Guodan Healthcare Holding Limited 國丹健康醫療控股有限公司 (Incorporated in the Cayman Islands with Limited Liability) (The “Company”)

The Stock Exchange of Hong Kong Limited and 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

Guodan Healthcare Holding Limited 國丹健康醫療控股有限公司 (incorporated in the Cayman Islands with limited liability) (the “Company”)

WARNING

The publication of this Application Proof is required by The Stock Exchange of Hong Kong Limited (the “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, advisers or member 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 Exchange’s website does not give rise to any obligation of the Company, its sponsor, advisers 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 Exchange;

(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, advisers or underwriters 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 of America;

(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 Exchange and the Commission may accept, return or reject the application for the subject public offering and/or listing.

No offer or invitation will be made to the public in Hong Kong until after a prospectus of the Company has been registered with the Registrar of Companies in Hong Kong in accordance with the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong). 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 decision solely based on the Company’s prospectus registered with the Registrar of Companies in Hong Kong, copies of which will be distributed to the public during the offer period. THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND 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.

Guodan Healthcare Holding Limited 國丹健康醫療控股有限公司 (incorporated in the Cayman Islands with limited liability) [REDACTED] Number of [REDACTED] : [REDACTED] Shares (subject the [REDACTED]) Number of [REDACTED] : [REDACTED] Shares (subject to [REDACTED]) Number of [REDACTED][REDACTED] Shares (subject to [REDACTED] and the [REDACTED]) [REDACTED] (subject to a : not more than [REDACTED] per Downward [REDACTED] Adjustment) [REDACTED] and expected to be not less than [REDACTED] per [REDACTED], plus brokerage of 1%, SFC transaction levy of 0.0027% and Stock Exchange trading fee of 0.005% (payable in full on application in Hong Kong dollars and subject to refund) (If the [REDACTED] is set at 9.1% below the bottom end of the indicative [REDACTED] after making a Downward [REDACTED] Adjustment, the [REDACTED] will be HK$[REDACTED] per [REDACTED]) Nominal value : HK$0.01 per Share Stock code : [●]

Sponsor

[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 the section headed “Documents delivered to the Registrar of Companies and available for inspection” in Appendix VI to this document, has been registered by the Registrar of Companies of Hong Kong as required by section 342C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong). The Securities and Futures Commission of Hong Kong and the Registrar of Companies of Hong Kong take no responsibility as to the contents of this document or any other documents referred to above. The [REDACTED] is expected to be determined by agreement between our Company and the [REDACTED] (for itself and on behalf of the [REDACTED]) on or around the [REDACTED]. The [REDACTED] will be not more than [REDACTED] per [REDACTED] and is expected to be not less than [REDACTED] per [REDACTED] (subject to a Downward [REDACTED] Adjustment), unless otherwise announced. The [REDACTED] (for itself and on behalf of the [REDACTED]) may, with our Company’s consent, reduce the indicative [REDACTED] range stated in this document and/or the number of [REDACTED] being [REDACTED] at any time on or prior to the morning of the last day for lodging applications under the [REDACTED]. In such case, a notice of the reduction of the indicative [REDACTED] and/or the number of [REDACTED] will be published on the website of the Stock Exchange at www.hkexnews.hk and our website at [www.guodan.com] not later than the morning of the last day for lodging applications under the [REDACTED]. Further details are set out in the sections headed “Structure and conditions of the [REDACTED]” and “How to apply for [REDACTED]” in this document. 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 around [Thursday], [20 May] 2021 and in any event, no later than 5:00 p.m. on [Monday], [24 May] 2021 or such later date as may be agreed by our Company and the [REDACTED] (for itself and on behalf of the [REDACTED]), the [REDACTED] will not become unconditional and will lapse immediately. Prior to making an investment decision, prospective investors should consider carefully all of the information set out in this document and the [REDACTED], including the risk factors set out in the section headed “Risk factors” in this document. 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]. Such grounds are set out in the paragraph headed “[REDACTED]—[REDACTED] arrangements and expenses — [REDACTED] — Grounds for termination” in this document. The [REDACTED] have not been and will not be registered under the U.S. Securities Act or any state securities law in the United States and may not be offered, sold, pledged or transferred within the United States or to, or for the account or benefit of U.S. persons, except that [REDACTED] may be offered, sold or delivered (i) to QIBs as defined in Rule 144A pursuant to an exemption from registration under the U.S. Securities Act; and (ii) outside the United States in accordance with Regulation S.

[REDACTED] THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. EXPECTED TIMETABLE

[REDACTED]

–i– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. EXPECTED TIMETABLE

[REDACTED]

–ii– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. EXPECTED TIMETABLE

[REDACTED]

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

IMPORTANT NOTICE TO INVESTORS

This document is issued by our Company, solely in connection with the [REDACTED] and the [REDACTED] and does not constitute an offer to sell or a solicitation of an offer to buy any security other than the [REDACTED]. This document may not be used for the purpose of, and does not constitute, an offer to sell or a solicitation of an offer to buy in any other jurisdiction or in any other circumstances. No action has been taken to permit a [REDACTED] of the [REDACTED] or the distribution of this document. The offering 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 jurisdiction pursuant to registration with or authorisation by the relevant securities regulatory authorities or an exemption therefrom. You should rely only on the information contained in this document and the [REDACTED] to make your investment decision. Our Company, the Sponsor, the [REDACTED], the [REDACTED], the [REDACTED] and the [REDACTED] have not authorised anyone to provide you with information that is different from what is contained in this document. Any information or representation not included in this document must not be relied on by you as having been authorised by us, the Sponsor, the [REDACTED], the [REDACTED], the [REDACTED], the [REDACTED], any of their respective directors, officers or representatives or any other person or party involved in the [REDACTED]. Information contained in our Company’s website, at [www.guodan.com], does not form part of this document.

Page

Expected timetable ...... [i]

Contents ...... [iv]

Summary ...... [1]

Definitions ...... [26]

Glossary of technical terms ...... [41]

Forward-looking statements ...... [44]

Risk factors ...... [46]

Waiver from compliance with Listing Rules ...... [71]

Information about this document and [REDACTED] ...... [75]

Directors and parties involved in the [REDACTED] ...... [80]

Corporate information ...... [84]

Industry overview ...... [86]

Regulatory overview ...... [105]

History, Reorganisation and corporate structure ...... [128]

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Business ...... [148]

Relationship with our Controlling Shareholders ...... [246]

Continuing connected transactions ...... [253]

Directors and senior management ...... [256]

Share capital ...... [269]

Substantial Shareholders ...... [272]

Financial information ...... [274]

Future plans and [REDACTED] ...... [329]

[REDACTED]...... [337]

Structure and conditions of the [REDACTED] ...... [346]

How to apply for [REDACTED] ...... [354]

Appendix I — Accountants’ Report ...... [I-1]

Appendix II — Unaudited pro forma financial information ...... [II-1]

Appendix III — Property valuation report ...... [III-1]

Appendix IV — Summary of the constitution of the Company and Cayman Islands Company Law ...... [IV-1]

Appendix V — Statutory and general information ...... [V-1]

Appendix VI — Documents delivered to the Registrar of Companies and available for inspection ...... [VI-1]

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

This summary aims to give you an overview of the information contained in this document. As it is a summary, it does not contain all the information that may be important to you. You should read the whole document before you decide to invest in the [REDACTED]. There are risks associated with any investment. Some of the particular risks in investing in the [REDACTED] are set forth in the section headed “Risk factors” in this document. You should read that section carefully before you decide to invest in the [REDACTED].

OVERVIEW

We own and operate a network of five private for-profit hospitals in Guangdong Province in the PRC, four of which are Class I general hospitals recognised by Shenzhen HFPC located in Shenzhen and the remaining one is a TCM hospital of Class II located in Zhongshan City. Hospitals in China are ranked into three classes (Class I, II and III, with Class III being the highest class) based on the assessment of competent authorities. Class III hospitals are typically larger in scale and have larger number of beds compared to Class I and Class II hospitals. Apart from abovementioned hospitals ranked into Class I, II and III, there are clinics and community healthcare centres in China which generally are less sophisticated in the provision of medical treatments and specialised diagnostic and treatment facilities for tertiary care patients are not generally available. As the majority of our hospitals are Class I general hospitals, we focus on the treatment of common diseases, frequently-occurring diseases and chronic diseases and generally provide healthcare services to residents in the local communities, where severe disease and injuries that require more sophisticated treatment are transferred to Class III hospitals. During the Track Record Period, Renkang Hospital owned 41 registered beds and 41 beds in operation; Luogang Hospital owned 99 registered beds and 78 beds in operation; Xuexiang Hospital owned 99 registered beds and 99 beds in operation prior to its relocation in late July 2020; Jian’an Hospital owned 60 registered beds and 60 beds in operation; and Zhongshan TCM Hospital owned 90 registered beds and 90 beds in operation. In aggregate, we owned 389 registered beds, of which there were 368 beds in operation during the Track Record Period (Xuexiang Hospital commenced its relocation to a new site in late July 2020, please refer to the paragraph headed “Business — Properties — Relocation of Xuexiang Hospital” in this document). Upon Xuexiang Hospital’s relocation, Xuexiang Hospital owned 40 registered beds and 40 beds in operation at its new site as at the Latest Practicable Date. Accordingly, we owned 330 registered beds and 309 beds in operation as at the Latest Practicable Date. For the three years ended 31 December 2020, the total number of outpatient visits of our hospitals amounted to 522,906, 614,428 and 484,648, respectively, and the total number of inpatient visits of our hospitals amounted to 10,645, 7,118 and 5,334, respectively for the same periods. Although Guangdong Province’s hospital market is highly competitive, we believe that we enjoy a competitive edge over our competitors because of our competitive strengths. For further details of our competitive strengths, please refer to the paragraph headed “Business — Competitive strengths” in this document. In 2020, there were over 400 private general hospitals in operation in Guangdong Province. Since private general hospitals normally targeted local residents and had decentralised layout, the overall private general hospital market in Guangdong Province was highly fragmented. According to the F&S Report, our private general hospital medical groups in Guangdong Province, the PRC, accounted for approximately 0.8% of the market share of the private general hospitals and medical groups in terms of the revenue and approximately 2.2% of the market share of the private general hospitals and medical groups in terms of the number of patient visits in 2019.

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During the Track Record Period, all of our hospitals were “designated” hospitals under the social insurance programmes. As “designated” hospitals, our hospitals were subject to inspections and regular evaluations by the relevant social insurance fund authorities, and have been attaining the required operation standards. By maintaining the designated status, our hospitals can attract more patients by keeping our good reputation while also providing the convenience of registration and payment for patients covered by social insurance programmes. For the current validity periods of each of our hospitals as a “designated” hospital subject to renewal under the social insurance programmes, please refer to the paragraph headed “Business — Customers — Social Insurance Programmes” in this document. However, there were in aggregate 277, 8 and 10 medical cases (each involving one inpatient visit) respectively for each year of the Track Record Period in breach of the designated medical institution service agreement. For details of the breaches of the designated medical institution service agreement, please refer to the paragraph headed “Business — Customers — Social Insurance Programmes — Sampling reviews conducted by the Social Insurance Fund Administrations/ Healthcare Security Bureaux” in this document. Nevertheless, we have maintained the “designated” status since 2005 when we first entered into the “designated” agreements with the local social insurance fund administrations and, save for Zhongshan TCM Hospital whose agreement with the local social insurance fund administration has been renewed, the designated medical institution service agreements of our other hospitals are under renewal for 2021.

We are committed to providing quality healthcare services to our patients and their families. Through over a decade of operations, we have accumulated extensive experience and developed detailed management and operational procedures in operating general hospitals. During the Track Record Period, we maintained a satisfactory treatment records for our patients and had a low rate of medical disputes or proceedings. For each of the Track Record Period, each of our hospital has maintained less than 1% of medical disputes and proceedings in term of the percentage to our respective hospital’s number of patient visits and its respective revenue.

We have a dedicated management team with extensive experience and profound understanding of the healthcare industry in the PRC. Our management team takes into consideration the background and circumstances of each individual hospital and develops various strategies and key measures at the Group level to improve our hospitals’ services quality, operational efficiency as well as financial performance. Notably, with the success of our acquisition of Jian’an Hospital during the Track Record Period, we further enriched our medical resources to the hospital network that we are building up. Going forward, we will continue to develop ourselves into a network of primary hospitals with trustworthiness and integrity rooted in the local communities accompanied by external development by way of medical departments establishment and operation (學科建設) and strategic hospital acquisition to be funded by our [REDACTED] from the [REDACTED].

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BUSINESS MODEL

Our Hospitals

The following table sets forth certain key information of our hospitals as at 31 December 2020 :

Operation Number of by our registered Number of Group No. Hospital Hospital type (1) Location GFA beds (2) doctors (3) since (sq.m.)

1 Renkang Hospital General hospital Luohu District, 4,234.10 41 20 2004 Shenzhen 2 Luogang Hospital General hospital Longgang District, 2,226.55 99 35 2004 Shenzhen 3 Xuexiang Hospital(4) General hospital Longgang District, 9,469.42(4) 99(4) 26 2005 Shenzhen

4 Jian’an Hospital General hospital Longhua District, 4,000.00 60 47 2016 Shenzhen 5 Zhongshan TCM TCM hospital Torch High-tech 18,059.40 90 21 2007 Hospital Development Zone, Zhongshan City

Total 37,989.47 389 149

Notes:

(1) According to the Implementing Rules for Regulation on the Administration of Medical Institutions《醫療機構管 ( 理條例實施細則》), the hospitals in the PRC consist of general hospitals, TCM hospitals, hospitals of traditional Chinese and Western medicine, hospitals of minority ethnic medicine, specialty hospitals and rehabilitation hospitals.

(2) It refers to the number of beds that were registered in the hospital’s practising licence.

(3) It represents the total number of doctors who only work at our hospitals, which does not include the number of multi-site practice doctors.

(4) These figures represent the GFA and number of registered beds prior to Xuexiang Hospital’s relocation. As at the Latest Practicable Date, the GFA of Xuexiang Hospital was 4,474 sq. m. and the number of registered beds was 40 for Xuexiang Hospital’s new site.

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Despite Luogang Hospital locates in Longgang District and Renkang Hospital locates in Luohu District, the distance between Luogang Hospital and Renkang Hospital is only approximately 1.9 kilometers apart and the scope of services provided by each of them is similar. Therefore, the close proximity of Luogang Hospital and Renkang Hospital may affect their respective patient visits and revenue, please refer to the section “Risk factors” for details. Save for the proximity between Luogang Hospital and Renkang Hospital, the distances between each of the four hospitals of our Group in Shenzhen, namely Luogang Hospital, Renkang Hospital, Xuexiang Hospital and Jian’an Hospital are more than 4.1 kilometers and they mainly serve different patient groups in the local communities, we believe that there is no direct competition among them.

Our utilisation rate of beds in operation:

FY2018 FY2019 FY2020

Renkang Hospital 83.4% 49.0% 40.5% Luogang Hospital 50.4% 28.9% 31.4% Xuexiang Hospital 42.2% 21.5% 7.8% Jian’an Hospital 112.7% 92.8% 71.2% Zhongshan TCM Hospital 70.6% 65.3% 61.9%

The utilisation rate of beds in operation decreased substantially for Renkang Hospital and Jian’an Hospital during FY2019 as compared to FY2018 which was mainly driven by the decrease in inpatient visit during FY2019 due to the tightening up of our inpatient admission procedures in order to strictly comply with the guidelines as set out by the relevant social insurance fund administrations/healthcare security bureau to prevent the recurrence of similar incidents in the breach of the medical institution service agreements entered into by us with the relevant social insurance fund administration bureaus, whereby only patients with relatively severe illness or injuries were allowed for inpatient treatment. Our Directors believe that the decrease in utilisation rate for most of our hospitals during FY2020 as compared to FY2019 was mainly due to the outbreak of COVID-19 where patients generally were reluctant to stay in hospitals unless they suffered from severe illnesses of which inpatient treatments were necessary. In particular, the utilisation rate of beds in operation for Xuexiang Hospital decreased substantially during FY2020, which was also attributable to our Group’s attempt to reduce the number of inpatients in preparation of the relocation of Xuexiang Hospital. For details of the relocation of Xuexiang Hospital, please refer to the paragraph headed “Business — Properties — Relocation of Xuexiang Hospital” in this document.

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Our revenue by hospital:

FY2018 FY2019 FY2020 (RMB’000) (RMB’000) (RMB’000)

Renkang Hospital – Outpatient hospital services 17,217 20,616 20,687 – Inpatient hospital services 9,339 5,507 4,769 – Sales of pharmaceuticals 10,024 9,520 5,885 – Miscellaneous service income(1) ––– Total 36,580 35,643 31,341

Luogang Hospital – Outpatient hospital services 20,043 21,742 21,325 – Inpatient hospital services 9,516 7,448 8,171 – Sales of pharmaceuticals 11,186 10,730 7,728 – Miscellaneous service income(1) ––– Total 40,745 39,920 37,224

Xuexiang Hospital – Outpatient hospital services 19,290 21,406 6,282 – Inpatient hospital services 11,130 6,950 3,038 – Sales of pharmaceuticals 7,956 7,759 1,872 – Miscellaneous service income(1) 65 5 – Total 38,441 36,120 11,192

Jian’an Hospital – Outpatient hospital services 33,970 39,539 32,854 – Inpatient hospital services 20,050 16,629 14,692 – Sales of pharmaceuticals 13,141 14,395 11,028 – Miscellaneous service income(1) –96 Total 67,161 70,572 58,580

Zhongshan TCM Hospital – Outpatient hospital services 12,329 13,925 16,688 – Inpatient hospital services 11,224 11,151 12,837 – Sales of pharmaceuticals 6,938 6,992 5,176 – Miscellaneous service income(1) ––– Total 30,491 32,068 34,701

Total outpatient hospital services 102,849 117,228 97,836 Total inpatient hospital services 61,259 47,685 43,507 Total sales of pharmaceuticals 49,245 49,396 31,689 Others(2) 468 812 678

Total 213,821 215,121 173,710

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Notes:

1. Miscellaneous service income mainly represents income such as venue leasing fee for placing ATM machines in the hospitals.

2. It mainly represents (i) income from our involvement in medical departments establishment and operations (學科建設); and (ii) miscellaneous service income that are allocated to the respective hospitals.

3. The above amounts have been subject to rounding adjustments. Accordingly, figures shown as totals may not be an arithmetic aggregation of the figures preceding them.

The number of patient visits:

FY2018 FY2019 FY2020 number % number % number %

Outpatient hospital services 522,906 98.0 614,428 98.9 484,648 98.9 Inpatient hospital services 10,645 2.0 7,118 1.1 5,334 1.1

533,551 100.0 621,546 100.0 489,982 100.0

The number of patient visits by hospital:

FY2018 FY2019 FY2020 Number % Number % Number %

Renkang Hospital 82,544 15.5 71,555 11.5 46,030 9.4 Luogang Hospital 94,212 17.6 121,608 19.6 101,890 20.8 Xuexiang Hospital 102,973 19.3 108,934 17.5 31,567 6.4 Jian’an Hospital 149,441 28.0 219,077 35.3 210,013 42.9 Zhongshan TCM Hospital 104,381 19.6 100,372 16.1 100,482 20.5

Total 533,551 100.0 621,546 100.0 489,982 100.0

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The average spending per patient visit for hospital services by hospital:

FY2018 FY2019 FY2020 RMB per visit RMB per visit RMB per visit

Outpatient hospital services Renkang Hospital 296.0 394.2 559.7 – Social Insurance Programmes Insured Patients(1) 330.9 432.7 575.3 – Self-pay and Corporate Customers(2) 261.3 352.7 542.9

Luogang Hospital 305.5 248.4 271.6 – Social Insurance Programmes Insured Patients(1) 320.2 323.1 462.0 – Self-pay and Corporate Customers(2) 292.4 211.4 205.3

Xuexiang Hospital 252.7 261.0 252.3 – Social Insurance Programmes Insured Patients(1) 306.8 313.1 361.2 – Self-pay and Corporate Customers(2) 234.4 246.4 224.9

Jian’an Hospital 298.4 234.2 196.0 – Social Insurance Programmes Insured Patients(1) 348.5 349.0 405.7 – Self-pay and Corporate Customers(2) 280.4 207.5 163.4

Zhongshan TCM Hospital 154.8 177.5 200.6 – Social Insurance Programmes Insured Patients(1) 274.6 271.7 343.6 – Self-pay and Corporate Customers(2) 151.7 174.9 197.9

Average spending 262.2 250.9 250.3 Inpatient hospital services Renkang Hospital 7,254.4 7,830.0 7,540.2 – Social Insurance Programmes Insured Patients(1) 7,935.1 8,805.3 8,265.7 – Self-pay and Corporate Customers(2) 4,879.8 5,165.9 5,338.3

Luogang Hospital 6,222.4 8,278.1 9,724.0 – Social Insurance Programmes Insured Patients(1) 7,880.3 11,851.1 11,726.9 – Self-pay and Corporate Customers(2) 4,445.6 4,554.2 6,169.4

Xuexiang Hospital 6,764.5 7,017.1 12,960.7 – Social Insurance Programmes Insured Patients(1) 8,017.4 9,235.5 13,377.5 – Self-pay and Corporate Customers(2) 5,561.8 5,712.8 5,000.6

Jian’an Hospital 7,055.2 8,281.5 10,096.2 – Social Insurance Programmes Insured Patients(1) 8,012.7 8,689.1 10,655.3 – Self-pay and Corporate Customers(2) 6,384.9 7,907.9 9,442.8

Zhongshan TCM Hospital 8,510.6 10,522.2 9,819.8 – Social Insurance Programmes Insured Patients(1) 8,900.1 11,569.3 9,373.0 – Self-pay and Corporate Customers(2) 8,999.0 9,072.9 10,713.5

Average spending 7,167.1 8,449.3 9,700.9

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Notes:

1 It represents the patients which are insured by the Social Insurance Programmes where part of their payments or entire of their payments are directly settled by the Shenzhen Social Insurance Fund Administration (深圳市社會保險基金管理局) and Zhongshan Social Insurance Fund Administration (中山市社會保險基金管理局).

2 It includes the patients where their payments are entirely (i) from patients who finance their medical treatments by themselves (including their settlement of the self-pay portion of their medical bills that were not covered by the social insurance programmes); (ii) from the commercial insurance providers which reimbursed the patients according to their commercial insurance policies; and (iii) business corporations, which purchase the Group’s healthcare services, such as physical examination and work-related injuries services, for their designated persons, normally being their employees.

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Our gross profit and gross profit margin by hospital:

FY2018 FY2019 FY2020 Gross Gross Gross Gross profit Gross profit Gross profit profit margin profit margin profit margin (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)

Renkang Hospital – Outpatient hospital services 9,857 57.2 12,791 62.0 12,264 59.3 – Inpatient hospital services 6,694 71.7 2,940 53.4 2,996 62.8 – Sales of pharmaceuticals 674 6.7 517 5.4 265 4.5 – Miscellaneous service income(1) –N/A–N/A–N/A – Total 17,225 47.1 16,248 45.6 15,525 49.5 Luogang Hospital – Outpatient hospital services 6,716 33.5 10,288 47.3 10,032 47.0 – Inpatient hospital services 4,313 45.3 2,548 34.2 4,569 55.9 – Sales of pharmaceuticals 958 8.6 712 6.6 417 5.4 – Miscellaneous service income(1) –N/A–N/A–N/A – Total 11,988 29.4 13,548 33.9 15,018 40.3 Xuexiang Hospital – Outpatient hospital services 5,686 29.5 8,838 41.3 2,141 34.1 – Inpatient hospital services 6,345 57.0 2,827 40.7 1,386 45.6 – Sales of pharmaceuticals 1,371 17.2 1,103 14.2 188 10.0 – Miscellaneous service income(1) 65 100.0 5 100.0 – N/A – Total 13,467 35.0 12,773 35.4 3,715 33.2 Jian’an Hospital – Outpatient hospital services 14,454 42.5 19,342 48.9 14,203 43.2 – Inpatient hospital services 10,369 51.7 7,713 46.4 6,684 45.5 – Sales of pharmaceuticals 2,397 18.2 2,352 16.3 1,741 15.8 – Miscellaneous service income(1) – N/A 9 100.0 6 100.0 – Total 27,219 40.5 29,416 41.7 22,634 38.6 Zhongshan TCM Hospital – Outpatient hospital services 3,699 30.0 4,114 29.5 6,868 41.2 – Inpatient hospital services 4,716 42.0 4,611 41.3 6,804 53.0 – Sales of pharmaceuticals 2,075 29.9 2,288 32.7 1,454 28.1 – Miscellaneous service income(1) –N/A–N/A–N/A – Total 10,491 34.4 11,013 34.3 15,126 43.6

Total outpatient hospital services 40,412 39.3 55,373 47.2 45,508 46.5 Total inpatient hospital services 32,437 53.0 20,639 43.3 22,439 51.6 Total sales of pharmaceuticals 7,475 15.2 6,972 14.1 4,065 12.8 Others(2) 402 85.9 612 75.4 102 15.0

Total 80,726 37.8 83,596 38.9 72,114 41.5

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Notes:

1. Miscellaneous service income mainly represents income such as venue leasing fee for placing ATM machines in the hospitals.

2. It mainly relates to the gross profit arising from (i) income from our involvement in medical departments establishment and operations (學科建設); and (ii) miscellaneous service income that are allocated to the respective hospitals.

3. The above amounts and percentage figures have been subject to rounding adjustments. Accordingly, figures shown as totals may not be an arithmetic aggregation of the figures preceding them.

