, ranging from immediate live
consultations to overnight delivery. We provide both patients with prescriptions acquired
from hospitals and non-patients outside hospitals with tailored healthcare solutions
enabled by our out-of-hospital prescription fulfillment capabilities and our insights into
their health profiles. Following a customer’s purchase, we offer continuous services,
such as post-purchase feedback through customer ratings, customized follow-up
medication reminders and health reports. Through our customer management system, we
understand customers’ pain points and formulate customer retention plans customized to
their needs throughout their entire purchasing cycle.
• Omni-channel operations via online and offline presence: We offer customers

round-the-clock access to our versatile product offerings through our omni-channel retail
network, encompassing offline, O2O and B2C retail business modes, as well as
complimentary Internet hospital-based medical consultation services delivered on a 24/7
basis across our omni-channel retail operations. Our nationwide offline pharmacy
network comprised 931 self-operated pharmacies and 116 franchised pharmacies as of
September 30, 2022, covering 65 cities and 22 provinces. Leveraging our offline
presence, we empowered all of our self-operated pharmacies with O2O capabilities with
express product delivery addressing customers’ immediate needs. Through our
centralized dispatching system backed by our warehousing capabilities, we also sell
products in the B2C retail mode reaching customers located in any city across China.
Our O2O and B2C retail business modes are also available on our 111Yao App and our
WeChat mini program. Furthermore, we offer offline in-clinic western and TCM medical
consultation services via our 50 medical clinics (including one general outpatient clinic
and 49 TCM clinics) as of September 30, 2022. To complement our pharmaceutical
retail and medical consultation service capabilities, we also promote preventive wellness
management services at our 24 wellness centers to help our customer preempt illnesses
or problems and pursue a healthy lifestyle. Based upon our online and offline presence,
we proactively engage in customers’ health management, as we establish health profiles
for them with the support of data analytics tools, through addressing their consultations
online and offline, arranging complimentary health awareness seminars, performing
complimentary health check-up tests, and closely attending and proposing solutions to
their health abnormalities from their medication records.
We believe our continuous growth and development have been catalyzed by our core business
strategy of “family doctor with quality Fang”, which is consistently executed across all our sales
channels and provides us with a competitive edge to capture the growth in China’s health
management and healthcare solutions industry:
• Our Fang Strategy. Our Fang strategy anchors on our capability to develop Fang, our
designated term inspired by the transliteration of the Chinese character “方” under TCM
discipline that refers to standardized medicinal combinations primarily based on
medications and supplemented by wellness products. We have accumulated our Fang
anthology from our more than two decades of experience with prescriptions, formulas
and methods. As of September 30, 2022, our Fang anthology comprised 1,429 sets of
Fang, covering 340 diseases and other health issues across 10 medical disciplines. Our
Fang anthology is maintained and continuously developed by the licensed physicians
and licensed pharmacists at our Fangdao Academy based on western and TCM
pharmacology and medicinal science, contemporary industry developments, best
practices from clinical practitioners, and analysis of first-hand data collected from our
omni-channel operations. We follow the traditional Chinese medicinal principle of
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“Monarch, Minister, Assistant, and Guide (君臣佐使)”, which illustrates the allocation
of medicinal substances according to their functions and effects, and adopt treatment
techniques to formulate our Fang that combines TCM’s holistic view to treating the
human body as an organic whole with the precise disease treatment methodology under
western medicinal theories. During the Track Record Period, we cumulatively offered
12.5 million sets of Fang contained in 9.2 million product orders.
• Our “Family Doctor” Approach. Our “family doctor” approach is executed through our
Internet hospital-based medical consultation service capabilities. As of September 30,
2022, we had 94 licensed physicians staffed at our Internet hospital and 1,088 licensed
pharmacists providing purchase guidance as well as prescription review services, as
further supported by our team of 43 customer support professionals. We offer
personalized healthcare solutions online on a 24/7 basis and offline whenever our
customers visit any of our brick-and-mortar operations, just like having their own family
doctor on standby at all times. Aided by data analytics technologies, we provide timely
responses to customer-specific enquiries and consultations, create and maintain
personalized health profiles for each customer, analyze customer data that allows us to
provide tailored follow-up services, which ultimately contributes to the development and
advancement of our Fang anthology. Patients can connect with general practice and
specialty physicians at our Internet hospital capable of offering medical consultation
services for over 90 common and chronic diseases. During the Track Record Period, we
provided approximately 29.1 million online medical consultations in aggregate.
COMPETITIVE STRENGTHS
We believe the following competitive strengths have led to our continued success, contributed
to our industry position and distinguished us from our competitors.
Leading health management and healthcare solutions provider in China backed by a full suite
of product and service offerings
As a health management and healthcare solutions provider in China, we offer full-suite

products and services to our customers through our omni-channel retail network with
comprehensive coverage encompassing their entire purchasing cycle. Our products and services are
assembled to cater to the all-round health management needs of our customers that span the
medical, pharmaceutical, wellness and safeguarding elements along the entire healthcare value
chain. We formulate and deliver customized healthcare solutions with our offering of
pharmaceutical and healthcare products, medical consultations, prescription services and wellness
management services, through our omni-channel retail network, Internet hospital, TCM clinics,
general outpatient clinic and wellness centers.
Following our “family doctor” approach, we address the medical, pharmaceutical, wellness
and safeguarding needs of individuals as follows:
• Medical
We address a wide range of conditions and cases for customers through our various
medical consultation service capabilities, with a primary focus on commonly seen illnesses
and chronic diseases. Responding to customers’ needs for convenient access to medical and
general health consultation online or within their neighborhood, we offer various Internet
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hospital-based medical services, which are free of charge, as well as offline medical services
based on our brick-and-mortar clinics (including our TCM clinics and general outpatient
clinic), from which we generated a small amount of revenue during the Track Record Period.
• Internet hospital-based medical consultation services. Our Internet hospital-based

medical consultation, prescription review and renewal services are accessible to
patients both online and offline throughout our omni-channel operations, provided
by our licensed physicians and pharmacists. As of September 30, 2022, we had 94
licensed physicians staffed at our Internet hospital, while our 1,088 on-site licensed
pharmacists provided purchase guidance as well as prescription review services,
together helping patients with medical queries through real-time connections with
our Internet hospital.
• In-clinic medical consultation services. We offer in-clinic western and TCM

medical consultation services offline at our brick-and-mortar clinics. Leveraging
the expertise of our 91 licensed TCM physicians, we offer TCM consultation and
prescription services at our 49 TCM clinics in Gansu Province. We also base our
offline medical consultation, diagnosis and treatment services at our general
outpatient clinic in Gansu Province, which specializes in internal medicine,
gynecology and TCM.
• Pharmaceutical
Our three-pronged pharmaceutical retail network is closely integrated with our medical
consultation service capabilities, comprising offline, O2O and B2C business modes to
flexibly address customers’ consultation and medication needs all at once. According to CIC,
in 2021, we ranked 15th among pharmaceutical retailers nationwide operating through all
these three sales channels in terms of our omni-channel pharmaceutical retail revenue in
China. Across these sales channels, we offer customers convenient access to a wide variety of
healthcare products including prescription and OTC drugs, TCM decoction pieces, medical
devices, wellness products and other products. In addition to third-party branded products
available in our retail network, we also sell products under our own brand names.
o Nationwide offline retail network. With over 20 years of experience operating in

the pharmaceutical retail industry in China, we have built up a nationwide offline
pharmacy network with 1,047 pharmacies across 65 cities and 22 provinces,
including 931 self-operated pharmacies and 116 franchised pharmacies as of
September 30, 2022. The geographical layout of our pharmacies is carefully
designed to address the purchase preferences of customer groups at different
locations in a city and customers’ diverse medication needs, such as those for
specialty diseases or chronic diseases. For the years ended December 31, 2020 and
2021 and the nine months ended September 30, 2022, we recorded RMB1,408.9
million, RMB1,501.7 million and RMB1,264.4 million in revenue, respectively,
from our offline pharmaceutical retail business. According to CIC, in 2021, we
ranked (i) first among all pharmaceutical retailers operating in Gansu Province in
terms of offline pharmaceutical revenue generated in the province, (ii) third among
all pharmaceutical retailers operating in Northwestern China in terms of offline
pharmaceutical revenue generated in the region, and (iii) 16th among
pharmaceutical retailers nationwide in terms of offline pharmaceutical retail
revenue.
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o O2O retail mode. Under our O2O retail mode, our self-operated offline pharmacies
with O2O capabilities are listed online on third-party O2O platforms that we
collaborate with (including Meituan and JD) as well as our 111Yao App and
WeChat mini program, where our offline in-pharmacy product offerings are
available for on-demand express delivery to customers after customers browse and
order the products online on the O2O platforms. Customers purchase our products
in the O2O business mode from nearby offline pharmacies, typically within five
kilometers to the delivery address. Products from our offline pharmacies are
delivered to customers by riders engaged by O2O platforms or third-party express
delivery service providers which we collaborate with including DADA and SF
Intra-city, typically within 30 minutes. As of September 30, 2022, all of our 931
self-operated pharmacies were equipped with O2O capabilities. In 2020, 2021 and
the nine months ended September 30, 2022, we recorded RMB43.3 million,
RMB101.2 million and RMB150.2 million in revenue, respectively, from our O2O
retail operations.
o B2C retail mode. Our B2C retail mode caters to less time-sensitive orders from
customers located in any city or province across China, who enjoy access to our
product offerings on our online pharmacies operated on well-known third-party
B2C platforms, including Tmall, JD and Baidu Health, as well as our 111Yao App
and WeChat mini program. Products are dispatched utilizing our centralized
dispatching system primarily supported by our warehousing capabilities and are
delivered to customers by third-party courier service providers which we cooperate
with, with delivery time ranging from one to seven days. See “— Our Product
Sales — Our Omni-channel Pharmaceutical Retail Business — Differences between
Our O2O Retail Business and B2C Retail Business” for further details regarding
differences between our O2O and B2C business modes. In 2020, 2021 and the nine
months ended September 30, 2022, we recorded RMB262.0 million, RMB363.7
million and RMB250.3 million in revenue, respectively, from our B2C retail
operations.
• Wellness
To further realize the TCM discipline that of “wise doctors preempt the disease”, we
promote preventive wellness management services to help our customers preempt illnesses or
problems and pursue a healthy lifestyle. Our service offerings include TCM appropriate
techniques such as cupping therapy, moxibustion, acupressure and TCM massage, as well as
health exercise programs, namely yoga and Pilates, which are available at our 24 wellness
centers located in eight cities and three provinces in China. Our wellness management
services complement our medical service and pharmaceutical retail capabilities by upgrading
and enriching our customers’ experience with us and appealing to their pursuit of health.
• Safeguards
As we operate around customers’ needs, we provide additional value propositions that

focus on enhancing customers’ continuous access to our offerings, further safeguarding their
health conditions. To that end, we had arranged more than 90% of our self-operated
pharmacies to be covered in the national medical insurance direct-billing program as of
September 30, 2022, higher than the industry average, according to CIC, and most of our
sales of prescription and OTC drugs during the Track Record Period was paid out by national
medical insurance. In addition, we have collaborated with six insurance companies to
facilitate their policyholders to directly bill pharmaceutical products purchased from us to
their insurance plans. We also arrange complimentary health awareness seminars at our
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pharmacies and various residential communities, bringing health-related information to

existing and potential customers while building health profiles for them as we address their
inquiries. As we proactively engage in customers’ post-purchase health management, we
closely attend and propose solutions to health problems detected with the support of data
analytics tools from customers’ personalized health check-up tests. We also periodically offer
medication guidance, health reports and health tips to improve their overall health awareness.
Furthermore, benefiting from our solid supplier network, we have secured the opportunity to
offer long-term prescription refill promotional plans to patients who purchase chronic disease
drugs from us, helping them manage their medication needs and encouraging them to
continue to refill prescriptions with us.
Superior customer experience empowered by our “family doctor” approach and

comprehensive product and service coverage across the entire customer purchasing cycle
We proactively deliver quality, seamless and personalized services supported by our “family
doctor” approach across all our business categories to create an optimized customer experience
centered on customers’ specific needs. As of September 30, 2022, we had a dedicated team of 185
licensed physicians (including 94 licensed physicians staffed at our Internet hospital and 91
licensed physicians to our offline medical clinics), 1,088 licensed pharmacists and 43 customer
support professionals, online and offline, backed by our Internet hospital and data analytics
technologies. Our customers have readily available access to personalized healthcare solutions
online on a 24/7 basis through our Internet hospital, O2O and B2C business modes and offline
pharmacies whenever they visit our brick-and-mortar operations, just like having their own family
doctor on standby at all times covering their entire purchasing cycle:
• Pre-purchase stage.
o Online: Empowered by our online consultation portal embedded in our 111Yao App
and our WeChat mini program, and each of the third-party online platforms
covered by our O2O and B2C capabilities, we deliver on-demand services on a
24/7 basis. Upon receiving any enquiry via the portal, our system quickly responds
and assigns relevant customer support professionals, licensed physicians and/or
licensed pharmacists to address the request.
o Offline: During each customer’s visit to our offline pharmacies, our on-site
customer support personnel and licensed pharmacists interact with each customer
to understand their requirements and respond to any enquiries with the support
from our online medical team, who may also interact with the customers via video
or voice conversations. We also offer customers on-site routine health check-up
tests, through which we enrich their health profiles and provide tailor-made
healthcare solutions specific to their health status and needs. As of September 30,
2022, we had performed health check-up tests for more than one million customers
cumulatively. We also organize complimentary health awareness seminars for
chronic disease patients to better understand their conditions and become
acquainted with the diverse products and services we offer after their hospital
visits.
• Purchasing stage. We provide personalized and professional on-demand consultation

services online and offline throughout the purchasing process. Depending on the health
status and prescription requests that come to our attention at the pre-purchase stage, our
individualized service teams, supported by licensed physicians, licensed pharmacists and
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customer support professional, seek to accurately address customer concerns and needs.
Customers can easily find what they need from us while enjoying a seamless and
interactive purchase experience both online and offline.
• Post-purchase stage. Our post-purchase services are primarily delivered online through
our WeChat and WeCom accounts, our online consultation portal embedded in our
111Yao App and our WeChat mini program, and each of the third-party online platforms
we collaborate with in our O2O and B2C business modes. After customers’ purchases,
we generate monthly health reports and label and categorize customers according to
their health status to facilitate our provision of follow-up healthcare solutions. Based on
the refill cycle, medication habits and specific disease conditions of individual
customers, especially chronic disease patients, we send personalized timely reminders
and guidance to accurately manage their medication process to enhance customer
demand for our offerings. We also deliver follow-up consultations, chronic disease
management, health and wellness guidance and complementary health-related
information updates.
With a view to continuously enhancing customer engagement, we have established a customer

feedback system promptly interlinking customers’ post-purchase ratings of us with our routine
review and evaluation of our employees. In this way, we aim to gain deeper understanding of
customers’ pain points, training our professionals, continuously improving our services, enhancing
our management efficiency and elevating customers’ satisfaction rate.
Effective sales approach supported by our Fang strategy and our versatile marketing
strategies
Guided by the traditional Chinese medical theory of “Monarch, Minister, Assistant, and
Guide” and in combination with modern western and TCM pharmacology and medical science, we
develop Fang in the form of standardized medicinal combinations primarily based on medications
and supplemented by wellness products, which aims to yield optimal efficacy targeting towards
specific diseases or health conditions. Our Fang anthology is being continuously developed and
improved by the medical experts at our Fangdao Academy, based on data analytics and continuous
study of up-to-date western and TCM medication and pharmacology science and contemporary
industry developments. We strive to provide Fang that is standardized and readily available for use
under our “family doctor” approach for customers across all sales channels, while we recommend
Fang to customers according to their specific conditions and needs. As of September 30, 2022, our
Fang anthology contained 1,429 sets of Fang in the form of standardized medicinal combinations,
which together targeted 340 diseases and other health problems across 10 medical disciplines.
According to CIC, in 2021, we ranked first among all pharmaceutical retailers in China in terms of
the number of available standardized medicinal combinations, and first in terms of revenue
generated from the sales of standardized medicinal combinations.
Backed by our Fang strategy, we can quickly identify such combination of products that best
suit our customers’ needs. During the Track Record Period, the average retention rate of our
members with purchases made pursuant to the recommended Fang reached over 80%, which
demonstrates a strong member stickiness supported by our Fang strategy. For the years ended
December 31, 2020 and 2021 and the nine months ended September 30, 2022, we recorded
Fang-directed revenue, referring to the revenue generated from our sales of products to customers
pursuant to customer purchases under the standardized medicinal combinations (i.e., our Fang)
recommended by us, in the amount of RMB236.0 million, RMB252.1 million and RMB218.1
million, respectively. In addition to our Fang strategy, we have also developed a set of marketing
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strategies which focus on bringing more benefits to our members and encompass versatile online
and offline marketing events in collaboration with pharmaceutical enterprises, complimentary
health awareness seminars in the form of workshops and lectures by renowned physicians from
hospitals or senior medical experts from pharmaceutical enterprises, complimentary
disease-specific testing events targeting customers with relevant chronic diseases, as well as
precise membership management with customized rewards, discounts, and/or exclusive offers to
different groups of members. We also collaborate with pharmaceutical enterprises as we endeavor
to attract patients who have received prescriptions from their hospital visits to our pharmaceutical
retail channels to fulfill their medication requests, therefore serving a dynamic group of customers
coming from both inside and outside hospitals.
As a testament to our effective sales and marketing strategies, we have witnessed a steady
growth in our customer base, particularly our members. The volume of purchase orders by
customers generated from our omni-channel pharmaceutical retail operations increased from 31.5
million in 2020 to 33.9 million in 2021, and from 25.5 million in the nine months ended
September 30, 2021 to 26.7 million in the nine months ended September 30, 2022. In addition, as
of September 30, 2022, we accumulated approximately 9.2 million members in our membership
program and the number of our followers of our WeChat and WeCom accounts reached over two
million.
Effective and efficient supply chain management supported by in-depth connections with
participants along the healthcare value chain
We have established a vertically integrated supply chain system effectively and efficiently
connecting numerous upstream supply chain enterprises, which is supported by our automated and
digitalized warehousing management capabilities and our offline pharmacies network.
• Upstream extensive supplier network. During the Track Record Period, we procured
quality pharmaceutical and healthcare products from more than 700 suppliers including
pharmaceutical and medical device manufacturers and distribution enterprises. Our
supplier network covers renowned pharmaceutical and medical device companies, such
as AstraZeneca (阿斯利康), CR Sanjiu (華潤三九), CSPC (石藥), By-Health (湯臣倍健),
Dong-E-E-Jiao (東阿阿膠), Chiatai Tianqing (正大天晴), Hengrui (恆瑞), and Sinocare
(三諾). Leveraging our extensive customer reach, professional customer service and
precise sales and marketing strategies supported by our Fang strategy, we can match the
products of our pharmaceutical suppliers with targeted customers. In return, supply
chain enterprises provide us with products at competitive prices as well as customized
procurement strategies and promotional plans.
• Digitalized warehousing management capabilities. As of September 30, 2022, we

operated three digitalized warehouses strategically located in Lanzhou, Xi’an and
Beijing, with an aggregate GFA of approximately 26,000 sq.m. We utilize a uniform
warehousing management system across all our warehouses, which are connected to our
omni-channel sales and finance management systems, enabling improved operational
efficiency by providing real-time visibility and analysis of our inventory levels across
all product categories. We also adopt a stringent quality control system at each
warehouse to optimize operating efficiency and minimize potential product issues or
customer complaints resulting from logistics issues. In addition, our warehouses in
Lanzhou and Xi’an are each equipped with automated order processing and sorting
capabilities, which significantly enhance our procurement planning and order fulfillment
efficiency.
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• Downstream technology-empowered pharmacy network. We utilize technologies backed

by algorithms to promote and improve the digitalization and intelligence level of our
pharmacies, which provide us with intelligent customer flow and customer demand
analysis and forecast through real-time pharmacy monitor systems. We have also
adopted machine learning technologies to examine pharmacy layout and inventory levels
on a real-time basis, which significantly enhance the operational efficiency at our
pharmacies. Such technologies, in combination with our warehouse management system
and centralized operational data view board, enable us to achieve central management
and dynamic synchronization of inventory levels across all our self-operated pharmacies
in our offline network.
Digitalized and technology-driven operations with enhanced management and operating

efficiency
Our business is digitally empowered and driven by technology that we continuously develop
and adopt. For the years ended December 31, 2020, 2021 and the nine months ended September
30, 2022, we incurred R&D expenses of RMB3.3 million, RMB9.5 million and RMB7.0 million,
respectively. Through our automated marketing tools built from machine learning and data
analytics capabilities, as well as the data-supported health profiles that we build for customers
with their advanced consent, we constantly expand and enhance our understanding of our
customers, including their health status, purchase habits and preferences, demands and pain points
as well as other elements that may impact their behavior and decisions, such as their purchase
method and their geographical locations. In addition, big data-empowered tools have allowed us to
intelligently select new sites and optimize the structure and layout of our offline storefronts,
continuously improving our competitive edge in the regions where we operate.
We adopt a digitalized approach to improve our overall efficiency throughout our front-line
business processes, middle-office operations and back-office management systems:
• Front-line digitalized customer-facing business processes: Our front-line digital

infrastructure supports our seamless interactions with customers across our
omni-channel operations. We address customer requests received via offline, O2O and
B2C channels with real-time support of our online medical and customer support teams.
In addition, we proactively communicate with and seek feedback from our customers
from various online portals including WeCom customer groups and our customer rating
system, while we quickly respond to medical and general consultations received from
our different sales channels through our Internet hospital system, effectively enhancing
our customers’ satisfaction and level of engagement with us.
• Middle-office data-driven operations interlinking the front and back offices: Our
digitalized middle-office technology platform was developed in-house, consisting of a
data center and various operational center, which are interconnected modules that
synchronize corporate-level data sharing. As we collect diverse categories of customer
data from our front-line business processes, our middle-office data center automatically
identifies and labels such data for further processing at our designated middle-office
operational centers and transmits such data to our back office. Our middle-office setup
synchronizes every inventory movement in real time across our omni-channel
pharmaceutical retail network, enhancing our operational efficiency and order
fulfillment capabilities. We also employ machine learning and algorithms to analyze
customer behavior to predict customer needs, improve our performance and tailor our
sales and marketing strategies to improve customer acquisition and retention.
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• Back-office technology infrastructure enabling centralized management at the corporate

level: Our back-office IT infrastructure is supported by our big data and cloud server
capabilities using services from leading international and domestic corporate
management solutions providers. Our back-office management system can accommodate,
store and swiftly transmit data required for our middle-office operations, and also
facilitate our management team’s review and monitor of our various business processes
and enable key logistical functions, which can facilitate our overall decision-making
processes.
Dedicated and experienced management team with a resilient corporate culture and robust
pipeline of talents
Our accomplished management team with extensive experience in the health management and
healthcare solutions industry upholds the core values of “virtue, astuteness and integrity” to
nurture a corporate culture abound with enhanced competitiveness, professionalism, and pursuit of
excellence. “Virtue” manifests our quest to serve the society by bringing our products and services
to each and every household in China. “Astuteness” necessitates our constant efforts in learning
and improving to deliver quality services. “Integrity” commands our strong business ethics to
create an inclusive and honest environment for the stakeholders and society as a whole.
Persistently standing by our conviction to be the guardian of the general public’s health, our
management advocates to continuously learn, improve, and overcome challenges with perseverance
and resilience, with the aim of providing our healthcare solutions to every household however,
wherever and whenever.
Mr. Long Yan, our founder and chairman, has spearheaded our development since our
inception in 1999 and is primarily responsible for developing overall corporate and business
strategies and making key business and operational decisions of our Group. With nine years of
experience at a public hospital and 23 years of industry experience building and growing our
Group into a comprehensive health management and healthcare solutions provider, Mr. Long Yan’s
leadership has earned him numerous recognitions in the industry, recent examples of which include
the 2020 Member on the Drug Governance System Research Committee with the China Society for
Drug Regulation (2020年中國藥品監督管理研究會藥品治理體系研究專業委員會委員), the
Annual Figure awarded by China Pharmacy (中國藥店年度人物) for 2021, Chairman of the
Healthcare Alliance of the Internet Association at Tsinghua University School of Economics and
Management (清華經管互聯網協會醫療健康聯盟主席), and Vice President of the China Medical
Materials Association (中國醫藥物資協會副會長). In 2022, Mr. Long Yan was also recognized as
an extraordinary entrepreneur (功勛企業家) by the China Health Ecology Organization (健康產
業(國際)生態大會). Our senior management members possess diverse expertise and in-depth
understanding of our industry and customers.
At the core of our leadership is our deep talent pool. We adopt a flat management structure to
optimize our efficiency and unleash the potential of our talents. We continuously cultivate and
promote our talents by providing regular training through our Fangdao Academy, which covers
versatile medical and healthcare-related professional knowledge and know-how as well as
up-to-date industry developments, with the aim to constantly enriching their skills and service
capabilities. We also actively engage in extensive cooperation with universities, including
executive seminars with Tsinghua University and Renmin University of China and talent sourcing
programs with Lanzhou University. During the Track Record Period, we maintained a highly stable
team of mid- and senior-level staff with an annual turnover rate of less than 3.0% on average,
which was lower than the industry average, according to CIC.
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OUR STRATEGIES
We aspire to building an all-round and accessible health management and healthcare solutions
infrastructure for a wide coverage of individuals in different communities. Set forth below are our
key growth strategies:
Continue to optimize the delivery of health management services and healthcare solutions
with enriched products and service offerings
We will continue to unyieldingly enhance our health management capabilities and enrich our
product and service portfolio of healthcare solutions. We seek to continuously enhance our
capabilities in delivering services to customers abiding by our core strategy “family doctor with
quality Fang.” Along with continuous expansion of our capabilities under our business model
entailing solutions to customers’ increasingly diverse health needs across medical, pharmaceutical,
wellness and safeguarding aspects, we seek to pursue the following:
• Strengthen medical service capabilities. We will continue to strengthen our medical

consultation expertise and service capabilities supported by both our Internet hospital
and our medical clinics. We plan to further strengthen the medical service capability of
our Internet hospital to address more specialty diseases through attracting and hiring
more licensed physicians and licensed pharmacists with relevant expertise. We will
continue to improve the various functions of our Internet hospital service portal to
improve customer experience. To further level up our capability to offer customers
comprehensive and quality healthcare solutions under our Fang strategy, we will
continuously commit to leveling up the overall service and research capabilities as well
as the professional and industry knowledge of our medical professionals. In doing so,
we plan to further enrich our internal training scheme, designed and administered by our
Fangdao Academy, as well as to further enrich our internal trainings at our Fangdao
Academy by inviting more industry experts, scholars and experienced medical
practitioners.
With our TCM insights gained from offering TCM consultation and prescription
services, we seek to further advance our expertise in TCM by developing in-hospital
CCMG products based on well-established TCM theories and well-recognized traditional
Chinese medicinal formulas, which complement our existing capability in TCM
decoction pieces, prescriptions and our planned developments of TCM decoction
services. We intend to complement our existing TCM products and service offerings by
further establishing decoction centers to deliver decoction services and enhance home
delivery services of decoction pieces. We will also leverage our technology capabilities
to bring our TCM consultation services online. In addition, we will seek to establish
more medical clinics, including TCM clinics, to further elevate our TCM diagnostic
capabilities.
In addition, we plan to leverage our existing Internet hospital capability and

strategically cooperate with renowned third-party offline hospitals in the establishment
of new Internet hospitals with an aim to enrich our capabilities in providing online
medical consultation services and developing more scenario-based health management
services.
• Expand other health management services. With the aim to further drive customers’
receptiveness of our health management services and reinforce our reputation as an
all-round healthcare solutions provider, we plan to offer customers customized service
package subscriptions through discovering and understanding their health needs,
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providing, among others, tailored medical and healthcare consultations, and delivering
on-demand scenario-specific healthcare kits and wellness management services to
customers’ door front. We will further enrich our wellness management service offerings
by organizing wellness-featured travel tours in collaboration with local travel agents
and/or medical service providers (such as local hospitals) in tourist-focused cities to
offer customers routine health check-up tests, guided dietary schedules and personalized
health management plans. We also plan to launch healthcare escort services to
accompany and provide support to patients on their hospital visits. In addition, we plan
to launch our home care services program through collaborating with postpartum care
service providers as well as recruiting obstetricians and gynecologists for our Internet
hospital and business professionals experienced on operating the postpartum care service
business, to provide home care services to newborns and mothers with our all-round
health management capabilities.
• Enhance market recognition of our brands. We will further promote our pharmacy
brands by increasingly focusing on corporate social responsibility and initiating or
participating in health awareness promotion programs in the community, and charitable
and volunteering activities related to health, education, and culture. We will also step up
our development efforts of branded products by developing and launching new
private-label and co-branded products with a focus on addressing customers’ various
wellness and cosmetic needs, appealing to a wider group of younger generations and
customers seeking quality products for a healthy lifestyle.
Further solidify our existing market coverage, strengthen our sales channels and augment our
customer base
We plan to leverage our existing offline pharmacy chain network by further expanding each
pharmacy’s SKU capability. We also seek to level up customer experience by operating
“all-in-one” offline pharmacies, where customers can access our full suite of product and service
offerings in a single pharmacy, covering western and traditional Chinese medical consultations
online and offline, omni-channel product retail, routine health check-up tests, drug and medical
device usage assistance, decocting services, health awareness seminars, TCM physiotherapy and
health exercise programs. We will upgrade our pharmacies in a prudent and scientific approach
based on potential market demand garnered from our technology-enabled site analysis processes,
while continuously expanding into new regions with the aid of our smart site selection tools. By
further penetrating regions covered by our existing sales network, we plan to increase our market
share and further cement our leading position in the health management and healthcare solutions
industry in China. We aim to expand our network of pharmacies (including both self-operated and
franchised pharmacies), our medical clinics and our wellness centers with strategic focus on
reaching wider market coverage in China including in Gansu Province, Beijing, Shaanxi Province,
Qinghai Province, Ningxia Autonomous Region, Inner Mongolia Autonomous Region and Shanxi
Province. We also plan to launch flagship pharmacies in top tier metropolitan areas, such as
Shanghai, Tianjin and Guangzhou, Guangdong Province. In addition, we plan to expand our
customer base and effectively enhance our marketing efforts with newly developed technologies
and new media channels, which will allow us to continuously refine our membership management
and automated marketing capabilities. In addition, we will seek to launch new TCM clinics and
wellness centers at the same locations as or in close proximity to our existing self-operated offline
pharmacies to broaden the service scope at our offline pharmacies and increase the customer
stickiness through cross-sales of our products and services. We also expect to attract more
customers looking beyond medical and pharmaceutical products and services and in pursuit of a
healthy lifestyle by augmenting our offerings with healthy and trending products.
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Enhance our pharmaceutical warehousing and logistics capabilities to meet our growing
business demand
We believe that convenient and accessible warehousing and logistics services will support our
pharmaceutical retail and wholesale business, and increase the efficiency of the distribution and
circulation processes of our products. We plan to amplify our technology-driven warehousing and
logistics capabilities by constructing additional digitalized warehouses located in Beijing,
Guangdong Province and Gansu Province. We also seek to focus on bolstering our logistics and
delivery service network by introducing industry-leading logistics software and hardware, such as
automated storage and retrieval system, automated sorting system and automated replenishment
device and upgrading logistics control system with the aim of improved efficiency to facilitate
timely delivery of our products to our customers.
Selectively pursue strategic alliances, investments and acquisitions along the healthcare value
chain
Along with our organic business growth, we strive to further complement our products and
service offerings and strengthen our market position by selectively establishing strategic alliances
and pursuing investments and/or acquisitions in synergistic businesses along the healthcare value
chain.
We will explore potential acquisition and investment opportunities in cities, including those
where we do not have a business footprint. We will seek to acquire small-scale pharmacies with an
established customer base in local regions to quickly increase our market penetration in such
regions, with a primary focus on regions where we do not have business footprint yet. We will also
seek to acquire DTP pharmacies or pharmacies that focus on selling medicinal products targeting
at chronic diseases to further diversify our product offerings, broaden our supplier resources and
enrich our clientele. In addition, we plan to acquire other TCM clinics and general outpatient
clinics. As of the Latest Practicable Date, we had not identified any acquisition or investment
target. We also seek to further cooperate with upstream large-scale pharmaceutical enterprises to
better connect them to our patients, by introducing more disease-specific health awareness
seminars and drug product promotional programs for patients’ enhanced access to our health
management services and healthcare solutions, simultaneously assisting pharmaceutical companies
to better understand their end-customers. We will also collaborate with wellness institutions and
postpartum care service providers as we develop our home care services business to leverage their
existing customer pool and quickly build ours.
To keep abreast of latest industry developments, we seek to continuously gain industry

insights through collaboration with industry participants along the healthcare value chain
encompassing pharmaceutical companies, pharmacy chains, hospitals, medical clinics and wellness
service institutions. We will deepen our collaboration with insurance companies as well as
third-party payment processing companies to provide customers with expanded selections of
payment means.
Further reinforce our technological capabilities by continuously applying new technologies

and digitalization tools
We aim to further empower our all-round and full suite of online and offline service offerings
with enhanced digital infrastructures and data-empowered solutions. In line with our quest to
revolutionize our brick-and-mortar operations, we will continue to devote efforts in fully
digitalizing our offline pharmacies to achieve improved management efficiency and operational
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workflows. We plan to recruit more experienced and qualified talents in the areas of algorithms,
software development, AI, product development and data analytics to further promote the
digitalization level of our business operations. We will continue to enhance the technology systems
at our front-, middle- and back-office, leveraging technologies including AI, 5G and data analytics.
We also plan to further invest in big data analytics technologies to facilitate more efficient,
rationalized and data-driven decision-making and planning of precise procurement, and sales and
marketing. We expect to continue to invest in our IT infrastructure, data analytics and application
capabilities backed by algorithms and other advanced technologies for our online consultation
portal and Internet hospital operations to optimize customer experience in seeking medical
consultations. We will upgrade our Internet hospital system by continuously utilizing and training
our automated response tools to assist our licensed physicians in the online consultations, and
further engage in medical risk management pertinent to our online medical services by developing
a wider data-supported disease map and medication knowledge base. We will also leverage our
technology platform to bring more of our products and services online, including our yoga and
other health exercise programs, through online livestreaming and video workshops.
In addition, we plan to monetize our established IT capabilities. For example, we will seek to
develop digitalized tools to address corporate customers’ needs, including hospitals and physicians,
pharmaceutical enterprises and pharmaceutical retailers. We intend to offer data analytics tools for
upstream supply chain enterprises to better understand the circulation and popularity of their
products in the market, which will help them achieve more efficient business planning and more
effective marketing strategies. We also plan to offer pharmaceutical retailers digitalized operation
tools that mirror our self-developed inventory management, warehouse management, product
management, promotional activities management and back-office management tools, to help them
improve the efficiency of their operations.
OUR BUSINESS
Our full-suite products and services are assembled to cater to the all-round health
management needs of our customers that span the medical, pharmaceutical, wellness and
safeguarding elements encompassing customers’ entire purchasing cycle along the entire healthcare
value chain. Under our core business strategy of “family doctor with quality Fang”, we formulate
and deliver scenario-based healthcare solutions to customers, with our offering of pharmaceutical
and healthcare products, medical consultations, prescription services and wellness management
services, through our omni-channel retail network entailing offline, O2O and B2C business modes,
our Internet hospital, TCM clinics, general outpatient clinic and wellness centers.
During the Track Record Period, our revenue was primarily generated from our product sales,
being our (i) omni-channel pharmaceutical retail business through offline, O2O and B2C business
modes, and (ii) pharmaceutical wholesale business through which we supply products to our
franchisees and other third-party enterprises. To a lesser extent, we also generated revenue from
our healthcare, consultation and other services, being our (i) medical consultation services through
which we offer offline western and TCM consultations at our medical clinics, (ii) wellness
management services that cover TCM physiotherapy and health exercise programs, and (iii)
franchise-related services in the form of trademark licensing fees and management consultation
service fees from our franchisees.
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The following table sets forth a breakdown of our revenue generated from the above business
categories.
Business Category 2020 2021 2021 2022
RMB’000 % RMB’000 % RMB’000 % RMB’000 %
(unaudited) (unaudited)
Product sales . . . . . . . . . . . . . . . . 1,748,875 99.7% 2,007,418 99.6% 1,462,048 99.6% 1,700,817 99.6%
Omni-channel pharmaceutical retail . . . . . 1,714,177 97.7% 1,966,579 97.6% 1,434,088 97.7% 1,664,958 97.5%
Offline retail . . . . . . . . . . . . . . 1,408,852 80.3% 1,501,719 74.6% 1,089,661 74.3% 1,264,437 74.0%
O2O retail . . . . . . . . . . . . . . . 43,282 2.5% 101,173 5.0% 69,780 4.7% 150,204 8.8%
B2C retail . . . . . . . . . . . . . . . 262,043 14.9% 363,687 18.0% 274,647 18.7% 250,317 14.7%
Pharmaceutical wholesale . . . . . . . . . . 34,698 2.0% 40,839 2.0% 27,960 1.9% 35,859 2.1%
Healthcare, consultation and other services. . 5,086 0.3% 6,931 0.4% 5,327 0.4% 6,710 0.4%
Medical consultation services 1,015 0.1% 1,197 0.1% 891 0.1% 1,004 0.1%
Wellness management services . . . . . . . 750 0.0% 1,322 0.1% 945 0.1% 2,382 0.1%
Franchise-related services . . . . . . . . . . 3,321 0.2% 4,412 0.2% 3,491 0.2% 3,324 0.2%
Total Revenue. . . . . . . . . . . . . . . . 1,753,961 100% 2,014,349 100% 1,467,375 100% 1,707,527 100%
Our Product Sales
Our Omni-channel Pharmaceutical Retail Business
According to CIC, we ranked 15th among all pharmaceutical retailers operating offline and
online in O2O and B2C modes in China, in terms of our omni-channel pharmaceutical retail
revenue in 2021. During the Track Record Period, we derived a substantial portion of our revenue
from our omni-channel pharmaceutical retail business. Our omni-channel pharmaceutical retail
network is accessible online on a 24/7 basis through our O2O and B2C business modes, as well as
at our brick-and-mortar pharmacies. As of September 30, 2022, we directly operated (i) 931 offline
retail pharmacies across 22 cities and seven provinces in China, all of which were capable of
fulfilling O2O orders and 27 of which were DTP pharmacies, and (ii) 55 online pharmacies on
well-known third-party B2C platforms for the operation of our B2C business. Our O2O and B2C
retail business modes are also available on our 111Yao App and our WeChat mini program. We
also have franchised pharmacies to expand our network and geographical market coverage faster
and achieve greater recognition of our brand in China, strengthening our omni-channel retail
capabilities. As of September 30, 2022, we had 116 franchised pharmacies across 58 cities and 20
provinces in China. While we do not operate the franchised pharmacies directly, nor do we
consolidate their revenue from product sales into our revenue, we supply products to a majority of
our franchisees as part of our pharmaceutical wholesale business and also receive upfront
trademark licensing fees and management consultation service fees. For further details, see “—
Our Business — Our Product Sales — Our Pharmaceutical Wholesale Business” and “— Our
Business — Our Healthcare, Consultation and Other Services — Our Franchise-related Services
Business.”
Our omni-channel retail capabilities allow us to offer and deliver a wide variety of products
to customers in different modes. As of September 30, 2022, we had procured and initiated sales of
over 20,000 SKUs. Our omni-channel pharmaceutical retail network allows customers from
different geographical and demographic groups to conveniently access our products, continuously
helping maintain and grow our customer pool. In particular, products sold at our offline
pharmacies as well as on third-party O2O and B2C platforms are also available on our 111Yao App
and our WeChat mini program. Depending on our customers’ locations vis-à-vis our operation
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sites, we provide different modes of product deliveries, with O2O orders delivered from nearby
offline pharmacies to customers through on-demand express delivery and B2C orders delivered
with courier service. Across our different sales channels, we provide our customers with access to
products meeting consistent quality standards. For further details on the products sold in our
omni-channel pharmaceutical retail business, see “— Our Product Offerings — Categories of Our
Product Offerings.”
The table below sets forth key operating metrics of our omni-channel pharmaceutical retail
business encompassing offline retail through our self-operated pharmacies and online retail through
O2O and B2C modes:

2020 2021 2021 2022
customers(1) (in millions) . . . . . . . . . . . 31.5 33.9 25.5 26.7
order by customers(1)(2)(in RMB) . . . . . 60.9 64.8 62.9 69.8
Notes:
(1) The offline portion of the omni-channel operating metrics takes into account purchase amounts and orders for
medical consultation services (which accounted for approximately 0.1% of our total revenue during each
year/period of the Track Record Period) at certain of our offline TCM clinics that share the same location with our
self-operated offline pharmacies, where patients can pay for their medical consultation service purchases and
product purchases at the same time at check-out.
customers (including express delivery service fees or courier service fees incurred in the purchase orders under our
O2O or B2C retail business, as applicable) divided by the total number of purchase orders by customers in the
relevant year or period.
Our Offline Pharmaceutical Retail Business
Our offline pharmaceutical retail operation is conducted through our self-operated offline
pharmacies. At our offline pharmacies, we offer customers a broad array of constantly updated
products that are of high quality, affordable, popular and easy to use. Through our offline
presence, we continue to accumulate customer trust and validate our brand reputation as a reliable
and accessible pharmacy chain situated in proximity to residential communities. In terms of
revenue from offline pharmaceutical retail, we ranked first in Gansu Province among all
pharmaceutical retailers operating in the province, third in Northwestern China among all
pharmaceutical retailers operating in the region and 16th nationwide among all pharmaceutical
retailers operating in China in 2021, according to CIC. Our network of pharmacies primarily
consists of our self-operated pharmacies that we operate directly. We also have franchised
pharmacies to achieve faster expansion of our network and geographical market coverage and
greater recognition of our brand. As of September 30, 2022, we had operated our offline
pharmaceutical retail business at our self-operated offline pharmacies under three brands, namely
大藥房). See “ — Our Physical Presence — Our Pharmacy Network” for details of our three
pharmacy brands. As of September 30, 2022, in our nationwide pharmacy network, there were 931
self-operated pharmacies, which spanned across 22 cities and seven provinces, and there were 116
franchised pharmacies, which spanned across 58 cities and 20 provinces in China. For further
details on our franchised pharmacies, see “— Our Physical Presence — Our Pharmacy Network —
Our Franchised Pharmacies.” During the Track Record Period, a majority of our total revenue was
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derived from our offline pharmaceutical retail business, which amounted to RMB1,408.9 million,
RMB1,501.7 million and RMB1,264.4 million for the years ended December 31, 2020 and 2021
and the nine months ended September 30, 2022, respectively.
The table below sets forth key operating metrics of our self-operated offline pharmaceutical
retail business:

2020 2021 2021 2022
customers(1) (in millions) . . . . . . . . . .. 26.8 26.1(5) 19.7 19.8
members(1)(2) (in millions) . . . . . . . . .. 21.4 20.4(5) 15.4 15.7
order by customers(1)(3) (in RMB) . . .. 59.1 64.5 61.9 71.5
order by members(1)(4) (in RMB) . . . .. 65.0 72.0 69.2 79.3
Notes:
(1) Takes into account purchase amounts and orders for medical consultation services (which accounted for
approximately 0.1% of our total revenue during each year/ period of the Track Record Period) at certain of our
offline TCM clinics that share the same location with our self-operated offline pharmacies, where patients can pay
for their medical consultation service purchases and product purchases at the same time at check-out.
(2) Members are our customers who register their phone numbers in our membership program. For more information
on our membership program, see “— Our Customer Support System — Our Membership Program.” Our customers
may make purchases with us without registering for our membership program. Our system does not keep any
unique identification information for non-member customers.
customers divided by the total number of purchase orders by customers.
(4) Average purchase amount per purchase order by members represents the total purchase amount from purchases by
members divided by the total number of purchase orders by members. For further details on our members, see “—
Our Customer Support System — Our Membership Program” and “— Sales and Marketing — Acquisition and
Retention of Customers.”
(5) The total number of purchase orders by customers and the total number of purchase orders by members in 2021
decreased slightly from 2020 primarily because of the reduced customer traffic to our offline self-operated
pharmacies, primarily in Gansu Province, due to the adverse impact of the COVID-19 pandemic. For more details,
see “Financial Information — Impact of the COVID-19 Outbreak on Our Operations.”
For further details on our network of offline pharmacies, see “— Our Physical Presence —
Our Pharmacy Network.”
Our O2O Retail Business
Extending from our established offline pharmacy network, we launched our O2O retail
business in 2015. In our O2O retail business mode, our self-operated offline pharmacies with O2O
capabilities are listed online on third-party O2O platforms that we collaborate with, where
customers within the O2O on-demand express delivery range are able to browse catalogs of our
products available at our relevant offline pharmacies and place orders on such O2O platforms to
receive the purchased products through O2O on-demand express deliveries. As of September 30,
2022, we partnered with six third-party O2O platforms in China including Meituan and JD to
support the on-demand express delivery of pharmaceutical products sold in our O2O business
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mode. On our 111Yao App and our WeChat mini program, we also avail customers to place
product orders directly from our self-operated pharmacies with O2O capabilities. Customers
typically purchase in the O2O mode from a pharmacy with O2O capabilities located within five
kilometers of the customer’s address. The O2O delivery time is typically proportionate to the
delivery distance. During the Track Record Period, the majority of our O2O orders had a delivery
distance within three kilometers, which took 30 minutes on average from completion of order
preparation to the product being delivered to the relevant household.
During the Track Record Period, we generated revenue from our O2O pharmaceutical retail
business in the amount of RMB43.3 million, RMB101.2 million and RMB150.2 million for the
years ended December 31, 2020 and 2021 and the nine months ended September 30, 2022,
respectively. During the Track Record Period, a majority of our O2O orders came from third-party
O2O platforms because of their wider customer reach. To a lesser extent, we also processed O2O
orders received from our 111Yao App and WeChat mini program. See “— Our Online Presence —
Our Self-Operated 111Yao App and WeChat Mini Program” for more details.
The table below sets forth key operating metrics of our O2O retail business:

2020 2021 2021 2022
customers (in millions) . . . . . . . . . . 1.1 2.6 1.8 3.8
Average purchase amount per
purchase order by customers (1) (in
RMB) . . . . . . . . . . . . . . . . . . . . . . . . 44.3 41.8(2) 41.3 43.1
Notes:
(1) Average purchase amount per purchase order by customers under our O2O retail business represents the total
purchase amount from purchases by customers (including express delivery service fees incurred in the O2O
purchase orders) divided by the total number of purchase orders by customers under our O2O retail business.
(2) The average purchase amount per purchase order by customers in 2021 decreased from 2020 primarily because we
adopted a more competitive pricing approach of our products as part of our overall marketing strategies to increase
our sales volume and enhance our online presence, as we increasingly expanded our O2O operations into more
regions in 2021, which is in line with industry practice for pharmaceutical retailers with O2O retail business in
expanding their O2O operations into new areas, according to CIC.
The third-party O2O platforms we collaborate with typically have their own express delivery
offerings, mostly through employees or contract motorbike riders, to deliver products from our
offline pharmacies to the customers as part of the service packages with these platforms. We enter
into agreements with major third-party O2O platforms and list our self-operated pharmacies with
O2O capabilities on such platforms to receive customers’ O2O orders. Set forth below are some
key contractual terms in our agreements with third-party O2O platforms:
• Term: The initial terms are generally one year and may be renewed on an annual basis.
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• Delivery-related terms:
To the extent our service packages with the O2O platforms include express delivery
services:
o Delivery service: Delivery is generally performed by riders engaged by these O2O

platforms once the customer purchase order meets a required minimum amount;
o On-the-route product storage: We require the O2O platforms to ensure the

on-the-route storage condition is suitable for the products being delivered and is
sufficient to ensure the product’s delivery in safe and clean conditions; and
o Missing or lost items on the delivery route: The O2O platforms are generally
responsible for items missed or lost on the delivery route as caused by them.
To the extent our service packages with the O2O platforms do not include express
delivery services, we are responsible for arranging delivery according to standard
requirements of delivery speed and condition by the relevant O2O platforms.
• Technology support: The O2O platforms provide us with technology support of

displaying our product offerings from the relevant offline pharmacies on such platforms
in order to optimize customers’ viewing and purchase experience in our O2O business
mode.
• Fee payment: We typically pay service fees to these platforms as a percentage of the
dollar amount of transactions placed on the platforms. We generally extend a credit term
of 0 to 30 days to these third-party O2O platforms.
• Packaging: We are responsible for preparing and packaging the orders.
Separately, to fulfill O2O orders from those third-party O2O platforms that do not provide
express delivery services, as well as those from our 111Yao App and WeChat mini program, we
collaborate with third-party express delivery service providers to deliver products to customers.
Set forth below are key contractual terms in our agreements with third-party express delivery
partners for our O2O business mode:
• Delivery time: Delivery time is generally proportionate to the delivery distance. We

generally require our express delivery service providers to deliver the order in no more
than 30 minutes for a delivery distance within three kilometers. For delivery distance
above three kilometers, our express delivery service providers typically add a mark-up
fee for the increased delivery time and distance.
• Order preparation: We are typically required to finish preparing and packing the order
within three to ten minutes after receiving an order. The order preparation time is not
counted towards the delivery time.
• On-the-route storage condition: We require our express delivery service providers to

guarantee sufficient on-the-route storage space in their delivery vehicles that meets our
hygiene standards.
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• Missing or wrong items: We require express delivery riders to confirm the condition of
the product, the completeness of the delivery address and sufficient packaging, before
we pass it on to the rider at our O2O pharmacy. Our express delivery service providers
are responsible for items that are broken or lost on the delivery route, for which we
require delivery service providers to compensate us for each respective item.
• Professionalism and etiquette of riders: We require our express delivery service

providers to conduct specific training on the standard delivery procedure for their riders,
including professionalism and etiquette in client interactions as well as integrity and
punctuality.
Our B2C Retail Business
Different from our O2O retail business which primarily serves customers located within five
kilometers from any of our offline pharmacies with O2O capabilities, under the B2C mode,
customers located in any city or province across China can purchase from our online pharmacies
on third-party B2C platforms as well as our 111Yao App and WeChat mini program. Through the
B2C retail mode, we cater to less time-sensitive customer requests with products delivered via
courier services, with delivery time ranging from one to seven days. Upon orders placed on our
online pharmacies, we dispatch products through our centralized dispatching system, which is
primarily supported by our warehousing capabilities, and to a smaller extent, selected offline
pharmacies with large-scale SKUs and optimized locations taking into account customers’ delivery
addresses. As of September 30, 2022, we operated our B2C retail business through a total number
of 55 online pharmacies on an aggregate of six third-party B2C platforms including Tmall, JD and
Baidu Health. Our B2C operation is also available on our 111Yao App and WeChat mini program.
In terms of revenue generated from our B2C retail business, we ranked fifth among all
omni-channel pharmaceutical retailers in China in 2021. Our B2C sales channel covers
substantially all products sold through our offline and O2O retail network. We generated revenue
from our B2C sales channel in the amount of RMB262.0 million, RMB363.7 million and
RMB250.3 million for the years ended December 31, 2020 and 2021 and the nine months ended
September 30, 2022, respectively.
Our B2C retail business started in 2012 and we were among the first batch of enterprises in
Northwestern China to obtain the Qualification Certificate for Providing Internet Pharmaceutical
Dealing Service 《 ( 互聯網藥品交易服務資格證》) in February 2012, according to CIC. We
launched our first batch of B2C online pharmacies on Tmall in 2012 and JD in 2013. Since then,
we have been offering our B2C customers a full suite of products with streamlined order
fulfillment processes. In 2015, we launched our 111Yao App which integrated B2C functions,
where customers across China can place orders for products through our online store embedded in
the mobile app. See “— Our Online Presence — Our Self-Operated 111Yao App and WeChat Mini
Program” for more details. We also collaborate with leading third-party courier service providers,
such as EMS and Yunda, to deliver products purchased from our B2C online pharmacies to our
customers.
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The table below sets forth key operating metrics of our B2C retail business during the Track
Record Period:

2020 2021 2021 2022
customers (in millions). . . . . . . . . . . . . 3.7 5.2 4.0 3.1(3)
order by customers(1) (in RMB) . . . . . . 79.0 78.0(2) 77.7 91.9
Notes:
(1) Average purchase amount per purchase order by customers under our B2C retail business represents the total
purchase amount from purchases by customers (including courier service fees incurred in the B2C purchase orders)
divided by the total number of purchase orders by customers under our B2C retail business.
(2) The average purchase amount per purchase order by customers in 2021 decreased slightly from that in the previous
year primarily because we adjusted our product offering structures to include more high-demand products with
lower average prices to adjust to the then prevailing market conditions for B2C retail business.
(3) The total number of purchase orders by customers in the nine months ended September 30, 2022 decreased from
the previous period in 2021 primarily because of restrictions on inter-region logistics and courier delivery services
imposed in certain areas in China that experienced waves of the COVID-19 outbreak. For more details, see
“Financial Information — Impact of the COVID-19 Outbreak on Our Operations.”
We enter into agreements with major online B2C platforms and establish our online
pharmacies on such platforms to receive customers’ B2C orders. Set forth below are some key
contractual terms in our agreements with third-party B2C platforms:
• Term: The initial terms are generally one year and may be renewed on an annual basis.
• Fee payment: We typically pay service fees to these platforms as a percentage of the
dollar amount placed on the platforms. We generally extend a credit term of 0 to 30
days to these third-party B2C platforms.
• Deposits: We pay deposits to the B2C platforms upon the initial establishment of our
online pharmacies on such platforms. The deposits are returned to us upon the
termination of our collaboration with such platforms with no outstanding transactions,
complaints, penalties or disputes.
• Technology support: The B2C platforms provide us with technology support of

establishing our online pharmacies on such platforms as well as arranging the display of
our product catalogs online in order to optimize customers’ viewing and purchase
experience at our online pharmacies.
We fulfill our B2C orders by collaborating with third-party courier service providers for
product shipment and delivery. The material terms of our collaborations with third-party courier
service providers include the following:
• Delivery time: One to seven days after an order is placed.
• Packaging: We are responsible for product packaging.
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• Acceptance of delivery: The courier company is responsible for confirming the accurate
delivery of the parcel to the corresponding address; if the courier leaves the package
directly with the concierge or a local collection center and does not inform the customer
by phone, resulting in customer complaint, the courier company is required to
compensate us in the amount ranging from RMB50 to RMB200 for each respective item.
• Lost packages: The courier company is required to provide us compensation for lost
packages caused by it.
• Customer service: If a customer makes complaints about the delivery speed or attitude
problems caused by the courier company, the courier company is required to compensate
us if the complaint is substantiated by evidence.
Differences between Our O2O Retail Business and B2C Retail Business
The following table sets forth key differences between our O2O retail business and B2C retail
business:
O2O Retail Business B2C Retail Business

Platform and delivery O2O platforms that avail customers to B2C platforms that avail customers to
mode . . . . . . . . . . purchase products online from nearby purchase products online whereby products
offline pharmacies and enjoy express are delivered by courier
delivery services undertaken by express
delivery riders
Offline pharmacy’s O2O operations are supported by our offline B2C operations are supported by our
support . . . . . . . . pharmacies with O2O capabilities (i.e., centralized dispatching system primarily
purchase orders are made online on O2O based on our warehousing capabilities, and
platforms for products from specific offline purchase orders are made directly to our
pharmacies online pharmacies that are operated on B2C
platforms with deliveries fulfilled by
third-party courier service providers
Qualification required No specific qualification required for O2O Qualification Certificate for Internet Drug
for pharmaceutical pharmaceutical retail on top of the Information Services 《互聯網藥品信息服
(
retailers . . . . . . . . necessary licenses for operating offline 務資格證》) in addition to the qualification
pharmacies required for operating a brick-and-mortar
pharmacy
Delivery time . . . . . . Generally within 30 minutes Generally one to seven days
Delivery distance . . . . Generally within five kilometers (delivered Reaching any city across China supported by
from our offline pharmacies) and within the nationwide centralized order dispatching
same city where the customer is situated primarily based on our warehousing
capabilities
Target customers . . . . Customers who may have more time-sensitive Customers who wish to acquire products
needs of the desired products which are not immediately available at
nearby offline pharmacies with O2O
capabilities, or those whose needs for the
products are not time-sensitive
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Our Pharmaceutical Wholesale Business
During the Track Record Period, we also generated revenue from our pharmaceutical
wholesale business. In the years ended December 31, 2020 and 2021 and the nine months ended
September 30, 2022, our wholesale revenue amounted to RMB34.7 million, RMB40.8 million and
RMB35.9 million, respectively. We leverage our existing supplier networks and our warehouse
fulfillment capabilities to sell pharmaceutical products in the wholesale mode primarily to our
franchisees who are our customers in our pharmaceutical wholesale business. Product categories
sold in our pharmaceutical wholesale business to our franchisees are similar to those in our
omni-channel pharmaceutical retail business. For further details, see “— Our Physical Presence —
Our Pharmacy Network — Our Franchised Pharmacies — Our Franchise Model.”
Our Healthcare, Consultation and Other Services
Our Medical Consultation Services Business
During the Track Record Period, we generated revenue from our offline medical consultation
services offered at our medical clinics (namely 49 TCM clinics and one general outpatient clinic),
which complement our pharmaceutical retail business as customers can consult our physicians in
person and obtain western and TCM prescriptions at our medical clinics before picking up their
prescriptions at our self-operated offline pharmacies. Our medical consultation services revenue
did not include the amounts from sales of products that occurred at our self-operated offline
pharmacies pursuant to the relevant prescriptions issued at our offline medical clinics. For more
details on our medical clinics, see “— Our Physical Presence — Our Clinics.” For the years ended
December 31, 2020 and 2021 and the nine months ended September 30, 2022, we generated
revenue from our medical consultation services in the amount of RMB1.0 million, RMB1.2 million
and RMB1.0 million, respectively. During the Track Record Period, we also provided customers
with medical consultation services through our Internet hospital on a complimentary basis.
Through our medical consultation services business, we address customers’ medical needs by
offering medical diagnosis, prescription review, prescription renewal and tailored treatment plans.
Our Internet Hospital-based Medical Consultation Services
Responding to customers’ needs for convenient access to medical and general health
consultation online or within their neighborhood, we offer medical consultation, prescription
review and renewal services through our Internet hospital. According to applicable PRC laws and
regulations, Internet hospitals are not allowed to offer initial diagnosis to patients and can only
offer follow-up prescription renewal services. See “— Regulatory Overview — Regulations
Relating to Healthcare Services — Patient Medical Consultation Service” for more details. Our
Internet hospital-based medical consultation services follow such requirements. Our Internet
hospital-based medical consultation services are offered online by our team of 94 licensed
physicians as of September 30, 2022. Our online medical consultation service capabilities are built
on our Internet hospital operation, which supports our omni-channel pharmaceutical retail
operations in addressing customers’ medical consultation needs across their purchasing cycle. For
further details, see “— Our Online Presence — Our Internet Hospital.” Our Internet hospital-based
medical consultation services are presented as the customer-facing side of our healthcare services
when customers approach us, as we seek to create a uniform brand appearance across our
comprehensive network of healthcare management services. Our online medical consultation
services are offered on a complimentary basis, which is in line with industry practices of offering
Internet hospital-based online medical consultation services without charging a fee, according to
CIC. In addition, our online medical consultation services can be accessed via our online portals
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embedded on our O2O and B2C platforms as well as at our offline pharmacies through remote
video and voice consultations, therefore adding value to customers’ product purchasing experience
from our omni-channel retail business. Our medical team is available to our customers on a 24/7
basis. During the Track Record Period, we completed approximately 29.1 million Internet
hospital-based medical consultations. In addition, to better understand our customers’ needs, we
have analyzed the personalized health profiles that we create to identify commonly seen
abnormalities. Accordingly, we have developed treatment solutions targeting chronic diseases,
including endocrine abnormalities (such as diabetes, hyperuricemia, high cholesterol), neuro and
cardiovascular system diseases, gastrointestinal diseases, bone diseases and kidney diseases. For
further details on our sales and marketing strategies tailored to specific diseases and health
conditions, see “— Sales and Marketing — Acquisition and Retention of Customers.”
Our Offline Medical Consultation Services
As of September 30, 2022, we operated a network of offline medical clinics including 49

TCM clinics and one general outpatient clinic, where we address patients’ health problems through
medical consultations and issue prescriptions as needed. Specifically, we provide customers with
TCM consultations to provide diagnostic conclusions based on our customers’ symptoms, either for
a small prescription fee or on a complimentary basis if no prescription is issued. As we issue TCM
prescriptions, we facilitate our customers in their purchase of TCM decoction pieces and other
TCM medicinal products. Our TCM clinics are typically in proximity to our self-operated offline
pharmacies, where patients can easily fill their prescriptions after consulting with our licensed
physicians at our TCM clinics. We also review TCM prescriptions issued outside our TCM clinic
network as customers visit us with such requests, before we direct customers to fill their TCM
prescriptions with us. We dedicate ourselves to providing our customers with quality TCM medical
services, helping them alleviate their medical condition and health problems by attending to the
human body as an organic whole and improve their health gradually by enhancing overall
wellness. In doing so, we leverage the medical experience of our licensed TCM physicians and
also refer to our Fang anthology, the development of which is guided by the traditional Chinese
medical theory of “Monarch, Minister, Assistant, and Guide”. Additionally, we offer a combination
of offline medical consultation and treatment services at our general outpatient clinic. Our general
outpatient clinic specializes in internal medicine, gynecology, medical imaging and TCM. As of
September 30, 2022, we had 91 licensed physicians staffed at our offline medical clinics.
Other Value-Adding Healthcare Services
We offer other value-adding health management services on a complimentary basis to

enhance customers’ experience and engage their demand for our products and services. Our
value-adding health management services are offered before and after customers purchase with us,
including routine health check-up tests, post-purchase medication reminders, monthly health
reports, and other health-related guidance and information updates, to safeguard our customers’
health condition. We offer complimentary routine health check-up tests to customers that measure
their important health indicators, including blood pressure, blood glucose, blood lipids, blood
ketone, heart rate, uric acid, blood oxygen, height and weight, promoting customers’
self-awareness of their body condition. Our health check-up tests are offered offline throughout
our pharmacies and the results of the tests can be simultaneously synchronized to the digital health
profiles that we create for each customer who has taken the test or otherwise accessed our products
or services. We keep their medical records in such digital health profiles after they have registered
for our membership program on our 111Yao APP and Wechat Mini Program and consented to the
related privacy agreement. We also arrange complimentary health awareness seminars to help new
and existing customers form a more thorough understanding of their health condition, register for
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our membership program on our 111Yao APP and WeChat mini program, and create individual
health profiles with us for follow-up health management services. Our data analytics tool enables
us to label and categorize customers according to their health status, taking into consideration
information drawn from their health test metrics, drug usage history, purchase patterns and
consultation preferences. Customers’ health profiles facilitate our provision of data-driven
follow-up healthcare services in the long run, focusing on their specific health problems at
different stages. As part of our ongoing value-adding health management services, we offer
customers the requisite medical guidance according to their health profiles, including reminding
them to take medications or consume other health products as recommended in our Fang
anthology. In addition, according to customers’ health status and abnormalities that we identify
from their personalized health profiles with the support of our technological tools, we can generate
and deliver monthly health reports to our customers to help them better understand their health
needs.
Our Wellness Management Services Business
During the Track Record Period, we also generated revenue from offering wellness
management services, namely (i) TCM physiotherapy that we have designed based on TCM
appropriate techniques, such as cupping therapy, moxibustion, acupressure and TCM massage, and
(ii) health exercise programs including yoga and Pilates. Our wellness management services
business was launched in 2019. In order to further actualize the TCM discipline that “wise doctors
preempt the disease”, we have designed wellness management service offerings for the overall
health improvement of our customers. As of September 30, 2022, we operated 24 wellness centers.
For more details on our wellness centers, see “— Our Physical Presence — Our Wellness Centers.”
In the years ended December 31, 2020 and 2021 and the nine months ended September 30, 2022,
revenue from our wellness management services business amounted to RMB0.8 million, RMB1.3
million and RMB2.4 million, respectively.
Generally, our wellness centers are strategically located at the same addresses as our retail
pharmacies, but in separate areas or on different floors. In this way, we can achieve effective
cross-selling of our products and services between our offline pharmaceutical retail business and
our wellness management business. Customers who purchase our products can have the option to
engage in wellness programs designed to improve their overall physical well-being under the
guidance of TCM treatment principles, while customers engaged in our wellness management
programs can have convenient access to the pharmaceutical products that suit their health needs.
Our wellness management services are typically offered to our customers, especially our members,
in the form of service packages. We typically price our wellness management services at a
competitive level vis-à-vis our market competitors, while designing our programs with TCM
themes and offering service sessions that are suitable for customers’ specific health conditions,
such as physiotherapy and health exercises targeting specific body parts, maternity programs and
weight loss programs. We believe that our wellness management services are an important
component of our comprehensive healthcare service portfolio as a versatile extension of our
medical services. With our wellness programs, we are able to appeal to a wider customer base,
including younger generations and those who seek to include wellness routines into their healthy
lifestyles. In addition, based on our existing customer base accumulated from our pharmaceutical
retail business, we are able to attract more customers to our wellness management services in a
cost-efficient manner. Our members who have received our wellness management services tend to
make larger purchases at our offline pharmacies, as they are more familiar with our all-round
healthcare solutions with higher customer stickiness.
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Customers typically access our wellness management services by making appointments in

advance. For physiotherapy, our trained therapists perform such services for our customers in
standalone and private service rooms with the necessary therapy equipment. For yoga and Pilates
sessions, we typically offer customers one-on-one or small group sessions with up to eight
customers per group, to provide them with personalized guidance on their stances and thereby help
them relieve their physical pain or soreness on specific body parts. Following the wellness
management service sessions, we often seek feedback from our customers and discuss the service
results. We also periodically review the needs of our visiting customers for specific wellness
management services to understand their typical health problems and design our future wellness
management service offerings accordingly.
Our Franchise-related Services Business
During the Track Record Period, we generated revenue from providing franchise-related
services to our franchisees. As of September 30, 2022, our pharmacy network contained a total of
116 franchised pharmacies across 58 cities and 20 provinces in China. We typically charge a
trademark licensing fee upon entering into the franchise agreement with franchisees and
management consultation service fees as an agreed percentage of their sales of products to
end-customers or as fixed annual amounts, which vary across franchised pharmacies in different
provinces. We have franchised pharmacies under all our three pharmacy brands, and our
franchisees operate the franchised pharmacies under the relevant pharmacy brand as authorized and
receive operational support from us. For the years ended December 31, 2020 and 2021 and the
nine months ended September 30, 2022, our revenue from franchise-related services amounted to
RMB3.3 million, RMB4.4 million and RMB3.3 million, respectively. For further details on our
franchise model, see “— Our Physical Presence — Our Pharmacy Network — Our Franchised
Pharmacies — Our Franchise Model.”
OUR PRODUCT OFFERINGS
Our business operations encompass a wide variety of products, including prescription and
OTC drugs, TCM decoction pieces, medical devices, wellness products and other products as
further elaborated below.
Categories of Our Products Offerings
In our omni-channel pharmaceutical retail business, we carry a wide range of products in

terms of product type and price ranges, covering prescription and OTC drugs, TCM decoction
pieces, medical devices, wellness products and other products. We constantly review and update
our product portfolio to stay current with evolving market demands across the regions where we
operate. We typically procure the products we offer from our established pharmaceutical company
supplier networks in China to fill our inventories for our omni-channel sales. To a lesser extent,
we also sell products under our own product brands, including private-label and co-branded
products that are produced by third-party OEM manufacturers. We do not produce or manufacture
the products that we offer across our different business categories in-house. Our products are
available to our customers across all of our different sales channels, conveniently addressing their
medical needs while improving their general health conditions. As of September 30, 2022, we had
procured and initiated sales of over 20,000 SKUs across our offline, O2O and B2C operations.
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• Our prescription and OTC drug offerings covered a wide array of common, chronic,
acute and specialty diseases and health problems faced by all age groups of customers
as of September 30, 2022. We carried more than 155 new specialty drugs that focus on
various cancers, cardiovascular diseases and nervous system diseases. For further details
on our new specialty drugs, see “— Our Physical Presence — Our Pharmacy Network.”
• We sell TCM decoction pieces at certain of our pharmacies and TCM clinics to
customers seeking to fill their TCM prescriptions issued either at our TCM clinics by
our in-house TCM physicians or outside our network. For further details on our TCM
clinics, see “— Our Physical Presence — Our Clinics.” Our TCM decoction pieces can
be used in different combinations for disease treatment.
• Our medical device product offerings include primarily both Class I and Class II
medical devices according to the Provisions for Medical Device Classification (2022)
issued by the NMPA. The medical devices cover medical consumables, such as surgery
disposable tools, face masks, bandages and medicine patches, as well as medical and
testing equipment, such as blood glucose meters, blood pressure meters, thermometers
and hearing aids.
• Our wellness product offerings include nutritious and dietary supplements, healthy
snacks and other healthy food products.
• Our other product offerings include home-use health equipment, skin care products,
cosmetic products and daily consumables, among others.
The table below sets forth a breakdown of our revenue generated from our product sales by
product category and their respective percentage contribution to our total revenue from our product
sales during the Track Record Period:
2020 2021 2021 2022
RMB (in RMB (in RMB (in RMB (in
million) % million) % million) % million) %
Prescription and OTC
drugs . . . . . . . . . 1,534.7 87.8% 1,788.9 89.1% 1,305.0 89.3% 1,510.1 88.8%
TCM decoction pieces 59.0 3.4% 58.7 2.9% 43.4 3.0% 50.5 3.0%
Medical devices . . . . 87.7 5.0% 86.9 4.3% 61.0 4.2% 72.3 4.3%
Wellness products . . . 45.7 2.6% 51.5 2.6% 38.9 2.7% 45.2 2.7%
Other products . . . . . 21.8 1.2% 21.4 1.1% 13.7 0.8% 22.7 1.2%
Total revenue. . . . . . 1,748.9 100.0% 2,007.4 100.0% 1,462.0 100.0% 1,700.8 100.0%
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The table below sets forth the SKUs of our product offerings by product category as of the
dates indicated during the Track Record Period:
As of December 31, As of September 30,

2020 2021 2021 2022
Prescription and OTC drugs . . . . . . . . . . 6,734 8,205 7,650 8,797
TCM decoction pieces . . . . . . . . . . . . . . . 627 701 675 764
Medical devices. . . . . . . . . . . . . . . . . . . . 504 638 601 771
Wellness products . . . . . . . . . . . . . . . . . . 110 135 133 174
Other products. . . . . . . . . . . . . . . . . . . . . 286 466 394 599
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,261 10,145 9,453 11,105
Our Branded Products
Leveraging our decades of experience selling pharmaceutical products and the capabilities of
our in-house medical professionals as well as our product development team, we have made
available various branded products, comprising primarily our private-label products and, to a
smaller extent, our co-branded products, to enhance our brand image in the market and
complement our product portfolio. As of September 30, 2022, the SKUs of our branded products
exceeded 270, which is much higher than the industry average among China’s pharmaceutical
retailers with branded products, according to CIC. Our branded products span across prescription
and OTC drugs, TCM decoction pieces, medical devices, dietary and nutritional supplements,
healthy snacks and cosmetics products. We own the intellectual property rights to the registered
trademarks of the brands for our branded products. For the years ended December 31, 2020 and
2021 and the nine months ended September 30, 2022, we generated 0.8 million, 2.9 million and
2.8 million orders of our branded products, respectively. Our branded products mainly include:
Target Customer
Brand Name Products under the Brand Group
Kangmeishang Prescription drugs, OTC drugs, People seeking
(康美尚) TCM decoction pieces and commonly used
nutritional supplements that can medicinal and
be used to treat common diseases, health products
such as fever, cold, infections and that cover
gastropathy diseases, or generally multiple
improve health diseases and
health problems
Qianyin (纖音) Portable medical device products People seeking

such as portable blood pressure convenient
meters, hearing aids, pulse medical devices
oximeters, medical patches, for home use
massage equipment and cupping
therapy equipment
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Target Customer
Brand Name Products under the Brand Group
Zidan Fei Men’s health products Male customers,
(子彈飛) typically
middle-aged or
above, seeking
health
improvement
Longgui (龍歸) Women’s health products Female customers

seeking health
improvement
Mount Min Beauty and skincare products that Female customers

Longgui typically have Chinese herbal with beauty
(岷山龍歸) components, including essences, needs
lotions, face creams, face masks,
shampoos and conditioners
Beyond Day Dietary and nutritional supplements Health-conscious

(日行之外) such as protein powders and customers who
vitamin chewables, healthy snacks enjoy on-trend
such as black sesame balls, and health products
home-use wellness equipment
such as massage devices
We engage a selection of OEM partners to design and manufacture our branded products and
we work closely with them to ensure that R&D and production are carried out effectively and at a
high quality. During the Track Record Period, we engaged over 80 OEM manufacturers for the
production and supply of our branded products. A majority of our branded products are
private-label products, which are products that we consider innovative in the market and that our
OEM partners have exclusively designed and manufactured for our brand based on our particular
requirements. Private-label products only bear our brand and cannot be supplied to other
pharmaceutical retailers without our authorization. As of September 30, 2022, we had 258 SKUs of
private-label branded products, spanning across all product types in our branded product portfolio
and representing over 90% of the total SKUs of our branded products.
Typically, after we have conducted extensive market research and formulated plans to launch
a new branded product, we notify our OEM partners of our requirements on product design and
packaging, desired functions of the product, and specifications of the final product. Afterwards, we
work closely with our OEM partners during the product design process to ensure that the product
satisfies our requirements. To a lesser extent, we also collaborate with our OEM partners for
co-branded products, which bear both our brands and the OEM partners’ own brands. Our
co-branded products are typically products that we consider to be commercially mature with huge
market demand. In merchandizing co-branded products, we benefit from our OEM partners’
marketing and brand while capturing and expanding the market for our own brands. Before
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partnering with them, we individually assess each of our OEM partners to ensure that they possess
mature production lines, requisite qualifications, established market reputations, adequate market
experience and reliable business and financial resources. Below are key terms from our typical
OEM agreements:
• Supply of raw materials: In strict compliance with the quality standards and the efficacy
requirements prescribed by us, our OEM partners are responsible for the selection and
sourcing or raw materials and semi-finished products.
• Exclusivity: We have the exclusive right to sell and merchandize our private label
products manufactured and supplied by our OEM partners. In certain situations we
provide express authorization to our OEM partners to directly sell our private label
products to pharmaceutical retail companies to increase the market exposure of certain
products.
• Quality control: We have the right to monitor and supervise product quality, and to
periodically inspect the production process and the quality of raw materials. The
products produced by our OEM partners must meet our prescribed product quality
standards, failing which we are entitled to reject the products. Our OEM partners are
required to strictly inspect the products before they leave the factory and send them to
third-party inspection agencies for inspection when necessary.
• Alterations: Any actual or proposed change in the design, specifications, raw materials
and production process by our OEM partners is subject to our prior written approval.
• Fee arrangement: We pay a certain percentage of the purchase order as deposit at the
time of ordering, and the remaining payment is made within our credit term with the
OEM partner after our OEM partner completes production and we have examined the
lot, either on site or remotely to our satisfaction.
• Logistics: Our OEM partners typically bear the shipping costs and deliver the product
lots to our designated delivery address, with the method of transportation in compliance
with applicable laws and regulations.
• Intellectual property: Our OEM partners have the right to use our registered trademarks
for the limited purpose of fulfilling their contractual obligations under the OEM
agreements, strictly in the manner as prescribed by us, and assume full responsibilities
for damages caused by any infringements or misuse of our trademarks by their
collaborating third parties.
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OUR PHYSICAL PRESENCE
Overview
As of September 30, 2022, our offline business footprint had reached 65 cities and 22
provinces in China, with 1,047 pharmacies in our pharmacy network (including 931 self-operated
pharmacies and 116 franchised pharmacies), one general outpatient clinic, 49 TCM clinics and 24
wellness centers, evidencing our vision in becoming a trusted neighbor for health.
Heilongjiang
a
oli
ng
Mo
Inner Liaoning
Xinjiang
Beijing
Gansu
Hebei Tianjin
Ningxia Shanxi
Shandong
Qinghai
Shaanxi Henan Jiangsu
Sichuan
Chongqing Zhejiang
Hunan
Guangdong
Guizhou
Fujian Hong Kong SAR
Macau SAR
Guangdong
Hong Kong SAR
Macau SAR
Type Gansu Province Shaanxi Province Beijing Other regions

Self-operated pharmacies 794 62 52 23
Franchised pharmacies 61 5 – 50
TCM clinics 48 – – 1
Wellness centers 20 – 3 1
General outpatient clinic 1 – – –
Our Pharmacy Network
Our offline pharmacy network contains our self-operated and franchised pharmacies operated
under our three brands, namely Deshengtang Pharmacy (德生堂大藥房), 111 Pharmacy (111醫藥
館) and Longgui Pharmacy (龍歸大藥房). As of September 30, 2022, our pharmacy network
spanned across 65 cities and 22 provinces, and comprised 931 self-operated pharmacies in 22
cities and seven provinces, and 116 franchised pharmacies in 58 cities and 20 provinces in China.
Our pharmacies vary in size, functionality and layout across different locations, depending on
brand, local customer demographics and market landscapes. As of September 30, 2022, the average
size of our 794 self-operated pharmacies in Gansu Province was approximately 181.8 sq.m., the
average size of our 62 self-operated pharmacies in Shaanxi Province was approximately 137.9
sq.m., the average size of our 52 self-operated pharmacies in Beijing was approximately 129.3
sq.m., and the average size of our 23 self-operated pharmacies in other regions of China was
approximately 196.1 sq.m.
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Deshengtang Pharmacy (德生堂大藥房) is our first retail pharmacy brand and is used mostly
by our brick-and-mortar pharmacies in Gansu Province. As of September 30, 2022, there were 761
self-operated and 34 franchised Deshengtang Pharmacy (德生堂大藥房) stores in our network. 111
Pharmacy (111醫藥館) is the retail pharmacy brand on which we primarily operate outside of
Gansu Province. As of September 30, 2022, there were 166 self-operated and 80 franchised 111
Pharmacy (111醫藥館) stores in our network. Longgui Pharmacy (龍歸大藥房) places more
emphasis on promoting TCM theories and related products and pharmacies operated under this
brand are all located in Gansu Province. As of September 30, 2022, there were four self-operated
and two franchised Longgui Pharmacy (龍歸大藥房) stores in our network.
Our Self-operated Pharmacies
Management of Our Self-Operated Pharmacies
We are committed to improving the operational efficiency of our self-operated offline

pharmacies, thereby enhancing the quality of our comprehensive healthcare services offered to
customers. To achieve this goal, we adopt a tiered yet centralized management and supervision
approach of our network of self-operated offline pharmacies. Management of our self-operated
pharmacies are further elaborated below.
Qualification requirements
In compliance with relevant PRC laws and regulations, each of our self-operated pharmacies
is supported by at least one licensed pharmacist.
Appearance and layout
Our self-operated pharmacies across different cities and provinces all bear the appropriate
store logos, depending on the brand of the pharmacy, and adopt similar decoration styles and
layout approaches. In this way, we create a uniform ambience for customers as they visit our
pharmacies. Depending on the location of the pharmacy and taking into consideration local market
conditions, we operate pharmacies of different sizes ranging from under 50 sq.m. to over 1,000
sq.m. Inside our self-operated pharmacies, we have adopted optimized layouts. Typically, shelving
and display in our pharmacies are arranged by functionality. Customers can easily find prescription
and OTC drugs (including new specialty drugs and others), TCM decoction pieces, medical
devices and other wellness products in different zones of our pharmacies. In addition, we usually
have temperature-controlled areas for products that are sensitive to temperature changes and areas
specifically designated for products that have stringent storage requirements under GSP.
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The following are pictures of one of our flagship stores in Lanzhou, Gansu Province:
Standardized monitoring and supervision
Supported by our technology capabilities, we empower our self-operated pharmacies with

technology-driven and data-driven operational tools such as real-time remote monitoring,
automatic drug selection and smart distribution. Through analysis of our historical sales records,
we understand market demand and customer preferences, and we selectively display products on
our shelves that we anticipate to be in popular and continuous demand. In addition, we have put in
place a series of measures to ensure standardized operation and consistent service quality across
our network of self-operated pharmacies. On the corporate level, we have established a
comprehensive set of policies and standards relating to key aspects of our brick-and-mortar
operations. Such policies and standards cover procurement and inventory levels, stock-taking,
controlled and monitored access to the cash system, customer service procedures, temperature
control, hygiene levels, operating hours, and employee conduct. On the regional level, we station
regional managers who oversee and periodically inspect each self-operated pharmacy to ensure the
compliance with our standard operation policies. Our regional managers also report to our
corporate-level management team on a daily basis. On the store level, we also have store managers
in place who are responsible for the day-to-day operations of our self-operated pharmacies. Such
standardized operations have helped us accumulate practical knowledge on effective operations and
also formed best practices when opening new pharmacies. At the same time, our customers can
receive consistent and quality services across our different self-operated pharmacies.
Performance recognition
We value customer satisfaction, which we believe is vital to the success of our pharmacies.
We evaluate the performance of our self-operated pharmacies and make available award packages,
such as bonuses, promotions and travel and training opportunities, for staff and managers at our
top-performing self-operated pharmacies, in order to encourage our pharmacies to comply with our
operating procedures and incentivize our staff for continuously improved performance.
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The table below sets forth the number of our self-operated pharmacies, sorted by province,
during the Track Record Period:
As of December 31, As of September 30,

2020 2021 2021 2022
Number % Number % Number % Number %
Gansu Province . . . . . . . . . . . 710 88.5% 781 85.4% 771 86.5% 794 85.3%
Shaanxi Province . . . . . . . . . . 59 7.4% 62 6.8% 62 7.0% 62 6.7%
Beijing . . . . . . . . . . . . . . . . . 20 2.5% 51 5.6% 37 4.2% 52 5.6%
Ningxia Autonomous Region . . 6 0.7% 9 1.0% 9 1.0% 9 1.0%
Inner Mongolia Autonomous
Region . . . . . . . . . . . . . . .. 2 0.2% 6 0.7% 6 0.7% 6 0.6%
Shanxi Province . . . . . . . . . .. 5 0.6% 5 0.5% 5 0.6% 5 0.5%
Qinghai Province . . . . . . . . .. — — 1 0.1% 1 0.1% 3 0.3%
Total . . . . . . . . . . . . . . . . . . . 802 100.0% 915 100.0% 891 100.0% 931 100.0%
The table below sets forth the revenue generated from our self-operated pharmacies, which
entails revenue from our offline pharmaceutical retail operation, as well as from our O2O
pharmaceutical retail supported by the respective offline pharmacy, and their respective percentage
contribution, sorted by province, during the Track Record Period:
2020 2021 2021 2022
RMB RMB RMB RMB
(million) % (million) % (million) % (million) %
Gansu Province. . . . . . . . . . . . 1,328.1 91.5% 1,412.2 88.1% 1,024.7 88.4% 1,196.3 84.6%
Shaanxi Province . . . . . . . . . . 64.1 4.4% 91.4 5.7% 65.5 5.6% 86.5 6.1%
Beijing . . . . . . . . . . . . . . . . . 46.8 3.2% 81.5 5.1% 56.7 4.9% 112.4 7.9%
Ningxia Autonomous Region. . . 6.1 0.4% 8.3 0.5% 6.5 0.6% 6.5 0.5%
Inner Mongolia Autonomous
Region . . . . . . . . . . . . . . . . 3.6 0.3% 4.3 0.3% 2.9 0.3% 5.3 0.4%
Shanxi Province . . . . . . . . . . . 3.4 0.2% 4.1 0.2% 2.9 0.2% 3.6 0.2%
Qinghai Province . . . . . . . . . . — — 1.1 0.1% 0.2 0.0% 4.0 0.3%
Total . . . . . . . . . . . . . . . . . . . 1,452.1 100.0% 1,602.9 100.0% 1,159.4 100.0% 1,414.6 100.0%
Continuous Expansion of Our Pharmacy Network
We conduct market analysis on a quarterly basis as part of our general market and expansion
planning process. Based on our understanding of the market and budgeting considerations
including rent and other types of expenses, we undertake a comprehensive evaluation and decide
whether to open up new pharmacies. We select sites for our offline pharmacies with the assistance
of technology. We leverage data analytics tools to promote and improve the digitalization and
intelligence level of our pharmacies, which provides us with real-time customer flow and inventory
level movement analysis and forecast, aiding in our location selection process. In addition, we
collaborate with third-party O2O platforms, map service providers and store location service
providers for data-driven smart site selection technology, such as heat map and honeycomb tools,
to understand market data in different geographical areas in order to optimize the location of our
pharmacies. In this way, we strategically select those sites for our pharmacies in locations with
high customer traffic, remarkable customer spending, manageable competition and reasonable rent
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levels. We also use technology to oversee our existing and planned pharmacy network to avoid
geographical overlap, optimize our geographical coverage, improve our overall operational
efficiency and control the cost of opening new pharmacies.
We also consider various criteria when determining whether to open a new pharmacy at a
specific location, primarily focusing on our existing and planned service capacity within a certain
radius, as well as the local market and competitive landscape. We evaluate our pharmacy
expansion strategy and speed regularly to support our overall business growth. In doing so, we
take into consideration factors including our existing market coverage in different regions, local
demands for our products and services, shifting market conditions and changing governmental
policies. We also frequently evaluate the performance of our existing self-operated pharmacies in
different regions and we may relocate those pharmacies with less satisfactory performance to new
sites, taking into consideration various factors such as customer traffic, lease expenses and local
competitive landscape, with the aim to maintaining optimal performance of our self-operated
pharmacies. Such efforts have allowed us to carefully plan our establishment of additional
self-operated pharmacies. During the Track Record Period, we continuously expanded our
self-operated pharmacies across various provinces, including Gansu, Shaanxi, Beijing, Inner
Mongolia, Shanxi and Qinghai.
The table below sets forth the movement in the number of our self-operated pharmacies
during the Track Record Period:

2020 2021 2021 2022
Number of pharmacies at the beginning
of the year/period. . . . . . . . . . . . . . . . . 746 802 802 915
Opening of new pharmacies. . . . . . . . . . . 58 114(1) 90 (1) 20 (1)
Closure of existing pharmacies(2) . . . . . . . 2 1 1 4
Number of pharmacies at the end of the
year/period . . . . . . . . . . . . . . . . . . . . . . 802 915 891 931
Notes:
(1) In 2021, our newly established pharmacies were mostly in Gansu Province, where the COVID-19 pandemic
resurged during the year and many offline business operations in the province were subject to extended lockdown
measures. For the nine months ended September 30, 2022, considering the continuing impact of and uncertainties
caused by the pandemic, we were particularly cautious about establishing new pharmacies and hence fewer new
pharmacies were established. For more details, see “Financial Information — Impact of the COVID-19 Outbreak on
our Operations.”
(2) During the Track Record Period, we closed some of our self-operated pharmacies after evaluating the performance
of the relevant pharmacies, while taking into account our overall pharmacy expansion plan.
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Once a potential site for a new pharmacy is identified, we deploy management-level

personnel to negotiate the lease. In particular, our site selection criteria include, without limitation,
the following factors:
• Existing market coverage by our self-operated and franchised pharmacies;
• Demographics and diverse health needs of the local population;
• Level of competition from other pharmacies;
• Applicable local laws and regulations;
• Available resources of suppliers that can cover the relevant region; and
• Availability of suitable sites for lease.
As our business further grows in scale and as we continue to level up our pharmacies’
capabilities, we will continue to expand our pharmacy network to further boost our economies of
scale. It generally takes us one to three months to open a new self-operated offline pharmacy,
counting from the start of the lease to storefront opening. Depending on the amount of time
required to obtain the necessary business licenses and operating approvals and permits in different
provinces or cities, such time may vary. However, as local administrative processes and/or
COVID-19-related policies may affect offline operations in relevant regions, the time required to
open a new pharmacy is not always within our control, taking more than 100 days under certain
circumstances.
We categorize our self-operated pharmacies into three types based on their date of
establishment, namely newly-established pharmacies (i.e., pharmacies that have been established
for less than two years), developing pharmacies (i.e., pharmacies that have been established for at
least two years, but less than five years) and matured pharmacies (i.e., pharmacies that have been
established for at least five years). As of September 30, 2022, we had 155 newly-established
self-operated pharmacies, 386 developing self-operated pharmacies, and 390 matured self-operated
pharmacies.
During its initial two years of operation, our self-operated pharmacies typically grow faster as
we quickly establish our market recognition and accumulate customers in the local area. After our
self-operated pharmacies have been established for more than two years but less than five years,
our customer base tends to stabilize, which can slow down the pharmacies’ growth. Our
self-operated pharmacies that have been established for over five years typically experience a
steady growth, at a rate lower than our other, more recently established, self-operated pharmacies.
According to CIC, such categorization reflects the general business cycles of pharmaceutical
retailers in China.
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The following table sets forth key performance metrics of our self-operated same stores by
newly-established pharmacies, developing pharmacies and matured pharmacies, during the Track
Record Period.