The utilisation rate of beds in operation decreased significantly for FY2019, which was in line with the significant decrease in inpatient visits principally caused by the adoption of our strengthened inpatient admission standards in order to ensure strict compliance with the guideline as published by the Shenzhen Social Insurance Fund Administration to prevent the recurrence of similar breaches of the medical institution service agreements entered into by us with the relevant social insurance fund administration. Details of such breaches are set out in the paragraphs head “Business — Customers — Social Insurance Programmes — Breaches of the designated medical institution service agreement”. Our Directors are of the view that the decrease in inpatient visit during FY2019 was mainly due to the tightening up of our inpatient admission procedures while we were in the course of implementing enhanced internal procedures in respect of, among others, the provision of appropriate treatments and medications and the maintenance of records in order to strictly comply with the guidelines as set out by the Social Insurance Fund Administration to prevent the recurrence of similar incidents in breach of the medical institution service agreements entered into by us with the relevant social insurance fund administration bureaus. As a result, during the interim period, patients are only allowed to stay for a relatively shorter period of time and only patients with relatively severe illness or injuries are allowed for inpatient treatment. Therefore, revenue and gross profit derived from inpatient hospital services decreased significantly. The gross profit and gross profit margin of inpatient and outpatient services of each hospital fluctuated during the Track Record Period which were mainly caused by the fluctuations in the number of patients for different medical departments that have different gross profit margin.

Compared with FY2019, the number of inpatient and outpatient visits decreased significantly leading to a significant decrease in our revenue during FY2020, which was mitigated by an increase in the average spending per patients for inpatient hospital services. Our Directors believed this was mainly attributable to one-off events such as (i) the outbreak of COVID-19, which deterred patients with less severe illness from visit or stay in hospital; and (ii) the suspension of the operation of Xuexiang Hospital due to relocation since late July in FY2020.

Our Treatment Process

The treatment processes of our healthcare services can be generally divided into two categories: (i) inpatient hospital services; and (ii) outpatient hospital services.

Inpatient hospital services refer to the treatment of patients who receive healthcare services at a hospital and is hospitalised overnight. Outpatient hospital services refer to the treatment of patients who receive healthcare services at a hospital but not hospitalised overnight. Our outpatient hospital services consist of outpatient clinical services and physical examination services.

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The following diagram sets forth an overview of the generic treatment process of our healthcare services covering inpatient hospital services and outpatient hospital services:

Acceptance and registration of patients

Pre-examination and Follow-up triage of patients consultation with doctors

For patients with intractable For patients with For patients with illness which our hospitals serious illness mild illness cannot handle

Medical referral to Payment of deposit for Reception of diagnosis, other hospitals hospitalisation examination, clinical treatment or day surgery (where applicable) of outpatients Assignment of bed, nurse and doctor

Payment of medical bills by outpatients (1) Reception of diagnosis, examination, clinical treatment or inpatient surgery (where Reception of drugs applicable) of inpatients from pharmacy

Inpatient treatment Outpatient treatment

Payment of medical Discharge bill by inpatients(1)

Discharge For patients that need return visit

Notes:

(1) Patients finance their medical treatments by themselves if they have not joined the social insurance programmes or settle the self-pay portion of their medical bills that are not covered by the social insurance programmes if they have joined the social insurance programmes before they are discharged, while we settle the remaining portion of their medical bills with the relevant social insurance fund administrations on a monthly basis.

(2) We also provide physical examination services to individuals for signs of diseases and health advisory services. We generally build up business relationships with corporations and government institutions who purchase our physical examination packages for their employees out of certain reasons, such as routine check-ups and pre-employment health check. The treatment process of our physical examination services mainly involves: (i) selection of physical examination items or packages; (ii) completion of registration and payment; (iii) undergoing physical examination; (iv) completion of payment; and (v) delivery of physical examination report at the scheduled time.

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Our Pricing

The PRC laws and regulations at the national and regional levels impose pricing controls and price ceilings on various healthcare services, pharmaceuticals and medicals consumables in the healthcare industry. Our hospitals, as “designated” hospitals under social insurance programmes, are subject to the pricing guidelines for our provision of healthcare services set by the relevant authorities with respect to the medical services covered by public medical insurance programmes. For patients not covered by the public medical insurance programmes, we, as private for-profit hospitals, are not subject to such pricing guidelines and entitled to set the prices of our healthcare services at our own discretion. In general, patients not covered by the public medical insurance programmes are charged with higher price of approximately 15% compared to patients covered by the public medical insurance programmes during the Track Record Period for our healthcare services.

For further details on our pricing, please refer to the paragraph headed “Business — Pricing” in this document.

Our Customers

Our customers generally include (i) individual patients from the local communities; and (ii) business corporations, which purchase our healthcare services, such as physical examination and work-related injuries services, for their designated persons, normally being their employees. During the Track Record Period, each of our five largest customers contributed less than 2% of our total revenue, respectively. We receive payments primarily from (i) Shenzhen Social Insurance Fund Administration (深圳市社會保險基金管理局) and Zhongshan Social Insurance Fund Administration (中山市社會保險基金管理局) under the social insurance programmes; (ii) patients who finance their medical treatments by themselves and/or by their commercial insurance providers; and (iii) business corporations which purchase our healthcare services.

The table below sets out our revenue by payer sources for the periods indicated:

FY2018 FY2019 FY2020 (RMB’000) (RMB’000) (RMB’000)

Social Insurance Programmes Insured Patients 94,810 88,002 74,373 Self-pay and Corporate Customers 119,011 127,119 99,337

213,821 215,121 173,710

Our revenue and profitability experience seasonal fluctuations due to changes in patient volume. Our hospitals generally experience fewer patient visits in January and February of each year due to the effect of the Chinese New Year holiday, during which many migrant workers in Shenzhen and Zhongshan City, two typical immigrant cities, return to their hometowns and during which Chinese people usually avoid visiting hospitals. As a result, our results of operations may fluctuate significantly from period to period and a comparison of different periods may not be meaningful. Our results for a given fiscal period are not necessarily indicative of results to be expected for any other fiscal period.

For further details of our customers, please refer to the paragraphs headed “Business — Customers” in this document.

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Our Suppliers

We are not required to purchase from certain designated suppliers for pharmaceuticals that are subject to various government price controls. During the Track Record Period, we have sourced same type of pharmaceuticals but different quality and packages from different suppliers, generally depending the individual patients’ special need, severity of illness or injuries, our inventory level and turnover, and more importantly, the price negotiated with our suppliers.

For further details of our suppliers, please refer to the paragraphs headed “Business — Suppliers” in this document.

Competitive Landscape

All of our hospitals are located in Guangdong Province. Since the implementation of reform and opening up policy in 1978, Guangdong Province has become one of the most affluent and developed provinces in the PRC. According to the F&S Report, the GDP of Guangdong Province reached RMB107,671.1 billion in 2019, ranking the first in the PRC. However, the healthcare resources of Guangdong Province lag behind many other provinces, according to the F&S Report. In 2019, for every 1,000 people in the resident population, Guangdong Province had 4.7 beds and 2.5 certified (assistant) doctors, ranking relatively low compared to other major provinces in the PRC. Although Guangdong Province’s hospital market is highly competitive, we believe that we enjoy a competitive edge over our competitors because of our competitive strengths. For further details of our competitive strengths, please refer to the section headed “Business — Competitive strengths” in this document. According to the F&S Report, our private general hospital medical groups in Guangdong Province of the PRC accounted for approximately only 0.8% of the market share of the private general hospitals and medical groups in terms of the revenue in 2019.

According to F&S Report, the private hospital market in Guangdong Province has recorded, and is expected to continue to record, a more rapid growth compared to the public hospital market. The revenue of private hospitals in Guangdong Province is expected to increase from approximately RMB17.3 billion in 2015 to approximately RMB32.9 billion in 2019, representing a CAGR of 17.4%, and it is estimated that the revenue of private hospitals in Guangdong Province will reach approximately RMB68.2 billion in 2024, representing a CAGR of 15.7%.

Our Competitive Strengths

We believe that the following competitive strengths have enabled us to differentiate us from our competitors:

– we have established a network of five private hospitals to provide healthcare services to the local communities in Shenzhen and Zhongshan City in Guangdong Province;

– we own and operate general hospitals which enable us to capture opportunities arising from China’s healthcare reforms and meet the increasing demand for fundamental healthcare services;

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– we actively explore cooperation opportunities with public Class III hospitals in the upstream part of the value chain of healthcare industry as well as with community healthcare centres (社區健康服務中心) in the downstream part of the value chain; and

– we have experienced management team and healthcare professionals.

For further details of our competitive strengths, please refer to the paragraph headed “Business — Competitive strengths” in this document.

SHAREHOLDERS INFORMATION

So far as our Directors are aware, immediately following completion of the [REDACTED] and the [REDACTED] without taking into account of any Shares which may be allotted and issued upon the exercise of the [REDACTED] or any options which may be granted under the Share Option Scheme, our Company will be owned as to [55.63%] in aggregate by our Controlling Shareholders, namely Mr. Li, Ms. Li, Guodan Healthcare and Victory Universe. For the purposes of the Listing Rules, Mr. Li, Ms. Li, Guodan Healthcare and Victory Universe are a group of our Controlling Shareholders.

[REDACTED] INVESTMENTS

Pursuant to the First Share Transfer Agreement dated 25 December 2017, the Second Share Transfer Agreement dated 14 February 2019 and the Subscription Agreement dated 25 April 2019, the [REDACTED] Investors invested in our Group in three steps. Details of the investment by the [REDACTED] Investors are set out in the paragraph headed “History, Reorganisation and corporate structure — [REDACTED] Investments” in this document.

SELECTED KEY OPERATIONAL AND FINANCIAL DATA

The following table sets forth our key operational and financial data during the Track Record Period:

Highlight of our Consolidated Statements of Profit or Loss and Other Comprehensive Income

FY2018 FY2019 FY2020 RMB’000 RMB’000 RMB’000

Revenue 213,821 215,121 173,710 Gross profit 80,726 83,596 72,114 Other revenue 823 2,654 16,997 Profit before taxation 34,217 27,069 40,895 Profit for the year 25,070 18,372 29,784

Note: During the three years ended 31 December 2020, our other revenue mainly comprises government grants, interest income, net foreign exchange gain, compensation for relocation of Xuexiang Hospital, gain from early termination of lease rental of Xuexiang Hospital and others. The other revenue for FY2020 mainly comprises of the compensation for relocation of Xuexiang Hospital of approximately RMB10.0 million and the gain from early termination of lease agreement of Xuexiang Hospital of approximately RMB4.9 million. For the breakdown of our other revenue, please refer to the section headed “Financial Information — Discussion and analyses of financial performance of our group — other revenue” in this document.

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Non-IFRS measures

FY2018 FY2019 FY2020 RMB’000 RMB’000 RMB’000

Profit for the year 25,070 18,372 29,784 Adjusted for: [REDACTED] 3,887 8,238 3,455 Refund and penalty for breaches of the designated medical institution service agreement – 3,389 –

Non-IFRS adjusted profit for the year 28,957 29,999 33,239

Note: Adjusted profit represents profit for the year excluding the (i) [REDACTED] incurred; and (ii) the refund and penalty for the breaches of the designated medical institution service agreement of our hospitals. The management believes that (i) the [REDACTED] is non-recurring in nature; and (ii) the refund and penalty for the breaches of the designated medical institution service agreement do not occur normally in our ordinary course of business and represents a non-recurring and one-off incident. Adjusted net profit is not a measure of performance under IFRS. As a non-IFRS measure, adjusted profit is presented because the management believes such information will be helpful for investors in assessing the effect of [REDACTED] and the refund and penalty for the breaches of the designated medical institution service agreement on our Group’s net profit. The use of adjusted profit has material limitations as an analytical tool as it does not include all items that impact our Group’s profit for the relevant year. Details of the breaches of the designated medical services agreement are set out in the paragraph headed “Business — Customers — Social Insurance Programmes — Breaches of the designated medical institution service agreement” in this document.

Highlight of our Consolidated Statements of Financial Position

As at 31 December 2018 2019 2020 RMB’000 RMB’000 RMB’000

Non-current assets 90,094 132,167 141,467 Current assets 103,249 122,182 87,352 Current liabilities 89,201 185,275 130,265 Net current (liabilities)/assets 14,048 (63,093) (42,913) Total equity 61,198 27,080 56,415

Highlight of our Consolidated Statements of Cash Flows

FY2018 FY2019 FY2020 RMB’000 RMB’000 RMB’000

Net cash generated from operating activities 58,748 56,871 49,921 Net cash used in investing activities (37,238) (5,927) (12,628) Net cash (used in)/generated from financing activities (11,520) (61,274) 3,689

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Highlight of our Key Financial Ratio

As at/For the year ended 31 December 2018 2019 2020

Current ratio 1.2 times 0.7 times 0.7 times Quick ratio 1.1 times 0.6 times 0.6 times Gearing ratio 27.3% 111.3% 63.3% Debt to equity ratio N/A 69.0% N/A Interest coverage 30.7 times 16.8 times 21.0 times Return on total assets 13.0% 7.2% 13.1% Return on equity 41.0% 67.8% 52.8% Net profit margin 11.7% 8.5% 17.1%

Please refer to the section headed “Financial Information — Selected key financial ratios” in this document for more details.

Analysis on Selected Key Operational and Financial Data

Revenue

Our revenue increased by approximately RMB1.3 million, or approximately 0.6%, from approximately RMB213.8 million for FY2018 to approximately RMB215.1 million for FY2019. Such increase is primarily due to the increase in revenue generated from our outpatient healthcare services for FY2019 of approximately RMB14.4 million, which was offset by the decrease in revenue generated from our inpatient healthcare services for FY2019 of approximately RMB13.6 million.

Our revenue decreased by approximately RMB41.4 million, or approximately 19.3%, from approximately RMB215.1 million for FY2019 to approximately RMB173.7 million for FY2020. Such decrease is primarily due to (i) the decrease in revenue generated from our outpatient healthcare services for FY2020 of approximately RMB19.4 million; (ii) the decrease in revenue generated from our inpatient healthcare services for FY2020 of approximately RMB4.2 million; and (iii) the decrease in revenue generated from our sales of pharmaceuticals for FY2020 of approximately RMB17.7 million.

Profit for the year

Our profit for the year decreased by approximately RMB6.7 million, or approximately 26.7%, from approximately RMB25.1 million for FY2018 to approximately RMB18.4 million for FY2019. Such decrease was mainly due to the increase in our administrative and other operating expenses which was mainly due to (i) the refund and penalty for breaches of the designated medical institution service agreement of approximately RMB3.4 million; (ii) the increase in depreciation expenses due to the addition of buildings for office use of approximately RMB2.9 million; (iii) the increase of impairment expenses of RMB2.1 million which was mainly driven by the impairment expenses for our other receivables; and (iv) the increase of [REDACTED] of approximately RMB4.4 million for FY2019.

Our profit for the year increased by approximately RMB11.4 million, or approximately 62.1%, from approximately RMB18.4 million for FY2019 to approximately RMB29.8 million for FY2020. Such increase is primarily due to (i) the increase in other revenue by approximately RMB14.3 million from approximately RMB2.7 million for FY2019 to approximately RMB17.0 million for FY2020; and (ii) decrease in administrative and other operating expenses by approximately RMB11.9 million from approximately RMB51.0 million for FY2019 to approximately RMB39.1 million for FY2020; which was

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Net assets

As at 31 December 2018, 2019 and 2020, we recorded net assets of approximately RMB61.2 million, RMB27.1 million and RMB56.4 million, respectively.

Our net assets of approximately RMB61.2 million as at 31 December 2018 decreased to approximately RMB27.1 million as at 31 December 2019, which was mainly due to the deemed distribution of approximately RMB60.0 million which was due to the Reorganisation of the Group where the Controlling Shareholders and the other then shareholders transferred all the equity interests in Guodan SZ to Guodan HK, which was partially offset by (i) the profit and total comprehensive income for FY2019 of approximately RMB18.7 million; and (ii) the capital injection of approximately RMB7.2 million during FY2019. For further details on the Reorganisation, please refer to section headed “History, Reorganisation and corporate structure” in this document. Our net assets of approximately RMB27.1 million as at 31 December 2019 increased to approximately RMB56.4 million as at 31 December 2020 which was due to the profit of FY2020 of approximately RMB29.8 million.

Net current liabilities

For the three years ended 31 December 2020, we are able to generate positive operating cashflows. However, we recorded net current liabilities of approximately RMB63.1 million and RMB42.9 million as at 31 December 2019 and 2020. The net current liabilities as at 31 December 2019 was primarily due to a relatively low amount of cash and cash equivalents is recorded at the end of 2019 as (i) approximately RMB47.0 million was drawn by our Controlling Shareholder during FY2019 for personal reasons; and (ii) receivables from our Controlling Shareholder of approximately RMB36.0 million was repaid by non-cash repayment as a result of the acquisition of properties by our Group from our Controlling Shareholder. As at 31 December 2020, we continued to record net current liabilities while our net current liabilities improved from approximately RMB63.1 million as of 31 December 2019 to approximately RMB42.9 million as of 31 December 2020.

For further details regarding our net current liabilities, please refer to the paragraph headed “Financial information — Net current assets and liabilities — Background of net current liabilities” in this document.

SUFFICIENCY OF WORKING CAPITAL

During the Track Record Period, we met our working capital needs mainly from our cash and cash equivalents on hand, cash generated from operations and bank and other borrowings. We manage our cash flow and working capital by closely monitoring our operations and hospital expansion plans. We also diligently review future cash flow requirements and adjust our operation and expansion plans, if necessary, to ensure that we maintain sufficient working capital to support our business operations and expansion plans. We recorded net current liabilities of approximately RMB63.1 million and RMB42.9 million as at 31 December 2019 and 2020, respectively. For details, please refer to the paragraphs headed “Financial information — Net current assets and liabilities — Background of net current liabilities” in this section and “Risk Factors — We recorded net current liabilities as at 31 December 2019 and 2020 and we cannot assure you that we will not continue to record net current liabilities.” in this document. We intend to continue to finance our working capital with cash generated from our operations, external borrowings and the expected [REDACTED]ofthe[REDACTED]. Our Directors confirm that we are communicating with commercial banks with a view to (i) obtain long-term banking facilities to replace

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We will continue to closely monitor the level of our working capital, particularly in view of our strategy to expand our operational capacity. After due and careful enquiry and taking into account the financial resources available to us, including cash flow from operating activities, available banking facilities and the expected [REDACTED]ofthe[REDACTED] (after a possible Downward [REDACTED] Adjustment setting the final [REDACTED] up to 9.1% below the bottom end of the indicative [REDACTED]), our Directors are of the view, and the Sponsor concur, that we have sufficient working capital to meet our present requirements and for the next 12 months from the date of this document.

Our Directors confirm that we did not have any material default in payment of trade and non-trade payables, bank borrowings and other debt financing obligations and/or breaches of finance covenants during the Track Record Period and up to the Latest Practicable Date.

RECENT DEVELOPMENT AND NO MATERIAL ADVERSE CHANGE

Relocation of Xuexiang Hospital

Xuexiang Hospital commenced the relocation in late July 2020. Our Group signed lease agreement with a new lessor for leasing a nearby premises situated at Jihua Subdistrict (吉華街道) in the same district, Longgang District (龍崗區), for the relocation of Xuexiang Hospital. The Directors confirmed that, after the relocation, Xuexiang Hospital duly obtained all the required certificates and complied with all relevant standards and safety regulations before commencement of its daily operation. We commenced the daily operation of Xuexiang Hospital in the new premises on 5 March 2021.

The new premises of Xuexiang Hospital are with a leased GFA of approximately 4,474 sq.m.. As at the Latest Practicable Date, Xuexiang Hospital had 40 registered beds and 39 medical professionals.

For details about Xuexiang Hospital’s relocation, please refer to the paragraph headed “Business — Properties — Relocation of Xuexiang Hospital” in this document.

Outbreak of COVID-19

There has been an outbreak of COVID-19, since January 2020 across PRC and around the world. The relevant nation-wide policy to contain the outbreak of COVID-19, including temporary suspension of work in various provinces and cities including Guangdong Province where our Group majorly operates, and the general negative impact of COVID-19 on consumers’ demand on our services, have affected our Group’s business operation and financial performance in FY2020. For further details, please refer to the section headed “Financial Information — Period to period comparison of results of operations” in this document.

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Due to the strict policy on quarantine rules, the outbreak of COVID-19 also disrupted the operation of many corporations. Up to the Latest Practicable Date, we have not encountered supply chain disruption as the supply of necessary pharmaceuticals and medical consumables is still normal and our inventories are sufficient for our business operation for a certain period of time. However, there is no assurance that the operation of our suppliers for pharmaceuticals and medical consumables will not be disrupted in the future. For further details, please refer to the section headed “Risk factors — An occurrence of a natural disaster, widespread health epidemic or other outbreaks could have a material adverse effect on our business, financial condition and results of operations” in this document.

Although our performance, especially in the first quarter of 2020, was adversely affected by the outbreak of COVID-19, our Directors believed that when the situation of COVID-19 becomes under control, given that there has been no large scale outbreak in Shenzhen and Zhongshan since the first quarter of 2020 and the PRC authorities have successful experiences in containing outbreaks, the demand of our medical services by the patients that have delayed medical treatment for their mild or chronic diseases would increase compared with FY2020, and so the number of patients’ visit is expected to return to the normal level gradually. According to our internal records, the average number of patient visits per month for 2M2021 was approximately 61,900 and was significantly higher than (i) the average number of patient visits per month for the corresponding period in FY2020 of approximately 17,000, representing an increase of approximately 264.2%; and (ii) the average number of patient visits per month for FY2020 of approximately 40,800, representing an increase of approximately 51.6%. Our Directors believe that the aforementioned increment in average number of patient visits during the 2M2021 is due to the fact that COVID-19 was generally under control in FY2021 in the area the Group operates as mentioned above as well as more people had stayed in Shenzhen as Chinese authorities have been encouraging people to skip returning home for the Chinese New Year holiday. Our Directors believed that we will continue to enhance our operating capabilities to better serve our customers and to improve our profitability as our business in general recovered from the outbreak of COVID-19 in 2020.

However, if COVID-19 becomes deteriorative in the near future and our hospitals might have to be suspended in operation. In such event, no healthcare services can be provided to patients and no pharmaceutical can be sold to patients, the Group will not incur any of the purchase and consumption costs. Only staff cost and overhead cost will be required to maintain basic commitment of the Group. For the worst-case scenario that the Group can only generate limited operating income, based on the assumptions that (a) only 8% of the [REDACTED] will be used for working capital and other general corporate purposes; (b) the Group will only generate revenue with reference to the level of the average monthly revenue generated during FY2020, which was affected by the outbreak of COVID-19; (c) the Company’s prudent estimation on the settlement of trade receivables and trade payables with reference to its historical settlement pattern; (d) no redundancy or pay cut to current staff; and (e) the utilisation of the Group’s unutilised banking facilities, the cash balance of the Group as at 28 February 2021 will be able to support the monthly cash demands for over 24 months.

Our Directors have confirmed that, save as disclosed above and the [REDACTED]of approximately RMB[10.6] million to be charged to our Group’s consolidated profit or loss for the year ending 31 December 2021, since 1 January 2021 and up to the date of this document, there had been no material adverse change in the financial and trading position or prospects of our Group and no event had occurred that would materially and adversely affect the information shown in the Accountants’ Report as set out in Appendix I to the document.

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Analysis on our Group’s business sustainability

Our Group’s business is robust and sustainable as it has always been able to generate positive operating cashflow and maintain a stable level of overall revenue during the Track Record Period, apart from periods affected by one-off events such as (i) the outbreak of COVID-19 in the PRC; and (ii) the suspension of the operation of one of our Group’s hospitals due to relocation from late July in FY2020 to March 2021. In addition, our Group has been able to recover quickly from the adverse impact of the outbreak of COVID-19 which has negatively impacted the financial performance for the first half of 2020 as demonstrated by (i) the increment in the level of patient visits and the narrowing of the period to period decrement in revenue for the second half of 2020; and (ii) the abovementioned increment in the average number of patient visits per month for 2M2021 as compared to the corresponding period in 2020. For details, please refer to the paragraph headed “Recent development and no material adverse change — Outbreak of COVID-19” in this section.

Our Directors believe that our Group’s business is sustainable due to the following reasons:

(i) The number of doctors and hospital beds per capita in the PRC are relatively lower than other countries and even lower in the regions which our Group’s hospitals currently operate. According to the latest available data published by the World Health Organization, the PRC’s number of doctors per 1,000 population was approximately 1.98 in 2017, while higher than the world’s average of approximately 1.56, but was much lower than more advanced economies such as the European Union (approximately 3.74), the United States (approximately 2.61), South Korea (approximately 2.36). According to the latest available data published by the relevant Health Commissions of the PRC, the number of beds in Shenzhen medical institutions per 1,000 population was approximately 3.8 in 2019, which is significantly lower than that of Beijing (approximately 5.9) and Shanghai (approximately 10.5). Moreover, Shenzhen’s certified doctors per 1,000 population in 2019 was approximately 3.0 in 2019, which is significantly lower than that of Beijing (approximately 5.4) and Shanghai (approximately 5.3).

As stated in (a) the Plan of the Establishment of Medical Institutions in Shenzhen (2016-2020) (深圳市醫療機構設置規劃(2016-2020)) (the “Plan”), the Shenzhen government is of the view that the overall medical resources of Shenzhen was in need to be further optimised to meet the growing medical needs of the citizens in Shenzhen and it was necessary to increase the capacity of such and implement policies to support the development of private hospitals; and (b) the Notice on the Highlights and Guidance of Healthcare Service Work for Shenzhen in 2021 published by Shenzhen Municipal Health Commission (市衛生健康委關於印發深圳市2021年衛生健康工作要點的通知) (the “Guidance on Healthcare Service Work”), which highlighted the overall guidance on the promotion and support of basic medical institutions, including private medical institutions, to enhance basic and essential medical services for the local communities, our Directors are of the view that taking into account the above factors, combined with the fact that the medical services our Group provides are basic and essential to the local communities, there is objective indication of the macro environment that provides sustainable demand for the medical services of our Group, among other factors as further discussed in the section headed “Industry overview” in this document.