2020 2021 2021 2022
(1)
Number of same stores
Newly-established pharmacies(3) . . . .... 94 80
Developing pharmacies(3) . . . . . . . . .... 388 414
Matured pharmacies(3) . . . . . . . . . . .... 215 245
Same store revenue(2)(5) (RMB’000)
Newly-established pharmacies(3) . . . .... 105,838 130,305 145,643 195,450
Developing pharmacies(3) . . . . . . . . .... 654,248 698,795 501,323 587,023
Matured pharmacies(3) . . . . . . . . . . .... 648,254 637,937 467,411 500,308
Same store revenue period-to-period
growth (%)
Newly-established pharmacies(3) . . . .... 23.1% 34.2%
Developing pharmacies(3) . . . . . . . . .... 6.8% 17.1%
Matured pharmacies(3) . . . . . . . . . . .... (1.6)%(4) 7.0%
Notes:
(1) Our same stores are defined as those self-operated offline retail pharmacies that remained open for at least 300 days
in both 2020 and 2021, or at least 225 days in both the nine months ended September 30, 2021 and the nine months
ended September 30, 2022, as applicable.
(2) Revenue from our same stores entails offline retail revenue generated from the relevant offline pharmacies, as well
as from our O2O retail revenue generated from our O2O operations supported by the same offline pharmacies.
(3) The development stage of each same store during the years under comparison was its development stage as of the
end of the first year or period, as applicable.
(4) The slight decline of same store revenue for our same stores at the matured stage in 2021 from the previous year
was primarily due to the impact of the COVID-19 pandemic on our offline operations.
(5) Takes into account revenue from medical consultation services (which accounted for approximately 0.1% of our
total revenue during each year/period of the Track Record Period) at certain of our offline TCM clinics that share
the same location with our self-operated offline pharmacies, where patients can pay for their medical consultation
service purchases and product purchases at the same time at check-out.
During the Track Record Period, a majority of our self-operated same stores were developing
pharmacies. During the Track Record Period, we generally achieved a healthy growth of our same
store revenue, particularly our same stores at the newly-established and developing stages. From
2020 to 2021, our same stores at the newly-established and developing stages achieved a revenue
growth rate of 23.1% and 6.8%, respectively, despite the impact of the COVID-19 pandemic on
our offline operations, while our same stores at the matured stage experienced a slight revenue
decline for the same period. For more details, see “Financial Information — Impact of the
COVID-19 Outbreak on our Operations.”
Our Specialized Pharmacies
We commenced our DTP business in 2020. In order to take advantage of favorable policies
encouraging prescription outflow enabling in-hospital prescriptions to be fulfilled by
out-of-hospital channels, we operate DTP pharmacies to specifically target patients in need of new
specialty drugs, which are drugs that hospitals have prioritized to be prescribed at out-of-hospital
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pharmacies, upon receiving their prescriptions prescribed by hospitals. Among our 931
self-operated pharmacies as of September 30, 2022, 27 were DTP pharmacies, which were mainly
located in proximity to hospitals, carrying new specialty drug products that can only be sold in
DTP pharmacies and targeting patients in need of such products with prescriptions from hospitals.
As of September 30, 2022, our DTP pharmacies offered our customers over 155 new specialty
drugs covering various diseases including cancers, cardiovascular diseases and nervous system
diseases.
As of September 30, 2022, we operated 152 pharmacies that are qualified as Specialized
Pharmacies for Chronic Diseases, which were designated pharmacies under the national medical
insurance scheme carrying over 950 specialized prescription drugs for certain chronic diseases
such as diabetes, hypertension, liver diseases, severe Parkinson’s, schizophrenia and chronic renal
failure. Chronic disease patients have convenient access to medicinal products on which they rely
for long-term treatment, which can be directly billed to the national medical insurance scheme for
eligible customers.
Our Franchised Pharmacies
Our Franchise Model
As of September 30, 2022, there were 116 franchised pharmacies in our pharmacy network,
among which 44 were equipped with O2O capabilities. We enter into franchise agreements with
franchisees for our Deshengtang Pharmacy (德生堂大藥房), 111 Pharmacy (111醫藥館) and
Longgui Pharmacy (龍歸大藥房) brands. We adopted the franchise model in 2016 to achieve faster
expansion of our network and geographical market coverage and greater recognition of our brand.
According to CIC, it is common industry practice for pharmaceutical retailers to adopt franchise
models to facilitate expansions of the pharmacy network and leverage on the franchisees’ financial
and business resources. For the years ended December 31, 2020 and 2021 and the nine months
ended September 30, 2022, there were 0.7 million, 1.0 million and 0.9 million purchase orders by
customers generated at our franchised pharmacies, respectively. We derive revenue from our
franchise model through various means. Our franchisees typically pay us an upfront trademark
licensing fee and we collect management consultation service fees as a certain percentage of our
franchisees’ sales (including their offline retail and online O2O retail of products to
end-customers) or a fixed annual amount. We also earn a margin for products we procure for our
franchisees as part of our wholesale business. For the years ended December 31, 2020 and 2021
and the nine months ended September 30, 2022, we generated revenue from our franchise-related
services in the amount of RMB3.3 million, RMB4.4 million and RMB3.3 million, respectively.
As of the Latest Practicable Date, all of our franchisees were independent third parties. We
maintain a buyer-seller relationship with franchisees who procure pharmaceutical products to be
sold at the franchised pharmacies from our wholesale business. Ownership of the products is
transferred to our franchisees upon delivery of the same by us. During the Track Record Period,
our franchisees typically procured products from our wholesale business to the extent covered
within the regions of our warehouses’ fulfillment capabilities. As we maintain stringent inventory
level management policies, we believe our sales to our franchisees during the Track Record Period
reflected true market demand. For the products that we supply to our franchisees, we recognize
revenue at the point in time when control of the products has been transferred to the franchisees.
For more details regarding our revenue recognition policies, see Note 2.24(c) in Appendix I to this
Document. In our supply to our franchisees, we generally require payment in advance from our
franchisees for products sold.
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Selection and Management of Our Franchisees
Effective selection of franchisees is critical to our reputation and business strategy. Among
our selection criteria of franchisee candidates, we consider their passion and trust in our brand and
our business model, practical experience in the pharmaceutical retail industry, business experience
operating or managing pharmacies, entrepreneurial spirit, capital resources and other available
external resources and legal and compliance status.
We follow the operational and managerial standards of our self-operated pharmacies in the
management of our franchisees and our franchised pharmacies, as set out in our franchise
agreements and franchise operation manual, including store management, marketing activities,
personnel training, SKU selections, product pricing and inventory levels. For further details on the
standardized management of our self-operated pharmacies, see “— Our Pharmacy Network — Our
Self-operated Pharmacies — Management of Our Self-Operated Pharmacies.”
Set forth below are key contractual terms in our agreements with the franchisees:
• Site Selection: We jointly decide with our franchisees the site location for the franchised
pharmacies. Our franchisees have the discretion to identify and propose potential sites,
as the franchisees are typically more familiar with the area in which they invest and
conduct business operations. However, we require that our franchisees report their site
selection to us before executing the relevant lease agreements, as we believe a
pharmacy’s location is crucial to its future profitability. The selected sites can only be
put into operation after our field audit and evaluation. In the event our franchisees wish
to resort to our expertise in site selection they can also request our professional site
selection team to select a site for them.
• Support for franchisees: We provide our franchisees the pharmacy layout and design
plans, while our franchisees are typically responsible for carrying out the renovation and
construction at their expense. We provide standard training and evaluation to employees
hired by the franchisees as a requisite part of their onboarding process. Where requested
by our franchisees, we may provide marketing materials of our brand and pharmacies to
be used by our franchisees in promotional campaigns.
• Intellectual property: Our franchisees can use our brand names, logos, trademarks or
other intellectual property for the purpose of pharmacy operations during the term of the
franchise agreement in accordance with our standards and specifications.
• Product returns: Save for defective or misdelivered products that can be returned under
our standard internal policy, we generally do not have any obligation to accept any
return of unsold products from our franchisees during the franchise term. Upon
termination of the franchise arrangement, our franchisees can return unsold products to
us.
• Business licenses: Our franchisees are required to obtain and furnish us with the
requisite business licenses, approvals and permits for operating the franchised
pharmacies. As of September 30, 2022, all of our franchised pharmacies operated under
valid business licenses.
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• Minimum purchase amount: To ensure sufficient quantities and categories of product

offerings to our end-customers, we impose an initial one-time minimum purchase
amount by our franchisees which is proportional to the gross floor area of the franchised
pharmacies.
• Sub-licensing: Our franchisees do not have the right to engage sub-contractors or

sub-franchisees or otherwise assign the rights under the franchise agreement to a third
party without our prior written consent.
• Termination of franchise agreements: Prior to the expiration of the franchise term, we

are entitled to terminate the franchise agreements in the event of material breach of the
agreement by the franchisees, such as (i) when our franchisees fail to follow our
requirements for them to improve their operations or standard product quality
management, (ii) if our franchisees provide us with fraudulent or misleading
information, such as franchising another brand without providing notice to us or seeking
our prior approval, whether intentionally or not, and (iii) in the event of unauthorized
use of our intellectual property outside of pharmacy operations or other misconduct by
our franchisees which would jeopardize our business or reputation. Prior to the
expiration of the franchise term, our franchisees may terminate the franchise agreements
voluntarily or in the event that our relevant trademarks are voided during the franchise
term or we have caused such irreparable damage to our brand image that the franchised
pharmacy cannot continue its normal operation. Where our franchisees request to
terminate the franchise agreements voluntarily, the deposit fees previously provided by
such franchisees will not be reimbursed.
• Term and renewal of franchise agreements: Our franchise agreements typically have an
initial term of between one to two years. Subject to our approval and our franchisees’
payment of the trademark licensing fee again upon renewal of the franchise agreement,
a franchisee may generally renew the franchise agreement upon expiration for an
additional term mutually agreed between the franchisee and us. Under certain
circumstances, we will exempt or reduce the upfront trademark licensing fee for existing
franchisees upon renewal.
• Disputes during the term of the franchise agreement: Our franchisees are obliged to
notify us immediately of their involvement in any dispute, litigation or arbitration
proceeding. They should follow our instructions when taking legal or other necessary
actions and use their best efforts to avoid any damage to our reputation and interests.
During the Track Record Period, we did not experience any breach of franchise agreements,
or any dispute or claim with any franchisee, that had a material adverse impact on our business
operations.
In addition to the terms in the franchise agreements, we have adopted a series of measures to
further manage and support our franchisees, including real-time business performance monitoring,
stock-taking and guidance on inventory level and direct supervision by our corporate-level regional
managers. Our franchisees are required to conduct inventory count on a monthly basis, the results
of which, together with the sales and invoicing data, are recorded on systems designated by us and
are available to us for review. Our franchisees typically set the retail price of products with
reference to the pricing level determined by us.
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As we impose the same appearance and layout requirements for our franchised pharmacies,
customers can enjoy the same level of in-store shopping experience at our franchised pharmacies
as in our self-operated pharmacies. Consistent with our self-operated pharmacies, our franchised
pharmacies are also subject to our periodic evaluation. Our franchised pharmacies do not have
apparent operational differences when compared with our self-operated pharmacies. We also have
internal protocols that prevent cannibalization among our self-operated pharmacies and franchised
pharmacies and among different franchised pharmacies by requiring a minimum distance between
the pharmacies. We take into consideration the possibility of cannibalization with our existing
pharmacy network when discussing proposed locations for the franchised pharmacies. For
franchisees within the same region, we strictly forbid our franchisees from competing maliciously
with each other. Our marketing proposals are made at the corporate level and our product pricing
levels are unified within the same region, which also significantly reduces the risk of franchisee
cannibalization.
We provide our franchisees with support at various important stages during their business
operation, including their site selection, SKU selection, marketing campaign and adaption to our
business strategies. Our franchisees are generally granted access to our industry know-how,
management and operational experience, customer base and supply chain resources in relation to
pharmacy operations. Upon opening of the franchised pharmacies, we provide the franchisees with
on-site assistance. Throughout the business operations of our franchised pharmacies, we also
provide periodic support including marketing plans, business analysis and customer service
guidance.
Where our franchisees request to terminate the franchise agreements voluntarily, they are
required to submit a formal application to us. After initial assessment and further confirmation
with such franchisees, we will initiate the termination procedure, which include removal of any
display of our trademarks in the franchised pharmacies, agreement on unpaid management
consultation service fees and reimbursement of any pre-paid fees previously provided by such
franchisees. Records relating to the terminated franchise agreements should be maintained for a
period of not less than one year.
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The table below sets forth changes in the number of our franchised pharmacies during the
Track Record Period:

2020 2021 2021 2022
Number of franchised pharmacies at the
beginning of the year/period . . . . . . . . 46 59 59 88
Opening of new franchised pharmacies . . 18 45 33 32
Closure of existing franchised
pharmacies(1) . . . . . . . . . . . . . . . . . . . . 5 16 11 4
Number of franchised pharmacies at the
end of the year/period . . . . . . . . . . . . . 59 88 81 116
Note:
(1) Closures of our franchised pharmacies during the Track Record Period were initiated by the relevant franchisees
and with our prior approval. In determining whether to continue to operate the pharmacies, our franchisees may
consider their own business development plans and their changed business focus. During the Track Record Period,
we did not experience any dispute with our franchisees that materially affected our relationship with them or led to
the closure of our franchised pharmacies. During the Track Record Period, no franchise agreement was terminated
or requested to be terminated by our franchisees or us due to breach of any franchise agreement.
Our Clinics
As of September 30, 2022, we operated (i) 49 TCM clinics, where we provided our customers
with in-store TCM medical consultations and prescriptions of TCM decoction pieces and other
TCM drug products, and (ii) one general outpatient clinic.
Our TCM clinics are typically located in proximity to, or as a standalone functional area on
the same premises our top-selling pharmacies, which have a better customer traffic with sufficient
floor area. Our TCM clinics are strategically located this way as we think it is important for our
customers to have convenient access to our in-store product sales and TCM medical consultation
services all at once. In this way, we can leverage our intuitive advantage to attract our retail
pharmacy customer traffic to our TCM clinics while our customers can enjoy convenient, one-stop
access to our pharmacy, healthcare services and TCM services. As of September 30, 2022, the
average area size of our TCM clinics was approximately 40 sq.m. As of September 30, 2022, our
general outpatient clinic had three clinical departments including internal medicine, gynecology
and TCM in an area of total GFA of 150 sq.m, with our licensed physicians on site to
accommodate patient visits.
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The table below sets forth the movement in the number of our TCM clinics during the Track
Record Period:

2020 2021 2021 2022
Number of TCM clinics at the beginning
of the year/period. . . . . . . . . . . . . . . . . 18 27 27 39
Opening of new TCM clinics. . . . . . . . . . 11 14 9 11
Closure of existing TCM clinics(1) . . . . . . 2 2 2 1
Number of TCM clinics at the end of the
year/period . . . . . . . . . . . . . . . . . . . . . . 27 39 34 49
Note:
(1) During the Track Record Period, we had closed certain TCM clinics after evaluating the performance of the
relevant clinics, while taking into account our overall expansion plan for our clinics.
Our Wellness Centers
As of September 30, 2022, we operated 24 wellness centers, where we provided our

customers with TCM physiotherapy services, such as cupping therapy, moxibustion, acupressure
and TCM massage, and health exercise programs, including yoga and Pilates. Our wellness centers
are also typically located in proximity to our pharmacies and TCM clinics with relatively heavier
customer traffic, because we perceive our wellness programs as valuable additions to our medical
services in our effort to help customers achieve their health goals and also to diversify our
healthcare service offerings. To a lesser extent, certain of our wellness centers are located on the
same premises as our pharmacies, usually on different floors, so that our product-purchasing
customers can easily access our wellness management services. The average size of our wellness
centers was approximately 82 sq.m., as of September 30, 2022. Since we only launched our
wellness management programs in 2019, we are continuously strengthening our service capacity as
well as expanding the network of our wellness centers. Our customer traffic from the retail
pharmacies and our wellness centers are channeled both ways, and in such process our customers
can physically experience the breadth of our healthcare service offerings, which in turn enhance
their trust in and loyalty to our brand.
The table below sets forth the movement of the number of our wellness centers during the

2020 2021 2021 2022
Number of wellness centers at the
beginning of the year/period . . . . . . . . 2 3 3 16
Opening of new wellness centers. . . . . . . 1 13 10 9
Closure of existing wellness centers . . . . 0 0 0 1
Number of wellness centers at the end of
the year/period . . . . . . . . . . . . . . . . . . . 3 16 13 24
Note:
(1) During the Track Record Period, we had closed certain wellness centers after evaluating the performance of the
relevant wellness centers, while taking into account our overall expansion plan for our wellness centers.
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OUR ONLINE PRESENCE
Our Internet Hospital
In 2018, the State Council issued the Opinions on Promoting the Development of “Internet +
Healthcare”, which proposed to allow medical institutions to carry out Internet medical services
such as follow-up consultations for some common and chronic diseases. Consistent with such
governmental policy, we obtained our Internet hospital license in August 2019. Our Internet
hospital provides convenient and personalized medical services, enabling customers to avoid the
complicated administrative protocols and the time-consuming pre-consultation preparation works
associated with a brick-and-mortar hospital. Reading and interpreting enquiries from customers,
our Internet hospital service portals are able to distinguish between conversations that need to be
continued with live pharmacists or physicians from those that can be resolved with off the shelf
solutions from system-prepared automatic responses, which simplifies the administrative
procedures that are unavoidable at traditional offline hospitals by significantly reducing the typical
wait time. Our Internet hospital provides online medical consultation and prescription renewal
services to the general public, which helps direct patient flow from public hospitals, alleviating
pressure on the public health system, especially in regions where public medical resources may be
less abundant.
Our Internet hospital, as the medical institution hosting our medical team to provide remote
medical consultation services, is connected not only to our 111Yao App and our WeChat mini
program, but also to each and every third-party online platforms which we collaborate with in
offering products in our O2O and B2C sales modes. As of September 30, 2022, we had 94 licensed
physicians staffed at our Internet hospital. Our technology-empowered Internet hospital has
integrated a wide range of functions that are fundamental to our capability to provide Internet
hospital-based medical consultation services. Such functions include receiving medical
consultation applications from our pharmacies or online platforms, confirming prescriptions
already reviewed by our licensed pharmacists, data-enabled management of our pharmacists and
physicians, management of medical consultation records, prescription drug usage management and
other functions. As of September 30, 2022, our Internet hospital had five departments, comprising
internal medicine, general surgery, gynecology, dentistry and TCM, with the capability of handling
medical consultations and prescription reviews and renewals for over 90 diseases, including
common, chronic and specialty diseases and health problems such as diabetes, pulmonary
hypertension, hyperlipidemia, cardiovascular diseases, fungal infection diseases, gastropathy, liver
disease and gout, as well as other common diseases and health problems in pediatrics and
dermatology such as obesity, short-sightedness, acne, and skin spots.
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Our Self-Operated 111Yao App and WeChat Mini Program
We launched our 111Yao App in 2015 and our WeChat mini program in 2020 to facilitate our
online product retail operations through O2O and B2C modes. Our 111Yao App and our WeChat
mini program enable our customers to conveniently access our products offered across various
channels and our Internet hospital-supported medical consultation services on a 24/7 basis. In
addition, customers have one-stop access there to our Fang anthology as well as their personalized
health profiles. The following screenshots illustrate the interfaces and key functions of our 111Yao
App and our WeChat mini program:
We can locate our Customers can

pharmacies closest to conveniently browse
customers according our product offerings
to their real-time categorized by
specific diseases and
locations after
health problems
gaining their consent
Customers have quick

access to our Fang
After obtaining their anthology, which
consent, we monitor comprised 1,429 sets
customers’ tests results of Fang as of
to provide them September 30, 2022
customized health
management services
Customers receive
tailored and
c u s t o m i z e d
healthcare services
from us as we
Convenient entrance monitor health
portal to our online abnormalities from
medical consultation their health profiles
services under the they upload or we
“family doctor” collected during our
approach operation and offer
solutions to their
unique health needs,
per their consent
To provide customers with consistent browsing and purchasing experiences across our 111Yao
App and our WeChat mini program, we have designed the interfaces of our 111Yao App and our
WeChat mini program to be highly similar. Our 111Yao App is available for downloading from
both iOS and Android systems, while our WeChat mini program can be conveniently accessed on
WeChat. Particularly, our 111Yao App and our WeChat mini program have comprehensive
functions, such as (i) 24/7 medical consultation services by our licensed physicians accessible to
customers at various access points, including on the home page and at various other places
embedded in different display pages on our 111Yao App or the WeChat mini program; (ii)
user-friendly display of product categories, including promotional information related to our Fang
anthology; (iii) designated pages with healthcare information providing details of specific
symptoms or health conditions, which demonstrate our “single disease” sales and marketing
strategy; and (iv) convenient access to customers’ personalized health profiles containing their
purchasing history, medical records and health check-up test records all at once, and access to
health-related articles that help raise customers’ overall health awareness. For the years ended
December 31, 2020 and 2021 and the nine months ended September 30, 2022, the number of
average monthly active users (i.e., users that logged in at least once during the applicable month)
on our self-operated 111Yao App and/or WeChat mini program was 201,079, 260,360 and 367,383,
respectively.
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OUR TEAM OF MEDICAL PROFESSIONALS
Our licensed physicians and licensed pharmacists work seamlessly as a team to cater to our
customers’ requests for efficient health management services and healthcare solutions. As of
September 30, 2022, our team of medical professionals consisted of 185 licensed physicians
(including 94 licensed physicians staffed at our Internet hospital and 91 licensed physicians at our
offline medical clinics) and 1,088 licensed pharmacists.
At each of our self-operated offline pharmacies, we have at least one licensed pharmacist in
compliance with the relevant requirements under PRC laws and regulations. If customers have
enquiries relating to their health problems, they can be connected to licensed physicians based in
our Internet hospital through online or video and/or communications. To the extent that our
customers require renewal of their prescriptions by our licensed physicians after consulting with
our licensed physicians at our Internet hospital, our licensed physicians work on such patient
requests immediately after the relevant consultations. Our licensed pharmacists then review
prescriptions issued by the licensed physicians before filling relevant prescriptions for the
customers, which can be completed both offline for customers that visit our offline pharmacies or
online through our Internet hospital operations. Our medical team members work closely to present
our “family doctor” functions to our customers and assign a suitable combination of qualified team
members to answer to our customers’ various needs. In addition, our Internet hospital-based
licensed physicians also offer medical consultation services for third-party pharmacies operating
on well-known third-party O2O and B2C platforms from time to time, responding to patient
enquiries when those platforms do not have sufficient in-house licensed physicians available and
reaching out to a wider group of customers.
We impose strict qualification requirements on our licensed physicians as we consider them

pivotal to our healthcare services, including online and offline consultation, diagnosis and
prescription issuance services. As of September 30, 2022, among our 185 licensed physicians, 63
were our in-house full-time physicians and 122 were part-time external physicians. Before our
in-house physicians are on boarded, we verify their practicing licenses and relevant qualifications.
For our external physicians, we examine their practicing qualifications and require their
confirmation regarding capability of practicing with us in compliance with the Law of the People’s
Republic of China on Medical Practitioners 《 ( 中華人民共和國醫師法》) and the Administrative
Measures for the Registration of Practicing Physicians 《 ( 醫師執業註冊管理辦法》) to us before
the external physicians can provide medical services to our patients. As of September 30, 2022, all
our physicians have obtained the Medical Practitioner Certificates 《 ( 醫師執業證書》). We also
verify their education and professional backgrounds before their on-boarding processes and hone
their specialty and professional skills at our Fangdao Academy, as we seek to gather a team of
physicians that are experienced and passionate for providing quality medical services.
For our licensed pharmacists, we also impose strict qualification requirements including the
Certificate of Professional Qualification for Licensed Pharmacists 《( 執業藥師職業資格證書》). As
our pharmacists are primarily responsible for providing guidance to customers on choosing
appropriate medicinal products while reviewing and confirming prescriptions before they are filled,
the quality of our pharmacists’ service is crucial to our capabilities. As part of our pharmacists’
on-boarding process, we provide them with systematic training on the operating procedures at our
pharmacies and our Internet hospital, our service protocols, our product quality management
requirements and our corporate values. As of September 30, 2022, all our licensed pharmacists had
obtained the Certificate of Professional Qualification for Licensed Pharmacists 《( 執業藥師職業資
格證書》) reflecting their actual place and scope of pharmacist practice, in compliance with
relevant laws and regulations.
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We rely on our medical professionals to provide high-quality healthcare services to

customers, as we believe a high degree of competency among our medical professionals is key to
our competitiveness and success. Our physicians and pharmacists can continuously sharpen their
professional skills as they provide services to our extensive pool of customers with the support of
our technology-empowered Internet hospital. In addition, we provide extensive professional
development support to them. Our medical professionals participate in various research projects at
our Fangdao Academy. We arrange ongoing specialty training and other professional development
programs for our medical professionals to broaden their professional knowledge base as well as
enhance their management skills. We have also established a rigorous evaluation process, with
periodic evaluations of our licensed physicians and our licensed pharmacists. For further details on
our training and assessment of our medical professionals, see “— Employees.” We generally
maintain good relationships with our medical professionals. During the Track Record Period, we
did not experience any disputes with any of our licensed pharmacists or licensed physicians which
had a material adverse impact on our operations. online through our Internet hospital operations.
TECHNOLOGY AND R&D
We are committed to digitally empowering our business operations. For the years ended
December 31, 2020, 2021 and the nine months ended September 30, 2022, we incurred R&D
expenses of RMB3.3 million, RMB9.5 million and RMB7.0 million, respectively. We have a
dedicated technology and R&D team responsible for developing and continuously enhancing our
digital operational systems. As of September 30, 2022, our technology and R&D team comprised
78 employees, among whom 57 employees held undergraduate or above degrees, with academic or
professional experiences across multiple sectors, including information technology and computer
science, engineering management, automation, communication engineering, visual communication
design, industrial design, statistics and electrical engineering, among others. See “Appendix VI —
Statutory and General Information B. Further Information about Our Business — 2. Intellectual
Property Rights of Our Group — (iii) Copyrights — (a) Computer Software” in Appendix IV to
this Document for further details of our material copyrights for softwares developed by us.
Our Operating Systems
We have been continuously developing and upgrading our operating systems under our
mission of “serving health with technology.” Our operation processes are continuously digitalized
and increasingly empowered by technology, with data analytics tools integrated into our front-line
business processes, our middle-office operations and back-office management functions. With the
help of our operating systems, we can significantly enhance our overall efficiency across data
analysis processes, order management, membership management, warehouse management and
inventory management.
Front-line Business Platforms
Our front-line digital infrastructure supports our seamless interactions with customers across
our omni-channel operations. At the frontline of our business are the various platforms on which
customers interact and transact with us in our omni-channel retail network. Our 111Yao App and
WeChat mini program support our online operations across all our O2O pharmacies and can
independently fulfill B2C orders. In our offline operations, we have installed a centralized order
receipt and payment processing system at our 931 self-operated offline pharmacies, 49 TCM
clinics, our general outpatient clinic and 24 wellness centers, which allows us to record sales data
from our widespread offline operations in an organized way. We also address customer requests
received offline with real-time support of our online medical and customer support teams,
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providing customers with access to personalized healthcare solutions supported by our

omni-channel product and service offerings. In addition, we proactively communicate with and
seek feedback from our customers from various online portals including WeCom customer groups
and our customer rating system, while also utilizing technology driven customer service tools to
increase the timeliness and accuracy of our medical consultation, which can significantly improve
our customers’ satisfaction and level of engagement with us.
Middle-Office Operational Centers
Our middle-office operational centers are essential operational modules for the centralized
inter-transmission of data and information among our corporate departments. The centers allow us
to avoid repetitive system construction and reduce information waste as our business categories
and sales channel continue to expand. We have independently designed and developed our
middle-office operational centers, while using external third-party cloud servers to host them.
Data Processing Center
Our middle-office data processing center automatically studies and categorizes the diverse
customer data which is collected through our frontline product and service offerings by identifying
and labeling it for further use at our various functional centers, including our sales and order
center, membership center, warehouse center and inventory center. Our middle-office data
processing center can generate a real-time and historical data view board through real-time data
analysis and computing technologies. This data view board pulls together and also summarizes
real-time and historical sales data among our various sales channels online and offline across
different regions in China. Utilizing a data analytics tool like this enables our management team to
quickly track our overall business situation and gain insight into business trends. Through our data
processing system as demonstrated by the data view board, our overall business management has
access to robust digital support, which in turn provides support for the sales capability of our
front-line personnel. Our data processing center improves the efficiency of our corporate-wide data
queries and therefore enables us to deploy a statistical-based method in our daily business
operations.
Sales and Order Center
Our operational system used for the management of customer purchase orders has effectively
enhanced our capability in the offering of our comprehensive products and healthcare services to
customers. Our sales and order center acts as the middle-office functional center to collectively
handle and fulfill customer purchase orders received from our diverse sales channels. Through
digitalization of the sales and order center, we have significantly improved the overall efficiency
of our management of offline pharmacies as well as our online pharmacies in our O2O and B2C
retail businesses. With our sales and order center, we can check the status of customer purchase
orders across our multiple sales channels, as well as visualize the conditions of our products. With
the aid of data analytics tools, we are also able to analyze our orders on a periodic basis and
generate insight into our performance across different pharmacies, locations, and business
categories. In this way, we have achieved centralized management of our offline and online orders
across different geographical regions.
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Warehousing and Inventory Centers
Our digitalized warehousing center and inventory centers are connected to our data
processing center and our sales and order center, with customer purchase order information across
our sales channels received and synchronized in real time, allowing us to assess the impact on our
current inventory levels from each customer purchase order. Our warehousing center and inventory
center can help enhance our understanding of our procurement needs through automatic
stocktaking. Specifically, our inventory management system can perform multiple functions
including inventory documentation, inventory allocation, estimation for procurement needs, and
inventory monitoring and control, all on a real-time basis not only in our offline pharmacies but
also in our warehouses, addressing the inventory and procurement needs of all business processes
in our omni-channel pharmaceutical retail business. In this way, we can achieve effective
utilization and mobilization of our inventories across our three warehouses and reducing the risk of
non-fulfillment of customer purchase orders caused by inadequate understanding of real-time
inventory levels, further elevating our fulfillment capabilities.
Membership Center
We have designed and established a digitalized membership center as the centralized

management system of our membership program. We have achieved a systematic approach to
monitor the development trends of our membership programs and to manage our different classes
of members acquired from different sales channels. Through our uniform member management
system, we view in real time the numbers of members, status of members exercising their
membership rights or using their membership benefits, membership points accumulated in total,
distribution of members in terms of their health conditions and feedback from our members. In this
way, we have built a closed-loop management of our membership programs online and offline that
greatly improves the integrity and applicability of membership operation processes. After we
obtain consent from our customers, our membership center can also access information about
members’ health condition, particularly abnormal health test results in the members’ health
profiles, from our data center, and formulate tailored service plans such as monthly health reports,
reminders for abnormal health data, or medication reminders after processing such information.
Back-Office Information Technology Infrastructure
At the back office of our operating systems is our information technology infrastructure
supported by big data and cloud server capabilities, which serve to provide a stable and reliable
framework supporting our frontline business processes and middle-office operations. We have
utilized services from leading international and domestic corporate management solutions
providers to establish our back-office system. Our back-office management system can
accommodate, store and swiftly transmit to our middle office all such data underlying our
middle-office operations, which facilitates our overall review of and decision-making in budgeting,
capital management, warehouse and logistics management, and human resources management.
OUR WAREHOUSING AND INVENTORY CAPABILITIES
As of September 30, 2022, we operated three warehouses from which we provide inventories
to our pharmacies as well as fulfill orders received in our pharmaceutical wholesale business.
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Our Digitalized Warehouses
As of September 30, 2022, we operated three digitalized warehouses in Lanzhou, Gansu

Province, Xi’an, Shaanxi Province and Beijing, with an aggregate GFA of approximately 26,000
square meters. Each of these warehouses is equipped with streamlined order receipt and sorting as
well as stocking and package dispatching capabilities. In addition, each of these warehouses is
equipped with refrigeration capabilities which allow us to stock temperature-sensitive products,
especially certain prescription drug products that are required to be stored between two Celsius
degrees to eight Celsius degrees under GSP requirements. We also adopt stringent quality control
system in each warehouse to optimize operating efficiency and minimize potential product issues
or customer complaints resulting from logistical issues. In addition, our warehouses in Lanzhou
and Xi’an are each equipped with automated order processing and sorting capabilities, with data
analytics tools available to significantly enhance our procurement planning and order fulfillment
efficiency, as well as a smart humidity management system to help us control the storage condition
of our inventory.
Our Inventory Management
We have a warehousing and inventory management system mainly used for real-time tracking
of our procurement needs and inventory level changes. For further details, see “— Technology and
R&D — Our Operating Systems — Middle-Office Operational Centers.” While we maintain excess
inventories to a certain extent to prevent products from being sold out, we have a strict inventory
control management policy and a detailed and centralized merchandise planning system. Our
procurement department is primarily responsible for overseeing our inventories, assisted by our
sales and marketing personnel, with the aim to promote product sales through analysis and
optimization of our product structures. Our corporate level inventory count is conducted on a
monthly basis by our warehouse team, with occasional spot checks, and under the supervision of
our finance team, to further ensure the accuracy of our inventories. At each of our self-operated
offline pharmacies and the franchised offline pharmacies, dynamic inventory checking is conducted
on daily, monthly or annual basis. During the Track Record Period and up to the Latest Practicable
Date, no material losses to our inventories caused by defects in storage conditions have occurred.
SALES AND MARKETING
We have dedicated teams responsible for our sales and marketing activities at both corporate
and storefront levels. As of September 30, 2022, our storefront, sales and marketing team consisted
of more than 4,000 members. At the corporate level, our sales and marketing personnel are divided
into retail and marketing functions, which work together closely to implement our business
philosophy and service objectives, as well as to ensure the implementation of our long-term market
expansion strategies. In terms of our storefront, sales and marketing team at the regional level, our
local storefronts actively participate in the planning of marketing campaigns that are tailored to
specific sales and operation targets, supplementing the overall sales and marketing strategies of
our Group on the corporate level.
Our Sales and Marketing Strategies
We have also developed a set of sales and marketing strategies which focus on bringing more
benefits to our members and encompass online and offline promotional campaigns in collaboration
with pharmaceutical enterprises, health awareness education programs promoting general
community awareness of health and wellness, complimentary disease-specific testing events
targeting customers with relevant chronic diseases, as well as precise membership management
with customized rewards, discounts, and/or exclusive offers to different groups of members. For
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further details, see “— Our Customer Support System — Our Membership Program.” We also
utilize marketing automation tools to efficiently achieve our goals of meeting the precise needs of
our customers. In addition, we collaborate with our suppliers, many of which are renowned
pharmaceutical and medical device manufacturing and distribution enterprises, to leverage our
relationship with them and their sales and marketing resources for the purpose of attracting and
retaining customers. Our suppliers also work with us to offer various promotional programs for our
customers to access our products at more affordable levels. At various conferences and workshops,
we also discuss development trends of the pharmaceutical retail industry with upstream
pharmaceutical companies, which further helps us identify effective sales and marketing strategies.
Acquisition and Retention of Customers
As a testament to our effective sales and marketing strategies, we have witnessed a steady
growth in our customer base. For the years ended December 31, 2020 and 2021 and the nine
months ended September 30, 2022, we generated 31.5 million, 33.9 million and 26.7 million
customer purchase orders, respectively, by all our customers across our omni-channel
pharmaceutical retail operations. During the Track Record Period, we successfully expanded our
member base through our relentless efforts to build our brand and promoting the sales of Fang
through our multiple sales channels. As of December 31, 2020 and 2021 and as of September 30,
2022, we accumulated approximately 5.9 million, 7.4 million and 9.2 million members. During the
Track Record Period, we achieved an average member retention rate of 63.4%. In addition, as of
December 31, 2020 and 2021 and as of September 30, 2022, we accumulated 1.9 million, 2.4
million and 2.8 million Fang members (i.e., members who made purchases pursuant to our
recommended Fang) for the respective periods. As of September 30, 2022, the number of followers
of our WeChat and WeCom accounts was over two million. For further details on our membership
program, see “— Our Customer Support System — Our Membership Program.”
The table below sets forth key information with respect to the acquisition and retention of the
active members in our self-operated business operations in the respective year or period during the

2020 2021 2021 2022
Active members(1) served during each
period (in million) . . . . . . . . . . . . . . . 2.7 2.7 2.4 2.7
Average total spending per active
member during each period (RMB) . . . 508.6 536.5 440.4 466.2
Note:
(1) Active members refer to members that have made one or more purchases with us during the relevant periods. This
table contains relevant information relating only to our active members, instead of all members or all customers.
Our customers may make purchases with us without registering for our membership program. Our system does not
keep any unique identification information for non-member customers. Therefore, we cannot systematically identify
multiple purchases made by the same non-member customer or track the purchase records of non-member
customers. For more information on our membership program, see “— Our Customer Support System — Our
Membership Program.”
We have a particular sales and marketing strategy focusing on the vertical health management
of customers with specific diseases and health problems. As of September 30, 2022, such strategy
allowed us to help customers manage more than 90 common and chronic diseases and other health
problems. Patients can connect with our online medical team for these diseases and health
problems, including general practice and specialty physicians at our Internet hospital capable of
offering tailored medical advice. Under this strategy, we can vertically explore the medical and
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health needs of our customers by tracking their progress after they use our products and services
and continuously uncover their new problems. Leveraging our capabilities of collecting and
analyzing historical sales performance of certain pharmaceutical products, especially medicines
promoted under our single disease management strategy, we gain deep understanding of health
needs of different customer demographics.
OUR CUSTOMER SUPPORT SYSTEM
We believe in the importance of promptly collecting and processing feedback from our
customers for us to continuously improve our service quality and strengthen our customers’ trust in
our brand.
Our Membership Program
We have adopted a uniform membership program throughout our online and offline sales
channels. As of September 30, 2022, the total number of our members reached approximately 9.2
million. A substantial majority of our members registered for our membership program on our
111Yao App and WeChat mini program during their visits to us at our self-operated offline
storefronts. During the Track Record Period, we also accumulated a small number of members
from certain of our franchised pharmacies as we sought to establish a uniform membership system
across our self-operated and franchised pharmacies for more efficient membership management.
See “— Our Physical Presence — Our Pharmacy Network — Our Franchised Pharmacies” for
details on our franchise model. We provide various benefits to our members, not only to express
gratitude for their choice of our products and services, but also to enhance their loyalty and
increase the exposure of our offerings and to recruit new customers to join our membership
program. Our members can accumulate points after making purchases with us, which can be
redeemed at our self-operated pharmacies for certain categories of products time to time. They can
also purchase pre-paid spending cards or service packages associated with their membership
accounts for future purchases with us. Depending on the purchase history and levels of spending in
a given year, we categorize our members into gold, platinum and diamond levels, each with
different levels of benefits corresponding to their accumulated amounts of purchase. Members at
all levels can also enjoy birthday coupons. During the Track Record Period, our membership
program experienced increased popularity and significant growth, with the number of customers
registered for our membership program increasing from approximately 5.9 million as of December
31, 2020, to approximately 7.4 million as of December 31, 2021, and further to approximately 9.2
million as of September 30, 2022.
We also design a series of marketing campaigns and promotional events around our
membership program. For example, we designate certain key dates as our membership promotion
dates, such as Membership Day on the first of every month, “Health Day” on the 11th of every
month, “Men’s Health Day” on January 11, “Women’s Health Day” on November 1, “Children’s
Health Day” on June 1, and “Deshengtang Day” on September 9 of each year. On these
membership promotion dates, we organize themed promotional events and discount activities. We
pick one type of chronic disease each day as the theme for that day to promote products, services
and health information targeting patients with the relevant disease. In addition, we collaborate with
our pharmaceutical enterprise suppliers to design additional promotional programs for our
members. For certain categories of products offered by our suppliers, our members can enjoy
year-long discounts. We also collaborate with our suppliers to arrange health workshops and
disease-specific testing targeting chronic diseases on a complimentary basis for our members.
Through these efforts, we gain trust from our members and enhance their stickiness to our
corporate brand.
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Customers can join our membership program once they choose to register their phone
numbers in our membership program. Since our 111Yao App and our WeChat mini program can
handle the entire customer product purchase process, our members can conveniently view their
membership status on these platforms while completing various transactions with us. Through our
111Yao App and our WeChat mini program, our customers can register with us with one click and
join our membership program automatically. With the aid of our technology tools, we can
synthesize a vast amount of members’ information acquired from different sales channels and
systematically manage such member data. The following screenshots illustrate the interfaces and
key functions of our membership program.
Members of different
levels can check their
membership progress
and respective benefits
from our membership
program
Our Customer Feedback System
Our customer feedback system is closely integrated into our omni-channel sales procedures,
whether offline in our storefronts or online through our 111Yao App, our WeChat mini program,
and our online pharmacies established on third-party platforms. As we are committed to constantly
improving our service capabilities and providing superior customer experience, we value first-hand
feedback from our customers. Immediately after customers make purchases with us, we can follow
up for their assessment of our performance, with the support of our SCRM, which enables us to
understand customer needs, improve our service and offer customers customized products and
consultation services based on their purchase history. We welcome any feedback from our
customers, which we take as constructive criticism for our long-term benefit to continuously
enhance our service and improve customers’ satisfaction of our services. We have a dedicated team
of customer support professionals responsible for call-backs with concerned customers to solicit
their recommendations for our improvement. In addition, our management, sales and marketing,
quality control and human resources teams all actively review and address customer feedbacks in
relation to the quality of our products and services. In this way, our employees can constantly
enhance their performance and service capability.
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As we offer products and services to a vast number of individual customers in the ordinary
course of our business, we have found it inevitable that customer complaints arise in relation to
our products and services as well as other aspects of our operations and corporate management.
We promptly respond to customer complaints and take the opportunity to reflect on any issues in
order to continuously improve our service capabilities. We have also adopted a series of customer
complaint handling policies, procedures and standards in order to effectively address and manage
any complaints received, which we believe are crucial to maintaining or brand image and market
reputation. To address customer complaints, we have a streamlined mechanism to resolve our
customers’ problems with the support of not only our customer support team, but also our
administrative, quality control and other operation departments.
If we receive customer complaints via our multiple sales channels, our front-line customer
support professionals will first handle the complaints. Typically, our customer support
professionals retrieve the relevant purchase or service record and the customer’s health profile, if
available, to understand the nature of the complaint and formulate a preliminary plan to address
the customer’s concern. If a complaint involves the quality of our healthcare product or service,
our licensed physicians and licensed pharmacists become engaged immediately, in order to
understand the nature of the complaint and design a resolution for the problem on site. Generally,
customer complaints can be immediately handled by our medical professionals and customer
support professionals on-site. To a lesser extent, if our on-site or immediate handling of the
complaint is unsatisfactory to the customer, such incident will be reported up to our
corporate-level customer support department for further in-depth review, analysis and follow-up.
We also strive to prevent future instances of customer complaints of a similar nature by

addressing existing complaints swiftly and effectively. After customers purchase our products or
use our services, we send them a customer rating request for them to evaluate their overall
experience with us.
During the Track Record Period, we received a minimal amount of customer complaints in
relation to our product sales. According to our internal policy, upon receiving customer complaints,
we promptly communicate with customers and study the circumstances in which complaints are
raised in order to understand the cause of the complaints. With respect to complaints on product
quality issues, in general, we promptly take remedial measures including proactive
communications with the customer to formulate solutions satisfactory to the customer, refunding
the customer for the relevant product and issuing coupons to the customer, informing relevant
suppliers of the issue, facilitating suppliers with product recalls and replacements, and following
up on quality checks for future batches of product supplies. We generally proactively examine the
root cause of such quality issues and take the initiative to communicate with applicable regulatory
authorities. With respect to complaints received on the quality of our services, in addition to
communicating with customers to satisfactorily address their concerns, we generally conduct
internal service quality reviews and provide relevant trainings to our employees to continue to
optimize our service quality.
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PRICING AND PAYMENT
Pricing
We price our products and service offerings competitively, according to the geographical
locations we operate in and the general local market conditions. The following are some key
pricing strategies that we have typically adopted for our different business categories:
• Omni-channel pharmaceutical retail: We refer to the sales prices recommended by our

pharmaceutical enterprise suppliers and pricing levels of competitive products available
on the market to appropriately price our products. For our branded products, we adopt
pricing levels reflective of our envisioned market position and brand value of each of
the brands.
• Pharmaceutical wholesale: We refer to the sales prices recommended by our

pharmaceutical enterprise suppliers and set our prices at a discount to prices at our retail
operations for our pharmaceutical wholesale customers, mostly our franchisees and some
third-party alliance partners to a lesser extent, as they typically procure the products in
batches from us. Our wholesale supply price is typically set with only a marginal
mark-up from the original procurement price as part of our strategy to develop
long-term collaborative relationships with our franchisees and third-party alliance
partners.
• Wellness management services: We price our wellness management services based on the
service type and length of service, in line with similar services provided in the market.
As we are still in an early development stage of our wellness management service
offerings, we typically do not price higher than average market levels.
• Offline medical consultation services: We price our medical consultation services at our
offline medical clinics primarily with reference to public medical institutions’ pricing of
similar medical consultation services in the same region.
Payment Methods
Direct Payments and Cash Management
Our customers have a wide array of payment options when making purchases of our products
and services, offline and online. We accept cash and as non-cash payments become increasingly
common, we take credit cards, WeChat Pay, Alipay and other online payment methods at our
pharmacies, clinics and wellness centers. During the Track Record Period, customer purchase
orders that were not paid through the national medical insurance scheme or other insurance
arrangements in our omni-channel pharmaceutical retail business category were directly paid by
our customers.
To avoid the misappropriation and embezzlement of cash, we have utilized third party
services to deploy a financial management system at each of our offline pharmacies, clinics and
wellness centers. We also station regional cashier supervisors who are responsible for training the
cashiers at our self-operated storefronts and ensuring that payment received matches the sales
records and cash received is timely transferred to our corporate bank accounts. We also monitor
the accuracy of sales records through business and operation systems installed at all of our
self-operated storefronts. As our customers have become increasingly accustomed to non-cash
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payment methods, cash payment by customers typically represents a small percentage of our
payments received. Any non-cash payments received are typically automatically transferred to our
corporate bank accounts opened at the relevant third-party payment processing platforms within
three business days. During the Track Record Period, we were not aware of any incident involving
cash misappropriation or embezzlement activities that materially and adversely affected our
financial condition, operational results and business prospects.
National Medical Insurance Scheme
Through obtaining the qualifications for our self-operated offline pharmacies to be eligible
for coverage under the national medical insurance scheme, we help customers safeguard their
needs for and access to prescription and OTC drugs. As of September 30, 2022, 855 out of our 931
our self-operated pharmacies in 22 cities and seven provinces were qualified as Designated Retail
Pharmacies under the Interim Measures for the Management of Medical Insurance Designation of
Retail Pharmacies 《 ( 零售藥店醫療保障定點管理暫行辦法》), accounting for 91.8% of all
self-operated pharmacies in our network. As of September 30, 2022, approximately 86.5% of the
products in our omni-channel sales were covered under the national medical insurance scheme.
According to CIC, the coverage by the national medical insurance scheme on our pharmacy
network is markedly higher than the industry average of approximately 80%. Medicinal products
that are on the National Medical Insurance Catalogue (國家醫保目錄) in China and sold at our
offline pharmacies which are Designated Retail Pharmacies are eligible to be paid out directly by
or reimbursed through national medical insurance, with the specific percentage reimbursable
varying according to the product type, customer age, the type of insurance program and different
administration by the local medical insurance bureau. After customers purchase medicinal products
using their national medical insurance card, the local medical insurance bureau generally settles
amounts with us every one to three months according to the local medical insurance policy. For the
years ended December 31, 2020 and 2021 and the nine months ended September 30, 2022, we
generated sales amounts from our product sales paid through the national medical insurance
scheme in the amount of RMB662.0 million, RMB750.5 million and RMB706.6 million,
respectively.
For those pharmacies that are not yet designated as a Designated Retail Pharmacy, which are
mostly new pharmacies recently opened that could not yet meet the length of operation
requirement for the qualification as a Designated Retail Pharmacy, we had been proactively
applying for the relevant qualification during the Track Record Period and up to the Latest
Practicable Date. As of the Latest Practicable Date, no application for any of our newly opened
pharmacies to be qualified as Designated Retail Pharmacies had been rejected and we do not
anticipate any material difficulty in obtaining such qualifications once the relevant pharmacies
meet the length of operation requirement.
Insurance Arrangements
To further safeguard customers’ health management needs and enhance customers’ access to
our product offerings, we collaborate with third parties to extend different insurance programs as
additional medical benefits that can cover customer purchases of pharmaceutical products under
our omni-channel sales initiative. During the Track Record Period, we collaborated with six
insurance companies and insurance solutions providers to coordinate for our customers to obtain
access to medical direct-billing insurance plans. Under such collaborations, we typically agree to
offer certain categories of products available for customers’ purchase through their insurance cards
issued by their insurance companies, and we bill these insurance companies and insurance
solutions providers directly or to a third-party payment processing company with the customers
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only required to cover any out-of-pocket amounts. Products covered under such insurance
arrangements typically include those medicinal products covered under the respective insurance
policy offered by the insurance provider to the relevant policyholder, who becomes our customer
when they visit our offline pharmacies. Our billing term with the insurance provider collaboration
partners is typically 30 days. In this way, we can broaden our means to acquire customers as the
insurance companies and insurance solutions providers that we collaborate with direct their
policyholders to our pharmacies. We help insurance provider collaboration partners to achieve
increased popularity of the insurance products offered to eligible policyholders, while reducing
transactional costs incurred at the individual payment processing stage and enhancing operational
efficiency with a shortened insurance claim review process.
For the years ended December 31, 2020 and 2021 and the nine months ended September 30,
2022, we generated sales amounts of customer product purchases paid through insurance
arrangements in the amount of RMB6.9 million, RMB23.4 million and RMB27.5 million,
respectively.
Pre-paid cards
During the Track Record Period, we sold pre-paid cards to our members primarily for
discounted access to wellness management service offerings. Our pre-paid cards are popular
among customers who prefer to purchase multiple wellness management service sessions all at
once as they choose the specific pre-paid amounts according to their needs. Customers can use
such pre-paid card when checking out for our services at our wellness centers. We typically do not
impose an expiration date or any restriction on spending location for our customers to use such
pre-paid cards. During the Track Record Period, we did not recognize any forfeited income from
any unused pre-paid cards by customers.
CUSTOMERS
During the Track Record Period, the majority of our revenue was generated from our
omni-channel pharmaceutical retail business. Our products are primarily offered via our
omni-channel pharmaceutical retail network, as individual customers make purchases with us at
our offline pharmacies and via our online O2O and B2C sales channels. In addition, customers
make purchase of our healthcare services, including our medical consultation services and wellness
management services, at our medical clinics and wellness centers. Due to the nature of our
business, our customer base is primarily composed of individual customers that purchase the
products and services that we offer. Our customer base of individual customers is highly
diversified, with nominal revenue contributions from each individual customer during the Track
Record Period.
During the Track Record Period, we also sold products to corporate customers in our
pharmaceutical wholesale business as we supplied products primarily to our franchisees and also,
to a much smaller extent, certain other third-party pharmaceutical retailers, although our revenue
generated from our pharmaceutical wholesale business accounted for a small portion of our overall
revenue and revenue contribution from any single customer in our pharmaceutical wholesale
business was immaterial. During the Track Record Period, our five largest customers were
customers from our pharmaceutical wholesale business category, who were all independent third
parties. None of our top five customers accounted for more than 0.5% of our total revenue during
the Track Record Period. For the years ended December 31, 2020 and 2021 and the nine months
ended September 30, 2022, revenue from our top five customers accounted for 0.8%, 0.7% and
0.7% of our total revenue, respectively, and revenue from our largest customer accounted for 0.3%,
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0.3% and 0.3% of our total revenue for each respective year or period. As of the Latest Practicable
Date, none of our Directors, their close associates or any Shareholders who, to the best knowledge
of our Directors, owned more than 5% of our issued share capital or had any interest in any of our
five largest customers. During the Track Record Period, there was no overlap between our five
largest customers and our suppliers.
SUPPLIERS AND PROCUREMENT
Owing to our broad selection of pharmaceutical, healthcare and wellness products and
services, we procure a wide variety of products, primarily including the products we sell in our
omni-channel pharmaceutical retail business. During the Track Record Period, we made purchases
from more than 700 suppliers. We also leverage our supplier network entailing large, medium and
small pharmaceutical and medical device manufacturers and distribution companies to identify
suitable products that are competitive in quality and pricing while meeting our various sales and
operational needs. As pharmaceutical company suppliers benefit from our understanding of
customer pain points and insights into customers’ receptiveness of different lines of products, we
have formed a healthy cycle of identifying suitable products that meet our procurement needs from
collaboration with these suppliers.
We recognize the importance of our supply quality and stability. Therefore, we adopt a
well-tested supplier selection system. Our suppliers are selected based on a variety of factors,
including their background, qualification, reputation, pricing, business scale, quality management
capabilities and overall services. All new suppliers must go through our internal supplier admission
process before entering into supply agreements with us. In addition, we conduct re-evaluation and
updated assessment of our existing suppliers upon contract renewal. We also regularly monitor and
review the performance of our suppliers.
We have maintained stable and long-term relationships with our major suppliers as we value
the length and depth of our collaborations with them. For the years ended December 31, 2020 and
2021 and the nine months ended September 30, 2022, purchases from our five largest suppliers
accounted for RMB638.1 million, RMB867.0 million, and RMB682.4 million, representing 48.2%,
52.8% and 53.9% of our total purchases for the respective year or period. The following tables set
forth key information about our five largest suppliers in terms of purchases (in descending order)
in the years of 2020 and 2021 and the nine months ended September 30, 2022, respectively:
For the year ended December 31, 2020

Year of
Commencement
of Business
Relationship Amount of % of Total
Ranking Suppliers with Us Principal Business Products Purchased Purchase Purchases Payment method
(RMB in
million)
1 Supplier A 2009 Wholesale of pharmaceutical, medical Prescription and 254.7 19.2% Bank’s acceptance
device and wellness products, OTC drugs, and telegraphic
distribution and logistics services, and wellness products transfer
pharmaceutical retail and e-commerce
2 Supplier B 2010 Wholesale and retail of pharmaceutical, Prescription and 137.3 10.4% Bank’s acceptance
healthcare and medical device OTC drugs and telegraphic
products, and supply chain services transfer
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Year of
Commencement
of Business
(RMB in
million)
3 Supplier C 2005 Wholesale and retail of pharmaceutical, Prescription and 89.4 6.8% Bank’s acceptance
wellness and medical device products, OTC drugs, and telegraphic
supply chain services, pharmaceutical wellness products transfer
R&D and medical device
manufacturing
4 Supplier D 2005 Wholesale of pharmaceutical, wellness Prescription and 85.8 6.5% Bank’s acceptance
and medical device products, and OTC drugs and telegraphic
distribution and logistics services transfer
5 Supplier E 2005 Wholesale and retail of pharmaceutical, Prescription and 71.0 5.4% Bank’s acceptance
wellness and medical device products OTC drugs, and telegraphic
wellness products transfer
Total 638.1 48.2%

Year of
Commencement
of Business
Relationship Services/Products Amount of % of Total
Ranking Suppliers with Us Principal Business Purchased Purchase Purchases Payment method
(RMB in
million)
3 Supplier F 2005 Manufacture and wholesale of Prescription and 164.3 10.0% Bank’s acceptance
pharmaceutical, healthcare, wellness OTC drugs, and telegraphic
and medical device products wellness products transfer
manufacturing
Total 867.0 52.8%
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For the nine months ended September 30, 2022

Year of
Commencement
of Business
(RMB in
million)
manufacturing
5 Supplier F 2005 Manufacture and wholesale of Prescription and 97.0 7.7% Bank’s acceptance
pharmaceutical, healthcare, wellness OTC drugs, and telegraphic
and medical device products wellness products transfer
Total 682.4 53.9%
All of our five largest suppliers during the Track Record Period were independent third
parties. None of our Directors or any Shareholder who, to the knowledge of our Directors, owns
more than 5% of our issued share capital immediately following completion of the [REDACTED]
(but without taking into account the exercise of the [REDACTED]) nor any of their respective
associates had any interest in any of our five largest suppliers during the Track Record Period.
During the Track Record Period, our five largest suppliers granted us credit periods ranging
from 60 to 90 days. Our supply agreements with suppliers are generally renewed on an annual
basis and we generally require that our suppliers adopt our standard terms for the supply
agreements. These supply agreements set forth the standard criteria, the key performance metrics
we require to evaluate the capacity of the supplier and the quality of their products and services,
the delivery schedule and terms of pricing and payment. Our suppliers typically charge us upon
delivery of the procured supplies based on the delivery schedule and payment terms set forth in the
relevant supply contracts. We typically receive favorable pricing arrangements from suppliers from
whom we procure frequently and in bulk. Long-term suppliers often consider us as a strategic
partner and offer us various promotional arrangements when we achieve an agreed-upon sales
volume. We leverage our economies of scale and industry resources in managing our relationship
with suppliers to obtain favorable terms from suppliers (including pricing terms, credit period and
volume-based rebates). In addition, suppliers support us in marketing events, promotional displays
of products at our pharmacies and advertisement to continuously facilitate our product sales.
Suppliers further provide value for us in offering
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complimentary health check-up tests for our chronic disease patients, health awareness seminars
for customers, medical and medicinal knowledge trainings for our employees, and customized
product packaging for the products offered in our omni-channel pharmaceutical retail business.
Set forth below is a summary of key terms in the supply agreements that we typically enter
into with our suppliers as to pharmaceutical, healthcare and wellness products.
• Term: We generally renew our supply agreements with suppliers of mainstream

pharmaceutical companies and specific purchase agreements on an annual basis,
depending on our specific procurement plans.
• Product price: We purchase relevant products from our suppliers at competitive prices
and hold our suppliers responsible for maintaining market prices for the relevant
products. Any increase in product prices must be approved through prior communication
with us.
• Supply: We require suppliers to provide goods to meet our omni-channel sales demand.
In the event that our warehouse or storefronts are out of stock due to the supplier’s
failure to supply, the supplier is required to reimburse a specified percentage of the
aggregate sales loss to us.
• Warranties: Our suppliers, especially pharmaceutical companies, will ensure that the
products supplied meet quality standards, including compliance with national
pharmaceutical and medical standards.
• Product return: If there is any problem associated with product quality, we have the
right to unconditionally return the product and the supplier will bear the corresponding
return costs, including logistics costs, price difference subsidies, etc. If sales of newly
launched products by the supplier experience more than three months of non-movement
in our sales channels, we will have the right to unconditionally return the goods at the
supplier’s cost.
• Credit term: Our suppliers typically grant us credit terms ranging from 60 days to 90
days, depending on our length and extent of collaboration.
• Termination: We typically have the right to terminate a supply contract when our
suppliers fail to cure a material breach within a certain period of time. We may also
terminate a supplier contract if the quality of products does not meet the required
specifications or the delivery is materially delayed.
• Payment: We typically pay our suppliers via wire transfer or bank draft.
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During the Track Record Period and up to the Latest Practicable Date, we did not encounter
any material dispute with our suppliers or any material breach of our supply contracts or
agreements. To the best of our knowledge, as of the Latest Practicable Date, we were not aware of
any information or arrangement that would lead to the termination of our relationship with any of
our major suppliers. We believe we have sufficient alternative suppliers that can fulfill our
requirements for products of comparable quality and price. During the Track Record Period, we
occasionally experienced delay in our supplies under the impact by the COVID-19 pandemic, as
some of our suppliers experienced reduced production and supply capacity. We did not experience
significant fluctuations in the supply price and were able to procure from alternative suppliers as
needed. The pandemic’s overall impact on our supply chain is limited. For more details, see
“Financial Information — Impact of the COVID-19 Outbreak on Our Operations.” During the
Track Record Period, none of our major suppliers was also our customer.
Across our business categories that generate procurement needs, including our omni-channel
pharmaceutical retail and pharmaceutical wholesale businesses, we adopt a corporate-level
centralized procurement process according to our overall budgets, remaining inventory levels
across our warehouses and storefronts, our strategic decisions to promote certain products based on
market analyzes and our business relationships with different suppliers. Most of our procurements
are completed after a careful price review and comparison process. Our procurement department
identifies suitable suppliers, with strong market recognition and preferably a track record of
successful transactions with us in the past, and then invite and compare quotations from these
suppliers. After a careful review and negotiation of the prices quoted, taking into consideration any
value-adding complementary services or benefits that each supplier can offer, we enter into
procurement agreements on commercial terms such as price and quantity.
INTELLECTUAL PROPERTY
We develop and use a number of methodologies, analytics, systems, technologies, trade

secrets, know-how and other intellectual property during the conduct of our business. As of the
Latest Practicable Date, we had a variety of registered trademarks, trademark applications,
registered patents, patent applications and software copyrights in mainland China to protect our
intellectual property, of which we owned eight patents relating to the design of our branded
products. See “Appendix VI — Statutory and General Information — B. Further Information about
Our Business — 2. Intellectual Property Rights of Our Group” in Appendix IV to this Document
for further details of our material intellectual property rights. During the Track Record Period, we
also maintained various licenses to use the intellectual property of third parties, such as our right
to use the image of our brand ambassador. During the Track Record Period and up to the Latest
Practicable Date, we had not been subject to any intellectual property infringement claims which
had any material adverse impact on our Group.
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EMPLOYEES
As of September 30, 2022, we had a total of 5,441 employees in our Group, comprising 4,452
employees in Gansu Province and 989 employees in other regions. Among our 5,441 employees as
of September 30, 2022, 5,177 were full-time and 264 were part-time employees. Among our
employees, 3,456 held a vocational college degree or higher, accounting for approximately 63.5%
of our total employees, and 604 held a bachelor’s degree or higher, accounting for approximately
11.1% of our total employees. 1,176 or our employees had professional experience in the health
management and healthcare solutions industry for more than five years, accounting for 21.6% of
our total employees, with experiences encompassing medical consultations, pharmaceutical retail,
wellness management, and pharmaceutical wholesale. The table below sets forth the numbers of
our employees according to their functions as of September 30, 2022.
% of total
Number of number of
employees employees
Supply Chain and Quality Control. . . . . . . . . . . . . . . . . . . . . . 284 5.2%
Management, Administration and Finance . . . . . . . . . . . . . . . . 194 3.6%
Technology and R&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 1.4%
Licensed Physicians Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 3.4%
Storefront, Sales, Marketing and Others(1) . . . . . . . . . . . . . . . . 4,700 86.4%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,441 100.0%
Note:
(1) Our storefront, sales, marketing and others team includes our 1,088 licensed pharmacists as of September 30, 2022,
as our licensed pharmacists were primarily on-site at our self-operated offline pharmacies.
In compliance with applicable labor laws, we enter into individual employment contracts with
our employees covering matters such as wages, bonuses, employee benefits, workplace safety,
confidentiality obligations, non-competition and grounds for termination. To remain competitive in
the labor market, we provide various incentives and benefits to our employees. In accordance with
applicable PRC regulations, we have made contributions to social insurance funds, including
pension plans, medical insurance, work-related injury insurance, unemployment insurance,
maternity insurance, and housing provident funds for our employees. See “Risk Factors — Risks
Related to Our Business and Industry — Failure to make adequate contributions to social
insurance and housing provident fund for our employees as required by the PRC regulations may
subject us to penalties.” In support of our growth, we regularly review our capabilities and make
adjustments to our workforce to ensure we have the right mix of expertise to meet the demand for
our services. We believe that our reputation, work environment, training system, remuneration
package and employee incentive scheme are advantages that attract qualified candidates. During
the Track Record Period, we have primarily employed a direct recruitment policy. We aim to
attract competent sales and marketing personnel for our omni-channel operations and mid-level to
senior personnel with experience from large pharmaceutical retailers, pharmaceutical companies
and information technology companies by offering competitive compensation packages. In
addition, for certain employees with outstanding historical performance records at our
self-operated pharmacies, we offer enhanced incentive packages with such employees’
compensation linked to their achievement of sales targets, which in turn can effectively improve
our financial performance and operational results at the relevant pharmacies.
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We invest in continuing education and training programs, including internal and external
training, for our management staff and other employees to upgrade their skills and knowledge. Our
periodic on-the-job training covers streamlined technical know-how of our integrated services,
environmental, health and safety management systems and mandatory training required by
applicable laws and regulations. In particular, we require all of our employees, especially those
involved in sales and marketing and business development activities, to abide by our anti-bribery
and anti-corruption compliance requirements and applicable laws and regulations to eliminate
bribery and corruption risks. We provide regular training on anti-bribery and anti-corruption
compliance requirements, regulatory updates and practical points to our employees to ensure their
compliance.
We provide diverse training courses and professional development programs to our medical
professionals, especially our licensed physicians, covering general and specialized medical
knowledge, our corporate values, technology and operation systems, and communication skills. We
founded the Fangdao Academy, our internal research institute, in 2019. Our Fangdao Academy, in
addition to being responsible for the development of Fang, offers academic programs for our
management members and employees to gain insight into the overall healthcare industry, analyze
policy trends, develop new service innovations, and continue their professional development. In
addition, we invite industry experts, including senior medical and pharmaceutical experts at
pharmaceutical enterprises, to periodic academic exchanges and communications with the medical
professionals at our Fangdao Academy, continuously honing our medical professionals’ medicinal
knowledge. With corporate and academic experts, Fangdao Academy carries out various projects
with the goal of researching, designing, innovating, digitizing and optimizing healthcare services
that suit people’s evolving health needs. Over the years, our Fangdao Academy has also
undertaken the responsibility of researching and putting together training programs for our medical
professionals related not only to pharmaceutical and medical knowledge, but also to marketing
strategies, our corporate culture, and business management skills, which help enhance our medical
team’s capability to provide quality services to our customers. Our medical professionals are all
required to be trained and evaluated by our Fangdao Academy before they are on boarded as well
as throughout their careers with us, and through such periodic performance evaluations, we can
provide feedback on their performance for their continuous improvement.
We did not experience any material labor disputes or any material difficulty in recruiting
employees for our operations during the Track Record Period and up to the Latest Practicable
Date.
PROPERTIES
Our Proprietary Properties
We own certain real properties in China which are used for our corporate offices, our offline
operations and our warehouses. As of September 30, 2022, we owned land use rights to 35
properties with an aggregate area of approximately 21,800 sq.m. As of September 30, 2022, we
obtained land use right certificates for all our proprietary real properties.
Our Leased Properties
Our leased properties are used for, including but not lmited to, our corporate headquarters,
our corporate offices, offline operations and warehouses. As of September 30, 2022, we had leased
910 properties in China which are used for our offline operations, with an aggregate GFA of
approximately 160,000 sq.m. The lengths of our lease agreements vary, depending on the purpose
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of the lease, our plan for using the leased property and the land ownership. Our current lease
agreements generally expire between five to ten years. It is our belief that our existing leased
properties are sufficient to meet our current business and operation needs. As our business grows
in scope and scale, we plan to seek additional space to accommodate our business growth and the
expansion in our operations, number of staff, and newly acquired equipment and facilities. See
“Risk Factors — Risks Related to Our Business and Industry — Certain leased properties used as
our premises could be challenged by the respective regulatory authorities or other third parties,
which may cause interruptions to our business operations” and “Risk Factors — Risks Related to
Our Business and Industry — Certain of our lease agreements with respect to our leased properties
have not been registered with the respective regulatory authorities as required by relevant PRC
laws and regulations, which may expose us to potential fines.”
As of September 30, 2022, no single property interest forming part of our non-property
activities as defined under Rule 5.01(2) of the Listing Rules had a carrying amount of 15% or
more of our total assets. As such, according to section 6(2) of Companies (Exemption of
Companies and Prospectuses from Compliance with Provisions) Notice (Chapter 32L of the laws
of Hong Kong), this Document is exempted from compliance with the requirements of section
342(1)(b) under paragraph 34(2) of the Third Schedule to the Companies (Winding Up and
Miscellaneous Provisions) Ordinance, which requires us to include a valuation report for any of
our interests in land or buildings.
INSURANCE
We have obtained different types of insurance policies to protect ourselves from unexpected
events and business risks. We maintain medical liability insurance for our Internet hospital, TCM
clinics and our general outpatient clinic, with the insurance coverage of a maximum of RMB10
million in aggregate for each year of coverage and of a maximum of RMB0.1 million for each
individual incident under which medical liability claims are successfully brought against our
medical professionals. During the Track Record Period and up to the Latest Practicable Date, we
did not experience any medical liability incidents, nor did we make any medical liability insurance
claim. We have also purchased commercial accidental injury insurance for our warehouse
employees to cover the situation where they are injured at work. In addition, we provide social
security insurance (including medical insurance, pension insurance, unemployment insurance,
maternity insurance and work-related injury insurance) to our employees in accordance with
relevant PRC laws and regulations. While our Directors consider that our existing insurance
coverage is sufficient for our present operations, our insurance coverage may be insufficient to
cover any claim for product liability, or damage to our fixed assets. Any liability or damage to, or
caused by, our facilities or our personnel beyond our insurance coverage may result in our
incurring substantial costs and a diversion of resources. See “Risk Factors — Risks Relating to
Our Business and Industry — We may not have sufficient insurance coverage and may not be able
to cover part or all such costs incurred in relation to relevant claims, which could subject us to
substantial amounts of expenses.”
QUALITY CONTROL
Our dedicated and independent quality control team is primarily responsible for establishing
and maintaining our quality control management system, managing and eliminating quality-related
risks, inspecting product and service quality and reviewing suppliers’ qualifications.
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Product Quality Control
We believe that the ability to offer quality and safe products is crucial to the success of our
omni-channel pharmaceutical retail business. We impose stringent quality control measures in
prescription review and confirmation as well as product storage, display and maintenance at our
offline pharmacies. For example, we have procedures mandating that prescription and OTC drugs
must be displayed separately and that prescription drugs cannot be placed on open shelves. We
also carefully select our inventory and do not display any product that we suspect of having
quality issues. We implement product quality assessment and control procedures in compliance
with applicable PRC laws and regulations, including the Product Quality Law 《 ( 產品質量法》), the
Drug Administration Law 《 ( 藥品管理法》), the Regulations for the Implementation of the Drug
Administration Law 《 ( 藥品管理法實施條例》), the Drug Administration Quality Management
Standards 《( 藥品經營質量管理規範》) and the Drug Distribution Supervision and Administration
Measures 《 ( 藥品流通監督管理辦法》). For our branded products, we carefully examine requisite
licenses and certifications of our OEM partners, including compliance with the GMP, before
engaging them to produce our branded products, and we periodically inspect product samples to
prevent defective products from being distributed into our sales channels.
Quality control is also an essential part of our supply chain management protocols. We
carefully select capable, reputable and resourceful suppliers in order to reduce the risk of products
that do not meet the requirements under the GSP. As part of our supplier selection process, we
have dedicated personnel to conduct due diligence on the supplier’s background, including
checking their requisite qualifications (such as the GMP) and reviewing their historical fulfillment
rates, and also periodically inspect the logistics chain through which our suppliers deliver products
to our warehouses to reduce the risk of products being damaged or lost during transportation. After
the products are delivered to our warehouses, we also randomly inspect products as they are stored
in our warehouses and as they are delivered to our individual pharmacies. For example, our quality
control team periodically visit our warehouses and storefronts to examine whether our pharmacy
operation complies with the relevant requirements under the GSP. We are focused on identifying
the fundamental cause of, and the responsible individuals for, any problems found in our quality
checking process and properly addressing them by enhancing our internal measures.
Our non-drug products can generally be returned in their original and packaged condition
within seven days of purchase from our offline pharmacies or confirming receipt of the product if
purchased through our online channels, which complies with relevant laws and regulations related
to consumer protection in China. Drug products including prescription and OTC drugs and TCM
decoction pieces generally can only be returned or exchanged if the products have quality issues.
We adopt strict follow-up review measures for returned products to reduce the risk that defective
or damaged returned products are resold to other customers.
During the Track Record Period and up to the Latest Practicable Date, we were not subject to
administrative or regulatory investigation, claim, proceeding, penalty or sanction in relation with
any products that do not meet the requirements under the GSP, nor did we receive any material
product returns or customer complaints in relation to any defective product, counterfeit product or
unsafe drug products.
Service Quality Control
We have implemented a series of service quality control measures to address our provision of
medical consultation and wellness management services. We implement standard and uniform
operating procedures for our licensed physicians, licensed pharmacists, therapists, health exercise
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coaches and other customer support professionals for their provision of services both offline and
online. We regularly review the performance of our personnel through various means including
random checks, customer feedbacks and periodic performance reviews. Our employees understand
their service quality and aspects of performance that require improvement from the constantly
updated performance metrics of our offline self-operated pharmacies in terms of key performance
metrics. In order to continuously improve the service quality of our personnel, we arrange
specialty and professional skills training from time to time. We also have policies strictly
prescribing hygiene, ventilation and operational safety standards to reduce the risk of exposing our
customers to injuries while they are receiving our services.
During the Track Record Period, we were not subject to any administrative or regulatory
investigation, claim, proceeding, penalty or sanction in relation to the quality or safety of our
service offerings, or any medical liability or professional liability claims that materially and
adversely affected our financial condition, operational results and business prospects.
COMPETITION
We operate in China’s health management and healthcare solutions market, which is highly
competitive, according to CIC. The health management and healthcare solutions market in China is
also dispersed among different regions and fragmented in terms of the types of products and
services offered by market players, as they have different business focuses along the healthcare
value chain, according to CIC. As our full suite of product and service offerings mainly span
across medical consultations, pharmaceutical retail and wellness management services, we compete
with market players offering all or part of such products and services in China. Key factors
affecting our competitiveness include: market recognition of our brand, quality of our product and
service offerings, execution of our operational and sales strategies, our supply chain capabilities,
acquisition and retention of our professionals, and progress on our digitalization efforts. For more
details on the industries in which we operate and compete, see “Industry Overview.” As the
competitive landscape of China’s health management and healthcare solutions industry continues
to evolve, we believe that we are well positioned to compete effectively based on the
aforementioned factors. However, some of our current and potential competitors may have greater
financial, industry, business or technology resources than we do, and their product or service
portfolios may outperform ours. See “Risk Factors — Risks Relating to Our Business and Industry
— Our success is dependent on our ability to compete effectively and successfully against current
and future industry and market competitors.”
SEASONALITY
We experience seasonality in line with general movements in China’s health management and
healthcare solutions industry as reflected in our financial condition and operational results. Major
factors that cause seasonality include holiday seasons in China and weather changes across
different geographical regions in China. During the Track Record Period and up to the Latest
Practicable Date, we did not experience any major seasonality that materially affected our financial
performance or operational results. During the Track Record Period, we generally witnessed
increased amounts of sales in northern parts of China during winter seasons. We also experienced
increased customer traffic and sales volume around public holidays (such as the Chinese New
Year) or other important dates for marketing events (such as “Deshengtang Day” on September 9,
“Men’s Health Day” on January 11, “Women’s Health Day” on November 1, “Children’s Day” on
June 1, and other dates when we arrange promotional events for our members), when we
conducted special promotional campaigns during the Track Record Period.
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE MATTERS
ESG Governance
Led by the Board of Directors, we are fully committed to integrating ESG considerations into
our business operations for sustainable growth and better business resilience in response to the
transition to a low-carbon economy. A robust ESG governance structure lays a solid foundation to
our long-term development and creation of sustainable value to our key stakeholders. The Board of
Directors has the overall responsibility for oversight of ESG issues with an emphasis on the
alignment with the Group’s future development and positioning. With clear directions, objectives
and priorities, the Board of Directors oversees a broad range of ESG issues, including ESG
strategy and management approach, ESG policy and practice, ESG-related risk management, and
review of progress made against metrics and targets to assess and manage material ESG-related
risks (including climate-related risks).
Delegated by the Board of Directors, an executive-level ESG working group, consisting of

senior management from departments including but not limited to human resources, administration
and development, marketing and branding, and internal control, has been established to drive the
planning and implementation of the Group’s ESG-related matters in our daily operations. The ESG
working group is responsible for advising and reporting to the Board of Directors on the following
ESG-related matters not less than twice a year:
• development, implementation, and review of the Group’s ESG framework, strategy,

management approach, and initiatives;
• formulation of an effective ESG risk management and internal control mechanism;
• identification, assessment, prioritization, and management of material ESG-related risks

and opportunities (including but not limited to climate-related risks and ESG risks along
supply chain);
• formulation, implementation, and review of ESG-related policies, practices, and action

plans;
• monitor and review of the Group’s ESG performance and progress against the metrics
and targets;
• monitor and review of key ESG trends in legislation, regulation, and litigation;
• review and evaluation of the effectiveness of the Group’s stakeholder engagement

channels; and
• preparation of an annual ESG report for the Board of Directors’ approval.
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Identification, Assessment, and Management of ESG-related Risks and Opportunities
We recognize that our business is exposed to ESG-related risks as well as opportunities. The
material ESG-related risks and opportunities are identified, assessed, and managed by our ESG
working group at least once a year. Corresponding strategies have been formulated and
implemented to mitigate material ESG-related risks and capture potential ESG-related
opportunities at various business levels. The Board of Directors regularly reviews the effectiveness
of the ESG risk management process and provide guidance when necessary. Set forth below are
summaries on our assessment results and management strategies of certain identified ESG-related
risks and opportunities.
ESG-related Risks
Climate-related Risks
Acute Physical Risk: extreme weather events, such as increased severity and frequency of
extreme weather events e.g., rainstorms, snowstorms, floodings, and typhoons.
• Potential impacts:
— damages to our offices, warehouses, and storefronts; and
— disruption to logistics service and delivery networks, resulting in delays or even

damages to our products
• Our response:
— we pay close attention to the weather forecast and remind our staff to take
preventative measures; and
— we regularly carry out safety inspections that examine the work-related safety
hazards
Chronic Physical Risk: long-term changes in weather patterns and the climate, such as
sustained high temperatures and sea-level rise.
— medication instability of medicinal products that require cold storage; and
— increased risk of heat stroke for employees working under high temperature.
• Our response:
— we have established a set of product quality policies and procedures regarding the
storage, transportation, and inspection of our medicinal products to ensure our
product quality; and
— we offer subsidies to employees working under high temperature.
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Policy and Legal Risks: evolving climate-related laws and regulations in transition to a
lower-carbon economy.
— increased compliance costs and litigation risks; and
— asset impairment and early retirement of existing assets due to policy changes.
• Our response:
— we regularly monitor the latest regulatory changes in laws, policies, and

regulations to ensure compliance.
Social Risks
Product Quality: inferior, counterfeit, diverted and other illicit medicinal products due to
failure in product quality management.
— potential harm to customers’ health and our credibility
• Our response:
— we have established a quality management system governing the process of

identification, analysis and evaluation, and control of potential hazards of
medicinal products to safeguard the drug safety and effectiveness;
— we have adopted a drug electronic supervision code system for specified drugs to
enhance product traceability and facilitate subquality product recall; and
— we regularly evaluate and monitor the supplier’s performance based on product

quality.
Business Ethics: corruption and dishonesty activities committed by our employees and
business partners.
— subject the Group to anti-corruption and anti-bribery law liabilities;
— potential investigation and/or prosecution that could lead to business disruption,

legal cost, and penalties; and
— potential damage to our reputation and brand image.
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• Our response:
— we have established a set of internal policies and procedures relating to

anti-corruption, anti-bribery and anti-money laundering activities;
— we regularly arrange anti-corruption trainings to raise the employees’ awareness on

the importance of compliance and business ethics;
— we have established a whistleblowing channel for stakeholders to raise concerns

regarding suspected or actual improprieties or any behaviour that may constitute
misconduct, malpractice or irregularities; and
— our compliance team has established a systematic investigation process to review,

record and report suspected violations. Proper corrective actions will be taken if
necessary.
ESG-related Opportunities
Long Term
Product and Service Quality: higher demand for smart and innovative healthcare products
and services.
— accelerated adoption of digital health technologies;
— reduced operating costs without sacrificing the quality of healthcare services; and
— enhancing our customer acquisition efforts and increasing customers’ stickiness to

us.
• Our response:
— we offer high quality health screenings and simultaneously generated and stored
personal electronic health records (EHRs), which contain patient medical history,
medication record, and health data;
— our Internet hospital allows our medical professionals to evaluate, diagnose and
treat patients based on their EHRs;
— we enable proactive and preventive healthcare by providing personalised health

advice on dietary regimens and disease prevention; and
— we provide technology-based and accessible chronic disease management service to

support customers’ unique care needs.
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Short to Medium Term
Resource Efficiency: adoption of equipment with higher energy efficiency and better
operational management.
— reduced operating costs.
• Our response:
— we plan to gradually replace our vehicle fleet with electrical vehicles;
— we prioritize the procurement of energy-efficient equipment; and
— we have replaced paper-based invoicing and receipt issuing systems with electronic
alternatives to reduce paper usage and improve our operational efficiency.
ESG Policy
We are dedicated to promoting health and well-being in the communities where we operate,
as well as environmental health by minimizing our environmental impacts, while providing a
long-term value to our [REDACTED] and Shareholders, employees, customers, suppliers, and the
community at large. We have established a Group-level ESG policy complemented by a set of
measures and initiatives to guide action, drive performance, and create impacts to advance our
sustainability journey.
Environment
We believe that a healthy planet is essential to human health and the sustainability of our
business. Despite that our business operations do not involve manufacturing and would not create
significant adverse impact to the environment, we strive to reduce our environmental footprints
and become a positive force to our environment for creating a sustainable future. With a focus on
reduction of emissions, conservation of resources, and reduction of waste arising from our
operations, our environmental policy has outlined our green practices and measures including but
not limited to the following (as far as practicable):
• adopting non-chlorofluorocarbon (non-CFC) refrigerants when storing medicinal

products under refrigerated conditions;
• prioritizing the purchase and use of electric vehicles;
• promoting the use of virtual meetings or conference calls in place of face-to-face

meetings;
• adopting energy-efficient equipment for offices and storefronts;
• collecting and sorting non-hazardous waste at designated areas before disposal;
• sending expired pharmaceutical products that may not be returnable for centralized
disposal by appropriate authorities or licensed service providers;
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• requiring employees to switch off unnecessary lighting and electrical equipment when
not in use;
• encouraging double-sided printing;
• reducing the use of paper by implementing a digital invoice system within our business
operation;
• reducing the use of energy by setting appropriate temperature thresholds for air
conditioning systems to turn on;
• repairing water faucets in a timely manner to prevent leakage; and
• incorporating environmental considerations during procurement, such as the

prioritization of materials that are more durable, reusable, or made of recycled or
sustainable materials.
Our operations are subject to various environmental protection laws and regulations. See
“Regulatory Overview — Regulations Relating to Environmental Protection” for more details.
During the Track Record Period and up to the Latest Practicable Date, we were not imposed any
administrative penalties or fines in relation to any violation of environmental protection laws and
regulations in China.
Social
We believe we have a responsibility to improve access to health for people and communities.
We are committed to fostering a culture that upholds equality, diversity, health, and well-being for
our workforce. Guided by our “supplier code of conduct”, we strive to work with suppliers that
share our ESG commitments to improve sustainability and encourage sound ESG practices in our
supply chain. Our social policy has outlined our socially responsible practices and measures
including but not limited to the following (as far as practicable):
• upholding principles of equal opportunity, diversity and inclusiveness in all aspects of

employment, including compensation, recruitment, promotion, benefit and welfare;
• protecting employees’ health and safety across all levels of business operation by
establishing health and safety policies and emergency response plans covering safety
measures, the process of documentation and handling of safety incidents, and each
department’s responsibility, to minimize the risk of workplace incidents, injuries, and
fatalities;
• providing internal and external training to equip employees with professional

knowledge, skills and competence;
• strictly prohibiting recruitment and use of child labor and any forms of forced labor;
• establishing a comprehensive product management mechanism covering procurement,

transportation, inspection, information management, storage and delivery to ensure
product quality and safety;
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• adhering to responsible marketing and promotion principles to prevent false and

misleading product information;
• encouraging our suppliers to provide environmentally friendly products;
• evaluating the performance of supplier regularly to minimize ESG risks of supply chain;
• prioritizing data security and user privacy by establishing internal data protection
management system to ensure high standards of information security and data
protection; and
• establishing whistle-blowing channels and handling procedures that allow our employees
and suppliers to report any suspected or actual fraud, corruption, illegal acts, or
unethical practices.
During the Track Record Period and up to the Latest Practicable Date, we did not experience
any material accidents in the course of our operations, nor were we subject to any material claims
for personal or property damages or compensation paid to employees.
Community Investment
Guided by our corporate vision and purpose, we are fully committed to enabling access to
healthcare and advancing health and well-being in the local communities in which we operate with
an aim to build healthier, stronger communities to create long-lasting societal impacts. Our key
philanthropic social investments during the Track Record Period and up to the Latest Practicable
Date were summarized below:
Combating the COVID-19 pandemic
We strived to aid the communities that were affected by the COVID-19 pandemic. We made
donations to local government bureaus and non-governmental organizations in the form of money,
sanitizers, masks, medications and personal protective equipment.
Championing health and well-being
We have actively improved the awareness of the community about health and well-being. In
particular, we provided free medical consultation services, donated medicine, and distributed
materials containing wellness information to the elderly and the people who are in need. In
addition, we arranged health awareness seminars, covering various health related topics to improve
the awareness and knowledge of the society on health and well-being.
Other charitable activities
We have participated in different kinds of charitable and volunteering activities related to

health, education, and culture. We visited kindergartens to express our care for the children’s
health and education. We also paid a visit to schoolteachers to extend respect and gratitude to them
while providing them with advice on voice protection and vocal health.
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Metrics and Targets
The table below sets forth key environmental metrics of our business operations:
For the nine

months ended
2020 2021 2022
(approximate) (approximate) (approximate)
Electricity consumption
(in MWh) . . . . . . . . . . . . . . . . . . . . . . . . . 12,742.29 13,018.46 10,841.03
Greenhouse gas emissions
(in tonnes of carbon dioxide equivalent) . 7,774.07 7,942.56 6,614.11
Greenhouse gas emissions
intensity (in tonnes of carbon dioxide
equivalent/million RMB) . . . . . . . . . . . . . 4.43 3.94 3.87
Water consumption(1) (in m 3) . . . . . . . . . . . 5,711.96 4,778.84 5,100.23
Note:
(1) Our self-operated retail pharmacies, warehouses and offices operate in leased premises where the water supply is
solely controlled and centrally managed by their respective property management of which most of them considered
the provision of water consumption data or sub-meter for individual occupant not feasible. Hence, the water
consumption figure only covers our major offices and warehouses located in Gansu Province.
During the Track Record Period, our business operations did not produce significant impact
nor incur significant cost regarding the compliance with the regulations described in the section
headed “Regulatory Overview — Regulations Relating to Environmental Protection”.
We have identified the below key metrics and targets to assess and manage the ESG-related
risks and continuously monitor our ESG performance:
• Greenhouse gas (GHG) emissions: Our key source of GHG mainly comes from the
consumption of purchased electricity. We target to reduce our GHG emissions across our
operations by enhancing energy consumption efficiency with implementation of energy
management and efficiency measures and by evaluating the potential for on-site
renewable energy or purchase of renewable energy certificates to reduce our GHG
emissions.
• Electricity consumption: We target to reduce electricity consumption by adopting energy

efficiency measures and driving employee behavioral change across our storefronts and
offices.
• Waste management: We target to reduce waste and facilitate recycling by promoting

waste separation management across our storefronts and offices.
• Community investment: We target to enhance the number of people reached through our
investment in social programs that improve people’s health awareness and access to
healthcare.
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LICENSES, PERMITS AND APPROVALS
As of the Latest Practicable Date, we obtained all requisite licenses, approvals and permits
from relevant authorities that are material to our operations. The table below sets forth the relevant
details of the material licenses required for our operation in the PRC:
Grant/Filing
License/Permit Holder Date Expiration Date
Pharmaceutical Operation License The Company 2022-12-20 2024-09-25
(《藥品經營許可證》) . . . . . . . . . . Baoji 111 2022-10-19 2027-10-18
Beijing 111 Chain 2021-12-06 2025-04-29
Deshengtang Baiyin 2021-10-22 2026-10-21
Deshengtang Dingxi 2021-03-24 2026-03-23
Deshengtang Jinchang 2021-08-02 2024-09-22
Deshengtang Jiuquan 2021-11-23 2026-11-22
Deshengtang Lintao 2020-08-31 2025-08-30
Deshengtang Wuwei 2022-03-24 2023-05-31
Deshengtang Zhangye 2021-08-02 2026-08-01
Deshengtang Wholesale 2020-09-21 2024-10-20
Gansu 111 2022-09-19 2023-11-28
Longgui 2019-05-22 2024-05-21
Deshengtang Inner 2023-01-16 2028-01-15
Mongolia
Deshengtang Qinghai 2021-08-12 2026-08-11
Shanxi 111 2022-03-10 2027-03-09
Shaanxi Yaojipi 2021-12-10 2026-12-09
Shaanxi 111 2022-06-13 2027-06-12
Weinan 111 2019-04-10 2023-08-06
Xi’an 111 2021-11-11 2026-11-10
Weinan Zhixinren 2021-05-31 2025-09-21
Deshengtang Linze 2022-06-16 2027-06-15
Deshengtang Ningxia 2022-08-12 2023-09-26
Medical Devices Operation License The Company 2022-12-16 2025-04-16
(《醫療器械經營許可證》) . . . . . . . Baoji 111 2018-04-16 2023-04-15
Beijing 111 2022-03-17 2025-12-09
Gansu 111 2018-12-27 2023-12-26
Shaanxi Yaojipi 2021-09-10 2026-09-09
Shaanxi 111 2019-12-02 2024-12-01
Weinan 111 2018-03-28 2023-03-27
Class II Medical Device Operation The Company 2022-12-13 /
Filing Certificate 《
( 第二類醫療器 Baoji 111 2018-10-09 /
械經營備案憑證》) . . . . . . . . . . . Beijing 111 2020-03-27 /
Deshengtang Dingxi 2016-11-07 /
Deshengtang Jiuquan 2018-08-31 /
Deshengtang Lintao 2020-12-22 /
Deshengtang Wuwei 2017-07-07 /
Deshengtang Zhangye 2017-07-04 /
Deshengtang Wholesale 2022-05-23 /
Gansu 111 2020-05-13 /
Longgui 2019-05-24 /
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Grant/Filing
Deshengtang Inner 2018-03-16 /
Mongolia
Deshengtang Qinghai 2021-08-31 /
Shanxi 111 2017-03-28 /
Shaanxi Yaojipi 2021-08-24 /
Shaanxi 111 2018-09-11 /
Weinan 111 2019-03-29 /
Xi’an 111 2018-12-18 /
Food Operation License The Company 2022-12-19 2025-12-20
(《食品經營許可證》) . . . . . . . . . . Baoji 111 2018-03-21 2023-03-20
Beijing 111 2021-08-06 2026-08-05
Gansu 111 2019-09-25 2023-12-06
Longgui 2019-06-11 2024-06-10
Deshengtang Inner 2023-01-03 2028-01-02
Mongolia
Deshengtang Qinghai 2021-08-23 2026-08-22
Shanxi 111 2020-12-25 2025-12-24
Shaanxi 111 2022-03-02 2027-03-01
Shaanxi Yaojipi 2021-10-09 2026-10-08
Weinan 111 2020-04-14 2025-04-13
The Filing of Operators Selling Deshengtang Wuwei 2022-05-06 /
Only Pre-Packaged Food 《 ( 僅銷 Xi’an 111 2022-01-25 /
售預包裝食品經營者備案信息》) .
Medical Institution Practicing Jinchang Deshengtang 2022-04-06 2027-04-06
License 《
( 醫療機構執業許可證》) Hospital
Health
Qualification Certificate for Internet The Company 2022-12-20 2026-02-01
Drug Information Services 《 ( 互聯 Beijing 111 Chain 2020-07-20 2025-07-19
網藥品信息服務資格證書》) . . . . Deshengtang Baiyin 2022-11-18 2027-01-17
Deshengtang Wuwei 2022-11-17 2027-01-10
Gansu 111 2022-12-02 2024-05-04
Longgui 2021-04-22 2026-04-21
The ICP License . . . . . . . . . . . . . . . The Company 2023-01-05 2028-01-05
The ICP Filing . . . . . . . . . . . . . . . . The Company 2021-11-02 /
Beijing 111 Chain 2020-12-09 /
Deshengtang Baiyin 2021-12-24 /
Deshengtang Dingxi 2017-08-11 /
Deshengtang Jinchang 2017-08-11 /
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Grant/Filing
Deshengtang Jiuquan 2021-12-29 /
Deshengtang Lintao 2020-11-26 /
Deshengtang Wholesale 2022-05-18 /
Deshengtang Wuwei 2021-12-24 /
Deshengtang Zhangye 2022-05-18 /
Gansu 111 2021-05-21 /
Longgui 2021-05-11 /
Shaanxi 111 2022-08-26 /
The Filing Certificate of The Company 2020-08-20 /
Commercial Franchising Operator Beijing 111 Chain 2016-08-15 /
(《商業特許經營備案憑證》) . . . . Longgui 2021-06-22 /
We routinely monitor the effective dates of our various licenses and proactively seek to apply
for renewal of these licenses prior to their expiry dates whenever practicable. As of the Latest
Practicable Date, we were in the course of preparing for the application to renew the licenses
which will expire in early 2023. We do not expect any legal impediment in completing such
renewals so long as we meet the applicable requirements and conditions set by the relevant
government agencies and adhere to procedures set forth in relevant laws and regulations.
Fire Safety
As of the Latest Practicable Date, among the offline storefronts operated by us, 30 storefronts
had not yet completed the fire safety filing (消防備案) according to the requirements of relevant
governmental authorities. Main reasons for such non-completion included (i) owners of the
relevant leased properties had not completed the required fire safety filings for the entire
properties where our relevant storefronts were located, which caused a delay in our application for
the required fire safety filings, and (ii) misunderstanding of the applicable local requirements and
practices by certain of our employees at the local storefronts who were previously in charge of
completing relevant fire safety filings procedures, in light of evolving and varied requirements and
practices on fire safety filing procedures adopted by the local authorities of different regions in
China where our relevant storefronts are located. As advised by our PRC Legal Advisors, a fire
safety filing should be submitted to the relevant government authority within five business days
from the date of completion of relevant construction project (the “Filing Timeline”), and our
storefronts that failed to complete the fire safety filing may be ordered to rectify and subject to a
fine of not more than RMB5,000 for each storefront.
We have been proactively rectifying such non-completion of fire safety filings by

communicating with relevant local government authorities that are in charge of fire safety filings
for each of the 30 storefronts (the “Fire Safety Authorities”). Based on verbal consultations with
such Fire Safety Authorities, practical uncertainties exist as a result of the lack of established
practices at the local and regional levels for accepting fire safety filings applications subsequent to
the expiration of the prescribed Filing Timeline due to absence of applicable regional-level
implementation rules in this regard, and the Fire Safety Authorities assess on a case-by-case basis
whether and how to process such fire safety filing applications. With a view to minimizing our
exposure to fire safety-related risks, we have been continuing our efforts in communicating with
the Fire Safety Authorities with the support of the inspections reports from the fire safety
consultants for the relevant storefronts, in an effort to either facilitate the completion of fire safety
filing procedures or obtain confirmations from the Fire Safety Authorities that we are not required
to complete the fire safety filings after the Filing Timeline and our relevant storefronts comply
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with applicable fire safety laws and regulations. As of the Latest Practicable Date, we had not
received any administrative order or request to complete the fire safety filings for the
above-mentioned storefronts.
We have engaged fire safety consultants, who are independent third parties and qualified
under relevant PRC laws and regulations to conduct fire safety inspection and assessment services,
to conduct inspections on each of the above 30 storefronts through on-site inspection and surveys
to assess, inter alia, the fire safety conditions of the relevant storefronts in accordance with
applicable national and/or local standards. Based on the procedures conducted by the fire safety
consultants, each of our 30 storefronts passed the relevant inspections and it is confirmed that,
inter alia, (i) the fire safety conditions (including the overall fire safety-related layout designs,
emergency evacuation plan and emergency exits-related layout) at these storefronts were in line
with applicable national and/or local standards, (ii) we have established and implemented a
comprehensive set of internal fire safety policies and procedures as well as fire safety emergency
evacuation plan that are generally in compliance with the applicable PRC laws and regulations and
are in line with applicable national and/or local standards, and (iii) our storefront staff generally
have sufficient knowledge and trainings in relation to fire safety.
We have already adopted and been implementing a series of policies and procedures with
respect to fire safety, including:
• Fire safety policies and procedures: We have adopted and implemented a set of policies
and procedures with respect to our offline operations, including clear prohibitions on
unauthorized use of fire or touch of electrical wires, a stringent review and approval
process for any fire-related work, frequent fire safety inspections of each offline
storefront, prohibition of in-door smoking, installation of necessary equipment including
fire extinguishers and ventilation venues, formulation of emergency evaluation plans,
and requirement for lessors to provide requisite fire safety filing documents before we
enter into new leases.
• Personnel: We have designated personnel at corporate-level as well as each offline

storefront to be responsible for fire safety. We also designated fire safety personnel at
our corporate level, responsible for reviewing our fire safety condition in our daily
operations as well as making and approving annual fire safety work plans, including
conducting periodic fire safety inspections, performing fire drills, and arranging fire
safety-related trainings for our employees.
• Training: We conduct extensive fire safety training for our staff, including periodic
trainings on general fire safety awareness and knowledge, latest updates on fire safety
related rules and regulations, proper use of fire safety equipment, emergency evacuation
plans and fire accident preventive measures.
For further details on our internal control, see “— Risk Management and Internal Controls —
Internal Controls.”
As advised by our PRC Legal Advisors, the risk that we will be penalized by relevant
government authorities due to the failure to complete the relevant fire safety filings of the above
30 storefronts is remote, considering that (i) we have not been imposed any material fines or
penalties due to any violation of the fire safety-related laws and regulations as of the Latest
Practicable Date, (ii) based on consultations with competent local government authorities in charge
of fire safety filings, there is a lack of established practices and clear local and regional-level
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BUSINESS
implementation rules for accepting fire safety filings applications subsequent to the expiration of
the prescribed Filing Timeline in regions where our above-mentioned 30 storefronts are located,
(iii) no fire safety accident had occurred at these above-mentioned storefronts as of the Latest
Practicable Date, and (iv) the fire safety conditions (including the overall fire safety-related layout
designs, emergency evacuation plan and emergency exits-related layout) at such 30 storefronts
were in line with applicable national and/or local standards based on the inspections conducted by
the fire safety consultants.
In light of the above, our Directors are of the view that the non-completion of the required
fire safety filings at certain of our storefronts has not had and will not have any material adverse
effect on our financial condition, results of operations and business prospects. Local administrative
authorities across different regions operate differently, and we may not be able to predict when or
whether the fire safety filing procedures will eventually be completed.
CYBERSECURITY, DATA PRIVACY AND PERSONAL INFORMATION PROTECTION
We believe that the ability to effectively protect the data and information collected from our
omni-channel operations is critical to a compliant business operator. In our online pharmaceutical
retail business mode, we collect customer data primarily from our 111Yao App, our WeChat mini
program and our online pharmacies on third-party platforms. In our offline pharmaceutical retail
business mode, customers register for our membership program, accessible to customers on our
111Yao App and WeChat mini program, at our self-operated stores and franchised pharmacies, as
we provide goods and services to our customers and collect customer data through the membership
center within our IT framework.
The customer data we collect and process in the course of our operations mainly include
name, date of birth, gender, mobile phone number, shipment address, order history and personal
health and medical data. We also collect customers’ ID numbers from customers filling
prescriptions with us or engaging in online medical consultations with us as required by relevant
PRC laws and regulations. We collect and process customer data and personal information if and
only if we have obtained the person’s explicit consent and authorization. We share customers’
personal information with our affiliates within our Group only with appropriate authorization by
relevant customers. Upon customers’ registration with us on our 111Yao App and/or WeChat mini
program, they are presented with our 111Yao Privacy Policy 《 ( 111醫藥館隱私政策》) and 111Yao
Platform Children’s Privacy Policy 《 ( 111醫藥館平台兒童隱私政策》), which inform customers of
our policies on collecting, using and processing relevant customers’ data and personal information.
We offer certain value-adding health management services, including medical consultations,
at-home health tests based on smart devices and the management of customers’ health profiles,
only to customers who have voluntarily opted in to receive such services and consent with our
collection and usage of such personal data separately. We collect, process and use customer data
and personal information in strict compliance with our privacy policies and within the scope of
customers’ authorization only for the purposes stated in our privacy policies, including offering our
products and services, personalized recommendations to customers, payment processing, delivery
arrangement and membership management. In addition, through our online operations on
third-party platforms, we receive and access customers’ data and personal information shared by
the third-party platforms pursuant to relevant customers’ explicit consent to such sharing of their
information and authorization for our collection, processing and use of their information. We
process and use the customer information within the scope of such authorization and solely for the
purpose of offering our products and services to customers on the third-party platforms.
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BUSINESS
We are committed to protecting the security of our network and the data and personal
information collected during our business operations. We have established a comprehensive
cybersecurity, data privacy and personal information protection system in accordance with
applicable legal and regulatory requirements of the PRC. In particular, we have taken the
following measures to build a compliant system for cybersecurity, data privacy and personal
information protection:
• Data Encryption: We employ cloud servers and databases provided by qualified cloud
service providers to support the normal operation of our business systems. We rely on
the technical capabilities of our cloud service providers to build firewalls, use
springboard or fortress machines to protect against internal and external intrusion, and
encrypt our cloud drives. We connect to third-party platforms that we collaborate with
via secure application programming interfaces (APIs), which are pre-processed and
encrypted. Customer information, such as phone numbers, transmitted through the APIs
are also encrypted.
• Data Security Incident and Network Security Incident Contingency Plan: We have
developed and implemented data security incident and cybersecurity incident
contingency plans to ensure that in the event of a data security incident or cybersecurity
incident, immediate response measures will be taken, customers will be informed and
necessary reports will be made to the relevant authorities in a timely manner as required
by the relevant authorities.
• Data Backup: We have designated personnel from our IT department to manage the
backup of computer information and data. We have established a data backup
mechanism for automatic operation and management, covering all data in the relevant
servers, databases and other data files.
• Algorithm-generated Recommendations: We extract data relating to customer profiles

and preferences to recommend products or services that may be of interest to customers
to enhance their purchase experience with us. Customers can conveniently unsubscribe
from the algorithm-based recommendation service. Upon such unsubscription, we
immediately stop providing personalized recommendation service to the relevant
customer.
• Protection of Children’s Personal Information: We attach great significance to the

protection of children’s personal information, and we have established the 111Yao
Platform Children’s Privacy Policy, which states that we only collect children’s personal
information for the limited purpose of verifying a child’s identity as a patient for online
medical consultations and as a purchaser of prescription drugs sold online as required by
relevant PRC laws and regulations. We do not collect or process children’s personal
information without the consent of their guardians.
• Restrictions on Employees’ Access to Personal Information: We have established an

access control mechanism for handling personal information of customers and follow the
principle of minimal authorization to reasonably determine the access and operation
permission of employees with respect to customers’ personal information. Our
employees cannot view, access, use or handle such personal information without prior
approval. We execute non-disclosure agreements with our employees to ensure that they
are bound by their confidentiality obligations with respect to personal information
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BUSINESS
known to them. We timely terminate employee access to customer personal information

upon changing of their job duties (where such access would no longer be required) or
their departure from our Company.
• Internal Control Mechanisms: We have designated personnel responsible for

cybersecurity and data privacy. We also have designated personnel responsible for
personal information protection to provide overall leadership and oversight of our
handling of personal information and our implementation of personal information
protection measures.
During the Track Record Period and up to the Latest Practicable Date, we had not been
involved in any material non-compliance with applicable PRC laws and regulations governing
cybersecurity, data privacy and personal information protection. During the same period, we were
not involved in any actual or pending litigation, arbitration or administrative proceedings related to
the breach of cybersecurity, data misuse or leakage or failure to protect personal information which
resulted in a material adverse effect on our financial condition, results of operations and business
prospects. To proactively identify and tackle any potential non-compliance incident in relation to
cybersecurity, data privacy and personal information protection, we have a designated team to
monitor our ongoing compliance with relevant PRC laws and regulations and oversee the
implementation of any necessary measures.
LEGAL PROCEEDINGS AND COMPLIANCE
Legal Proceedings
We may from time to time be involved in contractual disputes or legal proceedings arising
out of the ordinary course of our business. During the Track Record Period and up to the Latest
Practicable Date, we have not been subject to any claims, damages or losses which would have a
material adverse effect on our financial position or results of operations as a whole. As of the
Latest Practicable Date, no material litigation, arbitration or administrative proceeding, which
would have a material adverse effect on our financial position or results of operations as a whole,
was initiated or threatened against us. In addition, we were not aware that any of our franchisees
or our franchised pharmacies was subject to any material claims, litigation, arbitration or
administrative proceedings, actual or threatened, during the Track Record Period and up to the
Latest Practicable Date.
Compliance
During the Track Record and up to the Latest Practicable Date, we have not had any
non-compliance incidents which our Directors believe would, individually or in the aggregate,
have a material operational or financial impact on our Company as a whole.
RISK MANAGEMENT AND INTERNAL CONTROLS
Risk Management
Risk management is deeply rooted in our business operations. We face key operational risks
originating from changes in the overall market conditions and regulatory environment relating to
the health management and healthcare solutions market, our ability to offer services competitively
and efficiently, our ability to manage the growth strategies of our own organization in anticipation
of the growth of the market in which we operate, our competitiveness among industry peers and
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BUSINESS
our compliance with ever-changing regulations and evolving industry standards. See “Risk
Factors” for a discussion of various key risks and uncertainties that we face with respect to our
business operations, the health management and healthcare solutions industry and conducting
business in the PRC. We are committed to integrating a compliance culture into our everyday
workflow and promoting promote corporate policies and procedures to strengthen our compliance
status. We also face various market risks. In particular, we are exposed to credit and liquidity risks
that arise in the normal course of our business. See “Financial Information — Qualitative and
Quantitative Disclosure about Financial Risk” for a discussion of these market risks.
In order to meet these challenges, we have established a risk management framework, which
is summarized as follows:
• Our Audit Committee, led by Dr. CHAN Siu Yeung (陳兆陽), monitors and manages our
overall risks related to our business operations, and oversees the effective
implementation of our risk management and internal control system on an ongoing
basis. Our Audit Committee (i) monitors our risk management policy to ensure that such
policies are in line with our corporate objectives; (ii) monitors our corporate risk
tolerance; (iii) monitors significant risks related to our business operations and the
handling of such risks by our management; (iv) evaluates our corporate risk based on
our corporate risk tolerance; (v) reviews the effectiveness of our internal audit
functions; and (vi) monitors and ensures the appropriate application of our risk
management framework consistently within our Company.
• Our Board of Directors is responsible for (i) formulating and supervising our overall
risk management policy and objectives; (ii) reviewing and approving major risk
management matters of our Company; (iii) providing guidance on our risk management
approach to the relevant departments of our Company; (iv) reviewing the relevant
departments’ reporting on key risks and providing feedback; (v) monitoring the
implementation of risk management measures by relevant departments; (vi) ensuring
that the appropriate structure, processes and competences are in place across our
Company; and (vii) continuously fostering a corporate culture at our Company that
places utmost attention to risk management.
• The relevant departments of our Company are responsible for implementing our risk
management policy and our day-to-day risk management practices. In order to
standardize risk management across our Company and establish transparent and
standardized risk management performance, the relevant departments (i) collect data on
risks related to their operation and function; (ii) conduct risk assessment, including the
identification, prioritization, measurement and categorization of all major risks which
may have potential impacts on achieving their objectives; (iii) prepare risk management
reports for the review of our Board of Directors and Audit Committee; (iv) continuously
monitor major risks related to our operations; (v) implement appropriate measures in
response to our risk exposure where necessary; and (vi) formulate and implement
appropriate mechanisms to facilitate the application of our risk management framework.
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BUSINESS
Internal Controls
We have adopted and have been implementing a series of internal control policies and
procedures designed to provide reasonable assurance for achieving objectives, including effective
and efficient operations, reliable financial reporting and compliance with applicable laws and
regulations. We summarize below the internal control policies and procedures that we have
implemented or plan to implement:
• Our Board of Directors and senior management oversee and manage the overall risks
associated with our business operations.
• We have set up a compliance team, primarily responsible for issuing and amending
internal control policies, measures and procedures to ensure that we maintain
comprehensive and effective internal control and comply with applicable laws and
regulations. Our compliance team also monitors the implementation of our internal
control policies, measures and procedures and conducts regular compliance review and
investigation on our business processes. In addition, our compliance team provides
guidance to our business departments regarding each stage of our business operations.
• The head of each business department is responsible for implementing relevant internal
control policies, measures and procedures and conducting regular review regarding the
implementation of such policies, measures and procedures.
• We have adopted various measures and procedures across our business operations,
including project management, quality assurance, intellectual property protection,
environmental protection and occupational health and safety. We provide our employees
with regular training on these measures and procedures as part of our employee training
program.
• Our Audit Committee carries out the analysis and independent appraisal of the adequacy
and effectiveness of our risk management and internal control systems.
• We will continue to engage PRC legal counsel to advise us on and keep us abreast with
PRC laws and regulations after the [REDACTED]. We will continue to arrange various
training to be provided by our in-house external legal advisors from time to time when
necessary and/or any appropriate accredited institution to update our Directors,
supervisors, senior management and relevant employees on the latest applicable laws
and regulations.
• We have engaged Maxa Capital Limited as our compliance advisor to advise our
Directors and management team until the end of the first fiscal year after the
[REDACTED] regarding matters relating to the Listing Rules. Our compliance adviser
will provide support and advice regarding requirements of relevant regulatory authorities
under the Listing Rules in a timely manner.
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BUSINESS
AWARDS AND RECOGNITIONS
The table below sets forth certain major awards and recognitions we received during the
Award/Recognition Award Year Awarding Institution/Authority

2022 Top 10 E-commerce Pharmaceutical 2022 China Health Ecology
Retailers . . . . . . . . . . . . . . . . . . . . . . . . . . . . Organization (健康產業(國
際)生態大會)
2021-2022 Top 100 Valuable Pharmacies 2022 China Pharmacy (中國藥店)

(2021-2022年度中國藥店價值榜百強企業) . .
2022 Outstanding Chain Brand for O2O 2022 Meituan (美團)

Pharmaceutical Retail Services That
Operates During the Lunar New Year
Holiday (2022年春節不打烊O2O醫藥零售服
務優秀連鎖品牌) . . . . . . . . . . . . . . . . . . . . .
2020 Top 100 Pharmaceutical Retailers (2020 2021 China Association of

年藥品零售企業百強) . . . . . . . . . . . . . . . . . . Pharmaceutical Commerce
(中國醫藥商業協會)
The Best “Golden Abacus” Award 2020 JD (京東)

(最佳金算盤獎) . . . . . . . . . . . . . . . . . . . . . .
– 268 –
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
OUR CONTROLLING SHAREHOLDERS
As of the Latest Practicable Date, our Company was held by Mr. Long Yan, Mr. Long Yun,
Zhejiang Changqi and Zhejiang Yixue as to approximately 70.56%, 1.44%, 4.50% and 4.50%,
respectively.
Mr. Long Yan and Mr. Long Yun are brothers. Since becoming direct Shareholders and
serving as the Company’s members of senior management, Mr. Long Yan and Mr. Long Yun have
been acting in concert to exercise control over the Company and to make decisions relating to its
business development. Pursuant to the Concert Party Agreement, Mr. Long Yan and Mr. Long Yun
confirmed and acknowledged their acting-in-concert relationship. For details of the Concert Party
Agreement, see “History, Development and Corporate Structure — Concert Party Agreement.”
Zhejiang Changqi is the shareholding platform for our [REDACTED] Share Incentive Scheme
controlled by Mr. Long Yan as its general partner. Zhejiang Yixue is the family shareholding
platform for Mr. Long Yan, its general partner, and Mr. Long Yun, its limited partner. For
background of Zhejiang Changqi and Zhejiang Yixue, see “History, Development and Corporate
Structure — Major Shareholding Changes of Our Group — 3. Establishment of shareholding
platforms.” For details of Mr. Long Yan’s and Mr. Long Yun’s biographies, see “Directors,
Supervisors and Senior Management — Executive Directors.” As such, Mr. Long Yan, Mr. Long
Yun, Zhejiang Changqi and Zhejiang Yixue are regarded as a group of Controlling Shareholders of
our Company according to the Concert Party Agreement and the Guidance Letter HKEX-GL89-16
issued by the Stock Exchange.
Immediately upon the completion of the [REDACTED] (assuming the [REDACTED] is not
exercised), our Company will be held by Mr. Long Yan, Mr. Long Yun, Zhejiang Changqi and
Zhejiang Yixue as to approximately [REDACTED]%, [REDACTED]%, [REDACTED]% and
[REDACTED]%, respectively, of the enlarged total issued share capital. Accordingly, Mr. Long
Yan, Mr. Long Yun, Zhejiang Changqi and Zhejiang Yixue will remain as our Controlling
Shareholders upon completion of the [REDACTED].
DISCLOSURE UNDER RULE 8.10 OF THE LISTING RULES
Save as disclosed in “Directors, Supervisors and Senior Management - Other Disclosure

Pursuant to Rules 8.10 and 13.51(2) of the Listing Rules”, as of the Latest Practicable Date, none
of our Controlling Shareholders, our Directors and their respective 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, which requires disclosure pursuant to Rule 8.10
of the Listing Rules.
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].
– 269 –
Management Independence
Although Mr. Long Yan and Mr. Long Yun, each an executive Director, are our Controlling
Shareholders, our Directors consider that our Board of Directors and senior management will
function effectively and independently of our Controlling Shareholders and their close associates
for the following reasons:
(i) each of our Directors is aware of his or her fiduciary duties as a Director which require,
among other things, that he or she must act for the benefit of and in the best interests of
our Company and not allow his or her personal interests to interfere with our
Company’s best interests;
(ii) in the event that there is a potential conflict of interest arising out of any transaction to
be entered into between our Company and our Directors or their respective associates,
the interested Director(s) shall abstain from voting on any resolutions of the Board of
Directors approving any contract, arrangement or any other proposal in which he or she
or any of his or her close associates has a material interest and shall not be counted in
the quorum present at the relevant Board of Directors meeting;
(iii) we have appointed three independent non-executive Directors to provide a balance of

the number of our Board of Directors and with a view to ensuring the decisions of our
Board of Directors are made only after due consideration of independent and impartial
opinions and promoting the interest of the Company and our Shareholders as a whole;
and
(iv) we will establish corporate governance measures and adopt sufficient and effective
control mechanisms to manage conflicts of interest, if any, between our Group and the
Controlling Shareholders, which would support our independent management. Please see
“— Corporate Governance Measures” in this section for further details.
Based on the above, our Directors are satisfied that the Board of Directors as a whole,
together with our senior management team, is able to perform the managerial role in our Group
independently.
Operational Independence
We make operational decisions independently of our Controlling Shareholders. We have our

own organizational structure with independent departments, each with specific areas of
responsibility. We also maintain a set of comprehensive internal control measures to facilitate the
effective operation of our business. Our operating functions, such as cash and accounting
management, invoices and bills, operate independently of our Controlling Shareholders and their
close associates. We have independent access to suppliers and customers and are not dependent on
our Controlling Shareholders and their close associates (excluding the Group). We have our own
employees to operate our business and can independently manage our human resources. We have
obtained the relevant licenses, approvals and permits from the relevant regulatory authorities that
are material to our operations.
Based on the above, our Directors are of the view that we are able to operate independently
of our Controlling Shareholders.
– 270 –
Financial Independence
We have established our own finance department with a team of financial staff, who are
responsible for financial control, accounting, reporting, group credit and internal control of our
Company. Our finance department is also independent from our Controlling Shareholders. We can
make financial decisions independently and our Controlling Shareholders do not intervene with our
use of funds. We have also established an independent audit system, a standardized financial and
accounting system and a complete financial management system.
We are capable of obtaining financing from independent third parties without relying on any
guarantee or security provided by our Controlling Shareholders and their respective close
associates. As of the Latest Practicable Date, credit facilities of our Group in an aggregate amount
of approximately RMB266.6 million were personally guaranteed, or secured by properties owned
or co-owned by Mr. Long Yan, Mr. Long Yun and/or their respective spouses. We have obtained
confirmation letters from independent third party commercial banks which confirmed that they are
willing to provide our Group with credit facilities up to an aggregate amount of RMB700 million,
without any guarantee, security or financial support provided by our Controlling Shareholders
and/or their respective close associates to the Group, subject to approval procedures, regulatory
requirements and the customary credit policies of such banks. We expect that the personal
guarantee granted by Mr. Long Yan, Mr. Long Yun and/or their respective spouses to the Group
will be released within three months upon the [REDACTED]. In addition, during the Track
Record Period, we had received a series of [REDACTED] Investments from third party investors
independently. For details of the [REDACTED] Investments, see “History, Development and
Corporate Structure.” Furthermore, as of September 30, 2022, we had cash and cash equivalents
and restricted cash amounted to approximately RMB327.9 million.
The abovementioned guarantees, being financial assistance (as defined in the Listing Rules)
provided by Mr. Long Yan, Mr. Long Yun and/or their respective spouses for our benefit, were
made on normal commercial terms and no security over our assets was granted in respect of such
financial assistance. Accordingly, the provision of such guarantees is fully exempt from all
announcements, circulars and annual reports, and independent shareholder approval requirements
pursuant to Rule 14A.90 of the Listing Rules.
Based on the above, our Directors are satisfied that we are able to maintain financial
independence from our Controlling Shareholders and their respective close associates. Save as
disclosed above, as of the Latest Practicable Date, none of our Controlling Shareholders or their
respective close associates had provided any other financial assistance, guarantee, security or
pledge for any of our borrowings.
TRANSACTIONS ENTERED INTO BEFORE THE [REDACTED]
The Lease Agreements
On January 1, 2023, our Group has entered into various lease agreements for a term of one
year (the “Lease Agreements”) with each of Mr. Long Yan and Mr. Long Yun, each a Controlling
Shareholder and an executive Director, pursuant to which our Group leased seven properties in the
PRC with an aggregate GFA of approximately 2,387.2 sq.m. for the operation of our offline
pharmacies. The Group will comply with the applicable Listing Rules in the event of renewal of
the Lease Agreements after expiry.
– 271 –
Basis in Determining the Rental Payable
The Lease Agreements were entered into in the ordinary and usual course of business of our
Group based on the prevailing market rates of similar properties at comparable locations no less
favorable than those offered by independent third parties.
Reasons for the Transactions
Our Group has been using the properties under the Lease Agreements as our offline
pharmacies. The rents of the properties under the Lease Agreements are comparable to the
prevailing market rates of comparable properties within proximity thereto and we will continue to
gauge the prevailing market rates to ensure the rents for these properties under the Lease
Agreements are fair and reasonable. The proportion of our offline pharmacies using properties
leased from our Controlling Shareholders is minimal. Having considered the foregoing factors, our
Directors consider that it is desirable and in the interests of our Company and the Shareholders as
a whole to continue using the properties under the Lease Agreements.
Implication under the Listing Rules
Our Group has adopted IFRS 16 “Leases” in the preparation of the financial information of
our Group throughout the Track Record Period, pursuant to which, at the date at which the leased
asset is available for use by our Group, our Group as lessee shall recognize a liability to make
lease payments and an asset representing the right to use the underlying asset in connection with
the lease of the properties from each of Mr. Long Yan and Mr. Long Yun. Accordingly, the lease
transactions under the Lease Agreements, which were entered into before [REDACTED], would
be regarded as acquisitions of capital assets by the tenant for the purpose of the Listing Rules.
Therefore, the reporting, announcement, annual review and independent Shareholders’ approval
requirements in Chapter 14A of the Listing Rules will not be applicable.
NON-COMPETITION UNDERTAKING
Each of the Controlling Shareholders executed a non-competition undertaking in favor of our

Company on [•], 2023 (the “Non-Competition Undertaking”) which is effective in the Relevant
Period (as defined below). Pursuant to the Non-Competition Undertaking, the Controlling
Shareholders have confirmed that, as of the date of the Non-Competition Undertaking, each of the
Controlling Shareholders and any of his/its close associates has not engaged in or participated in
any form of business activities which, directly or indirectly, compete with our business. The
Controlling Shareholders have also made irrevocable covenants to our Company that during the
Relevant Period (as defined below), each of the Controlling Shareholders will not and will procure
that his/its respective close associates will not:
(i) solely or jointly with a third party, engage in or participate in business or activity (other
than the business activities of our Group) which constitute competition with our
principal business activity in any manner directly or indirectly (including but not limited
to investment, merger and acquisition, associates, joint ventures, cooperation,
partnership, contracting or leasing operation, purchase of shares of listed companies or
equity participation) domestically or abroad, in each case whether as a director or
shareholder (other than being a director or shareholder of our Group), partner, agent or
otherwise and whether for profit, reward or interest otherwise; and
– 272 –
(ii) directly or indirectly, hold any interest or obtain any control (in each case whether as a
director or shareholder (other than being a director or shareholder of our Group),
partner, agent or otherwise and whether for profit, reward or interest otherwise) in any
operating entities, institutions or economic organizations, which is engaged in any
business which competes with the business engaged by our Group domestically or
abroad from time to time.
The above restrictions are not applicable to circumstances where any of the Controlling
Shareholders or his/its close associates invests in, holds, engages in or participates in less than
10% of the equity interests in any other companies (whether listed or not) which engage in
business competing with our business.
Options for New Business Opportunities
Pursuant to the Non-Competition Undertaking, each of the Controlling Shareholders

undertakes that, during the Relevant Period (as defined below), if any of the Controlling
Shareholders or their close associates is aware of any new business opportunity which directly or
indirectly competes or may compete with our business (the “New Business Opportunities”), such
Controlling Shareholder will notify our Company as soon as practicable in writing, and will use
his/its best efforts to procure that the New Business Opportunity will be promptly offered to our
Company. Each of the Controlling Shareholders undertakes that our Company will have right of
first refusal to engage in the New Business Opportunity, pursuant to which we will be offered a
period of ten business days upon receipt of such written notice to decide and respond in writing on
whether to exercise such option. If we decide not to proceed with the New Business Opportunity
or not to provide our written response to such Controlling Shareholder within the required time,
such Controlling Shareholder may himself/itself proceed with or offer such option to third parties
on conditions as stated in his/its written notice to us. We will comply with the requirements under
the Listing Rules (as applicable) when deciding whether to exercise our option for any New
Business Opportunity.
If there is any material change in the nature, terms or conditions of such New Business
Opportunities pursued by our Controlling Shareholders, he/it shall refer such revised New Business
Opportunities to our Company. Each of the Controlling Shareholders undertakes to use his/its best
efforts to procure his/its close associates to offer our Group with options for any New Business
Opportunity in accordance with the requirements as stated above.
Options for Acquisitions
Pursuant to the Non-Competition Undertaking, each of the Controlling Shareholders

undertakes that, subject to applicable laws, our Group is entitled to acquire any equity interest,
asset or other interest in the business currently carried out by our Group from the Controlling
Shareholders at any time, unless a third party exercises its right of first refusal pursuant to relevant
laws or constitutional documents on the same conditions. Each of the Controlling Shareholders
also undertakes that he/it will use his/its best efforts to procure his/its close associates to provide
us such option for their respective businesses in accordance with the provisions as stated in the
Non-Competition Undertaking. We will comply with the requirements under the Listing Rules
when deciding whether to exercise our option for acquisitions.
– 273 –
Pre-emptive Rights
Where the Controlling Shareholders have acquired any business, investment or interest in any
entity relating to the business engaged by our Group from time to time pursuant to “— Options for
New Business Opportunities” above, the Controlling Shareholders shall provide us with
pre-emptive rights (the “Pre-emptive Rights”) by way of written notice to acquire any such
business, investment or interest under the same circumstances. We will be entitled to decide and
respond in writing on whether to acquire such business, investment or interest to such Controlling
Shareholder within 30 days upon receipt of the written notice from such Controlling Shareholder.
If we decide not to proceed with such acquisition opportunity or not to provide our written
response to such Controlling Shareholder within the required time, such Controlling Shareholder
may offer to sell such business, investment or interest to other third parties on such terms which
are no more favorable than those made available to our Group. We will comply with the provisions
under the Listing Rules (as applicable) when deciding on whether to exercise our Pre-emptive
Rights. Each of the Controlling Shareholders undertakes that he/it will use his/its best efforts to
procure his/its close associates to grant our Group with Pre-emptive Rights in accordance with the
Non-Competition Undertaking.
FURTHER UNDERTAKINGS FROM THE CONTROLLING SHAREHOLDERS
Each of the Controlling Shareholders further undertakes that:
(i) upon request from our independent non-executive Directors, he/it will provide all
necessary information to our independent non-executive Directors to review the
compliance with and implementation of the Non-Competition Undertaking by the
Controlling Shareholders and its subsidiaries (if applicable);
(ii) we can disclose the decisions made by the independent non-executive Directors
regarding his/its compliance with and implementation of the Non-Competition
Undertaking in our annual reports and announcements; and
(iii) he/it shall make an annual statement to our Company and our independent non-executive
Directors on his/its compliance with the Non-Competition Undertaking for disclosure in
our annual reports.
We will adopt the following measures to ensure that the undertakings under the
Non-Competition Undertaking are observed:
(i) we will provide the independent non-executive Directors with notices on offering or
transferring the New Business Opportunities or Pre-emptive Rights provided by the
Controlling Shareholders (as the case may be), within seven days upon receipt of such
notices;
(ii) the independent non-executive Directors will report in our annual reports (a) the results
of their review on the Controlling Shareholders’ compliance with the Non-Competition
Undertaking and (b) any decisions on our Company’s options for New Business
Opportunities and Pre-emptive Rights and basis for the decisions; and
– 274 –
(iii) our Directors considers that the independent non-executive Directors have sufficient
experience in assessing whether or not to take up the New Business Opportunities or
exercise the Pre-emptive Rights. Under appropriate or necessary circumstances, our
independent non-executive Directors may appoint financial advisors or experts to
provide advice on whether the options or Pre-emptive Rights under the Non-Competition
Undertaking shall be exercised and any fees incurred as a result of such shall be borne
by us.
The Non-Competition Undertaking will take effect from the date of this undertaking until the
occurrence of one of the following events, whichever is earlier, (the “Relevant Period”):
(i) when each of the Controlling Shareholders and his/its close associates, individually or
taken as a whole, ceases to be the Controlling Shareholders or controlling beneficial
owners of our Company; or
(ii) our H Shares cease to be [REDACTED] on the Stock Exchange except for suspension
of [REDACTED] of our H Shares due to any reasons.
Our PRC Legal Advisors are of the view that the Non-Competition Undertaking does not
violate relevant laws of the PRC. Upon signing of the Non-Competition Undertaking, the
undertakings made by the Controlling Shareholders pursuant to the Non-Competition Undertaking
are valid under the laws of the PRC and are binding on the Controlling Shareholders, and we may
enforce them through arbitration in the PRC.
In view of (i) the Controlling Shareholders’ undertaking that he/it will support the
development of our business on a priority basis; (ii) the legally binding obligations of the
Controlling Shareholders under the Non-Competition Undertaking and the options for New
Business Opportunities, options for acquisitions and the Pre-emptive Rights granted to us
thereunder; and (iii) the information sharing and other mechanisms in place as described above to
monitor the compliance with the Non-Competition Undertaking by the Controlling Shareholders,
our Directors are of the view that our Company has taken all appropriate and practicable measures
to ensure that each of the Controlling Shareholders will comply with his/its obligations under the
Non-Competition Undertaking.
CORPORATE GOVERNANCE MEASURES
In order to further safeguard the interests of our minority Shareholders, we will adopt the
following corporate governance measures to manage potential conflicts of interest:
• our Company has appointed independent non-executive Directors to ensure the effective
exercise of independent judgments on the decision-making process of our Board of
Directors and provide independent advice to our Shareholders;
• our independent non-executive Directors will review, on an annual basis, the compliance
by our Controlling Shareholders of their undertakings under the Non-Competition
Undertaking;
• our Controlling Shareholders will provide all information requested by our Company
which is necessary for the performance of the Non-Competition Undertaking, including
an annual review by the independent non-executive Directors;
– 275 –
• our Company will disclose decisions on matters reviewed by the independent

non-executive Directors relating to the compliance and enforcement of the
Non-Competition Undertaking in our annual reports or by way of announcement to the
public in compliance with the requirements of the Listing Rules;
• our Controlling Shareholders will provide an annual confirmation that it is in

compliance with their undertakings under the Non-Competition Undertaking for
disclosure in our annual report;
• we are committed that our Board of Directors shall have a sufficiently balanced
composition of executive Directors, non-executive Directors and independent
non-executive Directors that can facilitate the exercise of independent judgment. We
believe that the independent non-executive Directors have the necessary expertise to
form and exercise independent judgment in the event of any conflict of interest between
our Company and our Controlling Shareholders;
• the independent non-executive Directors will be able to seek independent professional

advice from external parties in appropriate circumstances at our Company’s cost in
respect of matters relating to the Non-Competition Undertaking;
• any proposed transaction between us and connected persons will be subject to Chapter
14A of the Listing Rules including, where applicable, the announcement, reporting and
independent Shareholders’ approval requirements of such rules;
• in the event of any potential conflict of interests, our Director(s) with an interest in the
relevant transaction(s) shall abstain from voting at the relevant Board of Directors
meeting and shall not be counted towards the quorum in respect of the relevant
resolution(s) at such meeting;
• in the event of any potential conflict of interests at the shareholders’ level, our
Controlling Shareholders shall abstain from voting at the Shareholders’ meeting of our
Company with respect to the relevant resolutions; and
• we have appointed Maxa 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 but not limited to various requirements relating to Directors’
duties and corporate governance.
– 276 –
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
BOARD OF DIRECTORS
The Board of Directors consists of nine Directors, including four executive Directors, two
non-executive Directors and three independent non-executive Directors. The Directors are elected
for a term of three years and are subject to re-election upon retirement. The following table sets
forth certain information regarding the Directors.
Date of Relationship with other

Date of joining appointment as a Directors, Supervisors and
Name Age our Group Director Position Responsibilities senior management
Mr. LONG Yan 55 September 9, September 22, Executive Director, Developing overall Mr. Long Yan is the
(龍岩) . . . . . . . . 1999 2009 chairman of the Board corporate and business brother of Mr. Long
of Directors and strategies of our Group Yun, our executive
general manager and making key Director
business and
operational decisions
of our Group
Mr. LONG Yun 49 March 11, 2002 August 31, Executive Director, vice Implementing and Mr. Long Yun is the
(龍雲) . . . . . . . . 2017 chairman of the Board executing resolutions brother of Mr. Long
of Directors and vice of the Board of Yan, our executive
president Directors, and Director
communicating and
coordinating external
affairs and managing
our offline pharmacies
Ms. BAI Yanping 41 February 18, August 31, Executive Director, vice Managing the Group’s None
(白燕平) . . . . . . . 2002 2017 president and public relations and
secretary of the Board assisting the general
of Directors manager of the
Company in the
Group’s operation and
management
Ms. LIANG Xiaoping 59 September 2, August 31, Executive Director, vice Formulating financial None
(梁曉萍) . . . . . . . 2007 2017 president and finance budget, profit
director distribution and loss
recovery plans of our
Group
Mr. LING Mingsheng 56 August 31, August 31, Non-executive Director Providing strategic None
(凌明聖) . . . . . . . 2017 2017 advice in the
formulation of business
plans and major
decisions of the Group
Mr. TU Yanwu 44 August 6, 2021 August 6, 2021 Non-executive Director Providing strategic None
(屠燕武) . . . . . . . advice in the
formulation of business
plans and major
decisions of the Group
– 277 –
Date of Relationship with other

Date of joining appointment as a Directors, Supervisors and
Name Age our Group Director Position Responsibilities senior management
Dr. ZHU Yan 51 December 6, December 6, Independent Supervising and None
(朱岩) . . . . . . . . 2022 2022 non-executive providing independent
Director advice on the operation
and management of
our Group
Mr. LI Yulong 46 December 6, December 6, Independent Supervising and None

(李玉龍) . . . . . . . 2022 2022 non-executive providing independent
Director advice on the operation
and management of
our Group
Dr. CHAN Siu Yeung 65 December 6, December 6, Independent Supervising and None
(陳兆陽) (alias 2022 2022 non-executive providing independent
CHAN Raymond). . . Director advice on the operation
and management of
our Group
Executive Directors
Mr. LONG Yan (龍岩), aged 55, is our founder. He has been a Director of our Company
since its inception in September 2009, the chairman of the Board of Directors since August 2017
and the general manager of our Company since December 2022. Since founding our Group in
September 1999, Mr. Long has also held directorship in several subsidiaries within our Group,
including Jinchang Deshengtang Hospital, Deshengtang Wholesale, Deshengtang Jinchang and
Deshengtang Jiuquan. Mr. Long was re-designated as an executive Director in December 2022 and
he is primarily responsible for developing overall corporate and business strategies of our Group
and making key business and operational decisions of our Group.
Prior to founding our Group, from 1990 to 1999, Mr. Long worked at Jinchang No. 2
People’s Hospital* (金昌市第二人民醫院, currently known as the People’s Hospital of Jinchang
(金昌市人民醫院)). From late 1993 to 1999, Mr. Long was also responsible for operating the
general outpatient clinic as designated by the same hospital.
Mr. Long obtained his associate (專科) degree in acupuncture and moxibustion from Gansu
Traditional Chinese Medicine School* (甘肅省中醫學校) in the PRC in July 1990. He graduated
from Lanzhou University of Finance and Economics (蘭州財經大學) (formerly known as Lanzhou
Business School* (蘭州商學院)) in the PRC with a bachelor’s degree in business administration in
July 2004. Mr. Long received his master’s degree in business administration of senior management
from Tsinghua University (清華大學) in the PRC in January 2017. Mr. Long was admitted as a
fellow student of the Global Finance Development (GFD) program in the PBC School of Finance
of Tsinghua University (清華大學五道口金融學院) in July 2018.
Mr. Long was qualified in May 1999 to practice as a licensed physician (執業醫師) with a
focus on TCM. He has been serving as the vice president of China Medical Pharmaceutical
Material Association (中國醫藥物資協會, “CMPMA”) since April 2011 and the president of
CMPMA’s Pharmaceutical Listing Development Committee* (醫藥上市發展委員會) since January
2017. Mr. Long also served as the president of CMPMA’s Pharmaceutical E-Commerce Branch*
(醫藥電子商務分會) from June 2013 to December 2016. Mr. Long was elected as a member of the
– 278 –
Professional Research Committee of Pharmaceutical Governance System* (藥品治理體系研究專業

委員會) of China Society for Drug Regulation* (中國藥品監督管理研究會) in December 2020 and
has been serving as an industry tutor of the graduate degree program in the School of Management
of Lanzhou University (蘭州大學管理學院) in the PRC since January 2022. In 2022, Mr. Long
Yan was also recognized as an extraordinary entrepreneur (功勛企業家) by the China Health
Ecology Organization (健康產業(國際)生態大會).
Mr. LONG Yun (龍雲), aged 49, has been a vice president of the Company since December
2016, a Director and the vice chairman of the Board of Directors since August 2017 and was
re-designated as an executive Director in December 2022. He is primarily responsible for
implementing and executing resolutions of the Board of Directors, communicating and
coordinating external affairs and managing our offline pharmacies.
Mr. Long joined our Group in March 2002 and has held various managerial roles, including
vice general manager of Deshengtang Wholesale and Deshengtang Jinchang. He has approximately
thirty years of managerial experience in the pharmaceutical sector. Prior to joining our Group,
from December 1994 to March 2002, Mr. Long was the manager of Zhangye Pharmaceutical
Company* (張掖市醫藥公司), currently known as Gansu Taihetang Medicine Co., Ltd.* (甘肅太和
堂醫藥有限責任公司), a company primarily engaged in wholesaling and retailing of
pharmaceutical products where he was responsible for wholesaling, purchasing and processing
TCM.
Mr. Long received his vocational school (中專) diploma in pharmacy from Gansu
Pharmaceutical Staff Secondary Professional School* (甘肅省醫藥職工中等專業學校) in the PRC
in July 2003 and his master’s degree in business administration from Sabi University (formerly
known as Scandinavian Art and Business Institute) in Helsinki, Finland in July 2013 through an
online degree program.
Ms. BAI Yanping (白燕平), aged 41, has been a vice president and a Director of our
Company since December 2016 and August 2017, respectively. She was re-designated as an
executive Director and appointed as the secretary of the Board of Directors in December 2022. She
is primarily responsible for managing the Group’s public relations and assisting the general
manager of the Company in the Group’s operation and management.
Ms. Bai joined our Group in February 2002 and has held various positions in our Group,
including a business manager at Deshengtang Wholesale and a vice president at Beijing 111.
Ms. Bai received her secondary vocational school (中專) diploma in traditional Chinese
medicine nursing from Gansu University of Chinese Medicine* (甘肅中醫藥大學) (formerly
known as Gansu Province Traditional Chinese Medicine School* (甘肅省中醫學校)) in the PRC in
June 1999.
Ms. LIANG Xiaoping (梁曉萍), aged 59, has been a vice president and finance director of
our Company since December 2016 and a Director since August 2017. She was re-designated as an
executive Director in December 2022. She is primarily responsible for formulating financial
budget, profit distribution and loss recovery plans of our Group.
Ms. Liang joined our Group in September 2007 and has been the financial controller at
Deshengtang Wholesale and our Company concurrently since then until December 2016.
Ms. Liang received her secondary vocational school (中專) diploma in electricity supply from
Xi’an Railway Vocational & Technical Institute (西安鐵路職業技術學院) (formerly known as
Xi’an Railway Transportation School* (西安鐵路運輸學校)) in the PRC in July 1981. In July
2002, she received her associate degree in computerized accounting from Lanzhou Jiaotong
University (蘭州交通大學) (formerly known as Lanzhou Railway College* (蘭州鐵道學院)) in the
PRC.
– 279 –
Non-executive Directors
Mr. LING Mingsheng (凌明聖), aged 56, has been a Director of our Company since August
2017 and was re-designated as a non-executive Director in December 2022. He is primarily
responsible for providing strategic advice in the formulation of business plans and major decisions
of the Group.
Mr. Ling has been serving as a director of Nanjing CCI Capital since January 2014 and a
director in Jiangsu Coastal Capital since February 2015. Mr. Ling was a director of
Sinopep-Allsino Bio Pharmaceutical Co., Ltd.* (江蘇諾泰澳賽諾生物製藥股份有限公司), a
company whose shares are listed on the Shanghai Stock Exchange (stock code: 688076) and
primarily engaged in the R&D of polypeptide drugs and small molecule drugs, from May 2019 to
May 2022. From August 2008 to February 2014, he served as the general manager and a member
of the investment review committee in the department of biotechnology and new medicine
investment of Jiangsu High-Tech Investment Group Co., Ltd.* (江蘇高科技投資集團有限公司).
Mr. Ling was a teaching assistant in Nanjing Medical University (南京醫科大學, formerly known
as Nanjing Medical School (南京醫學院)) in the PRC from July 1988 to July 1991.
Mr. Ling received his master’s degree in medicine from Academy of Military Medical
Sciences of the People’s Liberation Army Academy of Military Science* (中國人民解放軍軍事科
學院軍事醫學研究院, formerly known as the Academy of Military Medical Science of the People’s
Liberation Army* (中國人民解放軍軍事醫學科學院)) in the PRC in July 1994. Mr. Ling obtained
the Fund Practicing Qualification Certificate (基金從業資格證) in March 2017 from the Asset
Management Association of China (中國證券投資基金業協會).
Mr. TU Yanwu (屠燕武), aged 44, has been a Director since August 2021 and was
re-designated as a non-executive Director in December 2022. He is primarily responsible for
providing strategic advice in the formulation of business plans and major decisions of the Group.
Mr. Tu has been the chief financial officer and an executive director of Alibaba Health
Information Technology Limited (阿里健康信息技術有限公司, “Alibaba Health”), a company
whose shares are listed on the Stock Exchange (stock code: 241), since April 2020 and October
2020, respectively. Mr. Tu was a senior finance director of the Alibaba Health group from
September 2019 to March 2020, and was seconded to Guizhou Ensure Chain Pharmacy Company
Limited* (貴州一樹連鎖藥業有限公司) to act as its chief financial officer and senior vice
president from October 2018 to August 2019.
Mr. Tu obtained a bachelor of economics degree in international economics in July 2001 from
Fudan University (復旦大學) in the PRC and he is also a member of the Chinese Institute of
Certified Public Accountants (中國註冊會計師協會).
Independent Non-executive Directors
Dr. ZHU Yan (朱岩), aged 51, has been appointed as an independent non-executive Director
in December 2022. He is responsible for supervising and providing independent advice on the
operation and management of our Group.
Dr. Zhu joined the School of Economics and Management of Tsinghua University (清華大學
經濟管理學院) in the PRC in August 2000 as a lecturer and has been serving various roles therein
since then, with his current positions as a professor and a doctoral supervisor. He has been serving
as the dean of the Institute of Internet Industry Research* (互聯網產業研究院), the director of
Economic Management Advanced Information Technology Business Application Laboratory* (經管
– 280 –
先進信息技術商業應用實驗室) and executive vice president of the Research Center of Health

Care Management* (經管醫療管理研究中心) of Tsinghua University (清華大學) since December
2016, October 2011 and December 2008, respectively.
Dr. Zhu has been serving as an independent director of (i) Guangdong JingYi Metal Co.,
Ltd.* (廣東精藝金屬股份有限公司), a company whose shares are listed on the Shenzhen Stock
Exchange (stock code: 002295), since May 2019, (ii) Financial Street Holdings Co., Ltd.* (金融街
控股股份有限公司), a company whose shares are listed on the Shenzhen Stock Exchange (stock
code: 000402), since August 2020 and (iii) CCB Property Insurance Co., Ltd.* (建信財產保險有限
公司), a company primarily engaged in financial insurance business, since April 2021. Since
February 2020, Dr. Zhu has also been serving as the independent supervisor of Travelsky
Technology Limited* (中國民航信息網絡股份有限公司), a company whose shares are listed on
the Main Board of the Stock Exchange (stock code: 696).
Dr. Zhu received his bachelor’s degree in engineering physics majoring in nuclear and
thermal energy utilization from Tsinghua University (清華大學) in July 1994 and graduated from
the doctorate program in nuclear science and engineering of the Institute of Nuclear and New
Energy Technology* (核能與新能源技術研究院), formerly known as the Institute of Nuclear
Technology Design* (核能技術設計研究院), of Tsinghua University (清華大學) in April 1999. Dr.
Zhu served as a postdoctoral researcher at the Department of Management Science and
Engineering in the School of Economics and Management of Tsinghua University (清華大學) from
September 1998 to August 2000.
Dr. Zhu has been awarded the Second Prize of Scientific and Technological Progress* (科技
進步二等獎) of 2010 by the China National Association for Automation in Petroleum and
Chemical Industry (中國石油和化工自動化應用協會) and the Second Prize of the 16th Beijing
Excellent Achievement Award of Philosophy and Social Science* (北京市第十六屆哲學社會科學
優秀成果獎二等獎) in April 2011 and January 2021, respectively.
Mr. LI Yulong (李玉龍), aged 46, has been appointed as an independent non-executive
Director in December 2022. He is responsible for supervising and providing independent advice on
the operation and management of our Group.
Mr. Li is a qualified lawyer as to PRC laws who has been practising in Yingke Law Firm (盈
科律師事務所) since May 2017. Prior to joining Yingke Law Firm, he was a lawyer in Beijing
Huawei Law Firm* (北京市華衛律師事務所) from May 2010 to April 2017 with a focus on
litigation and general legal consultation for hospitals.
Mr. Li graduated from the bachelor’s degree program in Lanzhou University (蘭州大學) in
the PRC majoring in law in December 2004 through higher education self-taught examination. Mr.
Li received the qualification of legal profession (法律職業資格證) issued by Ministry of Justice of
the PRC (中華人民共和國司法部) in February 2008 and was later qualified as a licensed lawyer
by the Beijing Municipal Bureau of Justice* (北京市司法局) in July 2009. Mr. Li was qualified by
the National Health Commission of the PRC (中華人民共和國國家衛生健康委員會), formerly
known as Ministry of Health of the PRC (中華人民共和國衛生部), in December 2008 to practice
as a licensed physician (執業醫師). He also received the Certification of Fund Practice
Qualification (基金從業資格證書) from the Asset Management Association of China (中國證券投
資基金業協會) in August 2020 and the Certificate of Independent Director Qualification of Listed
Companies (上市公司獨立董事資格證書) from the Shenzhen Stock Exchange in November 2021.
– 281 –
Dr. CHAN Siu Yeung (陳兆陽) (alias CHAN Raymond), aged 65, has been appointed as an
independent non-executive Director in December 2022. He is responsible for supervising and
providing independent advice on the operation and management of our Group.
Dr. Chan has held various positions at the School of Business in Hong Kong Baptist
University (香港浸會大學) since August 1996, including an assistant professor, an associate
professor and the head of the Department of Accountancy and Law, with his current position as an
adjunct professor. He held various positions at the Faculty of Business of UOW College Hong
Kong (香港伍倫貢學院), formerly known as Community College of City University (香港城市大
學專上學院), from September 2018 to February 2022, including an adjunct professor, a professor
and the dean of the faculty. Dr. Chan was an independent non-executive director and the chairman
of audit committee of Long Success International (Holdings) Ltd., a company formerly listed on
GEM of the Stock Exchange (stock code: 8017), from July 2000 to June 2002. Dr. Chan served as
an assistant lecturer of the School of Accountancy in The Chinese University of Hong Kong (香港
中文大學) from September 1993 to September 1994 and a lecturer of School of Business &
Administration of Hong Kong Metropolitan University (香港都會大學, formerly known as the
Open Learning Institute of Hong Kong (香港公開進修學院)) from September 1994 to August
1996. From June 1989 to September 1991, Dr. Chan served as the finance and administration
manager of Rheem (Hong Kong) Limited (廉謙(香港)有限公司), a company primarily engaged in
the manufacture of hot water equipment. From February 1986 to May 1987, Dr. Chan was the
section head of the accounts department in the Hong Kong branch of The East Asiatic Company
Ltd. A/S, a Danish shipping company engaged in the provision of moving and relocation services.
He served as an accounting assistant in MUA Agencies Ltd. from August 1984 until late February
1986.
Dr. Chan received his bachelor’s degree in business administration with honors from The
Chinese University of Hong Kong (香港中文大學) in December 1984, master’s degree in business
administration from University of Missouri in the United States in December 1988, and a doctorate
degree of philosophy from The Chinese University of Hong Kong (香港中文大學) in December
1996. Subsequently, Dr. Chan also received three master’s degrees in different majors, including
the master of science in information systems from The Hong Kong Polytechnic University (香港理
工大學) in November 1998, the master of science in applied mathematics for science and
technology from The Hong Kong Polytechnic University (香港理工大學) in November 2004, and
the master of laws in Chinese business law from The Chinese University of Hong Kong (香港中文
大學) in December 2009.
Dr. Chan holds various professional qualifications. He was admitted as an associate of the
Association of Chartered Certified Accountants in May 1998 and an associate of the Hong Kong
Institute of Certified Public Accountants (formerly known as the Hong Kong Society of
Accountants) in July 1998. Dr. Chan was admitted as a fellow member of the Society of
Registered Financial Planners in June 2008, and was designated as a Fellow Certified Practicing
Accountant (FCPA) by CPA Australia in July 2016. Dr. Chan was also qualified as a member of
the Chartered Institute for Securities & Investment in August 2019.
– 282 –
BOARD OF SUPERVISORS
The PRC Company Law requires our Company to establish a board of supervisors that is
responsible for supervising the performance of the Board of Directors and senior management, our
Company’s financial operations, internal control and risk management. Our Board of Supervisors
consists of three Supervisors. Our Supervisors are elected for a term of three years and are subject
to re-election upon their retirement or resignation. The following table sets forth certain
information about our Supervisors.
Date of Relationship with other Directors,

Date of joining our appointment as a Supervisors and senior
Name Age Group Supervisor Position Responsibility management
Ms. SHAO Xiaxia 42 March 8, December 6, Employee’s Supervising the performance None
(邵霞霞) . . . . . . . . . 2001 2022 representative of duties by the Directors
Supervisor and the senior management
of the Group on behalf of
the employees
Ms. JIAO Duorong 49 November 28, December 6, Chairperson of Managing the overall work of None
(焦多蓉) . . . . . . . . . 2002 2022 the Board of the Board of Supervisors,
Supervisors and supervising financial
and Supervisor performance and the
performance of duties by
the Directors and senior
management of the Group
Ms. YANG Aiping 44 October 9, 2005 December 6, Supervisor Supervising the performance None
(楊愛萍) . . . . . . . . . 2022 of duties by the Directors
and the senior management
of the Group
Ms. SHAO Xiaxia (邵霞霞), aged 42, has been appointed as a Supervisor in December 2022.
She is responsible for supervising the performance of duties by the Directors and the senior
management of the Group on behalf of the employees.
Ms. Shao joined our Group in March 2001 and consecutively served as a store manager, a
region manager and retail director in Deshengtang Jinchang since then and until October 2019. She
has been the director of training in our Company since October 2019 and is responsible for the
formulation of training plans, implementation of training courses on the internal management and
policies of our Group under Fangdao Academy.
Ms. Shao obtained her associate (大專) degree in pharmacy from The Open University of
China (國家開放大學) in the PRC in July 2018. Ms. Shao was qualified as a licensed pharmacist
(執業藥師) by the CFDA (currently known as the NMPA) and the Ministry of Human Resources
and Social Security of the PRC (中華人民共和國人力資源和社會保障部) in July 2016.
Ms. JIAO Duorong (焦多蓉), aged 49, has been the chairperson of the Board of Supervisors
and a Supervisor since December 2022. She is responsible for managing the overall work of the
Board of Supervisors and supervising the financial performance and the performance of duties by
the Directors and senior management of the Group.
– 283 –
Ms. Jiao joined our Group in November 2002 and has been holding various positions since
then, including the financial manager at Beijing 111 and an accountant at Beijing 111 Chain, where
she was primarily responsible for the preparation of financial reports, review of salaries and
expense reimbursement and management of assets.
Ms. Jiao obtained her associate (專科) degree in accounting from Lanzhou University of
Finance and Economics (蘭州財經大學) (formerly known as Lanzhou Business School* (蘭州商學
院)) in the PRC in January 2008. Ms. Jiao received her Accounting Professional Qualification (會
計專業技術資格) from the Ministry of Finance of the PRC (中華人民共和國財政部) in May 2006.
Ms. YANG Aiping (楊愛萍), aged 44, has been appointed as a Supervisor in December 2022.
She is responsible for supervising the performance of duties by the Directors and the senior
management of the Group.
Ms. Yang joined our Group in October 2005 and served as the store manager in Deshengtang
Jinchang since then until August 2012. She has consecutively served as the manager and director
of customer services in our Company since August 2012.
Ms. Yang obtained her associate (專科) degree in TCM from Beijing University of Chinese
Medicine (北京中醫藥大學) in the PRC in July 2021. Ms. Yang was qualified as a licensed
pharmacist (執業藥師) by the NMPA and the Ministry of Human Resources and Social Security of
the PRC (中華人民共和國人力資源和社會保障部) in October 2018.
SENIOR MANAGEMENT
The following table sets out certain information regarding the senior management of our
Company.
Date of
appointment as a
senior Relationship with other
Date of joining management Directors, Supervisors and
Name Age our Group member Position Responsibility senior management
Mr. LONG Yan 55 September 9, September 22, Executive Director, Developing overall Mr. Long Yan is the
(龍岩) . . . . . . . . 1999 2009 chairman of the Board corporate and business brother of Mr. Long
of Directors and strategies of our Group Yun, our executive
general manager and making key Director
business and
operational decisions
of our Group
Mr. LONG Yun 49 March 11, 2002 December 6, Executive Director, vice Implementing and Mr. Long Yun is the
(龍雲) . . . . . . . . 2016 chairman of the Board executing resolutions brother of Mr. Long
of Directors and vice of the Board of Yan, our executive
president Directors, and Director
communicating and
coordinating external
affairs and managing
our offline pharmacies
– 284 –
Date of
appointment as a
senior Relationship with other
Date of joining management Directors, Supervisors and
Name Age our Group member Position Responsibility senior management
Ms. BAI Yanping 41 February 18, December 6, Executive Director, vice Managing the Group’s None
(白燕平) . . . . . . . 2002 2016 president and public relations and
secretary of the Board assisting the general
of Directors manager of the
Company in the
Group’s operation and
management
Ms. LIANG Xiaoping 59 September 2, December 6, Executive Director, vice Formulating the financial None
(梁曉萍) . . . . . . . 2007 2016 president and finance budget, profit
director distribution and loss
recovery plans of our
Group
Ms. WANG Chunhua 54 September 6, June 1, 2011 General manager of the Overall management of None
(王春華) . . . . . . . 2005 retail department our offline retail
operations,
pharmaceutical
wholesale business and
the supply chain
management of the
Group
Mr. HUANG Caiwang 39 September 3, December 5, Chief information Information development None
(黃才旺) . . . . . . . 2018 2018 officer and planning of our
Group
Mr. LEI Zhiqiang 50 March 10, 2007 January 17, Vice president B2C retail operations and None
(雷志強) . . . . . . . 2017 new retail channel
development
Mr. HUANG Bingyao 37 April 20, 2020 July 27, 2020 Chief technology officer Construction and None
(黃炳耀) . . . . . . . continuous leveling up
of the Company’s
technology
infrastructure and
digitalized front-line,
middle-office and
back-office systems
For biographical details of Mr. LONG Yan (龍岩), Mr. LONG Yun (龍雲), Ms. BAI
Yanping (白燕平) and Ms. LIANG Xiaoping (梁曉萍), see “— Board of Directors” in this
section.
Ms. WANG Chunhua (王春華), aged 54, has been the general manager of the retail
department of our Company since October 2021 and is primarily responsible for the overall
management of our offline retail operations, pharmaceutical wholesale business and the supply
chain management of the Group.
– 285 –
Ms. Wang joined our Group in September 2005 and has held various positions in our Group
since then, including the manager of Lanzhou region at Deshengtang Jinchang, the procurement
supervisor and deputy general manager at Deshengtang Wholesale, and deputy general manager of
the retail management department and supply chain management of the Company.
Ms. Wang obtained her vocational school (中專) diploma in community nursing (社區醫士) at
Gansu Health Vocational College (甘肅衛生職業學院) (formerly known as Gansu Health School*
(甘肅省衛生學校)) in the PRC in July 1993.
Mr. HUANG Caiwang (黃才旺), aged 39, has been the chief information officer of our
Company since February 2022. Mr. Huang is primarily responsible for the information
development and planning of our Group. Mr. Huang joined our Group in September 2018 and was
appointed as the information director of the Company in December 2018.
Prior to joining our Group, Mr. Huang worked at Shanghai Hydee Software Corp., Ltd.* (上
海海典軟件股份有限公司), a company listed on the National Equities Exchange and Quotations
(stock code: 831317), from October 2008 to August 2018 with his last position as the general
manager of the e-commerce department.
Mr. Huang obtained his associate (大專) degree in computer science and education from
Hunan University of Humanities, Science and Technology (湖南人文科技學院) in the PRC in June
2004. He graduated from the bachelor’s degree program in business administration of Hunan
University (湖南大學) in the PRC in June 2020.
Mr. LEI Zhiqiang (雷志強), aged 50, has been a vice president of our Company since
January 2017 and is primarily responsible for B2C retail operations and new retail channel
development.
Mr. Lei joined our Group in March 2007 and has held various positions in our Group
including serving as the purchasing manager, logistics manager, purchasing director and logistic
director consecutively in Deshengtang Wholesale from March 2007 to April 2014 and the vice
general manager of Beijing 111 from April 2014 to January 2017.
Mr. HUANG Bingyao (黃炳耀), aged 37, has been the chief technology officer of our
Company since January 2022. He is primarily responsible for the construction and continuous
leveling up of the Company’s technology infrastructure and digitalized front-line, middle-office
and back-office systems.
Mr. Huang joined the Group in April 2020 and was appointed as the technology director of
the Company in July 2020. Prior to joining our Group, from January 2019 to April 2020, Mr.
Huang served as a deputy general manager at Qingdao Xingwangbei Education Consulting Co.,
Ltd.* (青島星旺貝教育諮詢有限公司).
Mr. Huang obtained his bachelor’s degree in computer science and technology at North China
Institute of Aerospace Engineering (北華航天工業學院) (formerly known as Aerospace
Engineering Workers University* (航天工業職工大學)) in the PRC in June 2010. He obtained his
master’s degree in engineering management from University of Chinese Academy of Sciences (中
國科學院大學) in the PRC in July 2020.
– 286 –
JOINT COMPANY SECRETARIES
Ms. BAI Yanping (白燕平), aged 41, was appointed as one of our joint company secretaries
in December 2022. For biographical details of Ms. Bai, see “— Executive Directors” in this
section.
Ms. Yeung Siu Wai Kitty (楊小慧), aged 38, was appointed as one of our joint company
secretaries in December 2022. Ms. Yeung is a manager of Corporate Services of Tricor Services
Limited. Ms. Yeung has over 15 years of experience in the corporate secretarial field. She has been
providing professional corporate services to Hong Kong listed companies as well as private and
offshore companies.
Ms. Yeung is a Chartered Secretary, a Chartered Governance Professional and an associate of

each of The Hong Kong Chartered Governance Institute (HKCGI) (formerly known as The Hong
Kong Institute of Chartered Secretaries) and The Chartered Governance Institute (CGI) (formerly
known as The Institute of Chartered Secretaries and Administrators) in the United Kingdom.
Ms. Yeung received her bachelor’s degree of social science in administration and public
management from City University of Hong Kong (香港城市大學) in November 2006 and her
master’s degree in corporate governance from Hong Kong Metropolitan University (香港都會大學,
formerly known as The Open University of Hong Kong (香港公開大學)) in August 2017.
BOARD COMMITTEES
Our Company has established three committees under the Board of Directors, namely the
Audit Committee, the Remuneration Committee and the Nomination Committee.
Audit Committee
The Audit Committee consists of three Directors, namely Dr. Chan Siu Yeung (陳兆陽), Dr.
Zhu Yan (朱岩) and Mr. Li Yulong (李玉龍) with Dr. Chan currently serving as the chairman. Dr.
Chan has the appropriate professional qualification and experiences as required under Rules
3.10(2) and 3.21 of the Listing Rules. The Audit Committee is mainly responsible for supervising
and evaluating external and internal audits and internal control, proposing the engagement or
replacement of external auditors, reviewing disclosure of financial information and overseeing
other matters as authorized under laws and regulations, the Articles of Association and by the
Board of Directors.
Remuneration Committee
The Remuneration Committee consists of three Directors, namely Dr. Zhu Yan (朱岩), Mr. Li
Yulong (李玉龍) and Ms. Bai Yanping (白燕平), with Dr. Zhu currently serving as the chairman.
The Remuneration Committee is mainly responsible for making suggestions and recommendations
on the remuneration policies for senior management of the Company, including reviewing the
remuneration structure and level, and formulating remuneration package such as bonuses and share
incentive plans.
Nomination Committee
The Nomination Committee consists of three Directors, namely Mr. Long Yan (龍岩), Mr. Li
Yulong (李玉龍) and Dr. Zhu Yan (朱岩), with Mr. Long Yan currently serving as the chairman.
The Nomination Committee is mainly responsible for making recommendations on qualifications
and hiring selection criteria and procedures of Directors and officers of the Company, nominating
and considering candidates, including (1) deciding on the qualification criteria of Directors and
senior management; (2) formulating proposals for the composition of sub-committees of the Board
of Directors; (3) proposing the candidates for vacant positions of Directors and senior
management; (4) reviewing the selection of executive Directors, independent non-executive
– 287 –
Directors and senior management; (5) handling proposals from shareholders for Directors’
nominations; and (6) evaluating the performance of the Board of Directors, including the Directors
and the Board of Directors as a whole, etc.
CORPORATE GOVERNANCE CODE
Our Company recognizes the importance of incorporating elements of good corporate

governance in the management structures and internal control procedures of our Group so as to
achieve effective accountability.
Pursuant to code provision C.2.1 of the Corporate Governance Code, companies listed on the
Stock Exchange are expected to comply with, but may choose to deviate from the requirement that
the responsibilities between the chairman and the chief executive should be segregated and should
not be performed by the same individual. The roles of both chairman and general manager of our
Company (who is responsible under the immediate authority of the Board of Directors for the
conduct of the business of the Company) vest in Mr. Long Yan. Mr. Long Yan is the founder of our
Group and has extensive experience in the business operations and management of our Group. Our
Board of Directors believes that vesting the roles of both chairman and general manager to Mr.
Long Yan has the benefit of ensuring consistent leadership within our Group and enables more
effective and efficient overall strategic planning. This structure will enable our Company to make
and implement decisions promptly and effectively. Besides, with three independent non-executive
Directors out of a total of nine Directors in our Board of Directors, there will be sufficient
independent voice within our Board to protect the interests of our Company and our Shareholders
as a whole.
Our Board of Directors considers that the balance of power and authority will not be
impaired due to this arrangement. In addition, all major decisions are made in consultation with
members of the Board of Directors, including the relevant committees under the Board of
Directors, and three independent non-executive Directors. Our Board of Directors will reassess the
division of the roles of chairman and the general manager from time-to-time, and may recommend
dividing the two roles between different people in the future, taking into account the circumstances
of our Group as a whole.
Save as disclosed above, we expect to comply with the Corporate Governance Code as set out
in Appendix 14 to the Listing Rules after the [REDACTED]. We aim to achieve high standards of
corporate governance which are crucial to our development and safeguard the interests of our
Shareholders. Our Directors will review our corporate governance policies and compliance with
the Corporate Governance Code each financial year and comply with the “comply or explain”
principle in our corporate governance report, which will be included in our annual reports upon the
[REDACTED].
BOARD DIVERSITY POLICY
The Board of Directors has adopted a board diversity policy (the “Board Diversity Policy”)
in order to enhance the effectiveness of our Board of Directors and to maintain high standard of
corporate governance. The Board Diversity Policy sets out the criteria in selecting candidates to
our Board of Directors, including but not limited to gender, age, cultural and educational
background, ethnicity, professional experience, skills, knowledge and length of service. The
ultimate decision will be based on merit and contribution that the selected candidates will bring to
our Board of Directors.
– 288 –
Our Directors have a balanced mix of knowledge and skills, including but not limited to
overall business management, finance, law and medicine. They obtained degrees in diversified
majors including pharmacy, acupuncture and moxibustion, nursing, and computer science. The
Board of Directors is of the view that our Board of Directors satisfies the Board Diversity Policy.
In addition, our Board of Directors has a wide range of age, ranging from 41 years old to 65 years
old. Two of our Directors are female. While we recognize that the gender diversity at our Board of
Directors level can be improved given the majority of our Directors are male, we will continue to
apply the appointment criteria based on competence and with reference to the overall diversity
policy. Our Board of Directors will also ensure that appropriate balance of gender diversity is
achieved with reference to [REDACTED] expectation, and international and local recommended
best practices.
To further ensure gender diversity of our Board of Directors in the long run, our Group will
also identify and select several female individuals with a diverse range of skills, experience and
knowledge in different fields from time to time, and maintain a list of such female individuals who
possess qualities to become members of our Board of Directors, which will be reviewed by our
Nomination Committee periodically in order to develop a pipeline of potential successors to our
Board of Directors to promote gender diversity. In addition to the Board of Directors level, we are
also committed in promoting gender diversity at the senior management and all other levels of our
Group by providing career development opportunities for female staff, making available to them
knowledge and skills training in support of succession planning and ensuring future gender
diversity can be achieved on the Board of Directors.
The Nomination Committee is responsible for reviewing the diversity of the Board of
Directors. After [REDACTED], the Nomination Committee will monitor and evaluate the
implementation of the Board Diversity Policy from time to time to ensure its continued
effectiveness. The Nomination Committee will also include in successive annual reports a
summary of the Board Diversity Policy, including any measurable objectives set for implementing
the Board Diversity Policy and the progress on achieving these objectives.
OTHER DISCLOSURE PURSUANT TO RULES 8.10 AND RULE 13.51(2) OF THE

LISTING RULES
Except as disclosed in this Document, each of the Directors, Supervisors and senior
management (1) did not hold other positions in our Group as of the Latest Practicable Date; (2)
had no other relationship with any of the Directors, Supervisors, senior management, substantial
shareholders or Controlling Shareholders of the Company as of the Latest Practicable Date; and (3)
did not hold any other directorship and supervisor’s position in listed companies in the three years
prior to the Latest Practicable Date. Save as disclosed, to the best of the knowledge, information
and belief of our Directors and Supervisors, having made all reasonable enquiries, there was no
other matter with respect to the appointment of our Directors and Supervisors that need to be
brought to the attention of our Shareholders and there was no information relating to our Directors
and Supervisors that is required to be disclosed pursuant to Rule 13.51(2) of the Listing Rules as
of the Latest Practicable Date. For the Directors and Supervisors’ interests in the Shares within the
meaning of Part XV of the SFO, see “Appendix VI — Statutory and General Information — C.
Further Information about our Directors, Supervisors and Substantial Shareholders — 3. Disclosure
of Interests.”
– 289 –
Certain companies in which our non-executive Directors hold directorship are principally
engaged in the provision of healthcare, biopharmaceutical, Internet-related and digital services (the
“Interested Businesses”):
(i) Mr. Tu Yanwu (屠燕武) currently serves as a director of Alibaba Health and certain of
its subsidiaries; and
(ii) Mr. Ling Mingsheng (凌明聖) currently holds directorship in certain companies as an
investor board representative, i.e. Suqian Maternity Hospital Co., Ltd.* (宿遷市婦產醫
院有限公司), Kings Biotechnology (Changshu) Co., Ltd.* (金仕生物科技（常熟）有限
公司) and Nanjing Guoyue Pension Service Co., Ltd.* (南京國悅養老服務有限公司).
Despite the overlapping business between our Group and the Interested Businesses, our
Directors are of the view that our Group is and will be capable of carrying on our business
independent of and at arm’s length from the Interested Businesses for the following reasons:
(i) the management and operational decisions of our Group are made by our executive
Directors and senior management. Mr. Tu and Mr. Ling, as board representatives
nominated by Ali Health and Jiangsu Yanhai, respectively, with non-executive role in
our Company, are not involved in the daily operation and management of our Group;
and
(ii) we will establish corporate governance measures to balance any potential conflicts of
interest between our Group and our Directors to safeguard the interests of our Group
and the Shareholders as a whole. See “Relationship with our Controlling Shareholders
— Corporate Governance Measures” for details.
Saved as disclosed above, none of the Directors is interested in any business, apart from our
business, which competes or is likely to compete, either directly or indirectly, with our business
under Rule 8.10(2) of the Listing Rules.
COMPENSATION OF DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
The compensation and remuneration of our Directors, Supervisors and members of the senior
management of our Company are determined by the Shareholders’ meetings and our Board of
Directors as appropriate in the form of salaries and bonuses. Our Company also reimburses them
for expenses which are necessary and reasonably incurred in providing services to our Company or
discharging their duties in relation to the operations of our Company. When reviewing and
determining the specific remuneration packages for our Directors, Supervisors and members of the
senior management of our Company, the Shareholders’ meetings and the Board of Directors take
into account factors such as salaries paid by comparable companies, time commitment, level of
responsibilities, employment elsewhere in our Group and desirability of performance-based
remuneration. As required by the relevant PRC laws and regulations, our Company also
participates in various defined contribution plans organized by relevant provincial and municipal
government authorities and welfare schemes for employees of our Company, including medical
insurance, injury insurance, unemployment insurance, pension insurance, maternity insurance and
housing provident fund.
Our Company offers executive Directors, Supervisors and senior management members, who
are our employees, compensation in the form of salaries, bonuses, social security plans, housing
provident fund plans and other benefits. Our non-executive Directors do not receive any fees,
salaries, allowances, discretionary bonus, pension schemes contribution or other benefits in kind.
The independent non-executive Directors receive compensation based on their responsibilities.
– 290 –
The aggregate amounts of remuneration (including wages, salaries, bonuses, employee

welfare, pension, social security cost and housing benefits and share-based compensation
expenses) paid to our Directors and Supervisors for the years ended December 31, 2020 and 2021,
and the nine months ended September 30, 2022, were approximately RMB4.3 million, RMB4.2
The five highest paid individuals of our Group for the years ended December 31, 2020 and
2021, and the nine months ended September 30, 2022 included four, four and three Directors,
respectively, whose remuneration is included in the aggregate amounts of remuneration paid to the
relevant Directors and Supervisors as set our above. For the years ended December 31, 2020 and
2021, and the nine months ended September 30, 2022, the aggregate amounts of remuneration
(including wages, salaries, bonuses, employee welfare, pension, social security cost and housing
benefits and share-based compensation expenses) paid to the remaining one, one and two
individuals were approximately RMB0.4 million, RMB0.5 million and RMB0.7 million,
respectively. Further details on the remuneration of the five highest paid individuals during the
Track Record Period are set out in the Accountant’s Report in Appendix I to this Document.
It is estimated that remuneration equivalent to approximately RMB4.1 million in aggregate

will be paid to our Directors and Supervisors by our Company for the year ending December 31,
2023, based on the arrangements in force as of the date of the Document.
No remuneration was paid by our Company to our Directors, Supervisors or the five highest
paid individuals as inducement to join or upon joining our Company or as a compensation for loss
of office during the Track Record Period. Furthermore, none of our Directors or Supervisors had
waived or agreed to waive any remuneration during the Track Record Period.
COMPLIANCE ADVISOR
Our Company appointed Maxa Capital Limited as the compliance advisor pursuant to Rules
3A.19 and 19A.05 of the Listing Rules, and the compliance advisor will advise our Company in
the following circumstances.
• before the publication of any regulatory announcement, circular or financial report;
• where a transaction, which might be a notifiable or connected transaction, is

contemplated, including share issues and share repurchases;
• where our Company proposes to use the [REDACTED] of the [REDACTED] in a

manner that is different from that detailed in this Document or where our business
activities, developments or results deviate from any forecasts, estimates or other
information in this Document; and
• where the Stock Exchange makes an inquiry of our Company under Rule 13.10 of the
Listing Rules.
The terms of the appointment of the compliance advisor will commence on the
[REDACTED] and end on the date when our Company distributes the annual report of its
financial results for the first full financial year commencing after the [REDACTED].
– 291 –
SUBSTANTIAL SHAREHOLDERS
Substantial Shareholders
So far as our Directors are aware, immediately following the completion of the
[REDACTED] (assuming the [REDACTED] is not exercised), the following persons will have, or
be deemed, or taken to have an interest and/or short position in the H 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 will be, directly or indirectly, interested
in 10% or more of the nominal value of any class of share capital carrying rights to vote in all
circumstances at general meetings of our Company:
Shares held immediately following

the completion of the [REDACTED]
Shares held as of the (assuming the [REDACTED]
Name of Shareholder Nature of interest Latest Practicable Date is not exercised)
Percentage in Percentage in Percentage in
the relevant the relevant the total issued
Class of Shares Number class of Shares Number class of Shares share capital
Mr. Long Yan (1)(2)
. . . . . . Beneficial owner Domestic 87,111,112 70.56% [REDACTED] [REDACTED]% [REDACTED]%
Shares
H Shares — — [REDACTED] [REDACTED] [REDACTED]
Interest in controlled Domestic 11,111,110 9.00% [REDACTED] [REDACTED]% [REDACTED]%

corporations Shares
H Shares — — [REDACTED] [REDACTED]% [REDACTED]%
A concert party to an Domestic 1,777,778 1.44% [REDACTED] [REDACTED]% [REDACTED]%

agreement Shares
Mr. Long Yun(2) . . . . . . . Beneficial owner Domestic 1,777,778 1.44% [REDACTED] [REDACTED]% [REDACTED]%
Shares
A concert party to an Domestic 87,111,112 70.56% [REDACTED] [REDACTED]% [REDACTED]%

agreement Shares
Nanjing CCI Capital(3) . . . . . Interest in controlled Domestic 8,396,667 6.80% [REDACTED] [REDACTED]% [REDACTED]%
corporations Shares
Mr. Gao Chong (郜翀)(3) . . . . Interest in controlled Domestic 11,111,111 9.00% [REDACTED] [REDACTED]% [REDACTED]%
corporations Shares
Mr. Ling Mingsheng Interest in controlled Domestic 8,396,667 6.80% [REDACTED] [REDACTED]% [REDACTED]%
(凌明聖)(3) . . . . . . . . . corporations Shares
– 292 –
Shares held immediately following

the completion of the [REDACTED]
Shares held as of the (assuming the [REDACTED]
Name of Shareholder Nature of interest Latest Practicable Date is not exercised)
Percentage in Percentage in Percentage in
the relevant the relevant the total issued
Class of Shares Number class of Shares Number class of Shares share capital
Ali Health(4) . . . . . . . . . Interest in controlled Domestic 12,345,679 10.00% [REDACTED] [REDACTED]% [REDACTED]%
corporations Shares
Alibaba Health (Hong Kong) Interest in controlled Domestic 12,345,679 10.00% [REDACTED] [REDACTED]% [REDACTED]%
Technology Company corporations Shares
Limited
(阿里健康(香港)科技 H Shares — — [REDACTED] [REDACTED]% [REDACTED]%
有限公司, “Alibaba Health
(HK)”)(4) . . . . . . . . . .
Joy Heaven Interest in controlled Domestic 12,345,679 10.00% [REDACTED] [REDACTED]% [REDACTED]%
Incorporated . . . . . . . corporations
(4)
Shares
Alibaba Health Information Interest in controlled Domestic 12,345,679 10.00% [REDACTED] [REDACTED]% [REDACTED]%
Technology Limited corporations Shares
(阿里健康信息技術有限公司,
“Alibaba Health”)(4) . . . . H Shares — — [REDACTED] [REDACTED]% [REDACTED]%
Ali JK Nutritional Products Interest in controlled Domestic 12,345,679 10.00% [REDACTED] [REDACTED]% [REDACTED]%
Holding Limited (“Ali JK”) . corporations Shares
Alibaba Group Holding Limited Interest in controlled Domestic 12,345,679 10.00% [REDACTED] [REDACTED]% [REDACTED]%
(“Alibaba Group”) . . . . . corporations Shares
Notes:
(1) Mr. Long Yan, Zhejiang Yixue and Zhejiang Changqi holds 87,111,112 Shares, 5,555,555 Shares and 5,555,555
Shares, respectively. Each of Zhejiang Yixue and Zhejiang Changqi is controlled by Mr. Long Yan as its general
partner. As such, under the SFO, Mr. Long Yan is deemed to be interested in the 11,111,110 Shares held by
Zhejiang Yixue and Zhejiang Changqi.
(2) Pursuant to the Concert Party Agreement, Mr. Long Yan and Mr. Long Yun acknowledged and confirmed their
acting-in-concert relationship in our Company since becoming direct Shareholders and serving as the Company’s
members of senior management. As such, each of Mr. Long Yan and Mr. Long Yun is deemed to be interested in
each other’s interest in the Shares under the SFO. For details, see “History, Development and Corporate Structure
— Concert Party Agreement.”
– 293 –
(3) Jiangsu Yanhai is controlled by Jiangsu Coastal Capital as its general partner. More than 33.33% equity interest in
Jiangsu Coastal Capital is held by Nanjing Bangsheng Jurun, which is in turn owned as to more than 33.33%
limited partnership interest by Nanjing CCI Capital.
Jiangsu Jiequan is controlled by Nanjing Bangsheng Xingong as its general partner, which is in turned owned as to
more than 33.33% by Nanjing CCI Capital.
Nanjing Bangsheng Juyuan is controlled by Nanjing CCI Capital as its general partner.
Each of Mr. Gao Chong (郜翀) and Mr. Ling Mingsheng (凌明聖) is interested in more than 33.33% of equity
interests in Nanjing CCI Capital. As such, under the SFO, Nanjing CCI Capital, Mr. Gao Chong and Mr. Ling
Mingsheng are deemed to be interested in the 5,555,556 Shares, 2,714,444 Shares and 126,667 Shares held by
Jiangsu Yanhai, Jiangsu Jiequan and Nanjing Bangsheng Juyuan, respectively.
Suzhou Bangsheng Yingxin is controlled by Nanjing Bangsheng Investment Management as its general partner,
which is in turn controlled by Mr. Gao Chong as its general partner. As such, under the SFO, Mr. Gao Chong is
deemed to be interested in the 2,714,444 Shares held by Suzhou Bangsheng Yingxin.
(4) Ali Health and Jiangsu Zijin Hongyun holds 6,172,840 and 6,172,839 Shares, respectively. One of the general
partners of Jiangsu Zijin Hongyun is Hangzhou Hongyun Kangsheng Equity Investment Co., Ltd.* (杭州弘雲康晟
股權投資有限公司), an entity controlled by Ali Health. As such, under the SFO, Ali Health is also deemed to be
interested in the 6,172,839 Shares held by Jiangsu Zijin Hongyun.
Ali Health is wholly-owned by Alibaba Health (HK), which is in turn wholly-owned by Joy Heaven Incorporated.
Joy Heaven Incorporated is directly wholly-owned by Alibaba Health, a company whose shares are listed on the
Stock Exchange (stock code: 241). Alibaba Health is owned as to approximately 33.73% by Ali JK and
approximately 57.05% by Alibaba Group via Ali JK and other subsidiaries. As such, under the SFO, each of
Alibaba Health (HK), Joy Heaven Incorporated, Alibaba Health, Alibaba Group and Ali JK is deemed to be
interested in the 12,345,679 Shares held by Ali Health and Jiangsu Zijin Hongyun.
Save as disclosed herein, our Directors are not aware of any person who will, immediately
following the completion of the [REDACTED] (assuming the [REDACTED] is not exercised),
have an interest or short position in the H Shares or underlying Shares which will be required to
be disclosed to our Company and the Stock Exchange under the provisions of Divisions 2 and 3 of
Part XV of the SFO or will be, directly or indirectly, interested in 10% or more of the nominal
value of any class of share capital carrying rights to vote in all circumstances at general meetings
of our Company.
We are not aware of any arrangement which may result in any change of control in our
Company at any subsequent date.
– 294 –
SHARE CAPITAL
Our registered share capital as of the Latest Practicable Date was RMB123,456,790, divided
into 123,456,790 Domestic Shares, with a nominal value of RMB1.00 each.
Assuming the [REDACTED] is not exercised, the share capital of our Company immediately
after the [REDACTED] and Conversion of Domestic Shares into H Shares will be as follows:
Approximate
Percentage of Aggregate
Total Share nominal value of
Description of Shares Number of Shares Capital Shares
(RMB)
Domestic Shares . . . . . . . . . . . . . . . . . . . . . 114,259,190 [REDACTED]% 114,259,190.0
H Shares to be converted from Domestic [REDACTED] [REDACTED]% [REDACTED]

Shares . . . . . . . . . . . . . . . . . . . . . . . . . . .
H Shares issued pursuant to the [REDACTED] [REDACTED]% [REDACTED]

[REDACTED]. . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [REDACTED] 100.0% [REDACTED]

Assuming the [REDACTED] is exercised in full, the share capital of our Company
immediately after the [REDACTED] and Conversion of Domestic Shares into H Shares will be as
follows:
Approximate
Percentage of Aggregate
Total Share nominal value of
Description of Shares Number of Shares Capital Shares
(RMB)
Domestic Shares . . . . . . . . . . . . . . . . . . . . . 114,259,190 [REDACTED]% 114,259,190.0
H Shares to be converted from Domestic [REDACTED] [REDACTED]% [REDACTED]

Shares . . . . . . . . . . . . . . . . . . . . . . . . . . .
H Shares issued pursuant to the [REDACTED] [REDACTED]% [REDACTED]

[REDACTED]. . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [REDACTED] 100.00% [REDACTED]

The above table assumes that the [REDACTED] has become unconditional and the H Shares
are issued pursuant to the [REDACTED].
SHARE CLASSES AND RANKING
Upon completion of the [REDACTED] and Conversion of Domestic Shares into H Shares,
we will have two classes of Shares: H Shares as one class and Domestic Shares as another class.
Domestic Shares and H Shares are all ordinary Shares in the share capital of our Company.
However, apart from certain qualified domestic institutional [REDACTED] in the PRC and the
qualified PRC [REDACTED] under the Shanghai — Hong Kong Stock Connect or the Shenzhen −
Hong Kong Stock Connect and other persons who are entitled to hold our H Shares pursuant to
relevant PRC laws and regulations or upon approvals of any competent authorities (such as certain
of our existing Shareholders whose Domestic Shares will be converted to H Shares pursuant to
approval by the CSRC), H Shares generally cannot be subscribed for by or traded between legal or
natural persons of the PRC.
– 295 –
SHARE CAPITAL
The differences between the two classes of Shares and the provisions on class rights, the
dispatch of notices and financial reports to Shareholders, dispute resolution, registration of Shares
on different registers of members, the method of share transfer and appointment of dividend
receiving agents are set forth in “Appendix V — Summary of the Articles of Association of the
Company.” Except for the differences above, the Domestic Shares and the H Shares will rank pari
passu with each other in all other respects and, in particular, will rank equally for all dividends or
distributions declared, paid or made after the date of this document. All dividends in respect of the
H Shares are to be denominated and declared in RMB and paid by our Company in Hong Kong
dollars or RMB, while all dividends for Domestic Shares will be paid in RMB.
CIRCUMSTANCES UNDER WHICH GENERAL MEETING AND CLASS MEETING ARE

REQUIRED
For details of circumstances under which the Shareholders’ general meeting and class
Shareholders’ meeting are required, see “Appendix V — Summary of the Articles of Association of
the Company — Variation of Rights of Existing Shares or Classes of Shares” and “Requirements
for General Meetings.”
CONVERSION OF DOMESTIC SHARES INTO H SHARES
Our Domestic Shares are not listed or traded on any stock exchange. Based on procedures
disclosed in this section, holders of Domestic Shares may convert their Domestic Shares into H
Shares. Such conversion is subject to the Listing Rules, including the satisfaction of public float
requirements. In addition, the conversion of Domestic Shares and listing and trading of the
converted H Shares shall have gone through any requisite internal approval process of our
Company and complied with the regulations prescribed by the relevant regulatory authorities,
including the CSRC and the Stock Exchange.
[REDACTED] Review and Approval by the CSRC
In accordance with the Guidelines for the “Full Circulation” Program for Domestic Unlisted
Shares of H-share Listed Companies 《 ( H股公司境內未上市股份申請「全流通」業務指引》)
announced by the CSRC, H-share listed companies that apply for the conversion of domestic
shares into H shares for listing and circulation on the Stock Exchange shall file the application
with the CSRC according to the administrative licensing procedures necessary for the
“examination and approval of public issuance and listing (including additional issuance) of
overseas shares by a joint stock company”. An H-share listed company may apply for a “Full
Circulation” separately or when applying for refinancing overseas. An unlisted domestic joint
stock company may apply for “full circulation” when applying for an overseas initial public
offering.
We applied for a “full circulation” in relation to [REDACTED] Domestic Shares held by

eight Shareholders and have received the reply from the CSRC dated [•] approving these Domestic
Shares to be converted into H Shares. The H Shares may be [REDACTED] on the Stock Exchange
upon completion of the conversion. This reply shall remain effective within 12 months from the
date of approval.
[REDACTED] Approval by the Stock Exchange
We have applied to the Listing Committee of the Stock Exchange for the granting of
[REDACTED] of, and permission to [REDACTED], our H Shares to be issued pursuant to the
[REDACTED] (including any H Shares which may be issued pursuant to the exercise of the
[REDACTED]) and the H Shares to be converted from [REDACTED] Domestic Shares, which is
subject to the approval by the Stock Exchange.
– 296 –
SHARE CAPITAL
We will perform the following procedures for the Conversion of Domestic Shares into H
Shares after receiving the approval of the Stock Exchange: (1) giving instructions to our
[REDACTED] regarding the relevant share certificates of the converted H Shares; and (2)
enabling the converted H Shares to be accepted as eligible securities by [REDACTED] for
deposit, clearance and settlement in the [REDACTED]. The eight Shareholders who chose to
convert certain Domestic Shares into H Shares may only [REDACTED] in the H Shares upon
completion of the domestic procedures as disclosed in this section.
Domestic Procedures
The eight Shareholders who chose to convert certain Domestic Shares into H Shares may
only [REDACTED] in the H Shares upon completion of the below procedures for the registration,
deposit and transaction settlement in relation to the conversion and [REDACTED]:
i. We will appoint CSDC as the nominal holder to deposit the relevant securities at CSDC
(Hong Kong), which will then deposit the securities at [REDACTED] in its own name.
CSDC, as the nominal holder of the eight Shareholders who chose to convert certain
Domestic Shares into H Shares, shall handle all custody, maintenance of detailed
records, cross-border settlement and corporate actions, etc. relating to the converted H
Shares for the eight Shareholders who chose to convert certain Domestic Shares into H
Shares;
ii. We will engage a domestic securities company (the “Domestic Securities Company”)
to provide services such as the transmission of sale orders and trading messages in
respect of the converted H Shares. The Domestic Securities Company will engage a
Hong Kong securities company (the “Hong Kong Securities Company”) for the
settlement of transactions. We will make an application to CSDC, Shenzhen Branch for
the maintenance of a detailed record of initial holding of the converted H Shares.
Meanwhile, we will submit applications for a domestic transaction commission code and
abbreviation, which shall be provided by CSDC, Shenzhen Branch as authorized by
SZSE;
iii. The SZSE shall authorize Shenzhen Securities Communication Co., Ltd. to provide
services relating to transmission of trading orders and trading messages in respect of the
converted H Shares between the Domestic Securities Company and the Hong Kong
Securities Company, and the real-time market forwarding services of the converted H
Shares;
iv. According to the Notice of the SAFE on Issues Concerning the Foreign Exchange
Administration of Overseas Listing 《
( 國家外匯管理局關於境外上市外匯管理有關問題
的通知》), the eight Shareholders who chose to convert certain Domestic Shares into H
Shares shall complete the overseas shareholding registration with the local foreign
exchange administration bureau before they sell any converted H Shares. After
completing such overseas shareholding registration, the eight Shareholders who chose to
convert certain Domestic Shares into H Shares shall open a specified bank account for
the holding of overseas shares by domestic investors at a domestic bank with relevant
qualifications and open a fund account for the H Share “Full Circulation” at the
Domestic Securities Company. The Domestic Securities Company shall open a securities
trading account for the H Share “Full Circulation” at the Hong Kong Securities
Company; and
– 297 –
SHARE CAPITAL
v. The eight Shareholders who chose to convert certain Domestic Shares into H Shares
shall submit trading orders with respect to the converted H Shares through the Domestic
Securities Company. Such trading orders of the eight Shareholders who chose to convert
certain Domestic Shares into H Shares will be submitted to the Stock Exchange through
the securities trading account opened by the Domestic Securities Company at the Hong
Kong Securities Company. Upon completion of the transaction, settlements between
each of the Hong Kong Securities Company and CSDC (Hong Kong), CSDC (Hong
Kong) and CSDC, CSDC and the Domestic Securities Company, and the Domestic
Securities Company and the eight Shareholders who chose to convert certain Domestic
Shares into H Shares, will all be conducted separately.
As a result of the Conversion of Domestic Shares into H Shares, shareholding of the eight
Shareholders who chose to convert certain Domestic Shares into H Shares in our Domestic Share
capital shall be reduced by the number of Domestic Shares converted, and the number of H Shares
shall be increased by the number of converted H Shares.
RESTRICTIONS ON SHARE TRANSFER
The PRC Company Law provides that, in relation to the public share offering of a company,
the shares of the company which have been issued prior to the offering shall not be transferred
within one year from the date of the listing. Accordingly, Shares issued by our Company prior to
the [REDACTED] shall be subject to this statutory restriction and shall not be transferred for a
period of one year from the [REDACTED].
Our Directors, Supervisors and members of the senior management of our Company shall
declare their shareholdings in our Company and any changes in their shareholdings. Shares
transferred by our Directors, Supervisors and members of the senior management each year during
their term of office shall not exceed 25% of their total respective shareholdings in our Company.
The Shares that the aforementioned persons held in our Company cannot be transferred within one
year from the date on which the Shares are [REDACTED] and [REDACTED], nor within half a
year after they leave their positions in our Company.
For details of the lock-up undertaking given by our Controlling Shareholder pursuant to Rule
10.07 of the Listing Rules, see “[REDACTED] — [REDACTED] — Undertakings to the Stock
Exchange pursuant to the Listing Rules — Undertakings by the Controlling Shareholders.”
REGISTRATION OF SHARES NOT LISTED ON AN OVERSEAS STOCK EXCHANGE

According to the Notice of Centralized Registration and Deposit of Non-overseas Listed
Shares of Companies Listed on an Overseas Stock Exchange 《 ( 關於境外上市公司非境外上市股份
集中登記存管有關事宜的通知》) issued by the CSRC, an overseas listed company is required to
register its shares that are not listed on an overseas stock exchange with the China Securities
Depository and Clearing Corporation Limited within 15 business days upon listing and provide a
written report to the CSRC regarding the centralized registration and deposit of its non-overseas
listed shares as well as the current [REDACTED] and [REDACTED] of the H shares.
SHAREHOLDERS’ APPROVAL FOR THE [REDACTED]
Approval from holders of the Shares is required for the Company to issue H Shares and seek
the [REDACTED] of H Shares on the Stock Exchange. The Company has obtained such approval
at the Shareholders’ general meeting held on December 22, 2022.
– 298 –
FINANCIAL INFORMATION
You should read the following discussion and analysis with our consolidated financial
information as of and for the years ended December 31, 2020 and 2021 and the nine months
ended September 30, 2022 included in the Accountant’s Report in Appendix I to this Document,
together with the respective accompanying notes. Our consolidated financial information has
been prepared in accordance with IFRS issued by the International Accounting Standards Board
(“IASB”).
The following discussion and analysis contain forward-looking statements that reflect our
current views with respect to future events and financial performance that involve risks and
uncertainties. These statements are based on our assumptions and analysis in light of our
experience and perception of historical trends, current conditions and expected future
developments, as well as other factors we believe are appropriate under the circumstances. Our
actual results may differ materially from those anticipated in these forward-looking statements
as a result of certain factors. We discuss factors that we believe could cause or contribute to
these differences below and elsewhere in this Document, including those set forth under the
sections headed “Risk Factors” and under “Forward-looking Statements” in this Document.
OVERVIEW
medical diagnostic and medicinal capabilities. We offer full-suite products and services with
comprehensive coverage encompassing customers’ entire purchasing cycle through our
omni-channel retail network. Our products and services are assembled to cater to the all-round
health management needs of our customers that span the medical, pharmaceutical, wellness and
safeguarding elements along the entire healthcare value chain. Our business comprises product
sales through our omni-channel pharmaceutical retail business, comprising offline retail mode,
O2O retail mode and B2C retail mode, and our pharmaceutical wholesale business, as well as
healthcare, consultation and other services, which entail medical consultation services, wellness
management services and franchise-related services.
We achieved a stable revenue growth during the Track Record Period. For the years ended
December 31, 2020 and 2021, we recorded total revenue of RMB1,754.0 million and RMB2,014.3
million, representing an increase of 14.8%. Furthermore, our total revenue increased by 16.4%
from RMB1,467.4 million in the nine months ended September 30, 2021 to RMB1,707.5 million in
the same period of 2022. Our gross profit increased from RMB634.8 million in 2020 to RMB694.7
million in 2021, representing an increase of 9.4%. For the nine months ended September 30, 2022,
we recorded gross profit of RMB596.9 million compared to RMB492.7 million in the same period
in 2021, representing an increase of 21.1%. During the Track Record Period, we turned from a net
loss position into a net profit position. For the years ended December 31, 2020 and 2021 and the
nine months ended September 30, 2021, we incurred net losses of RMB7.8 million, RMB41.1
million and RMB40.9 million, respectively. For the nine months ended September 30, 2022, we
recorded a net profit of RMB0.8 million. Under non-IFRS measure, we recorded an adjusted profit
for the year of RMB29.7 million in 2020 and RMB0.8 million in 2021, an adjusted loss for the
period of RMB9.4 million for the nine months ended September 30, 2021 and an adjusted profit of
RMB35.2 million for the nine months ended September 30, 2022. We define adjusted profit/loss
(non-IFRS measure) as profit/loss for the year/period, adjusted by adding back share-based
payment expenses, interest expenses on redemption liabilities and [REDACTED]. We exclude
these items because they are not expected to result in future cash payments that are recurring in
nature and they are not indicative of our core operating results and business outlook.
– 299 –
BASIS OF PRESENTATION
The historical financial information of our Group has been prepared in accordance with IFRS
issued by the IASB.
The historical financial information has been prepared under the historical cost convention, as
modified by the revaluation of certain financial liabilities measured at fair value.
The preparation of historical financial information in conformity with IFRS requires the use
of certain critical accounting estimates. It also requires management to exercise its judgment in the
process of applying our Group’s accounting policies. The areas involving a higher degree of
judgment or complexity, or areas where assumptions and estimates are significant to the historical
financial information are disclosed in Note 4 to the Accountant’s Report in Appendix I to this
Document.
The historical financial information has been prepared based on the consolidated financial
statements of our Group. Inter-company transactions, balances and unrealized gains/losses on
transactions between group companies are eliminated on consolidation.
In preparing the historical financial information, our Group has consistently adopted all
applicable new and amended IFRS throughout all the years presented except for any new or
interpretation that are not yet effective as set out in Note 2.1(a) to the Accountant’s Report in
FACTORS AFFECTING OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our financial condition and results of operations have been, and are expected to continue to
be, affected by general factors driving the broader health management and healthcare solutions
industry in China. Such factors include China’s overall economic growth, increasing per capita
disposable income, aging population, increasing chronic disease patients, enhancing health
awareness, broadening medical insurance coverage, favorable government initiatives and policies,
increasingly complex diseases and health issues, and unmet market demands for comprehensive
healthcare services. According to CIC, the size of China’s health management and healthcare
solutions market has been growing significantly in recent years. See “Industry Overview —
Overview of the Health Management and Healthcare Solutions Market in China” for more
information.
Our financial condition and results of operations are also more directly affected by certain
factors specific to our business, which mainly include the following key factors:
• Our ability to expand our pharmaceutical retail network and increase and leverage our
scale;
• Our ability to retain and continue to acquire customers and to effectively promote our
brand;
• Our ability to enrich our products and service offerings;
• Our ability to integrate and leverage our supply chain resources; and
• Our ability to effectively invest in technologies.
– 300 –
Our Ability to Expand Our Pharmaceutical Retail Network and Increase and Leverage Our
Scale
Our ability to increase and leverage our scale is crucial to our financial performance through
increasing our revenue generated from multiple categories. Enhanced scale also helps us to achieve
a greater market share with increased sales of our products and services, which in turn increases
our customer base and our capability of generating profits and further boosts our economies of
scale and operating efficiency.
Through omni-channel retail, which is the foundation of our operations, we offer a wide
variety of products to customers in different modes and provide round the clock access to
personalized healthcare solutions supported by our omni-channel product and service offerings.
During the Track Record Period, our omni-channel pharmaceutical retail revenue increased from
RMB1,714.2 million in 2020 to RMB1,966.6 million in 2021, and from RMB1,434.1 million for
the nine months ended September 30, 2021 to RMB1,665.0 million for the nine months ended
September 30, 2022. We have dedicated our efforts to strengthening our presence both offline and
online. During the Track Record Period, the number of our self-operated offline pharmacies has
increased from 802 as of December 31, 2020 to 915 as of December 31, 2021 and further
increased to 931 as of September 30, 2022. As we continue to grow, we plan to further expand our
omni-channel pharmaceutical retail network by establishing more self-operated pharmacies, which
are equipped with O2O capabilities, and online stores on e-commerce platforms for our B2C retail
business. We are also dedicated to increasing the SKUs of our products currently available across
our offline, O2O and B2C operations, which increased from 8,261 as of December 31, 2020 to
10,145 as of December 31, 2021, and further increased to 11,105 as of September 30, 2022. We
believe that our ability to continuously expand our omni-channel pharmaceutical retail business is
essential for us to achieve a larger market share of our product offerings, which will enable us to
have stronger bargaining power over our suppliers and help us to achieve greater economies of
scale to improve our operating efficiency.
In addition to scaling up our omni-channel pharmaceutical retail business, we have also been
actively enhancing the scale of our other business categories, including pharmaceutical wholesale,
medical consultation services, wellness management services, and franchise-related services. For
the years ended December 31, 2020 and 2021, and the nine months ended September 30, 2021 and
2022, our revenue generated from these business categories amounted to RMB39.8 million,
RMB47.8 million, RMB33.3 million and RMB42.6 million, respectively. We believe that the
successful growth of our business will depend on our ability to leverage these business categories
to address customers’ diverse health needs, which will in turn affect our results of operations and
financial condition.
Our Ability to Retain and Continue to Acquire Customers and to Effectively Promote Our
Brand
During the Track Record Period, our revenue was primarily affected by our product sales
volume as well as our customer scale across our business operations. For the years ended
December 31, 2020 and 2021 and for the nine months ended September 30, 2022, the total
purchase orders by customers generated from our omni-channel pharmaceutical retail operations
encompassing offline retail mode through our self-operated pharmacies and online retail through
O2O and B2C modes were 31.5 million, 33.9 million and 26.7 million, respectively. We believe
that our ability in retaining and continuing to acquire customers is crucial to our business growth
and our financial performance. Our customer retention and acquisition capability is also
demonstrated by the increased popularity of our membership program during the Track Record
– 301 –
Period. As of December 31, 2020 and 2021 and as of September 30, 2022, we accumulated
approximately 5.9 million, 7.4 million and 9.2 million members registered for our membership
program, and we recorded an average member retention rate of 63.4% during the Track Record
Period.
In addition to our product offerings in our omni-channel pharmaceutical retail business, we

provide various value-adding healthcare services to elevate customer experience to address their
diverse health needs. During the Track Record Period, we completed approximately 29.1 million
Internet hospital-based medical consultations. Our various value-adding health management
services also reinforce our customers’ faith in our versatile capability to address their diverse
health needs. As of September 30, 2022, we had performed routine health check-up tests for more
than one million customers and generated approximately 3.8 million personalized customer health
profiles. In addition, our dedicated sales and marketing team has conducted sales and marketing
activities at both corporate and individual storefront levels, which has continuously expanded our
market base.
Further, our customers’ receptiveness to our products and service offerings depends on our
reputation and market recognition of our brand. Our ability to distinguish our brand from market
competitors helps us to gain customer trust and enhance customer stickiness, which in turn
increases customers’ purchases, as well as enhances our leverage in collaborations with suppliers
and other business partners. We believe that our capability of establishing a strong brand image
depends on the quality of our products and services to elevate customer experience, the
effectiveness of our marketing and promotional activities, our capabilities of carrying product
SKUs, and the provision of valuable service by our employees. During the Track Record Period,
our selling and marketing expenses increased from RMB452.9 million in 2020 to RMB526.6
million in 2021, and increased from RMB381.4 million for the nine months ended September 30,
2021 to RMB422.9 million for the same period in 2022. As our business grows, we expect to
continue to reasonably increase our selling and marketing expenses. We believe that the
effectiveness of our customer retention and acquisition strategies, which differentiates us from our
competitors, and our ability to promote our brand directly correlate to our revenue-generating
capability and affect our results of operations and financial condition.
Our Ability to Enrich Our Products and Service Offerings
Our results of operations also depend on our ability to enrich our products and services to
meet the increasingly complex health needs of customers. In our omni-channel pharmaceutical
retail business, we carry a wide range of product selections in terms of product pipelines and price
ranges, covering prescription and OTC drugs, medical devices, TCM decoction pieces, wellness
products and other products. We also sell products under our own brands in the categories of
prescription and OTC drugs, TCM decoction pieces, medical devices, dietary and nutritional
supplements, healthy snacks and cosmetics products to enhance our brand image in the market and
complement our product portfolio and other products. In addition to selling pharmaceutical
products, we offer our customers comprehensive customer-oriented healthcare services that address
both their medical needs and wellness needs. Our medical consultation services, offered online
through our Internet hospital and offline through our TCM clinics and general outpatient clinic,
conveniently address customers’ needs for medical diagnosis, prescription review, prescription
renewal and tailored treatment plans. Our wellness management services further bring value to
health-conscious customers as we address their health issues through TCM appropriate techniques
and health exercise programs. As our business grows, we intend to further enrich our product and
– 302 –
service offerings by expanding the portfolio of our products and service offerings and enhancing
the synergies among our product and service offerings and providing more value-adding offerings
to our customers.
Our Ability to Integrate and Leverage Our Supply Chain Resources
We leverage our supplier network of large, medium and small pharmaceutical and medical
device manufacturing and distribution companies to identify suitable products that are competitive
in quality and pricing while meeting our various sales and operational needs. Our ability to
effectively leverage our supply chain network affects our day-to-day business operations and
financial performance. Our profitability is dependent on our capability of leveraging our
economies of scale and industry resources in managing our relationship with suppliers to obtain
favorable terms, including pricing terms, credit period and volume-based rebates.
We value the length and depth of our relationship with suppliers and have been committed to
establishing reliable connections with them. We connect with our suppliers through our vertically
integrated supply chain system as supported by our digitalized warehouses and offline pharmacy
network nationwide. During the Track Record Period, we made purchases from more than 700
suppliers.
We believe our capability of systematically selecting suppliers of quality products, obtaining

favorable product pricing and cooperating with suppliers to arrange value-adding health
management programs for customers has provided us valuable supply chain resources. Through
collaborations with us, upstream suppliers also gain insights into customer pain points from our
sales results and identify products that better suit customers’ needs, which in turn improves our
procurement process and allows our inventories to stay current with market demands. As our
business grows, our ability to further leverage our supply chain resources will affect our results of
operations and financial performance.
Our Ability to Effectively Invest in Technologies
Our performance depends on our ability to effectively invest in technologies to empower our
business model and improve operational efficiency. We utilize technologies backed by data
analytics and machine learning to improve the digitalization and intelligence level of our
pharmacies. We have adopted machine learning technologies to examine pharmacy layout and
inventory levels on a real-time basis. Through our algorithm-based recommendation service, we
can better understand customer product preferences. During the Track Record Period, we achieved
important technological advancements as we were able to further integrate data analytical tools
into our operational processes, including front-line business processes, middle-office operations
and back-office management functions. With the help of our operating systems, we can
significantly enhance our overall efficiency across data gathering and processing processes,
customer purchase order management, membership management, warehouse management and
inventory management. During the Track Record Period, our R&D expenses increased from
RMB3.3 million in 2020 to RMB9.5 million in 2021, and increased from RMB6.0 million for the
nine months ended September 30, 2021 to RMB7.0 million for the same period in 2022. We
believe our long-term business success will build on our ability to adapt to fast-changing
technology landscapes in China’s health management and healthcare solutions industry in the
future. As our business grows, we expect to continue to increase our R&D expenses to enhance
our technologies aiming to increase our scale and operation efficiency and our ability to effectively
enhance our technologies will affect our results of operations and financial condition.
– 303 –
IMPACT OF THE COVID-19 OUTBREAK ON OUR OPERATIONS
The COVID-19 outbreak has been affecting the Chinese economy at various levels since the
end of 2019. There have been public efforts to contain the spread of COVID-19, which included
quarantine requirements, regional lockdowns, travel restrictions, remote work arrangement and
social distancing policies, among others, in various domestic regions such as Northwestern China.
In China, severity levels of the COVID-19 outbreak varied from time to time, and enterprises
experienced different impacts as corporate offices, storefronts, warehouses and factories were
subject to temporary closures at various times. In China, the COVID-19 outbreak has cultivated
long term consumer habit of purchasing pharmaceutical products through online channels and
obtaining online healthcare services, according to CIC. While by the second half of 2020, travel
restrictions across cities and provinces in China had been generally lifted as the pandemic was
largely put under control on a nationwide level, there were regional resurgences of the pandemic
due to different variants of the COVID-19 virus in 2021 and 2022 across China, including Gansu
Province and other parts of Northwestern China, which resulted in extended pandemic control
measures by local authorities in the affected areas. Despite the PRC government’s sustained efforts
to contain the spread of the pandemic in China, it may still be uncertain how and to what extent
the evolving COVID-19 situation and the PRC government’s pandemic preventive and containment
measures will impact our business or our industry. In response, we have closely monitored the
pandemic’s development and have adopted flexible operational and sales strategies accordingly.
Since early December 2022, the Chinese government announced ten new measures for dealing with
COVID-19, easing the restrictions previously imposed with respect to pandemic control. As a
result, regional lockdowns, quarantine requirements and inter-region travel restrictions have been
gradually lifted. For more details, see “Summary — Recent Development — Impact of the
COVID-19 Outbreak on Our Operations.”
During the Track Record Period, our business operations and financial conditions were
impacted primarily in the following ways:
• Offline operations: Our offline operations were subject to requirements of temporary

closure for a period of a few days to over one month under lockdown policies, which
temporarily impacted the sales performance at these storefronts.
The table below sets forth numbers of our self-operated pharmacies that experienced
temporary closure during the Track Record Period:
Gansu Shaanxi Beijing Others

For the year ended
December 31, 2020
1 to 30 days . . . . . . . . . . . . 92 22 2 2
31 to 90 days . . . . . . . . . . . 10 / / 1
More than 90 days . . . . . . . 1 / / /
Total . . . . . . . . . . . . . . . . . . 103 22 2 3
– 304 –
Gansu Shaanxi Beijing Others

For the year ended
December 31, 2021
1 to 30 days . . . . . . . . . . . . 266 28 7 5
31 to 90 days . . . . . . . . . . . 13 4 / /
More than 90 days . . . . . . . 4 / / /
Total . . . . . . . . . . . . . . . . . . 283 32 7 5
For the nine months ended
September 30, 2022
1 to 30 days . . . . . . . . . . . . 477 34 18 17
31 to 90 days . . . . . . . . . . . 19 4 / /
More than 90 days . . . . . . . 4 1 / /
Total . . . . . . . . . . . . . . . . . . 500 39 18 17
While the customer traffic at our pharmacies, wellness centers and medical clinics was
temporarily adversely affected during lockdowns, we generally experienced a
bounce-back of our offline customer traffic when the pandemic containment measures
were alleviated. Such impact by the lockdowns has been temporary and as of the Latest
Practicable Date, all of our self-operated offline pharmacies, wellness centers and
medical clinics had resumed to normal. Despite the temporary closures, we achieved a
same store revenue period-to-period growth of 23.1% from 2020 to 2021, and 34.2%
from the nine months ended September 30, 2021 to the nine months ended September
30, 2022 for our self-operated pharmacies at the newly-established stage and
period-to-period growth of 6.8% from 2020 to 2021, and 17.1% from the nine months
ended September 30, 2021 to the nine months ended September 30, 2022 for our
self-operated pharmacies at the developing stage. For more details on our same stores,
see “Business — Our Physical Presence — Our Pharmacy Network — Continuous
Expansion of Our Pharmacy Network.” In addition to our strong same store
performance, our revenue from offline pharmaceutical retail increased from RMB1,408.9
million in 2020 to RMB1,501.7 million in 2021, and increased from RMB1,089.7
million for the nine months ended September 30, 2021 to RMB1,264.4 million for the
same period in 2022.
• Online operations: Leveraging our O2O and B2C capabilities, we responded to the
public’s increasing demand for online healthcare services and products and strengthened
our online sales and marketing efforts to promote product sales. Along with people’s
increased health awareness and demand for online healthcare products and services as
stimulated by the COVID-19 pandemic, we have seen an increase in demand for our
online healthcare services, in particular, the demand for our O2O and B2C services. See
“Industry Overview — Overview of the Health Management and Healthcare Solutions
Market in China” for more details. As we have benefitted from such trend, our product
orders through online channels and Internet hospital-based medical consultations
achieved significant growth. During the Track Record Period, we enhanced our
operational and sales efforts through O2O and B2C channels. Despite the temporary
restrictions on our O2O operations due to lockdowns of relevant offline pharmacies, our
revenue from the O2O channel increased from RMB43.3 million in 2020 to RMB101.2
million in 2021, and increased from RMB69.8 million for the nine months ended
September 30, 2021 to RMB150.2 million for the same period in 2022. Our revenue
from the B2C retail business increased from RMB262.0 million in 2020 to RMB363.7
– 305 –
million in 2021, and decreased from RMB274.6 million for the nine months ended
September 30, 2021 to RMB250.3 million for the same period in 2022 due to decrease
in the number of total purchase orders by customers from our B2C retail business from
4.0 million for the nine months ended September 30, 2021 to 3.1 million for the same
period in 2022 as the COVID-19 and government measures negatively affected
inter-regional logistics and courier services.
• Product sales and service offerings: Government authorities implemented various

policies that restricted our sales of certain drugs during the pandemic, including
antibiotics, antipyretics and analgesics, cold and flu products and antiviral products,
which resulted in a temporary decrease in our sales of such products. On the other hand,
as people have developed a habit of stocking sanitization, personal protection, immune
system boosting and other virus-preventive products, customer demand for such
products increased. In addition, although we were unable to offer our healthcare services
offline during store closures of our medical clinics and wellness centers, we
continuously provided online medical consultation services to our customers, and also
continued to offer value-adding healthcare services such as post-purchase follow-ups
and monthly health reports.
• Supply chain: During the COVID-19 pandemic, we occasionally experienced delays in

our supplies due to lockdown measures. Some of our major suppliers experienced
reduced production and supply capacity, which resulted in slightly longer processes for
the suppliers to fulfill our procurement orders. Such delay has been manageable and the
pandemic’s overall impact to our supply chain is limited. We have been able to fulfill
our procurement needs as we have maintained sufficient inventory to fulfill customers’
purchase orders. We also did not experience significant fluctuations in the supply prices.
We did not experience any closures of our warehouses. In the event of supply chain
disruptions, we were able to procure from alternative sources to fulfill our orders.
• Employees: We placed emphasis on helping our employees stay healthy while making
operational adjustments to enhance our employees’ performance during the COVID-19
outbreak. We have taken a series of measures in response to the outbreak, including,
among others, offering personal protection equipment and masks to our employees,
instructing our employees to stay at and work from home during the outbreak, regularly
checking the body temperature of our employees at our headquarters and storefronts,
and closely monitoring their health conditions. We also distributed care packages
containing food, anti-viral medications and sanitization products to our employees to
help relieve their stress during the pandemic. During temporary lockdowns or
quarantines, we made arrangements for our employees to work from home. Many
employees worked from home, and we evaluated their performance from time to time to
minimize the impact of lockdown or quarantine policies. For our storefront employees
during lockdowns of our storefronts, we coordinated internal training programs for these
employees to enhance their product knowledge as well as sales and customer service
skills during those downtimes.
– 306 –
• Government policies: We benefited from a series of policies regarding deduction of or

exemptions from enterprise social insurance contributions promulgated by the MHRSS,
the MOF and the STA, and we were entitled to deduction of or exemptions from social
insurance contributions from February 2020 to December 2020. Along with our
commitment to aiding the public to combat the COVID-19 pandemic, we also donated
money, sanitizers, medications, masks and other personal protective equipment to local
government bureaus and non-governmental organizations.
The initial outbreak or the resurgences of COVID-19 have not materially affected our overall
business operations and financial position. We currently do not anticipate material deviation from
our development and business scaling-up plans. We believe that our current level of liquidity is
sufficient to successfully navigate an extended period of uncertainty. As of September 30, 2022,
we had cash and cash equivalents of RMB71.8 million. However, the longer-term trajectory of
COVID-19, both in terms of the scope and intensity of the pandemic, together with its impact on
our industry and the broader economy is still difficult to assess or predict and poses uncertainties
that will be difficult to quantify at this moment. We will continue to monitor the development of
the COVID-19 pandemic and adjust our action plans accordingly to maintain normal business
operations. We cannot guarantee you, however, that the COVID-19 pandemic will not further
escalate or have a material adverse effect on our results of operations, financial position or
prospects. For more details, see “Risk Factors — Risks Related to Our Business and Industry —
We are subject to domestic and global pandemics, such as the COVID-19 outbreak, as well as
other force majeures, the occurrence of which could significantly disrupt our operations.”
As a result of the relaxation of COVID-19-related pandemic control measures since early