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(ii) Moreover, the PRC government has implemented policies to regulate competitions among medical services providers as well as encouraging the development and strengthening of private hospitals, some of which have been included in the section headed “Regulatory overview” in this document. Furthermore, as stated in the Plan and the Guidance on Healthcare Service Work which outlines, among other things, the guiding principles of regulating, coordinating, and encouraging the development of medical services of Shenzhen:

(1) The Shenzhen government should improve overall medical service quality. Under this principle, the Shenzhen government aims to enhance the ability for basic medical institutions to handle common diseases and frequently-occurring diseases and implement division of labour and good coordination among different class of private hospitals and public hospitals, so that basic medical institutions could handle a significant portion of the out patient demand.

(2) The Shenzhen government should enhance the comprehensive system of medical institutions, which includes encouraging the integration of hospitals and basic medical institutions and promoting cooperation among public and private hospitals. Under this principle, the Shenzhen government would reasonably control the number and scale of public hospitals while clarifying the scope of services of public hospitals and allowing space for the development of private medical institutions and promoting healthy competition between public and private hospitals.

Our Directors are of the view that the above policies are effective in ensuring the development of private hospitals and preventing excessive competition among hospitals, channeling services from public hospitals to private and lower tier hospitals, which can further secure the sustainability of the current business of our Group.

[REDACTED]

Our estimated [REDACTED] primarily consist of [REDACTED] commissions in addition to professional fees paid to the Sponsor, legal advisers, the reporting accountants and other professional parties for their services rendered in relation to the [REDACTED]. Assuming the [REDACTED]isnot exercised and assuming an [REDACTED]of[REDACTED] per Share, being the mid-point of our indicative [REDACTED] for the [REDACTED] stated in this document, the total [REDACTED] will be approximately RMB[39.9] million or approximately [30.8]% of the [REDACTED], of which approximately RMB[13.7] million is directly attributable to the [REDACTED] and is expected to be accounted for as a deduction from equity upon [REDACTED]. The remaining amount of which approximately RMB15.6 million in aggregate were charged to our Group’s consolidated profit or loss during FY2018, FY2019 and FY2020, and RMB[10.6] million will be charged to our Group’s consolidated profit or loss for the year ending 31 December 2021, respectively. The estimated [REDACTED] subject to adjustments based on the actual amount incurred or to be incurred.

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BUSINESS STRATEGIES AND [REDACTED]

Business strategies

China’s deepening reform efforts in the healthcare industry are providing us with more opportunities to penetrate into the non-public healthcare market. With the nationwide trend of attracting more social capital to the healthcare industry in the PRC, we aim to develop ourselves into a healthcare service provider equipped with a network of primary hospitals with trustworthiness and integrity rooted in the local communities and accompanied by external development through medical department establishment and operation (學科建設) and strategic acquisition of medical institutions. We will continue to assume the responsibility of providing comprehensive and quality healthcare services to the local communities.

We will implement the following business strategies in order to achieve our objectives:

1. Further improve the healthcare services provided by our hospitals with a strategy of multi-dimensional development;

2. Strategic acquisitions of appropriate medical institutions to expand our hospitals network and capture the rapidly rising demand for quality healthcare services;

3. Leverage our expertise and professionalism in selecting investment and management opportunities to make external development; and

4. Further centralise key functionalities and standardise the operations of our hospitals.

For further details on our business strategies, please refer to the section headed “Future plans and [REDACTED]” in this document.

[REDACTED]

We estimate that the aggregate [REDACTED] from the [REDACTED], after deducting [REDACTED] commissions and estimated expenses paid and payable by us in connection with the [REDACTED] and assuming that the [REDACTED] is not exercised at all, to be approximately HK$[99.4] million (equivalent to approximately RMB[89.5] million), assuming an [REDACTED]of [REDACTED] per Share, being the mid-point of the indication [REDACTED] for the [REDACTED]. Our Company intends to use the [REDACTED] from the [REDACTED] as follows:

(i) approximately [REDACTED]ofthe[REDACTED], or approximately [REDACTED] (equivalent to approximately [REDACTED]) will be used to upgrade our medical, equipment of our existing hospitals;

(ii) approximately [REDACTED]ofthe[REDACTED], or approximately [REDACTED] (equivalent to approximately [REDACTED]) will be used to renovate hospital environment and upgrade general facilities of our existing hospitals;

(iii) approximately [REDACTED]ofthe[REDACTED], or approximately [REDACTED] (equivalent to approximately [REDACTED]) will be used to recruit talents and provide ongoing training;

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(iv) approximately [REDACTED]ofthe[REDACTED], or approximately [REDACTED] (equivalent to approximately [REDACTED]) will be used to expand three of our hospitals to include health management services, rehabilitation services and geriatric services integrating a continuum of institutional medical and nursing care for the elderly;

(v) approximately [REDACTED]ofthe[REDACTED], or approximately [REDACTED] (equivalent to approximately [REDACTED]) will be used to expand our healthcare operations in the PRC, including through selective mergers with and strategic acquisitions of other medical institutions in the PRC;

(vi) approximately [REDACTED]ofthe[REDACTED], or approximately [REDACTED] (equivalent to approximately [REDACTED]) will be used to invest into projects that cooperate with external medical institutions; and

(vii) approximately [REDACTED]ofthe[REDACTED], or approximately [REDACTED] (equivalent to approximately [REDACTED]) will be used to upgrade and develop our information technology system;

(viii) approximately [REDACTED]ofthe[REDACTED], or approximately [REDACTED] (equivalent to approximately [REDACTED]) will be used to provide funding for our working capital, rental and property related expenses and other general corporate purposes.

For further details on our future plans and [REDACTED], please refer to the section headed “Future plans and [REDACTED]” in this document.

DIVIDENDS

No dividend has been paid by the Group during FY2019 and FY2020. During FY2018, a dividend of RMB10.0 million was declared and where approximately RMB8.0 million was settled by cash; and approximately RMB2.0 million was the individual income tax withheld by the Group at a tax rate of 20% when distributing dividends pursuant to the relevant laws and which did not result in any cash outflow during FY2018. The respective individual income tax withheld was not settled as at the Latest Practicable Date. Our Directors believe that such amount will be settled with the respective tax bureau during the year ending 31 December 2021.

We do not have a fixed dividend payout ratio and do not intend to determine any expected dividend payout ratio since our priority is to use our earnings for business development and expansion in the interest of our Shareholders as a whole. Our dividend distribution record in the past may not be used as a reference or basis to determine the level of dividends that may be declared or paid by us in the future. The recommendation of the payment of dividend is subject to the absolute discretion of our Board, and, after [REDACTED], any declaration of final dividend for the year will be subject to the approval of our Shareholders.

Please refer to the paragraph headed “Financial information — Dividends” in this document on the details of our dividend policy.

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STATISTICS OF THE [REDACTED]

Based on an [REDACTED] of [REDACTED] per Based on the Based on the [REDACTED], after minimum maximum Downward [REDACTED] of [REDACTED] of [REDACTED] [REDACTED] per [REDACTED] per Adjustment of 9.1% [REDACTED] [REDACTED]

Market Capitalisation (Note 1) [REDACTED][REDACTED][REDACTED]

Unaudited pro forma adjusted net tangible assets of our Group per Share (Note 2) [REDACTED][REDACTED][REDACTED] Notes:

1. The calculation of market capitalisation is based on the [REDACTED] Shares expected to be in issue immediately upon completion of the [REDACTED], but does not take into account any Shares which may be allotted and issued pursuant to the exercise of the [REDACTED] or any options which may be granted under the Share Option Scheme or any Shares which may be allotted and issued or repurchased by our Company pursuant to the issuing mandate and repurchase mandate.

2. The unaudited pro forma adjusted net tangible assets of our Group per Share has been arrived at with reference to certain bases and assumptions. Please refer to the section headed “Unaudited pro forma financial information” in Appendix II to this document for further details.

MEDICAL DISPUTES

Due to the nature of the healthcare industry and the inherent risks in medical treatment for patients, our operations are subject to legal proceedings and claims that arise in the ordinary course of business, which primarily include medical disputes brought by patients and/or their families against us. We cannot entirely eliminate such disputes. We regard material medical disputes as disputes arising from our clinical activities that either involved a patient fatality or resulted in monetary compensation of RMB100,000 or more. During the Track Record Period and up to the Latest Practicable Date, we had five material medical disputes that had been settled and one on-going medical dispute. For details, please refer to the paragraph headed “Business — Legal proceedings and compliance — Medical disputes” in this document.

As advised by our PRC Legal Advisers, (i) none of our material medical disputes settled during the Track Record Period involved any determination that we were liable for medical malpractice as stipulated in the Regulations on Handling Medical Malpractice (醫療事故處理條例); and (ii) none of our on-going material medical disputes involved any determination that we were liable for medical malpractice as stipulated in the Regulations on Handling Medical Malpractice as at the Latest Practicable Date. During the Track Record Period and up to the Latest Practicable Date, none of our doctors or medical staffs were involved in any disciplinary proceedings or otherwise determined to be liable for medical malpractice as stipulated in the Regulations on Handling Medical Malpractice (醫療事故處理條例).

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NON-COMPLIANCE INCIDENTS

During the Track Record Period, we had not fully complied with certain laws and regulations in respect of contribution to social insurance, housing provident fund and environmental protection. Pursuant to the designated medical institution service agreement, Shenzhen Social Insurance Fund Administration/Healthcare Security Bureau of Shenzhen Municipality, Luogang Hospital was demanded to refund approximately RMB0.6 million and pay a contractual penalty of approximately RMB2.4 million; and Renkang Hospital was demanded to refund approximately RMB151,000 and pay a contractual penalty of approximately RMB273,000 during the Track Record Period. As at the Latest Practicable Date, all the refunds and contractual penalties have been settled. Please refer to the paragraph headed “Business — Customers — Social insurance programmes — Breaches of the designated medical institution service agreement”. In addition, certain properties used for our operations have certain defects, including failure to obtain title certificates, failure in registration of lease agreements and actual use does not comply with the permitted use. All such non-compliance incidents have not resulted, and are not expected to result, in any material impact on our financial and operational aspects. Please refer to the paragraphs headed “Business — Properties” and “Business — Legal proceedings and compliance — Non-compliance incidents” in this document for further information of these non-compliance incidents.

RISK FACTORS

Potential investors are advised to carefully read the section headed “Risk factors” in this document before making any investment decision in the [REDACTED]. Some of the more particular risk factors include: (i) we conduct our business in a heavily regulated industry; (ii) ongoing regulatory reforms in China are unpredictable. Changes in China’s regulatory regime for the healthcare service industry, particularly changes in healthcare reform policies, could have a material adverse effect on our business operations and future expansion; (iii) regulatory pricing controls and reimbursement limits under social insurance programmes may affect our pricing of certain healthcare services and products; (iv) we derive a significant portion of our revenue from healthcare services and products provided to patients covered under social insurance programmes, and the loss of any such revenue could have a material adverse effect on our business, results of operations and prospects; (v) our success is linked to our ability to recruit and retain high quality doctors and other healthcare professionals, such as nurses and technicians. We must also properly manage the employment of our doctors and nurses, as the failure to do so may lead to penalties against our hospitals, including fines, loss of licences, or an order to cease practice, which could materially and adversely affect our business, results of operations and prospects; (vi) our revenue has historically been entirely dependent on our operations in Guangdong Province and will remain largely dependent on our operations in Guangdong Province going forward. As such, we are especially sensitive to the local conditions and changes in Guangdong Province, such as with respect to its economy, laws and regulations, and any force majeure events, natural disasters or outbreaks of contagious diseases in this region; (vii) demand for our healthcare services is affected by macroeconomic and political conditions that are outside of our control; (viii) the underlying buildings of our hospitals are leaseholds. Termination or non-renewal of our leases may adversely affect our business, results of operations and prospects; and (ix) a significant amount of intangible assets are arising from the acquisition of Jian’an Hospital on our balance sheet. Any significant amount of impairment on such intangible assets could adversely affect our financial condition and results of operations.

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In this document, unless the context otherwise requires, the following expressions shall have the following meanings.

“2M2021” the two months ended 28 February 2021

“affiliate(s)” any other person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified person

“Ample Capital” or “Sponsor” Ample Capital Limited, a corporation registered under the SFO permitted to carry on type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO, appointed as the sponsor to the [REDACTED]

“Applicable Period” the period until the conclusion of the next annual general meeting of our Company is required by the Articles of Association, the Companies Law or any applicable laws of the Cayman Islands to be held, or the passing of an ordinary resolution by the Shareholders revoking or varying the authority given to our Directors, whichever occurs first

[REDACTED]

“Articles of Association” or “Articles” the amended and restated articles of association of our Company, conditionally adopted on [●] 2021 and will become effective on the [REDACTED], a summary of which is set out in Appendix IV to this document, and as amended from time to time

“Audit Committee” the audit committee of the Board

“associate(s)” has the meaning ascribed to it under the Listing Rules

“Board” the board of Directors

“Bolun Medical” Shenzhen Bolun Medical Technology Company Limited* (深圳市博倫醫療科技開發有限公司), a company established in the PRC on 12 January 2004 and is an Independent Third Party

“business day” any day (other than a Saturday, Sunday or public holiday) on which licensed banks in Hong Kong are normally open for business

“BVI” the British Virgin Islands

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“CAGR” compound annual growth rate, a method of assessing the average growth of a value over a certain time period

[REDACTED]

“CCASS” the Central Clearing and Settlement System established and operated by HKSCC

“CCASS Clearing Participant” a person admitted to participate in CCASS as a direct clearing participant or general clearing participant

“CCASS Custodian Participant” a person admitted to participate in CCASS as a custodian participant

“CCASS Investor Participant” a person admitted to participate in CCASS as an investor participant who may be an individual or joint individuals or a corporation

“CCASS Participant” a CCASS Clearing Participant, a CCASS Custodian Participant or a CCASS Investor Participant

“China National Accord” China National Accord Medicines Corporation Ltd. (國藥集團一致藥業股份有限公司), a company established in the PRC on 2 August 1986, the shares of which are listed on the Shenzhen Stock Exchange (stock code: 000028), an Independent Third Party

“close associate(s)” has the meaning ascribed to it under the Listing Rules

“Companies (Winding Up and the Companies (Winding Up and Miscellaneous Miscellaneous Provisions) Ordinance” Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time

“Companies Law” the Companies Law (as revised) of the Cayman Islands, as amended, supplemented or otherwise modified from time to time

“Companies Ordinance” the Companies Ordinance (Chapter 622 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time

“Companies Registry” the Companies Registry of Hong Kong

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“Company” or “our Company” Guodan Healthcare Holding Limited (國丹健康醫療控股有限公司), a company incorporated in the Cayman Islands on 4 August 2017 as an exempted company with limited liability

“connected person(s)” has the meaning ascribed to it under the Listing Rules

“Controlling Shareholders” has the meaning ascribed to it under the Listing Rules and in the case of our Company, refer to the controlling shareholders of our Company, namely Mr. Li, Ms. Li, Guodan Healthcare and Victory Universe

“core connected person(s)” has the meaning ascribed to it under the Listing Rules

“COVID-19” a coronavirus identified as the cause of an outbreak of respiratory illness that was first detected in 2019 and declared by the World Health Organization as a “Global Pandemic” on 11 March 2020

“CSRC” China Securities Regulatory Commission (中國證券監督管理委員會)

“Deed of Indemnity” a deed of indemnity dated [●] 2021 and signed by our Controlling Shareholders in favour of our Company (for itself and as trustee for each member of our Group), particulars of which are set out in the paragraph headed “Statutory and general information — Other information — 16. Estate duty, tax and other indemnities” in Appendix V to this document

“Deed of Non-competition” a non-competition deed entered into on [●] 2021 and signed by our Controlling Shareholders in favour of our Company (for itself and as trustee for its subsidiaries), with particulars set out in the paragraph headed “Relationship with our Controlling Shareholders — Deed of Non-competition” in this document

“Director(s)” the director(s) of our Company

[REDACTED]

“effective tax rate” the rate of income tax divided by the profit before taxation

“EIT” enterprise income tax

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“EIT Law” The PRC Enterprise Income Tax Law

“F&S Report” the commissioned report on the market overview and competitive analysis for China’s healthcare service market compiled by Frost & Sullivan, the content of which is referred in the section headed “Industry overview” in this document

“Frost & Sullivan” Frost & Sullivan (Beijing) Inc., Shanghai Branch Co., a global market research and consulting firm, which is an Independent Third Party

“FY2018” the financial year ended 31 December 2018

“FY2019” the financial year ended 31 December 2019

“FY2020” the financial year ended 31 December 2020

“First Share Transfer Agreement” A share transfer agreement dated 25 December 2017 entered into among Mr. Li, Ms. Li, Mr. Huang, Mr. Zhou, Mr. Yang and Mr. Tan pursuant to which Mr. Li agreed to transfer 16%, 1% and 1% of the equity interest in Guodan SZ to Mr. Huang, Mr. Yang and Mr. Tan at a consideration of RMB8,000,000, RMB500,000 and RMB500,000, respectively, and Ms. Li agreed to transfer 2% of the equity interest in Guodan SZ to Mr. Zhou at a consideration of RMB1,000,000

“GFA” gross floor area

[REDACTED]

“Group”, “our Group”, “we” or “us” our Company and its subsidiaries at the relevant time or, where the context so requires, in respect of the period before our Company became the holding company of its present subsidiaries, the subsidiary of our Company or the businesses operated by its present subsidiaries or (as the case may be) its predecessor

“Guangdong HFPC” the Health and Family Planning Commission of Guangdong Province (廣東省衛生和計劃生育委員會), which is currently known as the Health Commission of Guangdong Province (廣東省衛生健康委員會)

“Guanghua Doctors” Shenzhen Guanghua Doctors Group Company Limited* (深圳市光華醫生集團有限公司), a limited liability company established in the PRC on 8 May 2017 and a wholly-owned subsidiary of our Company

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“Guodan BVI” Guodan Holding Limited (國丹控股有限公司), a company incorporated in the BVI with limited liability on 14 August 2017 and a direct wholly-owned subsidiary of our Company

“Guodan Healthcare” Guodan Healthcare Limited (國丹醫療有限公司), a company incorporated in the BVI with limited liability on 20 June 2017 and is wholly and beneficially owned by Mr. Li

“Guodan HK” Guodan Holding (Hong Kong) Limited (國丹控股（香港）有限公司), a company incorporated in Hong Kong with limited liability on 29 August 2017 and a wholly-owned subsidiary of our Company

“Guodan Medical” Shenzhen Guodan Healthcare Medical Company Limited* (深圳市國丹健康醫療有限公司), a company established in the PRC with limited liability on 11 November 2013 and a wholly-owned subsidiary of our Company

“Guodan Properties” Shenzhen Guodan Properties Management Company Limited* (深圳市國丹置業管理有限公司), a limited liability company established in the PRC on 27 May 2010 and is wholly owned by Ms. Li as at the Latest Practicable Date, a connected person of the Company

“Guodan SZ” Shenzhen Guodan Healthcare Medical Technology Company Limited (深圳市國丹健康醫療科技有限公司), a company established in the PRC with limited liability on 25 October 2013 and a wholly-owned subsidiary of our Company

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“Hainan Guodan” Hainan Guodan Pharmaceutical Company Limited* (海南國丹藥業有限公司), a company established in the PRC on 8 May 1998, was owned by an Independent Third Party and Mr. Wu Yuanhe (吳元和), spouse of Mr. Li’s sister, each holding 50% equity interest during the Track Record Period and up to 7 March 2019; was then owned as to 45% by an Independent Third Party, 50% by Mr. Zhuo Ruifeng (卓瑞鳳), a cousin of Mr. Li, and 5% by Mr. Wu Yuanhe (吳元和) from 8 March 2019 and up to 20 March 2019; was then owned as to 40% by an Independent Third Party, 50% by Mr. Zhuo Ruifeng (卓瑞鳳) and 10% by Mr. Wu Yuanhe (吳元和) from 21 March 2019 and up to 19 September 2019; was then owned as to 40% by an Independent Third Party, 50% by Mr. Zhuo Ruifeng (卓瑞鳳) and 10% by Ms. Li Meilian (李美連), a sister of Mr. Li, from 20 September 2019 and up to the Latest Practicable Date. During the Track Record Period and up to 7 March 2019, the equity interest held by Mr. Wu Yuanhe (吳元和) in Hainan Guodan was held on trust for the benefit of Mr. Li, and therefore a connected person of the Company during the Track Record Period and up to 7 March 2019

[REDACTED]

“HK$” or “Hong Kong dollars” Hong Kong dollars, the lawful currency of Hong Kong or “HK dollars”

“HKSCC” Hong Kong Securities Clearing Company Limited

“HKSCC Nominees” HKSCC Nominees Limited, a wholly-owned subsidiary of HKSCC

“Hong Kong” or “HK” the Hong Kong Special Administrative Region of the PRC

“Hong Kong Branch Share Registrar” [REDACTED], our Hong Kong share registrar and transfer office

“IFRS” International Financial Reporting Standards

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“Independent Third Party(ies)” a person, persons, company or companies which is or are independent of, and not connected with (within the meaning under the Listing Rules), any directors, chief executive or substantial shareholders of our Company, any of its subsidiaries or any of their respective associate(s)

[REDACTED]

“Jian’an Hospital” Shenzhen Jian’an Hospital* (深圳健安醫院), a limited liability company established in the PRC on 11 January 2016 and a wholly-owned subsidiary of our Company

[[REDACTED][●]]

“Latest Practicable Date” 6 April 2021, being the latest practicable date for the inclusion of certain information in this document prior to its publication

“Lifangxin Investment” Lifangxin Investment Limited (立方鑫投資有限公司), a company incorporated in the BVI with limited liability on 7 July 2017 and is wholly and beneficially owned by Mr. Yang, and one of the [REDACTED] Investors

[REDACTED]

“Listing Committee” the Listing Committee of the Stock Exchange

[REDACTED]

“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange, as amended, supplemented or otherwise modified from time to time

“Longgang Economic” Shenzhen Longgang Buji Town Economic Development Company Limited* (深圳市龍崗區布吉鎮經濟發展有限公司), a company established in the PRC on 29 March 1986 and is an Independent Third Party

“Longgang HFPB” the Health and Family Planning Bureau of Longgang District in Shenzhen Municipality (深圳市龍崗區衛生和計劃生育局), which is currently known as the Health Bureau of Longgang District in Shenzhen Municipality (深圳市龍崗區衛生健康局)

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“Longhua HFPB” the Health and Family Planning Bureau of Longhua District in Shenzhen Municipality (深圳市龍華區衛生和計劃生育局), which is currently known as the Health Bureau of Longhua District in Shenzhen Municipality (深圳市龍華區衛生健康局)

“Luogang Hospital” Shenzhen Luogang Hospital* (深圳羅崗醫院), a limited liability company established in the PRC on 26 May 2014 and a wholly-owned subsidiary of our Company

“Luohu HFPB” the Health and Family Planning Bureau of Luohu District in Shenzhen Municipality (深圳市羅湖區衛生和計劃生育局), which is currently known as the Health Bureau of Luohu District in Shenzhen Municipality (深圳市羅湖區衛生健康局)

“Main Board” the Main Board of the Stock Exchange

“Memorandum of Association” or the amended and restated memorandum of association of “Memorandum” our Company adopted on [●] 2021 (with immediate effect), a summary of which is set out in Appendix IV to this document, and as amended from time to time

“Mengte Information” Shenzhen Mengte Health Information Service Company Limited* (深圳蒙特健康信息服務有限公司), a limited liability company established in the PRC on 16 June 2014 and was a wholly-owned subsidiary of Guodan SZ which was deregistered on 14 February 2019

“Mengte Management” Shenzhen Mengte Health Management Company Limited* (深圳蒙特健康管理有限公司), a limited liability company established in the PRC on 17 April 2014 and was a wholly-owned subsidiary of Guodan SZ which was deregistered on 13 February 2019

“Mengte Technology” Shenzhen Mengte Biotechnology Company Limited* (深圳蒙特生物科技有限公司), a limited liability company established in the PRC on 24 April 2014 and was a wholly-owned subsidiary of Guodan SZ which was deregistered on 13 February 2019

“Mr. Huang” Mr. Huang Zhigang (黃志剛), a non-executive Director, the sole beneficial owner of Union India, and one of the [REDACTED] Investors

“Mr. Li” Mr. Li Jinyuan (李金圓), formerly known as 李金園,an executive Director, chairman of our Company and a Controlling Shareholder

“Mr. Li JG” Mr. Li Jinguo (李金國), a brother of Mr. Li

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

“Mr. Li JT” Mr. Li Jintian (李金添), a cousin of Mr. Li

“Mr. Tan” Mr. Tan Xiaolong (譚小龍), the sole beneficial owner of Qianhai Hezhong, and one of the [REDACTED] Investors

“Mr. Yang” Mr. Yang Qingyun (楊清雲), the sole beneficial owner of Lifangxin Investment, and one of the [REDACTED] Investors

“Mr. Zhou” Mr. Zhou Yurong (周毓榮), the sole beneficial owner of Zhengyuan International, and one of the [REDACTED] Investors

“Ms. Li” Ms. Li Aijin (李愛金), the spouse of Mr. Li and a Controlling Shareholder

“Ms. Yuen” Ms.Yuen Shuk Lai Sherry (袁淑麗), the sole shareholder of Richcome Pacific

“NEEQ” the National Equities Exchange and Quotations (全國中小企業股份轉讓系統)

“Nomination Committee” the nomination committee of the Board

“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), which was recognised from the former Ministry of Health (衛生部) and the National Population and Family Planning Commission (國家人口和計劃生育委員會) and is currently known as the National Health Commission (國家衛生健康委員會)

[REDACTED]

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

[REDACTED]

“PRC” or “China” the People’s Republic of China and, except where the context otherwise requires and for the purpose of this document only, does not include Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan

“PRC Legal Advisers” Jingtian & Gongcheng

“[REDACTED] Investor(s)” Mr. Huang, Mr. Zhou, Mr. Yang, Mr. Tan, Ms. Yuen, Union India, Zhengyuan International, Lifangxin Investment, Qianhai Hezhong and Richcome Pacific

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

“[REDACTED] Investments” the investments made in our Group by the [REDACTED] Investors and completed on 26 April 2019 on the terms as more particularly set out in the paragraph headed “History, Reorganisation and corporate structure — [REDACTED] Investments”

[REDACTED]