December 2022, our omni-channel pharmaceutical retail business experienced overall strong
growth in terms of sales volume, particularly in our offline pharmaceutical retail business. On the
other hand, similar to other pharmaceutical retailers in China, we experienced a temporary supply
shortage of prescription and OTC drugs relating to COVID-19’s prevention and treatment in
December 2022. Supply shortage also affected our capabilities of supplying to certain franchisees
in our pharmaceutical wholesale business. We have nonetheless actively leveraged our supply
chain resources to continuously procure such products from our suppliers. We have also
experienced delays in fulfilling some of our O2O orders in light of surging customer purchase
orders and insufficient third-party express delivery riders. As of the Latest Practicable Date, such
temporary supply shortage and delays in the delivery of O2O orders had been significantly
alleviated. However, as these relaxations of COVID-19-related pandemic control measures
occurred recently, it is difficult for us to completely assess the impact of such relaxations on our
business and financial condition. There is no assurance that such trends identified so far would
continue.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Significant Accounting Policies
Revenue Recognition
Revenue is recognized when, or as, obligations under the terms of a contract are satisfied,
which occurs when control of the promised products or services is transferred to customers.
Revenue is measured as the amount of consideration we expect to receive in exchange for
transferring products or services to the customer.
– 307 –
A performance obligation represents a good and service (or a bundle of goods or services)
that is distinct or a series of distinct goods or services that are substantially the same.
Depending on the terms of the contract and the laws applicable, control of the goods and
services may be transferred over time or at a point in time. Control of the goods and services is
transferred over time if our Group’s performance:
• provides all of the benefits received and consumed simultaneously by the customer;
• creates and enhances an asset that the customer controls as our Group performs; or
• does not create an asset with an alternative use to our Group and our Group has an
enforceable right to payment for performance completed to date.
Contracts with customers may include multiple performance obligations. For such
arrangements, our Group allocates revenue to each performance obligation based on its relative
standalone selling price. Our Group generally determines standalone selling prices based on the
prices charged to customers. If the standalone selling price is not directly observable, it is
estimated using expected cost plus a margin or adjusted market assessment approach, depending on
the availability of observable information. Assumptions and estimations have been made in
estimating the relative selling price of each distinct performance obligation, and changes in
judgments on these assumptions and estimates may impact the revenue recognition.
When either party to a contract has performed, our Group presents the contract on the
consolidated balance sheets as a contract asset or a contract liability, depending on the relationship
between our Group’s performance and the customer’s payment.
A contract asset represents our Group’s right to consideration in exchange for goods that our
Group has transferred to a customer that is not yet unconditional. It is assessed for impairment in
accordance with using the same approach as for trade receivables. In contrast, a receivable
represents our unconditional right to consideration, i.e., only the passage of time is required before
payment of that consideration is due. There is normally no significant cost to obtain contract.
If a customer pays consideration or our Group has a right to an amount of consideration that
is unconditional, before our Group transfers a good or service to the customer, our Group presents
the contract liability when the payment is made or a receivable is recorded (whichever is earlier).
A contract liability is our obligation to transfer goods or services to a customer for which the
Group has received consideration (or an amount of consideration is due) from the customer.
The following is a description of the accounting policy for the principal revenue streams of
our Group.
Product Sales
1. Omni-channel pharmaceutical retail business
We are engaged in the omni-channel retail sale of pharmaceutical and healthcare products to
individual customers through: (i) offline retail business, (ii) O2O retail business and (iii) B2C
retail business. We sell and deliver our products directly to the customers. Revenue is recognized
– 308 –
at a point in time when control of the goods has transferred, being when the goods are delivered to
the customers. Revenue from these sales is recognized based on the price, net of the estimated
sales discounts at the time of sale.
We offer our customers with membership points plan. The membership points earned by
customers can be used to reduce the cost of future purchases. We allocate a proportion of the
consideration received to membership points based on the respective stand-alone selling prices.
The amount allocated to the membership points is deferred and is recognized as revenue when the
points are redeemed or expire. The deferred revenue is included in contract liabilities.
2. Pharmaceutical wholesale
We are also engaged in the pharmaceutical wholesale business to merchant customers. These
sales are recognized at a point in time when control of the goods has transferred, being when the
goods are delivered to the customer, the customer has full discretion over the channel and price to
sell the goods, and there is no unfulfilled obligation that could affect the customer’s acceptance of
the goods.
Healthcare, Consultation and Other Services
Healthcare, consultation and other services comprise medical consultation services, wellness
management services, and franchise-related services.
Revenue from wellness management services and medical consultation services are
recognized at a point in time when those services are completed, being when control of the
services is transferred and revenue can be recognized by our Group.
Revenue from franchise-related services comprises trademark licensing fees and management
consultation service fees charged according to the agreement with franchisees. Revenue from
trademark licensing fees which is a fixed amount received at the inception of franchise period and
management consultation services are recognized in the accounting period in which the services
are rendered over the period as the related services are performed.
Property, Plant and Equipment
Property, plant and equipment (other than construction in progress) are stated at historical
cost less accumulated depreciation and impairment, if any. Historical cost includes expenditure that
is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate
asset, as appropriate, only when it is probable that future economic benefits associated with the
item will flow to the Group and the cost of the item can be measured reliably. The carrying
amount of any component accounted for as a separate asset is derecognized when replaced. All
other repairs and maintenance are charged to profit or loss during the Track Record Period in
which they are incurred.
– 309 –
Depreciation is calculated using the straight-line method to allocate their cost or revalued
amounts, net of their residual value, over their estimated useful lives or, in the case of leasehold
improvement, the shorter lease term as follows:
Category Estimated useful life

Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 years
Electronic equipment . . . . . . . . . . . . . . . . . . . . 3 years
Equipment and furniture fixtures . . . . . . . . . . . 3−10 years
Vehicle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 years
Leasehold improvements . . . . . . . . . . . . . . . . . Shorter of remaining lease term or estimated

useful life
The assets’ useful lives are reviewed, and adjusted if appropriate, at the end of each
year/period during the Track Record Period.
An asset’s carrying amount is written down immediately to its recoverable amount if the
asset’s carrying amount is greater than its estimated recoverable amount (See Note 2.9 to the
Accountant’s Report included in Appendix I to this Document).
Gains and losses on disposals are determined by comparing proceeds with carrying amount
and are recognized in “other losses” in the consolidated statements of comprehensive income.
Construction-in-progress (the “CIP”) represents buildings and leasehold improvements under

construction and is stated at cost less accumulated impairment losses, if any. Cost includes the
costs of construction and acquisition and capitalized borrowing costs. No provision for
depreciation is made on CIP until such time as the relevant assets are completed and ready for
intended use. When the assets constructed are available for use, the cost are transferred to
property, plant and equipment and depreciated in accordance with the policy as stated above.
Intangible Assets
Software
Acquired computer software are capitalized on the basis of the costs incurred to acquire and
bring the specific software into usage. These costs are amortized using the straight-line method
over their estimated useful lives of 5−10 years. Costs associated with maintaining computer
software programs are recognized as expense as incurred.
Trademarks
Separately registered trademarks are shown at historical cost. Trademarks have a finite useful
life and are subsequently carried at cost less accumulated amortization and impairment losses.
Amortization is calculated using the straight-line method to allocate the cost of trademarks over
their useful lives of 5−10 years.
– 310 –
Pharmaceutical Operation Licenses
Pharmaceutical operation licenses are required in pharmaceutical retail business. Acquired

pharmaceutical operation licenses are recognized on the basis of costs incurred to acquire.
Amortization is calculated using the straight-line method to allocate the cost of pharmaceutical
operation licenses over their useful lives of 10 years.
R&D Expenditures
We incur significant costs and efforts on R&D activities. Research expenditures are charged
to the profit or loss as an expense in the period the expenditures are incurred. Development costs
are recognized as assets if they can be directly attributable to a newly developed products and all
the following can be demonstrated:
• it is technically feasible to complete the development project so that it will be available

for use;
• management intends to complete the development project, and use or sell it;
• the ability to use or sell the development project;
• it can be demonstrated how the development project will generate probable future
economic benefits;
• adequate technical, financial and other resources to complete the development and the
ability to use or sell the development project are available; and
• the expenditure attributable to the asset during its development can be reliably
measured.
Other development expenditures that do not meet those above criteria are recognized as an
expense as incurred. Development costs previously recognized as an expense are not recognized as
an asset in a subsequent period.
During the Track Record Period, there were no development costs meeting these criteria and
capitalized as intangible assets.
Inventories
Inventories are stated at the lower of cost and net realizable value. Cost of inventories
comprises direct purchase costs. Costs are assigned to individual items of inventory on the basis of
weighted average costs. Costs of purchased inventories are determined after deducting discounts.
Net realizable value is the estimated selling price in the ordinary course of business less the
estimated costs of completion and the estimated costs necessary to make the sale.
– 311 –
Leases
We mainly lease properties in the PRC as lessee. Rental contracts are typically made for
fixed periods of 1 to 10 years. Lease terms are negotiated on an individual basis and contain a
wide range of different terms and conditions. The 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.
Leases are recognized as a right-of-use asset and a corresponding liability at the date at
which the leased asset is available for use by our Group. Each lease payment is allocated between
the principal and finance cost. The finance cost is charged to profit or loss over the lease period so
as to produce a constant periodic rate of interest on the remaining balance of the liability for each
period.
Contracts may contain both lease and non-lease components. We allocate the consideration in
the contract to the lease and non-lease components based on their relative stand-alone prices.
Assets and liabilities arising from a lease are initially measured on a present value basis.
Lease liabilities include the net present value of the following lease payments:
• fixed payments (including in-substance fixed payments), less any lease incentives
receivable,
• variable lease payment that are based on an index or a rate, initially measured using the
index or rate as at the commencement date,
• amounts expected to be payable by the lessee under residual value guarantees,
• the exercise price of a purchase option if the lessee is reasonably certain to exercise that
option, and
• payments of penalties for terminating the lease, if the lease term reflects the lessee
exercising that option.
Lease payments to be made under reasonably certain extension options are also included in
the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate
cannot be readily determined, which is generally the case for leases in our Group, the lessee’s
incremental borrowing rate is used, being the rate that the individual lessee would have to pay to
borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar
economic environment with similar terms, security and conditions.
To determine the incremental borrowing rate, our Group:
• where possible, uses recent third-party financing received by the individual lessee as a
starting point, adjusted to reflect changes in financing conditions since third party
financing was received,
• uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk
for leases held by the Group, which does not have recent third-party financing, and
– 312 –
• makes adjustments specific to the lease, e.g. term, country, currency and security.
Right-of-use assets are measured at cost comprising the following:
• the amount of the initial measurement of lease liability,
• any lease payments made at or before the commencement date less any lease incentives
received,
• any initial direct costs, and
• restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the
lease term on a straight-line basis. If our Group is reasonably certain to exercise a purchase option,
the right-of-use asset is depreciated over the underlying asset’s useful life. Right-of-use assets are
subject to impairment (see Note 2.9 to the Accountant’s Report included in Appendix I to this
Document for details). Payments associated with short-term leases and leases of low-value assets
are recognized on a straight-line basis as an expense in profit or loss. Short-term leases are leases
with a lease term of 12 months or less without a purchase option.
Redemption Liabilities
A contract that contains an obligation for an entity to purchase its own equity instruments for
cash or another financial asset gives rise to a financial liability for the present value of the
redemption amount. Even if our Company’s obligations to purchase is conditional on the
counterparty exercising a right to redeem, the financial instruments with preferred rights are
recognized as financial liabilities initially at the present value of the redemption amount and
subsequently measured at amortized cost with interest charged to finance costs.
We derecognize redemption liabilities when, and only when, our obligations are discharged,
canceled or have expired. The carrying amount of the redemption liabilities derecognized is
credited into the equity.
Critical Accounting Estimates and Judgments
Net Realizable Value of Inventories
Our management reviews the aging and expiry dates of inventories of our Group at the end of
each reporting period, and makes provision on obsolete and slow-moving inventory items
identified. These estimates are based on the current market condition and the historical experience
of selling products of similar nature. If the market condition was to deteriorate so that the actual
provision might be higher than expected, our Group would be required to revise the basis of
making the provision and our future results would be affected.
– 313 –
Impairment Assessment of Trade Receivables and Other Receivables
The impairment provisions for trade and other receivables are based on assumptions about the
expected loss rates. The provision rates are based on internal credit ratings as groupings of various
debtors that have similar loss patterns. The provision matrix is based on our Group’s historical
default rates, taking into consideration forward-looking information that is reasonable and
supportable, available without undue costs or effort. For details of the key assumptions and inputs
used, see Note 3.1 to the Accountant’s Report included in Appendix I to this Document for details.
Changes in these assumptions and estimates could materially affect the result of the assessment
and it may be necessary to make additional impairment charge to the consolidated statements of
comprehensive income.
Current and Deferred Income Tax
Our Group is subject to corporate income taxes in the PRC. Judgment is required in
determining the amount of the provision for taxation and the timing of payment of the related
taxations. There are many transactions and calculations for which the ultimate tax determination is
uncertain during the ordinary course of business. Significant judgment is required from our Group
in determining the provision for income taxes. Where the final tax outcome of these matters is
different from the amounts that were initially recorded, such differences will impact the income
tax and deferred income tax provisions in the period in which such determination is made.
Our Group recognized deferred income tax assets based on estimates that it is probable to
generate sufficient taxable profits in the foreseeable future against which the deductible losses will
be utilized. The recognition of deferred income tax assets mainly involved management’s
judgments and estimations about the timing and the amount of taxable profits of the companies
who had tax losses.
Fair Value of Restricted Stock Units Granted under the [REDACTED] Share Incentive Scheme
The fair value of the restricted stock units granted to employees is determined by using
back-solve method from the most recent transaction price of the Company’s Series A
[REDACTED] Financing and equity allocation method. Significant estimates on assumptions, such
as risk-free interest rate and volatility are made based on management’s best estimates. See Note
24 of the Accountant’s Report included in Appendix I to this Document for details.
Impairment of Non-financial Assets
Our Group assesses whether there are any indicators of impairment of all non-financial assets
(including the right-of-use assets) at the end of each reporting period. Non-financial assets are
tested for impairment when there are indicators that the carrying amounts may not be recoverable.
An impairment exists when the carrying value of an asset or a cash-generating unit exceeds its
recoverable amount, which is the higher of its fair value less costs of disposal and its value in use.
The calculation of the fair value less costs of disposal is based on available data from binding
sales transactions in an arm’s length transaction of similar assets or observable market prices less
incremental costs for disposing of the asset. When value in use calculations are undertaken,
management must estimate the expected future cash flows from the asset or cash-generating unit
and choose a suitable discount rate in order to calculate the present value of those cash flows.
– 314 –
RESULTS OF OPERATIONS
The following table sets forth a summary of our consolidated statements of comprehensive
income with line items in actual terms and as a percentage of our total revenue for the periods
indicated derived from our consolidated statements of comprehensive income set out in the
Accountant’s Report included in Appendix I to this Document:
2020 2021 2021 2022
RMB’000 % RMB’000 % RMB’000 % RMB’000 %
REVENUE . . . . . . . . . . . . . . 1,753,961 100.0 2,014,349 100.0 1,467,375 100.0 1,707,527 100.0
Cost of revenue . . . . . . . . . . . . (1,119,157) (63.8) (1,319,617) (65.5) (974,662) (66.4) (1,110,677) (65.0)
GROSS PROFIT . . . . . . . . . . . 634,804 36.2 694,732 34.5 492,713 33.6 596,850 35.0
Selling and marketing expenses . . . . (452,897) (25.8) (526,585) (26.1) (381,412) (26.1) (422,882) (24.7)
General and administrative expenses . (97,270) (5.6) (102,105) (5.1) (73,354) (5.0) (85,053) (5.0)
R&D expenses . . . . . . . . . . . . . (3,276) (0.2) (9,529) (0.5) (6,024) (0.4) (6,963) (0.4)
Other income . . . . . . . . . . . . . 1,139 0.1 1,484 0.1 1,203 0.1 236 0.0
Other losses . . . . . . . . . . . . . . (1,239) (0.1) (3,341) (0.2) (507) (0.0) (1,117) (0.1)
Net impairment losses on financial
assets . . . . . . . . . . . . . . . . (33) (0.0) (605) (0.0) (558) (0.0) (3,257) (0.2)
Operating profit . . . . . . . . . . . 81,228 4.6 54,051 2.7 32,061 2.2 77,814 4.6
Finance income . . . . . . . . . . . . 3,311 0.2 3,121 0.2 2,356 0.2 3,064 0.2
Finance cost . . . . . . . . . . . . . . (66,649) (3.8) (72,899) (3.7) (54,517) (3.8) (53,305) (3.1)
Finance costs, net . . . . . . . . . . . (63,338) (3.6) (69,778) (3.5) (52,161) (3.6) (50,241) (2.9)
PROFIT/(LOSS) BEFORE
INCOME TAX . . . . . . . . . . . 17,890 1.0 (15,727) (0.8) (20,100) (1.4) 27,573 1.6
Income tax expenses . . . . . . . . . (25,734) (1.4) (25,412) (1.2) (20,761) (1.4) (26,801) (1.6)
(LOSS)/PROFIT FOR THE
YEAR/PERIOD . . . . . . . . . . (7,844) (0.4) (41,139) (2.0) (40,861) (2.8) 772 0.0
– 315 –
NON-IFRS MEASURES
To supplement our consolidated financial statements, which are presented in accordance with
IFRS, we also use adjusted profit/loss (non-IFRS measure) and adjusted EBITDA (non-IFRS
measure) as additional financial measures, which are not required by, or presented in accordance
with, IFRS. We believe these non-IFRS measures facilitate comparisons of operating performance
from period to period and company to company by eliminating potential impacts of items which
our management considers non-indicative of our operating performance.
We believe adjusted profit/loss (non-IFRS measure) and adjusted EBITDA (non-IFRS

measure) provide useful information to [REDACTED] and others in understanding and evaluating
our consolidated statements of comprehensive income in the same manner as they help our
management. However, our presentation of adjusted profit/loss (non-IFRS measure) and adjusted
EBITDA (non-IFRS measure) may not be comparable to similarly titled measures presented by
other companies. The use of adjusted profit/loss (non-IFRS measure) and adjusted EBITDA
(non-IFRS measure) has limitations as an analytical tool, and you should not consider it in
isolation from, or as a substitute for an analysis of, our consolidated statements of comprehensive
income or financial condition as reported under IFRS.
We define adjusted profit/loss (non-IFRS measure) as profit/loss for the year/period, adjusted
by adding back share-based payment expenses, interest expenses on redemption liabilities and
[REDACTED] expenses. We define adjusted EBITDA (non-IFRS measure) as EBITDA excluding
share-based payment expenses, interest expenses on redemption liabilities and [REDACTED]
expenses. We exclude these items because they are not expected to result in future cash payments
that are recurring in nature and they are not indicative of our core operating results and business
outlook.
The following table reconciles our adjusted profit/loss for the year/period (non-IFRS
measure) and adjusted EBITDA (non-IFRS measure) presented to the most directly comparable
financial measure calculated and presented in accordance with IFRS, which is profit/loss for the
year/period:

2020 2021 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
adjusted profit/(loss) (non-IFRS
measure):
(Loss)/profit for the year/period: . . . .. (7,844) (41,139) (40,861) 772
Add back:
Share-based payment expenses(1) . . . .. 1,171 1,171 878 (87)
liabilities(2) . . . . . . . . . . . . . . . . . .. 36,360 40,782 30,587 30,495
[REDACTED] expenses(3) . . . . . . . . . [REDACTED] [REDACTED] [REDACTED] [REDACTED]
Adjusted profit/(loss) for the
year/period (non-IFRS measure) . . 29,687 814 (9,396) 35,151
– 316 –

2020 2021 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
EBITDA and adjusted EBITDA
(non-IFRS measure) for the
year/period
Add back:
Net finance costs(4) . . . . . . . . . . . . . .... 63,338 69,778 52,161 50,241
Income tax expenses . . . . . . . . . . . . .... 25,734 25,412 20,761 26,801
Depreciation of right-of-use assets. . .... 187,545 195,478 144,017 156,706
equipment . . . . . . . . . . . . . . . . . . .... 30,814 39,552 29,406 30,400
Amortization of intangible assets. . . .... 1,544 2,652 2,732 1,713
EBITDA (Unaudited) . . . . . . . . . . . . . . . 301,131 291,733 208,216 266,633
Add back:
Share-based payment expenses(1) . . . . . . . 1,171 1,171 878 (87)
Adjusted EBITDA (non-IFRS
measure) . . . . . . . . . . . . . . . . . . . . . . . 302,302 292,904 209,094 270,517
Notes:
(1) Share-based payment expenses mainly represent the arrangement that we receive services from employees as
consideration for our equity instruments and were non-cash in nature. For the nine months ended September 30,
2022, we recorded a net reversal of share-based payment expenses of RMB87,000, due to the forfeiture of the
awards granted to an employee upon termination of employment.
(2) Interest expenses on redemption liabilities represent the interest expenses on our Angel Round [REDACTED]
Financing and Series A [REDACTED] Financing which are recognized as financial liabilities initially at the
present value of the redemption amount and subsequently measured at amortized cost with interest charged to
finance costs. On August 31, 2022, upon termination of certain preferred rights of the Angel Round [REDACTED]
Investors and the Series A [REDACTED] Investors, the balance of all redemption liabilities were reclassified to
equity and no interest was accrued subsequently. In addition, interest expenses on redemption liabilities were
non-cash in nature.
(3) [REDACTED] expenses represent expenses relating to this [REDACTED] and were non-recurring in nature.
(4) Net finance cost includes interest expenses on redemption liabilities. As such, interest expenses on redemption
liabilities were not added back again for the reconciliation of EBITDA to adjusted EBITDA (non-IFRS measure) for
the year/period. See Note (2) for details on interest expenses on redemption liabilities.
– 317 –
KEY COMPONENTS OF OUR CONSOLIDATED STATEMENT OF COMPREHENSIVE

INCOME
Revenue
Our sources of revenue encompass (i) revenue derived from product sales which includes (a)
revenue derived from our omni-channel pharmaceutical retail business covering offline retail
business, O2O retail business and B2C retail business and (b) revenue derived from our
pharmaceutical wholesale business, and (ii) revenue derived from our healthcare, consultation and
other services including (a) medical consultation services, (b) wellness management services and
(c) franchise-related services.
The following table sets forth the breakdown of revenue by business categories for the
periods indicated:
2020 2021 2021 2022
RMB’000 % RMB’000 % RMB’000 % RMB’000 %
REVENUE
Product sales
Omni-channel pharmaceutical retail
business . . . . . . . . . . . . . . . 1,714,177 97.7 1,966,579 97.6 1,434,088 97.7 1,664,958 97.5
Offline retail business. . . . . . . . 1,408,852 80.3 1,501,719 74.6 1,089,661 74.3 1,264,437 74.0
O2O retail business . . . . . . . . . 43,282 2.5 101,173 5.0 69,780 4.7 150,204 8.8
B2C retail business . . . . . . . . . 262,043 14.9 363,687 18.0 274,647 18.7 250,317 14.7
Pharmaceutical wholesale . . . . . . . 34,698 2.0 40,839 2.0 27,960 1.9 35,859 2.1
Healthcare, consultation and other
services
Medical consultation services . . . . . 1,015 0.1 1,197 0.1 891 0.1 1,004 0.1
Wellness management services . . . . 750 0.0 1,322 0.1 945 0.1 2,382 0.1
Franchise-related services . . . . . . . 3,321 0.2 4,412 0.2 3,491 0.2 3,324 0.2
Total . . . . . . . . . . . . . . . . . . 1,753,961 100.0 2,014,349 100.0 1,467,375 100.0 1,707,527 100.0
Cost of Revenue
Our cost of revenue mainly consists of (i) cost of prescription and OTC drugs, (ii) cost of
medical devices, (iii) cost of TCM decoction pieces, (iv) cost of wellness products, (v) cost of
other products, and (vi) others primarily including logistic fees, business taxes and surcharges and
impairment of inventory. The rebates from our suppliers are based on either the volume of
products we procured from our suppliers or volume of products we sold to our end customers after
our procurement from the supplier. The rebates from suppliers are treated as a reduction in the
purchase price and are recorded as a reduction in cost of revenue when recognized in our
consolidated statements of comprehensive income. The rebates from suppliers are calculated based
on the volume of products we have purchased or sold and are recorded as a reduction of cost of
revenue when the sales have been completed and the amount is determinable. During the Track
Record Period, the rebates we recorded as a reduction in cost of revenue were in the range of
approximately 9% to 14% of our cost of revenue before deducting rebates.
– 318 –
The following table sets forth a breakdown of our cost of revenue by business categories for
the periods indicated, both in actual terms and as a percentage of our total cost of revenue:
2020 2021 2021 2022
RMB’000 % RMB’000 % RMB’000 % RMB’000 %
Cost of revenue
Product sales. . . . . . . . . . . . . . 1,106,413 98.9 1,309,729 99.3 968,342 99.4 1,099,851 99.0
services . . . . . . . . . . . . . . . 550 0.0 1,454 0.1 862 0.1 2,327 0.2
Business taxes and surcharges (Note) . . 12,194 1.1 8,434 0.6 5,458 0.5 8,499 0.8
Total . . . . . . . . . . . . . . . . . . 1,119,157 100.0 1,319,617 100.0 974,662 100.0 1,110,677 100.0
Note: Business taxes and surcharges consist of taxes and surcharges (such as urban construction and maintenance tax,
local education surcharges and property tax) derived from our overall business operations which are recorded
under cost of revenue. The internal financial system of our Group does not track “business taxes and surcharges”
under cost of revenue by product sales and healthcare, consultation and other services as such taxes and surcharges
are paid by our Group on the basis of each individual offline pharmacy, and it is not practicable to apportion
“business taxes and surcharges” under cost of revenue into product sales and healthcare, consultation and other
services.
Gross Profit and Gross Profit Margin
Our gross profit represents our revenue less cost of revenue, and our gross profit margin
represents our gross profit as a percentage of our revenue. For the years ended December 31, 2020
and 2021, and for the nine months ended September 30, 2021 and 2022, our gross profit was
RMB634.8 million, RMB694.7 million, RMB492.7 million and RMB596.9 million, respectively,
and our gross profit margin was 36.2%, 34.5%, 33.6% and 35.0% for the respective periods.
The following table sets forth the breakdown of our gross profit and gross profit margin by
business categories for the periods indicated:
2020 2021 2021 2022
Gross Gross Gross Gross
profit profit profit profit
Gross profit margin Gross profit margin Gross profit margin Gross profit margin
RMB’000 % RMB’000 % RMB’000 % RMB’000 %
Product sales. . . . . . . . . . . . . . 642,462 36.7 697,689 34.8 493,706 33.8 600,966 35.3
services . . . . . . . . . . . . . . . 4,536 89.2 5,477 79.0 4,465 83.8 4,383 65.3
Total (Note) . . . . . . . . . . . . . . . 646,998 36.9 703,166 34.9 498,171 33.9 605,349 35.5
Note: The item “business taxes and surcharges” under cost of revenue is excluded from the calculation of the gross
profit and gross profit margin by business categories as the internal financial system of our Group does not track
“business taxes and surcharges” under cost of revenue by product sales and healthcare, consultation and other
services as such taxes and surcharges are paid by our Group on the basis of each individual offline pharmacy, and
it is not practicable to apportion “business taxes and surcharges” under cost of revenue into product sales and
healthcare, consultation and other services. Therefore, the (i) sum of gross profit for each business category, and
(ii) overall gross profit margins as presented in this breakdown and as discussed in “— Review of Historical
Results of Operations” slightly differ from the (i) total amount of gross profit as presented in, and (ii) overall
gross profit margins as derived from the consolidated statements of comprehensive income of the Group included
in the Accountant’s Report in Appendix I to this Document.
– 319 –
Other Income
Our other income primarily consists of (i) tax subsidies and (ii) government grants we
received. For the years ended December 31, 2020 and 2021, and for the nine months ended
September 30, 2021 and 2022, we recorded other income of RMB1.1 million, RMB1.5 million,
RMB1.2 million and RMB0.2 million, respectively.
The following table sets forth a breakdown of our other income for the periods indicated,
both in actual terms and as a percentage of our total other income:
2020 2021 2021 2022
RMB’000 % RMB’000 % RMB’000 % RMB’000 %
Other income
Tax subsidies . . . . . . . . . . . . . 647 56.8 1,404 94.6 1,123 93.4 236 100.0
Government grants . . . . . . . . . . 492 43.2 80 5.4 80 6.6 — —
Total . . . . . . . . . . . . . . . . . . 1,139 100.0 1,484 100.0 1,203 100.0 236 100.0
Selling and Marketing Expenses
Our selling and marketing expenses consist of (i) employee benefits expenses for storefront,
and sales and marketing staff, (ii) depreciation of right-of-use assets relating to leased properties,
(iii) third-party platform service charges and commissions mainly to third-party platforms in
relation to our O2O and B2C retail operations, (iv) depreciation of property, plant and equipment,
(v) utilities and energy expenses and (vi) others which primarily consist of office expenses, and
marketing and advertising costs. For the years ended December 31, 2020 and 2021, and for the
nine months ended September 30, 2021 and 2022, we recorded selling and marketing expenses of
RMB452.9 million, RMB526.6 million, RMB381.4 million and RMB422.9 million, respectively.
The following table sets forth a breakdown of our selling and marketing expenses for the
periods indicated, both in actual terms and as a percentage of our total selling and marketing
expenses:
2020 2021 2021 2022
RMB’000 % RMB’000 % RMB’000 % RMB’000 %
Selling and marketing expenses
Employee benefits expenses. . . . . . 183,963 40.6 220,728 41.9 158,109 41.5 185,604 43.9
Depreciation of right-of-use assets . . 181,770 40.1 188,733 35.8 138,816 36.4 151,255 35.8
Third-party platform service charges
and commissions . . . . . . . . . . 23,534 5.2 35,688 6.8 25,484 6.7 28,719 6.8
equipment . . . . . . . . . . . . . . 27,864 6.2 36,915 7.0 27,475 7.2 27,221 6.4
Utilities and energy expenses . . . . . 12,535 2.8 14,926 2.8 10,151 2.6 10,808 2.6
Others . . . . . . . . . . . . . . . . . 23,231 5.1 29,595 5.7 21,377 5.6 19,275 4.5
Total . . . . . . . . . . . . . . . . . . 452,897 100.0 526,585 100.0 381,412 100.0 422,882 100.0
– 320 –
General and Administrative Expenses
Our general and administrative expenses consist of (i) employee benefits expenses for
administrative staff, (ii) technical service expenses in relation to software for administrative
purposes, (iii) depreciation of right-of-use assets relating to leased properties, (iv) depreciation of
property, plant and equipment, (v) office expenses, (vi) [REDACTED] expenses, (vii) travel and
transportation expenses, (viii) amortization of intangible assets and (ix) others which primarily
consist of relocation costs and bank charges. For the years ended December 31, 2020 and 2021,
and for the nine months ended September 30, 2021 and 2022, we recorded general and
administrative expenses of RMB97.3 million, RMB102.1 million, RMB73.4 million and RMB85.1
million, respectively.
The following table sets forth a breakdown of our general and administrative expenses for the
periods indicated, both in actual terms and as a percentage of our total general and administrative
expenses:
2020 2021 2021 2022
RMB’000 % RMB’000 % RMB’000 % RMB’000 %
General and administrative
expenses
Employee benefits expenses . . . . . 61,018 62.7 74,654 73.1 53,244 72.6 55,414 65.2
Technical service expenses . . . . . 2,918 3.0 3,507 3.4 2,312 3.2 5,361 6.3
Depreciation of right-of-use assets. . 5,615 5.8 6,519 6.4 5,051 6.9 5,247 6.2
equipment . . . . . . . . . . . . 2,947 3.0 2,419 2.4 1,787 2.4 3,135 3.7
Office expenses . . . . . . . . . . . 7,608 7.8 4,216 4.1 2,773 3.8 2,428 2.9
[REDACTED] expenses . . . . . . [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
Travel and transportation expenses . 1,916 2.0 2,148 2.1 1,822 2.5 1,782 2.1
Amortization of intangible assets . . 1,322 1.4 1,966 1.9 2,227 3.0 1,073 1.3
Others . . . . . . . . . . . . . . . 13,926 14.3 6,676 6.6 4,138 5.6 6,642 7.6
Total . . . . . . . . . . . . . . . . 97,270 100.0 102,105 100.0 73,354 100.0 85,053 100.0
R&D Expenses
Our R&D expenses primarily consist of (i) employee benefits expenses for R&D staff, (ii)
technical service expenses in relation to the improvement of our technology platform, (iii)
depreciation of property, plant and equipment and (iv) others which primarily consist of travel and
transportation expenses and office expenses incurred by our R&D staff. For the years ended
December 31, 2020 and 2021, and for the nine months ended September 30, 2021 and 2022, we
recorded R&D expenses of RMB3.3 million, RMB9.5 million, RMB6.0 million and RMB7.0
– 321 –
The following table sets forth a breakdown of our R&D expenses for the periods indicated,
both in actual terms and as a percentage of our total R&D expenses:
2020 2021 2021 2022
RMB’000 % RMB’000 % RMB’000 % RMB’000 %
R&D expenses
Employee benefits expenses. . . . . . 3,067 93.6 6,474 67.9 4,091 67.9 6,653 95.5
Technical service expenses . . . . . . 197 6.0 2,793 29.3 1,759 29.2 204 2.9
equipment . . . . . . . . . . . . . . 3 0.1 218 2.3 144 2.4 44 0.6
Others . . . . . . . . . . . . . . . . . 9 0.3 44 0.5 30 0.5 62 1.0
Total . . . . . . . . . . . . . . . . . . 3,276 100.0 9,529 100.0 6,024 100.0 6,963 100.0
Other Losses
Our other losses primarily consist of (i) loss on disposals of property, plant and equipment,
(ii) loss on disposal of intangible assets, (iii) loss on termination of leases and (iv) others which
primarily consist of compensation expenses in relation to leases. For the years ended December 31,
2020 and 2021, and for the nine months ended September 30, 2021 and 2022, we recorded other
losses of RMB1.2 million, RMB3.3 million, RMB0.5 million and RMB1.1 million, respectively.
Net Impairment Losses on Financial Assets
Our net impairment losses on financial assets consist of impairment losses on our trade
receivables and other receivables. For the years ended December 31, 2020 and 2021, and for the
nine months ended September 30, 2021 and 2022, we recorded net impairment losses on financial
assets of RMB33,000, RMB0.6 million, RMB0.6 million and RMB3.3 million, respectively.
Finance Costs, Net
Our net finance costs primarily consist of interest expenses on redemption liabilities, interest
expenses on lease liabilities, interest expenses on bank borrowings and interest income from bank
deposits. For the years ended December 31, 2020 and 2021, and for the nine months ended
September 30, 2021 and 2022, we recorded net finance costs of RMB63.3 million, RMB69.8
million, RMB52.2 million and RMB50.2 million, respectively.
Income Tax Expenses
For the years ended December 31, 2020 and 2021, and for the nine months ended September
30, 2021 and 2022, our income tax expenses were RMB25.7 million, RMB25.4 million, RMB20.8
PRC Taxation
Under the EIT Law and Implementation Regulation of the EIT Law, the standard enterprise
income tax rate for our PRC subsidiaries is 25% during the Track Record Period. Certain PRC
subsidiaries of the Group that qualified as
– 322 –
“small low-profit enterprises” under the EIT Law enjoyed a preferential income tax rate of 20%
during the Track Record Period. See Note 12 of the Accountant’s Report set out in Appendix I to
this Document for further details on applicable tax rates we received during the Track Record
Period.
For the years ended December 31, 2020 and 2021, and for the nine months ended September
30, 2021 and 2022, we recognized tax subsidies under other income of RMB0.6 million, RMB1.4
During the Track Record Period and up to the Latest Practicable Date, our Directors were not
aware of any outstanding enquiry, audit, investigation, challenge or penalty from tax authorities in
relation to our tax filings.
Profit/Loss for the Year/Period
In 2020 and 2021, we recorded a net loss for the year of RMB7.8 million and RMB41.1
million, respectively. For the nine months ended September 30, 2021 and 2022, we recorded a net
loss for the period of RMB40.9 million and a net profit for the period of RMB0.8 million,
respectively. The net losses for the year in 2020 and 2021 and the net loss for the period for the
nine months ended September 30, 2021 were primarily due to the interest expenses on redemption
liabilities and share-based payments, which are not expected to result in future cash payments that
are recurring in nature and they are not indicative of our core operating results and business
outlook. For details on reasons pertaining to the changes of our net profit/loss during the Track
Record Period, see “Summary — Our Historical Performance and Outlook.”
We carried accumulated losses of RMB85.4 million as of January 1, 2020. The majority of

the accumulated losses as of January 1, 2020 was attributable to (i) the interest expenses on
redemption liabilities and share-based payment expenses that we have incurred before year 2020,
both of which were non-cash in nature and (ii) interest expenses on lease liabilities resulting from
the adoption of IFRS 16, which were primarily non-cash in nature. The remainder of the
accumulated losses as of January 1, 2020 was attributable to the accumulated losses from our
operations before year 2020 primarily as a result of our strategic expansion of our self-operated
offline pharmacy network to lay the foundation for achieving broader business coverage and
greater economies of scale, and improving operating leverage and profitability, the benefits of
which require time to come into fruition.
REVIEW OF HISTORICAL RESULTS OF OPERATIONS
Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30,
2021
Revenue
Our revenue increased by RMB240.2 million, or 16.4%, from RMB1,467.4 million for the
nine months ended September 30, 2021 to RMB1,707.5 million for the same period of 2022,
primarily due to the growth of revenue derived from our product sales and healthcare, consultation
and other services.
For product sales, (i) our revenue derived from omni-channel pharmaceutical retail business
increased by RMB230.9 million, or 16.1%, driven by (a) an increase in revenue derived from
offline retail business of RMB174.8 million, or 16.0%, from RMB1,089.7 million for the nine
months ended September 30, 2021 to RMB1,264.4 million for the same period in 2022 primarily
– 323 –
due to the growth of sales of products, which was in line with the increase of average purchase
amount per purchase order by customers generated from our self-operated offline pharmaceutical
retail operations from RMB61.9 for the nine months ended September 30, 2021 to RMB71.5 for
the same period in 2022, and the increase in the number of our self-operated offline pharmacies
from 891 as of September 30, 2021 to 931 as of September 30, 2022, (b) an increase in revenue
derived from O2O retail business of RMB80.4 million, or 115.3%, from RMB69.8 million for the
nine months ended September 30, 2021 to RMB150.2 million for the same period in 2022 due to
the growth of total purchase orders by customers of our O2O retail business from 1.8 million for
the nine months ended September 30, 2021 to 3.8 million for the same period in 2022, as a result
of an increase in the number of our offline pharmacies with O2O capabilities from 891 as of
September 30, 2021 to 931 as of September 30, 2022, partially offset by a decrease in revenue
derived from B2C retail business of RMB24.3 million, or 8.9%, from RMB274.6 million for the
nine months ended September 30, 2021 to RMB250.3 million for the same period in 2022
primarily due to the decrease in total purchase orders by customers from our B2C business from
4.0 million for the nine months ended September 30, 2021 to 3.1 million for the same period in
2022, as a result of the inter-regional logistics being negatively affected by the COVID-19
pandemic and the associated government measures; and (ii) our revenue derived from
pharmaceutical wholesale business increased by RMB7.9 million, or 28.3%, from RMB28.0
million for the nine months ended September 30, 2021 to RMB35.9 million for the same period in
2022, primarily attributable to the growth in sales of products to our franchisees as a result of the
increased sales of our franchised pharmacies to end-customers, which was in line with increase in
the number of our franchised pharmacies from 81 as of September 30, 2021 to 116 as of
September 30, 2022.
Our revenue derived from healthcare, consultation and other services including medical
consultation services, wellness management services and franchise-related services increased by
RMB1.4 million, or 26.0%, from RMB5.3 million for the nine months ended September 30, 2021
to RMB6.7 million for the same period in 2022, primarily attributable to the increase in revenue
derived from our wellness management services of RMB1.4 million as we expanded the network
of our wellness centers and the number of our wellness centers as of September 30, 2022 increased
by 11 as compared to September 30, 2021.
Cost of Revenue
Our cost of revenue increased by RMB136.0 million, or 14.0% from RMB974.7 million for
the nine months ended September 30, 2021 to RMB1,110.7 million for the same period of 2022,
primarily driven by the increase in our cost of revenue for product sales.
Our cost of revenue for product sales increased by RMB131.5 million, or 13.6%, from
RMB968.3 million for the nine months ended September 30, 2021 to RMB1,099.9 million for the
same period in 2022, primarily due to the increase in our cost of revenue of prescription and OTC
drugs, TCM decoction pieces, medical devices, wellness products and other products which was in
line with our business growth and the increase in our total revenue.
Our cost of revenue for healthcare, consultation and other services increased by RMB1.5
million, or 170.0%, from RMB0.9 million for the nine months ended September 30, 2021 to
RMB2.3 million for the same period in 2022, primarily because the number of our wellness centers
as of September 30, 2022 increased by 11 as compared to September 30, 2021.
Business taxes and surcharges under cost of revenue increased by RMB3.0 million, or 55.7%,
from RMB5.5 million for the nine months ended September 30, 2021 to RMB8.5 million for the
same period in 2022, primarily due to the increase in our total revenue.
– 324 –
As a result of the foregoing, our overall gross profit increased by RMB104.1 million, or
21.1%, from RMB492.7 million for the nine months ended September 30, 2021 to RMB596.9
million for the same period of 2022. Our overall gross profit margin increased from 33.6% for the
nine months ended September 30, 2021 to 35.0% for the same period of 2022, primarily driven by
the increase in our gross profit margin for product sales.
Our gross profit for product sales increased by RMB107.3 million, or 21.7%, from
RMB493.7 million for the nine months ended September 30, 2021 to RMB601.0 million for the
same period in 2022. The gross profit margin for product sales increased from 33.8% for the nine
months ended September 30, 2021 to 35.3% for the same period in 2022, primarily due to
economies of scale from our growth allowing us to control our cost of revenue.
Our gross profit for healthcare, consultation and other services slightly decreased by
RMB82,000, or 1.8%, from RMB4.5 million for the nine months ended September 30, 2021 to
RMB4.4 million for the same period in 2022. The gross profit margin for healthcare, consultation
and other services decreased from 83.8% for the nine months ended September 30, 2021 to 65.3%
for the same period in 2022, primarily because the customer traffic at our wellness centers was
temporarily affected by the COVID-19 pandemic control measures.
Other Income
Our other income decreased by RMB1.0 million, or 80.4%, from RMB1.2 million for the nine
months ended September 30, 2021 to RMB0.2 million for the same period of 2022, primarily as a
result of a decrease in tax subsidies of RMB0.9 million.
Our selling and marketing expenses increased by RMB41.5 million, or 10.9%, from
RMB381.4 million for the nine months ended September 30, 2021 to RMB422.9 million for the
same period of 2022, primarily due to (i) an increase in employee benefits expenses of RMB27.5
million, mainly because the average salary of our storefront, and sales and marketing staff
increased during the nine months ended September 30, 2022 as compared to the same period in
2021 and we hired more storefront, and sales and marketing staff as of September 30, 2022 as
compared to September 30, 2021 in connection with the expansion of our network of pharmacies,
wellness centers and TCM clinics, (ii) an increase in depreciation of right-of-use assets of
RMB12.4 million as we had more offline storefronts as of September 30, 2022 as compared to
September 30, 2021, and (iii) an increase in third-party platform service charges and commissions
of RMB3.2 million primarily due to the increase of revenue from our O2O retail operations for the
nine months ended September 30, 2022 as compared to the same period in 2021.
Our general and administrative expenses increased by RMB11.7 million, or 15.9%, from
RMB73.4 million for the nine months ended September 30, 2021 to RMB85.1 million for the same
period of 2022, primarily due to (i) an increase in [REDACTED] expenses of RMB4.0 million,
(ii) an increase in technical service expenses of RMB3.0 million in relation to software for
administrative purposes which was in line with our increased scale, (iii) an increase in employee
benefits
– 325 –
expenses of RMB2.2 million as the average salary of our administrative staff increased during the
nine months ended September 30, 2022 as compared to the same period in 2021 and (iv) an
increase in depreciation of property, plant and equipment of RMB1.3 million.
R&D Expenses
Our R&D expenses increased by RMB0.9 million, or 15.6%, from RMB6.0 million for the
nine months ended September 30, 2021 to RMB7.0 million for the same period of 2022, primarily
due to an increase in employee benefits expenses of RMB2.6 million as the average salary of our
R&D staff increased during the nine months ended September 30, 2022 as compared to the same
period in 2021, partially offset by a decrease in technical service expenses of RMB1.6 million as
we invested more in our technology platform improvement in 2021.
Other Losses
Our other losses increased by RMB0.6 million, or 120.3%, from RMB0.5 million for the nine
months ended September 30, 2021 to RMB1.1 million for the same period of 2022, primarily due
to loss on termination of leases of RMB0.4 million.
Our net impairment losses on financial assets increased by RMB2.7 million, or 483.7% from
RMB0.6 million for the nine months ended September 30, 2021 to RMB3.3 million for the same
period of 2022, primarily due to the increase in our trade receivables.
Finance Costs, Net
Our net finance costs decreased by RMB1.9 million, or 3.7%, from RMB52.2 million for the
nine months ended September 30, 2021 to RMB50.2 million for the same period of 2022, primarily
due to a decrease in interest expenses on bank borrowings of RMB1.3 million following the
repayment of the principal over time.
Income Tax Expenses
Our income tax expenses increased by RMB6.0 million, or 29.1%, from RMB20.8 million for
the nine months ended September 30, 2021 to RMB26.8 million for the same period of 2022,
primarily because more of our subsidiaries were profit-making and certain of our profit-making
subsidiaries generated more profits during the nine months ended September 30, 2022. Our
effective tax rate turned from -103.3% for the nine months ended September 30, 2021 to 97.2%
because we turned from a loss before income tax position for the nine months ended September
30, 2021 to a profit before income tax position for the same period of 2022.
Profit/Loss for the Period and Net Profit/Loss Margin
As a result of the foregoing, we turned from a loss for the period of RMB40.9 million for the
nine months ended September 30, 2021 to a profit for the period of RMB0.8 million for the same
period of 2022. Our net loss margin was 2.8% for the nine months ended September 30, 2021 and
our net profit margin was 0.0% for the same period of 2022.
– 326 –
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020
Revenue
Our revenue increased by RMB260.4 million, or 14.8%, from RMB1,754.0 million for the
year ended December 31, 2020 to RMB2,014.3 million for the year ended December 31, 2021,
primarily due to the growth of revenue derived from our product sales and healthcare, consultation
and other services.
For product sales, (i) our revenue derived from omni-channel pharmaceutical retail business
increased by RMB252.4 million, or 14.7% driven by (a) a moderate increase in revenue derived
from offline retail business of RMB92.9 million, or 6.6%, from RMB1,408.9 million in 2020 to
RMB1,501.7 million in 2021 primarily due to the growth of sales of products, which was in line
with the increase of average purchase amount per purchase order by customers generated from our
self-operated offline pharmaceutical retail operations from RMB59.1 in 2020 to RMB64.5 in 2021
and the increase in the number of our self-operated pharmacies from 802 as of December 31, 2020
to 915 as of December 31, 2021, (b) an increase in revenue derived from O2O retail business of
RMB57.9 million, or 133.8%, from RMB43.3 million in 2020 to RMB101.2 million in 2021 due to
the growth of total purchase orders by customers of our O2O retail business from 1.1 million in
2020 to 2.6 million in 2021, as a result of an increase in the number of our offline pharmacies
with O2O capabilities from 663 as of December 31, 2020 to 915 as of December 31, 2021 and (c)
an increase in revenue derived from B2C retail business of RMB101.6 million, or 38.8%, from
RMB262.0 million in 2020 to RMB363.7 million in 2021 due to the growth in total purchase
orders by customers of our B2C retail business from 3.7 million in 2020 to 5.2 million in 2021 and
the growth of types of products we sold in 2021; and (ii) our revenue derived from pharmaceutical
wholesale business increased by RMB6.1 million, or 17.7%, from RMB34.7 million in 2020 to
RMB40.8 million in 2021, primarily attributable to the growth in sales of products to our
franchisees as a result of the increased sales of our franchised pharmacies to end-customers, which
was in line with increase in the number of our franchised pharmacies from 59 as of December 31,
2020 to 88 as of December 31, 2021.
Our revenue derived from healthcare, consultation and other services including medical
consultation services, wellness management services and franchise-related services increased by
RMB1.8 million, or 36.3%, from RMB5.1 million in 2020 to RMB6.9 million in 2021, primarily
attributable to the increase in revenue derived from our wellness management services of RMB0.6
million as we expanded the network of our wellness centers and opened 13 new wellness centers
in 2021.
Cost of Revenue
Our cost of revenue increased by RMB200.5 million, or 17.9% from RMB1,119.2 million for
the year ended December 31, 2020 to RMB1,319.6 million for the year ended December 31, 2021
primarily driven by the increase in our cost of revenue of product sales.
Our cost of revenue for product sales increased by RMB203.3 million, or 18.4%, from
RMB1,106.4 million in 2020 to RMB1,309.7 million in 2021, primarily due to the increase in our
cost of revenue of prescription and OTC drugs which was in line with our business growth and the
increase in our total revenue.
– 327 –
Our cost of revenue for healthcare, consultation and other services increased by RMB0.9
million, or 164.4%, from RMB0.6 million in 2020 to RMB1.5 million in 2021, primarily because
we opened 13 new wellness centers in 2021.
Business taxes and surcharges under cost of revenue decreased by RMB3.8 million, or 30.8%,
from RMB12.2 million in 2020 to RMB8.4 million in 2021, primarily due to the (i) property tax
and land use tax expense recognized in 2020 as we had new office and warehouse premises
available for use in 2020 and (ii) decrease in value-added tax payable in 2021 due to the increase
in deductible value-added tax in 2021.
As a result of the foregoing, our overall gross profit increased by RMB59.9 million, or 9.4%,
from RMB634.8 million for the year ended December 31, 2020 to RMB694.7 million for the year
ended December 31, 2021. Our overall gross profit margin decreased from 36.2% for the year
ended December 31, 2020 to 34.5% for the year ended December 31, 2021, primarily due to the
decrease in gross profit margin for product sales.
Our gross profit for product sales increased by RMB55.2 million, or 8.6%, from RMB642.5
million in 2020 to RMB697.7 million in 2021. The gross profit margin for product sales decreased
from 36.7% in 2020 to 34.8% in 2021, primarily because (i) we sold more of certain types of
products for chronic and specialty diseases which generally have a relatively lower gross profit
margin as compared to the other types of our products and (ii) the proportion of our revenue
derived from our O2O and B2C retail businesses, which generally have a relatively lower gross
profit margin as compared to our other business categories for product sales, increased.
Our gross profit for healthcare, consultation and other services increased by RMB0.9 million,
or 20.7%, from RMB4.5 million in 2020 to RMB5.5 million in 2021. The gross profit margin for
healthcare, consultation and other services decreased from 89.2% in 2020 to 79.0% in 2021,
primarily because the customer traffic at our wellness centers was temporarily affected by the
COVID-19 pandemic control measures.
Other Income
Our other income increased by RMB0.3 million, or 30.3%, from RMB1.1 million for the year
ended December 31, 2020 to RMB1.5 million for the year ended December 31, 2021, primarily
due to the increase in tax subsidies of RMB0.8 million, partially offset by a decrease in
government grants of RMB0.4 million.
Our selling and marketing expenses increased by RMB73.7 million, or 16.3%, from
RMB452.9 million for the year ended December 31, 2020 to RMB526.6 million for the year ended
December 31, 2021, primarily attributable to (i) an increase in employee benefits expenses of
RMB36.8 million, mainly because we hired more storefront, and sales and marketing staff in
relation to the expansion of our network of pharmacies, wellness centers and TCM clinics in 2021
and the average salary of our storefront, and sales and marketing staff increased in 2021, (ii) an
increase in third-party platform service charges and commissions of RMB12.2 million primarily
because the number of our offline self-operated pharmacies with O2O capabilities increased in
2021 and we operated more online pharmacies in 2021, (iii) an increase in depreciation of
– 328 –
property, plant and equipment of RMB9.1 million as we opened more offline storefronts in 2021
and (iv) an increase in depreciation of right-of-use assets of RMB7.0 million as we opened more
offline storefronts in 2021.
Our general and administrative expenses increased by RMB4.8 million, or 5.0%, from
RMB97.3 million for the year ended December 31, 2020 to RMB102.1 million for the year ended
December 31, 2021, primarily attributable to an increase in employee benefits expenses of
RMB13.6 million as the number of our administrative staff and the average salary of our
administrative staff increased in 2021, partially offset by a decrease in relocation costs of RMB6.9
million and a decrease in office expenses of RMB3.4 million as we had new office premises
available for use in 2020, and such as these expenses in relation to such move were no longer
incurred in 2021.
R&D Expenses
Our R&D expenses increased by RMB6.3 million, or 190.9%, from RMB3.3 million for the
year ended December 31, 2020 to RMB9.5 million for the year ended December 31, 2021,
primarily due to (i) an increase in employee benefits expenses of RMB3.4 million as we hired
more R&D staff and the average salary of our R&D staff increased in 2021 and (ii) an increase in
technical service expenses of RMB2.6 million as we increased our R&D investment for the
improvement of our technology platform in 2021.
Other Losses
Our other losses increased by RMB2.1 million, or 169.7%, from RMB1.2 million in 2020 to
RMB3.3 million in 2021, primarily due to (i) loss on disposal of intangible assets of RMB1.4
million and (ii) an increase in others of RMB0.7 million which mainly consists of compensation
expenses in relation to leases.
Our net impairment losses of impairment loss on financial assets increased from RMB33,000
for the year ended December 31, 2020 to RMB0.6 million for the year ended December 31, 2021,
primarily due to the increase in trade receivables.
Finance Costs, Net
Our net finance costs increased by RMB6.4 million, or 10.2%, from RMB63.3 million for the
year ended December 31, 2020 to RMB69.8 million for the year ended December 31, 2021,
primarily due to an increase in interest expenses on redemption liabilities of RMB4.4 million in
relation to our Angel Round [REDACTED] Financing and Series A [REDACTED] Financing.
Income Tax Expenses
Our income tax expenses remained relatively stable at RMB25.7 million for the year ended
December 31, 2020 and RMB25.4 million for the year ended December 31, 2021. Our effective tax
rate turned from 143.8% for the year ended December 31, 2020 to -161.6% for the year ended
December 31, 2021, primarily because we turned from a profit before income tax position in 2020
to a loss before income tax position in 2021.
– 329 –
Loss for the Year and Net Loss Margin
As a result of the foregoing reasons, our loss for the year increased from RMB7.8 million for
the year ended December 31, 2020 to RMB41.1 million for the year ended December 31, 2021.
Our net loss margin was 0.4% for the year ended December 31, 2020 and was 2.0% for the year
ended December 31, 2021.
DISCUSSION OF SELECTED ITEMS FROM THE CONSOLIDATED BALANCE SHEETS
The table below sets forth our financial position as of the dates indicated:
As of
2020 2021 2022
RMB’000 RMB’000 RMB’000
(Unaudited)
ASSETS
Non-current assets
Property, plant and equipment . . . . . . . . . . . 213,085 206,946 190,018
Right-of-use assets . . . . . . . . . . . . . . . . . . . 616,319 668,829 607,547
Intangible assets . . . . . . . . . . . . . . . . . . . . . 14,931 18,204 18,450
Prepayments and other receivables . . . . . . . 8,692 15,352 17,122
Deferred income tax assets . . . . . . . . . . . . . 5,924 6,706 4,904
Total non-current assets . . . . . . . . . . . . . . 858,951 916,037 838,041
Current assets
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . 406,865 545,515 542,570
Trade receivables . . . . . . . . . . . . . . . . . . . . 127,941 160,474 183,513
Prepayments and other receivables . . . . . . . 54,113 48,492 34,214
Restricted cash . . . . . . . . . . . . . . . . . . . . . . 274,319 312,463 256,123
Cash and cash equivalents . . . . . . . . . . . . . . 54,822 24,902 71,758
Total current assets . . . . . . . . . . . . . . . . . 918,060 1,091,846 1,088,178
Total assets . . . . . . . . . . . . . . . . . . . . . . . . 1,777,011 2,007,883 1,926,219
EQUITY
Equity attributable to owners of the
Company
Paid in capital . . . . . . . . . . . . . . . . . . . . . . . 123,457 123,457 123,457
Treasury stock . . . . . . . . . . . . . . . . . . . . . . . (263,110) (263,110) —
Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . 282,145 283,316 421,273
Accumulated losses . . . . . . . . . . . . . . . . . . . (93,243) (134,382) (133,610)
Total equity . . . . . . . . . . . . . . . . . . . . . . . . 49,249 9,281 411,120
– 330 –
As of
2020 2021 2022
RMB’000 RMB’000 RMB’000
(Unaudited)
LIABILITIES
Non-current liabilities
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . 41,508 35,926 31,538
Lease liabilities . . . . . . . . . . . . . . . . . . . . . . 421,553 456,146 396,392
Contract liabilities . . . . . . . . . . . . . . . . . . . . 957 1,672 1,565
Deferred income tax liabilities . . . . . . . . . . 10,365 16,410 14,401
Redemption liabilities . . . . . . . . . . . . . . . . . 335,602 376,384 —
Total non-current liabilities . . . . . . . . . . . 809,985 886,538 443,896
Current liabilities
Trade and notes payables . . . . . . . . . . . . . . 674,526 840,062 772,204
Accruals and other payables . . . . . . . . . . . . 51,456 58,695 63,349
Contract liabilities . . . . . . . . . . . . . . . . . . . . 3,467 5,242 6,290
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . 35,282 45,581 55,068
Lease liabilities-current . . . . . . . . . . . . . . . . 138,287 155,426 158,762
Current income tax liabilities . . . . . . . . . . . 14,759 7,058 15,530
Total current liabilities . . . . . . . . . . . . . . . 917,777 1,112,064 1,071,203
Total liabilities . . . . . . . . . . . . . . . . . . . . . 1,727,762 1,998,602 1,515,099
Total equity and liabilities . . . . . . . . . . . . 1,777,011 2,007,883 1,926,219
Property, Plant and Equipment
Our property, plant and equipment primarily consist of buildings, equipment and furniture
fixtures, leasehold improvements and electronic equipment. Our property, plant and equipment
decreased by 2.9%, from RMB213.1 million as of December 31, 2020 to RMB206.9 million as of
December 31, 2021, primarily attributable to depreciation. Our property, plant and equipment
decreased by 8.2%, from RMB206.9 million as of December 31, 2021 to RMB190.0 million as of
September 30, 2022, primarily due to depreciation.
Right-of-use Assets
Our right-of-use assets primarily consist of the leased properties of our retail pharmacies. Our
right-of-use assets increased by 8.5%, from RMB616.3 million as of December 31, 2020 to
RMB668.8 million as of December 31, 2021, primarily due to our newly leased properties for the
expansion of our pharmacy network in 2021. Our right-of-use assets decreased by 9.2% from
RMB668.8 million as of December 31, 2021 to RMB607.5 million as of September 30, 2022,
primarily attributable to the depreciation of the right-of-use assets in relation to our leased
properties.
Intangible Assets
Our intangible assets primarily consist of software, trademarks and license qualifications. As
of December 31, 2020, 2021 and September 30, 2022, our intangible assets were RMB14.9
million, RMB18.2 million and RMB18.5 million, respectively. The increase of our intangible
assets from RMB14.9 million as of December 31, 2020 to RMB18.2 million as of December 31,
2021 was primarily due to (i) purchase of software and (ii) the Pharmaceutical Operation Licenses
– 331 –
(《藥品經營許可證》) from Shaanxi 111’s acquisition of Xi’an Baolun and Weinan Zhixinren. Our
intangible assets remained relatively stable at RMB18.2 million as of December 31, 2021 and
RMB18.5 million as of September 30, 2022.
Deferred Income Tax Assets
Our deferred income tax assets arise from the temporary differences primarily attributable to
lease liabilities, tax losses, unrealized profit and time differences of purchase rebate on unsold
inventories, partially offset by deferred tax liabilities which arise from the temporary differences
attributable to right-of-use assets and provision and time differences of purchase rebate. As of
December 31, 2020 and 2021 and September 30, 2022, our deferred income tax assets were
RMB5.9 million, RMB6.7 million and RMB4.9 million, respectively. The increase of our deferred
income tax assets from RMB5.9 million as of December 31, 2020 to RMB6.7 million as of
December 31, 2021 was primarily due to the increase of the temporary differences attributable to
tax losses and time differences of purchase rebate on unsold inventories. Our deferred income tax
assets decreased from RMB6.7 million as of December 31, 2021 to RMB4.9 million as of
September 30, 2022, primarily due to the decrease of temporary differences attributable to time
differences of purchase rebate on unsold inventories and tax losses.
Inventories
Our inventories primarily consist of prescription and OTC drugs, TCM decoction pieces,
wellness products, medical devices and others. Our inventories increased from RMB406.9 million
as of December 31, 2020 to RMB545.5 million as of December 31, 2021, primarily as a result of
the increase in inventories of products which was in line with the our business growth and the
expansion of our pharmacy network. Our inventories slightly decreased from RMB545.5 million as
of December 31, 2021 to RMB542.6 million as of September 30, 2022, primarily because we kept
less inventories of prescription and OTC drugs in response to the temporary shutdowns of offline
pharmacies caused by the resurgence of the COVID-19.
The table below sets forth our inventories by types of products and materials as of the dates
indicated:
As of
2020 2021 2022
RMB’000 RMB’000 RMB’000
(Unaudited)
Inventories
Prescription and OTC drugs . . . . . . . . . . . . 354,446 475,807 470,748
Medical devices . . . . . . . . . . . . . . . . . . . . . 20,947 25,195 27,148
TCM decoction pieces . . . . . . . . . . . . . . . . . 15,760 19,545 19,005
Wellness products . . . . . . . . . . . . . . . . . . . . 10,585 15,591 16,135
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,421 12,343 13,551
Less: provision for impairment . . . . . . . . . . (1,294) (2,966) (4,017)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 406,865 545,515 542,570
– 332 –
The table below sets forth our inventory turnover days for the periods indicated:
For the nine

months ended
2020 2021 2022
Inventory turnover days (Note)
........... 117 132 134
Note: Inventory turnover days were calculated using the average of the beginning and ending balances of inventories for
the relevant year or period, divided by the corresponding cost of revenue for the year or period, multiplied by 365
days for a year and 273 days for nine months.
Our inventory turnover days increased from 117 days for the year ended December 31, 2020
to 132 days for the year ended December 31, 2021, primarily due to the increase in our inventory
level attributable to (i) the increase in the number of our offline pharmacies as our business grew
and (ii) the temporary shutdowns of offline pharmacies impacted by the restrictions on offline
activities as a result of the resurgence of the COVID-19 pandemic in 2021. Our inventory turnover
days increased from 132 days for the year ended December 31, 2021 to 134 days for the nine
months ended September 30, 2022, primarily due to the slower sales of our inventories as a result
of the temporary shutdowns of offline pharmacies caused by the resurgence of the COVID-19.
As of November 30, 2022, RMB281.0 million, or 51.4%, of our inventories as of September

30, 2022 had been subsequently sold or utilized.
Trade Receivables
Our trade receivables primarily comprise of the outstanding amounts receivable by us from
other third parties we cooperate with, including local medical insurance bureaus, third-party
platforms (including O2O and B2C platforms), commercial insurance companies, wholesale
enterprises and franchisees. See “Business — Pricing and Payment — Payment Methods” for
details. The balances of our trade receivables are non-interest-bearing. We seek to maintain strict
control over our outstanding receivables and overdue balances are reviewed regularly by our senior
management.
The following table shows our trade receivables as of the dates indicated:
As of
2020 2021 2022
RMB’000 RMB’000 RMB’000
(Unaudited)
Trade receivables
Trade receivables from contracts with
customers — Third parties . . . . . . . . . . . 128,125 161,162 187,408
Less: Provision for impairment . . . . . . . . . . (184) (688) (3,895)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127,941 160,474 183,513
– 333 –
Our trade receivables increased by RMB32.5 million or 25.4% from RMB127.9 million as of
December 31, 2020 to RMB160.5 million as of December 31, 2021, primarily attributable to (i) the
increase in medical insurance receivables of RMB21.2 million as our business continued to expand
in 2021 which was in line with our increase in total revenue in 2021, (ii) the increase in
third-party platform receivables of RMB8.2 million as the revenue from our O2O retail business
increased in 2021 and (iii) the increase in receivables from commercial insurance companies of
RMB6.4 million as we partnered with a new insurance company partner in late 2020. Our trade
receivables increased by RMB23.0 million, or 14.4%, from RMB160.5 million as of December 31,
2021 to RMB183.5 million as of September 30, 2022, primarily due to the increase in medical
insurance receivables of RMB38.4 million as a result of the launch of inter-regional utilization of
medical insurance since late 2021, partially offset by (i) the decrease in third-party platform
receivables of RMB7.7 million due to settlement and (ii) the decrease in receivables from
commercial insurance companies of RMB4.2 million due to settlement.
Our typical credit term is of 30 to 60 days, and local medical insurance bureaus generally
settle amounts with us ranging from 30 to 90 days. The following is an aging analysis of trade
receivables presented based on the revenue recognition dates, as of the dates indicated:
As of
2020 2021 2022
RMB’000 RMB’000 RMB’000
(Unaudited)
Up to six months . . . . . . . . . . . . . . . . . . . . 127,741 156,429 171,505
Seven to 12 months. . . . . . . . . . . . . . . . . . . 216 3,007 13,172
Over 12 months. . . . . . . . . . . . . . . . . . . . . . 168 1,726 2,731
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128,125 161,162 187,408
In determining the recoverability of our trade receivables, our management makes periodic
assessments as well as individual assessment based on historical settlement records and past
experience and adjust for forward looking information. We apply the simplified approach in
calculating expected credit loss permitted by IFRS 9, which requires expected lifetime losses to be
recognized from initial recognition for all trade receivables. As of December 31, 2020 and 2021
and September 30, 2022, we recorded provision for impairment of trade receivables of RMB0.2
The following table sets forth our trade receivables turnover days for the periods indicated:
For the nine

months ended
2020 2021 2022
Trade receivables turnover days (Note)
..... 32 26 27
Note: Trade receivables turnover days were calculated using the average of the beginning and ending balances of trade
receivables for the relevant year or period, divided by the corresponding revenue for the year or period, multiplied
by 365 days for a year and 273 days for nine months.
– 334 –
During the Track Record Period, our trade receivables turnover days were 32 days, 26 days
and 27 days for the years ended December 31, 2020 and 2021 and for the nine months ended
September 30, 2022, respectively. The decrease in trade receivables turnover days from 2020 to
2021 was primarily attributable to the increase in the proportion of revenue from our O2O and
B2C retail businesses which generally have a shorter settlement period than that of our offline
retail business. Our trade receivables turnover days slightly increased from 26 days for the year
ended December 31, 2021 to 27 days for the nine months ended September 30, 2022, primarily due
to the slower settlement of our trade receivables caused by the launch of inter-regional utilization
of medical insurance since late 2021.
As of November 30, 2022, RMB97.6 million, or 53.2% of our trade receivables as of

September 30, 2022, had been subsequently settled. During the Track Record Period and up to the
Latest Practicable Date, we did not have any material dispute or disagreement with our customers
in relation to the timing, amounts of billing or the collection of our trade receivables.
Prepayments and Other Receivables
The following table shows a breakdown of our prepayments and other receivables as of the
dates indicated:
As of
2020 2021 2022
RMB’000 RMB’000 RMB’000
(Unaudited)
Current portion
Prepayments for inventories . . . . . . . . . . . . 12,089 8,402 6,728
Prepayments for [REDACTED] expenses . . [REDACTED] [REDACTED] [REDACTED]
Deductible value-added tax . . . . . . . . . . . . . 23,450 17,010 2,568
Prepayments for utilities expenses . . . . . . . . 2,974 2,382 948
Prepayments for technical services . . . . . . . 409 3,426 431
Other receivables — deposits . . . . . . . . . . . 6,031 7,698 7,929
Other receivables — amounts due from
third-party payment platforms . . . . . . . . . 8,065 7,783 6,301
Other receivables–others . . . . . . . . . . . . . . . 1,138 1,866 1,725
Less: loss allowance . . . . . . . . . . . . . . . . . . (43) (75) (90)
Non-current portion
Prepayments for leasehold improvements . . 856 4,980 5,105
Prepayments for technical services . . . . . . . 2,520 3,353 4,795
Prepayments — others. . . . . . . . . . . . . . . . . 801 459 388
Other receivables — deposits . . . . . . . . . . . 4,559 6,673 6,982
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,805 63,844 51,336
– 335 –
The current portion of our prepayments and other receivables primarily consists of (i)
prepayments for inventories, (ii) prepayments for [REDACTED] expenses, (iii) deductible
value-added tax, (iv) prepayments for utilities expenses, (v) prepayments for technical services,
(vi) other receivables in relation to deposits for our online pharmacies and (vii) other receivables
in relation to amounts due from third-party payment platforms which primarily represent the
balances in our WeChat Pay and Alipay accounts. The non-current portion of our prepayments and
other receivables primarily consists of (i) prepayments for leasehold improvements, (ii)
prepayments for technical services and (iii) other receivables in relation to deposits for our leased
properties.
Our prepayments and other receivables increased from RMB62.8 million as of December 31,
2020 to RMB63.8 million as of December 31, 2021, primarily attributable to (i) an increase in
prepayments for leasehold improvements of RMB4.1 million in relation to the renovation for our
newly leased self-operated pharmacies, (ii) an increase in prepayments for technical services of
RMB3.9 million as we increased our investment in the improvement of our technology platform in
2021 and (iii) an increase in deposits of RMB3.8 million driven by the increase in number of
online pharmacies of our B2C retail business and the expansion of our offline pharmacies coverage
in 2021, partially offset by (i) a decrease in deductible value-added tax of RMB6.4 million due to
the deduction of deductible value-added tax as value-added output tax increased from our
increased sales in 2021 and (ii) a decrease in prepayments for inventories RMB3.7 million.
Our prepayments and other receivables decreased from RMB63.8 million as of December 31,
2021 to RMB51.3 million as of September 30, 2022, primarily attributable to (i) a decrease in
deductible value-added tax of RMB14.4 million due to the refund of value-added tax under the
new tax policy in 2022 and the deduction of deductible value-added tax as value-added output tax
increased from our increased sales in 2022 (ii) a decrease in prepayments for inventories of
RMB1.7 million, (iii) a decrease in prepayments for technical services of RMB1.6 million, (iv) a
decrease in amounts due from third-party payment platforms of RMB1.5 million and (v) a decrease
in prepayments for utilities expenses of RMB1.4 million, partially offset by an increase in
prepayments for [REDACTED] expenses of RMB7.7 million.
Restricted Cash
Our restricted cash consists of guarantee deposits for notes payables. Our restricted cash
increased from RMB274.3 million as of December 31, 2020 to RMB312.5 million as of December
31, 2021, primarily due to the increase in notes utilized to fund our business operations. Our
restricted cash decreased from RMB312.5 million as of December 31, 2021 to RMB256.1 million
as of September 30, 2022, primarily due to the increase in the amount of settlement with suppliers
approaching the year end in 2021.
– 336 –
Cash and Cash Equivalents
The following table sets forth the breakdown of our cash and cash equivalents as of the dates
indicated:
As of
2020 2021 2022
RMB’000 RMB’000 RMB’000
(Unaudited)
Cash and cash equivalents
Cash at bank . . . . . . . . . . . . . . . . . . . . . . . 327,930 335,974 326,743
Cash on hand . . . . . . . . . . . . . . . . . . . . . . . 1,211 1,391 1,138
Less: restricted cash . . . . . . . . . . . . . . . . . . (274,319) (312,463) (256,123)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,822 24,902 71,758
Our cash and cash equivalents primarily consist of cash at bank and cash on hand, excluding
restricted cash. All of our cash and cash equivalents are denominated in RMB. Our cash and cash
equivalents decreased from RMB54.8 million as of December 31, 2020 to RMB24.9 million as of
December 31, 2021, primarily due to the decrease in cash at bank of RMB30.1 million as our trade
receivables from local medical insurance bureaus increased in 2021 due to their system update
which slowed down their settlement. Our cash and cash equivalents increased from RMB24.9
million as of December 31, 2021 to RMB71.8 million as of September 30, 2022, primarily due to
the increase in our total revenue for the nine months ended September 30, 2022 as compared to the
same period in 2021.
Trade and Notes Payables
Trade and notes payables to third parties mainly represent the balances due to our suppliers
for purchase of goods. The following table sets forth the breakdown of our trade and notes
payables as of the dates indicated:
As of
2020 2021 2022
RMB’000 RMB’000 RMB’000
(Unaudited)
Trade and notes payables
Notes payables . . . . . . . . . . . . . . . . . . . . . . 499,016 508,327 441,150
Trade payables to third parties . . . . . . . . . . 175,510 331,735 331,054
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 674,526 840,062 772,204
As of December 31, 2020 and 2021 and as of September 30, 2022, our trade and notes
payables were RMB674.5 million, RMB840.1 million and RMB772.2 million, respectively. The
increase in our trade and notes payables from RMB674.5 million as of December 31, 2020 to
RMB840.1 million as of December 31, 2021 was primarily due to the increase in our procurement
of products from suppliers which was in line with our growth in product sales and pharmacy
network expansion in 2021. The decrease in our trade and notes payables from RMB840.1 million
– 337 –
as of December 31, 2021 to RMB772.2 million as of September 30, 2022 was primarily due to the
decrease in our notes payables from our procurement of goods for the nine months ended
September 30, 2022.
Our suppliers generally grant us a credit term of 60 to 90 days, which we may settle with
notes having a general maturity period of 90 to 180 days. The following is an aging analysis of
trade and notes payables, based on recognition at the respective balance sheet dates:
As of
2020 2021 2022
RMB’000 RMB’000 RMB’000
(Unaudited)
Less than 1 year . . . . . . . . . . . . . . . . . . . . . 669,091 837,717 770,718
Over 1 year . . . . . . . . . . . . . . . . . . . . . . . . . 5,435 2,345 1,486
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 674,526 840,062 772,204
The following table sets forth our trade payables turnover days for the periods indicated:
For the nine

months ended
2020 2021 2022
Trade payables turnover days (Note)
....... 66 70 81
Note: Trade payables turnover days were calculated using the average of the beginning and ending balances of trade
payables for the relevant year or period, divided by the corresponding cost of revenue for the year or period,
multiplied by 365 days for a year and 273 days for nine months.
Our trade payables turnover days increased from 66 days for the year ended December 31,
2020 to 70 days for the year ended December 31, 2021 and further increased to 81 days for the
nine months ended September 30, 2022, which was consistent with normal course fluctuations in
our trade payables settlement arrangement within the general credit term of 60 to 90 days.
The following table sets forth our trade and notes payables turnover days for the periods
indicated:
For the nine

months ended
2020 2021 2022
Trade and notes payables turnover
days (Note) . . . . . . . . . . . . . . . . . . . . . . . . 213 209 198
Note: Trade and notes payables turnover days were calculated using the average of the beginning and ending balances of
trade and notes payables for the relevant year or period, divided by the corresponding cost of revenue for the year
or period, multiplied by 365 days for a year and 273 days for nine months.
– 338 –
Our trade and notes payables turnover days decreased from 213 days for the year ended
December 31, 2020 to 209 days for the year ended December 31, 2021 primarily due to the
repayment of notes payables from our procurement of goods. Our trade and notes payables
turnover days decreased from 209 days for the year ended December 31, 2021 to 198 days for the
nine months ended September 30, 2022 primarily due to the repayment of notes payables from our
procurement of goods.
As of November 30, 2022, RMB156.0 million, or 20.2%, of our trade and notes payables as
of September 30, 2022 had been subsequently settled. During the Track Record Period and up to
the Latest Practicable Date, we had no material defaults in our trade and notes payables.
Accruals and Other Payables
The following table sets forth a breakdown of our accruals and other payables as of the dates
indicated:
As of
2020 2021 2022
RMB’000 RMB’000 RMB’000
(Unaudited)
Payroll and welfare benefit payables . . . . . . 25,296 28,348 26,483
Value-added tax payables and other taxes
payable . . . . . . . . . . . . . . . . . . . . . . . . . . 11,758 16,096 18,602
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,163 6,122 6,099
Accrued [REDACTED] expenses . . . . . . . . [REDACTED] [REDACTED] [REDACTED]
Payables for acquisition of subsidiaries . . . . — 993 993
Payables for purchase of property, plant
and equipment . . . . . . . . . . . . . . . . . . . . . 3,955 3,297 848
Payables for third-party platform services
charges and commissions . . . . . . . . . . . . 495 1,101 695
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,789 2,738 2,509
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,456 58,695 63,349
Our accruals and other payables primarily comprise of (i) payroll and welfare benefit
payables, (ii) value-added tax payables and other taxes payable which represents value-added tax,
urban construction and maintenance tax, property tax, land use tax, withholding of personal
income tax, etc., (iii) deposits, (iv) accrued [REDACTED] expenses, (v) payables for acquisition
of subsidiaries, (vi) payable for purchase of property, plant and equipment, and (vii) payables for
third-party platform services charges and commissions.
Our accruals and other payables increased from RMB51.5 million as of December 31, 2020 to
RMB58.7 million as of December 31, 2021, primarily due to (i) an increase in value-added tax
payables and other taxes payable of RMB4.3 million due to the value-added tax and additional tax
such as urban construction and maintenance tax and local education surcharges in relation to our
newly opened self-operated pharmacies and the increase in our total revenue in 2021 and (ii) an
increase in payroll and welfare benefit payables of RMB3.1 million primarily due to the increase
in the number of employees and staff in 2021. Our accruals and other payables increased from
RMB58.7 million as of December 31, 2021 to RMB63.3 million as of September 30, 2022,
– 339 –
primarily attributable to the accrued [REDACTED] expenses of RMB7.1 million we recorded for
the nine months ended September 30, 2022, partially offset by the decrease in payables for
purchase of property, plant and equipment of RMB2.5 million as our purchases for store
renovations decreased in 2022.
Contract Liabilities
A contract liability represents our obligation to transfer goods or services to a customer for
which we have received consideration (or an amount of consideration is due) from the customer.
For details, see “— Critical Accounting Policies and Estimates — Contract Liabilities”. The
following table sets forth a breakdown of our contract liabilities as of the dates indicated:
As of
2020 2021 2022
RMB’000 RMB’000 RMB’000
(Unaudited)
Included in non-current liabilities . . . . . . . . 957 1,672 1,565
Included in current liabilities . . . . . . . . . . . 3,467 5,242 6,290
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,424 6,914 7,855
Our contract liabilities were recognized in relation to the unrendered purchase or service of
our pre-paid cards sold to members typically for discounted access to wellness management
service offerings, unused membership points that can be used for customers’ future purchases, and
also trademark licensing fees from our franchisees. Our contract liabilities increased from RMB4.4
million as of December 31, 2020 to RMB6.9 million as of December 31, 2021, primarily due to
the increase in prepayments from pre-paid cards sold and the increase in prepayments for
management consultation service fees, which were in line with our business growth and the
expansion of our pharmacy network in 2021. Our contract liabilities increased from RMB6.9
million to RMB7.9 million as of September 30, 2022, primarily due to the increase in unused
membership points of RMB1.0 million which was in line with our business growth.
As of November 30, 2022, RMB0.9 million, or 11.0%, of our contract liabilities as of

September 30, 2022 had been subsequently utilized and recognized in revenue.
Deferred Income Tax Liabilities
Our deferred income tax liabilities arise from the temporary differences attributable to
provision and time differences of purchase rebate, right-of-use assets and assets appreciation. As of
December 31, 2020 and 2021 and September 30, 2022, our deferred income tax liabilities were
RMB10.4 million, RMB16.4 million and RMB14.4 million, respectively. The increase of our
deferred income tax liabilities from RMB10.4 million as of December 31, 2020 to RMB16.4
million as of December 31, 2021 was primarily due to the increase of temporary differences
attributable to provision and time differences of purchase rebate. Our deferred income tax
liabilities slightly decreased from RMB16.4 million as of December 31, 2021 and RMB14.4
million as of September 30, 2022 as the temporary differences attributable to provision and time
differences of purchase rebate decreased and part of the deferred income tax liabilities attributable
to provision and time differences of purchase rebate were offset against our deferred income tax
assets as of September 30, 2022.
– 340 –
Current Income Tax Liabilities
As of December 31, 2020 and 2021 and as of September 30, 2022, we had current income tax
liabilities of RMB14.8 million, RMB7.1 million and RMB15.5 million, respectively. The
fluctuation in our current income tax liabilities as of December 31, 2020 and 2021 and as of
September 30, 2022 is in line with the fluctuation in our profit/loss before income tax during the
Track Record Period.
LIQUIDITY AND CAPITAL RESOURCES
Sources of Liquidity and Working Capital
The following table sets forth a summary of our liquidity and working capital as of the dates
indicated:
As of As of
As of December 31,
September 30, November 30,
2020 2021 2022 2022
RMB’000 RMB’000 RMB’000 RMB’000
CURRENT ASSETS
Inventories . . . . . . . . . . . . . . . . . . . . . 406,865 545,515 542,570 552,766
Trade receivables . . . . . . . . . . . . . . . . 127,941 160,474 183,513 205,727
Prepayments and other receivables . . . 54,113 48,492 34,214 45,734
Restricted cash . . . . . . . . . . . . . . . . . . 274,319 312,463 256,123 151,416
Cash and cash equivalents . . . . . . . . . . 54,822 24,902 71,758 119,214
Total current assets . . . . . . . . . . . . . . 918,060 1,091,846 1,088,178 1,074,857
CURRENT LIABILITIES
Trade and notes payables . . . . . . . . . . 674,526 840,062 772,204 830,198
Accruals and other payables . . . . . . . . 51,456 58,695 63,349 31,118
Contract liabilities . . . . . . . . . . . . . . . . 3,467 5,242 6,290 —
Borrowings . . . . . . . . . . . . . . . . . . . . . 35,282 45,581 55,068 35,865
Lease liabilities-current . . . . . . . . . . . . 138,287 155,426 158,762 152,163
Current income tax liabilities . . . . . . . 14,759 7,058 15,530 25,167
Total current liabilities . . . . . . . . . . . 917,777 1,112,064 1,071,203 1,074,511
NET CURRENT
ASSETS/(LIABILITIES) . . . . . . . . 283 (20,218) 16,975 346
As of November 30, 2022, we had net current assets of RMB0.3 million, as compared to
RMB17.0 million as of September 30, 2022, primarily due to (i) the decrease in restricted cash as
a result of the decrease in notes utilized and (ii) the increase in trade and notes payables as a result
of the increase in trade payables from our procurement of goods, partially offset by the increase in
cash and cash equivalents as our settlement of payables from procurement of goods was delayed
due to the impact of the COVID-19 pandemic.
As of September 30, 2022, we had net current assets of RMB17.0 million, as compared to the
net current liabilities of RMB20.2 million as of December 31, 2021, primarily due to (i) the
decrease in trade and notes payables mainly driven by the decrease in our notes payables from our
procurement of goods and (ii) the increase in cash and cash equivalents primarily driven by the
settlement of medical insurance receivables and the increase in our total revenue for the nine
– 341 –
months ended September 30, 2022 as compared to the same period in 2021, partially offset by the
decrease in restricted cash mainly due to our higher demand for notes to settle our payment to
suppliers approaching the year end in 2021.
As of December 31, 2021, we had net current liabilities of RMB20.2 million, as compared to
the net current assets of RMB0.3 million as of December 31, 2020, primarily due to the increase in
trade and notes payables mainly driven by the increase in our procurement of products from
suppliers which was in line with our growth in product sales and pharmacy network expansion in
2021, partially offset by the increase in inventories mainly attributable to the increase in
inventories of products which was in line with the our business growth and the expansion of our
pharmacy network.
Cash Flows
Our business operations and expansion plans require a significant amount of capital,
including cash and cash equivalents as well as other working capital requirements. Historically, we
financed our capital expenditure and working capital requirements mainly through cash generated
from operations, bank borrowings and the [REDACTED] Investments. For the years ended
December 31, 2020 and 2021 and for the nine months ended September 30, 2022, our net cash
flows from operating activities amounted to RMB132.3 million, RMB244.6 million and RMB251.8
The following table sets forth a summary of our cash flow data from our consolidated
statements of cash flows for the periods indicated:
For the nine

months ended
2020 2021 2022
RMB’000 RMB’000 RMB’000
(Unaudited)
activities . . . . . . . . . . . . . . . . . . . . . . . . . 132,327 244,625 251,825
Net cash used in investing activities . . . . . . (45,821) (51,236) (26,123)
Net cash used in financing activities . . . . . . (91,185) (223,309) (178,846)
Net (decrease)/increase in cash and cash
equivalents. . . . . . . . . . . . . . . . . . . . . . . . (4,679) (29,920) 46,856
Cash and cash equivalents at beginning of
year/period. . . . . . . . . . . . . . . . . . . . . . . . 59,501 54,822 24,902
Cash and cash equivalents at end of the
year/period . . . . . . . . . . . . . . . . . . . . . . . 54,822 24,902 71,758
Net Cash Generated from Operating Activities
Cash flows from operating activities consist of profit/loss before income tax adjusted for
certain non-cash or non-operating activities related items and changes in working capital.
For the nine months ended September 30, 2022, our net cash generated from operating
activities was RMB251.8 million, primarily attributable to profit before taxation of RMB27.6
million, as (i) adjusted by adding back non-cash items or non-operating items, which principally
included depreciation of right-of-use assets of RMB156.7 million, net finance costs of RMB50.2
– 342 –
million and depreciation on property, plant and equipment of RMB30.4 million, and (ii) negatively
adjusted by changes in working capital of RMB9.5 million. Changes in working capital mainly
represented (a) a decrease in trade and notes payables of RMB67.9 million mainly attributable to
the settlement of our trade and note payables and (b) an increase in trade receivables of RMB26.2
million mainly due to the increase in our total revenue, partially offset by (a) a decrease in
restricted cash of RMB56.3 million due to the decrease in notes utilized to fund our business
operations and (b) a decrease in prepayments and other receivables of RMB27.0 million as a result
of the decrease in deductible value-added tax due to the refund of value-added tax under the new
tax policy in 2022 and the deduction of deductible value-added tax as value-added output tax
increased from our increased sales in 2022, decrease in prepayments for inventories as some of our
suppliers no longer required prepayments for the procurement of inventories, decrease in amounts
due from third-party payment platforms and decrease in prepayments for utilities expenses as the
heating season had not started as of September 30, 2022.
For the year ended December 31, 2021, our net cash generated from operating activities was
RMB244.6 million, primarily attributable to loss before taxation of RMB15.7 million, as (i)
adjusted by adding back non-cash items or non-operating items, which principally included
depreciation of right-of-use assets of RMB195.5 million, net finance costs of RMB69.8 million
and depreciation on property, plant and equipment of RMB39.6 million, and (ii) negatively
represented (a) an increase in inventories of RMB140.8 million attributable to the increased
volume of products purchased from suppliers in 2021, (b) an increase in restricted cash of
RMB38.1 million due to the increase in guarantee deposits for notes payable as our purchase
volume of products from suppliers increased in 2021 and (c) an increase in trade receivables of
RMB33.5 million mainly due to our business growth and the expansion of our omni-channel retail
network, partially offset by an increase in trade and notes payables of RMB162.9 million as we
purchased more products from suppliers which was in line with the increase in the number of
offline pharmacies in 2021.
For the year ended December 31, 2020, our net cash generated from operating activities was
RMB132.3 million, primarily attributable to profit before taxation of RMB17.9 million, as (i)
adjusted by adding back non-cash items or non-operating items, which principally included
depreciation of right-of-use assets of RMB187.5 million, net finance costs of RMB63.3 million
and depreciation on property, plant and equipment of RMB30.8 million, and (ii) negatively
represented (a) an increase in inventories of RMB96.8 million mainly as a result of the increase in
volume of products purchased which was in line with the increase in the number of offline
pharmacies in 2020, (b) an increase in restricted cash of RMB73.9 million due to the increase in
guarantee deposits for notes payables as our purchase volume of products from suppliers increased
in 2020, (c) an increase in prepayments and other receivables of RMB28.7 million mainly due to
the increase in prepayments for inventories, increase in deductible value-added tax as a result of
our increased sales in 2020 and increase in prepayments for leasehold improvement in relation to
our office and warehouse premises and (d) a decrease in accruals and other payables of RMB56.1
million due to settlement, partially offset by an increase in trade and notes payables of RMB94.4
million as our purchase volume of products from suppliers increased in 2020.
– 343 –
Net Cash Used in Investing Activities
Our net cash used in investing activities primarily reflects our (i) purchases of property, plant
and equipment and (ii) purchases of intangible assets.
For the nine months ended September 30, 2022, our net cash used in investing activities was
RMB26.1 million, primarily resulted from (i) purchases of property, plant, and equipment of
RMB24.2 million in relation to the renovation and fixed assets purchased for our new
self-operated stores and (ii) purchases of intangible assets of RMB2.0 million in relation to our
business expansion.
For the year ended December 31, 2021, our net cash used in investing activities was
business expansion.
For the year ended December 31, 2020, our net cash used in investing activities was
business expansion.
Net Cash Used in Financing Activities
Our net cash used in financing activities primarily reflects our (i) principal elements and
interest elements of lease payments, (ii) proceeds from borrowings, (iii) repayments of borrowings,
(iv) capital injection from an equity holder of the Company and (v) interest paid for borrowings.
For the nine months ended September 30, 2022, our net cash used in financing activities was
RMB178.8 million, primarily resulted from (i) principal elements and interest elements of lease
payments of RMB172.4 million in relation to the lease of our self-operated stores, offices and
dormitories for our employees, (ii) repayments of borrowings of RMB44.2 million, (iii) payments
for business combinations under common control of RMB5.7 million in relation to the acquisition
of Deshengtang Jinchang Health in July 2022, (iv) payments for [REDACTED] expenses of
RMB3.6 million and (v) interest paid for borrowings of RMB2.3 million, partially offset by
proceeds from borrowings of RMB49.3 million.
For the year ended December 31, 2021, our net cash used in financing activities was
payments of RMB223.6 million in relation to our leased properties for retail pharmacies, (ii)
repayments of borrowings of RMB35.3 million and (iii) interest paid for borrowings of RMB4.5
million, partially offset by proceeds from borrowings of RMB40.0 million.
For the year ended December 31, 2020, our net cash used in financing activities was
payments of RMB201.1 million in relation to our leased properties for retail pharmacies, (ii)
repayments of borrowings of RMB11.0 million and (iii) interest paid for borrowings of RMB3.6
million, partially offset by (i) capital injection from an equity holder of the Company of RMB94.4
million (see “History, Development and Corporate Structure — Details of the [REDACTED]
Investments”) and (ii) proceeds from borrowings of RMB30.0 million.
– 344 –
Working Capital Sufficiency
Taking into account the financial resources available to us, including the estimated net
[REDACTED] of the [REDACTED], cash flow generated from our operations, facilities available
to us and cash and cash equivalents on hand, our Directors believe that we have sufficient working
capital to meet our present and future cash requirements for at least the next 12 months from the
date of this Document.
CAPITAL EXPENDITURES
Our capital expenditures during the Track Record Period represented purchases of property,
plant and equipment and purchases of intangible assets. Our capital expenditures were RMB45.8
million, RMB51.7 million and RMB26.1 million for the years ended December 31, 2020 and 2021
and the nine months ended September 30, 2022, respectively.
We expect to incur RMB30.0 million and RMB35.0 million in capital expenditures in 2022
and 2023, respectively, which we plan to fund primarily through our cash from operating activities,
additional loan facilities and the net [REDACTED] from the [REDACTED]. Our current capital
expenditure plans for any future period are subject to change, and we may adjust our capital
expenditures according to our future cash flows, results of operations and financial condition, our
business plans, the market conditions and various other factors we believe to be appropriate.
INDEBTEDNESS
Borrowings
As of December 31, 2020 and 2021, September 30, 2022 and November 30, 2022, we had
borrowings of RMB76.8 million, RMB81.5 million, RMB86.6 million and RMB85.8 million,
respectively.
The following table sets out our borrowings as of the dates indicated:
As of As of
As of December 31, September 30, November 30,
2020 2021 2022 2022
RMB’000 RMB’000 RMB’000 RMB’000
Non-current
Bank borrowings-secured . . . . . . . . . . 41,508 35,926 31,538 30,538
Current
Current portion of long-term
borrowings-secured . . . . . . . . . . . . . 5,282 5,581 5,813 5,865
Short-term borrowings-secured . . . . . . 20,000 40,000 49,255 49,384
Short-term borrowings-unsecured . . . . 10,000 — — —
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 76,790 81,507 86,606 85,787
– 345 –
Our total borrowings increased from RMB76.8 million as of December 31, 2020 to RMB81.5
million as of December 31, 2021, primarily due to the increase in short-term borrowings of
RMB10.0 million, which were used to fund our business operations and expansion, partially offset
by the decrease in secured long-term borrowings of RMB5.3 million as we have settled part of
such borrowings in 2021. Our total borrowings increased from RMB81.5 million as of December
31, 2021 to RMB86.6 million as of September 30, 2022, primarily due to the increase in secured
short-term borrowings of RMB9.3 million, which were used to fund our business operations and
expansion, partially offset by the decrease in secured long-term borrowings of RMB4.2 million as
we have settled part of such borrowings during the nine months ended September 30, 2022. Our
total borrowings slightly decreased from RMB86.6 million as of September 30, 2022 to RMB85.8
million as of November 30, 2022.
The following table sets forth the maturity profile of our borrowings as of the dates
indicated:
As of As of
2020 2021 2022 2022
RMB’000 RMB’000 RMB’000 RMB’000
Within one year. . . . . . . . . . . . . . . . . . 35,282 45,581 55,068 55,249
Between one and two years . . . . . . . . . 6,486 6,656 6,846 6,877
Between two and five years . . . . . . . . 19,467 19,976 20,548 20,642
Over five years . . . . . . . . . . . . . . . . . 15,555 9,294 4,144 3,019
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 76,790 81,507 86,606 85,787
As of December 31, 2020 and 2021, September 30, 2022 and November 30, 2022, the
weighted average annual interest rate of long-term borrowings was 5.86%, 5.83%, 4.33% and
5.37%, respectively. The weighted average annual interest rate of short-term borrowings was
4.63%, 3.68%, 3.51% and 4.28%, respectively. For details of the securities and guarantees for our
borrowings, see Note 25 to the Accountant’s Report in Appendix I to this Document. As of
November 30, 2022, we had unutilized credit facilities of RMB216.9 million. We plan to draw
down such credit facilities should any capital expenditure need arise in the future.
Our Directors confirm that as of the Latest Practicable Date, the agreements under our
borrowings did not contain any covenant that would have a material adverse effect on our ability
to make additional borrowings or issue debt or equity securities in the future. Our Directors further
confirm that we had no material defaults in bank and other borrowings, nor did we breach any
covenants during the Track Record Period and up to the Latest Practicable Date. Our Directors
further confirm that during the Track Record Period and up to the Latest Practicable Date, we did
not experience any material difficulty in obtaining credit facilities, or withdrawal of facilities or
request for early repayment.
– 346 –
Lease Liabilities
As of December 31, 2020 and 2021, September 30, 2022 and November 30, 2022, we had
lease liabilities of RMB559.8 million, RMB611.6 million, RMB555.2 million and RMB536.7
The following table sets forth our lease liabilities as of the dates indicated:
As of As of
2020 2021 2022 2022
RMB’000 RMB’000 RMB’000 RMB’000
Current portion . . . . . . . . . . . . . . . . . . 138,287 155,426 158,762 152,163
Non-current portion . . . . . . . . . . . . . . . 421,553 456,146 396,392 384,570
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 559,840 611,572 555,154 536,733
Our lease liabilities increased from RMB559.8 million as of December 31, 2020 to
RMB611.6 million as of December 31, 2021, primarily due to the increase in number of leased
retail pharmacies as we have continued to expand pharmacy network coverage. Our lease liabilities
decreased from RMB611.6 million as of December 31, 2021 to RMB555.2 million as of September
30, 2022 primarily because we have shortened the term of certain leases of our leased retail
pharmacies due to the impact of the resurgence of the COVID-19, partially offset by the increase
in number of leased retail pharmacies as we have continued to expand our pharmacy network
coverage. Our lease liabilities decreased from RMB555.2 million as of September 30, 2022 to
RMB536.7 million as of November 30, 2022 due to ordinary course of lease payments.
The following table shows the remaining contractual maturities of our lease liabilities at the
end of each reporting period and as of November 30, 2022:
As of December 31, As of September 30, As of November 30,

2020 2021 2022 2022
Present value of Present value of Present value of Present value of
the minimum Total minimum the minimum Total minimum the minimum Total minimum the minimum Total minimum
lease payments lease payments lease payments lease payments lease payments lease payments lease payments lease payments
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Within one year. . . . . . . . 138,287 161,324 155,426 180,285 158,762 180,960 152,163 174,096
Between one and two years . . 111,225 128,233 125,675 144,035 127,312 142,944 130,954 146,204
Between two and five years . . 215,362 242,252 252,713 278,953 221,261 240,679 209,694 228,000
Over five years . . . . . . . . 94,966 101,169 77,758 83,290 47,819 51,278 43,922 47,040
559,840 632,978 611,572 686,563 555,154 615,861 536,733 595,340
Less: total future interest
expenses . . . . . . . . . . (73,138) (74,991) (60,707) (58,607)
Present value of lease
liabilities . . . . . . . . . 559,840 611,572 555,154 536,733
As of November 30, 2022, our lease liabilities amounted to RMB536.7 million, certain of
which were secured by the rental deposits and all of which were unguaranteed.
– 347 –
Redemption Liabilities
We recognized redemption liabilities of RMB335.6 million, RMB376.4 million, nil and nil as
of December 31, 2020 and 2021, September 30, 2022 and November 30, 2022, respectively, due to
the redemption rights and liquidation preferences granted to the Angel Round [REDACTED]
Financing Investors and the Series A [REDACTED] Investors which constituted our Company’s
obligations to repurchase our own equity instruments. These obligations were recognized as
redemption liabilities which are initially measured at fair value (representing the present value of
the expected cash flows for settling the related obligations if these rights are exercised by the
investors) and subsequently measured at amortized cost. Interest expenses on the redemption
liabilities are charged to finance costs.
On August 31, 2022, upon termination of certain preferred rights of the Angel Round
[REDACTED] Investors and the Series A [REDACTED] Investors, the balance of all redemption
liabilities were reclassified to equity. See Note 28 to the Accountant’s Report in Appendix I to this
Document.
Contingent Liabilities
During the Track Record Period and up to the Latest Practicable Date, we had no contingent
liabilities.
Indebtedness Statement
Save as disclosed above, as of December 31, 2020 and 2021, September 30, 2022 and
November 30, 2022, we did not have any other loan capital issued and outstanding or agreed to be
issued, bank overdrafts, borrowings and other similar indebtedness, liabilities under acceptance
(other than normal trade bills) or acceptance credits, debentures, mortgages, charges, hire purchase
commitments, guarantees or other material contingent liabilities. Our Directors confirm that there
has not been any material change in our indebtedness since November 30, 2022 and up to the
Latest Practicable Date.
CONTRACTUAL OBLIGATIONS
Capital Commitments
As of December 31, 2020 and 2021 and September 30, 2022, we had no other material
commitments.
OFF-BALANCE SHEET COMMITMENTS AND ARRANGEMENTS
As of the Latest Practicable Date, we had not entered into any off-balance sheet commitments
or arrangements.
– 348 –
MATERIAL RELATED PARTY TRANSACTIONS
During the Track Record Period, we entered into a number of related party transactions. On
January 1, 2023, our Group has entered into various lease agreements (the “Lease Agreements”)
with each of Mr. Long Yan and Mr. Long Yun, each a Controlling Shareholder and an executive
Director, pursuant to which our Group leased seven properties in the PRC for the operation of our
offline pharmacies. The Lease Agreements were entered into in the ordinary and usual course of
business of our Group based on the prevailing market rates of similar properties at comparable
locations no less favorable than those offered by independent third parties. Our Group has adopted
IFRS 16 “Leases” in the preparation of the financial information of our Group throughout the
Track Record Period, pursuant to which, at the date which the leased asset is available for use by
our Group, our Group as lessee shall recognize a liability to make lease payments and an asset
representing the right to use the underlying asset in connection with the lease of the properties
from each of Mr. Long Yan and Mr. Long Yun. See “— Critical Accounting Policies and Estimates
— Leases” and “Relationship with our Controlling Shareholders — Transactions Entered into
Before the [REDACTED]” for details. For more details about our related party transactions, see
Note 32 to the Accountant’s Report included in Appendix I to this document.
Our Directors are of the view that each of the related party transactions set out in Note 32 to
the Accountant’s Report in Appendix I to this Document was conducted on an arm’s length basis
and would not distort our track record results or cause our historical results to become
non-reflective of our future performance.
QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT FINANCIAL RISK
We are exposed to a variety of financial risks, including market risk (including cash flow and
fair value interest rate risk), credit risk and liquidity risk, as set out below. We manage and
monitor these exposures to ensure appropriate measures are implemented in a timely and effective
manner. For further details, see Note 3 to the Accountant’s Report set out in Appendix I to this
Document.
Market Risk
Cash Flow and Fair Value Interest Rate Risk
Our income and operating cash flows are substantially independent of changes in market
interest rates. We have no significant interest-bearing assets and liabilities, except for cash and
cash equivalents, restricted cash, lease liabilities, borrowings and redemption liabilities. Those
carried at floating rates expose our Group to cash flow interest rate risk whereas those carried at
fixed rates expose the Group to fair value interest rate risk.
Our interest rate risk mainly arises from borrowings. As of December 31, 2020 and 2021 and
September 30, 2022, our long-term borrowings were carried at floating rates, which expose us to
cash flow interest rate risk.
– 349 –
The sensitivity analysis is determined based on the exposure to interest risk of bank
borrowings at the end of each reporting period. If the interest rate of the respective instruments
held by us had been 100 basis points higher/lower, the loss before income tax for the year ended
December 31, 2021 and for the nine months ended September 30, 2021 would increase/decrease by
RMB415,000 and RMB429,000, respectively, while the profit before income tax for the year ended
December 31, 2020 and for the nine months ended September 30, 2022 decrease/increase by
RMB468,000 and RMB374,000, respectively.
As of December 31, 2020 and 2021 and September 30, 2022, our borrowings including
short-term borrowings that carried at fixed rates, which exposed our Group to fair value interest
rate risk. Our management does not anticipate significant impact to the interest-bearing borrowings
resulted from fair value interest rate risk, because initial terms of borrowings are within one year.
Neither does our management anticipate significant impact to interest-bearing assets resulted
from the changes in interest rates, because the interest rates of bank deposits are not expected to
change significantly.
Credit Risk
Credit risk mainly arises from cash and cash equivalents, restricted cash, trade receivables
and other receivables. The maximum exposure to credit risk is represented by the carrying amount
of each financial asset in the consolidated balance sheets. Credit risk is managed on a group basis.
We expect that there is no significant credit risk associated with cash and cash equivalents and
restricted cash since they are held at state-owned banks or reputable commercial banks and other
high-credit-quality financial institutions. Our management does not expect that there will be any
significant losses from non-performance by these counterparties, therefore the expected credit loss
for cash and cash equivalents and restricted cash is minimal. Our management has assessed the
recoverability of receivables during the Track Record Period. For trade receivables, our
management applies the simplified approach to provide expected credit losses prescribed by IFRS
9, which permits the use of the lifetime expected loss provision for all trade receivables from third
parties and related parties. To measure the expected credit losses, trade receivables have been
grouped based on shared credit risk characteristics and the aging dates. The expected loss rates are
based on the payment profiles of sales over a period of three years and the corresponding
historical credit losses experienced within this period. The historical loss rates are adjusted to
reflect current and forward-looking information on macro-economic factors affecting the ability of
the debtors to settle the receivables. For other receivables, our management has assessed that
during the Track Record Period, there was no significant increase in credit risk since initial
recognition. Thus, a 12-month expected credit losses approach that results from possible default
event within 12 months of each reporting date is adopted by management. For details, see Note 3
to the Accountant’s Report set out in Appendix I to this Document.
Liquidity Risk
We aim to maintain sufficient cash and cash equivalents. Due to the dynamic nature of the
underlying businesses, our policy is to regularly monitor our liquidity risk and to maintain
adequate cash and cash equivalents to meet our liquidity requirements. For details of analyzes of
our financial liabilities that will be settled into relevant maturity grouping based on the remaining
period at each balance sheet date to the contractual maturity date, see Note 3 to the Accountant’s
Report set out in Appendix I to this Document.
– 350 –
KEY FINANCIAL RATIOS
The following table sets forth our key financial ratios as of the dates or for the periods
indicated:
For the nine

months ended/As
For the year ended/As of December 31, of September 30,
2020 2021 2022
Profitability ratios
Gross profit margin(1) . . . . . . . . . . . . . . . . . 36.2% 34.5% 35.0%
Net (loss)/profit margin(2) . . . . . . . . . . . . . . (0.4)% (2.0)% 0.0%
Return on equity (3) . . . . . . . . . . . . . . . . . . . (4.6)% (140.6)% 0.4%
Return on total assets (4) . . . . . . . . . . . . . . . . (0.4)% (2.2)% 0.0%
Adjusted net profit margin
(non-IFRS measure) (5) . . ............. 1.7% 0.0% 2.1%
Adjusted EBITDA margin
(non-IFRS measure)(6) . . ............. 17.2% 14.5% 15.8%
Liquidity ratios
Current ratio(7) . . . . . . . . . ............. 1.0 1.0 1.0
Quick ratio (8). . . . . . . . . . . ............. 0.6 0.5 0.5
Capital adequacy ratio
Gearing ratio (9) . . . . . . . . . ............. 12.9 74.7 1.6
Notes:
(1) Gross profit margin is calculated using gross profit divided by revenue and multiplied by 100%.
(2) Net (loss)/profit margin is calculated using (loss)/profit for the year/period divided by revenue and multiplied by
100%.
(3) Return on equity ratio is (loss)/profit for the year/period as a percentage of the average balance of total equity at
the beginning and the end of the year/period and multiplied by 100%.
(4) Return on total assets ratio is (loss)/profit for the year/period as a percentage of the average balance of total assets
at the beginning and the end of the year/period and multiplied by 100%.
(5) Adjusted net profit margin (non-IFRS measure) represents adjusted profit for the year/period (non-IFRS measure)
divided by revenue and multiplied by 100%. For details of the adjusted profit/loss of the year/period (non-IFRS
measure), see “— Non-IFRS Measures”.
(6) Adjusted EBITDA margin (non-IFRS measure) represents adjusted EBITDA (non-IFRS measure) divided by
revenue and multiplied by 100%. For details of the adjusted EBITDA (non-IFRS measure), see “— Non-IFRS
Measures”.
(7) Current ratio is calculated using total current assets divided by total current liabilities.
(8) Quick ratio is calculated using total current assets less inventories divided by total current liabilities.
(9) Gearing ratio is calculated using total debt (being interest-bearing borrowings and lease liabilities) divided by total
equity.
Gross Profit Margin
For the years ended December 31, 2020 and 2021 and for the nine months ended September
30, 2022, our gross profit margin was 36.2%, 34.5%, and 35.0%, respectively. See “— Review of
Historical Results of Operations” for factors affecting our gross profit margin during the respective
periods.
– 351 –
Net (Loss)/Profit Margin
For the years ended December 31, 2020 and 2021, our net loss margin was 0.4% and 2.0%,
respectively, and for the nine months ended September 30, 2022, our net profit margin was 0.0%.
See “— Review of Historical Results of Operations” for factors affecting our net (loss)/profit
margin during the respective periods.
Return on Equity
Our return on equity decreased from (4.6)% in 2020 to (140.6)% in 2021, primarily due to
the higher rate of increase in our loss for the year as compared to the rate of our decrease in total
equity. Our return on equity increased from (140.6)% in 2021 to 0.4% for the nine months ended
September 30, 2022, primarily because we recorded a net profit for the nine months ended
September 30, 2022 and our total equity also increased significantly for the same period.
Return on Total Assets
Our return on total assets decreased from (0.4)% in 2020 to (2.2)% in 2021, primarily due to
the higher rate of increase in our loss for the year as compared to the rate of increase in our total
assets. Our return on total assets increased from (2.2)% in 2021 to 0.0% for the nine months ended
September 30, 2022, primarily because we recorded a net profit for the nine months ended
September 30, 2022.
Adjusted Net Profit Margin (Non-IFRS Measure)
30, 2022, our adjusted net profit margin (non-IFRS measure) was 1.7%, 0.0% and 2.1%,
respectively.
Adjusted EBITDA Margin (Non-IFRS Measure)
30, 2022, our adjusted EBITDA margin (non-IFRS measure) was 17.2%, 14.5% and 15.8%,
respectively.
Current Ratio
Our current ratio remained stable at 1.0 as of December 31, 2020, December 31, 2021 and
September 30, 2022.
Quick Ratio
Our quick ratio slightly decreased from 0.6 as of December 31, 2020 to 0.5 as of December
31, 2021, primarily due to the higher rate of increase in inventories as compared to the rate of
increase in our total current assets and our total current liabilities. Our quick ratio remained stable
at 0.5 as of December 31, 2021 and September 30, 2022.
– 352 –
Gearing Ratio
Our gearing ratio increased from 12.9 as of December 31, 2020 to 74.7 as of December 31,
2021, primarily due to the decrease in our total equity as a result of our loss for the year and the
increase in our total borrowings and lease liabilities. Our gearing ratio decreased from 74.7 as of
December 31, 2021 to 1.6 as of September 30, 2022, primarily due to the higher rate of increase in
our total equity as the balance of all redemption liabilities were reclassified to equity upon
termination of certain preferred rights of the Angel Round [REDACTED] Investors and the Series
A [REDACTED] Investors on August 31, 2022 as compared to the rate of increase in our total
borrowings, and the decrease in our lease liabilities.
DIVIDEND
No dividend has been paid or declared by our Company or other companies comprising our
Group during the Track Record Period.
Our Company currently does not have any dividend policy. Our Board of Directors may
declare dividends in the future after taking into account our results of operations, financial
condition, cash requirements and availability and other factors as it may deem relevant at such
time. Any declaration and payment of dividends will be subject to our constitutional documents
and applicable laws. Our shareholders at a general meeting must approve any declaration of
dividends, which must not exceed the amount recommended by our Board of Directors. In
addition, our Directors may from time to time pay such interim dividends as our Board of
Directors considers to be justified by our profits and overall financial requirements, or special
dividends of such amounts and on such dates as they think appropriate. No dividend shall be
declared or payable except out of our profits and reserves lawfully available for distribution. Our
future declaration of dividends may or may not reflect our historical declarations of dividends and
will be at the absolute discretion of our Board of Directors.
DISTRIBUTABLE RESERVES
As of September 30, 2022, we did not have any distributable reserves.
[REDACTED] EXPENSES
Assuming an [REDACTED] of HK$[REDACTED] per [REDACTED] (being the mid-point

of the indicative [REDACTED] range stated in this Document), the [REDACTED] fees,
[REDACTED], together with the [REDACTED], legal and other professional fees, printing and
other expenses relating to the [REDACTED], which are payable by us are estimated to be
RMB[REDACTED] (equivalent to HK$[REDACTED]) in aggregate. For the nine months ended
September 30, 2022, [REDACTED] expenses charged to our consolidated statements of
comprehensive income were RMB[REDACTED]. The estimated remaining [REDACTED]
expenses of RMB[REDACTED] are expected to be charged to our consolidated statements of
comprehensive income for the three months ended December 31, 2022 and for the year ending
December 31, 2023 and RMB[REDACTED] are expected to be deducted from equity following
the [REDACTED]. The [REDACTED] expenses above are the latest practicable estimate and are
provided for reference only, and actual amounts may differ.
– 353 –
UNAUDITED [REDACTED] STATEMENT OF ADJUSTED NET TANGIBLE ASSETS
The following table of our unaudited [REDACTED] adjusted consolidated net tangible assets
was prepared in accordance with Rule 4.29 of the Listing Rules and is set out below to illustrate
the effect of the [REDACTED] on our net tangible assets as of September 30, 2022 as if it had
taken place on that date. The table of unaudited [REDACTED] adjusted consolidated net tangible
assets of our Group have been prepared for illustrative purpose only and, because of their
hypothetical nature, they may not give a true picture of our net tangible assets had the
[REDACTED] been completed as of September 30, 2022 or at any future date.
The unaudited [REDACTED] adjusted consolidated net tangible assets set out below are
calculated based on our consolidated net assets attributable to owners of our Company as of
September 30, 2022, as shown in the Accountant’s Report, the text of which is included in
Appendix II to this Document, and is adjusted as described below:
Unaudited
Unaudited [REDACTED]
consolidated net adjusted net
tangible liabilities tangible assets of
of the Group the Group
attributable to attributable to
owners of the Estimated net owners of the
Company as of [REDACTED] Company as of Unaudited [REDACTED] adjusted
September 30, from the September 30, consolidated net tangible assets
2022(1) [REDACTED](2) 2022 per Share(3)(4)
RMB’000 RMB’000 RMB’000 RMB HKD
Based on an [REDACTED] of
HK$[REDACTED] per H Share . 392,670 [REDACTED] [REDACTED] [REDACTED] [REDACTED]
Based on an [REDACTED] of
HK$[REDACTED] per H Share . 392,670 [REDACTED] [REDACTED] [REDACTED] [REDACTED]
Notes:
(1) The unaudited consolidated net tangible assets of the Group attributable to the owners of the Company as at
September 30, 2022 is extracted from the Accountant’s Report set out in Appendix I to this document, which is
based on the unaudited consolidated net assets of the Group attributable to the owners of the Company as at
September 30, 2022 of RMB411,120,000 with adjustment for intangible assets as at September 30, 2022 of
RMB18,450,000.
(2) The estimated net [REDACTED] from the [REDACTED] are based on the indicative [REDACTED] of
HK$[REDACTED] and HK$[REDACTED] per H share, respectively, after deduction of the estimated
[REDACTED] fees and other related expenses (excluding [REDACTED] expenses of approximately
RMB[REDACTED] which have been recognised for in the consolidated statements of comprehensive income prior
to September 30, 2022) and takes no account of any Shares which may be allotted and issued upon the exercise of
the [REDACTED].
(3) The unaudited [REDACTED] net tangible assets per Share is arrived at after the adjustments referred to in the
preceding paragraphs and on the basis that [REDACTED] Shares were in issue assuming that the [REDACTED]
have been completed on September 30, 2022 but takes no account of any Shares which may be allotted and issued
upon the exercise of the [REDACTED].
(4) For the purpose of this unaudited [REDACTED] adjusted net tangible assets, the amounts stated in Renminbi are
converted into Hong Kong dollars at the rate of HK$1.00 to RMB0.86456.
(5) Except as disclosed above, no adjustment has been made to reflect any trading results or other transactions of the
Group entered into subsequent to September 30, 2022.
– 354 –
DISCLOSURE REQUIRED UNDER THE LISTING RULES
We confirm that, as of the Latest Practicable Date, there were no circumstances that would
give rise to a disclosure requirement under Rules 13.13 to 13.19 of the Listing Rules.
RECENT DEVELOPMENT
See “Summary — Recent Developments” in this Document for further details of the impact
of recent developments on our business, operations and financial positions.
NO MATERIAL ADVERSE CHANGE
After performing sufficient due diligence work which our Directors consider appropriate and
after due and careful consideration, our Directors confirm that, up to the date of this Document,
there had been no material adverse change in our financial or trading position or prospects since
September 30, 2022, which is the end date of the periods reported in the Accountant’s Report
included in Appendix I to this Document, and there had been no event since September 30, 2022
that would materially affect the information as set out in the Accountant’s Report included in
– 355 –
FUTURE PLANS AND USE OF [REDACTED]
FUTURE PLANS
See “Business — Our Strategies” for further details of our future plans.
USE OF [REDACTED]
The net [REDACTED] from the [REDACTED] that we will receive after deducting the
[REDACTED] and other estimated expenses paid and payable by us in connection with the
[REDACTED] (assuming that the [REDACTED] is not exercised) will be:
• approximately HK$[REDACTED], assuming an [REDACTED] of HK$[REDACTED]

per [REDACTED] (being the [REDACTED]);

per [REDACTED] (being the [REDACTED]); or

per [REDACTED] (being the [REDACTED]).
Our Company intends to use the net [REDACTED] of HK$[REDACTED], assuming an

[REDACTED] of HK$[REDACTED] (being the [REDACTED]), from the [REDACTED]
(assuming the [REDACTED] is not exercised) for the following purposes:
(i) approximately [REDACTED]% of the net [REDACTED] (approximately

HK$[REDACTED]) will be used to scale up our business operations through
strengthening our omni-channel pharmaceutical retail capabilities, in order to reach
wider market coverage in China and further cement our leading position in the health
management and healthcare solutions industry in China, of which:
(a) approximately [REDACTED]% of the net [REDACTED] (approximately

HK$[REDACTED]) will be used to establish new offline self-operated
pharmacies, thereby expanding our business footprint and obtaining wider market
coverage. We plan to use such [REDACTED] to cover capital expenditures
including renovation, purchase and installation of facilities, equipment and in-store
digitalized infrastructure (such as automated check-out counters, medical
consultation stations with video chat functions and digitalized inventory movement
analysis tools), as well as to cover rental expenses and other ancillary expenses.
We intend to focus our business expansion in selected provinces including Gansu
Province (selected cities), Beijing, Shaanxi Province, Qinghai Province, Ningxia
Autonomous Region, Inner Mongolia Autonomous Region and Shanxi Province.
We also plan to launch flagship pharmacies in top-tier metropolitan areas, such as
Shanghai, Tianjin and Guangzhou;
(b) approximately [REDACTED]% of the net [REDACTED] (approximately

HK$[REDACTED]) will be used to pursue acquisition of offline pharmacies, TCM
clinics or general outpatient clinics if proper opportunities emerge, including:
(1) approximately [REDACTED]% of the net [REDACTED] (approximately

HK$[REDACTED]) will be used to acquire third-party offline pharmacies,
with a primary focus on those located in new cities which our current offline
network is yet to cover. Our potential acquisition targets include small-scale
pharmacies with established customer base in local regions to quickly
– 356 –
increase our market penetration in such regions. We will also seek to acquire
DTP pharmacies or pharmacies that focus on selling medicinal products
targeting at chronic diseases to further diversify our product offerings,
broaden our supplier resources and enrich our clientele. Through such
acquisitions, we seek to not only increase our profitability through further
achieving economies of scale, but also to strategically accelerate our
penetration into and quickly establish market shares in uncovered regions. In
identifying our acquisition targets, we will assess the local demands for our
products and services, locations of the targets, historical performance of our
existing pharmacies in comparable locations and prevailing local government
policies; and
(2) approximately [REDACTED]% of the net [REDACTED] (approximately

HK$[REDACTED]) will be used to acquire TCM clinics or general
outpatient clinics to strengthen our medical consultation capabilities. When
identifying potential acquisition targets, we will assess factors such as
capabilities of their medical professionals, their capabilities of providing
medical consultation services for specialty diseases, established customer
base, and geographical location. We believe such acquired clinics will bring
stable customer source and complement our business strategies;
as of the Latest Practicable Date, we had not identified any acquisition or

investment target, or entered into any agreement, commitments or understandings
with respect to any such transaction to which we plan, to apply the [REDACTED]
from the [REDACTED]. The timetable for the deployment of the [REDACTED]
will be subject to the identification of suitable targets, market conditions and the
opportunistic nature of the acquisition or investments;
(c) approximately [REDACTED]% of the net [REDACTED] (approximately

HK$[REDACTED]) will be used to upgrade our existing pharmacies through
renovating store layouts to increase the SKUs carried at our pharmacies, and
increasing the number of our pharmacies that can fulfill O2O and B2C orders as
well as provide more comprehensive health services, through further establishing
different function zones and enhancing the operational efficiency of these function
zones at our pharmacies, in order to further enhance our pharmacies’ capabilities of
fulfilling customer purchase orders received across our different sales channels;
and
(d) approximately [REDACTED]% of the net [REDACTED] (approximately

HK$[REDACTED]) will be used to recruit additional licensed pharmacists and
experienced talents in the areas of retail and customer service to support our
existing as well as newly opened pharmacies;
(ii) approximately [REDACTED]% of the net [REDACTED] (approximately

HK$[REDACTED]) will be used to enrich and broaden our product and service
offerings in order to further strengthen our market position as a provider of western and
TCM medical services as well as enhancing our capabilities of providing all-round
healthcare services, of which:
(a) approximately [REDACTED]% of the net [REDACTED] (approximately

HK$[REDACTED]) will be used to enhance our Internet hospital capabilities. We
will continue to improve the various functions of our Internet hospital service
portal to improve customer experience, including enhancing our ability to provide
– 357 –
solutions to specialty, common and chronic diseases, and launching our TCM
consultation services online. We seek to expand our medical professional team and
further elevate the professional skills of our medical professional team. We intend
to further recruit additional medical and pharmacological experts (including
experienced licensed physicians and licensed pharmacists) to strengthen our overall
R&D capabilities, enhance the variety of our Fang, and further strengthen our
capabilities of providing tailored solutions to specialty diseases. We also intend to
leverage our existing experience and capabilities in operating our Internet hospital
and collaborate with public hospitals in Beijing, Xi’an and Lanzhou in establishing
new Internet hospitals, with an aim to enriching our capabilities in providing
online medical consultation services and developing more scenario-based health
management services;
(b) approximately [REDACTED]% of the net [REDACTED] (approximately

HK$[REDACTED]) will be used to launch new TCM clinics and wellness centers
at the same locations as or in close proximity to our existing offline self-operated
pharmacies, which we believe will broaden the service scope at our offline
pharmacies, increase customer stickiness through cross-sales of our products and
services, and further increase the value of our members through offering enhanced
health management services;
(c) approximately [REDACTED]% of the net [REDACTED] (approximately

HK$[REDACTED]) will be used to (1) establish additional general outpatient
clinics in selected cities where we have laid extensive business footprints with
established pharmacies, (2) develop in-hospital CCMG products based on TCM
theories and traditional Chinese medicinal formulas and launch a CCMG R&D
center, and (3) set up TCM decoction centers and CCMG formula facilities, with a
view to further enhancing our TCM service capabilities; and
(d) approximately [REDACTED]% of the net [REDACTED] (approximately

HK$[REDACTED]) will be used to diversify our health management service
offerings. We plan to recruit obstetricians and gynecologists for our Internet
hospital and business professionals with experience in operating the postpartum
care service business as we seek to collaborate with postpartum care service
providers to launch home care services to newborns and mothers. We also intend to
collaborate with local travel agents and/or medical service providers (such as local
hospitals) to organize wellness-featured travel tours in tourist-focused cities. In
addition, we seek to recruit qualified medical care workers to accompany and
provide support to patients on their hospital visits as we seek to launch healthcare
escort service;
(iii) approximately [REDACTED]% of the net [REDACTED] (approximately

HK$[REDACTED]) will be used to establish additional digitalized warehouses in
Beijing, Guangdong Province and Gansu Province, supporting procurement needs of our
omni-channel pharmaceutical retail business and increasing the efficiency of our product
distribution and circulation processes. In this connection, we expect to incur rental
expenses, costs of renovation, and costs to purchase warehouse inventory management
equipment and digitalized warehouse management systems;
– 358 –
(iv) approximately [REDACTED]% of the net [REDACTED] (approximately

HK$[REDACTED]) will be used to further strengthen our digital infrastructures, such
as providing medical professionals with digitalization tools and medical resources
database, and providing analytical reports on real-time sales of the relevant suppliers’
products, of which:
(a) [REDACTED]% of the net [REDACTED] (approximately HK$[REDACTED])

will be used to recruit technology talents with expertise in the field of algorithms,
software development, AI, product development and data analytics; and
(b) [REDACTED]% of the net [REDACTED] (approximately HK$[REDACTED])

will be used to enhance our IT infrastructure and improve our overall digitalization
through the continuous development, operation and maintenance of enhanced
technology systems at our front-, middle- and back-office, leveraging technologies
including AI, 5G and data analytics;
(v) approximately [REDACTED]% of the net [REDACTED] (approximately

HK$[REDACTED]) will be used to cover our sale and marketing activities. We plan to
expand our sales and marketing team through recruitments to boost our brand awareness
and improve our customer acquisition ability. We also intend to improve our sales and
marketing approaches by upgrading our marketing campaigns that focus on elevating
customer experience and engaging external public relations and advertisement firms; and
(vi) approximately [REDACTED]% of the net [REDACTED] (approximately

HK$[REDACTED]) will be used for our working capital and other general corporate
purposes.
The above allocation of the net [REDACTED] will be adjusted on a pro rata basis in the
event that the [REDACTED] is fixed at a higher or lower level compared to the mid-point of the
[REDACTED] range. In the event that our net [REDACTED] are either more or less than
expected, we will increase or decrease the allocation of the net [REDACTED] to fit the above
purposes on a pro rata basis.
If the [REDACTED] is exercised in full, we will receive additional net [REDACTED]

ranging from approximately HK$[REDACTED] (assuming an [REDACTED] of
HK$[REDACTED] per H Share, being the low-end of the proposed [REDACTED] range) to
HK$[REDACTED] (assuming an [REDACTED] of HK$[REDACTED] per H Share, being the
high-end of the proposed [REDACTED] range), after deduction of [REDACTED] fees and
[REDACTED] and estimated expenses payable by us in connection with the [REDACTED]. If the
[REDACTED] is exercised, we intend to apply such additional net [REDACTED] for the above
uses on a pro-rata basis.
To the extent that the net [REDACTED] from the [REDACTED] are not immediately
applied to the above purposes or if we are unable to put into effect any part of our plan as
intended, and to the extent permitted by the relevant laws and regulations, we will hold these net
[REDACTED] in short-term demand deposits with licensed banks or other authorized financial
institutions in Hong Kong or China (as defined under the SFO or applicable laws and regulations
in China) so long as it is deemed to be in the best interests of our Company. In this event, we will
comply with the appropriate disclosure requirements under the Listing Rules.
– 359 –
[REDACTED]
[REDACTED]
– 360 –
[REDACTED]
[REDACTED]
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[REDACTED]
[REDACTED]
– 362 –
[REDACTED]
[REDACTED]
Undertakings to the Stock Exchange pursuant to the Listing Rules
Undertakings by the Company
Pursuant to Rule 10.08 of the Listing Rules, no further H Shares or securities convertible into
equity securities of the Company (whether or not of a class already listed) may be issued by us or
form the subject of any agreement to such an issue by us within six months from the
[REDACTED] (whether or not such issue of H Shares or securities will be completed within six
months from the [REDACTED]), except:
(a) under certain circumstances prescribed by Rule 10.08 of the Listing Rules; or
(b) pursuant to the [REDACTED] (including the [REDACTED]).
– 363 –
[REDACTED]
[REDACTED]
– 364 –
[REDACTED]
[REDACTED]
– 365 –
[REDACTED]
[REDACTED]
– 366 –
[REDACTED]
[REDACTED]
– 367 –
[REDACTED]
[REDACTED]
INDEPENDENCE OF THE SOLE SPONSOR
The Sole Sponsor satisfies the independence criteria applicable to sponsors set out in Rule
3A.07 of the Listing Rules.
– 368 –
[REDACTED]
[REDACTED]
– 369 –
[REDACTED]
[REDACTED]
– 370 –
STRUCTURE OF THE [REDACTED]
[REDACTED]
– 371 –
[REDACTED]
– 372 –
[REDACTED]
– 373 –
[REDACTED]
– 374 –
[REDACTED]
– 375 –
[REDACTED]
– 376 –
[REDACTED]
– 377 –
[REDACTED]
– 378 –
[REDACTED]
– 379 –
HOW TO APPLY FOR [REDACTED]
[REDACTED]
– 380 –
[REDACTED]
– 381 –
[REDACTED]
– 382 –
[REDACTED]
– 383 –
[REDACTED]
– 384 –
[REDACTED]
– 385 –
[REDACTED]
– 386 –
[REDACTED]
– 387 –
[REDACTED]
– 388 –
[REDACTED]
– 389 –
[REDACTED]
– 390 –
[REDACTED]
– 391 –
[REDACTED]
– 392 –
[REDACTED]
– 393 –
[REDACTED]
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[REDACTED]
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[REDACTED]
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[REDACTED]
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[REDACTED]
– 398 –
APPENDIX I ACCOUNTANT’S REPORT
The following is the text of a report set out on pages I-1 to I-3, received from the Company’s
reporting accountant, PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, for the
purpose of incorporation in this document. It is prepared and addressed to the directors of the
Company and to the Sole Sponsor pursuant to the requirements of HKSIR 200, Accountants’
Reports on Historical Financial Information in Investment Circulars, issued by the Hong Kong
Institute of Certified Public Accountants.
[Letterhead of PricewaterhouseCoopers]
[DRAFT]
ACCOUNTANT’S REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE

DIRECTORS OF DESHENGTANG PHARMACEUTICAL CO., LTD. (FORMERLY KNOWN
AS GANSU DESHENGTANG PHARMACEUTICAL TECHNOLOGY GROUP CO., LTD.)
AND HUATAI FINANCIAL HOLDINGS (HONG KONG) LIMITED
Introduction
We report on the historical financial information of Deshengtang Pharmaceutical Co., Ltd.

(formerly known as Gansu Deshengtang Pharmaceutical Technology Group Co., Ltd.) (the
“Company”) and its subsidiaries (together, the “Group”) set out on pages [I-4 to I-84], which
comprises the consolidated balance sheets as at December 31, 2020 and 2021, the balance sheets
of the Company as at December 31, 2020 and 2021, and the consolidated statements of
comprehensive income, the consolidated statements of changes in equity and the consolidated
statements of cash flows for each of the years ended December 31, 2020 and 2021 and a summary
of significant accounting policies and other explanatory information (together, the “Financial
Information”). The Financial Information set out on pages [I-4 to I-84] forms an integral part of
this report, which has been prepared for inclusion in the document of the Company dated
[document date] (the “Document”) in connection with the [REDACTED] of shares of the
Company on the Main Board of The Stock Exchange of Hong Kong Limited.
Directors’ responsibility for the Financial Information
The directors of the Company are responsible for the preparation of Financial Information
that gives a true and fair view in accordance with the basis of preparation set out in Note 2.1 to
the historical financial information, and for such internal control as the directors determine is
necessary to enable the preparation of Financial Information that is free from material
misstatement, whether due to fraud or error.
Reporting accountant’s responsibility
Our responsibility is to express an opinion on the Financial Information and to report our
opinion to you. We conducted our work in accordance with Hong Kong Standard on Investment
Circular Reporting Engagements 200, Accountants’ Reports on Historical Financial Information in
Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants
(“HKICPA”). This standard requires that we comply with ethical standards and plan and perform
our work to obtain reasonable assurance about whether the Financial Information is free from
material misstatement.
– I-1 –
Our work involved performing procedures to obtain evidence about the amounts and
disclosures in the Financial Information. The procedures selected depend on the reporting
accountant’s judgment, including the assessment of risks of material misstatement of the Financial
Information, whether due to fraud or error. In making those risk assessments, the reporting
accountant considers internal control relevant to the entity’s preparation of Financial Information
that gives a true and fair view in accordance with the basis of preparation set out in Note 2.1 to
the historical financial information in order to design procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. Our work also included evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by the directors, as well as evaluating the
overall presentation of the 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 Financial Information gives, for the purposes of the accountant’s report, a
true and fair view of the financial position of the Company as at December 31, 2020 and 2021 and
the consolidated financial position of the Group as at December 31, 2020 and 2021 and of its
consolidated financial performance and its consolidated cash flows for each of the years then
ended in accordance with the basis of preparation set out in Note 2.1 to the historical financial
information.
Review of stub period financial information
We have reviewed the stub period financial information of the Group which comprises the
consolidated balance sheet as at September 30, 2022, the company balance sheet as at September
30, 2022 and the consolidated statement of comprehensive income, the consolidated statement of
changes in equity and the consolidated statement of cash flows for the nine months ended
September 30, 2021 and 2022 and other explanatory information (the “Stub Period Financial
Information”). The directors of the Company are responsible for the presentation and preparation
of the Stub Period Financial Information in accordance with the basis of preparation set out in
Note 2.1 to the historical financial information. Our responsibility is to express a conclusion on
the Stub Period Financial Information based on our review. We conducted our review in
accordance with International Standard on Review Engagements 2410, Review of Interim Financial
Information Performed by the Independent Auditor of the Entity issued by the International
Auditing and Assurance Standards Board (“IAASB”). A review consists of making inquiries,
primarily of persons responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing and consequently does not enable us to obtain
assurance that we would become aware of all significant matters that might be identified in an
audit. Accordingly, we do not express an audit opinion. Based on our review, nothing has come to
our attention that causes us to believe that the Stub Period Financial Information, for the purposes
of the accountant’s report, is not prepared, in all material respects, in accordance with the basis of
preparation set out in Note 2.1 to the historical financial information.
– I-2 –
Report on matters under the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited (the “Listing Rules”) and the Companies (Winding Up and
Miscellaneous Provisions) Ordinance
Adjustments
In preparing the Financial Information, no adjustments to the Underlying Financial

Statements as defined on page [I-4] have been made.
Dividends
We refer to Note 34 to the historical financial information which states that no dividends
have been paid by Deshengtang Pharmaceutical Co., Ltd. in respect of the financial years ended
December 31, 2020 and 2021 and the nine months ended September 30, 2022.
No statutory financial statements for the Company
No statutory financial statements have been prepared for the Company since its date of
incorporation.
[PricewaterhouseCoopers]
Certified Public Accountants
Hong Kong
[Date]
– I-3 –
I. PREPARATION OF HISTORICAL FINANCIAL INFORMATION
Set out below is the historical financial information as at December 31, 2020 and 2021 and
September 30, 2022 and for the periods then ended (the “Track Record Period”) (the “Historical
Financial Information”) which forms an integral part of this accountant’s report.
The financial statements of the Group for the years ended December 31, 2020 and 2021, on
which the Financial Information is based, were audited by PricewaterhouseCoopers Zhong Tian
LLP in accordance with International Standards on Auditing issued by the International Auditing
and Assurance Standards Board (“IAASB”) (the “Underlying Financial Statements”).
The Historical Financial Information is presented in Renminbi (“RMB”) and all value are
rounded to the nearest thousand (RMB’000) except when otherwise indicated.
– I-4 –
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year ended December 31, Nine months ended September 30,

Note 2020 2021 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Revenue . . . . . . . . . . . . . . . . . . 6 1,753,961 2,014,349 1,467,375 1,707,527
Cost of revenue . . . . . . . . . . . . . . 9 (1,119,157) (1,319,617) (974,662) (1,110,677)
Gross profit . . . . . . . . . . . . . . . . 634,804 694,732 492,713 596,850
Selling and marketing expenses . . . . 9 (452,897) (526,585) (381,412) (422,882)
General and administrative expenses . 9 (97,270) (102,105) (73,354) (85,053)
Research and development expenses . 9 (3,276) (9,529) (6,024) (6,963)
Other income . . . . . . . . . . . . . . . 7 1,139 1,484 1,203 236
Other losses . . . . . . . . . . . . . . . . 8 (1,239) (3,341) (507) (1,117)
Net impairment losses on financial
assets. . . . . . . . . . . . . . . . . . . 3.1 (33) (605) (558) (3,257)
Operating profit . . . . . . . . . . . . . 81,228 54,051 32,061 77,814
Finance income . . . . . . . . . . . . . . 11 3,311 3,121 2,356 3,064
Finance costs . . . . . . . . . . . . . . . 11 (66,649) (72,899) (54,517) (53,305)
Finance costs, net. . . . . . . . . . . . . (63,338) (69,778) (52,161) (50,241)
Profit/(Loss) before income tax . . . 17,890 (15,727) (20,100) 27,573
Income tax expense . . . . . . . . . . . 12 (25,734) (25,412) (20,761) (26,801)
(Loss)/Profit for the year/period . . . (7,844) (41,139) (40,861) 772
Other comprehensive income . . . . . . — — — —
Total comprehensive (loss)/income
for the year/period . . . . . . . . . . (7,844) (41,139) (40,861) 772
Total comprehensive (loss)/income
for the year/period attributable
to:
Owners of the Company. . . . . . . . . (7,844) (41,139) (40,861) 772
(Losses)/Earnings per share
attributable to the owners of
Company
(expressed in RMB per share):
— Basic and diluted . . . . . . . . . . . 13 (0.06) (0.33) (0.33) 0.01
– I-5 –
CONSOLIDATED BALANCE SHEETS
As at
As at December 31, September 30,
Note 2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
ASSETS
Non-current assets
Property, plant and equipment . . . . . . . . . . 14 213,085 206,946 190,018
Right-of-use assets . . . . . . . . . . . . . . . . . . 15(a) 616,319 668,829 607,547
Intangible assets . . . . . . . . . . . . . . . . . . . . 16 14,931 18,204 18,450
Prepayments and other receivables . . . . . . 19 8,692 15,352 17,122
Deferred income tax assets . . . . . . . . . . . . 29 5,924 6,706 4,904
Total non-current assets . . . . . . . . . . . . . 858,951 916,037 838,041
Current assets
Inventories . . . . . . . . . . . . . . . . . . . . . . . . 17 406,865 545,515 542,570
Trade receivables . . . . . . . . . . . . . . . . . . . 18 127,941 160,474 183,513
Restricted cash . . . . . . . . . . . . . . . . . . . . . 20 274,319 312,463 256,123
Cash and cash equivalents . . . . . . . . . . . . . 20 54,822 24,902 71,758
Total current assets . . . . . . . . . . . . . . . . . 918,060 1,091,846 1,088,178
Total assets. . . . . . . . . . . . . . . . . . . . . . . . 1,777,011 2,007,883 1,926,219
EQUITY
Company
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . 22 123,457 123,457 123,457
Treasury stock . . . . . . . . . . . . . . . . . . . . . . 23 (263,110) (263,110) —
Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . 23 282,145 283,316 421,273
Accumulated losses . . . . . . . . . . . . . . . . . . (93,243) (134,382) (133,610)
Total equity . . . . . . . . . . . . . . . . . . . . . . . 49,249 9,281 411,120
LIABILITIES
Non-current liabilities
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . 25 41,508 35,926 31,538
Lease liabilities . . . . . . . . . . . . . . . . . . . . . 15(b) 421,553 456,146 396,392
Contract liabilities . . . . . . . . . . . . . . . . . . . 6(i) 957 1,672 1,565
Deferred income tax liabilities . . . . . . . . . 29 10,365 16,410 14,401
Redemption liabilities . . . . . . . . . . . . . . . . 28 335,602 376,384 —
Total non-current liabilities . . . . . . . . . . 809,985 886,538 443,896
Current liabilities
Trade and notes payables . . . . . . . . . . . . . 26 674,526 840,062 772,204
Accruals and other payables . . . . . . . . . . . 27 51,456 58,695 63,349
Contract liabilities . . . . . . . . . . . . . . . . . . . 6(i) 3,467 5,242 6,290
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . 25 35,282 45,581 55,068
Current income tax liabilities . . . . . . . . . . 14,759 7,058 15,530
Total current liabilities . . . . . . . . . . . . . . 917,777 1,112,064 1,071,203
Total liabilities . . . . . . . . . . . . . . . . . . . . . 1,727,762 1,998,602 1,515,099
Total equity and liabilities . . . . . . . . . . . 1,777,011 2,007,883 1,926,219
– I-6 –
BALANCE SHEETS OF THE COMPANY

As at
Note 2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
ASSETS
Non-current assets
Property, plant and equipment . . . . . . . . . . 14 56,928 47,337 41,232
Right-of-use assets . . . . . . . . . . . . . . . . . . 15(a) 255,317 262,086 242,804
Intangible assets . . . . . . . . . . . . . . . . . . . . 16 12,773 13,907 13,709
Investment in subsidiaries . . . . . . . . . . . . . 33 53,000 59,000 79,825
Total non-current assets . . . . . . . . . . . . . 382,461 392,358 387,239
Current assets
Inventories . . . . . . . . . . . . . . . . . . . . . . . . 17 89,909 108,620 106,636
Trade receivables . . . . . . . . . . . . . . . . . . . 18 57,498 59,400 80,927
Amounts due from subsidiaries . . . . . . . . . 207,675 194,161 184,107
Restricted cash . . . . . . . . . . . . . . . . . . . . . 20 55,506 — 20,001
Cash and cash equivalents . . . . . . . . . . . . . 20 10,466 3,697 8,608
Total current assets . . . . . . . . . . . . . . . . . 427,438 372,388 412,853
Total assets. . . . . . . . . . . . . . . . . . . . . . . . 809,899 764,746 800,092
EQUITY
Company
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . 22 123,457 123,457 123,457
Treasury stock . . . . . . . . . . . . . . . . . . . . . . 23 (263,110) (263,110) —
Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . 23 281,845 283,016 426,698
Accumulated losses . . . . . . . . . . . . . . . . . . (136,487) (185,999) (210,407)
Total equity/(Accumulated deficits) . . . . 5,705 (42,636) 339,748
LIABILITIES
Non-current liability
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . 25 4,856 4,161 3,615
Contract liabilities . . . . . . . . . . . . . . . . . . . 6(i) 274 748 759
Redemption liabilities . . . . . . . . . . . . . . . . 28 335,602 376,384 —
Total non-current liabilities . . . . . . . . . . 518,674 563,327 165,456
Current liabilities
Amounts due to subsidiaries . . . . . . . . . . . 111,275 120,333 138,049
Trade and notes payables . . . . . . . . . . . . . 26 95,385 642 61,441
Accruals and other payables . . . . . . . . . . . 27 17,193 20,574 27,202
Contract liabilities . . . . . . . . . . . . . . . . . . . 6(i) 1,057 2,432 3,271
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . 25 658 40,695 723
Current income tax liabilities . . . . . . . . . . 3,492 1,598 1,931
Total current liabilities . . . . . . . . . . . . . . 285,520 244,055 294,888
Total liabilities . . . . . . . . . . . . . . . . . . . . . 804,194 807,382 460,344
Total equity and liabilities . . . . . . . . . . . 809,899 764,746 800,092
– I-7 –
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Paid-in Treasury Accumulated
capital stock Reserves losses Total equity
Note (Note 22) (Note 23) (Note 23)
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Balance at January 1, 2020 . . . . . . . . . . . . 117,284 (176,332) 178,631 (85,399) 34,184
Comprehensive loss
Total comprehensive loss for the year. . . . . . . — — — (7,844) (7,844)
Transactions with owners of the Company:
Capital injection from an equity holder . . . . . . 22 6,173 — 88,271 — 94,444
Transfer from financial liabilities at fair value
through profit or loss upon completion of
capital injection. . . . . . . . . . . . . . . . . . . 23 — — 14,072 — 14,072
Recognition of redemption liabilities . . . . . . . 28 — (86,778) — — (86,778)
Share-based compensation . . . . . . . . . . . . . . 24 — — 1,171 — 1,171
6,173 (86,778) 103,514 — 22,909
Balance at December 31, 2020 . . . . . . . . . . 123,457 (263,110) 282,145 (93,243) 49,249
Comprehensive loss
Total comprehensive loss for the year. . . . . . . — — — (41,139) (41,139)
Share-based compensation . . . . . . . . . . . . . . 24 — — 1,171 — 1,171
Balance at December 31, 2021 . . . . . . . . . . 123,457 (263,110) 283,316 (134,382) 9,281

(Unaudited)
Comprehensive income
Total comprehensive profit for the period . . . . — — — 772 772
Share-based compensation . . . . . . . . . . . . . . 24 — — (87) — (87)
Acquisition of a subsidiary under common
control . . . . . . . . . . . . . . . . . . . . . . . . 1.2 — — (5,725) — (5,725)
Derecognition of redemption liabilities . . . . . . 28 — 263,110 143,769 — 406,879
— 263,110 137,957 — 401,067
Balance at September 30, 2022 . . . . . . . . . . 123,457 — 421,273 (133,610) 411,120

(Unaudited)
Comprehensive loss
Total comprehensive loss for the period . . . . . — — — (40,861) (40,861)
Share-based compensation . . . . . . . . . . . . . . 24 — — 878 — 878
Balance at September 30, 2021 . . . . . . . . . . 123,457 (263,110) 283,023 (134,104) 9,266
– I-8 –
CONSOLIDATED STATEMENTS OF CASH FLOWS

Note 2020 2021 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Cash flows from operating
activities
Cash generated from operations . . . . 31(a) 146,443 269,972 237,489 267,297
Interest received . . . . . . . . . . . . . 3,311 3,121 2,356 3,064
Income tax paid . . . . . . . . . . . . . . (17,427) (28,468) (23,412) (18,536)
activities . . . . . . . . . . . . . . . . 132,327 244,625 216,433 251,825
Cash flows from investing activities
Cash acquired from business
combinations . . . . . . . . . . . . . . 30 — 505 505 —
Purchases of property, plant and
equipment . . . . . . . . . . . . . . . . (33,319) (46,930) (38,145) (24,164)
Purchases of intangible assets . . . . . (12,502) (4,811) (1,720) (1,959)
Net cash used in investing
activities . . . . . . . . . . . . . . . . (45,821) (51,236) (39,360) (26,123)
Cash flows from financing activities
Capital injection from an equity
holder . . . . . . . . . . . . . . . . . . 22 94,444 — — —
Proceeds from borrowings . . . . . . . 31(b) 30,000 40,000 40,000 49,255
Repayments of borrowings . . . . . . . 31(b) (10,979) (35,283) (33,942) (44,156)
Interest paid for borrowings . . . . . . 31(b) (3,595) (4,474) (3,518) (2,261)
Principal elements and interest
elements of lease payments . . . . . 31(b) (201,055) (223,552) (173,991) (172,391)
Payments for business combinations
under common control . . . . . . . . — — — (5,725)
Payments for [REDACTED]
expenses . . . . . . . . . . . . . . . . . [REDACTED] [REDACTED] [REDACTED] [REDACTED]
Net cash used in financing
activities . . . . . . . . . . . . . . . . (91,185) (223,309) (171,451) (178,846)
Net (decrease)/increase in cash and
cash equivalents. . . . . . . . . . . . (4,679) (29,920) 5,622 46,856
Cash and cash equivalents at
beginning of year/period . . . . . . . 59,501 54,822 54,822 24,902
Cash and cash equivalents at end
of year/period . . . . . . . . . . . . . 20 54,822 24,902 60,444 71,758
– I-9 –
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION
1 General information and history of the Group
1.1 General information
Deshengtang Pharmaceutical Co., Ltd. (“德生堂醫藥股份有限公司”, the “Company”),

formerly known as “Gansu Deshengtang Pharmaceutical Technology Group Co., Ltd. (“甘肅德生堂
醫藥科技集團有限公司”) was incorporated in Lanzhou, Gansu of the People’s Republic of China
(the “PRC”) on September 22, 2009 as a limited liability Company under the Company Law of the
PRC. The registered office is at No. 425, Langongping Road, Qilihe District, Lanzhou City, Gansu
Province, the PRC.
The Company and its subsidiaries (collectively, the “Group”) principally engaged in
pharmaceutical retail business via offline, online-to-offline (“O2O”) and business-to-customer
(“B2C”) retail channels. A group of entities and individuals collectively held 81% of the equity
interest of the Group, namely Mr. Long Yan (the “Founder”), Mr. Long Yun, Zhejiang Free Trade
Zone Changqi Project Investment Partnership (Limited Partnership) (“Zhejiang Changqi”), and
Zhejiang Free Trade Zone Yixue Online Health Management Partnership (Limited Partnership)
(“Zhejiang Yixue Online”) (collectively, the “Controlling Shareholders”). Mr. Long Yan and Mr.
Long Yun are brothers and act in concert with each other according to the concert party agreement.
1.2 History of the Group
Prior to a series of capital increase and transfers as described below, the Company was owned
as to 98.0% by Mr. Long Yan and 2.0% by Gansu Deshengtang Medical Technology Group
Jinchang Co., Ltd. (“Deshengtang Jinchang”). The Company’s then registered and fully paid
capital was RMB5,000,000.
In April 2016, Mr. Long Yun entered into an equity transfer agreement with Deshengtang
Jinchang, pursuant to which, Deshengtang Jinchang transferred all its equity interest of the
Company to Mr. Long Yun at a consideration of RMB100,000. In addition, Mr. Long Yan and Mr.
Long Yun subscribed for an increase of RMB95,000,000 registered capital of the Company in
proportion to their then shareholding.
On August 9, 2017, Jiangsu Yanhai Industry Investment Fund (Limited Partnership)

(“Jiangsu Yanhai”), Suzhou Bangsheng Yingxin Venture Investment Enterprises (Limited
Partnership) (“Suzhou Bangsheng Yingxin”), Jiangsu Jiequan Xingong Bangsheng Venture Capital
Fund Partnership (Limited Partnership) (“Jiangsu Jiequan”) and Nanjing Bangsheng Juyuan
Investment Management Partnership (Limited Partnership) (“Nanjing Bangsheng Juyuan”)
(collectively, the “Angel Round [REDACTED] Financing Investors”) completed the injection of
an aggregate of RMB100,000,000 to the Company (the “Angel Round [REDACTED]
Financing”).
On May 22, 2018, Jinchang Changqi Management Consulting Center (Limited Partnership)
(“Jinchang Changqi”) was established as the shareholding platform to hold equity interest of the
Company for the employees under the Group’s employee share ownership plan (the “ESOP”), and
Jinchang Yixueyuan Management Consulting Center (Limited Partnership) (“Jinchang
Yixueyuan”) was established as the family shareholding platform for Mr. Long Yan and Mr. Long
Yun. In addition, each of Jinchang Changqi and Jinchang Yixueyuan entered into a couple of
– I-10 –
equity transfer agreements with Mr. Long Yan and Mr. Long Yun, pursuant to which, Mr. Long Yan
transferred 4.9% equity interest of the Company and Mr. Long Yun transferred 0.1% equity interest
of the Company to each of Jinchang Changqi and Jinchang Yixueyuan.
Pursuant to a capital increase agreement entered into among the Company, the then
shareholders of the Company and Alibaba Health Technology (China) Co., Ltd. (“Ali Health”) on
December 24, 2018 and a supplemental agreement entered into among the Company, the then
shareholders of the Company, Ali Health and Jiangsu Zijin Hongyun Health Industry Investment
Partnership (Limited Partnership) (“Jiangsu Zijin Hongyun”, an affiliate of Ali Health)
(collectively, the “Series A [REDACTED] Financing Investors”) on December 19, 2019, Ali
Health completed the injection of RMB94,444,000 to the Company on January 28, 2019 and
Jiangsu Zijin Hongyun completed the injection of RMB94,444,000 to the Company on March 2,
2020 (collectively, the “Series A [REDACTED] Financing”).
To benefit from favorable policies in the Zhejiang free trade zone, Zhejiang Changqi was
established on August 13, 2019 and Zhejiang Yixue Online was established on June 24, 2019 to
replace Jinchang Changqi and Jinchang Yixueyuan, respectively. Pursuant to respective equity
transfer agreements entered into between Zhejiang Changqi and Jinchang Changqi and between
Zhejiang Yixue Online and Jinchang Yixueyuan on September 27, 2019, Jinchang Changqi
transferred all its equity interest of the Company to Zhejiang Changqi, and Jinchang Yixueyuan
transferred all its equity interest of the Company to Zhejiang Yixue Online. The shareholding
structure of Zhejiang Changqi and Zhejiang Yixue Online respectively corresponded to that of
Jinchang Changqi and Jinchang Yixueyuan before the equity transfer.
On July 31, 2022, the Company entered into an equity transfer agreement with Ms. Long
Yufeng (Mr. Long Yan’s daughter) and Ms. Lou Yunying (Mr. Long Yan’s spouse), pursuant to
which the Company agreed to acquire 100% equity interests of Jinchang Deshengtang Health
Service Co., Ltd. (“Jinchang Health”) from Ms. Long Yufeng and Ms. Lou Yunying, at cash
consideration of RMB5,724,600. The consideration was fully paid on August 30, 2022. As the
Company and Jinchang Health were ultimately controlled by Mr. Long Yan before and after the
acquisition, and the control was not temporary, the acquisition was accounted for as business
combination under common control using predecessor method. The consolidated financial
statements were presented as if the business of Jinchang Health had always been carried out by the
Group.
On December 6, 2022, the Company was converted from a limited liability company into a
joint stock company with limited liability. The net assets of the Company as at August 31, 2022,
including paid-in capital, reserves and accumulated losses, amounting to RMB336,681,000, were
converted into 123,456,790 ordinary shares at RMB1.00 per share. The excess of the net assets
converted over the nominal value of the ordinary shares was credited to the Company’s capital
surplus.
2 Summary of significant accounting policies
The principal accounting policies applied in the preparation of the Historical Financial
Information are set out below. These policies have been consistently applied throughout the Track
Record Period, unless otherwise stated.
– I-11 –
2.1 Basis of preparation
The Historical Financial Information of the Group has been prepared in accordance with
International Financial Reporting Standards (“IFRS”) issued by the International Accounting
Standards Board (“IASB”).
The Historical Financial Information has been prepared under the historical cost convention,
as modified by the revaluation of certain financial liabilities measured at fair value.
The preparation of Historical Financial Information in conformity with IFRS requires the use
of certain critical accounting estimates. It also requires management to exercise its judgment in the
process of applying the Group’s accounting policies. The areas involving a higher degree of
judgment or complexity, or areas where assumptions and estimates are significant to the Historical
Financial Information are disclosed in Note 4.
The Historical Financial Information has been prepared based on the consolidated financial
statements of the Group. Inter-company transactions, balances and unrealised gains/losses on
transactions between group companies are eliminated on consolidation.
In preparing the Historical Financial Information, the Group has consistently adopted all
applicable new and amended IFRS throughout all the years presented except for any new or
interpretation that are not yet effective.
(a) New standards, amended standards and interpretations not yet adopted
The following new standards, amendments and interpretation to existing standards that have
been issued but not yet effective for the Track Record Period and have not been early adopted by
the Group:
New/amended standards Effective date

Amendments to Lease liability in a sales and leaseback January 1, 2024
IFRS 16 . . . . . . . . . . .
IFRS 17 . . . . . . . . . . . . Insurance Contracts January 1, 2023
Amendments to IAS 1 . . Classification of Liabilities as Current or January 1, 2024
Non-current
Amendments to IAS 1 . . Non-current Liabilities with Covenants January 1, 2024
Amendments to IAS 1 Disclosure of Accounting Policies January 1, 2023
and IFRS Practice
Statement 2 . . . . . . . .
Amendments to IAS 8 . . Definition of Accounting Estimates January 1, 2023
Amendments to IAS 12 . Deferred tax related to assets and liabilities January 1, 2023
arising from a single transaction
Amendments to IFRS 10 Sale or Contribution of Assets between an To be determined
and IAS 28 . . . . . . . . Investor and its Associate or Joint Venture
The Group has already commenced an assessment of the impact of these new/amended
standards and annual improvements, and amendments, certain of which are relevant to the Group’s
operations. According to the preliminary assessment made by the directors, no significant impact
on the financial performance and positions of the Group is expected when they become effective.
– I-12 –
2.2 Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control.
The Group controls an entity when the Group is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those returns through its power over
the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the
Group. They are deconsolidated from the date that control ceases.
The acquisition method of accounting is used to account for business combinations not under
common control by the Group (Note 2.3).
Inter-company transactions, balances and unrealised gains on transactions between Group

companies are eliminated. Unrealised losses are also eliminated unless the transaction provides
evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been
changed where necessary to ensure consistency with the policies adopted by the Group.
2.3 Business combinations
(a) Business Combinations under Common Control
The Historical Financial Information incorporates the financial statements of the

consolidating entities or business in which the common control combination occurs as if they had
been consolidated from the date when the consolidating entities or business first came under the
control of the controlling party.
The net assets of the consolidating entities or business are consolidated using the existing
book values from the controlling party’s perspective. No amount is recognised in consideration for
goodwill or excess of acquirers’ interest in the net fair value of acquiree’s identifiable assets,
liabilities and contingent liabilities over costs at the time of common control combination, to the
extent of the continuation of the controlling party’s interest.
The consolidated statements of comprehensive loss include the results of each of the
consolidating entities or business from the earliest date presented or since the date when the
consolidating entities or business first came under the common control, where there is a shorter
period, regardless of the date of the common control combination.
A uniform set of accounting policies is adopted by those entities. All intra-group transactions,
balances and unrealised gains on transactions between consolidating entities or business are
eliminated on consolidation.
(b) Business Combinations not under common Control
The Group applies the acquisition method to account for business combinations except for
business combination under common control. The consideration transferred for the acquisition of
subsidiaries comprises the:
• fair values of the assets transferred,
• liabilities incurred to the former owners of the acquired business,
• equity interests issued by the Group,
– I-13 –
• fair value of any asset or liability resulting from a contingent consideration arrangement,
and
• fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business
combination are, with limited exceptions, measured initially at their fair values at the acquisition
date. The Group recognises any non-controlling interest in the acquired entity on an
acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s
proportionate share of the acquired entity’s net identifiable assets.
Acquisition-related costs are expensed as incurred.
The excess of the:
• consideration transferred,
• amount of any non-controlling interest in the acquired entity, and
• acquisition-date fair value of any previous equity interest in the acquired entity
over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts
are less than the fair value of the net identifiable assets of the business acquired, the difference is
recognised directly in profit or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the
future are discounted to their present value as at the date of exchange. The discount rate used is
the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be
obtained from an independent financier under comparable terms and conditions. Contingent
consideration is classified either as equity or a financial liability. Amounts classified as a financial
liability are subsequently remeasured to fair value with changes in fair value recognised in profit
or loss.
If the business combination is achieved in stages, the acquisition date carrying value of the
acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the
acquisition date. Any gains or losses arising from such remeasurement are recognised in profit or
loss.
2.4 Separate financial statements
Investment in subsidiaries is accounted for at cost less impairment. Cost includes direct
attributable costs of investment. The results of the subsidiary are accounted for by the Group on
the basis of dividend received and receivable.
Impairment testing of the investment in the subsidiaries is required upon receiving a dividend
from the investment if the dividend exceeds the total comprehensive income of the subsidiary in
the period the dividend is declared or if the carrying amount of the investment in the separate
financial statements exceeds the carrying amount in the Historical Financial Information of the
investee’s net assets including goodwill.
– I-14 –
2.5 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided
to the chief operating decision-maker (“CODM”). The CODM, who is responsible for allocating
resources and assessing performance of the operating segments, has been identified as executive
directors of the Company.
2.6 Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using
the currency of the primary economic environment in which the entity operates (the “functional
currency”). Since the operations of the Group are located in the PRC, the Historical Financial
Information is presented in RMB, which is the Company and it’s subsidiaries’ functional and
presentation currency.
2.7 Property, plant and equipment
Property, plant and equipment (other than construction in progress) are stated at historical
cost less accumulated depreciation and impairment, if any. Historical cost includes expenditure that
is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate
asset, as appropriate, only when it is probable that future economic benefits associated with the
item will flow to the Group and the cost of the item can be measured reliably. The carrying
amount of any component accounted for as a separate asset is derecognised when replaced. All
other repairs and maintenance are charged to profit or loss during the Track Record Period in
which they are incurred.
Depreciation is calculated using the straight-line method to allocate their cost or revalued
amounts, net of their residual value, over their estimated useful lives or, in the case of leasehold
improvement, the shorter lease term as follows:
Estimated useful lives

— Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 years
— Electronic equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 years
— Equipment and furniture fixtures . . . . . . . . . . . . . . . . . . . . . 3 − 10 years
— Vehicle. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 years
— Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . Shorter of remaining lease
term or estimated useful life
The assets’ useful lives are reviewed, and adjusted if appropriate, at the end of each reporting
period.
An asset’s carrying amount is written down immediately to its recoverable amount if the
asset’s carrying amount is greater than its estimated recoverable amount (Note 2.9).
Gains and losses on disposals are determined by comparing proceeds with carrying amount
and are recognised in “other losses” in the consolidated statements of comprehensive income.
– I-15 –
Construction in progress (the “CIP”) represents buildings and leasehold improvements under
construction and is stated at cost less accumulated impairment losses, if any. Cost includes the
costs of construction and acquisition and capitalised borrowing costs. No provision for
depreciation is made on CIP until such time as the relevant assets are completed and ready for
intended use. When the assets constructed are available for use, the cost are transferred to
property, plant and equipment and depreciated in accordance with the policy as stated above.
2.8 Intangible assets
(a) Software
Acquired computer software are capitalised on the basis of the costs incurred to acquire and
bring the specific software into usage. These costs are amortised using the straight-line method
over their estimated useful lives of 5 − 10 years. Costs associated with maintaining computer
software programs are recognised as expense as incurred.
(b) Trademarks
Separately registered trademarks are shown at historical cost. Trademarks have a finite useful
life and are subsequently carried at cost less accumulated amortisation and impairment losses.
Amortisation is calculated using the straight-line method to allocate the cost of trademarks over
their useful lives of 5 − 10 years.
(c) Pharmaceutical operation licenses
Pharmaceutical operation licenses are required in pharmaceutical retail business. Acquired

pharmaceutical operation licenses are recognised on the basis of costs incurred to acquire.
Amortisation is calculated using the straight-line method to allocate the cost of pharmaceutical
operation licenses over their useful lives of 10 years.
(d) Research and Development Expenditures
The Group incurs significant costs and efforts on research and development activities.
Research expenditures are charged to the profit or loss as an expense in the period the
expenditures are incurred. Development costs are recognised as assets if they can be directly
attributable to a newly developed products and all the following can be demonstrated:
• it is technically feasible to complete the development project so that it will be available

for use;
• management intends to complete the development project, and use or sell it;
• the ability to use or sell the development project;
• it can be demonstrated how the development project will generate probable future
economic benefits;
• adequate technical, financial and other resources to complete the development and the
ability to use or sell the development project are available; and
– I-16 –
• the expenditure attributable to the asset during its development can be reliably
measured.
Other development expenditures that do not meet those above criteria are recognised as an
expense as incurred. Development costs previously recognised as an expense are not recognised as
an asset in a subsequent period.
During the Track Record Period, there were no development costs meeting these criteria and
capitalised as intangible assets.
2.9 Impairment of non-financial assets
Non-financial assets other than goodwill are tested for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable. An impairment
loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and
value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for
which there are separately identifiable cash inflows which are largely independent of the cash
inflows from other assets or groups of assets (cash-generating units). Non-financial assets other
than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at
the end of each reporting period.
2.10 Financial assets
2.10.1 Classification
The Group classifies its financial assets in the following measurement categories:
— those to be measured subsequently at fair value (either through other comprehensive

income (“OCI”) or through profit or loss), and
— those to be measured at amortised cost.
The classification depends on the entity’s business model for managing the financial assets
and the contractual terms of the cash flows.
For financial assets measured at fair value, gains and losses will be recorded either in profit
or loss or OCI. For investments in debt instruments, this will depend on the business model in
which the investment is held. For investments in equity instruments that are not held for trading,
this will depend on whether the Group has made an irrevocable election at the time of initial
recognition to account for the equity investment at fair value through other comprehensive income
(“FVOCI”).
The Group reclassifies debt investments when and only when its business model for
managing those assets changes.
– I-17 –
2.10.2 Recognition and Derecognition
Regular way purchases and sales of financial assets are recognised on trade-date, the date on
which the Group commits to purchase or sell the asset. Financial assets are derecognised when the
rights to receive cash flows from the financial assets have expired or have been transferred and the
Group has transferred substantially all the risks and rewards of ownership.
2.10.3 Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case
of a financial asset not at fair value through profit or loss (“FVTPL”), transaction costs that are
directly attributable to the acquisition of the financial asset. Transaction costs of financial assets
carried at fair value through profit or loss are recorded in profit or loss.
(a) Debt instruments
Subsequent measurement of debt instruments depends on the Group’s business model for
managing the asset and the cash flow characteristics of the asset. There are three measurement
categories into which the Group classifies its debt instruments:
• Amortised cost: Assets that are held for collection of contractual cash flows where those
cash flows represent solely payments of principal and interest are measured at amortised
cost. Interest income from these financial assets is included in finance income using the
effective interest rate method. Any gain or loss arising on derecognition is recognised
directly in profit or loss and presented in “Other losses” together with foreign exchange
gains and losses. Impairment losses are presented as separate line item in the statement
of profit or loss.
• FVOCI: Assets that are held for collection of contractual cash flows and for sale, where
the assets’ cash flows represent solely payments of principal and interest, are measured
at FVOCI. Movements in the carrying amount are taken through other comprehensive
income, except for the recognition of impairment gains or losses, interest income and
foreign exchange gains and losses which are recognised in profit or loss. When the
financial asset is derecognised, the cumulative gain or loss previously recognised in
other comprehensive income is reclassified from equity to profit or loss and recognised
in “other losses”. Interest income from these financial assets is included in finance
income using the effective interest rate method. Foreign exchange gains and losses are
presented in “Other losses”. Impairment losses are presented as separate line item in the
consolidated statements of comprehensive income.
• FVTPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured
at FVTPL. A gain or loss on a debt investment that is subsequently measured at FVTPL
is recognise in profit or loss and presented net in the consolidated statements of
comprehensive income within “Other losses” in the period in which it arises.
During the Track Record Period, no amount is recognised in respect of financial assets at
FVOCI and FVTPL.
– I-18 –
(b) Equity instruments
The Group subsequently measures all equity investments at fair value. Where the Group’s
management has elected to present fair value gains and losses on equity investments in OCI, there
is no subsequent reclassification of fair value gains and losses to profit or loss following the
derecognition of the investment. Dividends from such investments continue to be recognised in
profit or loss as other income when the Group’s right to receive payments is established.
Changes in the fair value of financial assets at FVTPL are recognised in “other losses” in the
statements of comprehensive income as applicable. Impairment losses (and reversal of impairment
losses) on equity investments measured at FVOCI are not reported separately from other changes
in fair value.
2.10.4 Impairment
The Group assesses the expected credit losses associated with its debt instruments carried at
amortised cost on a forward — looking basis. The impairment methodology applied depends on
whether there has been a significant increase in credit risk.
For trade receivables, the Group applies simplified approach in calculating expected credit
loss permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial
recognition for all trade receivables.
Impairment on other receivables and amounts due from subsidiaries are measured as either
12-month expected credit losses or lifetime expected credit losses, depending on whether there has
been a significant increase in credit risk since initial recognition. If no significant increase in
credit risk of a receivable has occurred since initial recognition, then impairment is measured as
12-month expected credit losses.
2.11 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount is reported in the consolidated
balance sheets when there is a legally enforceable right to offset the recognised amounts and there
is an intention to settle on a net basis, or realized the assets and settle the liabilities
simultaneously. The legally enforceable right must not be contingent on future events and must be
enforceable in the normal course of business and in the event of default, insolvency or bankruptcy
of the company or the counterparty.
2.12 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost of inventories
comprises direct purchase costs. Costs are assigned to individual items of inventory on the basis of
weighted average costs. Costs of purchased inventories are determined after deducting discounts.
Net realisable value is the estimated selling price in the ordinary course of business less the
estimated costs of completion and the estimated costs necessary to make the sale.
– I-19 –
2.13 Trade receivables
Trade receivables are amounts due from customers for goods sold or services performed in
the ordinary course of business. If collection of trade receivables is expected in one year or less
(or in the normal operating cycle of the business if longer), they are classified as current assets. If
not, they are presented as non-current assets.
Trade receivables are recognised initially at the amount of consideration that is unconditional
unless they contain significant financing components, when they are recognised at fair value. The
Group holds the trade receivables with the objective to collect the contractual cash flows and
therefore measures them subsequently at amortised cost using the effective interest method. See
Note 18 for further information about the Group’s accounting for trade receivables and Note 3.1(b)
for a description of the Group’s impairment policies.
2.14 Cash and cash equivalents
For the purpose of presentation in the consolidated statements of cash flows, cash and cash
equivalents includes cash on hand and deposits held at call with banks, other short-term, highly
liquid investments with original maturities of three months or less that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes in value.
2.15 Paid-in capital
Paid-in capital from owners are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in
equity as a deduction, net of tax, from the proceeds.
2.16 Treasury stock
Treasury stock is recorded to reflect the carrying amount of the redemption liabilities when it
is initially reclassified from equity, and will be reversed when the redemption liabilities are
derecognised upon when the Group’s obligations in connection with those financial instruments are
discharged, cancelled or have expired, which will then be reclassified back to equity (Note 2.18).
2.17 Trade and other payables
Trade and other payables represent liabilities for goods and services provided to the Group
prior to the end of financial year which are unpaid. Trade and other payables are presented as
current liabilities unless payment is not due within one year or less after the reporting period. They
are recognised initially at their fair value and subsequently measured at amortised cost using the
effective interest method.
2.18 Redemption liabilities
A contract that contains an obligation for an entity to purchase its own equity instruments for
cash or another financial asset gives rise to a financial liability for the present value of the
redemption amount. Even if the Company’s obligations to purchase is conditional on the
counterparty exercising a right to redeem, the financial instruments with preferred rights are
recognised as financial liabilities initially at the present value of the redemption amount and
subsequently measured at amortised cost with interest charged in finance costs.
– I-20 –
The Group derecognises redemption liabilities when, and only when, the Group’s obligations
are discharged, cancelled or have expired. The carrying amount of the redemption liabilities
derecognised is credited into the equity.
2.19 Borrowings and borrowing costs
Borrowings are initially recognised at fair value, net of transaction costs incurred.
Borrowings are subsequently measured at amortised cost. Any difference between the proceeds
(net of transaction costs) and the redemption amount is recognised in profit or loss over the period
of the borrowings using the effective interest method. Fees paid on the establishment of loan
facilities are recognised as transaction costs of the loan to the extent that it is probable that some
or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down
occurs. To the extent there is no evidence that it is probable that some or all of the facility will be
drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the
period of the facility to which it relates.
Borrowings are removed from the consolidated balance sheets when the obligation specified
in the contract is discharged, cancelled or expired. The difference between the carrying amount of
a financial liability that has been extinguished or transferred to another party and the consideration
paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or
loss as other income or finance costs.
Borrowings are classified as current liabilities unless the Group has an unconditional right to
defer settlement of the liability for at least 12 months after the reporting period.
General and specific borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset are capitalised during the period of time that is
required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets
that necessarily take a substantial period of time to get ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their
expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
Other borrowing costs are expensed in the period in which they are incurred.
2.20 Current and deferred income tax
The income tax expense or credit for the period is the tax payable on the current period’s
taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes
in deferred income tax assets and liabilities attributable to temporary differences and to unused tax
losses.
(a) Current Income Tax
The current income tax charge is calculated on the basis of the tax laws enacted or
substantively enacted at the end of the reporting period in the countries where the Company and its
subsidiaries operate and generate taxable income. Management periodically evaluates positions
taken in tax returns with respect to situations in which applicable tax regulation is subject to
interpretation and considers whether it is probable that a taxation authority will accept an uncertain
– I-21 –
tax treatment. The Group measures its tax balances either based on the most likely amount or the
expected value, depending on which method provides a better prediction of the resolution of the
uncertainty.
(b) Deferred Income Tax
Deferred income tax is provided in full, using the liability method, on temporary differences
arising between the tax bases of assets and liabilities and their carrying amounts in the
consolidated financial statements. However, deferred income tax liabilities are not recognised if
they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if
it arises from initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or
substantively enacted by the end of the reporting period and are expected to apply when the related
deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only if it is probable that future taxable amounts
will be available to utilise those temporary differences and losses.
Deferred income tax liabilities and assets are not recognised for temporary differences
between the carrying amount and tax bases of investments in foreign operations where the
Company is able to control the timing of the reversal of the temporary differences and it is
probable that the differences will not reverse in the foreseeable future.
(c) Offsetting
Deferred income tax assets and liabilities are offset where there is a legally enforceable right
to offset current tax assets and liabilities and where the deferred income tax balances relate to the
same taxation authority. Current tax assets and tax liabilities are offset where the entity has a
legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset
and settle the liability simultaneously.
Current and deferred income tax is recognised in profit or loss, except to the extent that it
relates to items recognised in other comprehensive income or directly in equity. In this case, the
tax is also recognised in other comprehensive income or directly in equity, respectively.
2.21 Employee benefits
(a) Short-term obligations
Liabilities for wages and salaries are expected to be settled wholly within 12 months after the
end of the period in which the employees render the related service are recognised in respect of
employees’ services up to the end of the reporting period and are measured at the amounts
expected to be paid when the liabilities are settled. The liabilities are presented as current
employee benefit obligations in the consolidated balance sheets.
(b) Pension Obligations
Employees in the PRC are covered by various government-sponsored defined-contribution

pension plans under which the employees are entitled to a monthly pension based on certain
formulas. The relevant government agencies are responsible for the pension liability to these
– I-22 –
retired employees. The Group contributes on a monthly basis to these pensions. Under these plans,
the Group has no further payment obligation for post-retirement benefits beyond the contribution
made. Contributions to these plans are expensed as incurred and contributions paid to the defined
contribution pension plans for an employee are not available to reduce the Group’s future
obligations to such defined contribution pension plans even if the staff leaves.
(c) Housing Funds, Medical Insurances and Other Social Insurances
Employees of the Group in the PRC are entitled to participate in various government
supervised housing funds, medical insurance and other social insurance plan. The Group
contributes on a monthly basis to these funds based on certain percentages of the salaries of the
employees, subject to certain ceiling. The Group’s liability in respect of these funds is limited to
the contributions payable in each year. Contributions to these plans are expensed as incurred.
2.22 Share-based payments
The Group operates equity-settled share-based compensation plans, under which the Group
receives service from its employees in exchange for the equity instruments of the Group. As
disclosed in Note 24, during the Track Record Period, certain equity instruments of the Group
were granted to employees on December 7, 2018 and January 12, 2019. The fair value of the
equity instruments granted to employees under the Employee Share Ownership Plan (the “ESOP”)
less amount paid by employees is recognised as an employee benefits expense over the relevant
service period. The total amount to be expensed is determined by reference to the fair value of the
equity instruments granted:
— Including any market performance conditions (e.g., the entity’s share price);
— Excluding the impact of any service and non-market performance vesting conditions
(e.g., profitability, sales growth targets and remaining an employee of the entity over a
specified time period); and
— Including the impact of any non-vesting conditions (e.g., the requirement for employees
to save or holdings shares for a specific period of time).
The total expense is recognised over the vesting period, which is the period over which all of
the specified vesting conditions are to be satisfied. The estimates about the number of equity
instruments that are expected to vest are revised at the end of each reporting period and
adjustments are recognised in profit or loss and the share-based payment reserves. Where shares
are forfeited due to a failure by the employee to satisfy the service conditions, any expenses
previously recognised in relation to such shares are reversed effective at the date of the forfeiture.
In addition, in some circumstances employees may provide services in advance of the grant
date and therefore the grant date fair value is estimated for the purposes of recognising the
expense during the period between service commencement period and grant date.
Where there is any modification of terms and conditions which increases the fair value of the
equity instruments granted, the Group includes the incremental fair value granted in the
measurement of the amount recognised for the services received over the remainder of the vesting
period. The incremental fair value is the difference between the fair value of the modified equity
instrument and that of the original equity instrument, both estimated as at the date of the
modification. An expense based on the incremental fair value is recognised over the period from
– I-23 –
the modification date to the date when the modified equity instruments vest in addition to any
amount in respect of the original instrument, which should continue to be recognised over the
remainder of the original vesting period. Furthermore, if the Group modifies the terms or
conditions of the equity instruments granted in a manner that reduces the total fair value of the
share-based payment arrangement, or is not otherwise beneficial to the employee, the entity shall
nevertheless continue to account for the services received as consideration for the equity
instruments granted as if that modification had not occurred (other than a cancellation of some or
all the equity instruments granted).
2.23 Provision and contingent liability
Provisions are recognised when the Group has a present legal or constructive obligation as a
result of past events; it is probable that an outflow of resources will be required to settle the
obligation; and the amount can be reliably estimated. Provisions are not recognised for future
operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be
required in settlement is determined by considering the class of obligations as a whole. A provision
is recognised even if the likelihood of an outflow with respect to any one item included in the
same class of obligations may be small.
Provisions are measured at the present value of the expenditures expected to be required to
settle the obligation using a pre-tax rate that reflects current market assessments of the time value
of money and the risks specific to the obligation. The increase in the provision due to passage of
time is recognised as interest expense.
2.24 Revenue recognition
Revenue is recognised when, or as, obligations under the terms of a contract are satisfied,
which occurs when control of the promised products or services is transferred to customers.
Revenue is measured as the amount of consideration the Group expects to receive in exchange for
transferring products or services to a customer (“transaction price”).
A performance obligation represents a good and service (or a bundle of goods or services)
that is distinct or a series of distinct goods or services that are substantially the same.
Depending on the terms of the contract and the laws applicable, control of the goods and
services may be transferred over time or at a point in time. Control of the goods and services is
transferred over time if the Group’s performance:
• provides all of the benefits received and consumed simultaneously by the customer;
• creates and enhances an asset that the customer controls as the Group performs; or
• does not create an asset with an alternative use to the Group and the Group has an
enforceable right to payment for performance completed to date.
Contracts with customers may include multiple performance obligations. For such
arrangements, the Group allocates revenue to each performance obligation based on its relative
standalone selling price. The Group generally determines standalone selling prices based on the
prices charged to customers. If the standalone selling price is not directly observable, it is
– I-24 –
estimated using expected cost plus a margin or adjusted market assessment approach, depending on
the availability of observable information. Assumptions and estimations have been made in
estimating the relative selling price of each distinct performance obligation, and changes in
judgments on these assumptions and estimates may impact the revenue recognition.
When either party to a contract has performed, the Group presents the contract on the
consolidated balance sheets as a contract asset or a contract liability, depending on the relationship
between the Group’s performance and the customer’s payment.
A contract asset represents the Group’s right to consideration in exchange for goods that the
Group has transferred to a customer that is not yet unconditional. It is assessed for impairment in
accordance with using the same approach as for trade receivables. In contrast, a receivable
represents the Group’s unconditional right to consideration, i.e., only the passage of time is
required before payment of that consideration is due. There is normally no significant cost to
obtain contract.
If a customer pays consideration or the Group has a right to an amount of consideration that
is unconditional, before the Group transfers a good or service to the customer, the Group presents
the contract liability when the payment is made or a receivable is recorded (whichever is earlier).
A contract liability is the Group’s obligation to transfer goods or services to a customer for which
the Group has received consideration (or an amount of consideration is due) from the customer.
The following is a description of the accounting policy for the principal revenue streams of
the Group.
(a) Sale of Goods — Retail
The Group is engaged in the retail sale of pharmaceutical and healthcare products to
individual customers through: (i) offline pharmacies; (ii) O2O channels; (iii) B2C channels. The
Group sells and delivers its products directly to the customers. Revenue is recognised at a point in
time when control of the goods has transferred, being when the goods are delivered to the
customers. Revenue from these sales is recognised based on the price, net of the estimated sales
discounts at the time of sale.
The Group offers its customers with membership points plan. The membership points earned
by customers can be used to reduce the cost of future purchases. The Group allocates a proportion
of the consideration received to membership points based on the respective stand-alone selling
prices. The amount allocated to the membership points is deferred, and is recognised as revenue
when the points are redeemed or expire. The deferred revenue is included in contract liabilities.
(b) Sale of Goods — Pharmaceutical Wholesale
The Group is also engaged in the pharmaceutical wholesale business to merchant customers.
These sales are recognised at a point in time when control of the goods has transferred, being
when the goods are delivered to the customer, the customer has full discretion over the channel
and price to sell the goods, and there is no unfulfilled obligation that could affect the customer’s
acceptance of the goods.
– I-25 –
(c) Healthcare, Consultation and Other Services
Healthcare, consultation and other services comprise wellness management services, medical
consultation services and franchise-related services.
Revenue from wellness management services and medical consultation service are recognised
at a point in time when those services are completed, being when control of the services is
transferred and revenue can be recognised by the Group. Revenue from franchise-related services
comprises trademark licensing fees and management consultation service fees charged according to
the agreement with franchisees. Revenue from trademark licensing fees which is a fixed amount
received at the inception of franchise period and management consultation services are recognised
in the accounting period in which the services are rendered over the period as the related services
are performed.
2.25 Interest income
Interest income is presented as “finance income” where it is earned from financial assets that
are held for cash management purposes.
Interest income is calculated by applying the effective interest rate to the gross carrying
amount of a financial asset except for financial assets that subsequently become credit-impaired.
For credit-impaired financial assets the effective interest rate is applied to the net carrying amount
of the financial asset (after deduction of the loss allowance).
2.26 (Losses)/Earnings per share
(a) Basic (Losses)/Earnings Per Share
Basic (losses)/earnings per share is calculated by dividing:
• The (losses)/earnings attributable to owners of the Company;
• By the weighted average number of ordinary shares outstanding during the financial
year/period, and excluding treasury stock.
(b) Diluted (Losses)/Earnings Per Share
Diluted (losses)/earnings per share adjusts the figures used in the determination of basic
(losses)/earnings per share to take into account:
• the after-income tax effect of interest and other financing costs associated with dilutive
potential ordinary shares, and
• the weighted average number of additional ordinary shares that would have been
outstanding assuming the conversion of all dilutive potential ordinary shares.
– I-26 –
2.27 Leases
The Group mainly leases properties in the PRC as lessee. Rental contracts are typically made
for fixed periods of 1 to 10 years. Lease terms are negotiated on an individual basis and contain a
wide range of different terms and conditions. The 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.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which
the leased asset is available for use by the Group. Each lease payment is allocated between the
principal and finance cost. The finance cost is charged to profit or loss over the lease period so as
to produce a constant periodic rate of interest on the remaining balance of the liability for each
period.
Contracts may contain both lease and non-lease components. The Group allocates the
consideration in the contract to the lease and non-lease components based on their relative
stand-alone prices.
Assets and liabilities arising from a lease are initially measured on a present value basis.
Lease liabilities include the net present value of the following lease payments:
• fixed payments (including in-substance fixed payments), less any lease incentives
receivable,
• variable lease payment that are based on an index or a rate, initially measured using the
index or rate as at the commencement date,
• amounts expected to be payable by the lessee under residual value guarantees,
• the exercise price of a purchase option if the lessee is reasonably certain to exercise that
option, and
• payments of penalties for terminating the lease, if the lease term reflects the lessee
exercising that option.
Lease payments to be made under reasonably certain extension options are also included in
the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate
cannot be readily determined, which is generally the case for leases in the Group, the lessee’s
incremental borrowing rate is used, being the rate that the individual lessee would have to pay to
borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar
economic environment with similar terms, security and conditions.
– I-27 –
To determine the incremental borrowing rate, the Group:
• where possible, uses recent third-party financing received by the individual lessee as a
starting point, adjusted to reflect changes in financing conditions since third party
financing was received,
• uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk
for leases held by the Group, which does not have recent third-party financing, and
• makes adjustments specific to the lease, e.g. term, country, currency and security.
Right-of-use assets are measured at cost comprising the following:
• the amount of the initial measurement of lease liability,
• any lease payments made at or before the commencement date less any lease incentives
received,
• any initial direct costs, and
• restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the
lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase option,
the right-of-use asset is depreciated over the underlying asset’s useful life. Right-of-use assets are
subject to impairment (Note 2.9).
Payments associated with short-term leases and leases of low-value assets are recognised on a
straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of
12 months or less without a purchase option.
2.28 Government grants
Grants from the government are recognised at their fair value where there is a reasonable
assurance that the grant will be received and the Group will comply with all attached conditions.
Government grants relating to costs are deferred and recognised in the profit or loss over the
period necessary to match them with the costs that they are intended to compensate.
Government grants relating to purchase of property, plant and equipment are deducted against
the carrying amount of the related assets.
2.29 Dividend distribution
Dividend distribution to the Company’s equity holders is recognised as a liability in the

Group’s and the Company’s financial statements in the period in which the dividends are approved
by the Company’s equity holders, where applicable.
– I-28 –
3 Financial risk management
3.1 Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (including cash
flow and fair value interest rate risk), credit risk and liquidity risk. The overall risk management
program of the Group focuses on the unpredictability of financial markets and seeks to minimize
potential adverse effects on financial performance of the Group. The Group currently does not use
any derivative financial instruments to hedge certain risk exposure.
(a) Market Risk
(i) Cash flow and fair value interest rate risk
The Group’s income and operating cash flows are substantially independent of changes in
market interest rates. The Group has no significant interest-bearing assets and liabilities, except for
cash and cash equivalents (Note 20), restricted cash (Note 20), lease liabilities (Note 15(b)),
borrowings (Note 25) and redemption liabilities (Note 28). Those carried at floating rates expose
the Group to cash flow interest rate risk whereas those carried at fixed rates expose the Group to
fair value interest rate risk.
The Group’s interest rate risk mainly arises from borrowings. As at December 31, 2020 and
2021 and September 30, 2022, the Group’s long-term borrowings were carried at floating rates,
which expose the Group to cash flow interest rate risk.
The sensitivity analysis is determined based on the exposure to interest risk of bank
borrowings (Note 25) at the end of each reporting period. If the interest rate of the respective
instruments held by the Group had been 100 basis points higher/lower, the loss before income tax
for the year ended December 31, 2021 and the nine months ended September 30, 2021 would
increase/decrease by RMB415,000 and RMB429,000, respectively, while the profit before income
tax for the year ended December 31, 2020 and the nine months ended September 30, 2022
decrease/increase by RMB468,000 and RMB374,000, respectively.
As at December 31, 2020 and 2021 and September 30, 2022, the Group’s borrowings
including short-term borrowings that carried at fixed rates, which exposed the Group to fair value
interest rate risk. Management does not anticipate significant impact to the interest-bearing
borrowings resulted from fair value interest rate risk, because initial terms of borrowings are
within one year.
Management also does not anticipate significant impact to interest-bearing assets resulted
from the changes in interest rates, because the interest rates of bank deposits are not expected to
change significantly.
(b) Credit Risk
Credit risk mainly arises from cash and cash equivalents, restricted cash, trade receivables
and other receivables. The maximum exposure to credit risk is represented by the carrying amount
of each financial asset in the consolidated balance sheets.
– I-29 –
(i) Risk management
Credit risk is managed on a group basis.
The Group expects that there is no significant credit risk associated with cash and cash
equivalents and restricted cash since they are held at state-owned banks or reputable commercial
banks and other high-credit-quality financial institutions. Management does not expect that there
will be any significant losses from non-performance by these counterparties, therefor the expected
credit loss for cash and cash equivalents and restricted cash is minimal.
Management has assessed the recoverability of receivables during the Track Record Period.
For trade receivables, management applies the simplified approach to provide expected credit
losses prescribed by IFRS 9, which permits the use of the lifetime expected loss provision for all
trade receivables from third parties and related parties. To measure the expected credit losses,
trade receivables have been grouped based on shared credit risk characteristics and the aging dates.
The expected loss rates are based on the payment profiles of sales over a period of three years and
the corresponding historical credit losses experienced within this period. The historical loss rates
are adjusted to reflect current and forward-looking information on macro-economic factors
affecting the ability of the debtors to settle the receivables. For other receivables, management has
assessed that during the Track Record Period, there was no significant increase in credit risk since
initial recognition. Thus, a 12-month expected credit losses approach that results from possible
default event within 12 months of each reporting date is adopted by management.
(ii) Impairment of financial assets
The Group has two types of assets that are subject to the expected credit loss assessment,
which are trade receivables and other receivables.
While cash and cash equivalents and restricted cash are also subject to the impairment
requirements of IFRS 9, the identified impairment loss was immaterial.
Trade receivables
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which
uses a lifetime expected loss allowance for all trade receivables.
To measure the expected credit losses, trade receivables have been grouped based on shared
credit risk characteristics and the days past due. For trade receivables, management makes periodic
assessments as well as individual assessment on the recoverability based on historical settlement
records and past experience and adjusts for forward looking information.
The expected loss rates are based on payment pattern of debtors with similar risk profiles and
the corresponding historical credit losses experienced within this period. The historical loss rates
are adjusted to reflect current and forward-looking information on macroeconomic factors affecting
the ability of the customers to settle the receivables. The Group has identified the gross domestic
product index(“GDP”), Consumer price index (“CPI”) and Producer price index(“PPI”) of the
country in which it sells its goods and services to be the most relevant factors, and accordingly
adjusts the historical loss rates based on expected changes in these factors.
– I-30 –
The loss allowance as at December 31, 2020 and 2021 and September 30, 2022 was
determined as follows for trade receivables.
As at December 31, 2020

Gross carrying Expected credit
amount loss rate Loss allowance
RMB’000 RMB’000
Within the credit period . . . . . . . . . . . . . . . 127,156 0.14% (178)
Overdue within 3 months . . . . . . . . . . . . . . 799 0.38% (3)
Overdue more than 3 months . . . . . . . . . . . 170 1.76% (3)
128,125 (184)

RMB’000 RMB’000
Within the credit period . . . . . . . . . . . . . . . 154,764 0.16% (251)
Overdue within 3 months . . . . . . . . . . . . . . 3,392 0.49% (17)
Overdue more than 3 months . . . . . . . . . . . 3,006 13.97% (420)
161,162 (688)
As at September 30, 2022

RMB’000 RMB’000
Within the credit period . . . . . . . . . . . . . . . 173,759 0.87% (1,509)
Overdue within 3 months . . . . . . . . . . . . . . 9,100 1.92% (175)
Overdue more than 3 months . . . . . . . . . . . 4,549 48.63% (2,211)
187,408 (3,895)
Movements in allowance for impairment of trade receivables are as follows:
Nine months ended

Year ended December 31, September 30,
2020 2021 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
At beginning of the year/period . . . . 143 184 184 688
Increase in loss allowance . . . . . . . . . . 41 504 442 3,207
At end of the year/period . . . . . . . . . 184 688 626 3,895
The Group assesses the credit quality of its customers by taking into account various factors
including their financial position, past experience and other factors. The compliance with credit
limits by customers is regularly monitored by the management.
– I-31 –
Trade receivables are written off when there is no reasonable expectation of recovery.
Indicators that there is no reasonable expectation of recovery include, amongst others, the failure
of a debtor to engage in a repayment plan with the Group, and indicators of severe financial
difficulty.
Impairment losses on trade receivables are presented as net impairment losses on financial
assets within operating expenses. Subsequent recoveries of amounts previously written off are
credited against the same line item.
Other receivables
Other receivables mainly include deposits and others. The Group considers the probability of
default upon initial recognition of asset and whether there has been significant increase in credit
risk on an ongoing basis during the Track Record Period. To assess whether there is a significant
increase in credit risk, the Group compares risk of a default occurring on the assets as at the
reporting date with the risk of default as at the date of initial recognition. Especially the following
indicators are incorporated:
• actual or expected significant adverse changes in business, financial economic

conditions that are expected to cause a significant change to the counterparty’s ability to
meet its obligations;
• actual or expected significant changes in the operating results of the counterparty;
• significant changes in the expected performance and behavior of the counterparty,

including changes in the payment status of the counterparty.
For the other receivables, management applies 3-stages model to assess the expected credit
loss. Management makes periodic collective assessments as well as individual assessment on the
recoverability of other receivables based on historical settlement records and past experience.
In view of the history of cooperation with the debtors and collection from them, the
management of the Group believes that the credit risk inherent in the Group’s outstanding other
receivables is not significant.
Net impairment losses on financial assets recognised in profit or loss as follows:
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
Expected credit loss rate . . . . . . . . . . . . . . . 0.44% 0.78% 1.04%
Gross carrying amounts — other
receivables. . . . . . . . . . . . . . . . . . . . . . . . 19,793 24,020 22,937
Loss allowance . . . . . . . . . . . . . . . . . . . . . . (87) (188) (238)
– I-32 –
Movements in allowance for impairment of other receivables are as follows:
Nine months ended

2020 2021 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
At beginning of the year/period . . . . 95 87 87 188
(Decrease)/Increase in loss allowance . (8) 101 116 50
At end of the year/period . . . . . . . . . 87 188 203 238
Impairment losses on other receivables are presented as net impairment losses on financial
assets within operating profit. Subsequent recoveries of amounts previously written off are credited
against the same line item.
(c) Liquidity risk
The Group aims to maintain sufficient cash and cash equivalents. Due to the dynamic nature
of the underlying businesses, the policy of the Group is to regularly monitor the Group’s liquidity
risk and to maintain adequate cash and cash equivalents to meet the Group’s liquidity
requirements.
The table below analyses the Group’s financial liabilities that will be settled into relevant
maturity grouping based on the remaining period at each balance sheet date to the contractual
maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
Less than Between Between

1 year 1 and 2 years 2 and 5 years Over 5 years Total
At December 31, 2020
Borrowings (including interests). . . . 38,224 7,702 23,106 18,432 87,464
Trade and notes payables . . . . . . . . 674,526 — — — 674,526
Accrual and other payables
(excluding value added taxes
(“VAT”) payables and other taxes
payable and payroll and welfare
benefit payables) . . . . . . . . . . . . 14,402 — — — 14,402
Lease liabilities (including interests). 161,324 128,233 242,252 101,169 632,978
888,476 135,935 265,358 119,601 1,409,370
– I-33 –
Less than Between Between

1 year 1 and 2 years 2 and 5 years Over 5 years Total
(excluding VAT payables and
other taxes payable and payroll
and welfare benefit payables) . . . . 14,251 — — — 14,251
1,082,948 151,737 302,059 94,020 1,630,764
At September 30, 2022
(excluding VAT payables and
other taxes payable and payroll
and welfare benefit payables) . . . . 18,264 — — — 18,264
1,029,533 150,646 263,785 56,231 1,500,195
As at December 31, 2020 and 2021, the redemption liabilities as described in Note 28 of
approximately RMB335,602,000 and RMB376,384,000 respectively, were not managed by maturity
date and were all reclassified to equity in 2022.
3.2 Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to
continue as a going concern in order to provide returns for equity holders and benefits for other
stakeholders and to maintain an optimal capital structure to enhance equity holders’ value in the
long term.
In order to maintain or adjust the capital structure, the Group may adjust the amounts of
dividends paid to equity holders, issue new shares, or sell assets to reduce debt.
The Group monitors capital (including paid-in capital, treasury stock, capital surplus and
other reserves) by regularly reviewing the capital structure. As a part of this review, the Company
considers the cost of capital and the risks associated with the issued paid-in capital. In the opinion
of the directors of the Company, the Group’s capital risk is low.
– I-34 –
The Group monitors capital on the basis of the liability-to-asset ratio. This ratio is calculated
as total liabilities divided by total assets. As at December 31, 2020 and 2021 and September 30,
2022, liability-to-asset ratio of the Group is as follows:
As at
2020 2021 2022
(unaudited)
Liability-to-asset ratio . . . . . . . . . . . . . . . . . 97% 100% 79%
4 Critical accounting estimates and judgments
The preparation of financial statements requires the use of accounting estimates which, by
definition, will seldom equal the actual results. Management also needs to exercise judgment in
applying the Group’s accounting policies.
Estimates and judgments are continually evaluated. They are based on historical experience
and other factors, including expectations of future events that may have a financial impact on the
entity and that are believed to be reasonable under the circumstances.
(a) Net realisable value of inventories
Management reviews the aging and expiry dates of inventories of the Group at the end of
each reporting period, and makes provision on obsolete and slow-moving inventory items
identified. These estimates are based on the current market condition and the historical experience
of selling products of similar nature. If the market condition was to deteriorate so that the actual
provision might be higher than expected, the Group would be required to revise the basis of
making the provision and its future results would be affected.
(b) Impairment assessment of trade receivables and other receivables
The impairment provisions for trade and other receivables are based on assumptions about the
expected loss rates. The provision rates are based on internal credit ratings as groupings of various
debtors that have similar loss patterns. The provision matrix is based on the Group’s historical
default rates, taking into consideration forward-looking information that is reasonable and
supportable, available without undue costs or effort. For details of the key assumptions and inputs
used, see Note 3.1. Changes in these assumptions and estimates could materially affect the result
of the assessment and it may be necessary to make additional impairment charge to the
consolidated statements of comprehensive income.
(c) Current and deferred income tax
The Group is subject to corporate income taxes in the PRC. Judgment is required in
determining the amount of the provision for taxation and the timing of payment of the related
taxations. There are many transactions and calculations for which the ultimate tax determination is
uncertain during the ordinary course of business. Significant judgment is required from the Group
in determining the provision for income taxes. Where the final tax outcome of these matters is
different from the amounts that were initially recorded, such differences will impact the income
tax and deferred income tax provisions in the period in which such determination is made.
– I-35 –
The Group recognises deferred income tax assets based on estimates that it is probable to
generate sufficient taxable profits in the foreseeable future against which the deductible losses will
be utilised. The recognition of deferred income tax assets mainly involved management’s
judgments and estimations about the timing and the amount of taxable profits of the companies
who had tax losses.
(d) Fair value of restricted stock units granted under ESOP
The fair value of the restricted stock units granted to employees is determined by using
back-solve method from the most recent transaction price of the Company’s Series A
[REDACTED] Financing and Equity Allocation Method. Significant estimates on assumptions,
such as risk-free interest rate and volatility are made based on management’s best estimates.
Further details are included in Note 24.
(e) Impairment of non-financial assets
The Group assesses whether there are any indicators of impairment of all non-financial assets
(including the right-of-use assets) at the end of each reporting period. Non-financial assets are
tested for impairment when there are indicators that the carrying amounts may not be recoverable.
An impairment exists when the carrying value of an asset or a cash-generating unit exceeds its
recoverable amount, which is the higher of its fair value less costs of disposal and its value in use.
The calculation of the fair value less costs of disposal is based on available data from binding
sales transactions in an arm’s length transaction of similar assets or observable market prices less
incremental costs for disposing of the asset. When value in use calculations are undertaken,
management must estimate the expected future cash flows from the asset or cash-generating unit
and choose a suitable discount rate in order to calculate the present value of those cash flows.
5 Segment Reporting
The Group’s business activities, for which discrete financial information is available, are
regularly reviewed and evaluated by the CODM. The CODM, who is responsible for allocating
resources and assessing performance of the operating segments, has been identified as the
executive directors of the Company that make strategic decisions.
The Group’s CODM reviews consolidated results when making strategic decisions about
allocating resources and assessing performance of the Group as a whole and hence, the Group has
only one reportable operating segment.
The major operating entities of the Group are domiciled in the PRC. Accordingly, all the
Group’s results were derived in the PRC and all the operating assets of the Group are located in
the PRC during the Track Record Period.
– I-36 –
6 Revenue
The principal activities of the Group are sale of pharmaceutical and healthcare products to
individual customers through offline pharmacies, O2O and B2C channels; pharmaceutical
wholesale business as well as healthcare services in the PRC.
Disaggregation of revenue from contracts with customers by each significant category is as

follows:
Nine months ended

2020 2021 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Revenue from contracts with
customers:
Sales of goods
— Offline . . . . . . . . . . . . . . . ...... 1,408,852 1,501,719 1,089,661 1,264,437
— B2C . . . . . . . . . . . . . . . . . ...... 262,043 363,687 274,647 250,317
— O2O . . . . . . . . . . . . . . . . . ...... 43,282 101,173 69,780 150,204
— Pharmaceutical wholesale
business . . . . . . . . . . . . ...... 34,698 40,839 27,960 35,859
1,748,875 2,007,418 1,462,048 1,700,817
Healthcare, consultation and
other services
— Franchise-related services. . . . . . . 3,321 4,412 3,491 3,324
— Wellness management services . . . 750 1,322 945 2,382
— Medical consultation services . . . . 1,015 1,197 891 1,004
5,086 6,931 5,327 6,710
1,753,961 2,014,349 1,467,375 1,707,527
Timing of revenue recognition:
At a point-in-time
— Offline . . . . . . . . . . . . . . . . . . . .. 1,408,852 1,501,719 1,089,661 1,264,437
— B2C . . . . . . . . . . . . . . . . . . . . . .. 262,043 363,687 274,647 250,317
— O2O . . . . . . . . . . . . . . . . . . . . . .. 43,282 101,173 69,780 150,204
— Pharmaceutical wholesale
business . . . . . . . . . . . . . . . . .. 34,698 40,839 27,960 35,859
— Wellness management services . .. 750 1,322 945 2,382
— Medical consultation services . . .. 1,015 1,197 891 1,004
1,750,640 2,009,937 1,463,884 1,704,203
Over time
— Franchise-related services. . . . . . . 3,321 4,412 3,491 3,324
1,753,961 2,014,349 1,467,375 1,707,527
– I-37 –
(i) The Group and the Company has recognised the following revenue-related contract liabilities:
The Group
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
Included in non-current liabilities . . . . . . . . 957 1,672 1,565
4,424 6,914 7,855
The Company
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
Included in non-current liabilities . . . . . . . . 274 748 759
1,331 3,180 4,030
(ii) Revenue recognised in relation to contract liabilities
Contract liabilities of the Group mainly arise from the advance payments made by customers
while the services are yet to be provided. The following table shows the amount of the revenue
recognised in the Track Record Period related to brought-forward contract liabilities.
Nine months ended

2020 2021 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Revenue recognised that was included
in the balance of contract liabilities
at the beginning of the year/period 2,851 3,097 2,190 3,808
During the years ended December 31, 2020 and 2021 and the nine months ended September
30, 2021 and 2022, there was no customer whose transactions with the Group have exceeded 10%
of the Group’s revenue.
– I-38 –
(iii) Unsatisfied performance obligations
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
Unsatisfied performance obligations . . . . . . 4,424 6,914 7,855
Management expects that 78%, 76%, and 80% of the transaction price allocated to the
unsatisfied contracts as at December 31, 2020 and 2021 and September 30, 2022 and will be
recognised as revenue within one year. The remaining 22%, 24%, 20% as at December 31, 2020
and 2021 and September 30, 2022 will be recognised over one year.
7 Other income
Nine months ended

2020 2021 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Tax subsidies. . . . . . . . . . . . . . . . . . . . 647 1,404 1,123 236
Government grants . . . . . . . . . . . . . . . 492 80 80 —
1,139 1,484 1,203 236
8 Other losses
Nine months ended

Year ended December,31, September 30,
2020 2021 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Losses on disposal of property, plant
and equipment . . . . . . . . . . . . . . . . . 42 76 77 44
Losses on disposal of intangible
assets . . . . . . . . . . . . . . . . . . . . . . . . — 1,365 — —
Losses on termination of leases . . . . . . — — — 423
Others . . . . . . . . . . . . . . . . . . . . . . . . . 1,197 1,900 430 650
1,239 3,341 507 1,117
– I-39 –
9 Expenses by nature
Nine months ended

2020 2021 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Purchase cost of goods . . . . . . . . . . . . 1,089,983 1,272,839 942,785 1,059,618
Employee benefits expenses
(Note 10) . . . . . . . . . . . . . . . . . . . . . 248,438 303,083 216,156 249,724
Depreciation of right-of-use assets
(Note 15) . . . . . . . . . . . . . . . . . . . . . 187,545 195,478 144,017 156,706
Logistic fees . . . . . . . . . . . . . . . . . . . . 15,136 33,924 23,731 36,216
equipment (Note 14) . . . . . . . . . . . . 30,814 39,552 29,406 30,400
Third-party platform service charges
and commissions . . . . . . . . . . . . . . . 23,534 35,688 25,484 28,719
Office expenses . . . . . . . . . . . . . . . . . . 18,420 19,615 14,486 11,293
Utilities and energy expenses . . . . . . . 12,944 15,168 10,306 11,068
Business taxes and surcharges . . . . . . . 12,194 8,434 5,458 8,499
Technical service expenses . . . . . . . . . 4,514 7,271 4,587 6,040
Impairment of inventories . . . . . . . . . . 1,294 2,966 1,826 4,017
[REDACTED] expenses . . . . . . . . . . . [REDACTED] [REDACTED] [REDACTED] [REDACTED]
Marketing and advertising expenses . . 2,877 5,871 3,900 3,556
Impairment of property, plant and
equipment (Note 14) . . . . . . . . . . . . 2,197 1,252 1,015 2,497
Travel and transportation costs . . . . . . 2,733 3,152 2,625 2,101
Amortisation of intangible assets
(Note 16) . . . . . . . . . . . . . . . . . . . . . 1,544 2,652 2,732 1,713
Maintenance expenses . . . . . . . . . . . . . 1,207 1,118 762 590
Professional services expenses . . . . . . 1,146 537 146 503
Auditors’ remuneration — audit
services . . . . . . . . . . . . . . . . . . . . . . — — — —
Others . . . . . . . . . . . . . . . . . . . . . . . . . 16,080 9,236 6,030 8,344
1,672,600 1,957,836 1,435,452 1,625,575
10 Employee benefits expenses
Nine months ended