“Qianhai Hezhong” Qianhai Hezhong Investment Holding Limited (前海合眾投資控股有限公司), a company incorporated in the BVI with limited liability on 10 July 2017 and wholly owned by Mr. Tan, and one of the [REDACTED] Investors

“Regulation S” Regulation S under the US Securities Act

“Remuneration Committee” the remuneration committee of the Board

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

“Renkang Hospital” Shenzhen Renkang Hospital* (深圳仁康醫院), a limited liability company established in the PRC on 24 December 2015 and a wholly-owned subsidiary of our Company

“Reorganisation” the reorganisation we have undergone in preparation for the [REDACTED] which are more particularly described in the paragraph headed “History, Reorganisation and corporate structure — Reorganisation” in this document

“Repurchase Mandate” the general unconditional mandate to repurchase Shares given to our Directors by our Shareholders, particulars of which are set forth in the paragraph headed “Statutory and general information — Further information about our Group — 3. Resolutions in writing of all our Shareholders passed on [●] 2021” in Appendix V to this document

“Richcome Pacific” Richcome Pacific Limited, a company incorporated in the BVI with limited liability on 3 January 2013 and wholly owned by Ms. Yuen , and one of the [REDACTED] Investors

“RMB” or “Renminbi” Renminbi, the lawful currency of the PRC

“SAFE” State Administration of Foreign Exchange of the PRC (中華人民共和國國家外匯管理局)

“SAT” State Administration of Taxation of the PRC (中華人民共和國國家稅務總局)

“SFC” the Securities and Futures Commission of Hong Kong

“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time

“Second Share Transfer Agreement” A share transfer agreement dated 14 February 2019 entered into between Mr. Huang and Richcome Pacific, pursuant to which, Mr. Huang agreed to transfer 1% equity interest in Guodan SZ to Richcome Pacific at a consideration of RMB606,200

“Share(s)” ordinary share(s) of our Company with a nominal value of HK$0.01 each, to be subscribed for and traded in Hong Kong dollars and listed on the Stock Exchange

[REDACTED]

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

“Share Option Scheme” the share option scheme conditionally adopted by our Company, further details of which are described in the paragraph headed “Statutory and general information — Other information — 15. Share Option Scheme” in Appendix V to this document

“Shareholder(s)” holder(s) of the Share(s)

“Shenzhen Aikangjian” Shenzhen Aikangjian Industry Company Limited* (深圳市愛康健實業有限公司), a limited liability company established in the PRC on 31 May 1999 and is an Independent Third Party

“Shenzhen HFPC” the Health and Family Planning Commission of Shenzhen Municipality (深圳市衛生和計劃生育委員會), which is currently known as the Health Commission of Shenzhen Municipality (深圳市衛生健康委員會)

“Shenzhen Nanda” Shenzhen Nanda Industry Company Limited* (深圳市南達實業有限公司), a limited liability company established in the PRC on 28 June 2002 and is owned as to 95% by Mr. Li and 5% by Ms. Li from 10 January 2017 and became a connected person of the Company since then

[REDACTED]

“sq.km.” square kilometres

“sq.m.” square metres

[REDACTED]

“Stock Exchange” The Stock Exchange of Hong Kong Limited

“Subscription Agreement” A share subscription agreement dated 25 April 2019 entered into among Victory Universe, Union India, Zhengyuan International, Lifangxin Investment, Qianhai Hezhong, Richcome Pacific and our Company pursuant to which Victory Universe, Union India, Zhengyuan International, Lifangxin Investment, Qianhai Hezhong and Richcome Pacific subscribed for an aggregate of 840 Shares representing 8.4% of the then issued share capital of our Company at a total consideration of HK$8.4 million

“subsidiary(ies)” has the meaning ascribed thereto under the Companies Ordinance

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

“substantial shareholder(s)” has the meaning ascribed to it under the Listing Rules

“Takeovers Code” the Codes on Takeovers and Mergers and Share Buy-backs in Hong Kong as approved by the SFC and as amended, supplemented or otherwise modified from time to time

“Track Record Period” comprises FY2018, FY2019 and FY2020

[REDACTED]

“Union India” Union (India) Co., Ltd., a company incorporated in the BVI with limited liability on 14 April 2014 and wholly owned by Mr. Huang, and one of the [REDACTED] Investors

“U.S.” or “United States” or “US” the United States of America

“U.S. Securities Act” the United States Securities Act of 1933, as amended, supplemented or otherwise modified from time to time

“Victory Universe” Victory Universe Limited (勝宇有限公司), a company incorporated in the BVI with limited liability on 28 March 2018 and wholly owned by Ms. Li

[REDACTED]

“Withdrawal Mechanism” a mechanism which requires the Company, among other things, to (a) issue a supplemental document as a result of material changes in the information (e.g. the [REDACTED]) in this document; (b) extend the offer period and to allow potential investors, if they so desire, to confirm their applications using an opt-in approach i.e. requiring investors to positively confirm their applications for shares despite the change

“Xuexiang Hospital” Shenzhen Xuexiang Hospital* (深圳雪象醫院), a limited liability company established in the PRC on 22 February 2016 and a wholly-owned subsidiary of our Company

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

“Xisi Medical” Shenzhen Xisi Medical Cosmetology Hospital Holding Company Limited* (深圳希思醫療美容醫院股份有限公司), a limited liability company established in the PRC on 8 June 2004 and quoted on NEEQ (stock code: 871107), is controlled by Mr. Li, Ms. Li and Mr. Li JG as at the Latest Practicable Date, is a connected person of the Company

[REDACTED]

“Zhengyuan International” Zhengyuan International (Holding) Limited (正元國際（控股）有限公司), a company incorporated in the BVI with limited liability on 7 September 2016 and wholly owned by Mr. Zhou, and one of the [REDACTED] Investors

“Zhongshan HFPB” the Health and Family Planning Bureau of Zhongshan City (中山市衛生和計劃生育局), which is currently known as the Health Bureau of Zhongshan City (中山市衛生健康局)

“Zhongshan Investment” Zhongshan Guodan Hospital Investment Management Company Limited* (中山市國丹醫院投資管理有限公司), a limited liability company established in the PRC on 4 December 2006 and is owned by Independent Third Parties as at the Latest Practicable Date

“Zhongshan TCM Hospital” Zhongshan Guodan Traditional Chinese Medicine Hospital Company Limited * (中山國丹中醫院有限公司), a limited liability company established in the PRC on 13 November 2007 and a wholly-owned subsidiary of our Company

“Zhouji Medical” Shenzhen Zhouji Medical Equipment Company Limited* (深圳市洲際醫療器械有限公司), a limited liability company established in the PRC on 21 July 2017 and a wholly-owned subsidiary of our Company

Certain amounts and percentage figures included in this document have been subject to rounding adjustments. Unless otherwise stated, all the numerical figures are rounded to one decimal place. Any discrepancy in any table between totals and sums of individual amounts listed in any table are due to rounding. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures preceding them.

For ease of reference, the names of Chinese laws and regulations, governmental authorities, institutions, natural persons or other entities (including certain of our subsidiaries) have been included in this document in both the Chinese and English languages and in the event of any inconsistency, the Chinese versions shall prevail. English translations of company names and other terms from the Chinese language are marked with “*” and are provided for identification purposes only.

–40– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. GLOSSARY OF TECHNICAL TERMS

This glossary contains explanations of certain terms used in this document. These terms and their meanings may or may not correspond to standard industry meaning or usage of these terms.

“ALOS” average length of stay, refers to the average number of days an inpatient stay in our hospitals; equals to the aggregated hospitalisation days of all inpatient visits during a specific period divided by the total inpatient visits during such period

“beds in operation” the fixed sum of beds that are used for clinical service in a medical institution as of a specified date, including regular beds, fold-up beds, care beds, beds that are being sterilised and repaired, out-of-service beds due to expansion or overhaul

“Class I hospital(s)” the smaller hospitals rated as Class I hospitals by the NHFPC hospital classification system, typically having 20 to 99 registered beds and primarily providing basic healthcare services to the local community

“Class II hospital(s)” the regional hospitals rated as Class II hospitals by the NHFPC hospital classification system, typically having 100 to 499 registered beds, providing multiple communities with integrated healthcare services and undertaking certain academic and scientific research initiatives. The Class II hospitals are graded into three sub-levels (A, B, C) based on the assessment of competent authorities and Class II Grade A hospitals are the highest-ranking hospitals among Class II hospitals

“Class III hospital(s)” the largest regional hospitals in the PRC rated as Class III hospitals by the NHFPC hospital classification system, typically having more than 500 registered beds, providing high quality professional healthcare services covering a wide geographic area and undertaking higher academic and scientific research initiatives. The Class III hospitals are graded into three sub-levels (A, B and C) based on the assessment of competent authorities and Class III Grade A hospitals are the highest-ranking hospitals among Class III hospitals

“community healthcare centre(s) primary medical institution(s) for the local residents in the (社區健康服務中心)” communities

“CT” computed tomography, a technique that uses X-rays to make detailed pictures of the structures inside the body

–41– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. GLOSSARY OF TECHNICAL TERMS

“effective service capacity” the estimated inpatient service capacity during a specific period, calculated as the number of beds deployed for operation as at the end of the relevant period multiplied by the number of days in such period

“ENT” eyes, ear, nose and throat

“general hospital” a hospital that provides multi-disciplinary healthcare services including outpatient, inpatient and diagnosis

“healthcare service(s)” the service practice that provides inpatient or outpatient diagnosis, treatment and prevention of human disease, illness, injury or dysfunction through the medical procedures performed by professional practitioners

“inpatient” a patient who receives healthcare services at a hospital and is hospitalised overnight

“inpatient bed-days” with respect to any given period, the actual number of beds occupied by our inpatients on each day aggregated over the course of the relevant period

“inpatient visits” the total number of inpatients (with hospital stay) in a hospital during a specific period

“material medical dispute” a medical dispute arising from our clinical activities that either (i) involved a patient fatality; or (ii) resulted in monetary compensation of RMB100,000 or more

“minimally invasive” advanced surgical techniques that result in less injuries to the body than with open surgeries. Such techniques minimise recovery time, blood loss, post-surgical complications, surgical traumas and infection risks and result in more aesthetically pleasing surgical wounds than conventional open surgeries for the same condition

“multi-site practice doctors licensed doctors who are qualified and permitted to (多點執業醫生)” practice at multiple sites in the PRC

“multi-site practice provision of medical services in two or more medical (多點執業)” institutions in the PRC

“O&G” The branch of medicine that deals with pregnancy care, childbirth and disorders of the female reproductive system

“outpatient” a patient who receives healthcare services at a hospital but is not hospitalised overnight

–42– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. GLOSSARY OF TECHNICAL TERMS

“outpatient visits” the total number of outpatients (without hospital stay) in a hospital during a specific period

“physical examination” the clinical examination of individuals for signs of disease and healthcare advisory services

“registered beds” the number of beds that are registered in a medical institution’s practicing licence

“staff turnover rate” staff turnover rate which was calculated as the number of resigned employees in the period divided by the average number of employees in the same period.

“TCM” traditional Chinese medicine, a broad range of medicine practices sharing common concepts which have been developed in China and are based on a tradition of more than 2,000 years

“TCM hospital” a hospital that primarily provides the treatment of traditional Chinese medicine

–43– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. FORWARD-LOOKING STATEMENTS

This document contains certain forward-looking statements and information relating to our Company and our subsidiaries that are based on the beliefs of our management as well as assumptions made by and information currently available to our management. When used in this document, the words “aim”, “anticipate”, “believe”, “could”, “expect”, “going forward”, “intend”, “may”, “ought to”, “plan”, “project”, “seek”, “should”, “will”, “would” and the negative of these words and other similar expressions, as they relate to our Group or our management, are intended to identify forward-looking statements. Such statements reflect the current views of our management with respect to future events, operations, liquidity and capital resources, some of which may not materialise or may change. These statements are subject to certain risks, uncertainties and assumptions, including the other risk factors as described in this document. You are strongly cautioned that reliance on any forward-looking statements involves known and unknown risks and uncertainties. The risks and uncertainties facing our Company which could affect the accuracy of forward-looking statements include, but are not limited to the following:

• our Group’s business prospects;

• our ability to maintain and enhance our market position;

• changes in the availability of, or new requirements, for financing;

• changes in our future capital needs and capital expenditure plans;

• future developments, trends and conditions in the industry and markets in which we operate;

• our Group’s business strategies and plans to achieve these strategies;

• general economic, political and business conditions in the markets in which our Group operates;

• changes to the regulatory environment and general outlook in the industry and markets in which our Group operates;

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

• our Group’s financial position;

• our Group’s ability to reduce costs;

• our Group’s dividend;

• the amount and nature of, and potential for, future development of our Group’s business;

• various business opportunities that our Group may pursue;

• capital market developments;

• our Group’s ability to source raw materials;

• fluctuation in the prices of raw materials and our Group’s ability to pass-through any increases in price to customers;

• our Group’s ability to protect our Group’s intellectual property rights;

–44– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. FORWARD-LOOKING STATEMENTS

• our Group’s ability to hire and retain talented employees;

• the actions and developments of our competitors and our Group’s ability to compete under these actions and developments;

• change or volatility in interest rates, foreign exchange rates, equity prices, volumes, operations, margins, risk management and overall market trends; and

• other factors beyond our Group’s control.

Subject to the requirements of applicable laws, rules and regulations, we do not have any and undertake no obligation to update or otherwise revise the forward-looking statements in this document, whether as a result of new information, future events or otherwise. As a result of these and other risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this document might not occur in the way we expect or at all. Accordingly, you should not place undue reliance on any forward-looking information. All forward-looking statements in this document are qualified by reference to the cautionary statements in this section.

In this document, statements of or references to our intentions or those of our Directors are made as of the date of this document. Any such information may change in light of future developments.

–45– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

Potential investors should consider carefully all the information presented in this document and, in particular, should consider the following risks and specific considerations in connection with an investment in our Company before making any investment decision in relation to the [REDACTED]. If any of the possible events described below materialises, our business, financial position and prospects may be materially and adversely affected. Additional risks not currently known to us or that we now consider immaterial may also harm us and affect our investment value. The trading prices of our Shares could decline considerably due to the occurrence of any of such risks and investors may lose part or all of their investments.

RISKS RELATING TO OUR BUSINESS AND INDUSTRY

We conduct our business in a heavily regulated industry.

Our business is subject to a high level of regulation and supervision at the national, regional and local levels. Such regulation and supervision relates mainly to (i) the quality and use of medical facilities, equipment, supplies and services; (ii) procurement, usage and storage of pharmaceuticals and medical consumables; (iii) the licensing and number of healthcare facilities, hospital beds and medical professionals; (iv) the discharge and disposal of pollutants and medical, radioactive and other hazardous waste; (v) anti-corruption and anti-bribery; and (vi) the maintenance and security of confidential patient medical records. For more details of the relevant laws and regulations in the PRC, please refer to the paragraph headed “Regulatory overview — Laws and regulations related to healthcare service sector in the PRC” in this document. We are also exposed to potential legal liabilities in the course of our operations arising from medical disputes, whether with or without merit. For more information, please refer to the paragraph headed “We may not carry adequate insurance for professional and other liabilities which may arise in our business” below. In addition, any changes in laws and regulations could broaden the scope of medical disputes, require us to obtain additional licences, permits, approvals or certificates, increase our operational expenses or result in the invalidation of our currently owned licences.

New regulations relevant to our business may be introduced in the future, or otherwise be amended or replaced requiring us to conduct our business with additional oversight and regulatory compliance. We cannot assure you that we can adapt to changes in the regulatory environment swiftly enough, or in a cost-efficient manner. We cannot assure you that our operations will not be adversely affected by regulatory developments or that the cost of compliance with new regulations will not be material. It is also possible that different interpretations or enforcement of these regulations could subject our current or past practices to allegations of impropriety or illegality or could require us to implement changes in our facilities, equipment, personnel or services or increase capital expenditure and operating expenses.

Inspections by regulators may be carried out at our hospitals on both an announced and unannounced basis depending on the specific regulatory provisions relating to the different healthcare services we provide. A failure to comply with regulations, the receipt of a poor or lower rating in an inspection, or a receipt of a negative report that leads to a determination of regulatory non-compliance or any failure to rectify any material deficiencies noted in an inspection report could, depending on the nature and severity, result in reputational damage, financial and administrative penalties, conditions being placed on our licences, the revocation or suspension of our licences or a decrease in, or cessation of, the services provided by us. If we fail to comply with one or more of these regulations, depending on the nature and severity of such non-compliance, we may face a number of legal consequences, including monetary and administrative penalties, criminal prosecution, increased compliance costs, exclusion from social insurance programmes, temporary or permanent closure of our hospitals or a complete or partial curtailment of our authorisation to perform a line of service or all of our business in its entirety. During the Track Record Period, we received notices from the relevant social insurance administration

–46– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS bureaux/healthcare security bureaux regarding certain incidents of, among others, unnecessary medical examination and treatment, admitting patients for inpatient treatment for mild diseases in Luogang Hospital and Renkang Hospital, in breach of the relevant designated medical institution service agreement, and we were demanded to refund approximately RMB0.8 million of payment reimbursed by Shenzhen Social Insurance Fund Administration and pay a contractual penalty of approximately RMB2.7 million. For details, please refer to the paragraph headed “Business — Social insurance programmes — Breaches of the designated medical institution service agreement” in this document. There is no assurance that we will not receive further notices in respect of medical bills settled by social insurance during the Track Record Period. Any of these consequences could have a material adverse effect on our business, results of operations and prospects.

Ongoing regulatory reforms in China are unpredictable. Changes in China’s regulatory regime for the healthcare service industry, particularly changes in healthcare reform policies, could have a material adverse effect on our business operations and future expansion.

China’s regulatory regime governing the healthcare service industry is undergoing reform, and new regulations and policies are expected to be promulgated. It is uncertain what impact these new regulations and policies would have on our competitiveness, operations and corporate structure. In recent years, the PRC government launched a new healthcare reform plan to ensure that every citizen has access to affordable basic healthcare services. In pursuit of these policy objectives, the PRC government has implemented extensive regulations and policies to address the affordability, accessibility and quality of healthcare services, medical insurance coverage, distribution of pharmaceutical products and reform of public hospitals. In addition, the PRC government has gradually reduced regulatory hurdles for establishing and investing in non-public hospitals, in particular by private capital.

Our business operations and future expansion are largely driven by the PRC government’s policies, which may change significantly and are beyond our control. There can be no assurance that the PRC government will not impose additional or stricter laws or regulations on healthcare services or foreign investments, or strengthen and tighten supervision and management of medical institutions including hospitals, in particular, non-public hospitals, or implement stricter regulations on the distribution of pharmaceutical products, medical devices and medical consumables. Depending on the priorities of the PRC government, the political climate and the regulatory regime with respect to foreign investment control at any given time, and the development of the Chinese healthcare system, future regulatory changes may affect public hospital reform, limit private or foreign investments in healthcare service industry, change reimbursement rates for healthcare services provided to publicly insured patients, or implement additional price control on pharmaceutical products or medical services. Any of these events could have a material and adverse impact on our business, financial condition, results of operations, prospects and future growth.

Regulatory pricing controls and reimbursement limits under social insurance programmes may affect our pricing of certain healthcare services and products.

PRC government laws and regulations at the national and regional levels impose pricing controls and price ceilings on various healthcare services and products provided by public and not-for-profit healthcare institutions. Furthermore, healthcare services and products covered under social insurance programmes are subject to reimbursement limits, thus, patients receiving such healthcare services and products are required to pay for the excess if their medical expenses exceed the reimbursement limits. For more details, please refer to the paragraph headed “Regulatory overview — Laws and regulations related to the healthcare service sector in the PRC — Laws and regulations on prices of medical services and medicine” in this document. Our private for-profit general hospitals are not directly subject to the pricing controls imposed on public or private not-for-profit hospitals for healthcare services and products

–47– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS not covered under social insurance programmes. However, in order to maintain our market position and compete effectively for patients seeking healthcare services and products subject to regulatory pricing controls in public or not-for-profit hospitals and/or social insurance reimbursement limits, we generally set the pricing of such services and products at a tariff similar to the pricing guideline published by government authorities on healthcare services and products not covered under social insurance programmes provided by public or not-for-profit hospitals of the same tier in the same region. As a result, government policies that impose price ceilings, reduce profit margins or restrict social insurance coverage and reimbursement limits will put pressure on our pricing of the relevant healthcare services and products, which may in turn negatively impact our overall profitability.

The PRC government may adjust the price ceilings in the future and subject additional healthcare services and products to pricing controls and/or more stringent social insurance reimbursement limits as part of its healthcare reform plan or for any other reason. We may need to adjust the pricing of our healthcare services and products in line with that of key competitors to maintain our competitiveness, which may reduce our overall profitability and in turn have a material adverse effect on our business, results of operation and prospects.

We derive a significant portion of our revenue from healthcare services and products provided to patients covered under social insurance programmes, and the loss of any such revenue could have a material adverse effect on our business, results of operations and prospects.

We receive a significant portion of payments for our medical bills from the PRC government, principally through social insurance programmes. The medical fee of patients for healthcare services and products covered under such programmes is generally paid by the PRC government to our hospitals. During the three years ended 31 December 2020, the revenue derived from social insurance programmes amounted to approximately RMB94.8 million, RMB88.0 million and RMB73.4 million, respectively, representing approximately 44.3%, 40.9% and 42.8% of our total revenue in the same periods, respectively. We expect to continue to derive a significant portion of our revenue under social insurance programmes. The PRC government also only reimburses medical expenses for certain approved services and pharmaceuticals, and the reimbursement percentages and limits for covered medical expenses may vary widely depending on the region, hospital rating, type of disease and the treatment and pharmaceuticals provided. Our participation in social insurance programmes is dependent on our hospitals’ maintaining the relevant “designated” status, which is subject to stringent regulatory scrutiny of, among other things, our practicing licence, information system, relevant management staff, information system incidents and accidents management policies, legal compliance status and credit rating. We cannot assure you that our hospitals will be able to maintain their status as a “designated” hospital under any of the social insurance programmes. The loss of the “designated” status of our hospitals will not only harm our reputation but may also result in a reduced volume of patients visiting our hospitals for healthcare services and products covered by the relevant social insurance programmes. Further, the PRC government may alter its reimbursement policies in coverage plans in the future such that: (i) certain healthcare services and products provided by us will no longer be covered; or (ii) more stringent thresholds on existing coverage may be imposed, such as reducing the admissions and length of stays for inpatients, for whom treatment is generally more costly than outpatients. Any reduction in the rates paid or the scope of services covered may reduce patient accessibility to our hospitals and may lead to reduced patient flow and fees. Both the loss of our “designated” status and any alternation in the PRC government’s reimbursement policies in social insurance programmes could lead to a decrease in our revenue and profitability which could have a material adverse effect on our business, results of operations and prospects.

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Our success is linked to our ability to recruit and retain high quality doctors and other healthcare professionals, such as nurses and technicians. We must also properly manage the employment of our doctors and nurses, as the failure to do so may lead to penalties against our hospitals, including fines, loss of licences, or an order to cease practice, which could materially and adversely affect our business, results of operations and prospects.

Our operations depend on the number, efforts, ability and experience of our doctors and other healthcare professionals at our hospitals. We compete with other healthcare providers in Shenzhen and Zhongshan, to recruit and retain qualified doctors and other healthcare professionals.

The reputation, expertise and demeanour of the doctors and other healthcare professionals who provide medical services at our hospitals are instrumental to our ability to attract patients. The success of our hospitals is, therefore, linked to the number and the quality of the doctors and other healthcare professionals at our hospitals, their admitting practices and our relationships with them. The factors that doctors consider important in deciding where they will work include their compensation package, reputation of the hospital, the quality of equipment and facilities, research capability, platform for career advancement, the quality and number of supporting staff, and market leadership of the hospital. We may not be able to compete with other healthcare providers, whether public or otherwise, on all of these factors. Without a team of quality doctors and other healthcare professionals, our hospitals would not be able to attract patients or offer high quality services to the general public. It has become increasingly costly to recruit and retain healthcare professionals in recent years. During the three years ended 31 December 2020, our total healthcare staff costs were approximately RMB49.2 million, RMB48.5 million and RMB36.6 million, representing approximately 36.9%, 36.9% and 36.0% of our cost of revenue in the same periods, respectively. Our staff turnover rate for healthcare professionals was approximately 64.3%,72.7%, 59.8% and 18.7% for the three years ended 31 December 2020 and the period from 1 January 2021 to the Latest Practicable Date, respectively. The loss of a significant number of our doctors and other healthcare professionals, or the inability to attract or retain sufficient numbers of qualified doctors and other healthcare professionals, could have a material adverse effect on our business, results of operations and prospects.

Even if we are able to recruit and retain quality doctors and other healthcare professionals, we may not be able to manage our employees properly. In particular, the practising activities of doctors and nurses are strictly regulated under PRC laws and regulations. Doctors and nurses who practise at medical institutions are required to hold practising licences and are only permitted to practise within the scope of their licences. For more details, please refer to the paragraph headed “Regulatory overview — Laws and regulations related to healthcare services sector in the PRC — Laws and regulations on medical personnel of medical institutions” in this document.

In practice, it may take a period of time for doctors and nurses to transfer their licences from one medical institution to another or to add another medical institution to their permitted practising institutions. We cannot assure you that any of our personnel transferred from a different hospital or any potential personnel to be hired by our hospitals will complete the transfer of their licences and the related government procedures on time, if at all, or that our doctors and nurses will not practise outside the permitted scope of their respective licences. Our failure to properly manage the employment of our doctors and nurses may subject us to administrative penalties against our hospitals including fines, loss of licences, or, in the worst case scenario, an order to cease practice, any of which could materially and adversely affect our business, results of operations and prospects.

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Our business is subject to seasonal fluctuations.

Our revenue has historically been entirely dependent on our operations in Guangdong Province and will remain largely dependent on our operations in Guangdong Province going forward. As such, we are especially sensitive to the local conditions and changes in Guangdong Province, such as with respect to its economy, laws and regulations, and any force majeure events, natural disasters or outbreaks of contagious diseases in this region.