2020 2021 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Wages, salaries, bonuses and
employee welfare. . . . . . . . . . . . . . . 236,829 271,020 193,961 220,701
Pension, social security costs and
housing benefits (a) . . . . . . . . . . . . . 10,438 30,892 21,317 29,110
Share-based compensation expenses
(Note 24) . . . . . . . . . . . . . . . . . . . . . 1,171 1,171 878 (87)
248,438 303,083 216,156 249,724
– I-40 –
(a) Employees in the Group’s PRC subsidiaries are required to participate in a defined
contribution retirement scheme administrated and operated by the local municipal
government. The Group’s PRC subsidiaries contribute funds which are calculated on certain
percentage of the average employee salary as agreed by local municipal government to the
scheme to fund the retirement benefits of the employees.
According to policies issued by the Ministry of Human Resources and Social Security and
local municipal departments, affected by Coronavirus Disease 2019 (COVID-19), social security
relief policies have been successively implemented by local authorities. As such, most of the social
insurance expenses for the period from February to December 2020 have been reduced or
exempted accordingly.
(b) Five highest paid individuals
The five individuals whose emoluments were the highest in the Group include 4, 4, 4, 3
directors for the years ended December 31, 2020 and 2021 and the nine months ended September
30, 2021 and 2022, respectively. Their emoluments are reflected in the analysis presented in Note
10 (c). The emoluments payable to the remaining 1, 1, 1, 2 individuals for Track Record Period are
as follows:
Nine months ended

2020 2021 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
employee welfare. . . . . . . . . . . . . . . 399 465 319 611
housing benefits. . . . . . . . . . . . . . . . 13 27 18 50
Share-based compensation expenses . . — — — 77
412 492 337 738
The number of highest paid individuals whose remunerations for each year fell within the
following band is as follows:
Nine months ended

2020 2021 2021 2022
Emolument bands (in Hong Kong
Dollar, “HKD”) . . . . . . . . . . . . . . . .
HKD nil — HKD500,000 . . . . . . . . . . 1 — 1 2
HKD500,001 — HKD1,000,000 . . . . . — 1 — —
1 1 1 2
– I-41 –
(c) Benefits and interests of directors and supervisors
Details of the emoluments paid or payable to the directors and supervisors for the Track
Record Period are set out as follows:
Wage, salaries, Pension, social

bonuses and security costs Share-based
employee and housing compensation
welfare benefits expenses Total
RMB’000 RMB’000 RMB’000 RMB’000
For the year ended
December 31, 2020
Executive directors
Mr. Long Yan . . . . . . . . . . . 1,324 74 — 1,398
Mr. Long Yun. . . . . . . . . . . (i) 361 10 — 371
Ms. Bai Yanping . . . . . . . . (i) 260 10 258 528
Ms. Liang Xiaoping . . . . . . (i) 254 - 276 530
Ms. Peng Yuping . . . . . . . . (i) 651 46 258 955
Supervisors
Ms. Shao Xiaxia. . . . . .... (ii) 108 9 — 117
Ms. Jiao Duorong. . . . .... (ii) 169 10 — 179
Ms. Yang Aiping . . . . .... (ii) 166 10 — 176
Total . . . . . . . . . . . . . . . . . 3,293 169 792 4,254

RMB’000 RMB’000 RMB’000 RMB’000
For the year ended
December 31, 2021
Executive directors
Mr. Long Yan . . . . . . . . . . . 1,324 106 — 1,430
Mr. Long Yun. . . . . . . . . . . (i) 362 11 — 373
Ms. Bai Yanping . . . . . . . . (i) 267 29 258 554
Ms. Liang Xiaoping . . . . . . (i) 254 — 276 530
Ms. Peng Yuping . . . . . . . . (i) 532 53 258 843
Supervisors
Ms. Shao Xiaxia. . . . . .... (ii) 102 10 — 112
Ms. Jiao Duorong. . . . .... (ii) 160 20 — 180
Ms. Yang Aiping . . . . .... (ii) 204 20 — 224
Total . . . . . . . . . . . . . . . . . 3,205 249 792 4,246
– I-42 –

RMB’000 RMB’000 RMB’000 RMB’000
For the nine months
ended September 30,
2021
Executive directors
Mr. Long Yan . . . . . . . . . . 923 49 — 972
Mr. Long Yun . . . . . . . . . . (i) 272 8 — 280
Ms. Bai Yanping . . . . . . . . (i) 190 22 193 405
Ms. Liang Xiaoping . . . . . (i) 191 — 207 398
Ms. Peng Yuping . . . . . . . . (i) 369 40 193 602
Supervisors
Ms. Shao Xiaxia. . . . . . . .. (ii) 84 8 — 92
Ms. Jiao Duorong. . . . . . .. (ii) 117 8 — 125
Ms. Yang Aiping . . . . . . .. (ii) 147 8 — 155
Total . . . . . . . . . . . . . . . . . 2,293 143 593 3,029

RMB’000 RMB’000 RMB’000 RMB’000
For the nine months
ended September 30,
2022
Executive directors
Mr. Long Yan . . . . . . . . . . 919 79 — 998
Mr. Long Yun . . . . . . . . . . (i) 270 9 — 279
Ms. Bai Yanping . . . . . . . . (i) 271 21 193 485
Ms. Liang Xiaoping . . . . . (i) 189 — 207 396
Ms. Peng Yuping . . . . . . . . (i) 205 3 (773) (565)
Supervisors
Ms. Shao Xiaxia. . . . . . . .. (ii) 83 9 — 92
Ms. Jiao Duorong. . . . . . .. (ii) 122 16 — 138
Ms. Yang Aiping . . . . . . .. (ii) 155 17 — 172
Total . . . . . . . . . . . . . . . . . 2,214 154 (373) 1,995
(i) Mr. Long Yun, Ms. Bai Yanping and Ms. Liang Xiaoping were appointed as executive
directors since August 31, 2017.
Ms. Peng Yuping was appointed as an executive director since August 31, 2017 and resigned
on August 28, 2022.
(ii) Ms. Shao Xiaxia, Ms. Jiao Duorong and Ms. Yang Aiping were appointed as supervisors since
December 6, 2022.
– I-43 –
(d) Directors’ retirement benefits
None of the directors received or will receive any retirement benefits during the Track
Record Period.
(e) Directors’ termination benefits
None of the directors received or will receive any termination benefits during the Track
Record Period.
(f) Consideration provided to third parties for making available directors’ services
During the Track Record Period, the Company did not pay consideration to any third parties
for making available directors’ services.
(g) Information about loans, quasi-loans and other dealings in favor of directors, bodies
corporate controlled by or entities connected with directors
There were no loans, quasi-loans and other dealings in favor of directors, controlled bodies
corporate by and connected entities with such directors during the Track Record Period.
(h) Directors’ material interests in transactions, arrangements or contracts
No significant transactions, arrangements and contracts in relation to the Group’s business to

which the Company was a party and in which a director of the Company had a material interest,
whether directly or indirectly, subsisted at the end of the year or at any time during the Track
Record Period.
11 Finance costs, net
Nine months ended

2020 2021 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Finance income:
Interest income from bank deposits . . . (3,311) (3,121) (2,356) (3,064)
Finance costs:
liabilities (Note 28) . . . . . . . . . . . . . 36,360 40,782 30,587 30,495
Interest expenses on lease liabilities . . 26,694 27,643 20,412 20,549
Interest expenses on bank borrowings . 3,595 4,474 3,518 2,261
66,649 72,899 54,517 53,305
Finance costs, net . . . . . . . . . . . . . . . 63,338 69,778 52,161 50,241
– I-44 –
12 Income tax expense
Nine months ended

2020 2021 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Current income tax expense . . . . . . . . 22,320 20,769 18,145 27,008
Deferred income tax expense
(Note 29) . . . . . . . . . . . . . . . . . . . . . 3,414 4,643 2,616 (207)
25,734 25,412 20,761 26,801
During the Track Record Period, certain PRC subsidiaries of the Group that qualified as
“small low-profit enterprises” under the Enterprise Income Tax Law of the PRC enjoyed a
preferential income tax rate of 20%.
A reconciliation of the expected income tax calculated at the applicable tax rate and
profit/(loss) before income tax, with the actual income tax is as follow:
Nine months ended

2020 2021 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Profit/(Loss) before income tax . . . . . . 17,890 (15,727) (20,100) 27,573
Tax calculated at PRC statutory
income tax rate of 25% . . . . . . . . . . 4,473 (3,932) (5,025) 6,893
Tax effects of:

— Effect of preferential tax rates . . . . (380) (89) (109) (398)
— Expenses not deductible for tax
purpose . . . . . . . . . . . . . . . . . . . . 12,283 11,741 8,106 7,801
— Tax losses and temporary
differences for which no deferred
income tax assets were
recognised . . . . . . . . . . . . . . . . . . 9,606 17,891 18,249 13,149
— Utilisation of previously
unrecognised tax losses and
temporary differences . . . . . . . . . (248) (199) (460) (644)
Income tax expense . . . . . . . . . . . . . . 25,734 25,412 20,761 26,801
As at December 31, 2020 and 2021 and September 30, 2022, tax losses and temporary
difference for which no deferred income tax assets were recognised were RMB90,034,000,
RMB160,804,000 and RMB210,825,000, respectively, of which tax losses will expire in 5 years
from the respective tax filing dates.
– I-45 –
13 (Losses)/Earnings per share
The basic (losses)/earnings per share is calculated by dividing the (losses)/profits attributable
to owners of the Company by the weighted average number of ordinary shares in issued or deemed
to be in issued during the Track Record Period.
Nine months ended

2020 2021 2021 2022
(Loss)/Profit attributable to owners of
the Company (RMB’000) . . . . . . . . . (7,844) (41,139) (40,861) 772
Weighted average number of ordinary
shares in issue (Thousand) (i) . . . . . 122,425 123,457 123,457 123,457
Basic and diluted (losses)/earnings per
share (RMB) (ii) . . . . . . . . . . . . . . . (0.06) (0.33) (0.33) 0.01
(i) On December 6, 2022, the Company was converted to a joint stock limited liability company
and total 123,456,790 ordinary shares with par value of RMB1.00 each were issued and
allotted to the respective owners of the Company according to the paid-in capital registered
under these equity holders on that day. For the purpose of computation of basic and diluted
(losses)/earnings per share, the weighted average number of ordinary shares in issue before
the conversion into a joint stock company was determined assuming the paid-in capital had
been fully converted into ordinary share deemed in issue at the same conversion ratio of 1:1
as upon conversion into joint stock company.
(ii) Diluted (losses)/earnings per share is calculated by adjusting the weighted average number of
ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. For
the years ended December 31, 2020 and 2021 and the nine months ended September 30, 2021
and 2022, the Company had redemption liabilities which are potential ordinary shares. As the
Group incurred losses for the years ended December 31, 2020 and 2021 and nine months
ended September 30, 2021, the potential ordinary shares were not included in the calculation
of diluted (losses)/earnings per share as their inclusion would be anti-dilutive. The potential
ordinary shares were not included in the calculation of diluted loss per share for the nine
months ended September 30, 2022 either, as their inclusion would be anti-dilutive.
Accordingly, diluted (losses)/earnings per share for the years ended December 31, 2020 and
2021 and nine months ended September 30, 2021 and 2022 are the same as basic
(losses)/earnings per share of the respective years/periods.
– I-46 –
14 Property, plant and equipment
The Group
Equipment
Electronic and furniture Construction Leasehold
Buildings equipment fixtures Vehicle in progress improvements Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At January 1, 2020
Cost . . . . . . . . . . . . . . . . . . . . 7,669 12,735 67,273 3,008 118,817 47,160 256,662
Accumulated depreciation . . . . . . . . . (1,031) (7,864) (23,493) (2,751) — (6,103) (41,242)
Impairment . . . . . . . . . . . . . . . . — — — — — (439) (439)
Net book amount . . . . . . . . . . . . . 6,638 4,871 43,780 257 118,817 40,618 214,981
Year ended December 31, 2020
Opening net book amount . . . . . . . . . 6,638 4,871 43,780 257 118,817 40,618 214,981
Additions . . . . . . . . . . . . . . . . . — 2,243 10,398 613 17,903 — 31,157
Transfers from constructions in progress . 115,009 — — — (131,052) 16,043 —
Depreciation charge (Note 9) . . . . . . . (1,303) (2,800) (14,067) (272) — (12,372) (30,814)
Disposals . . . . . . . . . . . . . . . . . — (19) (23) — — — (42)
Impairment (Note 9). . . . . . . . . . . . — — — — — (2,197) (2,197)
Closing net book amount . . . . . . . . 120,344 4,295 40,088 598 5,668 42,092 213,085
Cost . . . . . . . . . . . . . . . . . . . . 122,678 14,865 77,372 3,522 5,668 63,203 287,308
Impairment . . . . . . . . . . . . . . . . — — — — — (2,636) (2,636)
Net book amount . . . . . . . . . . . . . 120,344 4,295 40,088 598 5,668 42,092 213,085
Additions . . . . . . . . . . . . . . . . . 2,870 3,240 17,645 452 10,135 — 34,342
Additions from acquisition of
subsidiaries (Note 30). . . . . . . . . . — 41 58 — — 300 399
Transfers from construction in progress . — — — — (13,412) 13,412 —
Disposals . . . . . . . . . . . . . . . . . — (24) (52) — — — (76)
Impairment (Note 9). . . . . . . . . . . . — — — — — (1,252) (1,252)
Closing net book amount . . . . . . . . 117,579 4,852 41,362 894 2,391 39,868 206,946
Cost . . . . . . . . . . . . . . . . . . . . 125,548 18,118 94,581 3,648 2,391 76,538 320,824
Impairment . . . . . . . . . . . . . . . . — — — — — (3,511) (3,511)
Net book amount . . . . . . . . . . . . . 117,579 4,852 41,362 894 2,391 39,868 206,946
– I-47 –
Equipment
(Unaudited)
Nine months ended September 30,
2022
Additions . . . . . . . . . . . . . . . . . — 1,187 6,833 — 7,993 — 16,013
Disposals . . . . . . . . . . . . . . . . . — — (44) — — — (44)
Impairment (Note 9). . . . . . . . . . . . — — — — — (2,497) (2,497)
Closing net book amount . . . . . . . . 113,154 3,325 37,605 733 — 35,201 190,018
Cost . . . . . . . . . . . . . . . . . . . . 125,548 19,305 99,376 3,648 — 84,992 332,869
Impairment . . . . . . . . . . . . . . . . — — — — — (4,077) (4,077)
Net book amount . . . . . . . . . . . . . 113,154 3,325 37,605 733 — 35,201 190,018
(a) Depreciation of property, plant and equipment has been charged to the consolidated
statements of comprehensive income as follows:
Nine months ended

2020 2021 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Selling and marketing expenses. . . . . . 27,864 36,915 27,475 27,221
General and administrative expenses . . 2,947 2,419 1,787 3,135
Research and development expenses . . 3 218 144 44
30,814 39,552 29,406 30,400
(b) Pledged of assets
The buildings were located in the PRC. Buildings with net book amount of RMB114,070,000,
RMB111,671,000 and RMB107,520,000 as at December 31, 2020 and 2021 and September 30,
2022 were pledged as collateral for the Group’s bank borrowings (Note 25).
– I-48 –
The Company
Equipment
At January 1, 2020
Cost . . . . . . . . . . . . . . . . . . . . 5,416 5,853 29,051 93 14,551 17,314 72,278
Accumulated depreciation . . . . . . . . . (68) (3,349) (10,023) (89) — (1,615) (15,144)
Impairment . . . . . . . . . . . . . . . . — — — — — (414) (414)
Net book amount . . . . . . . . . . . . . 5,348 2,504 19,028 4 14,551 15,285 56,720
Additions . . . . . . . . . . . . . . . . . — 622 2,316 — 10,717 — 13,655
Transfers from construction in progress . 14,024 — — — (24,741) 10,717 —
Depreciation charge . . . . . . . . . . . . (368) (1,502) (6,091) (3) — (4,623) (12,587)
Disposals . . . . . . . . . . . . . . . . . — — (10) — — — (10)
Impairment . . . . . . . . . . . . . . . . — — — — — (850) (850)
Closing net book amount . . . . . . . . 19,004 1,624 15,243 1 527 20,529 56,928
At December 31, 2020 . . . . . . . . . .
Cost . . . . . . . . . . . . . . . . . . . . 19,440 6,402 31,332 93 527 28,031 85,825
Impairment . . . . . . . . . . . . . . . . — — — — — (1,264) (1,264)
Net book amount . . . . . . . . . . . . . 19,004 1,624 15,243 1 527 20,529 56,928
Opening net book amount . . . . . . . . . 19,004 1,624 15,243 1 527 20,529 56,928
Additions . . . . . . . . . . . . . . . . . — 564 3,889 — 332 — 4,785
Transfers from construction in progress . — — — — (332) 332 —
Depreciation charge . . . . . . . . . . . . (547) (1,095) (6,918) (1) — (5,430) (13,991)
Disposals . . . . . . . . . . . . . . . . . — — (23) — — — (23)
Impairment . . . . . . . . . . . . . . . . — — — — — (362) (362)
Closing net book amount . . . . . . . . 18,457 1,093 12,191 — 527 15,069 47,337
Cost . . . . . . . . . . . . . . . . . . . . 19,440 6,966 34,777 4 527 28,158 89,872
Impairment . . . . . . . . . . . . . . . . — — — — — (1,420) (1,420)
Net book amount . . . . . . . . . . . . . 18,457 1,093 12,191 — 527 15,069 47,337
– I-49 –
Equipment
(Unaudited)
2022
Opening net book amount . . . . . . . . . 18,457 1,093 12,191 — 527 15,069 47,337
Additions . . . . . . . . . . . . . . . . . — 107 1,901 — 3,372 — 5,380
Depreciation charge . . . . . . . . . . . . (707) (567) (4,356) — — (4,823) (10,453)
Disposals . . . . . . . . . . . . . . . . . — — (7) — — — (7)
Impairment . . . . . . . . . . . . . . . . — — — — — (1,025) (1,025)
Closing net book amount . . . . . . . . 17,750 633 9,729 — — 13,120 41,232
Cost . . . . . . . . . . . . . . . . . . . . 19,440 7,073 36,670 4 — 31,014 94,201
Accumulated depreciation . . . . . . . . . (1,690) (6,440) (26,941) (4) — (16,492) (51,567)
Impairment . . . . . . . . . . . . . . . . — — — — — (1,402) (1,402)
Net book amount . . . . . . . . . . . . . 17,750 633 9,729 — — 13,120 41,232
15 Leases
(a) Right-of-use assets
The Group
Leased properties
RMB’000
As at January 1, 2020
Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 796,501
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (161,880)
Net book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 634,621
Opening net book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 634,621
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169,243
Depreciation charge (Note 9). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (187,545)
Closing net book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 616,319
Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 891,087
Net book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 616,319
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244,985
Additions from acquisition of subsidiaries (Note 30) . . . . . . . . . . . . . . . . . . . . . . 3,003
– I-50 –
Leased properties
RMB’000
Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,055,443
Net book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 668,829
(Unaudited)
Year ended September 30, 2022
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,880
Lease termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,456)
Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,046,709
Net book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 607,547
(i) The amounts recognised in the consolidated statements of comprehensive income and cash
flows are as follows:
Nine months ended

2020 2021 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Depreciation (Note 9) . . . . . . . . . . . . . 187,545 195,478 144,017 156,706
Interest expenses (Note 11) . . . . . . . . . 26,694 27,643 20,412 20,549
214,239 223,121 164,429 177,255
The cash outflow for leases as
financing activities. . . . . . . . . . . . . . 201,055 223,552 173,991 172,391
(ii) Depreciation of right-of-use assets has been charged to the consolidated statements of
comprehensive income as follows:
Nine months ended

2020 2021 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Selling and marketing expenses. . . . . . 181,771 188,733 138,816 151,255
Cost of revenue . . . . . . . . . . . . . . . . . . 159 226 150 204
Total . . . . . . . . . . . . . . . . . . . . . . . . . 187,545 195,478 144,017 156,706
– I-51 –
The Company
Leased properties
RMB’000
As at January 1, 2020
Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340,855
Net book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271,961
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,203
Depreciation charge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (77,847)
Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 368,914
Net book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255,317
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83,016
Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 418,449
Net book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262,086
(Unaudited)
Year ended September 30, 2022
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,306
Lease termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,032)
Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 427,600
Net book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242,804
– I-52 –
(b) Lease liabilities
The Group
(i) Lease liabilities recognised in the consolidated balance sheets:
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
Lease liabilities
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138,287 155,426 158,762
Non-current . . . . . . . . . . . . . . . . . . . . . . . . . 421,553 456,146 396,392
559,840 611,572 555,154
(ii) The following table shows the remaining contractual maturities of the Group’s lease liabilities
at the end of each reporting period:
As at December 31, As at September 30,

2020 2021 2022
Present value Present value Present value
of the of the of the
minimum lease Total minimum minimum lease Total minimum minimum lease Total minimum
payments lease payments payments lease payments payments lease payments
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Within 1 year . . .... . . . . . . . . . . 138,287 161,324 155,426 180,285 158,762 180,960
Between 1 and 2 years . . . . . . . . . . 111,225 128,233 125,675 144,035 127,312 142,944
Over 5 years. . . .... . . . . . . . . . . 94,966 101,169 77,758 83,290 47,819 51,278
559,840 632,978 611,572 686,563 555,154 615,861
Less: total future interest expenses . . . (73,138) (74,991) (60,707)
Present value of lease liabilities . . . . . 559,840 611,572 555,154
The Company
(i) Lease liabilities recognised in the Company’s balance sheets:
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
Lease liabilities
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,460 57,781 62,271
Non-current . . . . . . . . . . . . . . . . . . . . . . . . . 177,942 182,034 161,082
234,402 239,815 223,353
– I-53 –
(ii) The following table shows the remaining contractual maturities of the Company’s lease
liabilities at the end of each reporting period:
As at December 31, As at September 30,

2020 2021 2022
Present value Present value Present value
of the of the of the
minimum lease Total minimum minimum lease Total minimum minimum lease Total minimum
payments lease payments payments lease payments payments lease payments
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Within 1 year . . .... . . . . . . . . . . 56,460 66,166 57,781 67,680 62,271 71,236
Over 5 years. . . .... . . . . . . . . . . 44,690 46,982 32,255 33,607 16,929 17,396
234,402 265,343 239,815 269,282 223,353 247,201
Less: total future interest expenses . . . (30,941) (29,467) (23,848)
Present value of lease liabilities . . . . . 234,402 239,815 223,353
16 Intangible assets
The Group
Pharmaceutical
operation
Software license Trademarks Total
RMB’000 RMB’000 RMB’000 RMB’000
At January 1, 2020
Cost . . . . . . . . . . . . . . . . . . . . . . . . . . 6,669 — 15 6,684
Accumulated amortisation . . . . . . . . . . (2,707) — (2) (2,709)
Net book value . . . . . . . . . . . . . . . . . . 3,962 — 13 3,975
Opening net book value . . . . . . . . . . . 3,962 — 13 3,975
Additions . . . . . . . . . . . . . . . . . . . . . . 12,500 — — 12,500
Amortisation charge (Note 9) . . . . . . . (1,541) — (3) (1,544)
Closing net book value . . . . . . . . . . . . 14,921 — 10 14,931
Cost . . . . . . . . . . . . . . . . . . . . . . . . . . 18,849 — 15 18,864
Accumulated amortisation . . . . . . . . . . (3,928) — (5) (3,933)
Net book value . . . . . . . . . . . . . . . . . . 14,921 — 10 14,931
– I-54 –
Pharmaceutical
operation
Software license Trademarks Total
RMB’000 RMB’000 RMB’000 RMB’000
Opening net book value . . . . . . . .... 14,921 — 10 14,931
Additions . . . . . . . . . . . . . . . . . . .... 4,758 — 53 4,811
Additions from acquisition of
subsidiaries (Note 30) . . . . . . . .... — 2,479 — 2,479
Amortisation charge (Note 9) . . . .... (2,439) (207) (6) (2,652)
Disposal . . . . . . . . . . . . . . . . . . . .... (1,365) — — (1,365)
Closing net book value . . . . . . . . . . . . 15,875 2,272 57 18,204
Cost . . . . . . . . . . . . . . . . . . . . . . . . . . 20,049 2,479 68 22,596
Accumulated amortisation . . . . . . . . . . (4,174) (207) (11) (4,392)
Net book value . . . . . . . . . . . . . . . . . . 15,875 2,272 57 18,204
(Unaudited)
2022
Opening net book value . . . . . . ..... 15,875 2,272 57 18,204
Additions . . . . . . . . . . . . . . . . . ..... 1,857 — 102 1,959
Amortisation charge (Note 9) . . ..... (1,518) (186) (9) (1,713)
Closing net book value . . . . . . . . . . . . 16,214 2,086 150 18,450
Cost . . . . . . . . . . . . . . . . . . . . . . . . . . 21,906 2,479 170 24,555
Accumulated amortisation . . . . . . . . . . (5,692) (393) (20) (6,105)
Net book value . . . . . . . . . . . . . . . . . . 16,214 2,086 150 18,450
(a) Amortisation of intangible assets has been charged to the consolidated statements of
Nine months ended

2020 2021 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Selling and marketing expenses. . . . . . 222 681 501 640
1,544 2,652 2,732 1,713
– I-55 –
The Company
Software Trademarks Total

RMB’000 RMB’000 RMB’000
At January 1, 2020
Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,068 — 6,068
Accumulated amortisation . . . . . . . . . . . . . . (2,618) — (2,618)
Net book value . . . . . . . . . . . . . . . . . . . . . . 3,450 — 3,450
Opening net book value . . . . . . . . . . . . . . . 3,450 — 3,450
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . 10,714 — 10,714
Amortisation charge . . . . . . . . . . . . . . . . . . (1,391) — (1,391)
Closing net book value . . . . . . . . . . . . . . . . 12,773 — 12,773
Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,462 — 16,462
Accumulated amortisation . . . . . . . . . . . . . . (3,689) — (3,689)
Net book value . . . . . . . . . . . . . . . . . . . . . . 12,773 — 12,773
Opening net book value . . . . . . . . . . . . . . . 12,773 — 12,773
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . 4,141 53 4,194
Amortisation charge . . . . . . . . . . . . . . . . . . (2,463) (3) (2,466)
Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . (594) — (594)
Closing net book value . . . . . . . . . . . . . . . . 13,857 50 13,907
Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,841 53 17,894
Accumulated amortisation . . . . . . . . . . . . . . (3,984) (3) (3,987)
Net book value . . . . . . . . . . . . . . . . . . . . . . 13,857 50 13,907
(Unaudited)
Nine months ended September 30, 2022
Opening net book value . . . . . . ... ...... 13,857 50 13,907
Additions . . . . . . . . . . . . . . . . . ... ...... 1,134 50 1,184
Amortisation charge . . . . . . . . . ... ...... (1,377) (5) (1,382)
Closing net book value . . . . . . . . . . . . . . . . 13,614 95 13,709
Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,975 103 19,078
Accumulated amortisation . . . . . . . . . . . . . . (5,361) (8) (5,369)
Net book value . . . . . . . . . . . . . . . . . . . . . . 13,614 95 13,709
– I-56 –
17 Inventories
The Group
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
Prescription and OTC drugs . . . . . . . . . ... 354,446 475,807 470,748
Medical devices . . . . . . . . . . . . . . . . . . ... 20,947 25,195 27,148
Traditional Chinese medicine decoction
pieces . . . . . . . . . . . . . . . . . . . . . . . . ... 15,760 19,545 19,005
Wellness products . . . . . . . . . . . . . . . . . ... 10,585 15,591 16,135
Others . . . . . . . . . . . . . . . . . . . . . . . . . . ... 6,421 12,343 13,551
408,159 548,481 546,587
Less: provision for impairment . . . . . . . . . . (1,294) (2,966) (4,017)
406,865 545,515 542,570
For the years ended December 31, 2020 and 2021 and the nine months ended September 30,
2021 and 2022, the cost of inventories recognised as expenses included in cost of revenue
amounted to approximately RMB1,089,983,000, RMB1,272,839,000, RMB942,785,000 and
RMB1,059,618,000, respectively.
The Company
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
Prescription and OTC drugs . . . . . . . . . ... 76,484 91,980 90,379
Traditional Chinese medicine decoction
pieces . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,814 5,364 5,117
Medical devices . . . . . . . . . . . . . . . . . . . . . 4,777 5,884 5,986
Wellness products . . . . . . . . . . . . . . . . . . . . 2,725 3,823 3,459
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,461 2,448 2,859
90,261 109,499 107,800
Less: provision for impairment . . . . . . . . . . (352) (879) (1,164)
89,909 108,620 106,636
– I-57 –
18 Trade receivables
The Group
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
customers
— Third parties. . . . . . . . . . . . . . . . . . . . . . 128,125 161,162 187,408
Less: provisions for impairment . . . . . . . . . (184) (688) (3,895)
127,941 160,474 183,513
The Group’s trade receivables were denominated in RMB and their carrying amounts
approximated their fair values.
Aging analysis of trade receivables based on the revenue recognition dates as follows:
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
Up to 6 months . . . . . . . . . . . . . . . . . . . . . . 127,741 156,429 171,505
7 to 12 months . . . . . . . . . . . . . . . . . . . . . . 216 3,007 13,172
Over 12 months. . . . . . . . . . . . . . . . . . . . . . 168 1,726 2,731
128,125 161,162 187,408
The Group applies the IFRS 9 simplified approach to measure expected credit losses and uses
life time expected loss allowance for all trade receivables. Note 3.1 (b) provides for details about
the calculation of the allowance.
The Company
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
customers
— Third parties. . . . . . . . . . . . . . . . . . . . . . 57,535 59,651 83,020
Less: provisions for impairment . . . . . . . . . (37) (251) (2,093)
57,498 59,400 80,927
– I-58 –
The Company’s trade receivables were denominated in RMB and their carrying amounts
approximated their fair values.
Aging analysis of trade receivables based on the revenue recognition date as follows:
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
Up to 6 months . . . . . . . . . . . . . . . . . . . . . . 57,535 57,746 73,804
7 to 12 months . . . . . . . . . . . . . . . . . . . . . . — 1,734 7,396
Over 12 months. . . . . . . . . . . . . . . . . . . . . . — 171 1,820
57,535 59,651 83,020
19 Prepayments and other receivables
The Group
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
Included in non-current assets
Prepayments
— Prepayments for leasehold
improvements . . . . . . . . . . . . . . . . . . . . . 856 4,980 5,105
— Prepayments for technical services . . . . . 2,520 3,353 4,795
— Others . . . . . . . . . . . . . . . . . . . . . . . . . . 801 459 388
4,177 8,792 10,288
Other receivables
— Deposits . . . . . . . . . . . . . . . . . . . . . . . . . 4,559 6,673 6,982
Non-current portion . . . . . . . . . . . . . . . . . . . 8,692 15,352 17,122
Included in current assets
Prepayments
— Prepayments for inventories . . . . . . .... 12,089 8,402 6,728
— Prepayments for [REDACTED]
expenses . . . . . . . . . . . . . . . . . . . . . . . [REDACTED] [REDACTED] [REDACTED]
— Deductible VAT . . . . . . . . . . . . . . . . . . . 23,450 17,010 2,568
— Prepayments for utilities expenses . . . . . 2,974 2,382 948
— Prepayments for technical services . . . . . 409 3,426 431
38,922 31,220 18,349
Other receivables
— Deposits . . . . . . . . ................. 6,031 7,698 7,929
— Amounts due from third-party payment
platforms . . . . . . ................. 8,065 7,783 6,301
— Others . . . . . . . . . ................. 1,138 1,866 1,725
15,234 17,347 15,955
Current portion . . . . . . . . . . . . . . . . . . . . . . 54,113 48,492 34,214
– I-59 –
As at December 31, 2020 and 2021 and September 30, 2022, the carrying amounts of other
receivables were primarily denominated in RMB and approximated their fair values. For the other
receivables, the Group applied 3-step model to assess the expected credit loss. Details are
disclosed in Note 3.1(b).
The Company
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
Included in non-current assets
Prepayments
— Prepayments for leasehold improvement . 259 4,599 5,105
— Prepayments for technical services . . . . . 1,948 1,806 2,140
— Others . . . . . . . . . . . . . . . . . . . . . . . . . . 311 1,796 737
2,518 8,201 7,982
Other receivables
— Deposits . . . . . . . . . . . . . . . . . . . . . . . . . 1,943 1,859 1,727
Non-current portion . . . . . . . . . . . . . . . . . . . 4,443 10,028 9,669
Included in current assets
Prepayments
— Prepayments for [REDACTED]
expenses . . . . . . . . . . . . . . . . . . . . . . . [REDACTED] [REDACTED] [REDACTED]
— Prepayments for utilities expenses and
others . . . . . . . . . . . . . . . . . . . . . . . . . 763 1,409 667
763 1,409 8,341
Other receivables
— Amounts due from third-party payment
platforms . . . . . . ................. 4,955 4,293 3,720
— Deposits . . . . . . . . ................. 277 399 182
— Others . . . . . . . . . ................. 400 428 354
5,632 5,120 4,256
Current portion . . . . . . . . . . . . . . . . . . . . . . 6,384 6,510 12,574
– I-60 –
20 Cash and cash equivalents and restricted cash
Cash and cash equivalents
The Group
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
Cash at bank . . . . . . . . . . . . . . . . . . . . . . . 327,930 335,974 326,743
Cash on hand . . . . . . . . . . . . . . . . . . . . . . . 1,211 1,391 1,138
329,141 337,365 327,881
Less: restricted cash (i) . . . . . . . . . . . . . . . . (274,319) (312,463) (256,123)
The Company
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
Cash at bank . . . . . . . . . . . . . . . . . . . . . . . 65,550 3,177 28,216
Cash on hand . . . . . . . . . . . . . . . . . . . . . . . 422 520 393
65,972 3,697 28,609
Less: restricted cash (i) . . . . . . . . . . . . . . . . (55,506) — (20,001)
Cash and cash equivalents, including cash on hand and cash at bank are all denominated in
RMB.
(i) Restricted cash
As at December 31, 2020 and 2021 and September 30, 2022, the restricted cash were
guarantee deposits for notes payables. Restricted cash are all denominated in RMB.
– I-61 –
21 Financial instruments by category
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
Financial assets at amortised cost:
Trade receivables (Note 18). . . . . . . . . . . . . 127,941 160,474 183,513
Other receivables (Note 19). . . . . . . . . . . . . 19,706 23,832 22,699
Restricted cash (Note 20) . . . . . . . . . . . . . . 274,319 312,463 256,123
Cash and cash equivalents (Note 20) . . . . . . 54,822 24,902 71,758
476,788 521,671 534,093
Financial liabilities at amortised cost:
Borrowings (Note 25) . . . . . . . . . . . . . . . . . 76,790 81,507 86,606
Trade and notes payables (Note 26). . . . . . . 674,526 840,062 772,204
Accrual and other payables (excluding VAT
payables and other taxes payable and
payroll and welfare benefit payables)
(Note 27) . . . . . . . . . . . . . . . . . . . . . . . . . 14,402 14,251 18,264
Lease liabilities (Note 15) . . . . . . . . . . . . . . 559,840 611,572 555,154
Redemption liabilities (Note 28) . . . . . . . . . 335,602 376,384 —
1,661,160 1,923,776 1,432,228
22 Paid-in capital
The Group and the Company
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . 123,457 123,457 123,457
A summary of movements in the Company’s paid-in capital is as follows:
Paid-in capital
RMB’000
At January 1, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117,284
Capital injection and contribution from Jiangsu Zijin Hongyun (a) . . . . . . . . . . . 6,173
At December 31, 2020 and 2021 and September 30, 2022 . . . . . . . . . . . . . . . . 123,457
(a) On March 2, 2020, the Company received capital injection in cash of RMB94,444,000 from
Jiangsu Zijin Hongyun, of which RMB6,173,000 was recorded as paid-in capital and
RMB88,271,000 was recorded as capital surplus (Note 23).
– I-62 –
23 Treasury stock and reserves
The Group
Reserves
Treasury Capital Share-based Other
stock (a) surplus compensation reserves Total
As at January 1, 2020 . . . . . . . . . . (176,332) 177,160 1,171 300 178,631
Capital injection from Jiangsu Zijin
Hongyun (Note 22) . . . . . . . . . . . — 88,271 — — 88,271
Transfer from financial liabilities at
fair value through profit or loss
upon completion of capital
injection (b) . . . . . . . . . . . . . . . . — 14,072 — — 14,072
Recognition of redemption liabilities
(Note 28). . . . . . . . . . . . . . . . . . (86,778) — — — —
(Note 24). . . . . . . . . . . . . . . . . . — — 1,171 — 1,171
As at December 31, 2020. . . . . . . . (263,110) 279,503 2,342 300 282,145
As at January 1, 2021 . . . . . . . . . . (263,110) 279,503 2,342 300 282,145
(Note 24). . . . . . . . . . . . . . . . . . — — 1,171 — 1,171
As at December 31, 2021. . . . . . . . (263,110) 279,503 3,513 300 283,316
(Unaudited)
As at January 1, 2022 . . . . . . . . . . (263,110) 279,503 3,513 300 283,316
(Note 24). . . . . . . . . . . . . . . . . . — — (87) — (87)
Derecognition of redemption
liabilities (Note 28) . . . . . . . . . . . 263,110 143,769 — — 143,769
Addition from acquisition of a
subsidiary under common control . — — — (5,725) (5,725)
As at September 30, 2022 . . . . . . . — 423,272 3,426 (5,425) 421,273
(Unaudited)
As at January 1, 2021 . . . . . . . . . . (263,110) 279,503 2,342 300 282,145
(Note 24). . . . . . . . . . . . . . . . . . — — 878 — 878
As at September 30, 2021 . . . . . . . (263,110) 279,503 3,220 300 283,023
– I-63 –
The Company
Reserves
Treasury Capital Share-based
stock (a) surplus compensation Total
RMB’000 RMB’000 RMB’000 RMB’000
As at January 1, 2020 . . . . . . . . . . . . (176,332) 177,160 1,171 178,331
Capital injection from Jiangsu Zijin
Hongyun (Note 22) . . . . . . . . . . . . . — 88,271 — 88,271
Transfer from financial liabilities
at fair value through profit or loss
upon completion of capital
injection (b) . . . . . . . . . . . . . . . . . . . — 14,072 — 14,072
Recognition of redemption liabilities
(Note 28) . . . . . . . . . . . . . . . . . . . . . (86,778) — — —
(Note 24) . . . . . . . . . . . . . . . . . . . . . — — 1,171 1,171
As at December 31, 2020 . . . . . . . . . . (263,110) 279,503 2,342 281,845
As at January 1, 2021 . . . . . . . . . . . . (263,110) 279,503 2,342 281,845
(Note 24) . . . . . . . . . . . . . . . . . . . . . — — 1,171 1,171
As at December 31, 2021 . . . . . . . . . . (263,110) 279,503 3,513 283,016
(Unaudited)
As at January 1, 2022 . . . . . . . . . . . . (263,110) 279,503 3,513 283,016
(Note 24) . . . . . . . . . . . . . . . . . . . . . — — (87) (87)
Derecognition of redemption liabilities
(Note 28) . . . . . . . . . . . . . . . . . . . . . 263,110 143,769 — 143,769
As at September 30, 2022 . . . . . . . . . — 423,272 3,426 426,698
(Unaudited)
As at January 1, 2021 . . . . . . . . . . . . (263,110) 279,503 2,342 281,845
(Note 24) . . . . . . . . . . . . . . . . . . . . . — — 878 878
As at September 30, 2021 . . . . . . . . . (263,110) 279,503 3,220 282,723
(a) Treasury stock is recorded to reflect the carrying amount of the redemption liabilities when it
is initially reclassified from equity, and will be reversed when the redemption liabilities are
derecognised upon when the Group’s obligations in connection with those redemption
liabilities are discharged, cancelled or have expired, which will then be reclassified back to
equity. Details of the redemption liabilities have been set out in Note 28.
(b) Pursuant to a capital increase agreement entered into among the Company, the then
shareholders of the Company and Ali Health on December 24, 2018, Ali Health agreed to (i)
make capital injection of RMB94,444,000 to the Company and (ii) commit to make or
designate an affiliate to make another capital injection of RMB94,444,000 (the “Capital
Injection Commitment”). The Group initially recognised the Capital Injection Commitment
as financial liabilities at fair value through profit or loss and subsequently measured these
liabilities at fair value. On December 19, 2019, Ali Health designated its affiliate, Jiangsu
– I-64 –
Zijin Hongyun to make the Capital Injection Commitment of RMB94,444,000. Upon

completion of the capital injection made by Jiangsu Zijin Hongyun on March 2, 2020, the
then fair value of the financial liabilities at fair value through profit or loss of
RMB14,072,000 was transferred to capital surplus.
24 Share-based payments
Share-based compensations are provided to certain directors, mid-level and senior

management and employees of the Group via its ESOP for the purpose of attracting and retaining
the best personnel and to provide additional incentive to promote the business, which includes the
grant of restricted stock units (“RSUs”) through Zhejiang Changqi. Mr. Long Yan is the general
partner of Zhejiang Changqi and has the power to manage its operations, to act on its behalf
externally and to exercise all voting rights held by it in investee companies. As the Group does not
have power to govern the relevant activities of Zhejiang Changqi nor having the repurchase or
settlement obligations to acquire any shares granted under the ESOP, the directors of the Company
consider that it is appropriate not to consolidate Zhejiang Changqi.
On December 7, 2018, 1,111,000 RSUs were granted to certain directors, mid-level and
senior management and employees at a consideration of RMB5.0 per RSU as rewards for their
services, full time devotion and professional expertise to the Company and certain of its
subsidiaries.
On January 12, 2019, 1,333,000 RSUs were granted to certain directors, mid-level and senior
management and employees at a consideration of RMB5.2 per RSU as rewards for their services,
full time devotion and professional expertise to the Company and certain of its subsidiaries.
These grantees’ interests in the granted RSUs are held through their proportionate partnership
interests in Zhejiang Changqi as limited partners. Pursuant to the limited partnership agreement of
Zhejiang Changqi, all equity interests owned by each grantee will be vested and released after the
6th anniversary of the grant, subject to him/her continuing to be an employee of the Group.
(a) Set out below are summary of RSUs granted:

2020 2021 2021 2022
Average Average Average Average
exercise exercise exercise exercise
price per Number price per Number price per Number price per Number
shares of RSUs shares of RSUs shares of RSUs shares of RSUs
RMB Thousand RMB Thousand RMB Thousand RMB Thousand
As at beginning of year/period . . 5.11 2,444 5.11 2,444 5.11 2,444 5.11 2,444
Forfeited during the year/period. . — — — — — — 5.20 (556)
As at end of year/period. . . . . . 5.11 2,444 5.11 2,444 5.11 2,444 5.08 1,888
– I-65 –
(b) Fair value of RSUs granted
Based on fair value of the underlying equity instruments, the Group independently
determined the fair value of RSUs at grant date using Back-solve Method and Equity Allocation
Method that takes into account the exercise price, fair value of ordinary shares at the grant date,
the term of the option, the expected volatility, the risk-free interest rate. Key assumptions are set
as below:
key assumptions
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.00%
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.94%
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47.22%
(c) Expenses for the share-based payments have been charged to the consolidated statements of
Nine months ended

2020 2021 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
General and administrative expenses . . 1,171 1,171 878 (87)
25 Borrowings
The Group
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
Included in non-current liabilities
Secured
Bank borrowings (a) . . . . . . . . . . . . . . . . . . 46,790 41,507 37,351
Less: current portion . . . . . . . . . . . . . . . . . . (5,282) (5,581) (5,813)
Subtotal. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,508 35,926 31,538
Included in current liabilities
Secured
borrowings (a) . . . . . . . . . . . . . . . . . . . . . 5,282 5,581 5,813
Short-term borrowings (b) . . . . . . . . . . . . . . 20,000 40,000 49,255
Subtotal. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,282 45,581 55,068
Unsecured
Short-term borrowings (b) . . . . . . . . . . . . . . 10,000 — —
Total borrowings . . . . . . . . . . . . . . . . . . . . 76,790 81,507 86,606
– I-66 –
As at December 31, 2020 and 2021 and September 30, 2022, the Group’s borrowings were
repayable as follows:
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
Within 1 year . . . . . . . . . . . . . . . . . . . . . . . 35,282 45,581 55,068
Between 1 and 2 years . . . . . . . . . . . . . . . . 6,486 6,656 6,846
Over 5 years . . . . . . . . . . . . . . . . . . . . . . . . 15,555 9,294 4,144
76,790 81,507 86,606
(a) Long-term borrowing of RMB5,514,000, RMB4,856,000 and RMB4,338,000 as at December

31, 2020 and 2021 and September 30, 2022, respectively, was secured by buildings with net
book amount of RMB13,912,000, RMB13,623,000 and RMB13,108,000. Mr. Long Yan, Mr.
Long Yun and Gansu Deshengtang Pharmaceutical Wholesale Co., Ltd. were the guarantors of
the long-term bank borrowing with irrevocable joint guarantee liabilities. The principal and
interests are paid monthly. Maturity date for the long-term borrowing is January 16, 2028.
Long-term borrowing of RMB21,137,000, RMB18,616,000 and RMB16,630,000 as at

December 31, 2020 and 2021 and September 30, 2022, respectively, was secured by buildings
with net book amount of RMB53,355,000, RMB52,231,000 and RMB50,294,000. Mr. Long
Yan, Ms. Liu Yuxiang, Mr. Long Jizhong and the Company were the guarantors of the
long-term bank borrowing with irrevocable joint guarantee liabilities. The principal and
Long-term borrowing of RMB18,729,000, RMB16,772,000 and RMB15,236,000 as at

December 31, 2020 and 2021 and September 30, 2022, respectively, was secured by buildings
with net book amount of RMB43,533,000, RMB42,616,000 and RMB41,036,000. Mr. Long
Yan, Ms. Lou Yunying and the Company were the guarantors of the long-term bank
borrowing with irrevocable joint guarantee liabilities. The principal and interests are paid
monthly. Maturity date for the long-term borrowing is October 18, 2028.
Long-term borrowing of RMB1,410,000, RMB1,263,000 and RMB1,147,000 as at December

book amount of RMB3,270,000, RMB3,201,000 and RMB3,082,000. Mr. Long Yan, Ms. Lou
Yunying and the Company were the guarantors of the long-term bank borrowing with
irrevocable joint guarantee liabilities. The principal and interests are paid monthly. Maturity
date for the long-term borrowing is October 19, 2028.
– I-67 –
(b) Mr. Long Yan and the Company were the guarantors of the Group’s aforementioned secured
short-term bank borrowings of RMB20,000,000 and RMB20,000,000 as at December 31,
2020 and September 30, 2022 respectively with irrevocable joint guarantee liabilities. Mr.
Long Yan and Gansu Deshengtang Pharmaceutical Wholesale Co., Ltd. were the guarantors of
the Group’s aforementioned secured short-term bank borrowings of RMB20,000,000 as at
December 31, 2021 with irrevocable joint guarantee liabilities. Mr. Long Yan and Ms. Lou
Yunying, were the guarantors of the Group’s aforementioned secured short-term bank
borrowings of RMB10,000,000 as at September 30, 2022 with irrevocable joint guarantee
liabilities.
As at December 31, 2021, trade receivables of RMB20,000,000 were pledged as collateral for
short-term borrowings of RMB20,000,000, and Mr. Long Yan and Gansu Deshengtang
Pharmaceutical Wholesale Co., Ltd. were the guarantors.
As at September 30, 2022, notes receivables of RMB20,000,000 of Gansu Deshengtang

Pharmaceutical Wholesale Co., Ltd. were pledged as collateral for the Group’s short-term
borrowing of RMB19,255,000.
(c) As at December 31, 2020 and 2021 and September 30, 2022, the fair value of borrowings
approximated their carrying amounts.
(d) As at December 31, 2020 and 2021 and September 30, 2022, the weighted average annual
interest rate of long-term borrowings was 5.86%, 5.83% and 4.33%, respectively.
As at December 31, 2020 and 2021 and September 30, 2022, the weighted average annual
interest rate of short-term borrowings was 4.63%, 3.68% and 3.51%, respectively.
The Company
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
Including in non-current liabilities
Secured
Bank borrowings (a) . . . . . . . . . . . . . . . . . . 5,514 4,856 4,338
Less: current portion . . . . . . . . . . . . . . . . . . (658) (695) (723)
Subtotal. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,856 4,161 3,615
Including in current liabilities
Secured
borrowings (a) . . . . . . . . . . . . . . . . . . . . . 658 695 723
Short-term borrowings (b) . . . . . . . . . . . . . . — 40,000 —
Subtotal. . . . . . . . . . . . . . . . . . . . . . . . . . . . 658 40,695 723
Total borrowings . . . . . . . . . . . . . . . . . . . . 5,514 44,856 4,338
– I-68 –
As at December 31, 2020 and 2021 and September 30, 2022, the Company’s borrowings were
repayable as follows:
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
Within 1 year . . . . . . . . . . . . . . . . . . . . . . . 658 40,695 723
Between 1 and 2 years . . . . . . . . . . . . . . . . 809 832 841
Over 5 years . . . . . . . . . . . . . . . . . . . . . . . . 1,619 832 252
5,514 44,856 4,338
(a) Long-term borrowing of RMB5,514,000, RMB4,856,000 and RMB4,338,000 as at December

book amount of RMB13,912,000, RMB13,623,000 and RMB13,108,000. Mr. Long Yan, Mr.
Long Yun and Gansu Deshengtang Pharmaceutical Wholesale Co., Ltd. were the guarantors of
the long-term bank borrowing with irrevocable joint guarantee liabilities. The principal and
(b) Mr. Long Yan and Gansu Deshengtang Pharmaceutical Wholesale Co., Ltd. were the
guarantors of the Company’s aforementioned secured short-term bank borrowing of
RMB20,000,000 as at December 31, 2021 with irrevocable joint guarantee liabilities.
As at December 31, 2021, trade receivables of RMB20,000,000 were pledged as collateral for
short-term borrowing of RMB20,000,000, and Mr. Long Yan and Gansu Deshengtang
Pharmaceutical Wholesale Co., Ltd. were the guarantors.
(c) As at December 31, 2020 and 2021 and September 30, 2022, the fair value of borrowings
approximated their carrying amounts.
(d) As at December 31, 2020 and 2021 and September 30, 2022, the weighted average annual
interest rate of the Company’s long-term borrowings was 5.72%, 5.70% and 4.23%,
respectively.
As at December 31, 2021, the weighted average annual interest rate of the Company’s
short-term borrowings was 2.81%.
– I-69 –
26 Trade and notes payables
The Group
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
Notes payables . . . . . . . . . . . . . . . . . . . . . . 499,016 508,327 441,150
Trade payables to third parties . . . . . . . . . . 175,510 331,735 331,054
674,526 840,062 772,204
Aging analysis of the trade and notes payables based on recognition at the respective balance
sheet dates were as follows:
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
Less than 1 year . . . . . . . . . . . . . . . . . . . . . 669,091 837,717 770,718
over 1 year . . . . . . . . . . . . . . . . . . . . . . . . . 5,435 2,345 1,486
674,526 840,062 772,204
The Company
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
Notes payables . . . . . . . . . . . . . . . . . . . . . . 95,268 — 60,000
Trade payables to third parties . . . . . . . . . . 117 642 1,441
95,385 642 61,441
Aging analysis of the Company’s trade and notes payables based on recognition at the
respective balance sheet dates were as follows:
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
Less than 1 year . . . . . . . . . . . . . . . . . . . . . 95,385 150 60,618
over 1 year . . . . . . . . . . . . . . . . . . . . . . . . . — 492 823
95,385 642 61,441
– I-70 –
As at December 31, 2020 and 2021 and September 30, 2022, the Group’s and the Company’s
trade and notes payables were denominated in RMB. The carrying amounts of trade and notes
payables were considered to be the same as their fair values.
27 Accruals and other payables
The Group
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
VAT payables and other taxes payable. . . . . 11,758 16,096 18,602
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,163 6,122 6,099
Payables for acquisition of subsidiaries . . . . — 993 993
and equipment . . . . . . . . . . . . . . . . . . . . . 3,955 3,297 848
charges and commissions . . . . . . . . . . . . . 495 1,101 695
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,789 2,738 2,509
51,456 58,695 63,349
The Company
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
VAT payables and other taxes payable. . . . . 7,016 9,572 9,454
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . 631 1,653 2,244
charges and commissions . . . . . . . . . . . . . 491 810 695
and equipment . . . . . . . . . . . . . . . . . . . . . 1,913 528 49
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313 335 331
17,193 20,574 27,202
As at December 31, 2020 and 2021 and September 30, 2022, the carrying amount of the
Group’s and the Company’s accruals and other payables were primarily denominated in RMB.
– I-71 –
28 Redemption liabilities
The Group and Company
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
Redemption liabilities . . . . . . . . . . . . . . . . . 335,602 376,384 —
Since the date of incorporation, the Company completed several rounds of financing
including Angel Round [REDACTED] Financing and Series A [REDACTED] Financing in the
way of capital increase of the Company. Pursuant to the shareholders agreements entered into with
each of the Angel Round [REDACTED] Financing Investors and the Series A [REDACTED]
Financing Investors, preferred rights are expected to be granted to these investors. The key terms
of the preferred rights are summarized as follows:
Redemption Right
The Angel Round [REDACTED] Financing Investors have a right to require Mr. Long Yan or
the Company to redeem their investments if the Company fails to achieve a qualified
[REDACTED] (“[REDACTED]”) prior to December 31, 2022 or 2023. The Series A
[REDACTED] Financing Investors have a right to require Mr. Long Yan or the Company to
redeem their investments if the Company fails to achieve a qualified [REDACTED] prior to
December 31, 2023. In addition, both these investors have a right to require the Company or Mr.
Long Yan, the Founder, to redeem their investments if (a) the Company or the Founder is
convicted by the judicial authority; (b) the labor relation between the Founder and the Group is
terminated; (c) the Company, the Founder or any other existing equity holders severely violates the
provisions of the transaction documents and imposed a significant adverse impact on the
Company’s operations; (d) the Company or Mr. Long Yan has integrity issues, i.e. fraud; (e) any of
the annual growth rate of the Group’s revenue from 2018 to 2020 is below 30%; or (f) auditors of
the Company do not issue standard unqualified opinion.
The redemption amount is the original investment principal from the Angel Round
[REDACTED] Financing Investors and the Series A [REDACTED] Financing Investors, plus an
annual rate of 10% of the original investment principal for a period of time commencing from the
relevant payment date of investments to the relevant payment date of redemption amount
(calculated as 365 days in a calendar year) and any declared but unpaid dividends or profits. Any
dividends or profits previously distributed to these investors shall be deducted from the redemption
amount.
Liquidation preferences
In the event of any liquidation, dissolution or winding up of the Company (the “Legal
Liquidation Event”), or a Deemed Liquidation Event I or a Deemed Liquidation Event II (as
defined in shareholders agreements), the Angel Round [REDACTED] Financing Investors and the
Series A [REDACTED] Financing Investors shall be entitled to receive the liquidation preference
amount, prior and in preference to any distribution of any of the assets or surplus funds of the
Company to Mr. Long Yan, Mr. Long Yun, Jinchang Changqi and Jinchang Yixueyuan.
– I-72 –
(i) Liquidation preference amount for Angel Round [REDACTED] Financing Investors
In the event of the Legal Liquidation Event, the liquidation preference amount of Angel
Round [REDACTED] Financing Investors is the original investment principal plus an annual rate
of 10% of the original investment principal for a period of time commencing from the relevant
payment date of investments to the relevant payment date of liquidation preference amount
(calculated as 365 days in a calendar year). Any dividends or profits previously distributed to
Angel Round [REDACTED] Financing Investors shall be deducted from the liquidation preference
amount. In the event of Deemed Liquidation Event I or Deemed Liquidation Event II, the
liquidation preference amount of Angel Round [REDACTED] Financing Investors is calculated
whichever higher of: (a) the distributable assets of the Company based on their equity interests
holding percentage and (b) the original investment principal plus an annual rate of 10%, 15%, 20%
or 25% of the original investment principal for a period of time commencing from the relevant
payment date of investments to the relevant payment date of liquidation preference amount
(calculated as 365 days in a calendar year). Any dividends or profits previously distributed to
Angel Round [REDACTED] Financing Investors shall be deducted from the liquidation preference
amount. The actual annual rate is determined by the overall company valuation in the Deem
Liquidation Event I or II.
(ii) Liquidation preference amount for Series A [REDACTED] Financing Investors
The liquidation preference amount of Series A [REDACTED] Financing Investors is

calculated whichever higher of: (a) the distributable assets of the Company based on their equity
interests holding percentage; (b) the original investment principal plus an annual rate of 10% of
the original investment principal for a period of time commencing from the relevant payment date
of investments to the relevant payment date of liquidation preference amount (calculated as 365
days in a calendar year), whereas any dividends or profits previously distributed to Series A
[REDACTED] Financing Investors shall be deducted from the liquidation preference amount; and
(c) 150% of the original investment principal.
(iii) Definition of Deemed Liquidation Event I and II
Deemed Liquidation Event I means any sale, lease, disposition or conveyance by the
Company of all or substantially all of the Company’s assets (excluding the licensing of intellectual
property assets to the franchisees during the Group’s daily operation). Deemed Liquidation Event
II means any merger, reorganisation, consolidation, equity transfer or other transactions resulting
in the Company acquired by other entity or after which change the substantial control of the
Company.
Anti-dilution Right
If the Company increases its paid-in capital at a price lower than the price paid by Angel
Round [REDACTED] Financing Investors and Series A [REDACTED] Financing Investors on a
per paid-in capital basis (The “New Low Financing”), the Angel Round [REDACTED] Financing
Investors and the Series A [REDACTED] Financing Investors have a right to require: (a) the
Founder to transfer the equity interests of the Company directly or indirectly held to these
investors at the lowest price allowed by the law; and (b) other arrangements allowed by the law, so
that the total amount paid by the investors divided by the total amount of paid-in capital obtained
is equal to the price per paid-in capital in the new issuance. The Company shall bear unlimited
joint and several liability for the Founder’s obligations under the new issuance.
– I-73 –
The redemption right and liquidation preferences granted to the investors constitute as the
Company’s obligations to repurchase its own equity instruments. These obligations were
recognised as redemption liabilities which are initially measured at fair value (representing the
present value of the expected cash flows for settling the related obligations if these rights are
exercised by the investors) and subsequently measured at amortised cost. The Company applied a
redemption discount rate ranged from 11.68% to 12.55% to determine the initial recognition
amount of the redemption liabilities. The anti-dilution right is a derivative financial instrument
measured at fair value through profit or loss, of which the fair value was considered close to nil as
the directors of the Company expects the New Low Financing would never occur.
Pursuant to the preferred rights termination agreement as entered into with respective investor
on August 31, 2022, the Angel Round [REDACTED] Financing Investors and the Series A
[REDACTED] Financing Investors agreed to terminate abovementioned preferred rights. As a
result, the balance of all redemption liabilities were reclassified to equity upon termination.
The movements of redemption liabilities for the years ended December 31, 2020 and 2021
and the nine months ended September 30, 2021 and 2022 are set out below:
The Group and Company
Redemption
liabilities
RMB’000
As at January 1, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212,464
Recognition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,778
Charged to finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,360
As at December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335,602
As at January 1, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335,602
As at December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 376,384
(Unaudited)
As at January 1, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 376,384
Derecognition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (406,879)
As at September 30, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
(Unaudited)
As at January 1, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335,602
As at September 30, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 366,189
– I-74 –
29 Deferred income tax
The Group
Deferred income tax assets
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
Deferred income tax assets (i):
— to be recovered within 12 months. . . . . . 14,333 4,036 4,449
— to be recovered more than 12 months . . . 54,831 2,878 1,264
69,164 6,914 5,713
Deferred income tax liabilities (ii):
— To be settled within 12 months. . . . . . . . 26,603 16,112 14,750
— To be settled after 12 months . . . . . . . . . 47,002 506 460
73,605 16,618 15,210
Offset of deferred income tax liabilities
pursuant to set-off provisions. . . . . . . . . . (63,240) (208) (809)
Net deferred income tax assets . . . . . . . . . . 5,924 6,706 4,904
Net deferred income tax liabilities . . . . . . . 10,365 16,410 14,401
(i) Deferred income tax assets:

The balance comprises temporary
differences attribute to:
— Tax losses . . . . . . . . . . . . . . . . . . . . 711 3,385 2,636
— Unrealised profit . . . . . . . . . . . . . . . 725 1,310 2,163
— Impairment loss for inventories . . . 167 312 472
— Impairment loss for property, plant
and equipment . . . . . . . . . . . . . . . 240 188 186
— Allowances for receivables . . . . . . . 21 81 256
— Time differences of purchase rebate
on unsold inventories . . . . . . . . . . — 1,638 —
— Lease liabilities . . . . . . . . . . . . . . . . 67,300 — —
69,164 6,914 5,713
(ii) Deferred income tax liabilities:
The balance comprises temporary
differences attribute to:
— Provision and time differences of
purchase rebate . . . . . . . . . . . . . . . 10,553 16,050 14,688
— Right-of-use assets . . . . . . . . . . . . . 63,052 — —
— Assets appreciation . . . . . . . . . . . . . — 568 522
73,605 16,618 15,210
– I-75 –
The movement in deferred income tax assets and deferred income tax liabilities during the
Track Record Period, without taking into consideration the offsetting of balance within the same
tax jurisdiction are as follows:
The Group
Deferred income tax assets

Time
Impairment differences of
loss for purchase
Impairment property, Allowances rebate on
Unrealised loss for plant and for unsold Lease
Tax losses profit inventory equipment receivables inventories liabilities Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At January 1, 2020 . . . . . . . . 1,227 — 135 — 22 — 67,933 69,317
(Charged)/Credited to profit or
loss (Note 12) . . . . . . . . . . (516) 725 32 240 (1) — (633) (153)
At December 31, 2020 . . . . . . 711 725 167 240 21 — 67,300 69,164
At January 1, 2021 . . . . . . . . 711 725 167 240 21 — 67,300 69,164
Credited/(Charged) to profit or
loss (Note 12) . . . . . . . . . . 2,674 585 145 (52) 60 1,638 (67,300) (62,250)
At December 31, 2021 . . . . . . 3,385 1,310 312 188 81 1,638 — 6,914
(unaudited)
At January 1, 2022 . . . . . . . . 3,385 1,310 312 188 81 1,638 — 6,914
(Charged)/Credited to profit or
loss (Note 12) . . . . . . . . . . (749) 853 160 (2) 175 (1,638) — (1,201)
At September 30, 2022 . . . . . . 2,636 2,163 472 186 256 — — 5,713
Deferred income tax liabilities

Provision and
time
differences of
purchase Assets Right-of-use
rebate appreciation assets Total
RMB’000 RMB’000 RMB’000 RMB’000
At January 1, 2020 . . . . . . . . ...... 5,082 — 65,262 70,344
Charged/(Credited) to profit or loss
(Note 12) . . . . . . . . . . . . . . . ...... 5,471 — (2,210) 3,261
At December 31, 2020 . . . . . . ...... 10,553 — 63,052 73,605
At January 1, 2021 . . . . . . . . ...... 10,553 — 63,052 73,605
Addition on acquisition of
subsidiaries . . . . . . . . . . . . . ...... — 620 — 620
(Note 12) . . . . . . . . . . . . . . . ...... 5,497 (52) (63,052) (57,607)
At December 31, 2021 . . . . . . ...... 16,050 568 — 16,618
(unaudited)
At January 1, 2022 . . . . . . . . ...... 16,050 568 — 16,618
(Note 12) . . . . . . . . . . . . . . . ...... (1,362) (46) — (1,408)
At September 30, 2022 . . . . . ...... 14,688 522 — 15,210
– I-76 –
30 Business combinations
30.1 Acquisition of subsidiaries
In February 2021, pursuant to a share purchase agreement, the Company acquired from
independent individuals 100% equity interests of Xi’an Baolun Pharmaceutical Co., Ltd. (“Xi’an
Baolun”), a retail pharmacy located in Shaanxi, with total cash consideration of RMB717,000. The
acquisition date was on February 28, 2021 and Xi’an Baolun became an indirect wholly owned
subsidiary of the Company since then.
In February 2021, pursuant to a share purchase agreement, the Company acquired from
independent individuals 100% equity interests of Weinan Zhixinrenda Pharmacy Co., Ltd.
(“Weinan Zhixinren”), a retail pharmacy located in Shaanxi, with total cash consideration of
RMB276,000. The acquisition date was on February 28, 2021 and Xi’an Baolun became an
indirect wholly owned subsidiary of the Company since then.
Xi’an Baolun and Weinan Zhixinren were mainly engaged in pharmaceutical retail business,
the identified assets within these acquisitions were mainly pharmaceutical operation licenses. As
the purchase considerations are equal to the fair value of the net identifiable assets acquired, no
goodwill was recognised.
Xi’an Baolun Weinan Zhixinren

RMB’000 RMB’000
Total consideration
Cash paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 717 276
The assets and liabilities recognised as a result of the acquisitions are as follows:
As at February 28, 2021

Xi’an Baolun Weinan Zhixinren
RMB’000 RMB’000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 296 209
Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211 62
Prepayments and other receivables . . . . . . . . . . . . . . . . . . . . . 55 —
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 586 222
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . 223 176
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,114 365
Right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,738 265
Trade and notes payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,213) (462)
Accruals and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . (171) (258)
Lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,589) (208)
Current income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . (4) (4)
Deferred income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . (529) (91)
Total identifiable net assets . . . . . . . . . . . . . . . . . . . . . . . . . 717 276
Purchase consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 717 276
Outflow of cash to acquire subsidiary, net of cash
acquired
Cash consideration paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —
Less: Balances acquired — cash . . . . . . . . . . . . . . . . . . . . . . . 296 209
Cash acquired from business combinations . . . . . . . . . . . . . 296 209
– I-77 –
31 Cash flow information
(a) Cash generated from operations
Nine months ended

2020 2021 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Profit/(Loss) before income tax . . . . . . 17,890 (15,727) (20,100) 27,573
Adjustments for:
— Depreciation of property, plant and
equipment (Note 9) . . . . . . . . . . . 30,814 39,552 29,406 30,400
— Depreciation of right-of-use assets
(Note 9) . . . . . . . . . . . . . . . . . . . . 187,545 195,478 144,017 156,706
— Amortisation of intangible assets
(Note 9) . . . . . . . . . . . . . . . . . . . . 1,544 2,652 2,732 1,713
— Loss on disposal of property, plant
and equipment (Note 8) . . . . . . . . 42 76 77 44
— Loss on disposal of intangible
assets (Note 8) . . . . . . . . . . . . . . . — 1,365 — —
— Loss on disposal of right-of-use
assets (Note 8) . . . . . . . . . . . . . . . — — — 423
— Provision for impairment of
inventories (Note 9) . . . . . . . . . . . 1,294 2,966 1,826 4,017
— Provision for impairment of
property, plant and equipment
(Note 9) . . . . . . . . . . . . . . . . . . . . 2,197 1,252 1,015 2,497
— Net impairment losses on financial
assets . . . . . . . . . . . . . . . . . . . . . . 33 605 558 3,257
— Finance costs, net (Note 11) . . . . . . 63,338 69,778 52,161 50,241
— Share-based compensation
expenses (Note 10) . . . . . . . . . . . 1,171 1,171 878 (87)
305,868 299,168 212,570 276,784
Change in working capital:
— (Increase)/Decrease in restricted
cash . . . . . . . . . . . . . . . . . . . . . . . (73,905) (38,144) 10,508 56,340
— Decrease/(Increase) in trade
receivables. . . . . . . . . . . . . . . . . . 1,876 (33,467) (30,061) (26,246)
— (Increase)/Decrease in prepayments
and other receivables . . . . . . . . . . (28,745) 13,073 22,941 26,997
— Increase in inventories . . . . . . . . . . (96,832) (140,807) (58,842) (1,071)
— (Decrease)/Increase in contract
liabilities . . . . . . . . . . . . . . . . . . . (203) 1,775 578 1,048
— Increase/(Decrease) in trade and
notes payables . . . . . . . . . . . . . . . 94,446 162,862 91,692 (67,858)
— (Decrease)/Increase in accruals and
other payables . . . . . . . . . . . . . . . (56,062) 5,512 (11,897) 1,303
(159,425) (29,196) 24,919 (9,487)
Cash generated from operations . . . . 146,443 269,972 237,489 267,297
– I-78 –
(b) Net cash reconciliation
Set out below is an analysis of net cash and the movements in net cash for each of the
years/periods presented.
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . (76,790) (81,507) (86,606)
Lease liabilities . . . . . . . . . . . . . . . . . . . . . . (559,840) (611,572) (555,154)
Redemption liabilities . . . . . . . . . . . . . . . . . (335,602) (376,384) —
Net debt . . . . . . . . . . . . . . . . . . . . . . . . . . . (917,410) (1,044,561) (570,002)
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,822 24,902 71,758
Gross debt — fixed interest rates . . . . . . . . (925,442) (1,027,956) (604,409)
Gross debt — floating interest rates . . . . . . (46,790) (41,507) (37,351)
Net debt . . . . . . . . . . . . . . . . . . . . . . . . . . . (917,410) (1,044,561) (570,002)
Cash and
cash Lease Redemption
equivalents Borrowings liabilities liabilities Net debt
Balance at January 1, 2020 . . . . . . 59,501 (57,769) (564,957) (212,464) (775,689)
Cash flows . . . . . . . . . . . . . . . . . . (4,679) (15,426) 201,055 (94,444) 86,506
Additions . . . . . . . . . . . . . . . . . . . — — (169,244) — (169,244)
Interest expense . . . . . . . . . . . . . . . — (3,595) (26,694) (36,360) (66,649)
Other changes . . . . . . . . . . . . . . . . — — — 7,666 7,666
Balance at December 31, 2020 . . . . 54,822 (76,790) (559,840) (335,602) (917,410)
Cash flows . . . . . . . . . . . . . . . . . . (29,920) (243) 223,552 — 193,389
Additions . . . . . . . . . . . . . . . . . . . — — (247,641) — (247,641)
Balance at December 31, 2021 . . . . 24,902 (81,507) (611,572) (376,384) (1,044,561)
(Unaudited)
Balance at January 1, 2022 . . . . . . 24,902 (81,507) (611,572) (376,384) (1,044,561)
Cash flows . . . . . . . . . . . . . . . . . . 46,856 (2,838) 172,391 — 216,409
Additions . . . . . . . . . . . . . . . . . . . — — (103,456) — (103,456)
Derecognition . . . . . . . . . . . . . . . . — — 8,032 406,879 414,911
Balance at September 30, 2022 . . . 71,758 (86,606) (555,154) — (570,002)
– I-79 –
Cash and
cash Lease Redemption
equivalents Borrowings liabilities liabilities Net debt
(Unaudited)
Cash flows . . . . . . . . . . . . . . . . . . 5,622 (2,540) 173,991 — 177,073
Additions . . . . . . . . . . . . . . . . . . . — — (204,593) — (204,593)
Balance at September 30, 2021 . . . 60,444 (82,848) (610,854) (366,189) (999,447)
32 Related party transactions
Parties are considered to be related if one party has the ability, directly or indirectly, to
control the other party or exercise significant influence over the other party in making financial
and operating decisions. Parties are also considered to be related if they are subject to common
control, common significant influence or joint control.
Save as disclosed elsewhere, the following is a summary of the significant transactions

carried out between the Group and its related parties in the ordinary course of business during the
years ended December 31, 2020 and 2021 and the nine months ended September 30, 2021 and
2022, respectively, and balances arising from related party transactions as of December 31, 2020
and 2021 and September 30, 2022, respectively.
(a) Names and relationships with related parties
Name Relationship with the Group
Mr. Long Yan Founder of the Group
Mr. Long Yun Director of the Group
Ms. Lou Yunying Spouse of the Founder
(b) Transactions with related parties
Continuing Transactions — Trade
(i) Increase of right-of-use assets leased from related parties
Nine months ended

Year ended December 31, September 30 ,
2020 2021 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Mr. Long Yan . . . . . . . . . . . . . . . . . . . 2,005 1,515 1,515 1,444
Mr. Long Yun . . . . . . . . . . . . . . . . . . . 1,881 300 300 380
3,886 1,815 1,815 1,824
– I-80 –
(c) Balances with related parties
(i) Guarantee from related parties
As at December 31, 2020 and 2021 and September 30, 2022, the Group’s short-term bank
borrowings of RMB20,000,000, RMB40,000,000 and RMB20,000,000, and long-term bank
borrowing of RMB21,137,000, RMB18,616,000 and RMB16,630,000 were guaranteed by Mr. Long
Yan respectively.
As at December 31, 2020 and 2021 and September 30, 2022, the Group’s short-term bank
borrowing of nil, nil and RMB10,000,000, and long-term bank borrowings of RMB20,139,000,
RMB18,035,000 and RMB16,383,000 were guaranteed by Mr. Long Yan and Ms. Lou Yunying
respectively.
As at December 31, 2020 and 2021 and September 30, 2022, the Group’s long-term bank
borrowing of RMB5,514,000, RMB4,856,000 and RMB4,338,000 was guaranteed by Mr. Long Yan
and Mr. Long Yun respectively.
(ii) Lease liabilities due to related parties
As at
2020 2021 2022
RMB’000 RMB’000 RMB’000
(unaudited)
Mr. Long Yan . . . . . . . . . . . . . . . . . . . . . . . 2,020 200 1,644
Mr. Long Yun . . . . . . . . . . . . . . . . . . . . . . . 1,938 715 —
3,958 915 1,644
(d) Key management personnel compensations
Key management includes directors and senior management. The compensation paid or
payable to key management for employee services is shown below:
Nine months ended

2020 2021 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
employee welfare. . . . . . . . . . . . . . . 4,697 4,883 3,197 3,748
housing benefits. . . . . . . . . . . . . . . . 216 348 221 255
Share-based compensation expenses . . 1,171 1,171 878 (88)
6,084 6,402 4,296 3,915
– I-81 –
33 Subsidiaries
The subsidiaries of the Group as at the date of this report are set out below:
Registered/
Place and date of incorporation/ Paid-in Direct or
Company Name Establishment capital Effective interests held by the Group as at indirect Principal activities
APPENDIX I
December 31, December 31, September 30,

RMB 2020 2021 2022 Report date
(unaudited)
Gansu Deshengtang Pharmaceutical Lanzhou City, February 4, 2005 5,000,000/ 100% 100% 100% 100% Direct Pharmaceutical wholesale
Wholesale Co., Ltd. . . . . . . . . . . . . . 5,000,000
Gansu Deshengtang Pharmaceutical Jinchang City, April 26, 2002 5,000,000/ 100% 100% 100% 100% Direct Pharmaceutical retail
Technology Group Jinchang Co., Ltd. . . . 5,000,000
Gansu Deshengtang Pharmaceutical Baiyin City, June 23, 2016 5,000,000/ 100% 100% 100% 100% Direct Pharmaceutical retail
Technology Group Baiyin Co., Ltd.. . . . . 5,000,000
Gansu Deshengtang Pharmaceutical Zhangye City, May 12, 2016 5,000,000/ 100% 100% 100% 100% Direct Pharmaceutical retail
Technology Group Zhangye Co., Ltd.. . . . 5,000,000
Gansu Deshengtang Pharmaceutical Wuwei City, May 26, 2016 5,000,000/ 100% 100% 100% 100% Direct Pharmaceutical retail
Technology Group Wuwei Co., Ltd. . . . . 5,000,000
Gansu Deshengtang Pharmaceutical Dingxi City, May 26, 2013 5,000,000/ 100% 100% 100% 100% Direct Pharmaceutical retail
Technology Group Dingxi Co., Ltd. . . . . 5,000,000
Gansu Deshengtang Pharmaceutical Jiuquan City, May 27, 2016 5,000,000/ 100% 100% 100% 100% Direct Pharmaceutical retail
– I-82 –
Technology Group Jiuquan Co., Ltd. . . . . 5,000,000
Beijing Yibaiyishiyi Pharmaceutical Beijing, October 26, 2012 20,000,000/ 100% 100% 100% 100% Direct Franchise management
Technology Co., Ltd. . . . . . . . . . . . . 20,000,000 consulting
Inner Mongolia Deshengtang Pharmaceutical Alxa Right Banner, October 25, 1,000,000/ 100% 100% 100% 100% Direct Pharmaceutical retail
Technology Co., Ltd. . . . . . . . . . . . . 2017 1,000,000
Longgui Chinese Medicine Culture Dingxi City, March 12, 2019 10,000,000/ 100% 100% 100% 100% Direct Pharmaceutical retail
Development (Gansu) Co., Ltd. . . . . . . 2,000,000
Zhejiang Free Trade Zone Longgui Trading Zhoushan City, August 13, 2019 3,000,000/ 100% 100% — — Direct Pharmaceutical retail
Co., Ltd. (i) . . . . . . . . . . . . . . . . . Nil
Gansu Deshengtang Pharmaceutical Dingxi City, July 23, 2020 5,000,000/ 100% 100% 100% 100% Direct Pharmaceutical retail
Technology Group Lintao Co., Ltd. . . . . . 5,000,000
Shaanxi Yaoji Pharmaceutical Wholesale Xi’an City, December 30, 2020 5,000,000/ 100% 100% 100% 100% Direct Pharmaceutical wholesale
Co., Ltd. . . . . . . . . . . . . . . . . . . . 5,000,000
Qinghai Deshengtang Pharmacy Co., Ltd.. . . Xining City, May 17, 2021 2,000,000/ — 100% 100% 100% Direct Pharmaceutical retail
2,000,000
Beijing Yiyiyi Commercial Chain Co., Ltd. . . Beijing, March 11, 2015 15,000,000/ 100% 100% 100% 100% Indirect Pharmaceutical retail
15,000,000
Gansu Deshengtang Traditional Chinese Jinchang City, June 22, 2018 20,000,000/ 100% 100% 100% 100% Indirect Healthcare, consultation
Medicine Culture Development Co., Ltd. . . 750,000 and other services
ACCOUNTANT’S REPORT
Registered/
Place and date of incorporation/ Paid-in Direct or
Company Name Establishment capital Effective interests held by the Group as at indirect Principal activities
December 31, December 31, September 30,
RMB 2020 2021 2022 Report date
(unaudited)
Jinchang Deshengtang Hospital Co., Ltd. . . . Jinchang City, December 2, 2016 1,000,000/ 100% 100% 100% 100% Indirect Healthcare, consultation
APPENDIX I
1,000,000 and other services

Shanxi Yiyiyi Pharmaceutical Co., Ltd. . . . . Changzhi City, May 12, 2016 1,110,000/ 100% 100% 100% 100% Indirect Pharmaceutical retail
1,110,000
Shaanxi Yiyiyi Pharmaceutical Co., Ltd. . . . Xi’an City, July 12, 2011 10,000,000/ 100% 100% 100% 100% Indirect Pharmaceutical retail
10,000,000
Gansu Yiyiyi Pharmaceutical Technology Qingyang City, June 16, 2016 2,000,000/ 100% 100% 100% 100% Indirect Pharmaceutical retail
Co., Ltd. . . . . . . . . . . . . . . . . . . . 2,000,000
Weinan Yiyiyi Pharmaceutical Co., Ltd.. . . . Weinan City, August 7, 2017 2,000,000/ 100% 100% 100% 100% Indirect Pharmaceutical retail
2,000,000
Xi’an Yiyiyi Pharmaceutical Co., Ltd. . . . . Xi’an City, October 18, 2016 2,631,565/ 100% 100% 100% 100% Indirect Pharmaceutical retail
2,631,565
Baoji Yiyiyi Pharmaceutical Co., Ltd.. . . . . Baoji City, November 22, 2017 1,000,000/ 100% 100% 100% 100% Indirect Pharmaceutical retail
1,000,000
Xi’an Baolun Pharmaceutical Co., Ltd. . . . . Xi’an City, February 28, 2021 200,000/ — 100% 100% 100% Indirect Pharmaceutical retail
Nil
Weinan Zhixinrenda Pharmacy Co., Ltd. . . . Weinan City, February 28, 2021 1,000,000/ — 100% 100% 100% Indirect Pharmaceutical retail
– I-83 –
150,000
Gansu Yiyiyi Health Management Service Lanzhou City, February 16, 2022 100,000/ — — 100% 100% Direct Healthcare, consultation
Co., Ltd. . . . . . . . . . . . . . . . . . . . 100,000 and other services
Beijing Yiyiyi Wangjing Traditional Chinese Beijing, March 11, 2022 100,000/ — — 100% 100% Indirect Healthcare, consultation
Medicine Clinic Co., Ltd. . . . . . . . . . . 100,000 and other services
Gansu Deshengtang Pharmaceutical Linze City, May 10, 2022 2,000,000/ — — 100% 100% Direct Pharmaceutical retail
Technology Group Linze Co., Ltd. . . . . . 2,000,000
Jinchang Health (ii) . . . . . . . . . . . . . . Jinchang City, September 9, 1999 300,000/ 100% 100% 100% 100% Direct General outpatient clinic
300,000
Ningxia Deshengtang Pharmaceutical Zhongwei, City, July 28, 2022 2,000,000/ — — 100% 100% Direct Pharmaceutical retail
Technology Co., Ltd. . . . . . . . . . . . . 2,000,000
*The English name of the subsidiaries represents the best effort by the management of the Group in translating their Chinese names as they do not have an official English
name.
(i) Zhejiang Free Trade Zone Longgui Trading Co., Ltd. was deregistered on August 8, 2022.
(ii) Jinchang Health was acquired on July 31, 2022, as the Company and Jinchang Health were ultimately controlled by Mr. Long Yan before and after the acquisitions,
and the control was not temporary, the acquisition was accounted for as business combination under common control. For details, please refer to Note 1.2.
ACCOUNTANT’S REPORT
All the companies comprising the Group are incorporated/established with limited liability in
the PRC and adopt December 31, as their financial year end date.
No audited statutory financial statements were issued for all subsidiaries during the Track
Record Period since there is no statutory audit requirement under the applicable law in the place of
incorporation of these entities.
34 Dividend
No dividend has been paid or declared by the Company or the companies now comprising the
Group during each of the years ended December 31, 2020 and 2021 and the nine months ended
September 30, 2021 and 2022.
35 Subsequent events
On December 6, 2022, the Company was converted from a limited liability company into a
joint stock company with limited liability. The net assets of the Company as at August 31, 2022,
including paid-in capital, reserves and accumulated losses, amounting to RMB336,681,000, were
converted into 123,456,790 ordinary shares at RMB1.00 per share. The excess of the net assets
converted over the nominal value of the ordinary shares was credited to the Company’s capital
surplus.
III SUBSEQUENT FINANCIAL STATEMENTS
No audited financial statements have been prepared by the Company or any the companies
now comprising the Group in respect of any period subsequent to December 31, 2021 and up to
the date of this report. No dividend or distribution has been declared or made by the Company or
any of the companies now comprising the Group in respect of any period subsequent to September
30, 2022.
– I-84 –
APPENDIX II UNAUDITED [REDACTED] FINANCIAL INFORMATION
[REDACTED]
– II-1 –
[REDACTED]
– II-2 –
[REDACTED]
– II-3 –
[REDACTED]
– II-4 –
[REDACTED]
– II-5 –
APPENDIX III TAXATION AND FOREIGN EXCHANGE
TAXATION OF SECURITY HOLDERS
The taxation of income and capital gains of holders of H Shares is subject to the laws and
practices of the PRC and of jurisdictions in which holders of H Shares are residents or otherwise
subject to tax. The following summary of certain relevant taxation provisions is based on current
effective laws and practices, and no predictions are made about changes or adjustments to relevant
laws or policies, and no comments or suggestions will be made accordingly. The discussion has no
intention to cover all possible tax consequences resulting from the [REDACTED] in H Shares, nor
does it take the specific circumstances of any particular [REDACTED] into account, some of
which may be subject to special regulations. Accordingly, you should consult your own tax advisor
regarding the tax consequences of an [REDACTED] in H Shares. The discussion is based upon
laws and relevant interpretations in effect as of the date of this Document, which is subject to
change or adjustment and may have retrospective effect. No issues on PRC or Hong Kong taxation
other than income tax, capital appreciation and profit tax, business tax/appreciation tax, stamp duty
and estate duty were referred in the discussion. Prospective [REDACTED] are urged to consult
their financial advisors regarding the PRC, Hong Kong and other tax consequences of owning and
disposing of H Shares.
TAXATION IN THE PRC
Taxation on Dividends
Individual Investors
Pursuant to the Individual Income Tax Law of the PRC 《 ( 中華人民共和國個人所得稅法》),

which was most recently amended on August 31, 2018, and the Implementation Provisions of the
Individual Income Tax Law of the PRC 《 ( 中華人民共和國個人所得稅法實施條例》), which was
most recently amended on December 18, 2018 (hereinafter collectively referred to as the “IIT
Law”), dividends distributed by PRC enterprises are subject to individual income tax levied at a
flat rate of 20%. For a foreign individual who is not a resident of the PRC, the receipt of dividends
from an enterprise in the PRC is normally subject to individual income tax of 20% unless
specifically exempted by the tax authority of the State Council or reduced by relevant tax treaty.
Pursuant to the Circular on Issues Concerning Taxation and Administration of Individual

Income Tax After the Repeal of the Document Guo Shui Fa [1993] No. 045 (《關於國稅發
[1993]045號文件廢止後有關個人所得稅徵管問題的通知》) issued by the STA on June 28, 2011,
for a domestic non-foreign invested enterprise who has been issuing shares in Hong Kong, its
foreign individual shareholders may enjoy the relevant preferential tax treatment according to the
taxation agreement between the PRC and the country where they reside and the taxation
arrangement between the PRC and Hong Kong (or Macau). When domestic non-foreign invested
enterprises, which issue stocks in Hong Kong, pay dividends and bonus, in general, it will
withhold 10% of the dividends and profits as individual income tax and no applications are
needed. Where the individuals who receive the dividends are residents of countries where the
agreed tax rate is lower than 10%, the withholding agent shall, according to regulations provisions,
handle the applications for relevant preferential treatments and refund the extra tax upon the
approval of competent tax authorities. Where the individuals are residents of countries where the
agreed tax rate is higher than 10% but lower than 20%, the withholding agent shall withhold the
individual income tax according to the agreed actual tax rate when paying the dividends and
bonuses and no applications are needed in such cases. Where the dividend receiving individuals
are residents of countries which have not established tax treaties with China or other circumstances
exist, the withholding agent shall withhold the individual income tax based on the rate of 20%
when paying dividends and bonuses.
– III-1 –
Enterprise Investors
In accordance with the EIT Law and the Implementation Rules of the EIT Law, the rate of
EIT shall be 25%. A non-resident enterprise is generally subject to a 10% EIT on PRC-sourced
income (including dividends received from a PRC resident enterprise that issues shares in Hong
Kong), if it does not have an establishment or premise in the PRC or has an establishment or
premise in the PRC but its PRC-sourced income has no real connection with such establishment or
premise. The aforesaid income tax payable for non-resident enterprises are deducted at source,
where the payer of the income is required to withhold the income tax from the amount to be paid
to the non-resident enterprise.
The Circular on Issues Relating to the Withholding and Remitting of EIT by PRC Resident
Enterprises on Dividends Distributed to Overseas Non-Resident Enterprise Shareholders of H
Shares 《( 關於中國居民企業向境外H股非居民企業股東派發股息代扣代繳企業所得稅有關問題的
通知》), which was issued and implemented by the STA on November 6, 2008, further clarified
that a PRC-resident enterprise must withhold EIT at a rate of 10% on the dividends of 2008 and
onwards that it distributes to overseas non-resident enterprise shareholders of H Shares. In
addition, the Response to Questions on Levying EIT on Dividends Derived by Non-resident
Enterprise from Holding Stock such as B Shares 《 ( 關於非居民企業取得B股等股票股息徵收企業
所得稅問題的批覆》), which was issued by the STA and came into effect on July 24, 2009, further
provides that any PRC-resident enterprise whose shares are listed on overseas stock exchanges
must withhold and remit EIT at a rate of 10% on dividends of 2008 and onwards that it distributes
to non-resident enterprises. Such tax rates may be further modified pursuant to the tax treaty or
agreement that China has entered into with a relevant country or area, where applicable.
The PRC and the government of Hong Kong entered into the Arrangement between the
Mainland of the PRC and Hong Kong Special Administrative Region on the Avoidance of Double
Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income 《 ( 內地和香港特別
行政區關於對所得稅避免雙重徵稅和防止偷漏稅的安排》) (the “Arrangement”) on August 21,
2006, which came into effect on December 8, 2006. Pursuant to the Arrangement, the Chinese
Government may levy taxes on the dividends paid by a PRC-resident enterprise to Hong Kong
residents (including resident individuals and resident entities) in an amount not exceeding 10% of
the total dividends payable by the PRC-resident enterprise unless a Hong Kong resident directly
holds 25% or more of the equity interest in a PRC-resident enterprise, then such tax shall not
exceed 5% of the total dividends payable by the PRC-resident enterprise. The Fifth Protocol of the
Arrangement between the Mainland of the PRC and the Hong Kong Special Administrative Region
on the Avoidance of Double Taxation and the Prevention of Fiscal Evasion 《 ( 〈內地和香港特別行
政區關於對所得避免雙重徵稅和防止偷漏稅的安排〉第五議定書》), which came into effect on
December 6, 2019, adds a criteria for the qualification of entitlement to enjoy treaty benefits.
Although there may be other provisions under the Arrangement, the treaty benefits under the
criteria shall not be granted in the circumstance where relevant gains, after taking into account all
relevant facts and conditions, are reasonably deemed to be one of the main purposes for the
arrangement or transactions which will bring any direct or indirect benefits under this
Arrangement, except when the grant of benefits under such circumstance is consistent with
relevant objective and goal under the Arrangement. The application of the dividend clause of tax
agreements is subject to the requirements of PRC tax law and regulation, such as the Notice of the
STA on the Issues Concerning the Application of the Dividend Clauses of Tax Agreements 《 ( 關於
執行稅收協定股息條款有關問題的通知》).
– III-2 –
Tax Treaties
Non-resident investors residing in jurisdictions which have entered into treaties or

adjustments for the avoidance of double taxation with the PRC might be entitled to a reduction of
the Chinese EIT imposed on the dividends received from PRC companies. The PRC currently has
entered into Avoidance of Double Taxation Treaties or Arrangements with a number of countries
and regions including Hong Kong Special Administrative Region, Macau Special Administrative
Region, Australia, Canada, France, Germany, Japan, Malaysia, the Netherlands, Singapore, the
United Kingdom, the United States and etc. Non-PRC resident enterprises entitled to preferential
tax rates in accordance with the relevant taxation treaties or arrangements are required to apply to
the Chinese tax authorities for a refund of the EIT in excess of the agreed tax rate, and the refund
application is subject to approval by the Chinese tax authorities.
Taxation on Share Transfer
VAT and Local Additional Tax
According to the Interim Regulations on Value-added Tax of the PRC 《 ( 中華人民共和國增值

稅暫行條例》(2017修訂)) and the Implementation Rules for the Interim Regulations on
Value-Added Tax of the PRC 《 ( 中華人民共和國增值稅暫行條例實施細則》(2011修訂)), all
enterprises and individuals that engage in the sale of goods, the provision of processing, repair and
replacement services, sales of service, intangible assets and real estate and the importation of
goods within the territory of the PRC shall pay VAT at the rate of 0%, 6%, 11% and 17% for the
different goods it sells and different services it provides, except when specified otherwise.
According to the Notice on the Adjustment to VAT Rates 《 ( 財政部、國家稅務總局關於調整

增值稅稅率的通知》), the VAT rates of 17% and 11% applicable to the taxpayers who have VAT
taxable sales activities or imported goods are adjusted to 16% and 10%, respectively.
Subsequently, the MOF, the STA and the General Administration of Customs of the PRC jointly
issued the Announcement on Relevant Policies for Deepening Value-Added Tax Reform 《 ( 關於深
化增值稅改革有關政策的公告》) to further adjust the VAT rates of 16% and 10% applicable to the
taxpayers who have VAT taxable sales activities or imported goods to 13% and 9%, respectively.
In accordance with the Circular on Comprehensively Promoting the Pilot Program of the
Collection of Value-added Tax in Lieu of Business Tax 《( 關於全面推開營業稅改徵增值稅試點的
通知》), which was promulgated on March 23, 2016 and came into effect on May 1, 2016, transfer
of financial products by individuals are exempt from VAT.
Income tax
Individual Investors
According to the IIT Law, gains on the transfer of equity interests in the PRC resident
enterprises are subject to individual income tax at a rate of 20%.
Pursuant to the Circular on Continuing to Temporarily Exempt Individual Income Tax on

Income from the Transfer of Shares by Individuals 《( 關於個人轉讓股票所得繼續暫免徵收個人所
得稅的通知》) issued by the MOF and the STA on March 30, 1998, from January 1, 1997, income
of individuals from transfer of the shares of listed enterprises continues to be exempted from
individual income tax.
– III-3 –
On December 31, 2009, the MOF, the STA and CSRC jointly issued the Circular on Related
Issues on Levying Individual Income Tax over the Income Received by Individuals from the
Transfer of Restricted Shares of Listed Companies 《( 關於個人轉讓上市公司限售股所得徵收個人
所得稅有關問題的通知》), which states that, since January 1, 2010, income derived by individuals
from transfer of shares of listed companies issued to the public by the listed companies and
transfer of shares of listed companies obtained from the market at the Shanghai Stock Exchange
and the SZSE shall continue to be exempted from individual income tax, except for the relevant
shares which are subject to sales restriction (as defined in the Supplementary Notice on Issues
Concerning the Levy of Individual Income Tax on Individuals’ Income from the Transfer of
Restricted Shares of Listed Companies 《 ( 關於個人轉讓上市公司限售股所得徵收個人所得稅有關
問題的補充通知》) jointly issued and implemented by the above three departments on November
10, 2010).
As of the Latest Practicable Date, no aforesaid provisions have expressly provided that
individual income tax shall be levied from non-PRC resident individuals on the transfer of shares
in PRC resident enterprises listed on overseas stock exchanges. To the knowledge of the Company,
in practice, the PRC tax authorities have not levied income tax from non-PRC resident individuals
on gains from the transfer of PRC resident enterprises listed overseas. However, there is no
assurance that the PRC tax authorities will not change these practices which could result in
levying income tax on non-PRC resident individuals on gains from the sale of H shares.
Enterprise Investors
In accordance with the EIT Law and the Implementation Rules of the EIT Law, a
non-resident enterprise is generally subject to EIT at the rate of a 10% on PRC-sourced income,
including gains derived from the disposal of equity interests in a PRC resident enterprise, if it does
not have an establishment or premise in the PRC or has an establishment or premise in the PRC
but its PRC-sourced income has no real connection with such establishment or premise. Such
income tax payable for non-resident enterprises are deducted at source, where the payer of the
income is required to withhold the income tax from the amount to be paid to the non-resident
enterprise. Such tax may be reduced or exempted pursuant to relevant tax treaties or agreements on
avoidance of double taxation.
Stamp Duty
Pursuant to the Implementation Provisions of Provisional Regulations of the PRC on Stamp

Duty 《( 中華人民共和國印花稅暫行條例施行細則》), which came into effect on October 1, 1988,
PRC stamp duty only applies to specific taxable document executed or received within the PRC,
having legally binding force in the PRC and protected under the PRC laws, thus the requirements
of the stamp duty imposed on the transfer of shares of PRC listed companies shall not apply to the
acquisition and disposal of H Shares by non-PRC investors outside the PRC.
According to the Stamp Duty Law of the PRC 《 ( 中華人民共和國印花稅法》), which was
promulgated by the SCNPC on June 10, 2021, and will came into effect in July 1, 2022, the
disposal of H Shares by non-PRC investors outside the PRC is still not subject to the requirements
of PRC stamp duty.
Estate Duty
As of the Latest Practicable Date, no estate duty has been levied in the PRC under the PRC
laws.
– III-4 –
Shanghai-Hong Kong Stock Connect Taxation Policy and Shenzhen-Hong Kong Stock
Connect Taxation Policy
On October 31, 2014, the MOF, STA and CSRC jointly issued the Circular on the Relevant
Taxation Policy regarding the Pilot Inter-connected Mechanism for Trading on the Shanghai Stock
Market and the Hong Kong Stock Market 《 ( 關於滬港股票市場交易互聯互通機制試點有關稅收政
策的通知》) (hereinafter as “SHHK Stock Connect Tax Policies”) which clarified the relevant
taxation policy under Shanghai-Hong Kong Stock Connection. The SHHK Stock Connect Tax
Policies has come into effect on November 17, 2014.
According to the SHHK Stock Connect Tax Policies, revenues gained by mainland individual
investors from the price difference arising from the trade of shares on the Stock Exchange through
SHHK Stock Connect may be exempted from VAT during China’s pilot fiscal reform where the
business tax is to be replaced by VAT. The dividends obtained by mainland individual investors
from the listing of H-shares on the Stock Exchange via SHHK Stock Connect shall be subject to
20% individual income tax, provided that the H-share companies shall submit application to
CSDC, after which CSDC will furnish them with a roster of the mainland individual investors, and
the H-share companies may withdraw individual income tax at a rate of 20% in accordance
therewith. If, however, dividends are generated from the listing of non-H-shares on the Stock
Exchange via SHHK Stock Connect, such individual income tax at the rate of 20% will be
deducted by CSDC. In case the individual investors have paid taxes in other jurisdictions by
withdrawal in advance, the investors may apply for tax exemption to the tax authority in charge of
CSDC using materials evidencing such withdrawal. Dividends gained by mainland securities
investment funds via investing in shares listed on the Stock Exchange via SHHK Stock Connect
shall be subject to individual income tax according to the aforementioned provisions as if they are
individual investors.
According to the SHHK Stock Connect Tax Policies, revenues made by mainland enterprise
investors from their transfer of shares that they have invested in the shares listed on the Stock
Exchange via SHHK Stock Connect shall be factored in their total revenues and subject to EIT,
and incomes received by mainland enterprise investors in the PRC from trading shares listed on
the Stock Exchange via SHHK Stock Connect are exempted from VAT during the pilot period of
replacement of business tax by VAT. If mainland enterprise investors gain dividends through
investment in shares listed on the Stock Exchange via SHHK Stock Connect, such dividends shall
be calculated in the total revenue of the enterprises and will be subject to income tax accordingly,
in which case, a mainland domiciled enterprise legally holding H shares for no less than 12
consecutive months will be exempted from EIT for the amounts earned from the H shares during
such 12-month period. The H-share company listed on the Stock Exchange shall apply to CSDC to
obtain the register of enterprise investors in Mainland to the H-share company, however, the
H-share company shall not withhold income tax on the dividends distributed to such enterprise
investors, and payable income tax shall be declared and paid by the investors themselves; if a
mainland enterprise investor has any tax imposed on the dividends deducted by a non-H-share
company listed on the Stock Exchange, the investor may apply for tax offset.
According to the SHHK Stock Connect Tax Policies, in case that any mainland investor
trades, inherits or gives as gift shares listed on the Stock Exchange, stamp tax will be imposed
thereon according to the tax law currently prevalent in Hong Kong SAR, and both the CSDC and
Hong Kong Securities Clearing Company Limited may collect the stamp tax on behalf of one
another.
– III-5 –
On November 5, 2016, the MOF, the STA and CSRC jointly promulgated the Circular on the
Relevant Taxation Policy regarding the Pilot Inter-connected Mechanism for Trading on the
Shenzhen Stock Market and the Hong Kong Stock Market 《 ( 關於深港股票市場交易互聯互通機制
試點有關稅收政策的通知》) (the “SZHK Stock Connect Tax Policies”), which clearly set forth
tax policies applicable to transactions via SZHK Stock Connect and took effect on December 5,
2016. SZHK Connect Tax Policies remains generally the same on the content as those provided in
SHHK Connect Tax Policies.
TAXATION IN HONG KONG
Profits Tax
The Company will be subject to Hong Kong profits tax in respect of profits arising in or
derived from Hong Kong at the current rate of 16.5% unless such profits are chargeable under the
half-rate of 8.25% that may apply for the first HK$2 million of assessable profits for years of
assessment beginning on or after April 1, 2018. Dividend income derived by the Company from its
subsidiaries will be excluded from Hong Kong profits tax.
Hong Kong Taxation of Shareholders
Tax on Dividends
No tax is payable in Hong Kong in respect of dividends paid by the Company.
Profits Tax
Hong Kong profits tax will not be payable by any Shareholders (other than Shareholders
carrying on a trade, profession or business in Hong Kong and holding the H Shares for trading
purposes) on any capital gains made on the sale or other disposal of the H Shares. Trading gains
from the sale of H Shares by persons carrying on a trade, profession or business in Hong Kong
where such gains are derived from or arise in Hong Kong from such trade, profession or business
will be chargeable to Hong Kong income tax rates of 16.5% on corporations and 15.0% on
individuals, unless such gains are chargeable under the respective half-rates of 8.25% and 7.5%
that may apply for the first HK$2 million of assessable profits for years of assessment beginning
on or after April 1, 2018. Gains from sales of H Shares effected on the Stock Exchange will be
considered by the Hong Kong Inland Revenue Department to be derived from or arise in Hong
Kong. Shareholders should take advice from their own professional advisors as to their particular
tax position.
Stamp Duty
Hong Kong stamp duty will be charged on the sale and purchase of Shares at the current rate
of 0.26% of the consideration for, or (if greater) the value of, the H Shares being sold or
purchased, whether or not the sale or purchase is on or off the Stock Exchange. The Shareholder
selling the H Shares and the purchaser will each be liable for one-half of the amount of Hong
Kong stamp duty payable upon such transfer. In addition, a fixed duty of HK$5 is currently
payable on any instrument of transfer of Shares.
– III-6 –
Estate Duty
Hong Kong estate duty was abolished effective from February 11, 2006. No Hong Kong
estate duty is payable by Shareholders in relation to the H Shares owned by them upon death.
PRINCIPAL TAXATION OF OUR COMPANY IN THE PRC
See “Regulatory Overview.”
FOREIGN EXCHANGE
The lawful currency of the PRC is Renminbi, which is currently subject to foreign exchange
control and cannot be freely converted into foreign currency. The SAFE, with the authorization of
the PBOC, is empowered with the functions of administering all matters relating to foreign
exchange, including the enforcement of foreign exchange control regulations.
The Regulations on Foreign Exchange Control of the PRC classifies all international
payments and transfers into current account items and capital account items. Current account items
are subject to the reasonable examination of the veracity of transaction documents and the
consistency of the transaction documents and the foreign exchange receipts and payments by
financial institutions engaging in conversion and sale of foreign currencies and supervision and
inspection by the foreign exchange control authorities. For capital account items, overseas
organizations and overseas individuals making direct investments in China shall, upon approval by
the relevant authorities in charge, process registration formalities with the foreign exchange
control authorities. Foreign exchange income received overseas can be repatriated or deposited
overseas, and foreign exchange and foreign exchange settlement funds under the capital account
are required to be used only for purposes as approved by the competent authorities and foreign
exchange administrative authorities. In the event that international revenues and expenditure occur
or may occur a material misbalance, or the national economy encounters or may encounter a
severe crisis, the State may adopt necessary safeguard and control measures on international
revenues and expenditure.
The Regulations for the Administration of Settlement, Sale and Payment of Foreign Exchange
(《結匯、售匯及付匯管理規定》), which was promulgated by the PBOC on June 20, 1996 and
implemented on July 1, 1996, removes other restrictions on convertibility of foreign exchange
under current account items, while imposing existing restrictions on foreign exchange transactions
under capital account items.
According to the Announcement on Improving the Reform of the Renminbi Exchange Rate
Formation Mechanism 《 ( 關於完善人民幣匯率形成機制改革的公告》), which was issued by the
PBOC and implemented on July 21, 2005, the PRC has started to implement a managed floating
exchange rate system in which the exchange rate would be determined based on market supply and
demand and adjusted with reference to a basket of currencies since July 21, 2005. Therefore, the
Renminbi exchange rate was no longer pegged to the U.S. dollar. PBOC would publish the closing
price of the exchange rate of the Renminbi against trading currencies such as the U.S. dollar in the
interbank foreign exchange market after the closing of the market on each working day, as the
central parity of the currency against Renminbi transactions on the following working day.
– III-7 –
According to the relevant laws and regulations in the PRC, PRC enterprises (including
foreign investment enterprises) which need foreign exchange for current item transactions may,
without the approval of the foreign exchange administrative authorities, effect payment through
foreign exchange accounts opened at the designated foreign exchange bank, on the strength of
valid transaction receipts and proof. Foreign investment enterprises which need foreign exchange
for the distribution of profits to their shareholders and PRC enterprises which, in accordance with
regulations, are required to pay dividends to their shareholders in foreign exchange (such as our
Company) may, on the strength of resolutions of the board of directors or the shareholders’
meeting on the distribution of profits, effect payment from foreign exchange accounts at the
designated foreign exchange bank, or effect exchange and payment at the designated foreign
exchange bank.
According to the Decisions on Matters including Canceling and Adjusting a Batch of