During the Track Record Period, we derived our revenue primarily from our hospitals, all of which are located in Guangdong Province. Going forward, we expect that a large part of our revenue will remain dependent on our operations in Guangdong Province. We are therefore highly sensitive to the regulatory, economic, environmental and competitive conditions, as well as the public health landscape, in this region. In particular, many large-scale factories and manufacturing operations located in Guangdong Province, including Zhongshan City, have closed down or relocated to countries in the Southeast Asia in recent years due to increasing costs and the deterioration of the global environment as a result of the trade war between China and the United States, resulting in many of their employees becoming unemployed. A significant reduction in the aggregate workforce employed in Guangdong Province in general and Zhongshan City in particular, many of whom may be covered by social insurance programmes, may reduce the demand for our healthcare services, such as employee physical examination, general medical consultation and work-related injuries services, resulting in lower volume of patients. Furthermore, significant changes in the laws and regulations governing the healthcare industry in Guangdong Province may have a material effect on our business operations. In addition, if there is an outbreak of contagious disease in Guangdong Province, the volume of patients that would seek non-urgent medical care at our hospitals may decrease if such patients avoid visiting hospitals during such outbreak. The service capability of our hospitals will also be disrupted as a result of the need to implement heightened sanitisation and quarantine procedures. Any epidemic outbreaks in Guangdong Province may disrupt our operations significantly. Furthermore, natural disasters or other catastrophic events that may occur in Guangdong Province, such as earthquakes, fires, droughts, typhoons, floods, outages of critical utilities, disruptions to transportation systems, including as a result of terrorist attacks, may damage or limit our ability to operate our hospitals. Any such unpredictable development in Guangdong Province could have a material adverse effect on our business, results of operations and prospects.

Demand for our healthcare services is affected by macroeconomic and political conditions that are outside of our control.

The demand for our healthcare services can be affected by a number of factors that are beyond our control such as general macroeconomic conditions, conditions in the financial services markets, geopolitical conditions and other general political and economic developments. Recent turmoil in the financial markets, including the capital and credit markets, may continue to put pressure on the PRC and/or global economy and could have a negative effect on the demand for our healthcare services that are not covered by social insurance programmes. We may be more susceptible to changes in patient preference, patient spending power and economic conditions than some of our competitors who provide similar services at lower prices. In particular, our patients may cut back spending on treatments,

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During the three years ended 31 December 2020, approximately 55.7%, 59.1% and 57.2% of our total revenue respectively, was generated from (i) self-pay patients who funded their treatments themselves and/or by their commercial insurance providers; and (ii) corporate customers who purchase employee healthcare services. The self-pay market and employee healthcare market are subject to fluctuations in demand and are likely to be adversely affected in an economic downturn, particularly if employers become unable to employ additional workers or provide health benefits for their existing employees or if there is a decline in the number of people with sufficient income or capital to pay for treatment themselves. To the extent our payers are negatively affected by a decline in the economy, we may experience further pressure on commercial rates, less demand and a reduction in the amounts we expect to collect, any of which could have a corresponding material adverse effect on our business, results of operations and prospects.

The underlying buildings of our hospitals are leaseholds. Termination or non-renewal of our leases may adversely affect our business, results of operations and prospects.

Each of our hospitals had entered into a lease agreement for its underlying buildings for a term from approximately 11 months to 11 years and 9 months. Under the lease agreements, in the event of certain material breaches by us, such as non-payment of rent, our landlords may enforce their right to terminate the lease agreements. Under the lease agreements, we are typically given the priority for the leasing of the underlying buildings after the expiry of the lease term. However, there is no assurance as to the renewal of the lease agreements. Accordingly, our ability to use the underlying buildings of our hospitals will be materially adversely affected if the lease agreements have not been renewed upon its expiration and we are asked to vacate the underlying buildings upon the expiration of the lease agreements. If we are unable to procure another suitable location and facilities in a timely manner on commercially reasonable terms for the operations of our hospitals, which could subject us to interruption to our business, construction, renovation and other costs and risks. In addition, the revenue and profit generated after relocation may be less than the revenue and profit previously generated before such relocation. As a result, our business, results of operations and prospects would be materially adversely affected.

If Xuexiang Hospital is not being able to resume same scale of operation after relocation, our business, financial condition and results of operations may be adversely affected.

According to a notice from the Shenzhen Longgang District Ban Tian Street Office, the building where Xuexiang Hospital was located at would be expropriated and demolished and subject to urban transformation. Xuexiang Hospital has completed relocation and has acquired all necessary licenses and approval from various departments, including Ecology and Environment Bureau and Housing and Construction Bureau, for its business. However, we cannot assure the period of time for Xuexiang Hospital to attain the same scale of operation as compared to its operation prior to its relocation, or at all. If we cannot resume same scale of operation as anticipated, our business, financial position, results of operations and prospects could be adversely affected.

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The actual use of our owned and leased properties in Zhongshan City and a leased property in Shenzhen does not comply with the permitted use as stated in the relevant ownership certificates, which may result in a disruption of our operations and subject us to penalties.

The permitted use of our (i) land use right of a site area of approximately 538.51 sq.m.; (ii) building ownership with a GFA of approximately 2,194.29 sq.m.; (iii) leased properties with a GFA of approximately 15,865.11 sq.m. in Zhongshan City; and (iv) a leased property with a GFA of approximately 4,474 sq.m. in Shenzhen, is “industrial” and we are in contravention of such permitted use by using it as a hospital for our inpatient and outpatient treatment. As a result, our right to use our owned and leased properties as a hospital may be limited or challenged by the relevant government authorities. As advised by our PRC Legal Adviser, if the authorities determine that this is sanctionable, we may be ordered to return the land and be subject to fines due to the non-industrial use of the land and may be further subject to administrative penalties. If the use of our owned or leased properties in Zhongshan City and Shenzhen is challenged by the relevant land administration, we may incur additional costs relating to such relocations as well as business interruption. There can be no assurance that we can relocate to comparable alternative premises without any adverse effect on our business, financial condition, results of operations and prospects.

Our rights to use our leased properties could be challenged by third parties, or we may be forced to relocate due to title defects, or we may be liable for failure to register our leased agreements, which may result in a disruption of our operations and subject us to penalties.

As of the Latest Practicable Date, 48 properties with a total GFA of approximately 17,860.60 sq.m. were leased from lessors who were unable to provide sufficient or valid ownership certificates or other ownership documents, of which 9 properties with a total GFA of approximately 9,184.10 sq.m. are used as hospitals, one property with a total GFA of approximately 3,210.58 sq.m. is used as both hospital and staff’s dormitory and the remaining 38 properties with a total GFA of approximately 5,465.92 sq.m. are used as offices, staff’s dormitory or canteen. As of the Latest Practicable Date, we were not aware of any actions, claims or investigations being contemplated by the competent government authorities with respect to the defects in our leased real properties or any challenges by third parties to our use of these properties. However, if third parties who purport to be property owners or beneficiaries of the mortgaged properties challenge our right to lease these properties, we may not be able to protect our leasehold interest and may be ordered to vacate the affected premises. Any relocation could disrupt our operations and adversely affect our business, financial condition, results of operations and growth prospects. In addition, there can be no assurance that the PRC government will not amend or revise existing property laws, rules or regulations to require additional approvals, licences or permits, or impose stricter requirements on us to obtain or maintain relevant title certificates for the properties that we use. For more details of these legal irregularities, please refer to the paragraph headed “Business — Properties — Leased properties” in this document for details.

As of the Latest Practicable Date, we had not fully completed the housing tenancy registration formalities of 57 lease agreements relating to properties as required by the PRC regulation, of which 12 properties were used as hospital, one property was used as both hospital and staff’s dormitory and the remaining 44 properties were used as offices, staff’s dormitory or canteen. Although the failure to do so would not invalidate the leases, we may be subject to fines from RMB1,000 to RMB10,000 for each unregistered lease agreement.

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We may be subject to fines and penalties as a result of our non-compliance with relevant social insurance and housing provident fund contribution laws and regulations in the PRC during the Track Record Period.

During the Track Record Period, we failed to make adequate social insurance and housing provident fund contributions for our employees as required by relevant PRC laws and regulations. Please refer to the paragraph headed “Business — Legal proceedings and compliance — Non-compliance incidents” in this document for details.

There is no assurance that we will not be subject to penalties or fines imposed by the relevant PRC authority as a result of such non-compliance incidents. In the event that the relevant authority later strengthens the enforcement of the relevant laws and regulations on social insurance and housing provident fund in respect of the enterprises within its jurisdiction and accordingly require payment by enterprises of underpaid social insurance fund or housing provident fund and impose penalties, the amount of which may be significant, our Group’s business, financial condition and operating results may be materially and adversely affected.

The close proximity of Luogang Hospital and Renkang Hospital may affect the patient visits and revenue of Luogang Hospital and/or Renkang Hospital.

The target coverage area of each of our hospitals varies by location, depending on a number of factors such as population density, area demographics, geography and ease of access to public transportation. Despite Luogang Hospital locates in Longgang District and Renkang Hospital locates in Luohu District, the distance between Luogang Hospital and Renkang Hospital is only approximately 1.9 kilometers apart and the scope of services provided by each of them is similar. As a result, existing customers of Luogang Hospital may be diverted to the Renkang Hospital due to, among others, quality of doctors, technology advancement of medical facilities and price charged for medical services, which could adversely impact the patient visits and revenue of Luogang Hospital, and vice versa. There can be no assurance that patient diversion between Luogang Hospital and Renkang Hospital will not occur or become more significant in the future if Luogang Hospital and/or Renkang Hospital increase their competitiveness by employing more talents and upgrading medical facilities, which could have a material adverse effect on patient visits and revenue of individual hospital. Save for the proximity between Luogang Hospital and Renkang Hospital, the distances between each of the four hospitals of our Group in Shenzhen, namely Luogang Hospital, Renkang Hospital, Xuexiang Hospital and Jian’an Hospital are more than 4.1 kilometers and they mainly serve different patient groups in the local communities, we believe that there is no direct competition among them.

Any failure to maintain our reputation may materially and adversely affect our results of operations and prospects.

We depend on the strength of our brand and reputation. If we fail to maintain our brand image and if there is any incident that jeopardises patients’ trust in the quality of our services or products, this could materially and adversely affect our brand value and recognition, thereby weakening their affinity to our brand and decreasing their demand for our services. Factors such as poor clinical outcomes, health and safety incidents, problems with our medical equipment, negative press or patient dissatisfaction, could lead to deterioration in our hospitals’ rating or the public perception of the quality of our services, which could result in a reduction in the number of our patients.

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Regulatory action by PRC regulatory authorities could also result in a reduction of patient numbers or in us ceasing to provide a service or closing down part of our service offerings because of the negative publicity such regulatory action may generate. In addition, actions taken by a regulator in relation to one or more of our services, regardless of the substantive merit or the eventual outcome of such action, may have a material adverse effect on our reputation and our ability to attract and/or retain medical professionals, expand our business or seek licences for new services.

Some of our patients have complex medical conditions, are considered vulnerable and often require a substantial level of intensive care and supervision. There is a risk that one or more of such patients could be harmed by our employees, either intentionally, negligently or accidentally. A serious incident involving harm to one or more of our patients could result in negative publicity. Furthermore, the damage to our reputation or to the reputation of our hospitals could be exacerbated by any failure on our part to respond effectively. We cannot assure you that our clinical, educational and other governance procedures will enable us to prevent an event giving rise to significant negative publicity.

Any deterioration of our hospitals’ rating, loss of goodwill or damage to our reputation or the value of our brand caused by any of the foregoing factors could have a material adverse effect on our ability to attract new and returning patients and, as a result, adversely affect our business, results of operations and prospects.

Our reputation may be negatively impacted by various circumstances and events, some of which may be beyond our control.

We operate in an industry in which maintaining a reputation for high quality and reliable healthcare services overseen by a professional, high calibre and stable management team is paramount to success. Although as the operator of Class I general hospitals and Class II TCM hospital, we currently enjoy a strong reputation in the market in which we operate as evidenced by the numerous awards and honours that have been bestowed upon our hospitals in recent years, we cannot assure you that we will be able to maintain or further enhance this reputation. While many of the circumstances that may negatively impact our reputation, such as a failure to comply with existing or new regulations, loss of status as a designated service provider under key healthcare programs, the quality of our doctors, other healthcare professionals and services, and the quality of the services we provide are, to a reasonable extent, within our control, there are other circumstances and events that we may have limited or no control over. For example, despite our best efforts, there may be poor clinical outcomes with some of our patients and our employees may engage in conduct that is contrary to laws or regulations. Any deterioration of our reputation or the value of our brand caused by any of these events could have a material adverse effect on our ability to hire quality healthcare professionals and attract new and returning patients and, as a result, adversely affect our business, results of operations and prospects.

We are exposed to inherent risks of medical disputes and legal proceedings arising from our operations, and resolving such disputes and proceedings could result in significant costs and materially and adversely affect our results of operations and prospects, as well as our reputation and business.

We rely on doctors and other healthcare professionals of our hospitals to make proper clinical decisions regarding diagnosis and treatment of our patients. However, it is impossible for us to have direct control or oversight over all the clinical activities of our hospitals or the decisions and actions taken by doctors and other healthcare professionals as their diagnoses and treatments of patients are subject to their professional judgment and in many cases, must be performed swiftly on a real time basis. Any lapse of judgment on the part of our doctors and other healthcare professionals, or any failure by our hospitals to properly manage their clinical activities may result in unsatisfactory treatment outcomes,

–54– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS patient injury or possible patient death. We are especially exposed to these risks from the treatment of complex medical conditions at our hospitals that do not have guaranteed positive outcomes. In addition, there are inherent risks associated with our clinical activities which may result in unfavourable medical outcomes not caused by clinical decisions. We are susceptible to complaints from patients or their relatives associated with our services from time to time. They may use violence during the course of the disputes, which may result in damage to our equipment and facilities or cause harm to our doctors, other medical staff, patients or visitors. They may also generate negative publicity using the media. In such case, we may choose to settle with the unsatisfied parties without legal proceedings in order to minimise the negative impact on our reputation and operations. As at the Latest Practicable Date, we were involved in one on-going medical dispute and we estimate that the aggregate maximum exposure in relation to this dispute will not exceed RMB40,000. For further details of our on-going medical disputes, please refer to the paragraph headed “Business — Legal proceedings and compliance — Medical disputes” in this document.

Serious incidents of patient death or injury may occur at our hospitals. Through providing healthcare to patients with various medical conditions, we are exposed to inherent risks in our operations, even in areas for which we have adopted the highest clinical standards. Such risks cannot be entirely eliminated. Any medical dispute occurring at our hospitals may result in a claim or legal proceeding against us, which, regardless of merit or settlement status, could adversely affect our industry reputation, divert management resources and cause us to incur significant costs, such as legal fees. Further, we may not be adequately insured against losses and liabilities arising from such claims or proceedings. A settlement or successful claim against us can result in significant costs, damages, compensation and adversely affect our business, results of operations and prospects.

We may not carry adequate insurance for professional and other liabilities which may arise in our business.

We are exposed to potential liabilities that are inherent to the provision of healthcare services. We maintain medical liability insurance for all of our hospitals. However, we may face claims in excess of our insurance coverage or claims which are not covered by our insurance due to other policy limitations or exclusions or where we have failed to comply with the terms of the policy. There are only a limited number of medical liability insurance providers in the market and we may experience gaps in coverage when seeking to renew our insurance policies or seeking to change insurance providers. We cannot assure you that we will be able to obtain medical liability insurance in the future for our hospitals on acceptable terms or without substantial premium increases or at all, particularly if there is deterioration in our claims experience history. Any successful claim against us not covered by or in excess of our insurance cover could have a material adverse effect on our business, results of operation and prospects.

Our prospects for growth and reputation will be affected if we do not continuously enhance our facilities with the most recent technological advances in diagnostic and surgical equipment.

We utilise various types of medical equipment to carry out our operations. The healthcare industry is characterised by frequent product improvements and evolving technology. As technological advances in the healthcare industry continue to evolve rapidly, in order to compete with other hospitals and healthcare providers for doctors and patients, we must continuously assess our equipment at our hospitals and upgrade or acquire new equipment as a result of technological improvements. Such equipment upgrades and acquisitions represent significant expenditure and may be subject to licensing or other regulatory requirements. If we are unable to upgrade our existing medical equipment or satisfy relevant regulatory requirements for any newly acquired equipment in a timely manner, it could harm our competitiveness and adversely affect our patient visits. Inability to timely upgrade our medical equipment could also results in medical practitioners not being able to provide the required services,

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Rapid technological advances in the healthcare industry and in other hospitals could also, at times, lead to earlier-than-planned obsolescence or redundancy of equipment and result in asset impairment charges, which may materially adversely affect our results of operations.

Our operations are susceptible to fluctuations in the costs of pharmaceuticals and medical consumables, which could adversely affect our profitability and results of operations.

The availability and prices of the pharmaceuticals and medical consumables used in our business fluctuate from time to time and are subject to factors beyond our control, including supply, demand, general economic conditions and governmental regulations, each of which may affect our procurement costs or cause a disruption in our supply. During the three years ended 31 December 2020, pharmaceuticals and medical consumables costs accounted for approximately 40.3%, 41.4% and 38.3% of our cost of revenue in the same periods, respectively. We cannot assure you that we will be able to anticipate and react to changes in medical supply costs by changing replacement suppliers or adjusting our service fees in the future, or that we will be able to pass these cost increases onto our patients. Any of these factors may have a material adverse effect on our business, results of operations and prospects.

Delay or failure in obtaining necessary governmental approvals for expansion plans may adversely affect our business, operations and future growth plans.

Our success depends on the expansion of our hospitals’ facilities to accommodate increasing patient admissions. In the PRC, hospital expansion plans and changes in medical services offered require governmental approval. In 2018, we have increased Renkang Hospital’s bed counts to support the growth in in-patient admissions. If we fail to obtain the necessary governmental approvals to expand the operations in our hospitals, our ability to generate additional revenue through the expansion of hospital services and facilities will be limited, and our business and prospects may be adversely affected.

We may not be able to properly identify or effectively execute expansion opportunities and plans, and any business we acquire in relation to our growth and expansion may have unknown or contingent liabilities, which may materially and adversely affect our business, results of operations and prospects.

Our growth strategy also depends, to an extent, on our ability to acquire and manage additional hospitals and healthcare businesses. Although we continuously evaluate potential opportunities, we may not be able to identify suitable business targets to expand our business operations, or be able to negotiate commercially acceptable terms for such expansion. We may also compete with other companies on seeking suitable business targets. Even if we are able to identify suitable business targets, such expansion can be difficult, time consuming and costly and we may not be able to secure the necessary financing at commercially acceptable terms for such expansion. In addition, new facilities may require a significant number of additional staff, and we may have difficulty in hiring enough properly qualified personnel or in obtaining licences for such personnel to practise in the relevant location. If we cannot identify suitable expansion opportunities, secure suitable financing or achieve our target return on investment, our business, results of operations and prospects could be materially and adversely affected.

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With respect to the execution of our expansion strategy, we may encounter unknown or contingent liabilities, including those incurred for non-compliance with relevant laws, rules and regulations, such as failure to obtain requisite licences, permits and title certificates to land or failure to register leases, which may result in financial penalties, reputation damage as well as being required to relocate our facilities. If we suffer reputational damage or financial loss caused by unknown or contingent liabilities of the business targets that we expand to, our business, results of operations and prospects could be materially and adversely affected.

We may not be able to obtain any economic benefits by joining the medical institution syndicate (醫療聯合體) led by Shenzhen Luohu Medical Group* (深圳羅湖醫院集團), and medical negligence claims against any member of the syndicate may have adverse effect on our reputation.

During the Track Record Period, four of our hospitals in Shenzhen strategically entered into a cooperation agreement with Shenzhen Luohu Medical Group* (深圳羅湖醫院集團) to join the medical institution syndicate led by Shenzhen Luohu Medical Group* (深圳羅湖醫院集團) pursuant to which we are able cooperate with members of the syndicate in areas, among others, two-way transfers (雙向轉診), technical support, talents development and resources sharing. However, there is no assurance as to whether there will be any economic benefits brought to us by joining the syndicate led by Shenzhen Luohu Medical Group* (深圳羅湖醫院集團). In addition, if any medical negligence claims are brought against any member of the syndicate, the general public may lose confidence in the quality of service provided by members of the syndicate as a whole and may harm our reputation, which may in turn decrease the patient volume visiting our hospitals and may have a material adverse effect on our business, cash flows, financial condition, results of operations and prospects.

We face competition from other hospitals and healthcare providers, and if we do not compete successfully, our profitability and market share may decline.

The healthcare industry in the PRC is competitive. We compete with other public and private general hospitals and, to some extent, specialty hospitals, in particular those located in Guangdong Province. We will also compete with future market entrants as the growth of the healthcare market in the PRC may attract domestic or international players to enter or to expand their existing operations. International market players may have substantially greater financial, marketing or other resources than we do, and the international profile of these operators and their ability to draw resources may constitute attractive features for many patients, thus increasing their competitive advantage. It is also possible that there will be significant consolidation and mergers in the healthcare industry. Our competitors may develop alliances, and these alliances may acquire significant market share. Concentration within the healthcare industry or other potential corporate actions of our competitors could improve their competitive position and market share.

Furthermore, specialty hospitals that focus on one or only a few medical disciplines continue to grow. These hospitals generally have a lower barrier to entry than general hospitals. If the number of such hospitals increases over time, they may attract patients for their respective disciplines who might otherwise go to our hospitals for the same services, causing increased competition for our business, which could, in turn, have a negative effect on our patient volume and overall market share.

Hospitals compete on factors such as reputation, clinical excellence and patient satisfaction. We cannot assure you that we will be able to successfully compete against new or existing competitors, and changes in the competitive landscape may result in price reduction, reduced profitability or loss of market share, any of which could have a material adverse effect on our business, results of operations and prospects.

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An occurrence of a natural disaster, widespread health epidemic or other outbreaks could have a material adverse effect on our business, financial condition and results of operations.

Our business could be materially and adversely affected by natural disasters, such as snowstorms, earthquakes, fires or floods, the outbreak of a widespread health epidemic, such as swine flu, avian influenza, severe acute respiratory syndrome, or SARS, Ebola, Zika, COVID-19 or other events, such as wars, acts of terrorism, environmental accidents, power shortage or communication interruptions. The occurrence of a disaster or a prolonged outbreak of an epidemic illness or other adverse public health developments in China or elsewhere in the world could materially disrupt our business and operations. For example, the recent outbreak of COVID-19 has endangered the health of many people residing in China and disrupt the operation of many corporations. There is no assurance that the operation of our suppliers for pharmaceuticals and medical consumables will not be disrupted. In the event we do not have sufficient inventories and we are unable to procure necessary pharmaceuticals and medical consumables from our suppliers, we may not be able to carry out necessary medical treatments for our patients, which in turn may materially and adversely affect our results of operations and financial position. The development of COVID-19 and especially in Shenzhen and Zhongshan, where all our hospitals located, are beyond our control. There is no certainty as to the timing that situation of COVID-19 will be under control, and if the epidemic continues for a prolonged period of time, the business, results of operations and financial position of our Group may be materially and adversely affected.

On account of risks typically associated with the operation of healthcare facilities, patients may contract serious communicable infections or diseases at our hospitals.

Our operations does not generally involve the treatment of patients with a variety of infectious diseases. There is no assurance that patients with infectious diseases will not be admitted to our hospitals. Previously healthy or uninfected individuals may contract serious communicable diseases in connection with their stay or visit at our hospitals. This may result in significant claims for damages against us and, as a result of media coverage, damage of our reputation. For example, infectious diseases such as COVID-19, H7N9 virus, viral hepatitis, tuberculosis, may pose risks to our operations in the future. Furthermore, these germs of infections could also infect employees and thus significantly reduce the service capacity at our hospitals. In addition to claims for damages, any of these epidemic events may lead to limitations on the activities of our hospitals as a result of quarantines, closing of parts of our hospitals at times for sterilisation, regulatory restrictions on, or the withdrawal of, permits and authorisations, and it may indirectly result, through a loss of reputation, in reduced utilisation of our hospitals. Any of these factors may have a material adverse effect on our business, results of operations and prospects.

If we do not compete successfully against virtual hospitals and clinics, our business, financial condition and results of operations may be adversely affected.

Recently, there is an increasing trend of demand for virtual hospitals and clinics to provide remote medical consultation and diagnosis. Such remote medical services may compete against the outpatient services provided by our hospitals. We cannot assure you that our hospitals will be able to successfully compete with new or existing virtual hospitals and clinics and manage to attract and retain patients. Any inability to compete effectively could result in decrease in revenue and market share, any of which could have an adverse effect on our business, financial condition and results of operations.

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We depend on the continual service of our key personnel, and loss of the services of one or more of our key executives or a significant portion of our management personnel could weaken our management team and materially adversely affect our business, results of operation and prospects.

Our success depends on the skills, experience and efforts of our senior management team (whose names and biographical details are set out in the section headed “Director and senior management” in this document). Our senior management has extensive experience in the healthcare industry and has skills that are important to the operation of our business. In particular, we rely on the expertise, experience and leadership of (i) Mr. Li, our chairman, chief executive officer and executive Director, who has over 20 years of experience in the medical industry and is a pioneer in investing and operating non-public hospitals in the PRC and has steered us since the inception of our hospitals; and (ii) Mr. Luo Jian, member of our senior management, has 24 years of experience in hospital management.

Individuals with industry-specific experience are uncommon, and the market for such individuals is competitive. As a result, we may not be able to attract and retain qualified personnel to replace or succeed members of our senior management or other key employees, should the need arise. We do not maintain any key man life insurance policies. The loss of services of one or more members of our senior management or of a significant portion of any of our management staff could weaken our management expertise and our ability to deliver healthcare services efficiently, which could in turn have a material adverse effect on our business, results of operations and prospects.

We recorded net current liabilities as at 31 December 2019 and 2020, and we cannot assure you that we will not continue to record net current liabilities.

We recorded net current liabilities of approximately RMB63.1 million and RMB42.9 million as at 31 December 2019 and 2020, respectively. The net current liabilities position as at 31 December 2019 was primarily due to, among others, (i) payment made to the Controlling Shareholders of approximately RMB47.0 million during FY2019; and (ii) the increase in our trade and other payables of approximately RMB74.9 million which is mainly due to the increase of other payables of approximately RMB46.3 million, which represents the amounts outstanding for acquisition of subsidiaries under common control which arose from the equity transfer agreement between Guodan HK as a transferee and Mr. Li, Ms. Li, Mr. Huang, Mr. Zhou, Mr. Yang, Mr. Tan and Richcome Pacific as transferors in relation to the transfer of the equity interest of Guodan SZ as part of the reorganisation steps of our Group. Our net current liabilities position slightly improved as at 31 December 2020 was mainly due to (i) the decrease in our trade and other payables of approximately RMB65.0 million and (ii) the increase in cash and cash equivalents of approximately RMB40.5 million, which was partially offsetted by the decrease in trade and other receivables of RMB71.4 million. For further details regarding our net current liabilities, please refer to the paragraph headed “Financial information — Net current assets and liabilities — Background of net current liabilities” in this document.

There is no assurance that we will not experience net current liabilities position in the future. Having significant net current liabilities could constrain our operational flexibility and adversely affect our ability to expand our business. If we do not generate sufficient cash flow from our operations to meet our present and future financial needs, we may need to resort to external funding. If adequate external funds are not available on commercially reasonable terms or at all, we may face liquidity difficulties. As such, our business, financial condition and results of operations may be materially and adversely affected.

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The adoption of IFRS 16 affected our statement of financial position, profile of profit and loss statement and certain key ratios (including gearing ratio) due to our operating lease arrangements.

As at the Latest Practicable Date, most of our hospitals are operating on properties leased by our Group. Under IFRS 16, which we have adopted since and throughout the entire Track Record Period, leases are recognised as a right-of-use asset and corresponding liability at the date of which the leased asset is available for use by us. Each lease payment is allocated between the liability 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. Our current accounting policy for such leases is set out in note 2(f) to the Accountants’ Report in Appendix I to this document. As at 31 December 2020, our total lease liabilities amounted to approximately RMB48.7 million.

During the Track Record Period, our future operating lease commitments have been discounted and recognised as “lease liabilities” in our consolidated statements of financial position. IFRS 16 “Leases” provides new provisions for the accounting treatment of leases and no longer allows lessees to recognise certain leases outside of the consolidated statement of financial position. Instead, for all leases with a term of more than 12 months, unless the underlying asset is of low value, a lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments.

The adoption of IFRS 16 affected virtually all commonly used financial ratios and performance metrics, such as debt to equity ratio, gearing ratio, current ratio, quick ratio, interest coverage, return on total assets, return on equity, earnings per Share, operating cash flows and cash flows from financing activities. The recognition of right-of-use assets and lease liabilities expanded our consolidated statement of financial position and will materially affect our related financial ratios, resulted in an increase in total debt to equity ratio and a decrease in our net current assets, current ratio and quick ratio. In our consolidated statements of comprehensive income, the adoption of IFRS 16 gave rise to recognition of depreciation of the right-of-use assets, instead of recognition of lease payments as rental expenses. Depreciation expense associated with the right-of-use assets is charged over the life of the lease on a straight-line basis. Interest expenses on the lease liability are recorded under finance costs with reference to the incremental borrowing rate of the lessee and is expected to reduce over the life of the leases as lease payments are made. As a result, the rental expenses under otherwise identical circumstances decreased, while depreciation and interest expense increased and led to an increase in gearing ratio and decrease in interest coverage ratio. The combination of a straight-line depreciation of the right-of-use asset and the effective interest rate method applied to the lease liability resulted in a change of expenses recognition pattern, in particular, a higher total charge to the statement of comprehensive income in the initial years of the lease, and decreasing expenses during the latter part of the lease term, and it led to a decrease in profit before tax in the initial years of the lease as a result. In particular, (i) our current ratio and quick ratio is reduced as a result of the recognition of the current portion of the lease liabilities; and (ii) our gearing ratio are increased as a result of the change in profit and equity from adoption of IFRS 16. For details of the impact on the key items in our Group’s consolidated statements of financial position as at 31 December 2018, 2019 and 2020, and in the Group’s consolidated statements of financial position and consolidated cash flow statements during the Track Record Period, please refer to the paragraph headed “Financial information — Significant accounting policies, estimates and judgments — New standards adopted by the Group” in this document.

Our concentrated debtor’s portfolio may expose us to credit risks.

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in a financial loss to our Group. Our Group’s credit risk is primarily attributable to trade and other receivables. Our Group’s exposure to credit risk arising from cash and cash equivalents and restricted cash is limited because the counterparties are banks for which our Group considers to have low credit risk.

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The carrying amount of trade and other receivables represent our Group’s maximum exposure to credit risk in relation to trade and other receivables. Management has a credit policy in place and the exposures to these credit risks are monitored on an ongoing basis. Individual credit evaluations are performed on all debtors requiring credit over a certain amount. These evaluations focus on the debtors’ history of making payments, and take into account information specific to the debtor as well as pertaining to the economic environment in which the debtor operates.

Our Group, being a provider of healthcare services to patients, has a highly diversified customer base, without any single customer contributing material revenue. However, our Group has concentrated debtors’ portfolio, as many patients will claim their medical bills from governments’ social insurance programmes. Payments by governments’ social insurance programmes will normally be settled at the proportion of 97% for hospitals in Shenzhen and 95% for hospitals in Zhongshan City of our healthcare revenue within approximately 30 days from the transaction date by the local social insurance bureau which are responsible for the reimbursement of medical expenses for patients who are covered by the governments’ social insurance programmes. For those balances not covered by social insurance programmes, our management assessed the collectability based on historical patterns and data. Our Group has controls to closely monitor the patients’ billings and claim status to minimise the credit risk, and there is no significant concentration of credit risks. Our average trade receivable turnover days were 21.5 days, 23.7 days and 30.0 days during the Track Record Period. Although the trade receivable turnover days remained stable as at 31 December 2018, 2019 and 2020, we cannot guarantee that the trade receivable turnover days will remain stable in the future, especially the dominant position of local social insurance bureaux/healthcare security bureaux in reimbursement of our medical expenses through the government’s social insurance programmes. If the abovementioned parties delay or default in their payments to us, we may have to make impairment provisions and write-off the relevant receivables and hence our liquidity may be adversely affected. This may in turn materially and adversely affect our business, financial condition and results of operations.

We have significant amounts of intangible assets arising from the acquisition of Jian’an Hospital on our balance sheet, which would trigger impairment losses.

As of 31 December 2020, the carrying amount of our intangible asset other than goodwill arising from the acquisition of Jian’an Hospital was approximately RMB22.6 million, of which RMB22.0 million relates to the medical licence held by Jian’an Hospital.

Intangible assets that have a finite life are amortised over its estimated useful life and are reviewed for impairment whenever events on changes in circumstances indicate 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. The amount of impairment may be further affected by the assumptions used in cash flow generated from relevant intangible assets and the estimated useful life of intangible assets, which any significant impairment losses of intangible assets could adversely affect our financial condition and results of operations.

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We have recognised goodwill as a result of the acquisition of Jian’an Hospital. If our goodwill was determined to be impaired, it would adversely affect our results of operations and financial position.

We recorded goodwill of RMB8.0 million as at 31 December 2018, 2019 and 2020, accounting for 4.1%, 3.1% and 3.5% of our total assets as of the same respective dates. Our goodwill arose from our acquisition of Jian’an Hospital upon the signing of the equity transfer agreement between Guodan Medical and Shenzhen Nanda on 29 December 2016. The goodwill represents the excess of the consideration over the fair value of the net identifiable assets we acquired. After initial recognition, goodwill is subject to impairment test at least annually. We allocate goodwill to our cash-generating unit identified according to the relevant hospital acquired and determine the recoverable amount of the cash-generating units based on value-in-use calculations. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised. We did not recognise impairment losses in respect of goodwill during the Track Record Period. Any significant impairment losses of our goodwill could adversely affect our financial condition and results of operations. Please refer to Notes 2(e), 2(g) and 14 to the Accountants’ Report set out in Appendix I to this document for further details of our accounting policies for goodwill and goodwill impairment.

We may fail to deal with clinical and radioactive wastes in accordance with the applicable laws and regulations or otherwise be in breach of the relevant medical, health and safety or environmental laws and regulations.

As part of our normal business operations, we produce and store clinical and radioactive wastes, which may produce effects harmful to the environment or human health. The storage and transportation of such wastes are strictly regulated. Our clinical and radioactive wastes disposal services are outsourced and should the relevant service provider fail to comply with these regulations, we could face sanctions or fines which could adversely affect our brand, reputation, business, results of operation or prospects. Generally, our business is subject to laws and regulations relating to the environment and public health. If the applicable laws and regulations in the PRC were to become more stringent, we could incur additional compliance costs which could in turn have a material adverse effect on our business, results of operations and prospects. Failure to comply with applicable regulations in the PRC could also result in us being held liable or fined and any of our licences, permits, approvals and certificates could be suspended or withdrawn by the relevant PRC health authorities. Any of these consequences may have a material adverse effect on our business, results of operations and prospects.

Health and safety risks are inherent in the services we provide and are constantly present in our hospitals. A health and safety incident could be particularly serious as the patients at our hospitals may be dependent persons and therefore highly vulnerable. Some of our activities are especially vulnerable to medical risks, including the transmission of infections to employees and patients and the prescription and administration of drugs. Our business operations are also exposed to risks relating to health and safety, primarily in respect of food and water quality, as well as fire safety and the risk that patients may cause harm to themselves, other patients or our employees. We may also experience incidents at our hospitals where patients seek to coerce our employees for priority attention and treatment or dissatisfied patients display aggressive or violent behaviour towards our employees. If any of the above medical or health and safety risks were to materialise, it could have a material adverse effect on our brand and reputation.

Any participation in fraudulent or abusive practices at our hospitals may subject us to potential criminal and civil penalties.

It has become common in China for hospital personnel to overcharge certain pharmaceuticals and medical treatments, prescribe unnecessary pharmaceuticals and recommend unnecessary medical tests as well as negotiate kickbacks with manufacturers or distributors of pharmaceuticals and medical devices to increase revenue and profits.

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In April 2004, the Ministry of Health announced plans to deter and prevent these types of fraudulent and abusive practices. Although our hospitals have implemented policies to prevent these types of practices, any failure of our hospital employees to comply with those policies may result in the violation of relevant laws and regulations and may subject our hospitals to investigations and potential criminal and civil penalties. We received notices from the relevant social insurance administration bureaux/healthcare security bureaux regarding certain incidents of, among others, unnecessary medical examination and treatment, admitting patients for inpatient treatment for mild diseases in Luogang Hospital and Renkang Hospital during the Track Record Period, in breach of the relevant designated medical institution service agreement, and we were demanded to refund approximately RMB0.8 million of payment reimbursed by Shenzhen Social Insurance Fund Administration and pay a contractual penalty of approximately RMB2.7 million. For details, please refer to the paragraph headed “Business — Social insurance programmes — Breaches of the designated medical institution service agreement” in this document. As social insurance administration bureaux/healthcare security bureaux will only issue notices demanding refund and contractual payment after a period of time upon their review of prior medical cases, there is no assurance that we will not receive further notices in respect of medical bills settled by social insurance during the Track Record Period, which could have a material adverse effect on our business operations, financial results and prospects. There is no assurance that employees of our hospitals will follow our enhanced internal control and will not subject our hospitals to further claims or investigations. A determination that any employee of our hospitals has violated these laws and regulations, or the public announcement that our hospitals or any employee of our hospitals is being investigated for possible violations of these laws and regulations, may damage our reputation, result in a decrease in patient volume in our hospitals and have a material adverse effect on our business, cash flows, financial condition, results of operations and prospects.

Failure to comply with laws and regulations in relation to anti-corruption could subject us to investigations, sanctions or fines, which may harm our reputation and have a material adverse effect on our business, results of operations and prospects.

Our internal policies mandate compliance with laws and regulations in relation to anti-corruption. However, the healthcare industry in the PRC generally poses elevated risks of violations of laws and regulations in relation to anti-corruption, in particular with respect to improper payments or benefits received by doctors, staff and hospital management in connection with the purchase of pharmaceutical and the provision of healthcare services. The PRC government has recently increased its anti-bribery efforts by introducing a range of measures to address such improper payments or benefits. Although we have established anti-corruption policies and procedures and have not been subject to any government investigation relating to anti-corruption violations, we cannot assure you that our policies and procedures could effectively prevent non-compliances at all times, or that our management will be able to detect and identify all instances of bribery involving our hospitals. We may also be subject to adverse publicity based on false allegations of bribery or corruption within our hospitals. In the event that any bribery incident involving our doctors, management or employees materialises, we may be subject to investigations, sanctions or fines, and our reputation could be significantly harmed by any negative publicity stemming from such incidents or any penalties levied against us arising from them, which may have a material adverse effect on our business, results of operations and prospects.

We are subject to laws and regulations relating to the personal information of our patients. Any failure to adequately protect our patients’ personal data could expose us to liability.

As part of our business, we collect and maintain personal medical data and treatment records of our patients. PRC laws and regulations generally require medical institutions and their medical personnel to protect the privacy of their patients and prohibit unauthorised disclosure of personal information. Such medical institutions and their medical personnel will be liable for damage resulting from divulging the patients’ private or medical records without consent.

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We are obliged to protect the confidentiality of our patients’ personal information. However, there is a risk that such information could be compromised in the event of a security breach at our hospitals. Such information could be divulged due to, for example, theft or misuse arising from staff misconduct or negligence. Furthermore, any change in privacy laws and regulations in the PRC could affect our ability to use medical data and subject us to liability for the use of such data for current permitted purposes. Failure to protect the confidentiality of patient medical records and personal data, or any restriction on or liability as a result of, our use of medical data, could have a material adverse effect on our business, results of operations, and prospects.

Our operations could be impaired if our information systems fail or if our databases are destroyed or damaged.

The information technology platform at each of our hospitals supports, among other things, management control of patient administration, clinical governance, billing and financial information and settlement with insurance providers. Any system failure that causes an interruption in service or availability of our information systems may cause interruptions in our hospitals, ability to provide services to patients, keep accurate records; and could have a material adverse effect on our business and/or delay the collection of revenue. In addition, our information systems are potentially vulnerable to computer viruses, break-ins and similar disruptions from unauthorised tampering. The occurrence of any of these events could result in interruptions, delays, the loss or corruption of data, or unavailability of systems, or liability as a result of any theft or misuse of personal information stored in our systems, all of which could harm our reputation and have a material adverse effect on our business, results of operations and prospects.

We have limited control over the quality of the pharmaceuticals, medical equipment, medical consumables and other supplies we use in our operations.

The provision of general hospital healthcare services involves the frequent use of a variety of pharmaceuticals, medical equipment, medical consumables and other supplies, all of which we procure from suppliers we have limited control over. The faulty vaccines scandal in 2018 and the sale of counterfeit Chinese medicine in the PRC revealed the fact that the PRC healthcare industry relied on the quality control effort of medical suppliers in monitoring the quality of drugs and various medical supplies. The healthcare industry in the PRC has limited control over the quality of medical supplies. However, serving as the front line healthcare service providers to the general public, the healthcare industry may be exposed to potential direct claims and negative publicity in any case of any quality defects in medical supplies. We cannot assure you that all supplies are authentic, free of defects and meet the relevant quality standards. If these products are subsequently found to have been defective at the time of the supply, even though we did not know or could not have known about such defect, we may be subject to liability claims, negative publicity, reputational damage or administrative sanction, any of which may adversely affect our results of operations and reputation. Our Directors confirm that, during the Track Record Period, there were no significant claims of such nature asserted against us. However, we cannot assure you that significant claims of such nature will not be asserted against us in the future, and that adverse verdicts will not be reached or that we will be able to recover losses from our suppliers. In addition, we cannot assure you that we will be able to find suitable replacement suppliers, failing which our profitability, our business, results of operations and prospects will be adversely affected.

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Our past performance is not necessarily indicative of future results.

Our historical results may not be indicative of future performance. Our financial and operating results may not meet the expectations of our investors or public market analysts who are tracking our performance, which may cause the future price of our Shares to decline. Our revenue, cost, expenses, and operating results may vary from period to period as it could be affected by various factors beyond our control. Such factors may include, but are not limited to, changes in the general economic conditions, new trends in the PRC healthcare market, and our ability to control costs and operating expenses. Historically, our operations have largely depended on our ability to treat patients effectively and leveraging our success and reputation to attract new patients. To maintain our growth and profitability, we must continue to strengthen our reputation, attract quality talent, adopt innovative technologies and treatment processes, increase the awareness of our brand through effective marketing, promotional activities and word-of-mouth, and utilise any growth in demand or shortage of supply in the markets in which we operate or intend to operate. We will also need to successfully expand our footprint into new geographical locations where we have limited experience. We cannot assure you that we will achieve any of the above. As a result, we believe that period-to-period comparisons of our operating results during the Track Record Period may not be indicative of our future performance and you should not rely such comparisons to predict the future performance of our operating results or our Share price.

RISKS RELATING TO CONDUCTING BUSINESS IN THE PRC

The PRC economic, political and social conditions, as well as government policies, could adversely affect our business, financial condition and results of operations.

A substantial part of our businesses, assets and operations are located in or derived from our operations in the PRC. During the Track Record Period, all of our hospitals and medical services were supplied to our customers in the PRC.

As a result, our business, financial condition and results of operations are subject, to a significant degree, to the economic, political, social and regulatory environment in the PRC. The PRC government exerts substantial control over the growth of the domestic economy by means of resource allocation, setting policy on foreign exchange and payment of debts denominated in foreign currencies, setting monetary policy and giving preferential treatment to specific industries or companies. In recent years, the PRC government has implemented market-oriented reforms. Such economic reform measures could be adjusted or revised and may differ between industries or various regions in the PRC. As such, we may not benefit from such measures. Further, there can be no assurance that the PRC government will continue to pursue economic reforms and we cannot predict whether changes in the PRC’s political, economic and social conditions, laws, regulations and policies will have any material adverse effect on our current or future business. Even if new policies may benefit our business in the long term, we cannot assure you that we will be able to successfully adjust to such polices. The PRC is one of the fastest-growing economies in the world in recent years, in terms of gross domestic product. Nevertheless, the PRC may fail to sustain such growth rate, and growth rates in recent periods have been lower in the past. If there is a slowdown in the economic growth of the PRC or if its economy experiences a recession, demand for our products may also decrease and our business, financial condition and results of operations may be materially and adversely affected.

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Dividends from our PRC subsidiaries paid to us might not qualify for the reduced PRC withholding tax rate under the special arrangement between Hong Kong and the PRC.

Under the EIT Law and its implementation rules, if the foreign shareholder is not deemed a PRC tax resident enterprise under the EIT Law, dividend payments from the PRC subsidiary to their foreign shareholders, are subject to a withholding tax at the rate of 10%, unless the jurisdiction of such foreign shareholders has a tax treaty or similar arrangement with the PRC which provides otherwise. Pursuant to a special arrangement between Hong Kong and the PRC, the withholding tax rate is lowered to 5% if a Hong Kong resident enterprise is the beneficial owner of more than 25% of a PRC company distributing the dividends. According to the Announcement on the Administrative Measures for Nonresident Taxpayers to Enjoy the Treatment Under Treaties (關於發佈《非居民納稅人享受協定待遇管理辦法》的公告), which was promulgated on 14 October 2019 and came into effect on 1 January 2020, a non-resident taxpayer may enjoy the tax preferential treatment at the time of tax return filings or withholding and declaration through a withholding agent if it is eligible for the tax preferential treatment under the relevant provisions of a tax treaty, subject to the collection and preservation of relevant materials for review pursuant to the measures and the subsequent administration by the tax authorities. Moreover, according to the Notice of the State Administration of Taxation on the Issues Concerning the Application of the Dividend Clauses of Tax Agreements (國家稅務總局關於執行稅收協定股息條款有關問題的通知) issued by the SAT on 20 February 2009, if the main purpose of an offshore arrangement is to obtain preferential tax treatment, the PRC tax authorities have the discretion to adjust the preferential tax rate for which an offshore entity would otherwise be eligible. There is no assurance that the PRC tax authorities will recognise and accept the 5% withholding tax rate on dividends paid by our PRC subsidiaries and received by our Hong Kong subsidiaries.

If we are required under the EIT Law to withhold higher PRC income tax on dividends payable to foreign shareholders, the value of your investment in our Shares may be materially and adversely affected.

Uncertainties with respect to the PRC’s legal system which may affect the protection afforded to our business and shareholders.

Our business and operations are primarily conducted in the PRC and are thus governed by the legal system of the PRC. The PRC legal system is based on written laws and statutes. Prior court decisions are encouraged to be used for reference but it remains unclear to what extent the prior court decision may impact the current court ruling as the encouragement policy is new and there is limited judicial practice in this regard. Since 1979, the PRC government has promulgated laws, regulations and rules that had the effect of enhancing the protections afforded to corporate organisations and their governance, as well as various forms of foreign investments in the PRC. Nevertheless, as the PRC legal system continues to evolve rapidly, the interpretation and enforcement of these laws, regulations and rules involves significant uncertainty and different degrees of inconsistency, limiting potentially the available legal protections to our business operations. In addition, the PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms.

It is therefore difficult to evaluate the outcome of administrative and court proceedings and the actual level of legal protection we enjoy. These uncertainties may affect our judgment on the relevance of legal requirements and our decisions on the measures and actions to be taken to ensure full compliance. In addition, any litigation in the PRC may be protracted and result in substantial cost to us and diversion of both our resources and attention of our management.

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We cannot predict the effect of future legal developments in the PRC, including the promulgation of new laws, changes to existing laws or the interpretation or their enforcement, or the pre-exemption of local regulations by national laws. We cannot therefore assure you that we will enjoy the same level of legal protection in the future, nor such new laws and regulations will not affect our operations, causing adverse effects on our financial condition and results.

PRC government control over currency conversion and fluctuation in the exchange rates of the Renminbi may adversely affect our business and results of operations and our ability to remit dividends.

The PRC government imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of foreign currencies out of the PRC. Under PRC foreign exchange administration regulations, payments of current account items, including expenditures with respect to trade related transactions and other normal payments that occur in the ordinary course of business such as interest payments and profit distribution, can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. However, approval from or registration with appropriate governmental authorities or bank is required where Renminbi is to be converted into foreign currency and remitted out of the PRC to pay capital expenditures. The PRC government may also at its discretion restrict access to foreign currencies for current account transactions in the future. If the PRC foreign exchange control system prevents us from obtaining sufficient foreign currency, including Hong Kong dollars, to satisfy its requirements, it may restrict the ability of our PRC subsidiaries to remit sufficient foreign currency to pay dividends or make other payments to us or otherwise satisfy its currency-denominated obligations, and may adversely affect our business, financial condition and results of operations.

In addition, to the extent that we need to convert Hong Kong dollars that we will receive from the [REDACTED] into Renminbi for our operations, appreciation of Renminbi against the Hong Kong dollar would have an adverse effect on the Renminbi amount that we will receive. Conversely, if we decide to convert our Renminbi into Hong Kong dollars for the purpose of making dividend payments on our Shares or for other business purposes, appreciation of the Hong Kong dollar against Renminbi would reduce the Hong Kong dollar amount available to us.

It may be difficult to effect service upon, or to enforce judgments against us or the Directors or senior management residing in the PRC, in connection with judgments obtained from courts other than the PRC courts.

All of our executive Directors and members of our senior management reside in the PRC. Almost all of our assets and most of the assets of our Directors and the members of our senior management are located within the PRC. Moreover, the PRC does not have treaties with most other jurisdictions that provide for the reciprocal recognition and enforcement of judicial rulings and awards. As a result, recognition and enforcement in the PRC of the judgment of a non-PRC court in relation to any matter not subject to a binding arbitration provision may be difficult or impossible. Judgments obtained in a Hong Kong court may be enforced in the PRC, provided that certain conditions are satisfied. However, there are uncertainties as to the outcome of any applications to recognise and enforce such judgments in the PRC.

–67– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

RISK RELATING TO THE SHARES AND THE [REDACTED]

There is no prior market for the Shares and the liquidity and market price and the trading volume of the Shares may be volatile.

There is no public market for the Shares prior to the [REDACTED]. The [REDACTED] of, and the permission to deal in, the Shares on the Stock Exchange do not guarantee the development of an active public market or its sustainability following completion of the [REDACTED]. The market price and trading volume of the Shares can fluctuate depending on the following factors:

— variations in our Group’s revenue, earnings and cash flows;

— changes in competitive landscapes of our industries, including strategic alliances, acquisitions or joint ventures by us or our competitors;

— loss of key personnel;

— litigation or fluctuations in the market price for the services provided or supplies required by our Group;

— the liquidity of the market for the Shares; and

— regulatory developments, and our inability to obtain or renew necessary licences and permits.

Both the market price and liquidity of the Shares could be adversely affected by factors beyond our control and are unrelated to the performance of our business, especially if the financial market in Hong Kong experiences a significant price and volume fluctuation. In such cases, investors may not be able to sell their Shares at or above the [REDACTED] or at all.

Issuance of new Shares or equity linked securities may cause dilution in shareholding.

We may require additional funds due to changes in business conditions or other future developments relating to our existing operations. If additional funds are raised by way of issuance of new Shares or equity linked securities other than on a pro rata basis to existing Shareholders, the shareholding of existing Shareholders may be reduced. Such new securities issued may also confer rights and privileges that take priority over those conferred by the [REDACTED].

Any disposal by our Controlling Shareholders of a substantial number of Shares in the public market could materially and adversely affect the market price of the Shares.

There is no guarantee that our Controlling Shareholders will not dispose of their Shares following the expiration of the respective lock-up periods after the [REDACTED]. We cannot predict the effect, if any, of any future sales of the Shares by any of our Controlling Shareholders, or that the availability of the Shares for sale by any of our Controlling Shareholders may have on the market price of the Shares. Sale of a substantial number of Shares by any of our Controlling Shareholders or the market perception that any such sale may occur could materially and adversely affect the prevailing market price of the Shares.