Administrative Approval Items 《 ( 關於取消和調整一批行政審批項目等事項的決定》) which was
promulgated by the State Council on October 23, 2014, the approval requirement by the SAFE and
its branches for the remittance and settlement of the proceeds raised from the overseas listing of
the foreign shares into RMB domestic accounts is canceled.
According to the Notice on Relevant Issue Concerning the Administration of Foreign

Exchange for Overseas Listing, a domestic company shall, within 15 business days from the date
of the completion of its overseas listing issuance, register the overseas listing with the local branch
office of state administration of foreign exchange at the place of its establishment; the proceeds
from an overseas listing of a domestic company may be remitted to the domestic account or
deposited in an overseas account, but the use of the proceeds shall be consistent with the content
of the document and other disclosure documents. A domestic company (except for bank financial
institutions) shall present its certificate of overseas listing to open a special account at a local bank
for its initial public offering (or follow-on offering) and repurchase business to handle the
exchange, remittance and transfer of funds for the business concerned.
According to the Circular on Further Simplifying and Improving Foreign Exchange

Administration Policies in Respect of Direct Investment, the confirmation of foreign exchange
registration under domestic direct investment and the confirmation of foreign exchange registration
under overseas direct investment shall be directly examined and handled by banks. SAFE and its
branch offices shall indirectly regulate the foreign exchange registration of direct investment
through banks.
According to the SAFE Circular 16, discretionary foreign exchange settlement applies to
foreign exchange capital, The tentative percentage of foreign exchange settlement for foreign
currency earnings in capital account of domestic institutions is 100%, subject to adjustment of the
SAFE in due time in accordance with international revenue and expenditure situations.
– III-8 –
On January 26, 2017, Notice on Further Promoting the Reform of Foreign Exchange
Administration and Improving the Examination of Authenticity and Compliance 《 ( 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》) was issued by SAFE to further expand the scope of
settlement for domestic foreign exchange loans, allow settlement for domestic foreign exchange
loans with export background under goods trading, allow repatriation of funds under domestic
guaranteed foreign loans for domestic utilization, allow settlement for domestic foreign exchange
accounts of foreign institutions operating in the Free Trade Pilot Zones, and adopt the model of
full-coverage RMB and foreign currency overseas lending management, where a domestic
institution engages in overseas lending, the sum of its outstanding overseas lending in RMB and
outstanding overseas lending in foreign currencies shall not exceed 30% of its owner’s equity in
the audited financial statements of the preceding year. The Notice on Further Facilitating
Cross-Board Trade and Investment canceled restrictions on domestic equity investments made with
capital funds by non-investing foreign-funded enterprises. In addition, restrictions on the use of
funds for foreign exchange settlement of domestic accounts for the realization of assets have been
removed and restrictions on the use and foreign exchange settlement of foreign investors’ security
deposits have been relaxed. Eligible enterprises in the pilot area are also allowed to use revenues
under capital accounts, such as capital funds, foreign debts and overseas listing revenues for
domestic payments without providing materials to the bank in advance for authenticity verification
on an item-by-item basis, while the use of funds should be true, in compliance with applicable
rules and conforming to the current capital revenue management regulations.
– III-9 –
APPENDIX IV SUMMARY OF PRINCIPAL PRC AND HONG KONG

LEGAL AND REGULATORY PROVISIONS
This Appendix contains a summary of laws and regulations on companies and securities in
the PRC, certain major differences between the Company Law and Companies (Winding Up and
Miscellaneous Provisions) Ordinance and the Companies Ordinance as well as the additional
regulatory provisions of the Stock Exchange on joint stock limited companies of the PRC. The
principal objective of this summary is to provide potential [REDACTED] with an overview of
the principal laws and regulations applicable to us. This summary is with no intention to
include all the information which may be important to the potential [REDACTED]. For
discussion of laws and regulations specifically governing the business of the Company, see
“Regulatory Overview.”
PRC LAWS AND REGULATIONS
PRC Legal System
The PRC legal system is based on the PRC Constitution (the “Constitution”) and is made up
of written laws, administrative regulations, local regulations, autonomous regulations, separate
regulations, rules and regulations of State Council departments, rules and regulations of local
governments, laws of special administrative regions and international treaties of which the PRC
government is the signatory and other regulatory documents. Court judgments do not constitute
legally binding precedents, although they are used for the purposes of judicial reference and
guidance.
Pursuant to the Constitution and the Legislation Law of the PRC 《

( 中華人民共和國立法法》)
(the “Legislation Law”), the National People’s Congress (the “NPC”) and its Standing Committee
are empowered to exercise the legislative power of the State. The NPC has the power to formulate
and amend basic laws governing State organs, civil, criminal and other matters. The Standing
Committee of the NPC is empowered to formulate and amend laws other than those required to be
enacted by the NPC and to supplement and amend parts of the laws enacted by the NPC during the
adjournment of the NPC, provided that such supplements and amendments are not in conflict with
the basic principles of such laws.
The State Council is the executive organ of the highest organ of state power, the highest
organ of state administration and has the power to formulate administrative regulations based on
the Constitution and laws and issue the decisions and orders.
The people’s congresses of the provinces, autonomous regions and municipalities directly
under the central government and their respective standing committees may formulate local
regulations based on the specific circumstances and actual needs of their respective administrative
areas, provided that such regulations do not contravene any provision of the Constitution, laws or
administrative regulations. The people’s congresses of cities divided into districts and their
respective standing committees may formulate local regulations with respect to urban and rural
construction and administration, environmental protection, historical and cultural protection and
other aspects according to the specific circumstances and actual needs of such cities, provided that
such local regulations do not contravene any provision of the Constitution, laws, administrative
regulations and local regulations of their respective provinces or autonomous regions. If the law
provides otherwise on the formulation of local regulations by cities divided into districts, those
provisions shall prevail. Such local regulations will become enforceable after being reported to and
approved by the standing committees of the People’s congresses of the relevant provinces or
autonomous regions. The standing committees of the people’s congresses of the provinces or
– IV-1 –

autonomous regions shall examine the legality of local regulations submitted for approval, and
such approval should be granted within four months if they are not in conflict with the
Constitution, laws, administrative regulations and local regulations of the provinces or autonomous
regions concerned. Where, during the examination for approval of local regulations of cities with
districts by the standing committees of the people’s congresses of the provinces or autonomous
regions, conflicts are identified with the rules and regulations of the people’s governments of the
provinces or autonomous regions concerned, a decision should be made by the standing
committees of the people’s congresses of provinces or autonomous regions to handle the issue.
The ministries and commissions of the State Council, the PBOC, the National Audit Office
and the subordinate institutions with administrative functions directly under the State Council,
including the State Administration for Market Regulation, may formulate departmental rules and
regulations within the permissions of their respective departments based on the laws and
administrative regulations, and the decisions and orders of the State Council. Provisions of
departmental rules should be the matters related to the enforcement of the laws and administrative
regulations, the decisions and orders of the State Council. The people’s governments of the
provinces, autonomous regions, municipalities directly under the central government and cities
with districts may formulate rules and regulations based on the laws, administrative regulations
and local regulations of such provinces, autonomous regions and municipalities directly under the
central government.
According to the Constitution, the power to interpret laws is vested in the Standing
Committee of the NPC. Pursuant to the Resolution of the Standing Committee of the NPC
Providing an Improved Interpretation of the Law 《 ( 全國人民代表大會常務委員會關於加強法律解
釋工作的決議》) passed on June 10, 1981, issues related to the further clarification or supplement
of laws should be interpreted or provided by the Standing Committee of the NPC, issues related to
the application of laws in a court trial should be interpreted by the Supreme People’s Court, issues
related to the application of laws in a prosecution process should be interpreted by the Supreme
People’s Procuratorate, and the legal issues other than the above-mentioned should be interpreted
by the State Council and the competent authorities. The State Council and its ministries and
commissions are also vested with the power to give interpretations of the administrative
regulations and departmental rules which they have promulgated. At the regional level, the power
to interpret regional laws is vested in the regional legislative and administrative authorities which
promulgate such laws.
PRC Judicial System
Under the Constitution, the Civil Procedure Law and the Law of Organization of the People’s
Courts of the PRC 《 ( 中華人民共和國人民法院組織法》), the people’s court is the judging organ
of the state, and the people’s courts are classified into the Supreme People’s Court, the local
people’s courts at various local levels, and other special people’s courts. The local people’s courts
at various local levels are divided into three levels, namely the primary people’s courts, the
intermediate people’s courts and the higher people’s courts. The primary people’s courts are further
divided into civil, criminal and economic divisions. The intermediate people’s courts have
divisions similar to those of the primary people’s courts and other special divisions, such as the
intellectual property division. These two levels of people’s courts are subject to supervision by
people’s courts at higher levels. The Supreme People’s Procuratorate is authorized to supervise the
judgment and ruling of the people’s courts at all levels which have been legally effective, and the
people’s procuratorate at a higher level is authorized to supervise the judgment and ruling of a
– IV-2 –

people’s court at a lower level which have been legally effective. The Supreme People’s Court is
the highest judicial authority in the PRC. It supervises the administration of justice by the people’s
courts at all levels.
The people’s courts employ a two-tier appellate system. The judgments or rulings of the
second instance at a people’s court are final. A party may appeal against the judgment or ruling of
the first instance of a local people’s court. The people’s procuratorate may present a protest to the
people’s court at the next higher level in accordance with the procedures stipulated by the laws. In
the absence of any appeal by the parties and any protest by the people’s procuratorate within the
stipulated period, the judgments or rulings of the people’s court are final. Judgments or rulings of
the second instance of the intermediate people’s courts, the higher people’s courts and the Supreme
People’s Court are final. Judgments or rulings of the first instance of the Supreme People’s Court
are also final. However, if the Supreme People’s Court or a people’s court at the next higher level
discovers an error in a final and binding judgment or ruling which has taken effect in any people’s
court at a lower level, or the presiding judge of a people’s court finds an error in a final and
binding judgment or ruling which has taken effect in the court over which he presides, a retrial of
the case may be initiated according to the judicial supervision procedures.
The Civil Procedure Law of the PRC 《 ( 中華人民共和國民事訴訟法》) (the “PRC Civil
Procedure Law”) adopted on April 9, 1991 and amended on October 28, 2007, August 31, 2012,
June 27, 2017 and December 24, 2021, respectively, prescribes the conditions for instituting a civil
action, the jurisdiction of the people’s courts, the procedures to be followed for conducting a civil
action, and the procedures for enforcement of a civil judgment or ruling. All parties to a civil
action conducted within the PRC must abide by the PRC Civil Procedure Law. A civil case is
generally heard by the court located in the defendant’s place of domicile. The court of jurisdiction
in respect of a civil action may also be chosen by explicit agreement among the parties to a
contract, provided that the people’s court having jurisdiction should be located at places directly
connected with the disputes, such as the plaintiff’s or the defendant’s place of domicile, the place
where the contract is executed or signed or the place where the object of the action is located.
However, such choice shall not in any circumstances contravene the regulations of differential
jurisdiction and exclusive jurisdiction.
A foreign individual, a person without nationality, a foreign enterprise or a foreign

organization that institute or respond to proceedings in a people’s court is given the same litigation
rights and obligations as a citizen or legal person of the PRC. Should a foreign court limit the
litigation rights of PRC citizens and enterprises, the PRC court shall apply the same limitations to
the citizens and enterprises of such foreign country. A foreign individual, a person without
nationality, a foreign enterprise or a foreign organization must engage a PRC lawyer in case he or
it needs to engage a lawyer for the purpose of initiating actions or defending against litigations at
a PRC court. In accordance with the international treaties to which the PRC is a signatory or a
participant or according to the principle of reciprocity, a people’s court and a foreign court may
request each other to serve documents, conduct investigation, collect evidence and conduct other
actions on its behalf. A PRC court shall not accommodate any request made by a foreign court
which will result in the violation of sovereignty, security or public interests of the PRC.
All parties to a civil action shall perform legally effective judgments and rulings. If any party
to a civil action refuses to abide by a judgment or ruling made by a people’s court or an award
made by an arbitration tribunal in the PRC, the other party may apply to the people’s court for the
enforcement of the same within two years, subject to application for postponed enforcement or
revocation. If a party fails to satisfy within the stipulated period a judgment which the court has
– IV-3 –

granted an enforcement approval, the court may, upon the application of the other party,
mandatorily enforce the judgment. A party seeking to enforce a judgment or ruling of a people’s
court against another party who is not or whose property is not within the PRC may apply to a
foreign court with jurisdiction over the case for recognition and enforcement of such judgment or
ruling. Alternatively, the people’s court may, pursuant to an international treaty concluded or
acceded to by the PRC or in accordance with the principle of reciprocity, request the foreign court
to recognize and execute the judgment or ruling. Likewise, if the PRC has entered into either a
treaty relating to judicial enforcement with the relevant foreign country or a relevant international
treaty or according to the principle of reciprocity, a foreign judgment or ruling may also be
recognized and enforced in accordance with the PRC enforcement procedures by a PRC court
unless the people’s court considers that the recognition or enforcement of such judgment or ruling
would violate the basic legal principles of the PRC, its sovereignty or national security, or would
not be in the public interest.
The Company Law, Special Regulations and Mandatory Provisions
The Company Law was adopted by the Standing Committee of the Eighth NPC at its Fifth
Session on December 29, 1993 and came into effect on July 1, 1994. It was successively amended
on December 25, 1999, August 28, 2004, October 27, 2005, December 28, 2013 and October 26,
2018. The latest revised Company Law came into effect on October 26, 2018.
The Special Regulations of the State Council on the Overseas Offering and the Listing of
Shares by Joint Stock Limited Companies 《 ( 國務院關於股份有限公司境外募集股份及上市的特別
規定》) (the “Special Regulations”) were passed at the 22nd Standing Committee Meeting of the
State Council on July 4, 1994 and promulgated and implemented on August 4, 1994. The Special
Regulations include provisions in respect of the overseas share offering and listing of joint stock
limited companies.
The Mandatory Provisions jointly promulgated by the former Securities Commission of the
State Council and the former State Restructuring Commission on August 27, 1994 prescribe the
provisions which must be incorporated in the articles of association of joint stock limited
companies to be listed on overseas stock exchanges. Accordingly, the Mandatory Provisions have
been incorporated in the Articles of Association of the Company. References to a “company” made
in this Appendix are to a joint stock limited company established under the Company Law with H
Shares to be issued. Set out below is a summary of the major provisions of the Company Law, the
Special Regulations and the Mandatory Provisions.
General
A “joint stock limited company” refers to a corporate legal person established in China under
the Company Law with independent legal person properties and entitlements to such legal person
properties. The liability of the company is limited to the total amount of all assets it owns and the
liability of its shareholders is limited to the extent of the shares they subscribe for.
– IV-4 –

Incorporation
A company may be incorporated by promotion or subscription. A company shall be

incorporated by a minimum of two but no more than 200 promoters, and at least half of the
promoters must be residents within the PRC. Companies incorporated by promotion are companies
of which the entire registered capital is subscribed for by the promoters. Shares in the company
incorporated by promotion shall not be offered to others unless the registered capital has been
fully paid up. For companies incorporated by subscription, the registered capital is the total
paid-up capital as registered with the relevant registration authorities. If laws, administrative
regulations and decisions of the State Council have separate provisions on paid-in registered
capital and the minimum registered capital, the company should follow such provisions.
For companies incorporated by way of promotion, the promoters shall subscribe in writing for
the shares required to be subscribed for by them and pay up their capital contributions under the
articles of association. Procedures relating to the transfer of titles to non-monetary assets shall be
duly completed if such assets are to be contributed as capital. Promoters who fail to pay up their
capital contributions in accordance with the foregoing provisions shall assume default liabilities in
accordance with the covenants set out in the promoters’ agreements. After the promoters have
confirmed the capital contribution under the articles of association, a board of directors and a
board of supervisors shall be elected and the board of directors shall apply for registration of
incorporation by filing the articles of association with the company registration authority, and
other documents as required by laws or administrative regulations.
Where companies are incorporated by subscription, not less than 35% of their total number of
shares must be subscribed for by the promoters, unless otherwise provided for by laws or
administrative regulations. A promoter who offers shares to the public must publish a share
offering document and prepare a share subscription form to be completed, signed and sealed by
subscribers, specifying the number and amount of shares to be subscribed for and the subscribers’
addresses. The subscribers shall pay up monies for the shares they subscribe for. Where a promoter
is offering shares to the public, such offer shall be underwritten by security companies established
under PRC laws, and an underwriting agreement shall be concluded thereon. A promoter offering
shares to the public shall also enter into agreements with banks in relation to the receipt of
subscription monies. The receiving banks shall receive and keep in custody the subscription
monies, issue receipts to subscribers who have paid the subscription monies and is obliged to
furnish evidence of receipt of those subscription monies to relevant authorities. After the
subscription monies for the share issue have been paid in full, a capital verification institution
established under PRC laws must be engaged to conduct a capital verification and furnish a
certificate thereon. The promoters shall preside over and convene an inauguration meeting within
30 days from the date of the full payment of subscription monies. The inauguration meeting shall
be formed by the promoters and subscribers. Where the shares issued are not fully subscribed for
within the offer period stipulated in the share offering document, or where the promoter fails to
convene an inauguration meeting within 30 days of the subscription monies for the shares issued
being fully paid up, the subscribers may demand that the promoters refund the subscription monies
so paid together with the interest calculated at bank rates of a deposit for the same period. Within
30 days of the conclusion of the inauguration meeting, the board of directors shall apply to the
registration authority for registration of the establishment of the company. A company is formally
established and has the status of a legal person after approval of registration has been given by the
relevant administration bureau for industry and commerce and a business license has been issued.
– IV-5 –

A company’s promoters shall be liable for:
(i) the debts and expenses incurred in the incorporation process jointly and severally if the
company cannot be incorporated;
(ii) the refund of subscription monies paid by the subscribers together with interest
calculated at bank rates of deposit for the same period jointly and severally if the
company cannot be incorporated; and
(iii) the compensation of any damages suffered by the company in the course of its
incorporation as a result of the promoters’ fault.
Share Capital
The promoters may make a capital contribution in currencies, or non-monetary assets such as
in kind, intellectual property rights or land use rights which can be appraised with monetary value
and transferred lawfully, except for assets which are prohibited from being contributed as capital
by laws or administrative regulations. If a capital contribution is made in non-monetary assets, a
valuation of the assets contributed must be carried out pursuant to the provisions of laws or
administrative regulations on valuation without any over-valuation or under-valuation.
The issuance of shares shall be conducted in a fair and equitable manner. Each share of the
same class must carry equal rights. Shares issued at the same time and within the same class must
be issued on the same conditions and at the same price. The same price per share shall be paid by
any share subscriber (whether an entity or an individual). The share offering price may be equal to
or greater than the par value of the share, but may not be less than the par value.
A company must obtain the approval of the CSRC to offer its shares to the overseas public.
The Special Regulations and the Mandatory Provisions provide that shares issued to foreign
investors and listed overseas shall be in registered form, denominated in Renminbi and subscribed
for in foreign currencies. Shares issued to foreign investors and investors from the territories of
Hong Kong, Macau and Taiwan and listed in Hong Kong are classified as H Shares, and those
shares issued to investors within the PRC, except these regions above, are known as domestic
shares. Under the Special Regulations, upon approval of the CSRC, a company may agree, in the
underwriting agreement in respect of an issue of H Shares, to retain not more than 15% of the
aggregate number of overseas listed foreign invested shares proposed to be issued in addition to
the number of underwritten shares.
Under the Company Law, a company issuing registered share certificates shall maintain a
shareholder registry which sets forth the following matters:
(i) the name and domicile of each shareholder;
(ii) the number of shares held by each shareholder;
(iii) the serial numbers of shares held by each shareholder; and
(iv) the date on which each shareholder acquired the shares.
– IV-6 –

Increase in Share Capital
Pursuant to the Company Law, where a company is issuing new shares, resolutions shall be
passed at general meeting in accordance with the articles of association in respect of the class and
amount of the new shares, the issue price of the new shares, the commencement and end dates for
the issue of the new shares and the class and amount of the new shares proposed to be issued to
existing shareholders.
When a company launches a public issue of new shares upon the approval by the CSRC, a
new share offering document and financial accounting report must be published and a subscription
form must be prepared. After the new share issue of the company has been paid up, the change
must be registered with the relevant registration department and a public announcement must be
made accordingly. Where an increase in registered capital of a company is made by means of an
issue of new shares, the subscription of new shares by shareholders shall be made in accordance
with the relevant provisions on the payment of subscription monies for the incorporation of a
company.
Reduction of Share Capital
A company may reduce its registered capital in accordance with the following procedures
prescribed by the Company Law:
(i) the company shall prepare a balance sheet and an inventory of assets;
(ii) the reduction of registered capital must be approved by shareholders at the general
meeting;
(iii) the company shall notify its creditors of the reduction in share capital within 10 days
and publish an announcement of the reduction in newspapers within 30 days of the
resolution approving the reduction being passed;
(iv) the creditors of the company may within the statutory time limit require the company to
repay its debts or provide guarantees for covering the debts; and
(v) the company must apply to the relevant company registration authority for registration
of the change and reduction in registered capital.
Repurchase of Shares
Pursuant to the Company Law, a company shall not repurchase its own shares other than in
any of the following circumstances:
(i) reducing its registered capital;
(ii) merging with another company which holds its shares;
(iii) utilizing the shares for employee stock ownership plan or stock ownership incentive
scheme;
– IV-7 –

(iv) acquiring its own shares at the request of its shareholders who vote in a shareholders’
general meeting against a resolution regarding a merger or separation;
(v) utilizing the shares for conversion of corporate bonds which are convertible into shares
issued by a listed company; and
(vi) where it is necessary for a listed company to maintain its corporate value and
stockholders’ equity.
Any company’s purchase of its own shares for any reason specified in item (i) and item (ii)
of the preceding paragraph shall be subject to a resolution of the general meeting; any company’s
purchase of its own shares for any reason specified in item (iii), item (v) and item (vi) of the
preceding paragraph may be subject to a resolution of the board meeting with more than two thirds
of directors present, according to the provisions of the articles of associations or upon
authorization by the general meeting.
The shares acquired under the circumstance stipulated in item (i) hereof shall be deregistered
within ten days from the date of acquisition of shares; the shares shall be assigned or deregistered
within six months if the share buyback is made under the circumstances stipulated in either item
(ii) or item (iv); and the shares held in total by a company after a share buyback under any of the
circumstances stipulated in item (iii), item (v) or item (vi) shall not exceed 10% of the company’s
total outstanding shares, and shall be assigned or deregistered within three years.
Listed companies making a share buyback shall perform their obligation of information
disclosure according to the provisions of the Securities Law of the People’s Republic of China. If
the share buyback is made under any of the circumstances stipulated in item (iii), item (v) or item
(vi) hereof, centralized trading shall be adopted publicly.
A company shall not accept its own shares as the subject matter of pledge.
Transfer of Shares
Shares held by shareholders may be transferred in accordance with the relevant laws.
Pursuant to the Company Law, a shareholder should effect a transfer of his shares on a stock
exchange established in accordance with laws or by any other means as required by the State
Council. Registered shares may be transferred after the shareholders endorse the back of the share
certificates or in any other manner specified by laws or administrative regulations. Following the
transfer, the company shall enter the names and addresses of the transferees into its share register.
No changes of registration in the share register described above shall be effected during a period
of 20 days prior to convening a shareholders’ general meeting or 5 days prior to the record date for
the purpose of determining entitlements to dividend distributions, subject to any legal provisions
on the registration of changes in the share register of listed companies. The transfer of bearer share
certificates shall become effective upon the delivery of the certificates to the transferee by the
shareholder. The Mandatory Provision provides that changes due to share transfer should not be
made to shareholder registry within 30 days before a shareholders’ general meeting or within 5
days before the record date for the purpose of determining entitlements to dividend distributions.
– IV-8 –

Pursuant to the Company Law, shares held by promoters may not be transferred within one
year of the establishment of the company. Shares of the company issued prior to the public issue
of shares may not be transferred within one year of the date of the company’s listing on a stock
exchange. Directors, supervisors and the senior management of a company shall declare to the
company their shareholdings in it and any changes in such shareholdings. During their terms of
office, they may transfer no more than 25% of the total number of shares they hold in the company
every year. They shall not transfer the shares they hold within one year of the date of the
company’s listing on a stock exchange, nor within six months after they leave their positions in the
company. The articles of association may set out other restrictive provisions in respect of the
transfer of shares in the company held by its directors, supervisors and the senior management.
Shareholders
Under the Company Law and the Mandatory Provisions, the rights of shareholders include the
rights:
(i) to receive a return on assets, participate in significant decision-making and select

management personnel;
(ii) to petition the people’s court to revoke any resolution passed on a shareholders’ general
meeting or a meeting of the board of directors that has not been convened in compliance
with the laws, regulations or the articles of association or whose voting has been
conducted in an invalid manner, or any resolution the contents of which is in violation
of the articles of association, provided that such petition shall be submitted within 60
days of the passing of such resolution;
(iii) to transfer the shares of the shareholders according to the applicable laws and
regulations and the articles of association;
(iv) to attend or appoint a proxy to attend shareholders’ general meetings and exercise the
voting rights;
(v) to inspect the articles of association, share register, counterfoil of company debentures,
minutes of shareholders’ general meetings, board resolutions, resolutions of the board of
supervisors and financial and accounting reports, and to make suggestions or inquiries in
respect of the company’s operations;
(vi) to receive dividends in respect of the number of shares held;
(vii) to participate in distribution of residual properties of the company in proportion to their

shareholdings upon the liquidation of the company; and
(viii) any other shareholders’ rights provided for in laws, administrative regulations, other
normative documents and the articles of association.
The obligations of shareholders include the obligation to abide by the company’s articles of
association, to pay the subscription monies in respect of the shares subscribed for, to be liable for
the company’s debts and liabilities to the extent of the amount of subscription monies agreed to be
paid in respect of the shares taken up by them and any other shareholder obligation specified in
the articles of association.
– IV-9 –

Shareholders’ General Meetings
The general meeting is the organ of authority of the company, which exercises its powers in
accordance with the Company Law. The general meeting may exercise its powers:
(i) to decide on the company’s operational objectives and investment plans;
(ii) to elect and remove the directors and supervisors (not being representative(s) of
employees) and to decide on the matters relating to the remuneration of directors and
supervisors;
(iii) to review and approve the reports of the board of directors;
(iv) to review and approve the reports of the board of supervisors or supervisors;
(v) to review and approve the company’s annual financial budgets and final accounts plan;
(vi) to review and approve the company’s profit distribution proposals and loss recovery
proposals;
(vii) to decide on any increase or reduction of the company’s registered capital;
(viii) to decide on the issue of corporate bonds;
(ix) to decide on merger, division, dissolution and liquidation of the company or change of
its corporate form;
(x) to amend the company’s articles of association; and
(xi) to exercise any other authority stipulated in the articles of association.
Pursuant to the Company Law and the Mandatory Provisions, a shareholders’ general meeting
is required to be held once every year within six months after the end of the previous accounting
year. An extraordinary general meeting is required to be held within two months of the occurrence
of any of the following:
(i) the number of directors is less than the number stipulated by the law or less than two
thirds of the number specified in the articles of association;
(ii) the outstanding losses of the company amounted to one-third of the company’s total paid
in share capital;
(iii) shareholders individually or in aggregate holding 10% or more of the company’s shares
request that an extraordinary general meeting is convened;
(iv) the board of directors deems necessary;
(v) the board of supervisors so proposes; or
(vi) any other circumstances as provided for in the articles of association.
– IV-10 –

A shareholders’ general meeting shall be convened by the board of directors and presided
over by the chairman of the board of directors. In the event that the chairman is incapable of
performing or is not performing his duties, the meeting shall be presided over by the vice
chairman. In the event that the vice chairman is incapable of performing or is not performing his
duties, a director nominated by half or more of the directors shall preside over the meeting. Where
the board of directors is incapable of performing or is not performing its duties to convene the
general meeting, the board of supervisors shall convene and preside over such meeting in a timely
manner. If the board of supervisors fails to convene and preside over such meeting, shareholders
individually or in aggregate holding 10% or more of the company’s shares for 90 days or more
consecutively may unilaterally convene and preside over such meeting.
In accordance with the Company Law, a notice of the general meeting stating the date and
venue of the meeting and the matters to be considered at the meeting shall be given to all
shareholders 20 days before the meeting. A notice of extraordinary general meeting shall be given
to all shareholders 15 days prior to the meeting. For the issuance of bearer share certificates, the
time and venue of and matters to be considered at the meeting shall be announced 30 days before
the meeting.
In accordance with the Mandatory Provisions, a written notice of the general meeting stating
the date and venue of the meeting and the matters to be considered at the meeting shall be given to
all shareholders 45 days before the meeting. A shareholder who intends to attend the meeting shall
deliver his written reply regarding his attendance of the meeting to the company 20 days before
the date of the meeting.
There is no specific provision in the Company Law regarding the number of shareholders
constituting a quorum in a shareholders’ general meeting, although the Special Regulations and the
Mandatory Provisions provide that a company’s general meeting may be convened when written
replies to the notice of that meeting from shareholders holding shares representing no less than
50% of the voting rights in the company have been received 20 days before the proposed date. If
that 50% level is not achieved, the company shall notify shareholders again within five days by
announcement of the matters to be considered at the meeting as well as the date and venue of the
meeting, and the general meeting may be held by the company thereafter.
According to the Official Reply of the State Council on Adjusting the Provisions Governing
Matters Including the Application of the Notice Period for the Convening of Shareholders’ General
Meetings by Companies Listed Overseas 《 ( 國務院關於調整適用在境外上市公司召開股東大會通
知期限等事項規定的批覆》) promulgated by the State Council on October 17, 2019, for those
companies registered in the PRC and listed overseas, provisions and requirements stipulated in the
Company Law in relation to the notice period, shareholders’ right to submit proposals to, and the
procedures for convening, shareholders’ general meetings shall apply, and Article 20 to Article 22
of the Special Regulations shall no longer apply.
Pursuant to the Company Law, shareholders present at a shareholders’ general meeting have
one vote for each share they hold, save that shares held by the company are not entitled to any
voting rights.
An accumulative voting system may be adopted for the election of directors and supervisors
at the general meeting pursuant to the provisions of the articles of association or a resolution of
the general meeting. Under the accumulative voting system, each share shall be entitled to the
– IV-11 –

number of votes equivalent to the number of directors or supervisors to be elected at the general
meeting, and shareholders may consolidate their votes for one or more directors or supervisors
when casting a vote.
Pursuant to the Company Law, resolutions of the general meeting must be passed by more
than half of the voting rights held by shareholders present at the meeting, with the exception of
resolutions relating to merger, division or dissolution of the company, increase or reduction of
registered share capital, change of corporate form or amendments to the articles of association,
which in each case must be passed by more than two-thirds of the voting rights held by the
shareholders present at the meeting. Where the Company Law and the articles of association
provide that the transfer or acquisition of significant assets or the provision of external guarantees
by the company must be approved by way of resolution of the general meeting, the board of
directors shall convene a shareholders’ general meeting promptly to vote on such matters.
A shareholder may entrust a proxy to attend the general meeting on his/her behalf. The proxy
shall present the shareholders’ power of attorney to the company and exercise voting rights within
the scope of authorization.
Minutes shall be prepared in respect of matters considered at the general meeting and the
chairman and directors attending the meeting shall endorse such minutes by signature. The minutes
shall be kept together with the shareholders’ attendance register and the proxy forms.
Pursuant to the Mandatory Provisions, the increase or reduction of share capital, the issuance
of shares of any class, warrants or other similar securities and corporate bonds, the division,
merger, dissolution and liquidation of the company, the amendments to the articles of association
and any other matters, which, as resolved by way of an ordinary resolution of the general meeting,
may have a material impact on the company and require adoption by way of a special resolution,
must be approved through special resolutions by more than two-thirds of the voting rights held by
shareholders (including his/her proxies) present at the meeting.
The Mandatory Provisions require a special resolution to be passed at the general meeting
and a class meeting to be held in the event of a variation or derogation of the class rights of a
shareholder class. For this purpose, holders of domestic shares and H Shares are deemed to be
shareholders of different classes.
Board of Directors
A company shall have a board of directors which shall consist of 5 to 19 members. Members
of the board of directors may include staff representatives, who shall be democratically elected by
the company’s staff at a staff representative assembly, general staff meeting or otherwise. The term
of a director shall be stipulated in the articles of association, provided that no term of office shall
last for more than three years. A director may serve consecutive terms if re-elected. A director
shall continue to perform his/her duties as a director in accordance with the laws, administrative
regulations and the articles of association until a duly re-elected director takes office, if re-election
is not conducted in a timely manner upon the expiry of his/her term of office or if the resignation
of directors results in the number of directors being less than the quorum.
– IV-12 –

Under the Company Law, the board of directors may exercise its powers:
(i) to convene shareholders’ general meetings and report on its work to the shareholders’
general meetings;
(ii) to implement the resolutions passed by the shareholders at the shareholders’ general
meetings;
(iii) to decide on the company’s operational plans and investment proposals;
(iv) to formulate proposals for the company’s annual financial budgets and final accounts;
(v) to formulate the company’s profit distribution proposals and loss recovery proposals;
(vi) to formulate proposals for the increase or reduction of the company’s registered capital
and the issue of corporate bonds;
(vii) to formulate proposals for the merger, division or dissolution of the company or change
of corporate form;
(viii) to decide on the setup of the company’s internal management organs;
(ix) to appoint or dismiss the company’s manager and decide on his/her remuneration and,
based on the manager’s recommendation, to appoint or dismiss any deputy manager and
financial officer of the company and to decide on their remunerations;
(x) to formulate the company’s basic management system; and
(xi) to exercise any other authority stipulated in the articles of association.
Meetings of the board of directors shall be convened at least twice each year. Notices of
meeting shall be given to all directors and supervisors 10 days before the meeting. Interim board
meetings may be proposed to be convened by shareholders representing more than 10% of the
voting rights, more than one-third of the directors or the board of supervisors. The chairman shall
convene the meeting within 10 days of receiving such proposal, and preside over the meeting. The
board of directors may otherwise determine the means and the period of notice for convening an
interim board meeting. Meetings of the board of directors shall be held only if more than half of
the directors are present. Resolutions of the board of directors shall be passed by more than half of
all directors. Each director shall have one vote for a resolution to be approved by the board of
directors. Directors shall attend the meetings of the board of directors in person. If a director is
unable to attend for any reason, he/she may appoint another director to attend the meeting on
his/her behalf by a written power of attorney specifying the scope of authorization. The board of
directors shall make minutes of the meeting’s decisions on the matters discussed at the meeting,
and the directors attending the meeting shall sign the minutes.
If a resolution of the board of directors violates any laws, administrative regulations or the
articles of association or resolutions of the general meeting, and as a result of which the company
sustains serious losses, the directors participating in the resolution are liable to compensate the
– IV-13 –

company. However, if it can be proved that a director expressly objected to the resolution when the
resolution was voted on, and that such objection was recorded in the minutes of the meeting, such
director shall be relieved from that liability.
Under the Company Law, the following person may not serve as a director in a company:
(i) a person who is unable or has limited ability to undertake any civil liabilities;
(ii) a person who has been convicted of an offense of corruption, bribery, embezzlement,
misappropriation of property or destruction of the socialist economic order, or who has
been deprived of his political rights due to his crimes, in each case where no more than
five years have elapsed since the date of completion of the sentence;
(iii) a person who has been a former director, factory manager or manager of a company or
an enterprise that has entered into insolvent liquidation and who was personally liable
for the insolvency of such company or enterprise, where no more than three years have
elapsed since the date of the completion of the bankruptcy and liquidation of the
company or enterprise;
(iv) a person who has been a legal representative of a company or an enterprise that has had
its business license revoked due to violations of the law or has been ordered to close
down by law and the person was personally responsible, where less than three years
have elapsed since the date of such revocation; and
(v) a person who is liable for a relatively large amount of debts that are overdue.
Where a company elects or appoints a director to which any of the above circumstances
applies, such election or appointment shall be null and void. A director to which any of the above
circumstances applies during his/her term of office shall be released of his/her duties by the
company.
In addition, the Mandatory Provisions further stipulate other circumstances under which a
person is disqualified from acting as a director of a company, including: (1) the person is under
investigation by the judicial authorities after a claim has been brought for violating the criminal
law and the case has yet to be settled; (2) a person cannot assume the position of leader of an
enterprise according to laws and administrative regulations; (3) the person is not a natural person;
and (4) no more than 5 years has elapsed since the date the person was found to be in violation of
the provisions of relevant securities regulations and was involved in deceitful or dishonest
activities as ruled by the competent authority.
Pursuant to the Company Law, the board of directors shall appoint a chairman and may
appoint a vice chairman. The chairman and the vice chairman shall be elected with approval of
more than half of all the directors. The chairman shall convene and preside over board meetings
and review the implementation of board resolutions. The vice chairman shall assist the chairman to
perform his/her duties. Where the chairman is incapable of performing or is not performing his/her
duties, the duties shall be performed by the vice chairman. Where the vice chairman is incapable
of performing or is not performing his/her duties, a director elected by more than half of the
directors shall perform his/her duties.
– IV-14 –

Board of Supervisors
Pursuant to the Company Law, a company shall have a board of supervisors composed of not
less than three members. The board of supervisors shall consist of representatives of the
shareholders and an appropriate proportion of representatives of the company’s staff, among which
the proportion of representatives of the company’s staff shall not be less than one-third, and the
actual proportion shall be determined in the articles of association. Representatives of the
company’s staff at the board of supervisors shall be democratically elected by the company’s staff
at the staff representative assembly, general staff meeting or otherwise. The board of supervisors
shall appoint a chairman and may appoint a vice chairman. The chairman and the vice chairman of
the board of supervisors shall be elected by more than half of the supervisors. Directors and senior
management shall not act concurrently as supervisors.
The chairman of the board of supervisors shall convene and preside over board of supervisors
meetings. Where the chairman of the board of supervisors is incapable of performing or is not
performing his/her duties, the vice chairman of the board of supervisors shall convene and preside
over supervisory board meetings. Where the vice chairman of the board of supervisors is incapable
of performing or is not performing his/her duties, a supervisor nominated by more than half of the
supervisors shall convene and preside over meetings of the board of supervisors.
Each term of office of a supervisor is three years and he/she may serve consecutive terms if
re-elected. A supervisor shall continue to perform his/her duties as a supervisor in accordance with
the laws, administrative regulations and the articles of association until a duly re-elected
supervisor takes office, if re-election is not conducted in a timely manner upon the expiry of
his/her term of office or if the resignation of supervisors results in the number of supervisors being
less than the quorum.
The board of supervisors may exercise its powers:
(i) to review the company’s financial position;
(ii) to supervise the directors and senior management in their performance of their duties
and to propose the removal of directors and senior management who have violated laws,
regulations, the articles of association or shareholders’ resolutions;
(iii) when the acts of directors or senior management personnel are detrimental to the
company’s interests, to require the director and senior management to correct these acts;
(iv) to propose the convening of extraordinary shareholders’ general meetings and to

convene and preside over shareholders’ general meetings when the board fails to
perform the duty of convening and presiding over shareholders’ general meetings under
the Company Law;
(v) to submit proposals to the shareholders’ general meetings;
(vi) to bring actions against directors and senior management personnel pursuant to the
relevant provisions of the Company Law; and
(vii) to exercise any other authority stipulated in the articles of association.
– IV-15 –

Supervisors may be present at board meetings and make inquiries or proposals in respect of
the resolutions of the board. The board of supervisors may investigate any irregularities identified
in the operation of the company and, when necessary, may engage an accounting firm to assist its
work at the cost of the company.
Manager and Senior Management
Pursuant to the Company Law, a company shall have a manager who shall be appointed or
removed by the board of directors. The manager may exercise his/her powers:
(i) to manage the production, operation and administration of the company and arrange for
the implementation of the resolutions of the board of directors;
(ii) to arrange for the implementation of the company’s annual operation plans and
investment proposals;
(iii) to formulate proposals for the establishment of the company’s internal management
organs;
(iv) to formulate the fundamental management system of the company;
(v) to formulate the company’s specific rules and regulations;
(vi) to recommend the appointment or dismissal of any deputy manager and any financial
officer of the company;
(vii) to appoint or dismiss management personnel (other than those required to be appointed
or dismissed by the board of directors); and
(viii) to exercise any other authority granted by the board of directors.
Other provisions in the articles of association on the manager’s powers shall also be complied
with. The manager shall be present at meetings of the board of directors. However, the manager
shall have no voting rights at meetings of the board of directors unless he/she concurrently serves
as a director.
Pursuant to the Company Law, senior management refers to the manager, deputy manager,
financial officer, secretary to the board of directors of a listed company and other personnel as
stipulated in the articles of association.
Duties of Directors, Supervisors, Managers and Other Senior Management
Directors, supervisors and senior management are required under the Company Law to
comply with the relevant laws, regulations and the articles of association, and shall be obliged to
be faithful and diligent towards the Company.
– IV-16 –

Directors, supervisors and management personnel are prohibited from abusing their authority
in accepting bribes or other unlawful income and from misappropriating the company’s property.
Directors and senior management are prohibited from:
(i) misappropriating company funds;
(ii) depositing company funds into accounts under their own names or the names of other
individuals;
(iii) loaning company funds to others or providing guarantees in favor of others supported by
company’s property in violation of the articles of association or without approval of the
general meeting or the board of directors;
(iv) entering into contracts or transactions with the company in violation of the articles of
association or without approval of the general meeting;
(v) using their position to procure business opportunities for themselves or others that
should have otherwise been available to the company or operating businesses similar to
that of the company for their own benefits or on behalf of others without approval of the
general meeting;
(vi) accepting commissions paid by a third party for transactions conducted with the
company for their own benefit;
(vii) unauthorized divulgence of confidential information of the company; and
(viii) other acts in violation of their duty of loyalty to the company.
Income generated by directors or senior management in violation of aforementioned shall be

returned to the company.
A director, supervisor or senior management who contravenes any laws, regulations or the
company’s articles of association in the performance of his/her duties resulting in any loss to the
company shall be liable to the company for compensation.
Where a director, supervisor or senior management is required to attend a shareholders’

general meeting, such director, supervisor or senior management shall attend the meeting and
answer the inquiries from shareholders. Directors and senior management shall furnish all true
information and materials to the board of supervisors, without impeding the discharge of duties by
the board of supervisors or supervisors.
Where a director or senior management contravenes any laws, regulations or the company’s
articles of association in the performance of his/her duties resulting in any loss to the company,
shareholder(s) holding individually or in aggregate more than 1% of the company’s shares
consecutively for more than 180 days may request in writing that the board of supervisors institute
litigation at a people’s court. Where the board of supervisors violates the laws or administrative
regulations or the articles of association in the discharge of its duties resulting in any loss to the
company, such shareholder(s) may request in writing that the board of directors institute litigation
at a people’s court on its behalf. If the board of supervisors or the board of directors refuses to
institute litigation after receiving the abovementioned written request from the shareholder(s), or
– IV-17 –

fails to institute litigation within 30 days of the date of receiving the request, or in case of
emergency where failure to institute litigation immediately will result in irrecoverable damage to
the company’s interests, such shareholder(s) shall have the power to institute litigation directly at a
people’s court in its own name for the company’s benefit. For other parties who infringe the lawful
interests of the company resulting in loss to the company, such shareholder(s) may institute
litigation at a people’s court in accordance with the procedure described above. Where a director
or senior management contravenes any laws, administrative regulations or the articles of
association in infringement of shareholders’ interests, a shareholder may also institute litigation at
a people’s court.
The Special Regulations and the Mandatory Provisions provide that a company’s directors,
supervisors, managers and other senior management shall have fiduciary duties towards the
company. They are required to faithfully perform their duties, to protect the interests of the
company and not to use their positions in the company for their own benefits. The Mandatory
Provisions contain detailed stipulations on these duties.
Finance and Accounting
Pursuant to the Company Law, a company shall establish its own financial and accounting
systems according to the laws, administrative regulations and the regulations of the competent
financial departments of the State Council. At the end of each financial year, a company shall
prepare a financial report which shall be audited by an accounting firm in accordance with the
laws. The financial and accounting reports shall be prepared in accordance with the laws,
administrative regulations and the regulations of the financial departments of the State Council.
The company’s financial reports shall be made available for shareholders’ inspection at the
company 20 days before the convening of an annual general meeting. A joint stock limited
company that makes public stock offerings shall publish its financial reports.
When distributing each year’s profits after taxation, the company shall set aside 10% of its
profits after taxation for the company’s statutory common reserve fund until the fund has reached
more than 50% of the company’s registered capital. When the company’s statutory common
reserve fund is not sufficient to make up for the company’s losses for the previous years, the
current year’s profits shall first be used to make good the losses before any allocation is set aside
for the statutory common reserve fund. After the company has made allocations to the statutory
common reserve fund from its profits after taxation, it may, upon passing a resolution at a
shareholders’ general meeting, make further allocations from its profits after taxation to the
discretionary common reserve fund. After the company has made good its losses and made
allocations to its discretionary common reserve fund, the remaining profits after taxation shall be
distributed in proportion to the number of shares held by the shareholders, except for those which
are not distributed in a proportionate manner as provided by the articles of association.
Profits distributed to shareholders by a resolution of a shareholders’ general meeting or the

board of directors before losses have been made good and allocations have been made to the
statutory common reserve fund in violation of the requirements described above must be returned
to the company. The company shall not be entitled to any distribution of profits in respect of
shares held by it.
– IV-18 –

The premium over the nominal value of the shares of the company on issue and other income
as required by relevant government authorities to be treated as the capital reserve fund shall be
accounted for as the capital reserve fund. The common reserve fund of a company shall be applied
to make good the company’s losses, expand its business operations or increase its capital. The
capital reserve fund, however, shall not be used to make good the company’s losses. Upon the
transfer of the statutory common reserve fund into capital, the balance of the fund shall not be less
than 25% of the registered capital of the company before such transfer.
The company shall have no accounting books other than the statutory books. The company’s
assets shall not be deposited in any account opened under the name of an individual.
Appointment and Dismissal of Auditors
Pursuant to the Company Law, the appointment or dismissal of an accounting firm

responsible for the company’s auditing shall be determined by shareholders at a shareholders’
general meeting or the board of directors in accordance with the articles of association. The
accounting firm should be allowed to make representations when the general meeting or the board
of directors conducts a vote on the dismissal of the accounting firm. The company should provide
true and complete accounting evidence, accounting books, financial and accounting reports and
other accounting information to the engaged accounting firm without any refusal, withholding or
falsification of information.
The Special Regulations require a company to engage an independent qualified accounting

firm to audit the company’s annual reports and to review and check other financial reports of the
company. The accounting firm’s term of office shall commence from the end of the shareholders’
annual general meeting to the end of the next shareholders’ annual general meeting.
Profit Distribution
According to the Company Law, a company shall not distribute profits before losses are
covered and the statutory common reserve fund is provided. The Special Regulations require that
dividends and other distributions to be paid to holders of H Shares shall be declared and calculated
in RMB and paid in foreign currencies. Under the Mandatory Provisions, the payment of foreign
currency to shareholders shall be made through receiving agents.
Amendments to the Articles of Association
Pursuant to the Company Law, the resolution of a shareholders’ general meeting regarding
any amendment to a company’s articles of association requires affirmative votes by more than
two-thirds of the votes held by shareholders attending the meeting. Pursuant to the Mandatory
Provisions, the company may amend its articles of association according to the laws,
administrative regulations and the articles of association. The amendment to articles of association
involving content of the Mandatory Provisions will only be effective upon approval of the
department in charge of company examination and approval and the securities regulatory
department authorized by the State Council, while the amendment to articles of association
involving matters of company registration must be registered with the relevant authority in
accordance with applicable laws.
– IV-19 –

Dissolution and Liquidation
Pursuant to the Company Law, a company shall be dissolved for any of the following
reasons:
(i) the term of its operation set out in the articles of association has expired or other events
of dissolution specified in the articles of association have occurred;
(ii) the shareholders have resolved at a shareholders’ general meeting to dissolve the
company;
(iii) the company is dissolved by reason of its merger or division;
(iv) the business license of the company is revoked or the company is ordered to close down
or to be dissolved in accordance with the laws; or
(v) the company is dissolved by a people’s court in response to the request of shareholders
holding shares that represent more than 10% of the voting rights of all shareholders of
the company, on the grounds that the operation and management of the company has
suffered serious difficulties that cannot be resolved through other means, rendering
ongoing existence of the company a cause for significant losses to the shareholders’
interests.
In the event of paragraph (i) above, the company may carry on its existence by amending its
articles of association. The amendments to the articles of association in accordance with the
provisions described above shall require the approval of more than two-thirds of voting rights of
shareholders attending a shareholders’ general meeting.
Where the company is dissolved under the circumstances set forth in paragraph (i), (ii), (iv)
or (v) above, it should establish a liquidation committee within 15 days of the date on which the
dissolution matter occurs. The liquidation committee shall be composed of directors or any other
persons determined by a shareholders’ general meeting. If a liquidation committee is not
established within the prescribed period, the company’s creditors may file an application with a
people’s court, requesting that the court appoint relevant personnel to form a liquidation committee
to administer the liquidation. The people’s court should accept such application and form a
liquidation committee to conduct liquidation in a timely manner.
The liquidation committee may exercise following powers during the liquidation:
(i) to dispose of the company’s assets and to prepare a balance sheet and an inventory of
assets;
(ii) to notify the company’s creditors or publish announcements;
(iii) to deal with and settle any outstanding business related to the liquidation;
(iv) to pay any overdue tax together with any tax arising during the liquidation process;
(v) to settle the company’s claims and liabilities;
– IV-20 –

(vi) to handle the company’s remaining assets after its debts have been paid off; and
(vii) to represent the company in any civil procedures.
The liquidation committee shall notify the company’s creditors within 10 days from its
establishment, and publish an announcement in newspapers within 60 days.
A creditor shall lodge his claim with the liquidation committee within 30 days of receipt of
the notification or within 45 days of the date of the announcement if he has not received any
notification.
A creditor shall, in making his claim, state matters relevant to his creditor’s rights and furnish
relevant evidence. The liquidation committee shall register such creditor’s rights. The liquidation
committee shall not make any settlement to creditors during the period of the claim.
Upon disposal of the company’s property and preparation of the required balance sheet and
inventory of assets, the liquidation committee shall draw up a liquidation plan and submit this plan
to a shareholders’ general meeting or a people’s court for endorsement. The remaining assets of the
company, after payment of liquidation expenses, employee wages, social insurance expenses and
statutory compensation, outstanding taxes and the company’s debts, shall be distributed to
shareholders in proportion to shares held by them. The company shall continue to exist during the
liquidation period, although it cannot engage in operating activities that are not related to the
liquidation. The company’s property shall not be distributed to shareholders before repayments are
made in accordance with the requirements described above.
Upon liquidation of the company’s property and preparation of the required balance sheet and
inventory of assets, if the liquidation committee becomes aware that the company does not have
sufficient assets to meet its liabilities, it must apply to a people’s court for a declaration of
bankruptcy in accordance with the laws. Following such declaration by the people’s court, the
liquidation committee shall hand over the administration of the liquidation to the people’s court.
Upon completion of the liquidation, the liquidation committee shall prepare a liquidation
report and submit it to the shareholders’ general meeting or a people’s court for confirmation of its
completion, and to the company registration authority to cancel the company’s registration, and an
announcement of its termination shall be published. Members of the liquidation committee are
required to discharge their duties in good faith and in compliance with relevant laws. Members of
the liquidation committee shall be prohibited from abusing their authority in accepting bribes or
other unlawful income and from misappropriating the company’s properties. Members of the
liquidation committee are liable to indemnify the company and its creditors in respect of any loss
arising from their willful or material default.
Liquidation of a company declared bankrupt according to laws shall be processed in

accordance with the laws on corporate bankruptcy.
Overseas Listing
The shares of a company shall only be listed overseas after obtaining approval from CSRC,
and the listing must be arranged in accordance with procedures specified by the State Council.
Pursuant to the Special Regulations, a company may issue shares to overseas investors and list its
shares overseas upon approval from the CSRC. Subject to approval of the company’s plans to issue
– IV-21 –

overseas-listed foreign shares and domestic shares by the CSRC, the board of directors of the
company may make arrangement to implement such plans for the issuance of the foreign shares
and domestic shares, respectively, within fifteen (15) months from the date of approval by the
CSRC.
At the same time, according to the provisions of the Mandatory Provisions, if the company’s
shares determined by the company’s issuance plan are not fully issued, new shares which were not
included in the original issue plan shall not be issued by the company. If the company needs to
adjust the issuance plan, the general meeting of shareholders shall make a resolution. After being
approved by the company’s examination and approval department authorized by the State Council,
it shall be submitted to the CSRC for examination and approval.
Loss of Share Certificates
A shareholder may, in accordance with the public notice procedures set out in the PRC Civil
Procedure Law, apply to a people’s court if his share certificate(s) in registered form is either
stolen, lost or destroyed, for a declaration that such certificate(s) will no longer be valid. After
such a declaration has been obtained, the shareholder may apply to the company for the issue of a
replacement certificate(s).
A separate procedure regarding the loss of share certificates and H Shares certificates of the
overseas-listed foreign shareholders of the PRC is provided for in the Mandatory Provisions,
details of which are set out in the articles of association.
Merger and Division
Pursuant to the Company Law, a merger agreement shall be signed by merging companies
and the involved companies shall prepare respective balance sheets and inventory of assets. The
companies shall within 10 days from the date of passing the resolution approving the merger notify
their respective creditors and publicly announce the merger in newspapers within 30 days. A
creditor may, within 30 days of receipt of the notification, or within 45 days from the date of the
announcement if he has not received the notification, request the company to settle any
outstanding debts or provide corresponding guarantees.
In case of a merger, the credits and debts of the merging parties shall be assumed by the
surviving or the new company. In case of a division, the company’s assets shall be divided and a
balance sheet and an inventory of assets shall be prepared. When a resolution regarding the
company’s division is approved, the company should notify all its creditors within 10 days from
the date of passing such resolution and publicly announce the division in newspapers within 30
days. Unless an agreement in writing is reached with creditors in respect of the settlement of
debts, the liabilities of the company which have accrued prior to the separation shall be jointly
borne by the separated companies.
Changes in the registration as a result of the merger or division shall be registered with the
relevant administration authority.
– IV-22 –

The PRC Securities Laws, Regulations and Regulatory Regimes
The PRC has promulgated a series of regulations that relate to the issue and trading of the
shares and disclosure of information. In October 1992, the State Council established the Securities
Committee and the CSRC. The Securities Committee is responsible for coordinating the drafting of
securities regulations, formulating securities-related policies, planning the development of
securities markets, directing, coordinating and supervising all securities-related institutions in the
PRC and administering the CSRC. The CSRC is the regulatory arm of the Securities Committee
and is responsible for the drafting of regulatory provisions governing securities markets,
supervising securities companies, regulating public offerings of securities by PRC companies in
the PRC or overseas, regulating the trading of securities, compiling securities-related statistics and
undertaking relevant research and analysis. In April 1998, the State Council consolidated the
Securities Committee and the CSRC and reformed the CSRC.
On April 22, 1993, the State Council promulgated the Provisional Regulations Concerning the
Issue and Trading of Shares 《 ( 股票發行與交易管理暫行條例》) govern the application and
approval procedures for public offerings of equity securities, trading in equity securities, the
acquisition of listed companies, deposit, clearing and transfer of listed equity securities, the
disclosure of information, investigation, penalties and dispute resolutions with respect to a listed
company.
On December 25, 1995, the State Council promulgated the Regulations of the State Council
Concerning Domestic Listed Foreign Shares of Joint Stock Limited Companies 《 ( 國務院關於股份
有限公司境內上市外資股的規定》). These regulations principally govern the issue, subscription,
trading and declaration of dividends, other distributions of domestic listed foreign shares and
disclosure of information of joint stock limited companies having domestic listed foreign shares.
The Securities Law of the PRC 《 ( 中華人民共和國證券法》) (the “PRC Securities Law”)
took effect on July 1, 1999 and was revised as of August 28, 2004, October 27, 2005, June 29,
2013, August 31, 2014 and December 28, 2019, respectively. The latest revised PRC Securities
Law came into effect on March 1, 2020. It was the first national securities law in the PRC, and is
divided into 14 chapters and 226 articles regulating, among other matters, the issue and trading of
securities, takeovers by listed companies, securities exchanges, securities companies and the duties
and responsibilities of the State Council’s securities regulatory authorities. The PRC Securities
Law comprehensively regulates activities in the PRC securities market. Article 224 of the PRC
Securities Law provides that domestic enterprises shall satisfy the relevant requirements of the
State Council Securities when it issues or lists shares outside the PRC directly or indirectly.
Currently, the issue and trading of foreign issued securities (including shares) are principally
governed by the rules and regulations promulgated by the State Council and the CSRC.
Arbitration and Enforcement of Arbitral Awards
The Arbitration Law of the PRC 《 ( 中華人民共和國仲裁法》) (the “PRC Arbitration Law”)
was enacted by the Standing Committee of the NPC on August 31, 1994, which became effective
on September 1, 1995 and was amended on August 27, 2009 and September 1, 2017. The PRC
Arbitration Law is applicable to, among other matters, economic disputes involving foreign parties
where all parties have entered into a written agreement to resolve disputes by arbitration before an
arbitration committee constituted in accordance with the PRC Arbitration Law. The PRC
Arbitration Law provides that an arbitration committee may, before the promulgation of arbitration
regulations by the PRC Arbitration Association, formulate interim arbitration rules in accordance
– IV-23 –

with the PRC Arbitration Law and the PRC Civil Procedure Law. Where the parties have agreed to
settle disputes by means of arbitration, a people’s court will refuse to handle a legal proceeding
initiated by one of the parties at such people’s court, unless the arbitration agreement has lapsed.
The Listing Rules and the Mandatory Provisions require an arbitration clause to be included
in the articles of association of a company listed in Hong Kong and, in the case of the Listing
Rules, in a contract between the company and each of the directors and supervisors. Pursuant to
such clause, whenever a dispute or claim arises from any right or obligation provided in the
abovementioned contracts, the articles of association, the Company Law or other relevant laws and
administrative regulations concerning the affairs of the company between (i) a holder of overseas
listed foreign shares and the company; (ii) a holder of overseas listed foreign shares and a holder
of domestic shares; (iii) a holder of overseas listed foreign shares and the company’s directors,
supervisors or other management personnel; or (iv) the company and its directors or officers, such
parties shall be required to refer such dispute or claim to arbitration at either the China
International Economic and Trade Arbitration Commission (the “CIETAC”) or the Hong Kong
International Arbitration Center (the “HKIAC”). Disputes in respect of the definition of
shareholder and disputes in relation to the company’s shareholder registry need not be resolved by
arbitration. If the party seeking arbitration elects to arbitrate the dispute or claim at the HKIAC,
then either party may apply to have such arbitration conducted in Shenzhen in accordance with the
securities arbitration rules of the HKIAC.
Under the PRC Arbitration Law and the PRC Civil Procedure Law, an arbitral award shall be
final and binding on the parties involved in the arbitration. If any party fails to comply with the
arbitral award, the other party to the award may apply to a people’s court for its enforcement. A
people’s court may refuse to enforce an arbitral award made by an arbitration commission if there
is any procedural irregularity (including, but not limited to, irregularity in the composition of the
arbitration committee, the jurisdiction of the arbitration commission, or the making of an award on
matters beyond the scope of the arbitration agreement).
Any party seeking to enforce an arbitral award of a foreign affairs arbitration organ of the
PRC against a party who or whose property is not located within the PRC may apply to a foreign
court with jurisdiction over the case for recognition and enforcement of the award. Likewise, an
arbitral award made by a foreign arbitration body may be recognized and enforced by a PRC court
in accordance with the principle of reciprocity or any international treaties concluded or acceded
to by the PRC.
The PRC acceded to the Convention on the Recognition and Enforcement of Foreign Arbitral
Awards (the “New York Convention”) adopted on June 10, 1958 pursuant to a resolution of the
Standing Committee of the NPC passed on December 2, 1986. The New York Convention provides
that all arbitral awards made in a state which is a party to the New York Convention shall be
recognized and enforced by other parties thereto subject to their rights to refuse enforcement under
certain circumstances, including where the enforcement of the arbitral award is against the public
policy of that state. At the time of the PRC’s accession to the Convention, the Standing Committee
of the NPC declared that (i) the PRC will only apply the New York Convention to the recognition
and enforcement of arbitral awards made in the territory of another contracting state based on the
principle of reciprocity; and (ii) the New York Convention will only apply to disputes deemed
under PRC law to be arising from contractual or non-contractual mercantile legal relations.
– IV-24 –

An agreement has been reached between Hong Kong and the Supreme People’s Court of the
PRC for the mutual enforcement of arbitral awards. On June 18, 1999, the Supreme People’s Court
of the PRC adopted the Arrangement on Mutual Enforcement of Arbitral Awards between Mainland
and Hong Kong Special Administrative Region 《 ( 關於內地與香港特別行政區相互執行仲裁裁決
的安排》), which became effective on February 1, 2000. The arrangement is made in accordance
with the spirit of the New York Convention. Pursuant to this arrangement, awards made by PRC
arbitral authorities acknowledged by Hong Kong arbitration rules can be enforced in Hong Kong,
and Hong Kong arbitration awards are also enforceable in the Mainland. Where a court of the
Mainland finds that enforcement in the Mainland of the ruling made by the Hong Kong arbitral
authority will violate public interests of the Mainland, execution of the ruling may be ignored. On
November 26, 2020, the Supreme People’s Court of the PRC published the Supplemental
Arrangement on Mutual Enforcement of Arbitral Awards between Mainland and Hong Kong
Special Administrative Region 《 ( 關於內地與香港特別行政區相互執行仲裁裁決的補充安排》),
which expands the scope of awards that can be acknowledged and enforced. Arbitration awards
made in accordance with the PRC Arbitration Law may be applied for acknowledgment and
enforcement in Hong Kong, and arbitration awards made in accordance with the Arbitration
Ordinance of the Hong Kong may be applied for acknowledgment and enforcement in the
Mainland.
HONG KONG LAWS AND REGULATIONS
Material Differences between Certain Aspects of Corporation Law in the PRC and Hong
Kong
Hong Kong company law is primarily set out in the Companies Ordinance and the Companies
(Winding Up and Miscellaneous Provisions) Ordinance, supplemented by common law and rules of
equity that apply to Hong Kong. As a joint stock limited company incorporated in the PRC that is
seeking a listing of shares on the Stock Exchange, we are governed by the Company Law and all
other rules and regulations promulgated pursuant to the Company Law. Set out below is a
summary of certain material differences between Hong Kong company law and the Company Law.
This summary is, however, not intended to be an exhaustive comparison.
Corporate Existence
Under Hong Kong company law, a company with share capital is incorporated by the
Registrar of Companies in Hong Kong, which issues a certificate of incorporation to the Company
upon its incorporation, and the company will acquire an independent corporate existence
henceforth. A company may be incorporated as a public company or a private company. Pursuant
to the Companies Ordinance, the articles of association of a private company incorporated in Hong
Kong shall contain certain pre-emptive provisions. A public company’s articles of association do
not contain such pre-emptive provisions.
Under the Company Law, a joint stock limited company may be incorporated by promotion or
public subscription.
– IV-25 –

Share Capital
Under Hong Kong law, the directors of a Hong Kong company may, with the prior approval
of the shareholders if required, issue new shares of the company. The Company Law has no
provisions on minimum registered capital of joint stock companies, except that laws,
administrative regulations and State Council decisions have separate provisions on paid-in
registered capital and the minimum registered capital of joint stock companies, in which case the
company should follow such provisions. The Company’s registered capital is the amount of its
issued share capital. Any increase in the Company’s registered capital must be approved at the
general meeting and shall be approved by/filed with the relevant PRC governmental and regulatory
authorities (if applicable).
The Companies Ordinance does not prescribe any minimum capital requirement for
companies incorporated in Hong Kong.
Under the Company Law, the shares may be subscribed for in the form of money or
non-monetary assets (other than assets not entitled to be used as capital contributions under
relevant laws or administrative regulations). For non-monetary assets to be used as capital
contributions, appraisals must be carried out to ensure there is no over-valuation or
under-valuation of the assets. There is no such restriction on a company incorporated in Hong
Kong.
Restrictions on Shareholding and Transfer of Shares
Generally, domestic shares, which are denominated and subscribed for in Renminbi, can be
subscribed for and traded by PRC investors, qualified overseas institutional investors or qualified
overseas strategic investors.
Overseas listed shares, which are denominated in Renminbi and subscribed for in a currency
other than Renminbi, may only be subscribed for, and traded by, investors from Hong Kong,
Macau and Taiwan or any country and territory outside the PRC, or qualified domestic institutional
investors. If the H shares are eligible securities under the Southbound Trading Link, they are also
subscribed for and traded by PRC investors in accordance with the rules and limits of
Shanghai-Hong Kong Stock Connect or Shenzhen-Hong Kong Stock Connect. When the
application for “full circulation” has been approved by the CSRC, the domestic unlisted shares of
the H-share listed company might be listed and circulated on the Stock Exchange.
Under the Company Law, a promoter of a joint stock limited company is not allowed to
transfer the shares it holds for a period of one year after the date of establishment of the company.
Shares in issue prior to a public offering of the company cannot be transferred within one year
from the listing date of the shares on a stock exchange. Shares in a joint stock limited liability
company held by its directors, supervisors and senior management and transferred each year
during their term of office shall not exceed 25% of the total shares they held in a company, and
the shares they held in a company cannot be transferred within one year from the listing date of
the shares, and also cannot be transferred within half a year after the said personnel has left office.
The articles of association may set other restrictive requirements on the transfer of a company’s
shares held by its directors, supervisors and senior management. There are no restrictions on
shareholdings and transfers of shares under Hong Kong law apart from (i) the restriction on the
Company to issue additional Shares within six months, and (ii) 12-month lockup on Controlling
Shareholders’ disposal of Shares, after the [REDACTED].
– IV-26 –

Financial Assistance for Acquisition of Shares
The Company Law does not prohibit or restrict a joint stock limited company or its
subsidiaries from providing financial assistance for the purpose of an acquisition of its own or its
holding company’s shares. However, the Mandatory Provisions contain certain restrictions on a
company and its subsidiaries on providing such financial assistance similar to those under Hong
Kong company law.
Notice of Shareholders’ Meetings
Under the Company Law, notice of a shareholder’s annual general meeting must be given not
less than 20 days before the meeting. Whereas notice of an extraordinary general meeting must be
given not less than 15 days before the meeting. If a company issues bearer shares, notice of a
shareholder’s general meeting must be given at least 30 days prior to the meeting.
For a company incorporated in Hong Kong with limited liability, the minimum period of
notice of a general meeting is 14 days. Further, where a meeting involves consideration of a
resolution requiring special notice, the company must also give its shareholders notice of the
resolution at least 14 days before the meeting. The notice period for the annual shareholders’
general meeting is 21 days.
Quorum for Shareholders’ Meetings
The Company Law does not specify any quorum requirement for a shareholders’ general
meeting.
Under Hong Kong law, the quorum for a shareholders’ meeting is two members, unless the
articles of association of a company specifies otherwise or the company has only one member, in
which case the quorum is one.
Voting at Shareholders’ Meetings
Under the Company Law, the passing of any resolution requires more than one-half of the
voting rights represented by our shareholders present in person or by proxy at a shareholders’
meeting except in cases such as proposed amendments to our Articles of Association, increase or
decrease of registered capital, merger, division, dissolution or transformation, which require more
than two-thirds of the voting rights represented by shareholders present in person or by proxy at a
shareholders’ general meeting.
Under Hong Kong law, an ordinary resolution is passed by a simple majority of affirmative
votes cast by shareholders present in person, or by proxy, at a general meeting, and a special
resolution is passed by not less than three-fourths of affirmative votes casted by shareholders
present in person, or by proxy, at a general meeting.
Variation of Class Rights
The Company Law makes no specific provision relating to variation of class rights. However,
the Company Law states that the State Council can promulgate requirements relating to other kinds
of shares. The Mandatory Provisions contain detailed provisions relating to the circumstances
which are deemed to be variations of class rights and the approval procedures required to be
– IV-27 –

followed in respect thereof. These provisions have been incorporated in the Articles of
Association, which are summarized in “Appendix V — Summary of the Articles of Association of
the Company”.
Under the Companies Ordinance, no rights attached to any class of shares can be varied
except (i) with the passing of a special resolution by the shareholders of the relevant class at a
separate meeting sanctioning the variation, (ii) with the written consent of shareholders
representing at least three-fourths of the total voting rights of shareholders of the relevant class, or
(iii) if there are provisions in the articles of association relating to the variation of those rights,
then in accordance with those provisions.
As required by the Listing Rules and the Mandatory Provisions, we have adopted in the
Articles of Association provisions protecting class rights in a similar manner to those found in
Hong Kong law. Holders of overseas listed shares and domestic shares are defined in the Articles
of Association as different classes. The special procedures for voting by a class of Shareholders
shall not apply in the following circumstances: (i) where we issue, either separately or
concurrently in any 12-month period, upon approval by special resolutions passed at a general
meeting, domestic shares and H shares not more than 20% of each of the existing domestic shares
and H shares, respectively; (ii) where the plan for the issue of domestic shares and H shares upon
our establishment is fulfilled within 15 months following the date of approval by the securities
regulatory authorities under the State Council; and (iii) with the approval of the securities
regulatory authority under the State Council and with the consent of the HKEX, the Company’s
domestic shares may be transferred to foreign investors and listed on the overseas stock exchange,
and all or part of the domestic shares of the Company may be converted into foreign shares, and
the converted shares may be listed and traded on the overseas stock exchange.
Derivative Action By Minority Shareholders
Under Hong Kong company law, a shareholder may, with the leave of the Court, start a
derivative action on behalf of a company for any misconduct committed by its directors against the
company. For example, leave may be granted where the directors control a majority of votes at a
general meeting, and could thereby prevent the company from suing the directors in its own name.
Pursuant to the Company Law, in the event where the directors and senior management
violate their obligations and cause damages to a company, shareholders of a joint stock limited
company individually or jointly holding more than 1% of the shares in the company for more than
180 consecutive days may request in writing the board of supervisors to initiate proceedings in the
people’s court. In the event that the board of supervisors violates their obligations and cause
damages to a company, the above said shareholders may send written request to the board of
directors to initiate proceedings in the people’s court. Upon receipt of such written request from
the shareholders, if the board of supervisors or the board of directors refuses to initiate such
proceedings, or has not initiated proceedings within 30 days upon receipt of the request, or if
under urgent situations, failure of initiating immediate proceeding may cause irremediable damages
to the company, the above said shareholders shall, for the benefit of the company’s interests, have
the right to initiate proceedings directly to the people’s court in their own name. In addition, the
Mandatory Provisions provide us with certain remedies against the Directors, Supervisors and
senior management who breach their duties to the Company. In addition, as a condition to the
listing of overseas listed foreign Shares on the Stock Exchange, each director and supervisor of a
– IV-28 –

joint stock limited company is required to give an undertaking to observe the articles of
association in favor of the company. This allows minority Shareholders to take action against our
Directors and Supervisors in default.
Minority Shareholder Protection
Under the Companies Ordinance, a shareholder who alleges that the affairs of a company are
conducted in a manner unfairly prejudicial to his interests may petition to the Court to make an
appropriate order to give relief to the unfairly prejudicial conduct. Alternatively, pursuant to the
Companies (Winding Up and Miscellaneous Provisions) Ordinance, a shareholder may seek to
wind up the company on the just and equitable ground. In addition, on the application of a
specified number of members, the Financial Secretary may appoint inspectors who are given
extensive statutory powers to investigate the affairs of a company incorporated or registered in
Hong Kong. The Company Law provides that any shareholders holding 10% or above of voting
rights of all issued shares of a company may request a People’s Court to dissolve the company to
the extent that the operation or management of the company experiences any serious difficulties
and its continuous existence would cause serious losses to them, and no other alternatives can
resolve such difficulties.
The Company, as required by the Mandatory Provisions, has adopted in its Articles of
Association minority Shareholder protection provisions similar to (though not as comprehensive
as) those available under the Hong Kong law. These provisions state that a controlling shareholder
may not exercise its voting rights in a manner prejudicial to the interests of other shareholders,
may not relieve a director or supervisor of his duty to act honestly in our best interests or may not
approve the expropriation by a director or supervisor of our assets or the individual rights of other
shareholders.
Board of Directors
The Company Law, unlike Hong Kong company law, does not contain any requirements
relating to the declaration of directors’ interests in material contracts, restrictions on companies
providing certain benefits to directors and guarantees in respect of directors’ liability and
prohibitions against compensation for loss of office without shareholders’ approval. The
Mandatory Provisions, however, contain certain restrictions on interested contracts and specify the
circumstances under which a director may receive compensation for loss of office.
Under the Company Law, a joint stock limited company’s directors and members of the
senior management are subject to the supervision of the board of supervisors. There is no
mandatory requirement for the establishment of the board of supervisors for a company
incorporated in Hong Kong. The Mandatory Provisions provide that each supervisor owes a duty,
in the exercise of his powers, to act in good faith and honestly in what he considers to be in the
best interests of the company and to exercise the care, diligence and skill that a reasonably prudent
person would exercise in comparable circumstances.
– IV-29 –

Fiduciary Duties
In Hong Kong, directors owe fiduciary duties to the company, including the duty not to act in
conflict with the company’s interests. Furthermore, the Companies Ordinance has codified the
directors’ statutory duty of care. Under the Company Law and the Special Regulations, directors,
supervisors, managers and other members of senior management of the company shall honestly and
diligently perform their duties for the company.
Financial Disclosure
Under the PRC Company Law, a joint stock limited company is required to make available at
the company for inspection by shareholders its financial report 20 days before its shareholders’
annual general meeting. In addition, a joint stock limited company of which the shares are publicly
offered must publish its financial report. The Companies Ordinance requires a company
incorporated in Hong Kong to send to every shareholder a copy of its financial statements,
auditors’ report and directors’ report, which are to be presented before the company in its annual
general meeting, not less than 21 days before such meeting. A joint stock limited liability company
is required under the PRC law to prepare its financial statements in accordance with the PRC
GAAP. The Mandatory Provisions require that a company must, in addition to preparing financial
statements according to the PRC GAAP, have its financial statements prepared and audited in
accordance with international or Hong Kong accounting standards and its financial statements must
also contain a statement of the financial effect of the material differences (if any) from the
financial statements prepared in accordance with the PRC GAAP. The lower of the after-tax profits
of a specific fiscal year stated in the statements prepared based on the above-mentioned principles
shall prevail in the allocation of such profits. The company shall publish its financial reports twice
in each accounting year. An interim financial report shall be published within 60 days after the end
of the first six months of each accounting year, while an annual financial report shall be published
within 120 days after the end of each accounting year.
The Special Regulations require that there should not be any contradiction between the
information disclosed within and outside the PRC and that, to the extent that there are differences
in the information disclosed in accordance with the relevant PRC and overseas laws, regulations
and requirements of the relevant stock exchanges, such differences should also be disclosed
simultaneously.
Information on Directors and Shareholders
The PRC Company Law gives shareholders the right to inspect the company’s articles of
association, minutes of the shareholders’ general meetings, share register, counterfoil of company
debentures, resolutions of board meetings, resolutions of the board of supervisors and financial and
accounting reports, which is similar to the shareholders” rights of Hong Kong companies under
Hong Kong law.
– IV-30 –

Receiving Agent
Under the Hong Kong law, dividends once declared by the board of directors will become
debts payable to shareholders. The limitation period for debt recovery action under Hong Kong
law is six years, while under the PRC law this limitation period is three years. The Mandatory
Provisions require that the relevant company shall appoint a receiving agent for shareholders who
hold overseas listed foreign shares, and the receiving agent shall receive on behalf of such holders
of shares dividends declared and other monies owed by the company in respect of its overseas
listed foreign shares.
Corporate Reorganization
Corporate reorganization involving a company incorporated in Hong Kong may be effected in

a number of ways, such as a transfer of the whole or part of the business or property of the
company in the course of voluntary winding up to another company pursuant to Section 237 of the
Companies (Winding Up and Miscellaneous Provisions) Ordinance or a compromise or
arrangement between the company and its creditors or between the company and its members
pursuant to Section 673 and Division 2 of Part 13 of the Companies Ordinance, which requires the
sanction of the court. In addition, subject to the shareholders’ approval, an intra-group
wholly-owned subsidiary company may also be amalgamated horizontally or vertically under the
Companies Ordinance. Under PRC law, merger, division, dissolution or change to the status of a
joint stock limited liability company has to be approved by shareholders in general meeting.
Mandatory Deductions
With a view to increasing the level of protection afforded to investors, the Stock Exchange
requires the incorporation, in the articles of association of a PRC company whose primary listing
is on the Stock Exchange, of the Mandatory Provisions and provisions relating to the change,
removal and resignation of auditors, class meetings and the conduct of the board of supervisors of
the company. Such provisions have been incorporated into the Articles of Association, a summary
of which is set out in “Appendix V — Summary of the Articles of Association of the Company.”
Arbitration of Disputes
In Hong Kong, disputes between shareholders on the one hand, and a company incorporated
in Hong Kong or its directors on the other hand, may be resolved through legal proceedings in the
courts. The Mandatory Provisions provide that such disputes should be submitted to arbitration at
either the HKIAC or the CIETAC, at the claimant’s choice.
Remedies of a Company
Under the PRC Company Law, if a director, supervisor or senior management in carrying out
his duties infringes any law, administrative regulation or the articles of association of a company,
which results in damage to the company, that director, supervisor or senior management should be
responsible to the company for such damages. In addition, the Listing Rules require listed
companies’ articles of association to provide for remedies of the company similar to those
available under Hong Kong law (including rescission of the relevant contract and recovery of
profits from a director, supervisor or senior management).
– IV-31 –

Dividends
The company has the power in certain circumstances to withhold, and pay to the relevant tax
authorities, any tax payable under PRC laws on any dividends or other distributions payable to a
shareholder. Under Hong Kong law, the limitation period for an action to recover a debt (including
the recovery of dividends) is six years, whereas under PRC laws, the relevant limitation period is
three years. The company must not exercise its powers to forfeit any unclaimed dividend in respect
of shares until after the expiry of the applicable limitation period.
Closure of Register of Shareholders
The Companies Ordinance requires that the register of shareholders of a company must not be
closed for the registration of transfers of shares for more than 30 days (extendable to 60 days in
certain circumstances) in a year. Unless otherwise stipulated by laws, share transfers shall not be
registered within 20 days prior to convening a shareholders’ general meeting or 5 days before the
base date of distribution of dividends.
Listing Rules
The Listing Rules provide additional requirements which apply to an issuer which is
incorporated in the PRC as a joint stock limited company and seeks a primary listing or whose
primary listing is on the Stock Exchange. Set out below is a summary of such principal additional
requirements which apply to the Company.
Compliance Advisor
A company seeking listing on the Stock Exchange is required to appoint a compliance advisor
acceptable to the Stock Exchange for the period from its listing date up to the date of the
publication of its first full year ‘s financial results, to provide the company with professional
advice on continuous compliance with the Listing Rules and all other applicable laws, regulations,
rules, codes and guidelines, and to act at all times, in addition to the company’s two authorized
representatives, as the principal channel of communication with the Stock Exchange. The
appointment of the compliance advisor may not be terminated until a replacement acceptable to the
Stock Exchange has been appointed.
If the Stock Exchange is not satisfied that the compliance advisor is fulfilling its
responsibilities adequately, it may require the company to terminate the compliance advisor ‘s
appointment and appoint a replacement.
The compliance advisor must keep the company informed on a timely basis of changes in the
Listing Rules and any new or amended law, regulation or code in Hong Kong applicable to the
company.
It must act as the company’s principal channel of communication with the Stock Exchange if
the authorized representatives of the company are expected to be frequently outside Hong Kong.
– IV-32 –

Accountant’s Report
An Accountant’s report for a PRC issuer will not normally be regarded as acceptable by the
Stock Exchange unless the relevant accounts have been audited to a standard comparable to that
required in Hong Kong or under International Standards on Auditing or China Auditing Standards.
Such report will normally be required to conform to Hong Kong or international accounting
standards or China Accounting Standards for Business Enterprises.
Process Agent
The Company is required to appoint and maintain a person authorized to accept service of
process and notices on its behalf in Hong Kong throughout the period during which its securities
are listed on the Stock Exchange and must notify the Stock Exchange of his appointment, the
termination of his appointment and his contact particulars.
Public Shareholdings
If at any time there are existing issued securities of a PRC issuer other than foreign shares
which are listed on the Stock Exchange, the Listing Rules require that the aggregate amount of
such foreign shares held by the public must constitute not less than 25% of the issued share capital
and that such foreign shares for which listing is sought must not be less than 15% of the total
issued share capital if the company has an expected market capitalization at the time of listing of
not less than HK$50,000,000. The Stock Exchange may, at its discretion, accept a lower
percentage of between 15% and 25% if the company has an expected market capitalization at the
time of listing of over HK$10,000,000,000.
Independent Non-executive Directors and Supervisors
The independent non-executive directors of a PRC issuer are required to demonstrate an

acceptable standard of competence and adequate commercial or professional expertise to ensure
that the interests of the general body of shareholders will be adequately represented. The
supervisors of a PRC issuer must have the character, expertise and integrity and be able to
demonstrate a standard of competence commensurate with their position as supervisors.
Subject to governmental approvals and the provisions of the Articles of Association, the
Company may repurchase its own H shares on the Stock Exchange in accordance with the
provisions of the Listing Rules. Approval by way of special resolution of the holders of domestic
shares and the holders of H shares at separate class meetings conducted in accordance with the
Articles of Association is required for share repurchases. In seeking approvals, the Company is
required to provide information on any proposed or actual purchases of all or any of its equity
securities, whether or not listed or traded on the Stock Exchange. The Directors must also state the
consequences of any purchases which will arise under either or both of the Takeovers Code and
any similar PRC law of which the directors are aware, if any.
Any general mandate given to the directors to repurchase the foreign shares must not exceed
10% of the total amount of existing issued foreign shares of the company.
– IV-33 –

Mandatory Provisions
With a view to increasing the level of protection afforded to investors, the Stock Exchange
requires the incorporation, in the articles of association of a PRC company whose primary listing
is on the Stock Exchange, of the Mandatory Provisions and provisions relating to the change,
removal and resignation of auditors, class meetings and the conduct of the board of supervisors of
the company. Such provisions have been incorporated into the Articles of Association, a summary
of which is set out in Appendix V.
Redeemable Shares
The Company must not issue any redeemable shares unless the Stock Exchange is satisfied
that the relative rights of the holders of the foreign shares are adequately protected.
Pre-emptive Rights
Except in the circumstances mentioned below, the directors of a company are required to
obtain the approval by a special resolution of shareholders in general meeting, and the approvals
by special resolutions of the holders of domestic shares and foreign shares (each being otherwise
entitled to vote at general meetings) at separate class meetings conducted in accordance with the
company’s articles of association, prior to (1) authorizing, allotting, issuing or granting shares or
securities convertible into shares, or options, warrants or similar rights to subscribe for any shares
or such convertible securities; or (2) any major subsidiary of the company making any such
authorization, allotment, issue or grant so as materially to dilute the percentage equity interest of
the company and its shareholders in such subsidiary.
No such approval will be required, but only to the extent that, the existing shareholders of the
company have by special resolution in general meeting given a mandate to the directors, either
unconditionally or subject to such terms and conditions as may be specified in the resolution, to
authorize, allot or issue, either separately or concurrently once every 12 months, not more than
20% of the existing domestic shares and foreign shares as of the date of the passing of the relevant
special resolution or of such shares that are part of the company’s plan at the time of its
establishment to issue domestic shares and foreign shares and which plan is implemented within
15 months from the date of approval by CSRC; or where upon approval by securities supervision
or administration authorities of State Counsel, the shareholders of domestic invested shares of the
company transfer its shares to overseas investors and such shares are listed and traded in foreign
markets.
Supervisors
The Company is required to adopt rules governing dealings by its Supervisors in securities of
the Company in terms no less exacting than those of the model code (set out in Appendix 10 to the
Listing Rules) issued by the Stock Exchange.
– IV-34 –

The Company is required to obtain the approval of its shareholders at a general meeting (at
which the relevant Supervisor and his associates shall not vote on the matter) prior to the
Company or any of its subsidiaries entering into a service contract of the following nature with a
Supervisor or proposed Supervisor of the Company or its subsidiary: (1) the term of the contract
may exceed three years; or (2) the contract expressly requires the Company to give more than one
year ‘s notice or to pay compensation or make other payments equivalent to the remuneration more
than one year in order for it to terminate the contract.
The remuneration committee of the Company or an independent board committee must form a
view in respect of service contracts that require shareholders’ approval and advise shareholders
(other than shareholders with a material interest in the service contracts and their associates) as to
whether the terms are fair and reasonable, advise whether such contracts are in the interests of the
Company and its Shareholders as a whole and advise Shareholders on how to vote.
Amendment to the Articles of Association
The Company is required not to permit or cause any amendment to be made to its Articles of
Association which would cause the same to cease to comply with the mandatory provisions of the
Listing Rules or the Mandatory Provisions or the Company Law.
Documents on Display and for Inspection
The Company is required to make available on display on the websites of the Stock Exchange
and the Company copies of the following:
• a report showing the state of the issued share capital of the Company;
• the Company’s latest audited financial statements and the reports of the Directors,
auditors and Supervisors (if any) thereon;
• special resolutions of the Company;
• reports showing the number and nominal value of securities repurchased by the
Company since the end of the last financial year, the aggregate amount paid for such
securities and the maximum and minimum prices paid in respect of each class of
securities repurchased (with a breakdown between Domestic Shares and H Shares); and
• a copy of the latest annual return filed with the Beijing Administration for Industry and
Commerce.
The Company is required to make available copies of the following at a place in Hong Kong:
• a complete duplicate register of Shareholders (for inspection by the public and

Shareholders free of charge, and for copying by Shareholders at reasonable charges);
and
• the minutes of meetings of Shareholders (for inspection by Shareholders free of charge,

and for copying by Shareholders at reasonable charges).
Receiving Agents
The Company is required to appoint one or more receiving agents in Hong Kong and pay to
such agent(s) dividends declared and other monies owing in respect of the H Shares to be held,
pending payment, in trust for the holders of such H Shares.
– IV-35 –

Statements in H Share Certificates
The Company is required to ensure that all of its listing documents and H share certificates
include the statements stipulated below and to instruct and cause each of its share registrars not to
register the subscription, purchase or transfer of any of its shares in the name of any particular
holder unless and until such holder delivers to such share registrar a signed form in respect of such
shares bearing statements to the following effect that the acquirer of shares:
• agrees with the Company and each Shareholder of the Company, and the Company
agrees with each shareholder of the Company, to observe and comply with the Company
Law, the Special Regulations, the Articles of Association and other relevant laws and
administrative regulations;
• agrees with the Company, each Shareholder, Director, Supervisor, manager and officer
of the Company, and the Company acting for itself and for each Director, Supervisor,
manager and officer of the Company agrees with each shareholder, to refer all
differences and claims arising from the Articles of Association or any rights or
obligations conferred or imposed by the Company Law or other relevant laws and
administrative regulations concerning the affairs of the Company to arbitration in
accordance with the Articles of Association, and any reference to arbitration shall be
deemed to authorize the arbitration tribunal to conduct hearings in open session and to
publish its award. Such arbitration shall be final and conclusive;
• agrees with the Company and each shareholder of the Company that the H Shares are
freely transferable by the holder thereof; and
• authorizes the Company to enter into a contract on his behalf with each Director,
Supervisor, manager and officer of the Company whereby each such Director and officer
undertakes to observe and comply with his obligation to shareholders as stipulated in the
Articles of Association.
Compliance with the Company Law, the Special Regulations and the Articles of Association
The Company is required to observe and comply with the Company Law, the Special
Regulations and the Articles of Association.
Contract between the Company and its Directors, Officers and Supervisors
The Company is required to enter into a contract in writing with every Director and officer
containing at least the following provisions:
• an undertaking by the Director or officer to the Company to observe and comply with
the Company law, the Special Regulations, the Articles of Association, the Takeovers
Codes and an agreement that the Company shall have the remedies provided in the
Articles of Association and that neither the contract nor his office is capable of
assignment;
• an undertaking by the Director or officer to the Company acting as agent for each
shareholder to observe and comply with his obligations to shareholders as stipulated in
the Articles of Association;
– IV-36 –

• an arbitration clause which provides that whenever any disputes or claims arise from
that contract, the Articles of Association or any rights or obligations conferred or
imposed by the Company Law or other relevant law and administrative regulations
concerning the affairs of the Company between the Company and its Directors or
officers and between a holder of H Shares and a Director or officer of the Company,
such disputes or claims will be referred to arbitration at either the CIETAC in
accordance with its rules or the HKIAC in accordance with its Securities Arbitration
Rules, at the election of the claimant and that once a claimant refers a dispute or claim
to arbitration, the other party must submit to the arbitral body elected by the claimant.
Such arbitration will be final and conclusive;
• disputes over who is a shareholder and over the share registrar do not have to be
resolved through arbitration;
• if the party seeking arbitration elects to arbitrate the dispute or claim at HKIAC, then
either party may apply to have such arbitration conducted in Shenzhen according to the
Securities Arbitration Rules of HKIAC;
• PRC laws shall govern the arbitration of disputes or claims referred to above, unless
otherwise provided by law or administrative regulations;
• the award of the arbitral body is final and shall be binding on the parties thereto;
• the agreement to arbitrate is made by the Director or officer with the Company on its
own behalf and on behalf of each shareholder; and
• any reference to arbitration shall be deemed to authorize the arbitral tribunal to conduct
hearings in open session and to publish its award.
The Company is also required to enter into a contract in writing with every supervisor
containing statements in substantially the same terms.
Subsequent Listing
The Company must not apply for the listing of any of its foreign shares on a PRC stock
exchange unless the Stock Exchange is satisfied that the relative rights of the holders of foreign
shares are adequately protected.
English Translation
All notices or other documents required under the Listing Rules to be sent by the Company to
the Stock Exchange or to holders of H Shares are required to be in the English language, or
accompanied by a certified English translation.
– IV-37 –

General
If any change in the PRC law or market practices materially alters the validity or accuracy of
any of the basis upon which the additional requirements have been prepared, then the Stock
Exchange may impose additional requirements or make listing of the equity securities of a PRC
issuer, including the Company, subject to special conditions as the Stock Exchange considers
appropriate. Whether or not any such changes in the PRC law or market practices occur, the Stock
Exchange retains its general power under the Listing Rules to impose additional requirements and
make special conditions in respect of the Company’s [REDACTED].
Other Legal and Regulatory Provisions
Upon the Company’s [REDACTED], the provisions of the Securities and Futures Ordinance,
the Takeovers Codes and such other relevant ordinances and regulations as may be applicable to
companies listed on the Stock Exchange will apply to the Company.
Securities Arbitration Rules
The Articles of Association provide that certain claims arising from the Articles of
Association, Company Law and other applicable laws shall be arbitrated at either the CIETAC or
the HKIAC in accordance with their respective rules. The Securities Arbitration Rules of the
HKIAC contain provisions allowing an arbitral tribunal to conduct a hearing in Shenzhen for cases
involving the affairs of companies incorporated in the PRC and listed on the Stock Exchange so
that PRC parties and witnesses may attend.
Where any party applies for a hearing to take place in Shenzhen, the tribunal shall, where
satisfied that such application is based on bona fide grounds, order the hearing to take place in
Shenzhen conditional upon all parties including witnesses and the arbitrators being permitted to
enter Shenzhen for the purpose of the hearing. Where a party (other than a PRC party) or any of
its witnesses or any arbitrator is not permitted to enter Shenzhen, then the tribunal shall order that
the hearing be conducted in any practicable manner, including the use of electronic media. For the
purpose of the Securities Arbitration Rules, a PRC party means a party domiciled in the PRC other
than the territories of Hong Kong, Macau and China Taiwan.
PRC Legal Matter
Our PRC Legal Advisors have confirmed that it has reviewed the summaries of relevant PRC
laws and regulations as contained in this Appendix and that, in its opinion, such summaries are
correct summaries relevant to PRC laws and regulations. Any person wishing to have detailed
advice on PRC law and the laws of any jurisdictions is recommended to seek independent legal
advice.
– IV-38 –
APPENDIX V SUMMARY OF THE ARTICLES OF ASSOCIATION

OF THE COMPANY
This appendix contains the summary of the principal provisions of the Articles of Association
adopted by the Shareholders of the Company on December 16, 2022 in accordance with applicable
laws and regulations, and will become effective on the date that the H Shares are [REDACTED]
on the Stock Exchange. The main purpose of this appendix is to provide an overview of the
Company’s Articles of Association for potential [REDACTED], so it may not contain all the
information that is important to potential [REDACTED].
Power to allocate and issue shares
The Articles of Association does not contain clauses that authorize the Board of Directors to
allot or issue shares. The Board of Directors shall prepare proposals for share allotment or
issuance, which are subject to Shareholders’ approval in general meeting in the form of a special
resolution. Any such allotment or issuance shall be in accordance with the procedures stipulated in
applicable laws and administrative regulations.
Power to dispose of the PRC issuer’s or its subsidiaries’ assets
Upon a disposal of the fixed assets by the Board of Directors, if the sum of the expected
value of the fixed assets to be disposed of, and the aggregate value received from the fixed assets
of the Company disposed of within the four months immediately preceding this proposal for
disposal exceeds 33% of the value of fixed assets indicated on the latest audited balance sheet
submitted to the Shareholders’ general meeting, the Board of Directors shall not dispose of or
agree to dispose of such fixed assets without the prior approval of the Shareholders’ general
meeting.
The above disposal of fixed assets refers to the transfer of rights and interests in certain
assets, but does not include the provision of guarantees with fixed assets.
The validity of the transactions with respect to the disposal of fixed assets by the Company
shall not be affected by the violation of the above restrictions found in the Articles of Association.
Compensation or payments for loss of office
It shall be provided in the written contract entered into between the Company and the
Directors or Supervisors in connection with their emoluments that they are entitled to
compensation or other payments for loss of office or retirement as a result of the acquisition of the
Company, subject to the approval of the Shareholders’ general meeting in advance. Acquisition of
the Company refers to any of the following circumstances:
(I) An acquisition offer made to all of the Shareholders by any person; or
(II) An acquisition offer made by any person such that the said person will become the
controlling shareholder. The definition of controlling shareholder is consistent with that
in the Articles of Association.
– V-1 –

OF THE COMPANY
If the relevant Director or Supervisor fails to comply with the requirements stipulated within
this provision, any payment received by such Director or Supervisor shall belong to the person
who sells the Shares for accepting the aforesaid offer. The Director or Supervisor shall bear all
expenses arising from the distribution of such payments in a proportional manner and all related
expenses shall not be deducted from these payments.
Loans to Directors, Supervisors and other senior management
The Company shall neither provide the Directors, Supervisors, the managers or other senior
management of the Company or the parent company with loans or loan guarantees either directly
or indirectly; nor provide persons related to the above personnel with loans or loan guarantees.
The preceding provisions shall not apply in the following circumstances:
(I) The Company provides loans to its subsidiaries or the Company provides loan
guarantees for its subsidiaries;
(II) The Company provides the Directors, Supervisors, the manager and other senior
management with loans, loan guarantees or other funds pursuant to the appointment
contracts approved at the Shareholders’ general meeting to pay the expenses incurred for
the purpose of the Company or performing his or her duties to the Company; and
(III) In case that the normal scope of business of the Company covers the provision of loans
or loan guarantees, the Company may provide the Directors, Supervisors, the manager
or other senior management or his or her related personnel with loans or loan
guarantees, provided that conditions for provision of loans and loan guarantees shall be
normal commercial conditions.
As for such loans provided by the Company in violation of the preceding provisions, the
person who receives the loan(s) must forthwith repay such loan(s) immediately, regardless of the
terms of said loans.
Any guarantee for a loan provided by the Company in violation of the above requirements
shall not be mandatorily enforced against the Company, except under the following circumstances:
(I) Provision of loans to personnel related to the Directors, Supervisors, the manager and
other members of senior management of the Company or its parent company and the
loan provider has no knowledge of the relevant circumstances at the time of making the
loan;
(II) The loan provider has lawfully sold the collateral provided by the Company to a bona
fide purchaser.
For the purpose of the above, guarantee includes the acts of the guarantor bearing the
liabilities or providing properties to ensure that the obligor performs the obligations.
– V-2 –

OF THE COMPANY
Borrowing powers
The Articles of Association (i) do not contain any specific provision in respect of the manner
in which borrowing powers may be exercised by the Directors (other than provisions which give
the Directors the power to formulate proposals for the issue of bonds by the Company); and (ii)
provisions which provide that the issue of bonds must be approved by the shareholders’ general
meeting by way of a special resolution.
Provision of financial assistance to purchase the shares of the Company
The Company or its subsidiaries shall not provide any financial aid at any time or in any
manner to any person that acquires or plans to acquire the shares of the Company. Such person
includes anyone who undertakes obligations, directly or indirectly, resulting from acquiring the
Shares.
The Company or its subsidiaries shall not provide the person mentioned in the preceding
paragraph with financial aid at any time or in any manner, to mitigate or discharge the obligations
of the abovementioned obligor.
The following activities are not deemed as activities prohibited by the preceding provision:
(I) Related financial aid provided by the Company is in good faith for the interest of the
Company and the main purpose of the financial aid is not to acquire the shares of the
Company, or such financial aid is an incidental part of a master plan of the Company;
(II) The lawful distribution of the Company’s properties by way of dividends;
(III) Distribution of dividends in the form of Shares;
(IV) Reducing the registered capital, repurchasing the shares or adjusting the shareholding
structure, etc. Pursuant to the Articles of Association;
(V) The Company providing loans within its scope of business and in the ordinary course of
its business (provided that such loans shall not result in a reduction of the net assets of
the Company or even if the net assets are reduced, such financial aid is provided out of
the distributable profit of the Company);
(VI) The Company providing the employee stock ownership plan with funding (provided that
such funds shall not result in reduction in the net assets of the Company or even if the
net assets are reduced, such financial aid is provided out of the distributable profit of
the Company).
The financial aid mentioned above includes but not limited to the following approaches:
(I) Gifts;
(II) Provision of guarantees (including acts of the guarantor assuming liabilities or providing
properties to ensure that the obligor performs the obligations), provision of
compensation (excluding compensation arising out of the Company’s own fault), release
or waiver of rights;
– V-3 –