–68– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

There can be no assurance that we will declare or distribute any dividend in the future.

Any decision to declare and pay any dividends would require the recommendations of our Board and approval of our Shareholders. Any decision to pay dividends will be made having regard to factors such as the results of operation, financial condition and position, and other factors deemed relevant. Any distributable profits that are not distributed in any given year may be retained and be made available for distribution in subsequent years. To the extent profits are distributed as dividends, such portion of profits will not be available to be reinvested in our operation. There can be no assurance that we will be able to declare or distribute any dividend. Our future declarations of dividends will be at the absolute discretion of our Board.

Possible setting downward of the [REDACTED] after making a Downward [REDACTED] Adjustment.

We have the flexibility to make a Downward [REDACTED] Adjustment to set the final [REDACTED] at up to 9.1% below the bottom end of the indicative [REDACTED] per [REDACTED]. It is therefore possible that the final [REDACTED] will be set at [REDACTED] per [REDACTED] upon the making of a full Downward [REDACTED] Adjustment. In such a situation, the [REDACTED] will proceed and the Withdrawal Mechanism will not apply. If the final [REDACTED] is set at [REDACTED], the estimated [REDACTED] we will receive from the [REDACTED] will be reduced to HK$[81.6] million and such reduced [REDACTED] will be used as described in the section headed “Future plans and [REDACTED]—[REDACTED]” in this document.

Investors may experience difficulties in enforcing their shareholders’ rights because our Company is incorporated in the Cayman Islands, and the protection to minority shareholders under the Cayman Islands law may be different from that under the laws of Hong Kong or other jurisdictions.

Our Company is incorporated in the Cayman Islands and its affairs are governed by the Articles, the Companies Law and common law applicable in the Cayman Islands. The laws of the Cayman Islands may differ from those of Hong Kong or other jurisdictions where investors may be located. As a result, minority shareholders may not enjoy the same rights as pursuant to the laws of Hong Kong or such other jurisdictions. A summary of the Cayman Islands law on protection of minority shareholders is set out in paragraph headed “Summary of the constitution of the Company and Cayman Islands Company Law — Protection of minorities and shareholders’ suits” in Appendix IV to this document.

RISKS RELATING TO STATEMENTS MADE IN THIS DOCUMENT

Investors should read the entire document and should not unduly rely on any information contained in press articles or other media coverage regarding us and the [REDACTED].

We strongly caution our investors not to unduly rely on any information contained in press articles or other media regarding us and the [REDACTED]. Prior to the publication of this document, there may be press and media coverage regarding the [REDACTED] and us. 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 authorised 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 our investors should not unduly rely on such information.

–69– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

Certain facts, forecast and other statistics in this document obtained from publicly available sources have not been independently verified and may not be reliable.

Certain facts, forecast and other statistics in this document are derived from various government and official resources. Nevertheless, our Directors cannot guarantee the quality or reliability of such source materials. We believe that the sources of the said information are appropriate sources for such information and have taken reasonable care in extracting and reproducing such information. We have no reason to believe that such information is false or misleading or that any fact has been omitted that would render such information false or misleading. Nevertheless, such information has not been independently verified by us, the Sponsor, the [REDACTED], the [REDACTED], the [REDACTED], or any of their respective affiliates or advisers and, therefore, we make no representation as to the accuracy of such facts and statistics. Further, we cannot assure our investors that they are stated or compiled on the same basis or with the same degree of accuracy as similar statistics presented elsewhere. In all cases, our investors should consider carefully how much weight or importance should be attached to or placed on such facts or statistics.

–70– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. WAIVER FROM COMPLIANCE WITH LISTING RULES

WAIVER IN RELATION TO MANAGEMENT PRESENCE IN HONG KONG

Pursuant to Rule 8.12 of the Listing Rules, a new applicant applying for a primary listing on the Stock Exchange must have a sufficient management presence in Hong Kong. This normally means that at least two of its executive directors must be ordinarily resident in Hong Kong.

Given that our Group’s principal business operations and assets are located, managed and conducted in the PRC and that all of our executive Directors and senior management predominately reside in the PRC, our Company does not and will not, in the foreseeable future, have sufficient management presence in Hong Kong for the purpose of satisfying the requirement under Rule 8.12 of the Listing Rules.

In view of the above, our Company considers that it will be more effective and efficient for our executive Directors to be based in the PRC, where most of our Company’s operations are located, and it will be onerous and unduly burdensome for it to maintain management presence in Hong Kong in terms set out in Rule 8.12 of the Listing Rules. Accordingly, an application for a waiver from strict compliance with the requirement to have a sufficient management presence in Hong Kong under Rule 8.12 of the Listing Rules has been made to the Stock Exchange and [such waiver has been granted by the Stock Exchange] subject to the following arrangements:

(a) our Company has appointed two authorised representatives pursuant to Rule 3.05 of the Listing Rules, who will act as our Company’s principal channel of communication with the Stock Exchange. The two authorised representatives appointed are Mr. Li, an executive Director, chairman, the chief executive officer and the president of the Company, and Ms. Lam Chor Ling (林楚玲), one of our joint company secretaries. Ms. Lam Chor Ling (林楚玲) ordinarily residents in Hong Kong. Each of the authorised representatives will be available to meet with the Stock Exchange in Hong Kong within a reasonable time frame upon the request of the Stock Exchange and will be readily contactable by telephone, facsimile or email. Each of the two authorised representatives has been authorised by the Board to communicate on behalf of our Company with the Stock Exchange;

(b) both the authorised representatives have means to contact all members of the Board (including the proposed independent non-executive Directors) and the senior management team promptly. To enhance the communication between the Stock Exchange, the authorised representatives and the Directors, (i) each executive Director and proposed independent non-executive Director has provided his/her mobile phone numbers, office phone numbers, fax numbers (if available) and email addresses (if available) to the authorised representatives; (ii) in the event that an executive Director or proposed independent non-executive Director expects to travel and be out of office, he/she will provide the phone number of the place of his/her accommodation to the authorised representatives; and (iii) all Directors and authorised representatives will provide their respective mobile phone numbers, office phone numbers, fax numbers (if available) and email addresses (if available) to the Stock Exchange;

(c) all Directors (including the proposed independent non-executive Directors) who are not ordinarily residents in Hong Kong have confirmed that they possess or will apply for valid travel documents to visit Hong Kong and would be able to come to Hong Kong and meet the Stock Exchange within a reasonable period of time upon notice;

–71– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. WAIVER FROM COMPLIANCE WITH LISTING RULES

(d) our Company has appointed the Sponsor as the compliance adviser pursuant to Rule 3A.19 of the Listing Rules, who will, in addition to the two authorised representatives, act as the channel of communication with the Stock Exchange for a period commencing on the [REDACTED] and ending on the date on which our Company shall comply with Rule 13.46 of the Listing Rules in respect of its financial results for the first full financial year after the [REDACTED]; and

(e) our Company will promptly inform the Stock Exchange if there is any change to the authorised representatives of our Company and/or compliance advisor or contact details of any of them.

WAIVER IN RELATION TO THE APPOINTMENT OF JOINT COMPANY SECRETARIES

Pursuant to Rule 8.17 of the Listing Rules, our Company must appoint a company secretary who satisfies Rule 3.28 of the Listing Rules. According to Rule 3.28 of the Listing Rules, our Company must appoint as its company secretary an individual who, by virtue of his/her academic or professional qualifications or relevant experience, is, in the opinion of the Stock Exchange, capable of discharging the functions of company secretary.

The Stock Exchange considers the following academic or professional qualifications to be acceptable:

(a) a member of the Hong Kong Institute of Chartered Secretaries;

(b) a solicitor or barrister (as defined in the Legal Practitioners Ordinance (Chapter 159 of the Laws of Hong Kong)); and

(c) a certified public accountant (as defined in the Professional Accountants Ordinance (Chapter 50 of the Laws of Hong Kong)).

In assessing “relevant experience”, the Stock Exchange will consider the individual’s:

(a) length of employment with issuer and other issuers and the roles he/she played;

(b) familiarity with the Listing Rules and other relevant laws and regulations including the SFO, the Companies Ordinance, Companies (Winding Up and Miscellaneous Provisions) Ordinance and the Takeovers Code;

(c) relevant training taken and/or to be taken in addition to the minimum requirement under Rule 3.29 of the Listing Rules; and

(d) professional qualifications in other jurisdictions.

We have appointed Mr. Zhu Weifeng (朱偉鋒) and Ms. Lam Chor Ling (林楚玲) as our joint company secretaries. Although Mr. Zhu Weifeng (朱偉鋒) does not possess the specified qualifications required by Rule 3.28 of the Listing Rules and may not be able to solely fulfill the requirements of the Listing Rules, our Directors consider Mr. Zhu Weifeng (朱偉鋒) capable of discharging his duty as a company secretary of our Company by virtue of his academic background and his experience in our Group in the supervision of the accounting, financial management, fund raising and capital management of our Group. In addition, our Company has appointed Ms. Lam Chor Ling (林楚玲), who possesses such specified qualifications, to be one of our joint company secretaries. Mr. Zhu Weifeng (朱偉鋒) together

–72– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. WAIVER FROM COMPLIANCE WITH LISTING RULES with Ms. Lam Chor Ling (林楚玲) will be primarily responsible for company secretarial affairs and coordination of investor relations of our Group.

Please see paragraph headed “Directors and senior management — Joint company secretaries” in this document for the biographies of Mr. Zhu Weifeng (朱偉鋒) and Ms. Lam Chor Ling (林楚玲).

Given the important role of company secretary in the corporate governance of a listed issuer, particularly in assisting the listed issuer as well as its directors in complying with the Listing Rules and other relevant laws and regulations, our Company will make or have made the following arrangements:

(a) Ms. Lam Chor Ling (林楚玲), one of our joint company secretaries who satisfies the requirements under Rule 3.28 of the Listing Rules, will, throughout her engagement as one of our joint company secretaries, assist Mr. Zhu Weifeng (朱偉鋒) so as to enable him to acquire the requisite knowledge and experience (as required under Rule 3.28 of the Listing Rules) in order to discharge his duties and responsibilities as one of our joint company secretaries of our Company. Given Ms. Lam Chor Ling’s (林楚玲) relevant experience, she will be able to advise both Mr. Zhu Weifeng (朱偉鋒) and our Company on the relevant requirements of the Listing Rules as well as other applicable laws and regulations of Hong Kong;

(b) Mr. Zhu Weifeng (朱偉鋒), one of our joint company secretaries, will be assisted by Ms. Lam Chor Ling (林楚玲) for a period of three years commencing on the [REDACTED]or for a period commencing from the [REDACTED] to the date when he acquires the ‘‘relevant experience’’ under note (2) to Rule 3.28 of the Listing Rules so as to fully comply with the requirements set forth under Rules 3.28 and 8.17 of the Listing Rules. Upon expiry of such period, a further evaluation of the qualifications and experience of Mr. Zhu Weifeng (朱偉鋒) and the need for on-going assistance will be made;

(c) in order to enable Mr. Zhu Weifeng (朱偉鋒) to have a better understanding of the Listing Rules and other applicable Hong Kong laws, Mr. Zhu Weifeng (朱偉鋒) attended a training session given by our Company’s Hong Kong legal advisers in June 2019;

(d) pursuant to Rule 3.29 of the Listing Rules, Mr. Zhu Weifeng (朱偉鋒) and Ms. Lam Chor Ling (林楚玲) will also attend in each financial year no less than 15 hours of relevant professional training courses to familiarise themselves with the requirements of the Listing Rules and other regulatory requirements of Hong Kong. Both Mr. Zhu Weifeng (朱偉鋒) and Ms. Lam Chor Ling (林楚玲) will be advised by our Hong Kong legal advisers and the compliance adviser of our Company as and when required;

(e) our Company will ensure that Mr. Zhu Weifeng (朱偉鋒) has access to the relevant trainings and support to enable him to familiarise himself with the Listing Rules and the duties required of a company secretary of a Hong Kong listed company, and Mr. Zhu Weifeng (朱偉鋒) has undertaken to attend such trainings;

(f) Mr. Zhu Weifeng (朱偉鋒) will endeavour to attend relevant training courses organised by our Company’s Hong Kong legal advisers on an invitation basis and seminars organised by the Stock Exchange for listed issuers from time to time in addition to the minimum requirement under Rule 3.29 of the Listing Rules;

–73– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. WAIVER FROM COMPLIANCE WITH LISTING RULES

(g) Ms. Lam Chor Ling (林楚玲), who will familiarise herself with the affairs of our Company, will communicate with Mr. Zhu Weifeng (朱偉鋒) on a regular basis regarding matters in relation to corporate governance, the Listing Rules as well as other applicable laws and regulations of Hong Kong which are relevant to the operations and affairs of our Company. Ms. Lam Chor Ling (林楚玲) will work closely with, and provide assistance to Mr. Zhu Weifeng (朱偉鋒) with a view to discharging his duties and responsibilities as a company secretary, including organising Board meetings and Shareholders’ meetings of our Company; and

(h) Mr. Zhu Weifeng (朱偉鋒) will also be assisted by our compliance adviser and our Hong Kong legal advisers of our Company as and when required from time to time, particularly in relation to Hong Kong corporate governance practices and regulatory compliance, on matters concerning our on-going compliance obligations under the Listing Rules and the applicable laws and regulations of Hong Kong.

Accordingly, we have applied to the Stock Exchange for, and [the Stock Exchange has granted to us], a waiver from strict compliance with the requirements of Rules 3.28 and 8.17 of the Listing Rules on the following conditions:

(a) Mr. Zhu Weifeng must be assisted by a person who possesses the qualifications or experience as required under Rule 3.28 of the Listing Rules and is appointed as a joint company secretary throughout the three-year period; and

(b) the waiver can be revoked if there are material breaches of the Listing Rules by our Company.

[The waiver is valid for an initial period of three years commencing on the [REDACTED].] If Ms. Lam Chor Ling (林楚玲) ceases to provide assistance to Mr. Zhu Weifeng (朱偉鋒) during the three years from the [REDACTED], the waiver will be revoked with immediate effect.

If Mr. Zhu Weifeng (朱偉鋒) has not acquired the “relevant experience” specific qualifications under Rule 3.28 of the Listing Rules upon expiry of the initial three-year period, our Company will re-evaluate Mr. Zhu Weifeng’s (朱偉鋒) qualifications and experience. Upon the determination of our Company that no on-going assistance is necessary, we will demonstrate to the Stock Exchange that, with the assistance of Ms. Lam Chor Ling (林楚玲) over such three-year period, Mr. Zhu Weifeng (朱偉鋒) has acquired the requisite knowledge and experience as prescribed in Rule 3.28 of the Listing Rules. The Stock Exchange will then re-evaluate whether any further waiver would be necessary.

–74– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. INFORMATION ABOUT THIS DOCUMENT AND [REDACTED]

[REDACTED]

–75– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. INFORMATION ABOUT THIS DOCUMENT AND [REDACTED]

[REDACTED]

–76– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. INFORMATION ABOUT THIS DOCUMENT AND [REDACTED]

[REDACTED]

–77– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. INFORMATION ABOUT THIS DOCUMENT AND [REDACTED]

[REDACTED]

–78– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. INFORMATION ABOUT THIS DOCUMENT AND [REDACTED]

[REDACTED]

–79– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED]

DIRECTORS

Name Residential Address Nationality

Executive Directors

Mr. Li Jinyuan (李金圓) Room 1801, Unit 2, Building Block 3 Chinese Shenhang Jiari Ming Ju, Bao’an District Shenzhen, Guangdong Province PRC

Mr. Zhu Weifeng (朱偉鋒) 7-4-11F Chinese Xinghai Mingcheng, Phase 2, Nanshan District, Shenzhen, Guangdong Province PRC

Mr. Pei Benxin (裴本鑫) Room 2006, Unit A, Block 2 Chinese Shenglong Huayuan II, Longgang District Shenzhen, Guangdong Province PRC

Mr. Li Ruifang (李瑞芳) Flat 2106, Block 22B Chinese Rongchao Garden, Buji Subdistrict Longgang District, Shenzhen Guangdong Province PRC

Non-executive Directors

Mr. Huang Zhigang (黃志剛) Unit 801, Block 13 Chinese Xincheng Huayuan, Xiangcheng District Zhangzhou, Fujian Province PRC

Mr. Huang Liqun (黃立群) Unit 1202, Block 46 Chinese Tianli Renhe Phase 3 8, Xinpudong Road, Longwen District Zhangzhou, Fujian Province PRC

Independent non-executive Directors

Mr. Ru Xiangan (茹祥安) Unit 1106, Building 17 Chinese 18 Jianguo Road, Chaoyang District Beijing PRC

–80– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED]

Name Residential Address Nationality

Dr. Wu Ka Chee Davy (胡家慈) Flat D, 7/F Chinese Fu Kar Court 32 Fortress Hill Road Fortress Hill Hong Kong

Mr. Tsang Ho Yin (曾浩賢) Flat F, 6th Floor, Block 2 Chinese Island Place 55 Tanner Road North Point Hong Kong

Please refer to the section headed “Directors and senior management” in this document for further details.

–81– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED]

PARTIES INVOLVED

Sponsor Ample Capital Limited Unit A, 14/F, Two Chinachem Plaza 135 Des Voeux Road Central Central Hong Kong (A licensed corporation carrying on type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities as defined under the SFO)

[REDACTED]

Legal advisers to our Company as to Hong Kong law Loeb & Loeb LLP 21st Floor, CCB Tower 3 Connaught Road Central Hong Kong

as to the Cayman Islands law Conyers Dill & Pearman Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

as to the PRC law Jingtian & Gongcheng 34/F, Tower 3, China Central Place 77 Jianguo Road Beijing 100025, PRC

–82– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED]

Legal advisers to the Sponsor and as to Hong Kong law the [REDACTED] Chiu & Partners 40/F, Jardine House 1 Connaught Place Central, Hong Kong

as to the PRC law JunZeJun Law Offices 29/F, Rongchao Economic Trade Center 4028 Jintian Road Futian District Shenzhen 518035, PRC

Reporting accountants and auditors KPMG 8th Floor Prince’s Building 10 Chater Road Central Hong Kong

Independent Valuer Jones Lang LaSalle Corporate Appraisal and Advisory Limited 7/F, One Taikoo Place 979 King’s Road Hong Kong

Industry consultant Frost & Sullivan (Beijing) Inc., Shanghai Branch Co. 1018, Tower B 500 Yunjin Road Shanghai, 200232, PRC

Compliance adviser Ample Capital Limited Unit A, 14/F, Two Chinachem Plaza 135 Des Voeux Road Central Central Hong Kong (A licensed corporation carrying on type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities as defined under the SFO)

[REDACTED]

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

Registered office Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Headquarters and principal Unit 1302, Block 1, Phase 2 place of business Qianhaishimao Jinrong Centre 3040, Xinghai Dadao, Nanshan Subdistrict Qianhai Shenzhen-Hong Kong Cooperation Zone Shenzhen, Guangdong Province PRC

Principal place of business Suite No. 4, 3/F Sino Plaza in Hong Kong 255 – 257 Gloucester Road Causeway Bay Hong Kong

Company’s website [www.guodan.com] (Note: contents in this website do not form part of this document)

Joint company secretaries Ms. Lam Chor Ling (HKICPA) Suite No. 4, 3/F Sino Plaza 255 – 257 Gloucester Road Causeway Bay Hong Kong

Mr. Zhu Weifeng 7-4-11F Xinghai Mingcheng, Phase 2, Nanshan District Shenzhen, Guangdong Province PRC

Authorised representatives Mr. Li Jinyuan (for the purpose of the No. 1801, Unit 2, Building No.3 Listing Rules) Shenhang Jiari Ming Ju, Bao’an District Shenzhen, Guangdong Province PRC

Ms. Lam Chor Ling (HKICPA) Suite No. 4, 3/F Sino Plaza 255 – 257 Gloucester Road Causeway Bay Hong Kong

Audit Committee Mr. Ru Xiangan (Chairman) Dr. Wu Ka Chee Davy Mr. Tsang Ho Yin

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

Remuneration committee Mr. Ru Xiangan (Chairman) Mr. Li Ruifang Mr. Tsang Ho Yin

Nomination committee Mr. Li Jinyuan (Chairman) Mr. Ru Xiangan Dr. Wu Ka Chee Davy

Principal share registrar and [REDACTED] transfer office

Hong Kong Branch Share Registrar [REDACTED]

Principal banks China Construction Bank (Shenzhen Luogang Branch) First Floor, Block 2, Xinyiyicui Garden 87 Ronghua Road, Buji Subdistrict Longgang District, Shenzhen PRC

Bank of China (Shenzhen Changcheng Branch) First Floor, Baihua House Baihua Fifth Road Baishaling Futian District, Shenzhen PRC

–85– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. INDUSTRY OVERVIEW

Certain information and statistics set out in this section and elsewhere in this document are derived from various government and other publicly available sources, from the market research report prepared by Frost & Sullivan. Frost & Sullivan is an independent industry consultant engaged by us, and we commissioned Frost & Sullivan to prepare a market research report. The information extracted from the F&S Report should not be considered to be a basis for investments in the [REDACTED] or an opinion of Frost & Sullivan with respect to the value of any securities or the advisability of investing in our Company. We believe that the sources of such information are appropriate for such information and have taken reasonable care in extracting and reproducing such information. We have no reason to believe that such information is false or misleading in any material respect or that any fact has been omitted that would render such information false or misleading in any material respect. No independent verification has been carried out on such information by our Company or any other parties involved in the [REDACTED] (excluding Frost & Sullivan), or their respective directors, officers or representatives, and no representation is given as to the accuracy or completeness of such information. Accordingly, you should not place undue reliance on such information.

SOURCE OF INFORMATION

In connection with the [REDACTED], we engaged Frost & Sullivan to prepare the F&S Report for use in the document. Founded in 1961, Frost & Sullivan is an independent market consultant, providing market research on a variety of industries, including healthcare. We have agreed to pay a commission fee of approximately RMB850,000 for the F&S Report, which we believe reflects market rates for reports of this type. The F&S Report was compiled using both primary and secondary research conducted in the PRC and globally. The information from Frost & Sullivan disclosed in the document is extracted from the F&S Report and is disclosed with the consent of Frost & Sullivan. In preparing the F&S Report, Frost & Sullivan collected and reviewed publicly available data such as information provided by government institutions, annual reports, trade and medical periodicals, industry reports and other available information gathered by non-profit organizations. The data collected by Frost & Sullivan was last updated in September 2020 based upon data available to them. F&S Report was compiled using both primary and secondary research conducted in the PRC and globally, adopting a comprehensive data collection model. The primary research involved interviews and discussions with industry experts and participants. The secondary research utilised data such as government statistics, annual reports of public companies and data validation process with industry key opinion leaders. Frost & Sullivan assumes that the interviewees are not intentionally providing wrong and misleading information and the government statistics do not contain errors.

Frost & Sullivan has developed its forecasts on the following principles and assumptions:

• the social, economic and political environments of the PRC will remain stable during the forecast period, which will ensure a sustainable and steady development of healthcare industry in the PRC;

• the PRC healthcare market will grow as expected due to the increasing healthcare demand and supply;

• the PRC government will continue to support healthcare reform, encouraging private capital investments in the healthcare services market;

• the respective hospital market where our hospitals are located will grow during the forecast period; and

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• no unexpected events such as wars or disasters will occur during the relevant forecasting period.

Except as otherwise noted, all of the data and forecasts contained in this section are derived from the F&S Report. Our Directors confirm that after making reasonable inquiries, there is no material adverse change in the overall market information since the date of publication of the F&S Report, which may qualify, contradict with or have an impact on the information included in this section.

THE HEALTHCARE SERVICES MARKET IN THE PRC

Healthcare services refer to the services provided by healthcare institutions for patients, including physical checkup, diagnosis, therapy, rehabilitation, preventive care, baby delivery, family planning and related services. The PRC is one of the largest healthcare services markets in the world but still in an early stage of development compared to markets in developed countries. Driven by the acceleration of aging population and the rise in the prevalence of various diseases, the PRC healthcare market has experienced rapid growth in recent years. According to the F&S Report, the total healthcare expenditure in the PRC grew from RMB4,097.5 billion in 2015 to RMB6,505.7 billion in 2019, representing a CAGR of 12.3%. It is estimated that the total healthcare expenditure in the PRC will continue to grow to RMB10,147.2 billion in 2024, representing a CAGR of 9.3% from 2019 to 2024. The chart below sets forth, for the years indicated, the total actual and estimated healthcare expenditure in the PRC:

Total Healthcare Expenditure in China, 2015-2024E

Total Healthcare Expenditure RMB Billion CAGR (2015-2019) 12.3% CAGR (2019-2024E) 9.3% 11,000 10,000 9,000 8,000 7,000 10,147.2 6,000 9,352.3 8,591.8 5,000 7,887.4 7,167.2 4,000 6,505.7 5,912.2 3,000 4,634.5 5,259.8 4,097.5 2,000 1,000 0 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E

Source: NBSC, Frost & Sullivan analysis

Meanwhile, healthcare expenditure per capita in the PRC grew at a CAGR of 11.7% from RMB2,980.8 in 2015 to RMB4,646.8 in 2019, with forecast expenditure per capita growing at a CAGR of 8.9% from 2019 and reaching RMB7,116.5 in 2024, according to the F&S Report.

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Although China has become the world’s second-largest economy, its healthcare expenditure per capita in 2018 only surpassed India among ten major economies surveyed and was significantly lower than those of most other major countries, according to the F&S Report. In particular, healthcare expenditure per capita in the PRC was only around 1⁄17 of that of the United States. These factors indicate that healthcare market of the PRC has ample room for further growth in the foreseeable future.