OF THE COMPANY
(III) Provision of loans or signing of contracts whereby the Company performs obligations
before others, change of the parties to the loans or contracts as well as the transfer of
the rights under the loans or contracts;
(IV) Financial aid provided by the Company in any other manner when it is insolvent, has no
net assets, or when its net assets would thereby be reduced to a material extent.
The abovementioned assuming obligations includes an instance where an obligator undertakes

obligations by entering into contracts or making arrangements (no matter whether the contracts or
arrangements are mandatorily enforceable or whether the obligator bears the obligations by himself
or herself or jointly with any other person) or changing its financial status in any other manner.
Disclosure of interests in contracts with the PRC issuer or its subsidiaries
A Director, Supervisor, Manager and other members of senior management of the Company
who directly or indirectly has material interests in any contracts, transactions or arrangements
executed or proposed to be executed with the Company (except for the appointment contracts of
service between the Directors, Supervisors, Manager and other members of senior management and
the Company), shall, as soon as possible, disclose to the Board of Directors, the nature and extent
of his interest, regardless of whether or not such matters require the approval of the Board of
Directors under the normal circumstance.
Unless the interested Directors, Supervisors, Manager and other members of senior
management of the Company have made such disclosure to the Board of Directors as required by
the preceding paragraph of this article, and the relevant matter has been approved by the Board of
Directors at the Board meeting in which such Directors, Supervisors, Manager or other members of
senior management have not been counted into the quorum and voted at the meeting, the Company
shall be entitled to rescind such contracts, transactions or arrangements, except as to any other
party which is a bona fide party without knowledge of the violation of duties on the part of such
Directors, Supervisors, Manager and other members of senior management.
Where related personnel of the Directors, Supervisors, Manager and other members of senior
management have interests in certain contracts, transactions or arrangements, such Directors,
Supervisors, Manager and other members of senior management shall also be deemed to have
interests.
Remuneration
The Company shall enter into written agreements with the Directors and Supervisors of the
Company regarding remuneration, which shall be subject to prior approval of the Shareholders’
general meeting. The foregoing remuneration matters include:
(I) Remuneration for providing services as the Directors, Supervisors or members of senior
management of the Company;
(II) Remuneration for providing services as the Directors, Supervisors or members of senior
management of the subsidiaries of the Company;
– V-4 –

OF THE COMPANY
(III) Remuneration for providing other services for management of the Company and its
subsidiaries;
(IV) Compensation received by the Directors or Supervisors as a result of loss of position or

retirement.
Except under a contract entered into in accordance with the foregoing paragraph, no
proceedings may be brought by a Director or Supervisor against the Company for any benefits due
to him in respect of the above matters.
Appointment, Removal and Retirement
A person may not serve as the Director, Supervisor, manager or one of the member of other
senior management of the Company if:
(I) A person without legal or with restricted legal capacity;
(II) A person who has been found guilty of sentenced for corruption, bribery, infringement
of property, misappropriation of property or sabotaging the social economic order where
less than a term of 5 years have elapsed since the sentence was served; or a person who
has been deprived of his political rights, in each case where less than 5 years have
elapsed since the sentence was served;
(III) A person who is a former director, factory manager or general manager of a company or
enterprise which has been entered into insolvent liquidation because of mismanagement
and he/she is personally liable for the insolvency of such company or enterprise, where
less than 3 years have elapsed since the date of the completion of the insolvency and
liquidation of the company or enterprise;
(IV) A person who is a former legal representative of a company or enterprise which had its
business license revoked due to a violation of the law and who incurred personal
liability, where less than 3 years has elapsed since the date of the revocation of the
business license;
(V) A person who has a relatively large amount of debts due and outstanding;
(VI) A person who is under criminal investigation by judicial organization for the violation
of the criminal law which is not yet concluded;
(VII) A person who is not eligible to act as a leader of an enterprise according to laws and
administrative regulations;
(VIII) A non-natural person;
(IX) A person convicted of the contravention of provisions of relevant securities regulations

by a relevant government authority, and such conviction involves a finding that he has
acted fraudulently or dishonestly, where less than 5 years has elapsed since the date of
the conviction.
– V-5 –

OF THE COMPANY
The validity of any act carried out by a Director, manager or other members of senior
management of the Company on the Company’s behalf to a bona fide third party shall not be
affected by any irregularity in his office, election or any defect in his qualifications.
The fiduciary duty of a Director, Supervisor, manager and other senior management of the
Company may not necessarily cease upon the conclusion of his term, and their obligations to keep
the commercial secrets of the Company shall survive beyond the conclusion of his term. The
duration of other obligations and duties shall be determined in accordance with the principle of
fairness, taking into account the lapse between the time when a Director, Supervisor, Manager or
other members of senior management of the Company leaves the office and the occurrence of the
relevant event, and the situation and the circumstances under which his relation with the Company
was ceased.
The shareholders may by informed decisions at the general meeting to discharge the liability
of any Director, Supervisor, Manager and any other members of senior management of the
Company as a result of violation of any specific duty, except for the circumstances as specified in
Article 61 of the Articles of Association.
The Company shall have a Board of Directors consisting of 9 Directors, of which there shall
be 1 chairman and 3 independent non-executive directors. Directors shall be elected at the general
meeting, with a term of three years. Directors may be eligible for re-election upon expiration of
the term.
A written notice of the intention of nomination of a Director candidate and of his willingness
to be elected shall be sent to the Company seven days prior to the date of the general meeting.
Without violating the relevant laws, regulations and regulatory rules in connection with the
Company, the term of appointment of the newly elected director to fill a casual vacancy in the
Board or any director appointed so as to increase the number of directors will be effective from
the date of appointment to the next annual general meeting of the Company and such director will
then be eligible for re-election. The Chairman shall be elected and removed with approval of more
than half of all the directors.
The Chairman shall hold office for a period of three years and are eligible for re-election. A
Director needs not to hold the shares of the Company.
There is no provision in the Articles of Association relating to retirement of Directors upon

reaching any age limit.
There is no provision in the Articles of Association requiring Directors to hold any qualifying
shares.
the Board of Directors of the Company must have at least one-third of its members (and at
least three members) as independent non-executive directors;; and at least one of the independent
non-executive Directors must have appropriate professional qualifications or accounting or related
financial management expertise. Moreover, at least one of the independent non-executive Directors
of the Company must be ordinarily resident in Hong Kong.
– V-6 –

OF THE COMPANY
ALTERATIONS TO ARTICLES OF ASSOCIATION
The Company may amend the Articles of Association based on the provisions of the laws,
administrative regulations and Articles of Association.
Where the amendments to the Articles of Association involve the contents of the Mandatory
Provisions, it shall not take effect until approved by the competent company examinations
department authorized by the State Council and the CSRC; where the amendment of the Articles of
Association involves the Company’s registration, it shall be necessary to carry out the lawfully
prescribed procedures for a change in registration.
VARIATION OF RIGHTS OF EXISTING SHARES OR CLASSES OF SHARES
Shareholders who hold different classes of shares shall be known as class shareholders.
Class shareholders shall be entitled to rights and assume obligations according to the
provisions of laws, regulations and the Articles of Association.
Where the capital of the issuer includes shares which do not carry voting rights, the words
“non-voting” shall appear in the designation of such shares.
Where the share capital includes shares with different voting rights, the designation of each
class of shares, other than those with the most favorable voting rights, must include the words
“restricted voting” or “limited voting.”
Rights conferred on any class of shareholders in the capacity of shareholders may not be
varied or abrogated unless approved by a special resolution of shareholders at a general meeting,
and by the class shareholders so affected at a separate meeting conducted according to Articles 96
to 100 of the Articles of Association. The quorum for such separate class meeting (other than an
adjourned meeting) shall be the holders of at least one-half of the issued shares of the class.
The following circumstances shall be deemed as a variation or abrogation of rights of a class

shareholder:
(I) An increase or decrease in the number of shares of such class, or an increase or

decrease in the number of shares of another class having voting rights or distribution
rights or other privileges equal to or superior to those of the shares of such class;
(II) The conversion of all or part of the shares of such class into the shares of another class
or the conversion or creation of a right of conversion of all or part of the shares of
another class into the shares of such class;
(III) The removal or reduction of rights to receive accrued dividends or rights to cumulative
dividends attached to the shares of such class;
(IV) The reduction or removal of the preferential rights attached to the shares of such class
for the receipt of dividends or for the distribution of assets in the event that the
Company is liquidated;
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OF THE COMPANY
(V) The addition, removal or reduction of the rights of conversion, options rights, voting
rights, transfer rights, pre-emptive rights, or rights to acquire securities of the Company
attached to the shares of such class;
(VI) The removal or reduction of the rights to receive payment receivable from the Company
in the particular currencies attached to the shares of such class;
(VII) the creation of a new class of shares having voting rights or distribution rights or other
privileges equal to or superior to those of the shares of such class;
(VIII) The restriction of the transfer or ownership of the shares of such class or the imposition
of stricter restrictions thereof;
(IX) The issue of any rights to subscribe for, or to convert into, shares in the Company of the
same class or another class;
(X) The enhancement of rights or privileges of the shares of other classes;
(XI) The restructuring of the Company pursuant to which shareholders of different classes
assume disproportionate liability;
(XII) The revision or abrogation of the provisions of this Chapter.
The class shareholders so affected, whether or not otherwise entitled to vote at a general
meeting, shall nevertheless be entitled to vote at any class meeting with respect to matters set forth
in Clauses (II) to (VIII), (XI) to (XII) above, but interested shareholder(s) shall not be entitled to
vote in class meetings.
Apart from the holders of other classes of shares, holders of domestic shares and holders of
non-listed foreign shares shall be deemed to be of the same class; holders of domestic shares and
holders of overseas listed foreign shares shall be deemed to be of different classes; and holders of
non-listed foreign shares and holders of overseas listed foreign shares shall be deemed to be of
different classes.
The special procedures for voting of class shareholders shall not apply under the following
circumstances:
(I) Where, upon approval by a special resolution passed at a general meeting (subject to the
unconditional authorization or the terms and conditions stipulated in the resolution), the
Company authorizes, allocates or issues domestic shares and overseas listed foreign
shares either separately or concurrently once every twelve months, and the number of
each of the domestic shares and overseas listed foreign shares to be issued does not
exceed 20% of the number of the respective outstanding shares;
(II) Where such shares are part of a plan of the Company to issue domestic shares or
overseas listed foreign shares at its establishment, which is completed within 15 months
from the approval by the CSRC or other competent regulatory bodies under the State
Council;
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OF THE COMPANY
Upon the approval by the CSRC, the Company’s domestic shareholders and non-listed foreign
shareholders transfer all or part of their holdings to overseas investors and list and trade it on an
overseas stock exchange, or transfer all or part of the domestic shares and non-listed foreign
shares to overseas listed foreign shares and list and trade it on overseas stock exchanges.
SPECIAL RESOLUTIONS — MAJORITY REQUIRED
The resolutions of the Shareholders’ general meeting are categorized as ordinary resolutions
and special resolutions. An ordinary resolution can be adopted by one-half of the votes held by the
Shareholders (including proxies) in attendance of the Shareholders’ general meeting. A special
resolution can be adopted by two-thirds majority of the votes held by the Shareholders (including
proxies) in attendance of the Shareholders’ general meeting.
VOTING RIGHTS (GENERALLY AND ON A POLL)
When voting at the Shareholders’ general meeting, the Shareholder (or proxy) may exercise
his or her voting rights in accordance with the number of Shares with voting power held with each
Share representing one vote. When voting at a general meeting, shareholders (including their
proxies) who are entitled to two or more votes are not required to vote against or in favor of their
total number of votes. When the number of dissenting votes equals to the number of supporting
votes, no matter by a show of hands or by a vote, the chairman of the meeting is entitled to one
additional vote.
REQUIREMENTS FOR GENERAL MEETINGS
The Shareholders’ general meetings are divided into annual general meetings and
extraordinary general meetings. The Board of Directors may convene a general meeting. The
annual general meeting shall be convened once a year and be held within six months upon the end
of the previous fiscal year.
The general meetings shall have the right to elect and replace Directors and to determine
matters relating to the remuneration of Directors.
Requirements for the Board of Directors
Except as approved by the Stock Exchange, no Director of the Company shall vote on any
resolution of the Board of Directors in respect of any contract or arrangement or any other
proposal in which he/she or any of his/her close associates has a material interest, nor shall he/she
be counted for the purpose of determining whether or not a quorum is present at the meeting.
ACCOUNTS AND AUDIT
Financial and accounting policies
The Company shall establish its financial and accounting systems in accordance with the
laws, administrative regulations and accounting principles of the PRC formulated by the Ministry
of Finance. A financial report shall be prepared at the end of each financial year and shall be
examined and verified according to laws. The Board of Directors shall present to the shareholders,
at each annual general meeting, such financial reports as required by applicable laws,
administrative regulations, directives promulgated by local government and competent authorities.
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OF THE COMPANY
The Company shall make up its annual accounts to a date falling not more than 6 months before
the end date of such fiscal year or the accounting reference period in respect of the annual
financial statement.
The Company’s financial reports shall be made available for shareholders’ inspection at the
Company 20 days prior to the date of annual general meeting. Each shareholder of the Company
has right to obtain a copy of the financial reports referred to in this Chapter.
The financial statements of the Company shall, in addition to being prepared in accordance
with the PRC accounting standards and regulations, be prepared in accordance with either
international accounting standards or that of the place of listing overseas where the Company’s
shares are listed. If there is any material difference between the financial statements prepared
respectively in accordance with the two accounting standards, explanations shall be given in the
notes to the financial statements. When the Company distributes its after-tax profits for that
financial year, the lower of the after-tax profits as shown in (i) the financial statement prepared in
accordance with the PRC accounting standards and regulation; or (ii) the international accounting
standards or that of the place of listing overseas where the Company’s shares are listed, shall be
adopted.
The interim results or financial information published or disclosed by the Company shall be
prepared in accordance with the PRC accounting standards and regulations as well as the
international accounting standards or such accounting standards in the place of listing overseas.
The Company shall publish the financial report twice each accounting year, namely publish
the interim financial report within 60 days after the end of the first 6 months of the accounting
year, and publish the annual financial report within 120 days after the end of the accounting year.
Where the relevant provisions of the stock exchange and securities regulatory authorities of the
place where the shares of the Company are listed stipulate otherwise, such provisions shall prevail.
The Company shall not establish account books other than those required by law. The assets of the
Company shall not be deposited in any account opened under a personal name.
Appointment and Dismissal of Accountants
The Company shall retain an independent accounting firm that fulfills the requirements
provided by the relevant regulations of the PRC to audit the Company’s annual financial report
and review the Company’s other financial reports. For the purposes of the Articles of Association,
the accounting firm retained by the Company at any time shall be the Company’s auditor.
The term of an accounting firm retained by the Company shall commence upon the
conclusion of one annual general meeting and shall sustain until the conclusion of the next annual
general meeting of the Company.
The accounting firm engaged by the Company shall have the following rights:
(I) To inspect books, records and vouchers of the Company at any time, and to require the
Directors, manager and other members of senior management of the Company to
provide relevant information and explanations;
(II) To require the Company to take all reasonable steps to obtain from its subsidiaries any
information and explanations necessary for the discharge of its duties;
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OF THE COMPANY
(III) To attend any general meeting and to receive all notices of, and other information
relating to, any general meeting which any shareholder is entitled to receive, and to
speak at any general meeting in relation to matters concerning its role as the Company’s
retained accounting firm.
Irrespective of the provisions in the contract concluded between the Company and the
accounting firm, the general meeting may remove the accounting firm by an ordinary resolution
before the term of the accounting firm expires. Notwithstanding such provisions, the accounting
firm’s entitlement to claim for damages arising out of its removal shall not be affected thereby.
The remuneration of an accounting firm or the manner in which such firm is to be compensated
shall be decided by the general meeting. The remuneration of an accounting firm retained by the
Board of Directors shall be decided by the Board of Directors. The general meeting shall decide to
retain, remove or discontinue the retention of an accounting firm and file with the CSRC.
NOTICE AND AGENDA OF SHAREHOLDER’S GENERAL MEETING
The Shareholders’ general meeting is the authorized organ of the Company that can perform
duties and exercise powers in accordance with laws.
Without the approval of a resolution of the Shareholders’ general meeting, the Company shall
not enter into a contract with any person other than the Directors, Supervisors, the manager and
other senior management that would make such person responsible for the management of all or
the main business of the Company.
Under any of the following circumstances, the Board of Directors shall convene an
extraordinary general meeting within two months:
(I) The number of Directors is less than the number specified in the Company Law or less
than two thirds of the number required in the Articles of Association;
(II) The uncovered losses of the Company reach one-third of its total paid-in share capital;
(III) The Shareholders holding 10% or more issued Shares with voting rights request to
convene an extraordinary general meeting in writing;
(IV) The Board of Directors considers it necessary or the Supervisory Committee proposes
convening an extraordinary general meeting;
(V) When more than two independent non-executive directors propose to convene a general
meeting;
(VI) When referring to items (III), (IV), and (V) above, the subjects of the general meeting
proposed by the requester shall be included in the agenda of the general meeting.
When the Company convenes the annual general meeting, it shall notify the shareholders 20
days prior to the meeting; and the Company shall notify the shareholders 15 days prior to the
extraordinary general meeting. When the Company convenes general meetings, shareholder(s)
individually or jointly holding more than three percent (inclusive of three percent) of the total
– V-11 –

OF THE COMPANY
voting shares of the Company will be entitled to propose new proposals in writing to the
Company, which, if within the functions and powers of the general meeting, will be required to be
added to the agenda of the general meeting.
The notice of the Shareholders’ general meeting shall meet the following requirements:
(I) Made in writing;
(II) Specified the venue, date and duration of the meeting;
(III) Specified the matters and resolutions to be deliberated at the meeting;
(IV) Provision to the Shareholders of the materials and explanations necessary for the
Shareholders to make sound decisions about the matters to be deliberated. This principle
includes, but is not limited to, the provision of the detailed terms and contract(s), if any,
of the proposed transaction(s) and serious explanations about related causes and effects
when the Company proposes mergers, redemption of shares, restructuring of stock
capital or other restructuring;
(V) In the event that any of the Directors, Supervisors, the manager or other senior
management has material interests at stake in matters to be deliberated, the nature and
extent of the interests at stake shall be disclosed. If the matters to be deliberated affect
any Director, Supervisor, the manager or other senior management as a Shareholder in a
manner different from how they affect other Shareholders of the same type, the
difference shall be explained;
(VI) Inclusion of the full text of any special resolution to be proposed for adoption at the
meeting;
(VII) A clear explanation that the Shareholder is entitled to attend and vote at the general
Shareholders’ meeting, or to appoint one or more proxy(ies) to attend and vote at the
meeting on his or her behalf and that such person(s) may not necessarily be a
Shareholder(s) of the Company;
(VIII) Specified delivery time and place of the power of attorney for proxy voting of the
meeting; and
(IX) Name and telephone number of the contact person in relation to the shareholders’
general meeting.
The notice of the Shareholders’ general meeting shall be sent in person or by postage paid
mail, to the Shareholders (regardless of whether such Shareholders have the right to vote at the
Shareholders’ general meeting or not), and each recipient’s address shall be according to the
address indicated on the register of Shareholders. For holders of Domestic Shares, the notice of the
Shareholders’ general meeting may be given in the form of a public announcement.
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OF THE COMPANY
The public announcement provided in the preceding provision shall be published in one or
more newspapers designated by the CSRC twenty days prior to the annual general meeting or
fifteen days prior to the extraordinary general meeting. Once the announcement is made, all
holders of Domestic Shares shall be deemed to have received the notice of the Shareholders’
general meeting.
In the event that the notice of the meeting is not sent to persons entitled to receive it due to
accident or oversight, or such persons fail to receive notice of the meeting, the meeting and
resolutions made at the meeting shall not be held invalid.
Power of the Shareholders’ General Meeting
The following matters shall be resolved by ordinary resolutions at the general meeting:
(I) Reports of the Board of Directors and the Board of Supervisors;
(II) Any plans for the distribution of profits and for recovering losses formulated by the
Board of Directors;
(III) Removal of the members of the Board of Directors and Supervisors, and decision on
their remuneration and methods of payment;
(IV) Preliminary and final annual budgets, balance sheets, profit accounts, and other financial
statements of the Company;
(V) The Company annual report;
(VI) Resolutions on appointing, dismissing and not re-appointing the accounting firm;
(VII) Other matters other than those required by laws, administrative regulations, or by the
Articles of Association to be approved by a special resolution.
The resolutions of the Shareholders’ general meeting are categorized as ordinary resolutions
and special resolutions. An ordinary resolution can be adopted by one-half of the votes held by the
Shareholders (including proxies) in attendance of the Shareholders’ general meeting. A special
resolution can be adopted by two-thirds majority of the votes held by the Shareholders (including
proxies) in attendance of the Shareholders’ general meeting. The following matters shall be
resolved by ordinary resolutions at the general meeting:
(I) Reports of the Board of Directors and the Board of Supervisors;
(II) Any plans for the distribution of profits and for recovering losses formulated by the
Board of Directors;
(III) Removal of the members of the Board of Directors and Supervisors, and decision on
their remuneration and methods of payment;
(IV) Preliminary and final annual budgets, balance sheets, profit accounts, and other financial
statements of the Company;
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OF THE COMPANY
(V) The Company annual report;
(VI) Resolutions on appointing, dismissing and not re-appointing the accounting firm;
(VII) Other matters other than those required by laws, administrative regulations, or by the
Articles of Association to be approved by a special resolution.
The following matters shall be resolved by special resolutions at the general meeting:
(I) The increase or reduction in share capital and the issuance of shares of any class,
warrants and other similar securities;
(II) The issuance of debentures of the Company;
(III) The division, merger, dissolution, liquidation or change in the form of the Company;
(IV) The amendments to the Articles of Association;
(V) To review and approve matters relating to the purchases, disposals of material assets, or
provisions of investments or guarantees which are more than 30% of the latest audited
total assets of the Company within one year;
(VI) Other matters that ordinary resolutions have been made at the general meeting indicating
that resolutions regarding such matters will substantially impact the Company and such
matters need to be passed by special resolutions.
Where the Shareholders request the Board to convene an extraordinary general meeting or
classified Shareholders’ meeting, the following procedures shall be followed:
(I) The Shareholders who separately or jointly hold 10% or more of the Shares with voting
rights may request the Board to convene an extraordinary general meeting or classified
Shareholders’ meeting by signing a written requirement or several copies with the same
format and to illustrate the subject of the meetings. The Board of Directors shall
convene an extraordinary general meeting or classified Shareholders’ meeting as soon as
possible upon the receipt of the aforesaid written request. The Shareholders shall
calculate the aforesaid number of shareholdings as from the date of the submission of
the written requirement.
(II) If the Board of Directors fails to issue a notice of meeting within 30 days upon the
receipt of the aforesaid written request, the Shareholders who submit the requirement
may call and convene a meeting by themselves within 4 mouth after the Board of
Directors receives the said request, of which the convening procedure shall be at best
the same as if convened by the Board of Directors.
If the Shareholders call and convene a meeting by themselves due to the Board of Directors
being unable to convene a meeting in accordance with the aforesaid requirement, the expenses
reasonably resulted therefrom shall be borne by the Company and be deducted from the amounts
due to the Directors and Supervisors as a result of loss of office. The Chairman of the Board of
Directors shall preside over the general meetings. If the Chairman of the Board is unable to attend
the meeting for any reason, the Board of Directors may appoint a director of the Company to call
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OF THE COMPANY
and chair the meeting. In the event that no chairman of the meeting is so designated, the attending
shareholders shall elect one of the directors to act as the chairman of the meeting. In the event
that, for any reasons, the shareholders fail to elect a chairman, then the shareholder holding the
largest number of the voting shares present in person or by proxy shall be the chairman of the
meeting.
INCREASE OR DECREASE OF SHARE CAPITAL
Pursuant to the Articles of Association and subject to the approval by way of Shareholders’
General Meeting, the Company may, based on its business and development needs, increase the
capital in the following manners:
(I) issue new shares to non-specified investors for subscription;
(II) issue new shares to existing shareholders;
(III) issue bonus shares to existing shareholders;
(IV) convert reserve into share capital;
(V) other manners permitted and approved under laws and administrative regulations and by
the CSRC.
The increase of capital by issuing new shares shall be subject to approval as specified in the
Articles of Association and follow the procedures specified by the relevant laws and regulations of
the PRC.
The Company may reduce its registered capital in accordance with the Company Law and
other relevant provisions as well as procedures stipulated in the Articles of Association. The
registered capital, after the capital has been reduced, shall not be lower than the statutory
minimum.
TRANSFER OF SHARES
Unless otherwise specified by laws, administrative regulations, regulations of ministries and

commissions, and listing rules for stock exchanges where the Company’s Shares are listed, the
Shares of the Company may be transferred freely without any lien attached.
Fully paid H shares may be freely transferred pursuant to the Articles of Association.
However, unless the transfer complies with the following conditions, the Board of Directors may
refuse to process with transfer documents without stating any reasons therefor:
(I) That transferring and other documents relating to or affecting the title to any registered
securities shall be registered and the fee or fees levied pursuant to the Listing Rules
is/are paid to the Company;
(II) The transferring documents relate only to H shares;
(III) The stamp duty payable on the transferring documents has been paid;
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OF THE COMPANY
(IV) The relevant share certificates and the evidence as required by the Board of Directors to
prove that the transferor has the right to transfer the shares have been provided;
(V) If the shares is to be transferred to joint holders, the number of the joint holders shall
not exceed four;
(VI) The shares is free from all lien.
POWER OF THE PRC ISSUER TO REPURCHASE ITS OWN SHARES
The Company may, subject to the approval of the relevant governing authorities of China,
and according to the procedures set forth in the Articles of Association, repurchase its outstanding
shares under the following circumstances:
(I) Reducing the registered capital of the Company;
(II) Merging with other companies that hold shares in the Company;
(III) Applying the shares for the staff shareholding scheme or as share incentives;
(IV) Shareholders who disagree with the resolutions for the merger and separation of the
Company made in general meeting may demand the Company to purchase their shares;
(V) Utilizing the Shares for conversion of corporate bonds which are convertible into shares
issued by the listed companies;
(VI) Where it is necessary for the listed companies to safeguard its value and shareholders’
interests;
(VII) Other circumstances permitted by laws, administrative regulations, departmental

regulations, and regulatory rules of the place where the Company’s shares are listed.
Purchase of the Company’s shares for reasons set out in Clauses (I) and (II) of this Article
shall be subject to resolution at a shareholders’ general meeting. After the Company has purchased
its shares in accordance with Clause (I) of this Article, such shares shall be canceled within 10
days after purchase; When the Company has purchased its shares in accordance with Clause (II)
and (IV) of this Article, such shares shall be transferred or canceled within 6 months. Company
shares purchased in accordance with Clauses (III), (V) and (VI) shall be subject to resolution at a
Board meeting with the presence of two-thirds of Directors, and the aggregate number of such
Company shares held by the Company shall not exceed 10% of the total number of issued shares
of the Company, and such shares shall be transferred or canceled within 3 years.
As approved by relevant authorities, the Company may repurchase its shares by the following
means:
(I) by making a general offer to all of its shareholders for the repurchase of shares on a pro
rata basis;
(II) by open dealing on a stock exchange;
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OF THE COMPANY
(III) by an off-market agreement outside of stock exchanges;
(IV) other means approved by laws, administrative regulations and regulatory authorities.
DIVIDENDS AND OTHER METHODS OF DISTRIBUTION
The Company’s after-tax profit shall be allocated in the following order:
(I) the making up of any loss;
(II) allocation to the statutory reserve fund;
(III) setting aside of any reserves in accordance with the resolution passed at the general
meeting;
(IV) payment of ordinary share dividends. No profit shall be distributed as dividends or in

any other form as bonus before making up losses and setting aside of the Company’s
statutory reserve fund.
Any amount paid up in advance of calls on any shares may carry interest but shall not entitle
the holder of such shares to participate in respect thereof in a dividend subsequently declared.
The power to cease sending dividend warrants by post will not be exercised until such
dividend warrants have been so left uncashed on two consecutive occasions. However, such power
may also be exercised after the first occasion on which such a dividend warrant is returned
undelivered.
Subject to the laws and regulations of the PRC and the rules of Stock Exchange of Hong
Kong Limited, the Company may exercise its power to forfeit unclaimed dividends, but only upon
the expiry of the period for which the dividends can be claimed. With regard to the exercise of
power to issue warrants in bearer form, no new warrants shall be issued to replace one that has
been lost, unless the Company is satisfied beyond reasonable doubt that the original has been
destroyed.
The capital reserve fund shall include the followings:
(I) any premium which exceeds the proceeds from issuance of shares at par value;
(II) any other income credited to the capital reserve fund as required by the finance
department of the State Council.
Reserves of the Company may be applied towards the following objectives:
(I) making up of losses, except that capital reserves may not be used;
(II) conversion into capital. In the case of conversion of statutory reserves into capital
through capitalization, the balance of the statutory reserves shall not be less than 25% of
the registered capital of the Company prior to the conversion;
(III) expansion of the Company’s production and operation.
– V-17 –

OF THE COMPANY
The dividend distribution plans of the Company shall be voted at the general meeting. After
the Board of Directors takes into account the Company’s financial position and subject to the
relevant laws and regulations, shareholders may authorize by ordinary resolution the Board of
Directors to distribute and pay dividends. The Company may distribute its dividends in the form of
cash or shares.
The Company shall appoint a receiving agent in Hong Kong for the shareholders of the
overseas-listed foreign shares. Such receiving agent shall receive and keep dividends of the
overseas-listed foreign shares on behalf of such relevant shareholders so as to be paid to such
shareholders. The receiving agent appointed by the Company shall meet relevant requirements of
the laws of the places or the relevant regulations of the stock exchange in which the Company’s
shares are listed. The receiving agent appointed by the Company in respect of H shares listed on
the Stock Exchange of Hong Kong Limited shall be a trust company registered under the Trustee
Ordinance of Hong Kong.
PROXIES
Any Shareholder who is entitled to attend and vote at the Shareholders’ general meeting has
the right to appoint one or more persons (who may not necessarily be Shareholders) as his or her
proxy(ies) to attend and vote at the meeting in his or her place. Pursuant to the authorization of the
Shareholder, the proxy may exercise the following rights:
(I) Speak for the Shareholder at the general meeting;
(II) Demand a poll individually or with others; and
(III) Exercise the right to vote by a show of hands or a poll, but the Shareholder proxies may
only exercise the right to vote by a poll when more than one proxy is appointed.
The Shareholder shall entrust the proxy via written power of attorney, which shall be signed
by the principal or the proxy he entrusts in writing. If the principal is a legal person, the power of
attorney shall be stamped with the seal of the legal person or signed by the director or the duly
appointed proxy. If several persons are appointed as the shareholder’s proxies, the power of
attorney shall specify the number of shares to be represented by each proxy. The proxy form shall
be deposited at the address of the Company or other places specified in the notice of convening
the meeting not less than twenty-four hours prior to the time to convene the meeting according to
the proxy form or twenty-four hours prior to the designated time for voting.
Where the proxy form is signed by a person authorized by the principal, the power of
attorney or other authorization instruments shall be notarized. The notarized power of attorney or
other authorization instruments, together with the proxy form, shall be lodged at the address of the
Company or such other place as specified in the notice to the meeting. In the case that the
principal is a legal person, the proxy shall be authorized by the legal representative, the Board or
other authority body of that legal person to attend the Company’s general meeting.
Any form issued to Shareholders by the Board of Directors of the Company for the
appointment of proxies shall enable Shareholders to freely instruct their proxies to vote for or
against any resolution, and give separate instructions in respect of the matters to be voted on under
each subject. The proxy form shall contain a statement that a proxy may vote at his own discretion
in the absence of specific instructions from the Shareholder.
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OF THE COMPANY
Where the principal is deceased, incapacitated to act, withdrawn from the appointment or the
signed power of attorney, or where the relevant shares have been transferred prior to the voting, a
vote given in accordance with the letter of authorization shall remain valid provided that no
written notice of such event has been received by the Company prior to the commencement of the
relevant meeting.
INSPECTION OF REGISTER OF MEMBERS
The Company shall keep a register of Shareholders, which shall include the following
particulars:
(I) the name (title), address (residence), occupation or nature of each shareholder;
(II) the class and number of shares held by each shareholder;
(III) the amount paid-up or payable in respect of shares held by each shareholder;
(IV) the serial numbers of the shares held by each shareholder;
(V) the date on which a person registers as a shareholder;
(VI) the date on which a person ceases to be a shareholder.
The register of shareholders shall be sufficient evidence of the holding of the Company’s
shares by a shareholder; unless there is evidence to the contrary. The transfer and transmission of
shares shall be entered into the register of Shareholders. Pursuant to the understanding reached and
agreement entered into between the CSRC and the overseas securities regulatory authorities, the
Company may keep an overseas register of the holders of the overseas-listed foreign Shares and
entrust an overseas entity to manage it. The original register of Shareholders of overseas-listed
foreign Shares listed in Hong Kong shall be maintained in Hong Kong. And a duplicate of the
same shall be maintained in the Company’s residence; the appointed overseas agent(s) shall ensure
the consistency between the original and the duplicate of the register of Shareholders of overseas
listed foreign shares at all times. If there is any inconsistency between the original and the
duplicate of the register of shareholders of overseas-listed foreign shares, the original version shall
prevail. Different parts of the register of Shareholders shall not overlap one another. No transfer of
the shares registered in any part of the register shall, during the existence of that registration, be
registered in any other parts of the register of Shareholders. When the Company convenes the
general meeting, pays dividends, goes into liquidation and is involved in other actions that require
the confirmation of equities, the Board of Directors shall fix a date as the equity registration date.
Upon expiration of which the Shareholders whose names appear on the register of Shareholders
shall be the Shareholders of the Company. Any person who objects to the register of Shareholders
and requests to register his or her name (title) in the register of Shareholders, or to remove his or
her name (title) from the register of Shareholders may apply to the court with jurisdiction to
amend the register of Shareholders.
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OF THE COMPANY
RIGHTS OF THE MINORITIES IN RELATION TO FRAUD OR OPPRESSION THEREOF
In addition to the obligations as required under laws, administrative regulations or the listing
rules of the stock exchange(s) where the Company’s Shares are listed, when exercising his rights
as a Shareholder, a controlling Shareholder (under the definition of the following provisions) shall
not make decision on the following issues that are detrimental to the interest of all or some of the
Shareholders by exercising their voting rights:
(I) Relieving a Director or Supervisor of their responsibility to act in good faith for the best
interests of the Company;
(II) Approving a Director or a Supervisor (for his/her own or for the benefit of others) in
depriving the Company of its assets in any form, including (but not limited to) any
opportunities that are advantageous to the Company;
(III) Approving a Director or a Supervisor (for his/her own or for the benefit of others) in
depriving other Shareholders of their personal interests, including (but not limited to)
any distribution rights and voting rights, but excluding the Company’s restructuring
submitted to the general meeting for approval in accordance with the Articles of
Association. The controlling Shareholder(s) referred to in the preceding paragraph shall
refer to the person(s) satisfying any of the following conditions:
(I) The person may elect more than half of the Director(s) when acting alone or in
concert with others;
(II) The person may exercise or control the exercise of 30% or more of voting rights of
the Company when acting alone or in concert with others;
(III) The person holds 30% or more of the outstanding Shares of the Company when
acting alone or in concert with others;
(IV) The person may de facto control the Company in any other manner when acting
alone or in concert with others.
PROCEDURES ON LIQUIDATION
The Company shall be dissolved and liquidated according to laws upon any of the following
circumstances:
(I) A resolution for dissolution is passed at a general meeting;
(II) A merger or division of the Company for which a dissolution becomes necessary;
(III) The Company is announced bankrupt according to the laws due to overdue debts;
(IV) The Company is ordered to be close down for violation of laws and administrative
regulations in accordance with the laws;
– V-20 –

OF THE COMPANY
(V) Operation and management difficulties occur in the Company and significant losses will
be incurred to the shareholders by this continuance, and such difficulties cannot be
solved by other means, the shareholders holding more than 10% of the total voting
rights of the Company may request people’s courts to dissolve the Company.
In the event of dissolution pursuant to Clauses (I) and (V) of the preceding article, the
Company shall set up a liquidation committee within 15 days, and the members of the liquidation
committee shall be decided by an ordinary resolution at the general meeting. If the liquidation
committee is not duly set up, the creditors may request the People’s Court to designate related
persons to form a liquidation committee to carry out liquidation. If the Company is dissolved
pursuant to Clause (III) of the preceding article, a liquidation committee comprising shareholders,
the relevant departments and relevant professionals shall be arranged by the People’s Court in
accordance with relevant laws to carry out the liquidation. If the Company is dissolved pursuant to
Clause (IV) of the preceding article, a liquidation committee comprising shareholders, the relevant
departments and relevant professionals shall be arranged by the relevant supervisory authority to
carry out the liquidation. Where the board of directors has decided to liquidate the Company for
any reason other than the Company’s declaration of its own insolvency, the Board of Directors
shall state in the notice convening the general meeting that it has made full inquiry into the affairs
of the Company and is of the opinion that the Company shall be able to settle its debts in full
within 12 months from the commencement of the liquidation. The Board of Directors of the
Company shall stop exercising its powers and functions upon passing of the resolution for a
liquidation at the general meeting. The liquidation committee shall act in accordance with the
instructions from the general meeting to report at least once every year to the meeting on the
committee’s income and expenses, the business and the progress of the liquidation of the
Company; and to present a final report to the general meeting upon completion of the liquidation.
The liquidation committee shall, within 10 days of its establishment, notify the creditors, and,
within 60 days of its establishment, publish at least three times announcements on newspapers.
The liquidation committee shall register creditor’s rights. Creditors shall, within 30 days of receipt
of the written notice, or for creditors who have not personally received such notice, shall within 45
days of the date of the announcement, contact the liquidation committee to claim their rights. In
claiming their rights, the creditors shall explain matters relating to their rights and provide
evidentiary materials.
During liquidation, the liquidation committee shall exercise the following functions and
powers:
(I) to organize the Company’s assets and prepare a balance sheet and an inventory of assets
respectively;
(II) to notify or to publish an announcement to the creditors;
(III) to dispose of any continuing businesses of the Company in connection with the
liquidation;
(IV) to pay outstanding taxes;
(V) to settle claims and debts;
(VI) to organize the remaining assets subsequent to the settlement of the Company’s debts;
– V-21 –

OF THE COMPANY
(VII) to represent the Company in civil proceedings.
Following the settlement of the Company’s assets and the preparation of a balance sheet and
an inventory of assets by the liquidation committee, the liquidation committee shall formulate a
liquidation proposal and present it to the general meeting or the relevant competent authorities.
The Company’s assets shall be liquidated in accordance with the sequence required by laws and
regulations, if there is no applicable law, such liquidation shall be carried out in accordance with a
fair and reasonable sequence determined by the liquidation committee. Any assets of the Company
remaining after payment has been made in accordance with the provisions of the preceding
paragraph shall be distributed to its shareholders according to the class of shares and the
proportion of shares held. During the liquidation period, the Company shall not commence new
business activities. If the Company is liquidated due to dissolution, the liquidation committee shall
immediately apply to the People’s Court for a declaration of bankruptcy if it becomes aware,
having settled the Company’s assets, prepared a balance sheet and an inventory of assets, that the
Company’s assets are insufficient to repay its debts. Upon the Company being declared bankrupt
by a ruling of the People’s Court, the liquidation committee shall transfer to the People’s Court all
matters arising out of the liquidation. Following the completion of liquidation of the Company, the
liquidation committee shall prepare a liquidation report, a statement of income and expenses and
financial accounts for the liquidation, which shall be verified by a registered accountant in the
PRC and submitted to the general meeting or the relevant competent authorities for confirmation.
The liquidation committee shall, within 30 days of such confirmation of general meeting or
relevant competent authorities, submit the aforementioned documents to the Shanghai Market
Supervision Administration for an application for a cancelation of registration of the Company, and
publish an announcement in respect of the termination of the Company.
ANY OTHER PROVISIONS MATERIAL TO THE PRC ISSUER OR THE

SHAREHOLDERS THEREOF
General Provisions
The Company is a permanently existing joint stock limited liability company. The Company
is an independent enterprise legal person. All capital of the Company is divided into shares with
same par value per share, the liabilities of the shareholders of the Company shall be limited to the
shares they hold, and the Company is liable for its debts to the extent of its entire assets.
Shareholders may institute legal proceedings against the Company pursuant to the Articles of
Association; the Company may institute legal proceedings against its Shareholders pursuant to the
Articles of Association; Shareholders may institute legal proceedings against Shareholders pursuant
to the Articles of Association; Shareholders may institute legal proceedings against the Directors,
Supervisors, Manager and other senior management of the company pursuant to the Articles of
Association.
Shareholders
The shareholders of the Company refer to the legal holders of shares of the Company, whose
names (titles) are registered in the register of shareholders. The shareholders shall enjoy rights and
assume obligations on the basis of the class and amount of shares held; shareholders who hold
shares of the same class shall enjoy the same rights and assume the same obligations. All
– V-22 –

OF THE COMPANY
shareholders of different classes of the company shall rank pari passu among themselves as to
dividends or distributions in any other form. The Company’s shareholders of ordinary shares shall
enjoy the following rights:
(I) the right to receive dividends and other distributions proportional to the number of
shares held;
(II) the right to attend general meetings either in person or by proxy and exercise the voting
right;
(III) the right to supervise, advise or inquire the business operating activities of the
Company;
(IV) the right to transfer the shares according to the laws, administrative regulations and
provisions of the Articles of Association;
(V) the right to obtain relevant information in accordance with provisions of the Articles of
Association, including:
1. to obtain the Articles of Association, subject to payment of the cost;
2. to inspect and copy, subject to payment at a reasonable charge, of the followings:
A. all parts of the register of shareholders;
B. personal profiles of the Company’s Directors, Supervisors, Manager and other

members of senior management including: (1) their present and former names
and aliases; (2) their principal addresses (residence); (3) their nationalities;
(4) their full-time and all other part-time occupations and duties; (5) their
identification documents and the numbers thereof;
C. conditions on the Company’s share capital;
D. the latest audited financial statement, and the report of the Board of
Directors, auditors and the Board of Supervisors of the Company (classified
by domestic shares and foreign shares);
E. special resolutions of the Company;
F. report(s) showing the aggregate par value, number, maximum and minimum
price with respect to each class of shares repurchased by the Company since
the end of the last accounting year, and the aggregate fees paid by the
Company for this purpose;
G. a copy of the latest annual inspection report that has been filed with the
Department of Administration of Industry and Commerce or other competent
authorities of the PRC; and
H. minutes of Shareholders Meeting, and resolutions of meetings of the board of

directors and the Board of Supervisors.
– V-23 –

OF THE COMPANY
The Company shall make available the documents mentioned in Clauses (1) to (8) other
than Clause (2) above and other applicable documents at its Hong Kong office for
inspection, free of charge, by the public and shareholders in accordance with
requirements of the Listing Rules (the documents mentioned in Clause (8) shall be
available for inspection by shareholders only). If any shareholder needs to access the
relevant information or obtain such material as set out in the preceding article, the said
shareholder shall provide the Company with written documents evidencing the type and
number of shares held by the said shareholder, and the Company shall provide such
information as required by the said shareholder upon authentication of the said
shareholder;
(VI) the right to receive distribution of the remaining assets proportional to the number of
shares held when the Company dissolves or liquidates;
(VII) when the procedural requirements for repurchase of shares by the Company under the
Articles of Association and relevant laws and regulations are met, Shareholders who
disagree with the resolutions on the merger or division of the Company which are
passed by the general meeting may require the Company to repurchase their shares;
(VIII) shareholders individually or jointly holding more than 3% of shares of the Company are
entitled to propose extraordinary resolution in writing to the Board of Directors ten (10)
days before the general meeting;
(IX) other rights conferred by the laws, administrative regulations, and the Articles of
Association. The Company shall not otherwise stay or infringe any rights attached to
any shares on the sole basis that the holders of such shares with direct or indirect
interests in such shares have failed to disclose the said interests to the Company.
The Company shall establish a Board of Supervisors. The Board of Supervisors shall
supervise the Board of Directors, Directors, Manager and other members of senior management of
the Company and shall prevent them from abusing powers, infringing interests of the shareholders,
the Company and its employees.
The Board of Supervisors shall consist of three Supervisors, one of whom shall be appointed
as the chairman of the Board of Supervisors. The term of office of a supervisor shall be three
years, a supervisor may be re-elected upon the expiration of his/her term. The Board of
Supervisors shall consist of two shareholder representatives and one employee representative of
the Company. The shareholder representatives shall be elected and removed by the general meeting
and the employee representatives shall be democratically elected and removed by employees of the
Company. The chairman of the Board of Supervisors shall elected or removed by approval of more
than half of all the supervisors. The chairman convenes and conducts meetings of the supervisory
board. If the chairman cannot or does not carry out his duties, more than half of the supervisors
will nominate a supervisor to convene and conduct the meeting. Directors, Manager, the chief
financial officer or members of senior management of the Company shall not be concurrently
appointed as Supervisors. The Board of Supervisors shall hold at least one meeting every six
months, which shall be called by the chairman of the Board of Supervisors. Supervisors have right
to propose the convening of an interim meeting of the Board of Supervisors.
– V-24 –

OF THE COMPANY
The Board of Supervisors shall be held accountable to the general meeting and exercise the
following functions and powers in accordance with the laws:
(I) to review the Company’s financial affairs;
(II) to supervise the work of the Directors, Manager and other members of senior
management who have violated laws, administrative regulations or the Articles of
Association of the Company;
(III) to demand redress from Directors, manager or any other members of senior management
should their acts be deemed against the Company’s interests;
(IV) to review such financial information as the financial reports, business reports and any
plans for distribution of profits to be submitted by the Board of Directors to the general
meeting, and to retain, on the Company’s behalf any certified public accountants or
chartered auditors to assist in the review of such information should any doubt arises
with respect thereof;
(V) to propose the convening of extraordinary general meetings;
(VI) to coordinate with Directors on behalf of the Company or initiate legal proceedings
against the Directors;
(VII) other functions and powers designated by the general meetings.
A supervisor can attend the board meetings. All reasonable fees incurred in the retaining of
such professionals as lawyers, certified public accountants or chartered auditors by the Board of
Supervisors in the exercise of its functions and powers shall be borne by the Company.
Supervisors shall fulfill their obligations of supervision in accordance with the provisions of the
laws, administrative regulations and the Articles of Association of the Company.
Secretary to the Board of Directors
The Company shall have a Secretary to the Board of Directors, who shall be a member of the
senior management of the Company. The secretary to the Company’s Board of Directors shall be a
natural person who has the requisite professional knowledge and experience, and shall be
appointed by the Board of Directors. A Director or senior management of the Company may be
concurrently appointed as the Secretary to the Board of Directors. The accountant of the
Accounting firm appointed by the Company cannot serve concurrently as the Secretary to the
Board of Directors. In the event that the secretary to the Company’s Board of Directors is held
concurrently by a Director, and an action is required to be conducted separately by a Director and
a Secretary, the person who holds the offices of Director and Secretary shall not perform such
action in dual capacity.
– V-25 –

OF THE COMPANY
Resolution of disputes
The Company shall abide by the following principles for dispute resolution:
(I) Any disputes or claims (i) between the Company and the Directors or Supervisors or
members of senior management; and (ii) between holders of foreign shares (including
holders of overseas listed foreign shares and holders of non-listed foreign shares) and
the Company, between holders of foreign shares (including holders of overseas listed
foreign shares and holders of non-listed foreign shares) and the Directors, Supervisors,
manager or other members of senior management, and between holders of overseas
listed foreign shares and holders of non-listed foreign shares or holders of domestic
shares, with respect to any rights or obligations by virtue of the Articles of Association,
the Company Law, the Special Provisions and any rights or obligations conferred upon
or imposed by any other relevant laws and administrative regulations concerning the
affairs of the Company, shall be submitted to arbitration by the parties concerned.
When the aforementioned disputes or claims of rights is submitted to arbitration, the

entire claim or dispute shall be submitted to arbitration, and all persons whose causes of
action were based on the same ground, giving rise to the dispute or claim or whose
participation shall be necessary for the resolution of such dispute or claim, shall, where
such person is the Company, Shareholders, Directors, Supervisors, Manager, or other
members of senior management of the Company, comply with the arbitration. Disputes
with respect to the definition of shareholders and disputes concerning the register of
shareholders need not be resolved by arbitration.
(II) A claimant may select an arbitration to be administered either by the CIETAC in

accordance with its Rules, or the HKIAC in accordance with its Securities Arbitration
Rules. Once a claimant submits a dispute or claim of rights to arbitration, the other
party must submit to the arbitration institution selected by the claimant. If a claimant
selects the HKIAC as the arbitration institution, either party to the dispute or claim may
apply for the arbitration venue to be in Shenzhen, in accordance with the Securities
Arbitration Rules of the HKIAC.
(III) If any disputes or claims for rights as a result of Clause (I) are settled by arbitration, the
laws of the PRC shall govern, except otherwise provided by the laws and administrative
regulations.
(IV) The award of the arbitration shall be conclusive and binding on all the parties.
– V-26 –
APPENDIX VI STATUTORY AND GENERAL INFORMATION
A. FURTHER INFORMATION ABOUT OUR GROUP
1. Incorporation
The Company was established under the laws of the PRC as a limited liability company on
September 22, 2009, and was subsequently registered as a joint stock limited company in the PRC
on December 10, 2022. Our registered address is at No. 425, Langongping Road, Qilihe District,
Lanzhou, Gansu Province, PRC. A summary of our Articles is set out in “Appendix V — Summary
of the Articles of Association of the Company”. As at the date of this Document, our Company’s
head offices are located at 5/F, Tower A, Boya International Center, No. 1 Li Ze Zhong Yi Road,
Chaoyang District, Beijing, China, and No. 425, Langongping Road, Qilihe District, Lanzhou,
Gansu Province, China.
Our Company has established a principal place of business in Hong Kong at 5/F, Manulife
Place, 348 Kwun Tong Road, Kowloon, Hong Kong, and was registered with the Registrar of
Companies in Hong Kong as a non-Hong Kong company under Part 16 of the Companies
Ordinance on November 15, 2022. Ms. Yeung Siu Wai Kitty (楊小慧) and Ms. Cheung Yuet Fan
(張月芬), each of whose correspondence address is the same as our principal place of business in
Hong Kong, have been appointed as our authorized representatives for the acceptance of service of
process and notice in Hong Kong.
The Company has applied for the Conversion of Domestic Shares into H Shares, which
involves [REDACTED] Shares held by eight existing Shareholders. See “History, Development
and Corporate Structure” and “Share Capital” for details of our existing Shareholders and their
respective interests in the Company and relevant procedures for the Conversion of Domestic
Shares into H Shares. The Conversion of Domestic Shares into H Shares has been approved by the
CSRC on [[•], 2023] and is still subject to approval by the Stock Exchange.
As the Company was incorporated in the PRC, its operations are subject to the relevant laws
and regulations of the PRC. A summary of the relevant aspects of laws and regulations of the PRC
and the Articles of Association is set out in Appendices IV and V, respectively.
2. Changes in Share Capital of Our Company
As at December 10, 2022, the date on which the Company was registered as a joint stock
limited company, our registered share capital was 123,456,790, divided into 123,456,790 Domestic
Shares, each with a nominal value of RMB1.00, all of which had been fully paid.
Upon completion of the [REDACTED] and the Conversion of Domestic Shares into H
Shares, the registered share capital of our Company will increase to RMB[REDACTED],
comprising [REDACTED] H Shares and [REDACTED] Domestic Shares, representing
approximately [REDACTED]% and [REDACTED]% of our registered share capital, respectively,
assuming the [REDACTED] is not exercised; and RMB[REDACTED] comprising [REDACTED]
H Shares and [REDACTED] Domestic Shares, representing approximately [REDACTED]% and
[REDACTED]% of our share capital, respectively, assuming the [REDACTED] is exercised.
Save as disclosed herein, there has been no alteration in our share capital and no redemption,
repurchase or sale of any of our share capital within two years immediately preceding the date of
this Document.
– VI-1 –
3. Changes in the Share Capital of Our Subsidiaries
A summary of the corporate information and the particulars of our subsidiaries are set out in
Note 33 to the Accountant’s Report as set out in “Appendix I — Accountant’s Report.”
The following subsidiaries have been established within two years immediately preceding the
date of this Document:
Place of Date of
Name of subsidiary establishment establishment Registered capital
Deshengtang Qinghai . . . . . . . . . . . . . . . . . PRC May 17, 2021 RMB2,000,000
Gansu 111 Health . . . . . . . . . . . . . . . . . . . . PRC February 16, RMB1,000,000

2022
Beijing 111 Clinic . . . . . . . . . . . . . . . . . . . PRC March 11, RMB100,000

2022
Deshengtang Linze . . . . . . . . . . . . . . . . . . . PRC May 10, 2022 RMB2,000,000
Deshengtang Ningxia . . . . . . . . . . . . . . . . . PRC July 28, 2022 RMB2,000,000
The following sets out the changes in share capital of our subsidiary during the two years
immediately preceding the date of this Document. For details of our principal operating
subsidiaries, see “History, Development and Corporate Structure — Our Principal Subsidiaries.”
Longgui
On November 17, 2022, the registered capital of Longgui was decreased from RMB10
million to RMB2 million.
Save as disclosed above, there has been no alteration in the share capital of any of the
subsidiaries of the Company within the two years immediately preceding the date of this
Document.
4. Resolutions of Our Shareholders in Relation to the [REDACTED] and the Conversion of

Domestic Shares into H Shares
At the extraordinary general meeting of the Shareholders held on [[•], 2023], the following
resolutions, among other things, were duly passed:
(i) [the issue by the Company of H Shares each with a nominal value of RMB1.00 each and
such H Shares be listed on the Stock Exchange;]
(ii) [the number of H Shares to be issued shall be up to [REDACTED], and the grant of the
[REDACTED] in respect of no more than approximately [REDACTED]% of the
number of H Shares issued pursuant to the [REDACTED];]
(iii) [subject to the CSRC’s approval, upon completion of the [REDACTED],

[REDACTED] Domestic Shares in aggregate held by eight Shareholders will be
converted into H Shares on a one-for-one basis;]
– VI-2 –
(iv) [authorization of the Board of Directors or its authorized individual to handle all matters
relating to, among other things, the [REDACTED], the issue and the [REDACTED]];
and
(v) [subject to the completion of the [REDACTED], the conditional adoption of the revised
Articles of Association, which shall become effective on the [REDACTED]; and the
authorization of the Board of Directors to amend the Articles of Association in
accordance with relevant laws and regulations and upon the request from the Stock
Exchange and relevant PRC regulatory authorities.]
5. Corporate Reorganization
Our Company has not gone through any corporate reorganization. See “History, Development
and Corporate Structure” for further details of the history and development of our Company.
6. Restriction on Share Repurchases
See “Appendix V — Summary of the Articles of Association of the Company” for details of
the restrictions on share repurchases by our Company.
B. FURTHER INFORMATION ABOUT OUR BUSINESS
1. Summary of Material Contracts
The following contracts (not being contracts entered into in the ordinary course of business)
have been entered into by us within the two years preceding the date of this Document and are or
may be material:
(i) the supplemental agreement to the Shareholders’ Agreement dated June 30, 2022 entered
into among Mr. Long Yan, Mr. Long Yun, Jiangsu Yanhai, Suzhou Bangsheng Yingxin,
Jiangsu Jiequan, Nanjing Bangsheng Juyuan, Ali Health, Jiangsu Zijin Hongyun,
Zhejiang Changqi, Zhejiang Yixue and the Company;
(ii) the supplemental agreement to the Shareholders’ Agreement dated August 31, 2022
entered into among Mr. Long Yan, Mr. Long Yun, Jiangsu Yanhai, Suzhou Bangsheng
Yingxin, Jiangsu Jiequan, Nanjing Bangsheng Juyuan, Ali Health, Jiangsu Zijin
Hongyun, Zhejiang Changqi, Zhejiang Yixue and the Company;
(iii) the non-competition undertaking dated [•], 2023 entered into by the Controlling
Shareholders in favor of our Company;
(iv) the Deed of Indemnity; and
(v) [REDACTED].
– VI-3 –
2. Intellectual Property Rights of Our Group
(i) Patents
Registered Patents
As of the Latest Practicable Date, we were the registered owner of and had the right to use
the following patents which we consider to be material to our business:
Place of
No. Patent Patentee Registration Patent Number Application Date
1. Packaging box (Flying bullet liver and Deshengtang PRC 201730087872.0 March 23, 2017
body strengthening pill) Wholesale
(包裝盒(子彈飛補腎強身片)) . . . . ..
2. Packaging box (Flying bullet Deshengtang PRC 201730028826.3 January 24, 2017
Liuweidihuang pill) Wholesale
(包裝盒(子彈飛六味地黃丸)) . . . . ..
3. Packaging bag (High-calcium protein Beijing 111 PRC 202230002586.0 January 5, 2022
powder) (包裝袋(高鈣蛋白粉)) . . . ..
4. Packaging can (High-calcium protein Beijing 111 PRC 202230003069.5 January 5, 2022
powder) (包裝罐(高鈣蛋白粉)) . . . ..
5. Packaging box (Sesame planet) Beijing 111 PRC 202230002616.8 January 5, 2022
(包裝盒(芝麻星球)) . . . . . . . . . . ..
6. Packaging box (Sesame planet) Beijing 111 PRC 202230002566.3 January 5, 2022
(包裝盒(芝麻星球)) . . . . . . . . . . ..
7. Packaging can (Beyond day) Beijing 111 PRC 202230007485.2 January 7, 2022
(包裝罐(日行之外)) . . . . . . . . . . ..
8. Packaging box (Beyond day) Beijing 111 PRC 202230007521.5 January 7, 2022
(包裝盒(日行之外)) . . . . . . . . . . ..
(ii) Trademarks
(a) Registered Trademarks
As of the Latest Practicable Date, we had registered the following trademarks which we
consider to be material to our business:
Place of
No. Trademark Registration Registration No. Registered Owner Class Registration Date Expiry Date
1. PRC 57765342 the Company 2 January 28, 2022 January 27, 2032
2. PRC 57751165 the Company 3 February 7, 2022 February 6, 2032
– VI-4 –
Place of
– VI-5 –
Place of
57. PRC 5143357 Deshengtang 35 May 21, 2019 May 20, 2029
Wholesale
58. PRC 5523872 Deshengtang 35 June 14, 2020 June 13, 2030
Wholesale
59. PRC 11016779 Deshengtang 42 October 28, 2013 October 27, 2023
Wholesale
60. PRC 11988406 Deshengtang 35 September 28, September 27,

Wholesale 2015 2025
– VI-6 –
Place of
Wholesale 2015 2025
62. PRC 14813444 Beijing 111 38 March 21, 2016 March 20, 2026

Wholesale 2015 2025

Wholesale 2015 2025
65. PRC 9069872 Deshengtang 3 January 28, 2022 January 27, 2032
Wholesale
66. PRC 9069982 Deshengtang 5 March 28, 2022 March 27, 2032
Wholesale
Wholesale
Wholesale
Wholesale
Wholesale
Wholesale
Wholesale
73. PRC 9085078 Deshengtang 10 February 7, 2022 February 6, 2032

Wholesale
Wholesale

Wholesale

Wholesale

Wholesale
– VI-7 –
Place of
78. PRC 13177049 Deshengtang 9 April 7, 2015 April 6, 2025
Wholesale

Wholesale
80. PRC 14875133 Beijing 111 9 September 28, September 27,

2015 2025
81. PRC 11161629 Deshengtang 5 November 21, November 20,

Wholesale 2013 2023

Wholesale 2013 2023

Wholesale 2013 2023

Wholesale 2013 2023

Wholesale 2013 2023

Wholesale 2013 2023

Wholesale 2013 2023

Wholesale 2013 2023

Wholesale 2013 2023

Wholesale 2013 2023

Wholesale 2013 2023

Wholesale
93. PRC 13681930 Deshengtang 5 February 21, February 20,

Wholesale 2015 2025

Wholesale 2015 2025
– VI-8 –
Place of
Wholesale

Wholesale 2015 2025

Wholesale 2015 2025

Wholesale 2015 2025

Wholesale 2015 2025

Wholesale 2015 2025

Wholesale 2015 2025

Wholesale 2015 2025

Wholesale
Wholesale
Wholesale

Wholesale 2015 2025
107. PRC 12124345 Beijing 111 35 July 21, 2015 July 20, 2025
108. PRC 14813470 Beijing 111 38 July 14, 2015 July 13, 2025
109. PRC 15069154 Beijing 111 9 August 21, 2015 August 20, 2025
110. PRC 13681914 Deshengtang 5 August 21, 2015 August 20, 2025
Wholesale

Wholesale

Wholesale 2015 2025

Wholesale
– VI-9 –
Place of
Wholesale 2015 2025

Wholesale 2015 2025

Wholesale

Wholesale

Wholesale 2015 2025

Wholesale 2015 2025

Wholesale

Wholesale

Wholesale

Wholesale
124. PRC 34278095 Deshengtang 5 July 21, 2019 July 20, 2029
Wholesale
125. PRC 14080000 Deshengtang 35 July 28, 2015 July 27, 2025
Wholesale
127. PRC 16344452 Beijing 111 5 September 7, September 6,

2016 2026
– VI-10 –
Place of
149. PRC 23361942 Beijing 111 30 June 21, 2018 June 20, 2028
158. PRC 7559112 Beijing 111 35 April 14, 2021 April 13, 2031
Chain
159. PRC 7559142 Beijing 111 42 February 21, February 20,

Chain 2021 2031
– VI-11 –
Place of
160. PRC 7559172 Beijing 111 44 December 7, December 6,
Chain 2020 2030
161. PRC 11988409 Beijing 111 35 August 21, 2014 August 20, 2024
Chain
162. PRC 20966345 Beijing 111 10 December 21, December 20,

Chain 2017 2027
163. PRC 20966434 Beijing 111 30 October 7, 2017 October 6, 2027

Chain
164. PRC 20966533 Beijing 111 32 October 7, 2017 October 6, 2027

Chain
165. PRC 37867922 Longgui 3 December 21, December 20,

2019 2029

2019 2029

2019 2029

2019 2029

2019 2029

2019 2029

2019 2029

2019 2029

2019 2029

2019 2029

2019 2029

2019 2029
– VI-12 –
Place of
2019 2029

2019 2029

2019 2029

2019 2029
181. Hong Kong 306000911 the Company 3 July 4, 2022 July 3, 2032
– VI-13 –
Place of
– VI-14 –
Place of
199. Hong Kong 306001064 Beijing 111 35 July 4, 2022 July 3, 2032
Chain
200. Hong Kong 306001082 Beijing 111 44 July 4, 2022 July 3, 2032
Chain
(b) Trademark under Application
As of the Latest Practicable Date, we had also applied for the registration for the following
trademark which we consider to be material to our business:
No. Trademark Place of Registration Application No. Applicant Class Application Date
1. Hong Kong 306110027 the Company 16 November 17,
2022
(iii) Copyrights
As of the Latest Practicable Date, we were the registered owner of and had the right to use
the following copyrights which we consider to be material to our business:
(a) Computer Software
No. Copyright Name Version Owner Copyright Number Registration Date Place of Registration
1. 111 Doctor software (壹佰壹 — Beijing 111 2016SR338827 November 21, PRC
拾壹醫生軟件) . . . . . . . 2016
2. Health pioneer management — Beijing 111 2016SR038720 February 26, 2016 PRC
system (健康領秀管理系
統) . . . . . . . . . . . . .
3. 111Yao software (iOS — Beijing 111 2016SR031307 February 16, 2016 PRC
version) (111醫藥館軟件
(iOS版)) . . . . . . . . . .
– VI-15 –
4. 111Yao e-commerce sales — Beijing 111 2016SR030609 February 16, 2016 PRC
system (PC version) (111
醫藥館電子商務銷售系
統(PC前端)) . . . . . . . .
5. 111Yao WeChat store system — Beijing 111 2016SR031358 February 16, 2016 PRC
(111醫藥館微信商城系統) .
6. 111Yao e-commerce sales — Beijing 111 2016SR031300 February 16, 2016 PRC
system (PC version) (111
醫藥館電子商務銷售系
統(PC後端)) . . . . . . . .
7. 111Yao home physician — Beijing 111 2016SR031442 February 16, 2016 PRC
software (iOS version)
(111醫藥館藥師到家軟件
(iOS版)) . . . . . . . . . .
8. Flying bullet healthcare — Beijing 111 2016SR031352 February 16, 2016 PRC
platform (iOS version)
(子彈飛健康照顧平台 (iOS
版)) . . . . . . . . . . . . .
9. Flying bullet health — Beijing 111 2015SR166572 August 26, 2015 PRC
management system
(Android version) (子彈飛
健康管理系統 (安卓版)) . .
10. 111Yao software (Android — Beijing 111 2015SR166566 August 26, 2015 PRC
version) (111醫藥館軟
件(安卓版)). . . . . . . . .
11. 111Yao software (壹佰壹拾 V1.0 Beijing 111 2016SR338834 November 21, PRC
壹診室軟件) . . . . . . . . 2016
12. Deshengtang e-commerce V1.0 Company 2017SR068920 March 7, 2017 PRC
management software (德
生堂電子商務管理軟件) . .
13. Deshengtang e-commerce V1.0 Company 2017SR065750 March 3, 2017 PRC
sales software (德生堂電子
商務銷售軟件) . . . . . . .
14. Deshengtang shopping App V1.0 Company 2017SR084078 March 20, 2017 PRC
(Android version) (德生堂
購物APP安卓版軟件) . . .
15. Deshengtang health pioneer V1.0 Company 2017SR065802 March 3, 2017 PRC
生堂健康領袖管理軟件) . .
16. Deshengtang store APPIOS V1.0 Company 2017SR065756 March 3, 2017 PRC
version software (德生堂商
城APPIOS版軟件 ). . . . .
17. Deshengtang Wechat store V1.0 Company 2017SR084069 March 20, 2017 PRC
shopping software (德生堂
微信商城購物軟件) . . . .
18. Deshengtang Wechat store V1.0 Company 2017SR084075 March 20, 2017 PRC
生堂微信商城管理軟件) . .
– VI-16 –
19. Deshengtang Yaoshida V1.0 Company 2017SR066291 March 3, 2017 PRC
生堂藥士達管理軟件) . . .
20. Deshengtang flying bullet V1.0 Company 2017SR084072 March 20, 2017 PRC
(iOS version) health
socializing software (德生
堂子彈飛 (iOS version) 健
康交友軟件) . . . . . . . .
21. Deshengtang flying bullet V1.0 Company 2017SR066290 March 3, 2017 PRC
(Android version) health
socializing software (德生
堂子彈飛(安卓版)健康交友
軟件) . . . . . . . . . . . .
22. Deshengtang SCRM V1.0 Beijing 111 Chain 2022SR0644820 May 26, 2022 PRC
management system (德生
堂SCRM管理系統) . . . . .
23. Deshengtang family doctor V1.0 Beijing 111 Chain 2022SR0644819 May 26, 2022 PRC
center system (德生堂家醫
中心系統) . . . . . . . . .
24. Deshengtang inventory center V1.0 Beijing 111 Chain 2022SR0918750 July 12, 2022 PRC
auditing system (德生堂庫
存中心報表系統) . . . . . .
billing management system
(德生堂庫存中心單據管理
系統) . . . . . . . . . . . .
delivery and time
arrangement system (德生
堂庫存中心配送排班系統) .
distribution system (德生
堂庫存中心鋪貨系統) . . .
shipping notice planning
system (德生堂庫存中心請
貨計劃系統) . . . . . . . .
return application system
(德生堂庫存中心退貨申請
系統) . . . . . . . . . . . .
30. Deshengtang inventory center V1.0 Beijing 111 Chain 2022SR0597537 May 18, 2022 PRC
sales restriction system (德
生堂庫存中心銷售限制系
統) . . . . . . . . . . . . .
– VI-17 –
(b) Works
No. Copyright Name Owner Copyright Number Registration Date Place of Registration
1. Yaojipi (藥急批) . . . . . . . . . . . Deshengtang 國作登字 October 25, 2016 PRC
Wholesale -2016-F-00330386
2. Packaging of flying bullet liver and Deshengtang 國作登字 August 24, 2015 PRC
body strengthening pill (子彈飛補 Wholesale -2015-F-00222819
腎強身片包裝) . . . . . . . . . . .
3. Flying bullet Liuweidihuang pill (子 Deshengtang 國作登字 March 4, 2015 PRC
彈飛六味地黃丸包裝) . . . . . . . Wholesale -2015-F-00179093
4. Yixueyuan (壹學院) . . . . . . . . . Beijing 111 Chain 國作登字 September 20, 2017 PRC
-2017-F-00422168
5. Health “Fang” (健康“方” 道). . . . . the Company 國作登字 October 10, 2019 PRC
-2019-B-00895654
(iv) Domain Names
As of the Latest Practicable Date, we had registered and maintained ownership to the
following domain names in China which we consider to be material to our business:
No. Domain Name Registered Owner Registration Date

1. dst111.com the Company February 27, 2013
2. jklj.net the Company March 29, 2011
3. 健康鄰居.net the Company March 17, 2017
4. 德生堂.com the Company October 28, 2016
5. wyaoshi.com the Company April 28, 2015
6. 111yyg.com Beijing 111 Chain June 22, 2012
7. 111yao.com Beijing 111 Chain May 17, 2012
Save as disclosed above, as of the Latest Practicable Date, there were no other patents, trade
or service marks, intellectual or industrial property rights which are material in relation to our
business.
– VI-18 –
C. FURTHER INFORMATION ABOUT OUR DIRECTORS, SUPERVISORS AND

1. Particulars of Directors’ and Supervisors’ Service Contracts and Letters of Appointment
(i) Executive Directors
Each of Mr. Long Yan, Mr. Long Yun, Ms. Bai Yanping (白燕平) and Ms. Liang Xiaoping (梁
曉萍), being our executive Directors, has entered into a service contract with our Company on
December 6, 2022 pursuant to Rule 19A.54 of the Listing Rules. Each service contract is for an
initial term of three years commencing from the [REDACTED]. The service contracts may be
renewed in accordance with the Articles and the applicable laws, rules and regulations.
(ii) Non-executive Director and Independent Non-executive Directors
Each of Mr. Ling Mingsheng (凌明聖) and Mr. Tu Yanwu (屠燕武), being our non-executive
Directors, Dr. Zhu Yan (朱岩), Mr. Li Yulong (李玉龍) and Dr. Chan Siu Yeung (陳兆陽) (alias
Chan Raymond), being our independent non-executive Directors, has entered into a letter of
appointment with our Company on December 6, 2022 pursuant to Rule 19A.54 of the Listing
Rules. Each letter of appointment is for an initial term of three years commencing from the
[REDACTED]. The letters of appointment may be renewed in accordance with the Articles and
the applicable laws, rules and regulations.
(iii) Supervisors
Each of Ms. Shao Xiaxia (邵霞霞), Ms. Jiao Duorong (焦多蓉) and Ms. Yang Aiping (楊愛
萍), being our Supervisors, has entered into a service contract with our Company on December 6,
2022 pursuant to Rule 19A.55 of the Listing Rules. Each service contract is for an initial term of
three years commencing from the [REDACTED]. The service contracts may be renewed in
accordance with the Articles and the applicable laws, rules and regulations.
2. Remuneration of Directors and Supervisors
The aggregate amounts of remuneration (including wages, salaries, bonuses, employee

welfare, pension, social security cost and housing benefits and share-based compensation
expenses) paid to our Directors and Supervisors for the years ended December 31, 2020 and 2021,
and the nine months ended September 30, 2022, were approximately RMB4.3 million, RMB4.2
Based on the arrangements in force as of the Latest Practicable Date, it is estimated that the
total remuneration paid to the Directors and Supervisors for the year ended December 31, 2023
will be approximately RMB4.1 million.
During the Track Record Period, no remuneration was paid by us to, or receivable by, our
Directors, Supervisors or the five highest paid individuals as an inducement to join or upon joining
our Company. No compensation was paid by us to, or receivable by, our Directors, former
Directors, Supervisors, former Supervisors or the five highest-paid individuals for each of the
Track Record Period for the loss of any office in connection with the management of the affairs of
any members of our Group. Furthermore, none of the Directors or Supervisors had waived agreed
to waive any emoluments during the same periods.
– VI-19 –
Save as disclosed above, no other payments have been made or are payable in respect of the
two years ended December 31, 2020 and 2021 and the nine months ended September 30, 2022 by
any member of our Group to any of our Directors.
3. Disclosure of interests
Disclosure of Interests of Directors, Supervisors and Chief Executive of our Company
Immediately following the completion of the [REDACTED] (assuming the [REDACTED] is

not exercised), the interest or short position of our Directors, Supervisors or chief executives of
our Company in the Shares, underlying shares and debentures of our Company or its associated
corporations (within the meaning of Part XV of the SFO) which will be required to be notified to
our Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO
(including interest or short positions which they were taken or deemed to have under such
provisions of the SFO) or which will be required, pursuant to section 352 of the SFO, to be
entered in the register referred to therein, or which will be required, pursuant to the Model Code
for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing
Rules, to be notified to our Company and the Stock Exchange, once the Shares are listed, are as
follows:
(i) Interest in the Shares of our Company
Number of Shares held

immediately
followingthe completion
of the [REDACTED] Approximate percentage
(assuming the Approximate percentage of shareholding in the
[REDACTED] Optionis of shareholding in the total issued share
Name of Director or chief executive Nature of interest(1) Class of Shares not exercised) relevant class of Shares capital
Mr. Long Yan . . . . . . . . . . Beneficial interest
(2)
Domestic Shares [REDACTED] [REDACTED]% [REDACTED]%
H Shares [—] [—] [—]
Interest in controlled corporations Domestic Shares [REDACTED] [REDACTED]% [REDACTED]%
H Shares [REDACTED] [REDACTED]% [REDACTED]%
A concert party to an agreement(3) Domestic Shares [REDACTED] [REDACTED]% [REDACTED]%
H Shares [—] [—] [—]
Mr. Long Yun . . . . . . . . . . . Beneficial interest Domestic Shares [REDACTED] [REDACTED]% [REDACTED]%
H Shares [—] [—] [—]
A concert party to an agreement(3) Domestic Shares [REDACTED] [REDACTED]% [REDACTED]%
H Shares [—] [—] [—]
Mr. Ling Mingsheng (凌明聖) . . . . . Interest in controlled corporations(4) Domestic Shares [REDACTED] [REDACTED]% [REDACTED]%
H Shares [REDACTED] [REDACTED]% [REDACTED]%
Notes:
(1) All interests stated are long positions.
(2) Mr. Long Yan directly owns 87,111,112 Shares. He is also the general partner of each of Zhejiang Yixue and
Zhejiang Changqi.
As such, under the SFO, Mr. Long Yan is deemed to be interested in the 11,111,110 Shares held by Zhejiang Yixue
and Zhejiang Changqi.
(3) Pursuant to the Concert Party Agreement, Mr. Long Yan and Mr. Long Yun acknowledged and confirmed their
acting-in-concert relationship in our Company since becoming direct Shareholders and serving as the Company’s
members of senior management. As such, each of Mr. Long Yan and Mr. Long Yun is deemed to be interested in the
each other’s interest in the Shares under the SFO. For details, see “History, Development and Corporate Structure
— Concert Party Agreement.”
– VI-20 –
(4) Jiangsu Yanhai is controlled by Jiangsu Coastal Capital as its general partner. More than 33.3% equity interest in
Jiangsu Coastal Capital is held by Nanjing Bangsheng Jurun, which is in turn owned as to more than 33.3% limited
partnership interest by Nanjing CCI Capital.
Jiangsu Jiequan is controlled by Nanjing Bangsheng Xingong as its general partner, which is in turned owned as to
more than 33.3% by Nanjing CCI Capital.
Nanjing Bangsheng Juyuan is controlled by Nanjing CCI Capital as its general partner.
Mr. Ling Mingsheng (凌明聖), our non-executive Director, is interested in more than 33.3% of equity interests in
Nanjing CCI Capital. Under the SFO, Mr. Ling Mingsheng is deemed to be interested in the 5,555,556 Shares,
2,714,444 Shares and 126,667 Shares held by Jiangsu Yanhai, Jiangsu Jiequan and Nanjing Bangsheng Juyuan,
respectively.
Disclosure of Interests of Substantial Shareholders
For information on the persons who will, immediately following the completion of the
[REDACTED] and the Conversion of Domestic Shares into H Shares (without taking into account
any Shares which may be sold and [REDACTED] upon the exercise of the [REDACTED]), have
or be deemed or taken to have an interest and/or short position in the Shares or the underlying
Shares which would fall to be disclosed under the provisions of Division 2 and 3 of Part XV of the
SFO, see “Substantial Shareholders.”
Save as disclosed in “Substantial Shareholders”, our Directors are not aware of any other
person who will, immediately following the completion of the [REDACTED] have an interest or
short position in the Shares or the underlying Shares which are required to be disclosed to our
Company and the Stock Exchange under the provisions of Division 2 and 3 of Part XV of the
SFO, or directly or indirectly, be interested in 10% of more of the nominal value of any class of
share capital carrying the rights to vote in all circumstances at the general meetings of our
Company.
4. Disclaimers
Save as disclosed in this Document:
(i) none of our Directors, Supervisors or the chief executive of our Company has any
interest or short position in the Shares, underlying shares or debentures of our Company
or any of its associated corporation (within the meaning of the SFO) which will have to
be notified to our Company and the Stock Exchange pursuant to Divisions 7 and 8 of
Part XV of the SFO or which will be required, pursuant to section 352 of the SFO, to be
entered in the register referred to therein, or which will be required to be notified to our
Company and the Stock Exchange pursuant to the Model Code for Securities
Transactions by Directors of Listed Issuers once the Shares are listed;
(ii) none of our Directors, Supervisors or any of the experts referred to under paragraph
headed “— E. Other Information — 12. Qualification of Experts” in this appendix has
any direct or indirect interest in the promotion of our Company, or in any assets which
have within the two years immediately preceding the date of this Document been
acquired or disposed of by or leased to any member of our Group, or are proposed to be
acquired or disposed of by or leased to any member of our Group;
(iii) none of our Directors or Supervisors is materially interested in any contract or

arrangement subsisting at the date of this Document which is significant in relation to
the business of our Group;
– VI-21 –
(iv) none of our Directors or Supervisors has any existing or proposed service contracts with
any member of our Group (excluding contracts expiring or determinable by the
employer within one year without payment of compensation (other than statutory
compensation));
(v) so far as is known to our Directors, Supervisors or the chief executive of our Company,
no person (not being a Director, Supervisor or chief executive of our Company) will,
immediately following the completion of the [REDACTED], have an interest or short
position in the Shares or underlying shares of our Company which would fall to be
disclosed to our Company under the provisions of Divisions 2 and 3 of Part XV of SFO
or be interested, directly or indirectly, in 10% or more of the nominal value of any class
of share capital carrying rights to vote in all circumstances at general meetings of any
member of our Group; and
(vi) none of our Directors, Supervisors or their respective close associates (as defined under
the Listing Rules) or our Shareholders who are interested in more than 5% of the issued
share capital of our Company has any interest in the five largest customers or the five
largest suppliers of our Group.
D. [REDACTED] SHARE INCENTIVE SCHEME
We have adopted the [REDACTED] Share Incentive Scheme in May 2018 to provide
incentives to our employees. The purpose of the [REDACTED] Share Incentive Scheme is to
enhance the sense of responsibility and mission of the core management team and key employees
for the sustainable and healthy development of our Company, to align the interests of Shareholders
and our Company to that of employees of the Company, thereby promoting long-term development
of our Company. The [REDACTED] Share Incentive Scheme is funded by existing Shares and
will be subject to Rule 17.12 of the Listing Rules upon [REDACTED].
Incentive participants of the [REDACTED] Share Incentive Scheme (the “Participants”)

held their equity interest in the Company indirectly through holding corresponding partnership
interests as limited partners of Zhejiang Changqi, our employee shareholding platform (the
“Awards”). As at the Latest Practicable Date, Awards representing underlying equity interest of
2,444,445 Shares had been granted to nine individuals. Immediately after the [REDACTED],
Zhejiang Changqi will hold [REDACTED] Domestic Shares and [REDACTED] H Shares.
The following is a summary of the principal terms of the [REDACTED] Share Incentive
Scheme:
1. Awards
The maximum number of underlying Shares that can be granted to the Participants is
2,444,445 Shares, representing approximately 1.98% of the issued share capital of our Company as
at the Latest Practicable Date and approximately [REDACTED]% of the issued share capital of
our Company immediately after the completion of the [REDACTED] (assuming the
[REDACTED] is not exercised).
The Awards were granted to the Participants in two batches on December 7, 2018 and January
12, 2019. The prices paid by the Participants for subscribing for the Awards were RMB5.0 to
RMB5.2 per Share.
– VI-22 –
2. Participants
The Participants comprise the Group’s mid-level and senior management members and
supervisors. All Participants shall be employed by our Group at the time when the Awards were
granted.
3. Administration
The adoption of the [REDACTED] Share Incentive Scheme is subject to approval by the
Shareholders’ meeting. The Board of the Directors is responsible for the proposal, implementation,
execution and amendment of the [REDACTED] Share Incentive Scheme, including determining
the list of Participants. The human resources department and the financial management department
of our Company are responsible for handling certain logistics matters relating to the
[REDACTED] Share Incentive Scheme, including the registration of business administrations,
execution of agreements, etc.
4. Lock-up Period
According to the [REDACTED] Share Incentive Scheme, all Awards are subject to a lock-up
period of 72 months (the “Lock-up Period”) commencing from the date on which the
[REDACTED] Share Incentive Scheme was approved by the Shareholders’ meeting. Subject to the
fulfillment of certain unlocking conditions, all Awards will be unlocked in a one-off manner on
December 31, 2024.
In the event of consummation of public offering by the Company during the Lock-up Period,
the relevant regulations and requirements of the relevant stock exchange and other applicable laws
and regulations relating to lock-up period shall apply.
5. Rights and Restrictions Attached to the Awards
During the period of holding the Awards, where the annual cash dividend plan is approved by
the Shareholders’ meeting, the Participants are entitled to receive the cash dividends attached to
the Awards (including the unlocked portion).
Participants who are Directors, Supervisors or senior management of our Company shall also
abide by the following restrictions: (i) the number of underlying Shares transferred each year
during the term of his/her office shall not exceed 25% of the total number of underlying Shares
held by him/her in our Company, and he/she shall not transfer the underlying Shares held by
him/her in our Company within six months after the termination of employment; (ii) if he/she sells
the underlying Shares within six months of his/her purchase or purchases the underlying Shares
within six months of his/her sale, the proceeds thereby shall accrue to our Company and the Board
of Directors of the Company shall recover the such proceeds. Before the Awards are unlocked, the
Participants shall not pledge, transfer, gift or otherwise dispose of the Awards held by him/her, or
use such Awards for guarantee or debt repayment. Unlocked Awards may be transferred in
accordance with the terms of the [REDACTED] Share Incentive Scheme and all applicable rules
and regulations.
– VI-23 –
6. Exit Events
Non-negative Exit
Each Participant shall transfer the Awards to the general partner of our employee
shareholding platform or any person designated by the Board of Directors, at the price representing
the sum of grant price of the Awards paid by such Participant, together with the relevant interest,
upon occurrence of the following events:
(i) termination of employment of the Participant upon mutual consent between the
Participant and the Company due to adjustment of the Company’s strategy and business
restructuring;
(ii) retirement of the Participant;
(iii) work-related death of the Participant;
(iv) termination of employment of the Participant upon mutual consent between the
Participant and the Company due to loss or partial loss of working ability resulting from
work-related incidents;
(v) failure to meet the requirements under the [REDACTED] Share Incentive Scheme or
relevant regulations by the Participant; or
(vi) other circumstances as determined by the Board of Directors.
Negative Exit
Each Participant shall transfer the Awards granted to the general partner of our employee
shareholding platform or any person designated by the Board of Directors, at the price representing
the sum of grant price of the Awards paid by such Participant, together with the relevant interest
minus all profit distributions that such Participant has received, upon occurrence of the following
events:
(i) dismissal of the Participant due to ineligibility in job performance;
(ii) non-work-related death of the Participant or loss or partial loss of working ability
resulting from non-work-related incidents;
(iii) failure to meet the requirements under the [REDACTED] Share Incentive Scheme or
relevant regulations by the Participant; or
(iv) other circumstances as determined by the Board of Directors (for example, violation of
the Company’s rules and regulations or jeopardization of the Company’s interests by the
Participant, resulting in internal disciplinary actions such as demotion, salary reduction
or transfer of posts).
– VI-24 –
Exit upon Material Misconduct
Each Participant shall transfer the Awards granted to the general partner of our employee
shareholding platform or any person designated by the Board of Directors, at the price of
representing the sum of grant price of the Awards paid by such Participant minus all profit
distributions that such Participant has received, upon occurrence of the following events:
(i) violation of the law and being liable for any criminal liability or serious administrative
liability, resulting in damage to the reputation or interests of the Group;
(ii) holding any position within other enterprises, institutions or social organizations that
produce or operate similar products or provide similar services or engage in similar
business with the Group, including but not limited to shareholders, partners, directors,
supervisors, managers, employees, agents, consultants, etc.;
(iii) violation of the regulations relating to safety management in production or operation, or

coercing to work under risky circumstances in violation of regulations, resulting in
major casualty accidents or other serious consequences;
(iv) bankruptcy or insolvency of the Participant;
(v) other behaviors that, as determined by the Board of Directors, are malicious and
jeopardize the reputation or interests of the Company; or
(vi) failure to meet the requirements under the [REDACTED] Share Incentive Scheme or
relevant regulations by the Participant.
7. Details of the Awards granted
Details of the Awards granted under the [REDACTED] Share Incentive Scheme as at the
Latest Practicable Date are set out below:
Approximately percentage of
Number of Shares shareholding in the Company
underlying the immediately following
Name of Participants Awards granted the [REDACTED]
Assuming the Assuming the
[REDACTED] is [REDACTED] is
not exercised exercised in full
Directors
Ms. Bai Yanping (白燕平) . . . ........... 555,556 [REDACTED] [REDACTED]
Ms. Liang Xiaoping (梁曉萍) ........... 555,556 [REDACTED] [REDACTED]
Senior management
Mr. Lei Zhiqiang (雷志強) . . ........... 222,222 [REDACTED] [REDACTED]
Ms. Wang Chunhua (王春華). ........... 111,111 [REDACTED] [REDACTED]
Others
Five Participants . . . . . . . . . . ........... 1,000,000 [REDACTED] [REDACTED]
Total: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,444,445 [REDACTED] [REDACTED]
– VI-25 –
As of the Latest Practicable Date, (i) Awards representing the maximum number of
underlying Shares that could be granted under the [REDACTED] Share Incentive Scheme had
been fully granted; (ii) there was no ungranted Award under the [REDACTED] Share Incentive
Scheme; and (iii) all Awards under the [REDACTED] Share Incentive Scheme had been fully
vested. No further awards under the [REDACTED] Share Incentive Scheme will be granted after
the [REDACTED].
E. OTHER INFORMATION
1. Estate Duty
We have been advised that no material liability for estate duty under PRC law is likely to fall
upon the Group.
2. Litigation
During the Track Record Period and up to the Latest Practicable Date, save as disclosed in
this Document and so far as our Directors are aware, no litigation or claim of material importance
(to our Group’s financial condition or results of operation) is pending or threatened against any
member of our Group.
3. Sole Sponsor
The Sole Sponsor has made an application on our behalf to the Listing Committee of the
Stock Exchange for the [REDACTED] of, and permission to [REDACTED], the H Shares to be
issued as mentioned in this Document. All necessary arrangements have been made enabling the H
Shares to be admitted into [REDACTED].
The Sole Sponsor satisfies the independence criteria applicable to sponsors as set out in Rule
3A.07 of the Listing Rules. The sponsor fee payable to the Sole Sponsor in connection with the
[REDACTED] payable by our Company is US$600,000.
4. Compliance Advisor
Our Company has appointed Maxa Capital Limited as our compliance advisor in compliance
with Rules 3A.19 and 19A.05 of the Listing Rules.
5. Preliminary Expenses
As of the Latest Practicable Date, our Company had not incurred any material preliminary
expenses.
6. Promoters
The Promoters of our Company are Mr. Long Yan, Mr. Long Yun, Zhejiang Changqi,
Zhejiang Yixue, Jiangsu Yanhai, Suzhou Bangsheng Yingxin, Jiangsu Jiequan, Nanjing Bangsheng
Juyuan, Ali Health and Jiangsu Zijin Hongyun.
Save as disclosed in this Document, within the two years immediately preceding the date of
this Document, no cash, securities or other benefit have been paid, allotted or given or have been
proposed to be paid, allotted or given to the above promoters in connection with the
[REDACTED] or related transactions in this Document within the two years immediately
preceding the date of this Document.
– VI-26 –
7. Consents of Experts
Each of the experts as referred to in “— E. Other Information — 12. Qualification of

Experts” in this Appendix has given and has not withdrawn its consent to the issue of this
Document with the inclusion of its view, report and/or letter and/or legal opinion (as the case may
be) and references to its name included herein in the form and context in which it respectively
appears.
None of the experts named above has any shareholding interest in our Company or any of our
subsidiaries or the right (whether legally enforceable or not) to subscribe for or to nominate
persons to subscribe for securities in our Company or any of our subsidiaries.
8. Binding Effect
This Document shall have the effect, if an application is made in pursuance hereof, of
rendering all persons concerned bound by all of the provisions (other than the penal provisions) of
sections 44A and 44B of the Companies (Winding Up and Miscellaneous Provisions) Ordinance so
far as applicable.
9. Bilingual Document
The English language and Chinese language versions of this Document are being published
separately in reliance on the exemption provided in section 4 of the Companies Ordinance
(Exemption of Companies and Document from Compliance with Provisions) Notice (Chapter 32L
of the Laws of Hong Kong).
10. Taxation of Holders of H Shares
(i) Hong Kong
The sale, purchase and transfer of H Shares are subject to Hong Kong stamp duty if such
sale, purchase and transfer is effected on the H Share register of members of our Company,
including in circumstances where such transaction is effect on the Stock Exchange. The current
rate of Hong Kong stamp duty for such sale, purchase and transfer is HK$1.3 for every HK$1,000
(or part thereof) of the consideration or, if higher, the fair value of the H Shares being sold or
transferred. For further information in relation to taxation, see “Appendix III — Taxation and
Foreign Exchange.”
(ii) Consultation with Professional Advisors
Intending holders of the H 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 [REDACTED] in the H Shares. It is emphasized that none of our Company, our
Directors, Supervisors or the other parties involved in the [REDACTED] will accept responsibility
for any tax effect on, or liabilities of, holders of H Shares resulting from their subscription for,
purchase, holding or disposal of or [REDACTED] in the H Shares or exercise of any rights
attaching to them.
– VI-27 –
11. Indemnities
Mr. Long Yan and Mr. Long Yun (collectively, the “Indemnifiers”) have entered into the
Deed of Indemnity with and in favor of our Company (being the contract referred to in paragraph
(iv) of the paragraph headed “— B. Further Information about Our Business — 1. Summary of
Material Contracts” above), with effect from the [REDACTED], to provide indemnities on a joint
and several basis in respect of, among other matters, any claim to which any member of our Group
may be subject and payable before the [REDACTED], and all losses, liabilities or damages
suffered by it in connection with the legal proceedings and/or non-compliance before the
[REDACTED].
The Indemnifiers will, however, not be liable under the Deed of Indemnity for any claim (i)
to the extent that such liability is incurred as a result of act or omission of any member of our
Group without the prior written consent or agreement of the Indemnifiers; (ii) to the extent that
such liability is discharged by another person who is not a member of our Group and confirms in
writing that the Group is not required to reimburse such person in respect of such discharge of the
liability; (iii) as a result of a retrospective change in the law coming in force after the
[REDACTED]; (iv) as a result of any force majeure event; and (v) to the extent that the
Indemnifiers no longer have actual control (including holding an aggregate of no less than 51%
shareholding or voting interest in the Company and having actual control over the Company’s
business and voting related decisions by holding seats on the Board of Directors or otherwise
pursuant to any agreement) of the Company.
12. Qualification of Experts
The following are the qualifications of the experts who have given opinion or advice which
are contained in this Document:
Name Qualifications
Huatai Financial Holdings A licensed corporation to conduct Type 1 (dealing in
(Hong Kong) Limited securities), Type 2 (dealing in futures contracts), Type 4
(advising on securities), Type 6 (advising on corporate
finance) and Type 9 (asset management) regulated activities
under the SFO
AllBright Law Offices PRC Legal Advisors
China Insights Consultancy Industry consultant
PricewaterhouseCoopers Certified Public Accountants under Professional

Accountants Ordinance (Chapter 50 of the Laws of Hong
Kong)
Registered Public Interest Entity Auditor under Accounting

and Financial Reporting Council Ordinance (Chapter 588 of
the Laws of Hong Kong)
13. No Material Adverse Change
Our Directors believe that there has been no material adverse change in the financial or
trading position since September 30, 2022 (being the end date of the periods reported in the
Accountant’s Report included in Appendix I to this Document).
– VI-28 –
14. Miscellaneous
(i) save as disclosed in this Document, within the two years immediately preceding the date
of this Document:
(a) no share or loan capital of our Company or any of our subsidiaries had been issued
or agreed to be issued or proposed to be fully or partly paid either for cash or a
consideration other than cash;
(b) no commissions, discounts, brokerages or other special terms had been granted or
agreed to be granted in connection with the issue or sale of any share or loan
capital of our Company or any of our subsidiaries;
(c) no commission had been paid or payable for subscription, agreeing to subscribe,
procuring subscription or agreeing to procure subscription of any share in our
Company or any of our subsidiaries;
(ii) save as disclosed in this Document, no share or loan capital of our Company or any of
our subsidiaries had been under option or agreed conditionally or unconditionally to be
put under option;
(iii) save as disclosed in this Document, there are no founder, management or deferred
shares, convertible debt securities nor any debentures in our Company or any of our
subsidiaries;
(iv) save as disclosed in this Document, none of the persons named in “— E. Other
Information — 12. Qualification of Experts” in this appendix is interested beneficially
or otherwise in any shares of any member of our Group or has any right or option
(whether legally enforceable or not) to subscribe for or nominate persons to subscribe
for any securities in any member of our Group;
(v) our Directors confirm that there has been no material adverse change in the financial or
trading position of our Group since September 30, 2022 (being the end date of the
periods reported in the Accountant’s Report included in Appendix I to this Document);
(vi) 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;
(vii) no company within our Group is listed on any stock exchange or traded on any trading
system and at present, and our Group is not seeking or proposing to seek any listing of,
or permission to deal in, the share or loan capital of our Company on any other stock
exchange; and there is no arrangement under which future dividends are waived or
agreed to be waived; and
(viii) the Company currently does not intend to apply for the status of a sino-foreign
investment joint stock limited liability company and does not expect to be subject to the
Foreign Investment Law of the PRC 《 ( 中華人民共和國外商投資法》).
– VI-29 –
APPENDIX VII DOCUMENTS DELIVERED TO THE REGISTRAR

OF COMPANIES AND AVAILABLE ON DISPLAY
DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES
The documents attached to a copy of this Document and delivered to the Registrar of
Companies in Hong Kong for registration were:
(i) a copy of the [REDACTED];
(ii) a copy of each of the material contracts referred to in the sub-section headed “Appendix
VI — Statutory and General Information — B. Further Information about Our Business
— 1. Summary of Material Contracts”; and
(iii) the written consents referred to in the sub-section headed “Appendix VI — Statutory
and General Information — E. Other Information — 7. Consents of Experts”.
DOCUMENTS AVAILABLE ON DISPLAY
Copies of the following documents will be published on the websites of the Stock Exchange
at www.hkexnews.hk and our Company at www.dst111.com up to and including the date which is
14 days from the date of this Document:
(i) the Articles of Association of the Company;
(ii) the Accountant’s Report from our reporting accountant, the text of which is set out in
“Appendix I — Accountant’s Report”;
(iii) the report on the unaudited [REDACTED] financial information prepared by

PricewaterhouseCoopers, the text of which is set out in “Appendix II — Unaudited
[REDACTED] Financial Information”;
(iv) the audited consolidated financial statements of our Company for the years ended
December 31, [2020, 2021 and 2022];
(v) the PRC legal opinions issued by AllBright Law Offices, our PRC Legal Advisors, dated
[[•], 2023] in respect of certain aspects of our Group;
(vi) the material contracts referred to in the sub-section headed “Appendix VI — Statutory
and General Information — B. Further Information about Our Business — 1. Summary
of Material Contracts”;
(vii) the written consents referred to in the sub-section headed “Appendix VI — Statutory
and General Information — E. Other Information — 7. Consents of Experts”;
(viii) the service contracts and the letters of appointment referred to in the sub-section headed
“Appendix VI — Statutory and General Information — C. Further Information about
Our Directors, Supervisors and Substantial Shareholders — 1. Particulars of Directors’
and Supervisors’ Service Contracts and Letters of Appointment”;
(ix) the industry report issued by CIC, the summary of which is set forth in “Industry
Overview”;
(x) the PRC Company Law, the PRC Securities Law, the Special Regulations and the
Mandatory Provisions together with unofficial English translations thereof; and
(xi) the terms of the [REDACTED] Share Incentive Scheme.
– VII-1 –

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The Stock Exchange of Hong Kong Limited and the Securities and Futures Commission take no responsibility for

Deshengtang Pharmaceutical Co., Ltd.*

DESHENGTANG PHARMACEUTICAL CO., LTD.*

* For identification purpose only [REDACTED]

Glossary of Technical Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Waivers from Strict Compliance with the Listing Rules . . . . . . . . . . . . . . . . . . . . . . . . 98

Information about this Document and the [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . 102

Directors, Supervisors and Parties Involved in the [REDACTED] . . . . . . . . . . . . . . . . 107

Corporate Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

Industry Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112

Regulatory Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129

History, Development and Corporate Structure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166

Relationship with Our Controlling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269

Directors, Supervisors and Senior Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 277

Substantial Shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292

Share Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 295

Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 299

Future Plans and Use of [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 356

Structure of the [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 371

How to Apply for [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 380

Appendix I — Accountant’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1

Appendix II — Unaudited [REDACTED] Financial Information . . . . . . . . . . . . . . . II-1

Appendix III — Taxation and Foreign Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-1

Appendix IV — Summary of Principal PRC and Hong Kong Legal and

Appendix V — Summary of the Articles of Association of the Company . . . . . . . . V-1

Appendix VI — Statutory and General Information . . . . . . . . . . . . . . . . . . . . . . . . . VI-1

Appendix VII — Documents Delivered to the Registrar of Companies and

Across-the-board service coverage

Offline Omni-channel operations via Internet

Medical Health Pharmaceutical

products O2O Medical

profiles Customers management

Health Medication Safeguarding Wellness

• Further reinforce our technological capabilities by continuously applying new

For the year ended For the nine months ended

Summary of Consolidated Balance Sheets

Summary of Consolidated Statements of Cash Flows

Key Financial Ratios

OUR HISTORICAL PERFORMANCE AND OUTLOOK

For the year ended For the nine months ended

• Improved operational efficiency and cost control measures: In 2022, we implemented

OUR CONTROLLING SHAREHOLDERS

“111Yao App” our independently developed and self-operated mobile app

“affiliate” with respect to any specified person, any other person,

“AFRC” the Accounting and Financial Reporting Council of Hong

“Ali Health” Alibaba Health Technology (China) Co., Ltd.* (阿里健康科

“Angel Round [REDACTED] Jiangsu Yanhai, Suzhou Bangsheng Yingxin, Jiangsu

“Articles” or “Articles of the amended and restated articles of association of our

“Audit Committee” the audit committee of our Board of Directors

“Baidu Health” 百度健康, an Internet-based healthcare services platform in

“Baoji 111” Baoji 111 Pharmaceutical Co., Ltd.* (寶雞壹壹壹醫藥有限

“Beijing 111” Beijing One Hundred and Eleven Pharmaceutical

“Board of Directors” the board of directors of our Company

“Board of Supervisors” the board of supervisors of our Company

“CAC” the Cybersecurity Administration of China (中華人民共和

“CFDA” the China Food and Drug Administration (國家食品藥品監

“chain pharmacy” pharmacies operating with multiple pharmacy stores under

“CIC” China Insights Industry Consultancy Limited, a market

“CIC Report” an independent market research report commissioned by us

“Civil Code” the Civil Code of the PRC 《

“Companies Ordinance” the Companies Ordinance (Chapter 622 of the Laws of

“Companies (Winding Up and the Companies (Winding Up and Miscellaneous Provisions)