The expenditure on pharmaceuticals in China has been rising steadily in recent years. According to the F&S Report, the expenditure on pharmaceuticals in China has increased from RMB1,220.7 billion to RMB1,633.0 billion from 2015 to 2019, representing a CAGR of 7.5%. Based on historical growth trends, it is estimated that the expenditure on pharmaceuticals in China would rise to RMB2,228.8 billion by 2024, representing a CAGR of 6.4% during 2019 to 2024. The chart below sets forth, for the years indicated, the total expenditure on pharmaceuticals in the PRC:

Expenditure on Pharmaceuticals in China, 2015-2024E

Expenditure on Pharmaceuticals RMB Billion CAGR (2015-2019) 7.5% CAGR (2019-2024E) 6.4% 2,500

2,000

1,500

2,228.8 1,000 2,086.9 1,826.2 1,950.3 1,633.0 1,714.7 1,430.4 1,533.4 1,220.7 1,329.4 500

0 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E

Source: Frost & Sullivan analysis

In Guangdong Province, the total healthcare expenditure has grown more rapidly than the nationwide. According to the F&S Report, the total healthcare expenditure in Guangdong Province increased from RMB330.2 billion in 2015 to an estimation of RMB583.3 billion in 2019, representing a CAGR of 15.3%. It is estimated that the total healthcare expenditure in Guangdong Province will continue to rise to RMB996.2 billion in 2024, representing a CAGR of 11.3% from 2019 to 2024. Furthermore, healthcare expenditure per capita in Guangdong Province is also higher than the nationwide, growing with a CAGR of 13.6% from RMB3,043.3 in 2015 to an estimation of RMB5,062.9 in 2019. It is estimated that healthcare expenditure per capita in Guangdong Province will reach RMB8,146.2 in 2024.

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THE HOSPITAL MARKET IN THE PRC

Overview

Hospitals play a dominant role in the healthcare services market in the PRC, taking up 44.1% of the outpatient visits and 79.6% of the inpatient visits of the healthcare institutions in 2019, according to the F&S Report. In China, with regards to the ownership, hospitals are mainly categorised as public hospitals and private hospitals. With regards to the specialisation, China’s hospitals consist of general hospitals, specialty hospitals, TCM hospitals, and other hospitals. With regards to the tier of hospitals, China’s hospitals are categorised as Class I hospitals, Class II hospitals and Class III hospitals. According to the F&S Report, there were 34,354 hospitals in China by the end of 2019, of which 19,963 were general hospitals, 8,531 were specialty hospitals, 4,221 were TCM hospitals and 1,639 were other hospitals.

Public and Private Hospitals in the PRC

The number of private hospitals in the PRC has grown rapidly due to incentive policies issued by the government, according to the F&S Report. The number of private hospitals has grown from 14,518 by the end of 2015 to 22,424 by the end of 2019, representing a CAGR of 11.5%. Meanwhile, since some public hospitals have been restructured or purchased, the number of public hospitals has decreased from 13,069 by the end of 2015 to 11,930 by the end of 2019, representing a CAGR of -2.3%.

Number of Public and Private Hospitals in China, 2015-2024E Public Private Hospitals Hospitals Total CAGR (2015-2019) -2.3% 11.5% 5.6% 50,000 CAGR (2019-2024E) -1.6% 9.2% 5.9% 45,823 43,259 45,000 40,819 38,515 40,000 36,358 34,354 33,009 35,000 31,056 29,140 30,000 27,587 29,522 32,119 34,817 27,034 25,000 24,666 20,977 22,424 16,432 18,759 20,000 14,518 15,000 10,000 13,069 12,708 12,297 12,032 11,930 11,691 11,481 11,297 11,139 11,005 5,000 0 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E Public Private

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The revenue of private hospitals in the PRC is expected to increase from RMB203.6 billion in 2015 to RMB437.9 billion in 2019, representing a CAGR of 21.1%. Based on historical growth trends, Frost & Sullivan estimates that the revenue of private hospitals will reach RMB961.3 billion in 2024, representing a CAGR of 17.0% from 2019. By comparison, the CAGR of revenue for public hospitals in the PRC was 11.0% from 2015 to 2019 and is estimated to be 7.3% from 2019 to 2024. The chart below sets forth, for the years indicated, the total actual and estimated revenue of public and private hospitals in the PRC:

Revenue of Public and Private Hospitals in China, 2015-2024E Public Private Hospitals Hospitals Total CAGR (2015-2019) 11.0% 21.1% 12.0% 5,453.6 RMB Billion CAGR (2019-2024E) 7.3% 17.0% 8.7% 5,062.0 6,000 961.3 4,682.6 835.9 4,312.7 721.8 5,000 3,950.7 618.0 3,598.8 523.3 4,000 437.9 3,189.0 2,866.0 3,000 2,578.4 383.8 2,287.9 319.1 4,492.3 251.4 4,226.1 203.6 3,960.7 3,694.7 2,000 3,427.4 3,158.8 2,546.9 2,805.2 1,000 2,084.3 2,327.0

0 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E Public Hospitals Private Hospitals

Source: NHFPC, Frost & Sullivan analysis

Private General Hospital and TCM Hospital Market in the PRC

General hospitals provide multi-disciplinary healthcare services including diagnosis and treatment for outpatients and inpatients. According to the F&S Report, general hospitals play a key role in the hospital market in the PRC, accounting for (i) approximately 58.1% of the total number of hospitals in the PRC, with a CAGR of 3.5% from 2015 to 2019; and (ii) more than 70% of the total revenue of hospitals in the PRC, with a CAGR of 11.2% from 2015 to 2019.

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In the private hospital market in the PRC, general hospitals make up for more than half of private hospitals in China, accounting for 57.9% in terms of number, and TCM hospitals taking up 8.0% in terms of number in 2018. The following chart illustrates the breakdown of number of private hospitals in the PRC by specialisation by the end of 2019:

Breakdown of Number of Private Hospitals in China, 2019 1,186, 5.3%

6,756, 30.1%

12,572, 56.1%

1,910, 8.5% General Hospitals TCM Hospitals Specialty Hospitals Others

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THE HOSPITAL MARKET IN GUANGDONG PROVINCE

Public and Private Hospitals in Guangdong Province

There were 1,553 hospitals in Guangdong Province by the end of 2018, where 882 were general hospitals, 458 were specialty hospitals, 184 TCM hospitals and 29 other hospitals with regards to the specialisation, according to the F&S Report. Among these 882 general hospitals, 436 were private general hospitals. Due to intensive policies and developed economic level, the private hospital market has grown rapidly in recent years. The number of private hospitals in Guangdong Province has risen from 556 in 2015 to 896 in 2019, representing a CAGR of 12.7% from 2015 to 2019, and is expected to reach 1,197 in 2024, representing a CAGR of 6.0% from 2019 to 2024. Nevertheless, the number of public hospitals in Guangdong has decreased from 767 in 2015 to 735 in 2019, representing a CAGR of -1.1%, and the number is estimated to continue decreasing and fall to 721 in 2024. The chart below sets forth, for the years indicated, the total actual and estimated number of public hospital and private hospitals in Guangdong Province:

Number of Public and Private Hospitals in Guangdong Province, 2015-2024E Public Private Hospitals Hospitals Total CAGR (2015-2019) -1.1% 12.7% 5.4% CAGR (2019-2024E) -0.4% 6.0% 3.3% 2,200 2,000 1,870 1,918 1,745 1,799 1,800 1,631 1,680 1,553 1,600 1,464 1,380 1,400 1,323 1,148 1,197 1,075 951 1,018 1,200 818 896 634 719 1,000 556 800 600 400 767 746 745 735 735 729 727 724 722 721 200 0 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E Public Hospitals Private Hospitals

Source: NHFPC, Guangdong HFPC, Frost & Sullivan analysis

According to the F&S Report, the number of Class III, Class II and Class I hospitals in Guangdong have increased from 149, 433 and 301 in 2015 to 217, 516, and 444 in 2019, respectively, with CAGR of 9.9%, 4.5% and 10.2% during this period, respectively. It is estimated that number of Class III, Class II and Class I hospitals will continue to increase and will reach 340, 603 and 610 in 2024, respectively. However, according to F&S Report, the number of unrated hospitals has decreased from 454 to 365, representing CAGR of -4.3%, which may due to hospitals’ application and getting approval of hospital rating.

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The revenue of private hospitals in Guangdong Province is expected to increase from RMB17.3 billion in 2015 to RMB32.9 billion in 2019, with a CAGR of 17.4%. In the same period, the revenue of public hospitals in Guangdong Province increased from RMB181.4 billion to RMB268.0 billion, with a CAGR of 10.2%. It is estimated that revenue of private hospitals in Guangdong Province will reach RMB68.2 billion in 2024, representing a CAGR of 15.7% from 2019 to 2024, while the revenue of public hospitals in Guangdong Province will increase to RMB393.5 billion, representing a CAGR of 8.0% from 2019 to 2024, according to the F&S Report. The chart below sets forth, for the years indicated, the total actual and estimated revenue of public and private hospitals in Guangdong Province:

Revenue of Public and Private Hospitals in Guangdong Province, 2015-2024E Public Private Hospitals Hospitals Total CAGR (2015-2019) 10.2% 17.4% 10.9% RMB Billion 462 CAGR (2019-2024E) 8.0% 15.7% 9.0% 450 428 68.2 393 400 59.7 361 51.8 350 330 44.8 301 38.4 300 273 32.9 252 28.1 250 221 23.8 199 19.6 368.3 393.5 200 17.3 341.6 316.0 291.3 150 245.2 268.0 227.8 181.4 201.6 100

0 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E Public Hospitals Private Hospitals

Source: Frost & Sullivan analysis

According to the F&S Report, the revenue of Class III hospitals in Guangdong Province has increased rapidly from RMB124.8 billion in 2015 to RMB220.6 billion in 2019, representing CAGR of 15.3%. At the same time, total revenue of Class II and Class I hospitals have grown steadily from RMB49.3 billion and RMB9.7 billion in 2015 to RMB58.8 billion and RMB11.3 billion in 2019, representing CAGR of 4.5% and 3.9%, respectively. It is estimated that total revenue of Class III, Class II and Class I hospitals will continue to increase and will reach RMB370.0 billion, RMB69.5 billion and RMB13.4 billion in 2024, respectively. However, the revenue of unrated hospitals in Guangdong Province has decreased from RMB14.9 billion in 2015 to RMB10.2 billion in 2019, representing CAGR of -9.1% from 2015 to 2019, which may due to the decrease of total number of unrated hospitals.

In Guangdong Province, the average spending per outpatient visit for Class III, Class II, Class I and unrated hospitals have increased from RMB254, RMB151, RMB145 and RMB231 in 2015 to RMB358, RMB206, RMB205 and RMB322 in 2019, respectively. The average spending per outpatient visit of the four types of hospitals is expected to grow continuously.

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Average Spending per Outpatient Visit in Guangdong by Classes of Hospitals, 2015-2024E

Unrated Class III Class II Class I Hospital RMB CAGR (2015-2019) 9.0% 8.0% 9.0% 8.6% 600 CAGR (2019-2024E) 7.7% 6.9% 7.8% 7.5% 519 500 462

400 358 322 288 298 300 254 231 206 205 200 151 145

100

0 2015 2019 2024E Class III Class II Class I Unrated Hospital

According to the F&S Report, the average spending per inpatient visit of Class III, Class II and unrated hospitals have increased from RMB13,128, RMB6,869 and RMB6,414 in 2015 to RMB15,375, RMB7,911 and RMB7,659 in 2019, respectively. It is estimated that the average spending per inpatient visit of Class III, Class II and unrated hospitals will reach RMB18,550, RMB9,316 and RMB8,943 in 2024. Meanwhile, the average spending per inpatient visit in Guangdong of Class I hospitals decreased with a CAGR of -0.6% from 2015 to 2019, and reached RMB5,847 in 2019, according to the F&S Report.

Average Spending per Inpatient Visit of Public and Private Hospitals in Guangdong, 2015-2024E

Unrated Class III Class II Class I Hospital CAGR (2015-2019) 4.6% 3.6% -0.6% 4.5% RMB CAGR (2019-2024E) 3.3% 3.3% -1.1% 3.1% 20,000 18,550 18,000 15,735 16,000 14,000 13,128 12,000 10,000 9,316 8,943 7,911 7,659 8,000 6,869 6,414 5,992 5,847 5,523 6,000 4,000 2,000 0 2015 2019 2024E Class III Class II Class I Unrated Hospital

There were 144 hospitals, 827 clinics, 647 community healthcare centres in Shenzhen by the end of 2019 in Shenzhen. The average spending per outpatient visit of Class III, Class II, Class I and unrated hospitals have increased from RMB305, RMB181, RMB174 and RMB277 in 2015 to RMB394, RMB257, RMB246 and RMB338 in 2019, respectively. The average spending per outpatient visit of the four types of hospitals is expected to grow continuously in the near future.

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Average Spending per Outpatient Visit in Shenzhen by Classes of Hospitals, 2015-2024E

Unrated Class III Class II Class I Hospital RMB CAGR (2015-2019) 6.6% 9.1% 9.0% 5.1% 600 CAGR (2019-2024E) 3.7% 4.2% 4.6% 3.7%

500 473

394 406 400 338 305 316 307 300 277 257 246

200 181 174

100

0 2015 2019 2024E Class III Class II Class I Unrated Hospital

In Shenzhen, the average spending per inpatient visit of Class III, Class II and unrated hospitals have increased from RMB15,098, RMB7,899 and RMB7,376 in 2015 to RMB17,308, RMB9,494 and RMB8,425 in 2019, respectively. It is estimated that the average spending per inpatient visit of Class III, Class II and unrated hospitals will reach RMB19,107, RMB10,247 and RMB9,569 in 2024. Meanwhile, the average spending per inpatient visit in Shenzhen of Class I hospitals increased with a CAGR of 4.4% from 2015 to 2019, and reached RMB8,185 in 2019.

Average Spending per Inpatient Visit in Shenzhen by Classes of Hospitals, 2015-2024E

Unrated Class III Class II Class I Hospital RMB CAGR (2015-2019) 3.5% 4.7% 4.4% 3.4% 25,000 CAGR (2019-2024E) 2.0% 1.5% 1.9% 2.6%

20,000 19,107 17,308 15,098 15,000

10,247 9,494 9,004 9,569 10,000 7,899 8,185 8,425 6,891 7,376

5,000

0 2015 2019 2024E Class III Class II Class I Unrated Hospital

According to the F&S Report, the total number of Class I hospitals in Shenzhen is 39 in both 2014 and 2019. The number of public class I hospitals has decreased from 18 in 2014 to 9 in 2019, while the number of private class I hospitals has increased from 20 to 30 during the same period. The revenue of private class I hospitals in Shenzhen has increased from RMB8.4 billion in 2015 to RMB11.1 billion in 2019, with a CAGR of 7.1%. It is estimated that private class I hospitals in Shenzhen will continue to

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Revenue of Private Class I Hospitals in Shenzhen, 2015-2024E

Private Class I CAGR (2015-2019) 7.1% Billion RMB CAGR (2019-2024E) 5.9% 16.0

14.0

12.0

10.0

14.8 8.0 14.0 13.2 11.8 12.5 6.0 10.4 11.1 9.7 8.4 9.0 4.0

2.0

0.0 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E General Hospitals and TCM Hospitals in Guangdong Province

As a major part of the hospital market, the revenue of private general hospitals in Guangdong Province has increased from RMB14.4 billion in 2015 to RMB26.2 billion in 2019, with a CAGR of 16.1%. It is estimated that revenue of private hospitals in Guangdong Province will reach RMB50.7 billion in 2024, representing a CAGR of 14.1% from 2019 to 2024, according to the F&S Report.

TCM hospitals primarily provide the treatment of traditional Chinese medicine. According to the F&S Report, the revenue of private TCM hospitals in Guangdong Province has grown from RMB94.7 million in 2015 to RMB222.9 million in 2019, representing a CAGR of 23.9%, it is projected that the revenue of private TCM hospitals will reach RMB598.9 million in 2024, with a CAGR of 21.9% from 2019.

The four hospitals in our Group that are located in Shenzhen, namely Luogang Hospital, Xuexiang Hospital, Jian’an Hospital and Renkang Hospital, are capable of providing multi-disciplinary healthcare services. In terms of specialisation, they fall into the general hospital classification. One of our hospitals, namely Zhongshan TCM Hospital, falls into the TCM hospital classification.

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Key drivers for growth and development of private hospitals in Guangdong Province

• Increasing demand for healthcare services. In China, with the accelerating aging population and rising prevalence of chronic diseases, public hospitals are unable to fully satisfy the rapid growing demand for healthcare services, requiring private hospitals to play an essential role in addressing deficiencies in coverage. In addition, along with the rise of disposable income, more people are not satisfied with being offered fundamental medical services, and instead they require medical service of more customisation or privacy. However, public hospitals as main players in China medical system are limited by government on the service offerings, together with the increasing demand for healthcare services create an opportunity for further development and expansion of private hospitals.

• Increasing investment in private hospital market. In China, the development of private hospitals requires a lot of financial support. Guangdong Province is the forerunner of the China’s reform and opening up, and presents favourable policy environment for private hospitals. Coupled with strong health awareness of residents in Guangdong Province and close distance to Hong Kong and Macau, private hospitals in Guangdong Province have attracted social capital from Mainland, Hong Kong and Macau. For example, in 2013, Hong Kong’s famous ophthalmologist, Lam Shun Chiu, established the first Hong Kong-owned private hospital in Shenzhen. The investment of social capital can assist private hospitals in upgrading equipment, introducing talents and improving the environment for medical treatment, thus promoting the rapid development of private hospitals in Guangdong.

• Privatisation of public hospitals. Government of Guangdong Province has encouraged privatisation of inefficiently-managed public hospitals, which presents rapid entry opportunities into the PRC healthcare market. More flexible approaches are expected to be adopted in profit sharing with public hospitals, including management contracts to acquisition of equity ownership. Comparing to build a new hospital from nothing, the privatisation of public hospitals can activate the existing healthcare resources, involve less capital and time, therefore rapidly drive the development of private hospitals.

• Incentive policies for the development of private hospitals. As one of the leading provinces conducting healthcare reform nationwide, Guangdong Province has promulgated a series of policies aiming to accelerate the development of private hospitals. For example, physicians in Guangdong Province can work in different sites without approval of the hospital. Moreover, physicians who come from Hong Kong, Macau and Taiwan can also work in different sites in Guangdong Province within a certain period. In particular, as the first batch cities of comprehensive reform of public hospitals in China, Shenzhen has provided a more friendly medical policy environment for the development of private hospitals. In 2017, Shenzhen government decided to provide thirteen financial support projects for private medical institutions, including basic medical subsidy, basic public health service subsidy, basic medical bed award, hospital grade evaluation award, etc. Further, policies like easing the market access and simplifying registration procedures of private hospitals are implemented in Shenzhen for a long time. The progressive incentive policies made by government not only put emphasis on the quantity but the medical quality of private hospitals, creating a favourable policy environment for the development of private hospitals.

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Entry Barriers for private hospitals market in Guangdong Province

• Capital requirements. New market entrants need a large sum of initial capital for land rent, hospital construction, and medical equipment purchase, especially for those hospitals that are established in large cities. In Guangdong Province, private hospitals’ funding costs are much more than those of public hospitals. In average, it usually takes 5 to 8 years for a new market entrant to start to generate profits.

• Regulatory/Compliance issues. Approval process for developing and building a hospital is highly political in China, and obtaining the license to open and operate a private hospital is a complicated and lengthy process. The guidelines and rules may change unpredictably during the process. Although the policy proposed by Guangdong Province requires to simplify the approval process, the establishment of private hospitals still costs a lot of time due to involvement of various government departments such as health, land and taxation. This may affect the establishment process of private hospitals in Guangdong Province.

• Competition from public hospitals. In Guangdong Province, public hospitals have long dominated healthcare services market, taking over the majority of outpatient and inpatient visits. Patients in Guangdong Province rely heavily on public hospitals for almost all kinds of diseases. Thus, it is difficult for new entrants to acquire large amount of patients and obtain recognition among patients in a short time.

• Medical professional. With higher reputation, public hospitals are more attractive to physicians, making it difficult for private hospitals to hire and retain outstanding talents in Guangdong Province. Most of the private hospital physicians are retired physicians from public hospitals and medical students who have just graduated from colleges. Moreover, the assessment of professional titles and the restrictions of free practice also impede the mobility of physicians from public hospitals to private hospitals.

Future trends of private hospitals in Guangdong Province

• Private hospitals playing a more important role. Nowadays, although the number of private hospitals in Guangdong Province has accounted for almost half of total number of hospitals, most of the private hospitals are of small scales and they only contribute around 10% of total outpatient and inpatient volume. With increasing investments from social forces and encouragement by the incentive policies, the scale of private hospitals continues to expand and the quality of service provided by private hospitals tend to improve in the near future. The role of private hospitals will be increasingly important in the near future.

• Rapid development of hospitals providing primary healthcare services. In order to solve the problem of the uneven distribution of medical resources in Guangdong Province, government of Guangdong Province has attached great importance to the improvement of primary healthcare capacity, and invested a lot of funds in infrastructure construction, personnel training, and management information construction. Private hospitals that focus on primary healthcare services will benefit a lot and undergo a rapid development in this friendly policy environment in the near future.

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• Differentiated management of private hospitals. In terms of comprehensive strength, private hospitals usually have less competitive edges comparing to public hospitals. Therefore, as the beneficial supplement for public hospitals, private hospitals usually adopt differentiated management to form a strong competitive edge in certain niche areas. For example, some private hospitals focus on one or more specialties, while others focus on community and primary healthcare services. This differentiated way of operation enables private hospitals to concentrate limited resources in a certain field and make rapid breakthroughs therefore achieving considerable development of themselves.

• Medical equipment upgrade. Private hospital market in Guangdong Province are in a stage of rapid development, but many private hospitals are still facing the problem of old and inadequate medical equipment, therefore unable to carry out new technology and treatment which greatly affects the quality of medical service. With social capital continuously entering the market, more private hospitals will begin to upgrade their equipment and introduce new technology to further improve medical service quality.

Competitive landscape

Medical consortium refers to the joint organization of medical institutions formed by the integration of medical resources of medical institutions of different levels and categories, which is conducive to optimizing the structure of medical resources, improving efficiency of medical services, better implementing graded diagnosis and treatment, and solving the problem of difficult to acquire medical services. As of the beginning of 2019, around 590 medical consortiums were established in Guangdong Province.

Within medical consortium of large hospitals and community hospital, cooperation including two-way transfers, talent development, technical support and resource sharing can be conducted.

To large hospitals, community hospitals can transfer patients with difficult illness to them after first diagnosis, and provide timely and effective initial medical care to the patient before the arrival of first-aid medical staffs from large hospitals. To primary hospitals, large hospitals can transfer patients to them for follow-up treatment, arrange teaching programs for personnel in community hospital, guide implementation of selected medical technology and send experts regularly to primary hospitals to support in research, ward rounds and lectures. Four of our hospitals in Shenzhen strategically joined the medical consortium led by Shenzhen Luohu Medical Group, equipping us with an advanced platform to leverage the medical resources of large hospitals.

We, as a private hospitals group operator, have made satisfactory performance records in providing healthcare services, as measured by number of patient visits and revenue in 2019. As Guangdong Province’s hospital market is highly competitive, we accounted for a small market share, which was approximately 0.8% in terms of revenue of healthcare services of general hospitals in Guangdong in 2019.

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The table below sets forth the top nine private general hospitals or private general hospital medical groups in Guangdong Province in terms of revenue in 2019:

Rank Hospital/Medical group Revenue in 2019 Market share (RMB Million)

1. Company A 2,023 7.3% 2. Company B 1,793 6.5% 3. Company C 1,545 5.6% 4. Company D 628 2.3% 5. Company E 420 1.5% 6. Company F 355 1.3% 7. Company G 325 1.2% 8. Company H 305 1.1% 9. Our Group 214 0.8%

Total 7,608 27.6%

Source: F&S Report

The table below sets forth the top seven private general hospitals or private general hospital medical groups in Guangdong Province in terms of the number of patient visits in 2019:

Rank Hospital/Medical group Patient visits in 2019 Market share (thousand)

1. Company A 3,688 13.0% 2. Company B 1,813 6.4% 3. Company C 1,724 6.1% 4. Our Group 622 2.2% 5. Company D 598 2.1% 6. Company G 508 1.8% 7. Company E 505 1.8%

Total 9,458 33.4%

Source: F&S Report

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The table below sets forth the top five private general hospitals or private general hospital medical groups in Shenzhen in terms of the revenue from healthcare services in 2019:

Rank Hospital/Medical group Revenue in 2019 Market share (RMB million)

1. Company E 420 16.8% 2. Company A 397 15.9% 3. Company G 199 8.0% 4. Our Group 182 7.3% 5. Company I 123 4.9%

Total 1,321 52.9%

Source: F&S Report

The table below sets forth the top five private TCM hospitals in Guangdong Province in terms of the revenue from healthcare services in 2019:

Rank TCM hospital Revenue in 2019 Market share (RMB million)

1. Zhongshan TCM Hospital 32.1 14.4% 2. Company J 15.2 6.8% 3. Company K 14.3 6.4% 4. Company L 8.7 3.9% 5. Company M 3.7 1.6%

Total 74.0 33.1%

Source: F&S Report

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There are four private general hospitals of our Group in Shenzhen: Jian’an Hospital, Xuexiang Hospital, Luogang Hospital and Renkang Hospital. The following map highlights the location of the Group’s hospitals and its competitors (only hospitals) locating within 10 kilometers.

5 6 Long Hua Long Gang 8 13 Pin Shan 7 1 14 11 2 4 12 15 3 22 Bao An 1 4 Da Peng Xin 9 2 16 Yan Tian Nan Shan Luo Hu 17 19 Shen Zhen3 18 10 21

20 23

Fu Tian

1 Shenzhen Bantian Hospital 10 Shenzhen You Yi Hospital

1 Jian'an Hospital 2 Yunshan Winlead Hospital 11 Shenzhen Ren He Hospital 18 Shenzhen Boai Hospital

3 Shenzhen Xiao Chuan Guo Hospital 12 Shenzhen Baihe Hospital 19 Shenzhen Liuhua Hospital 2 Luogang Hospital 43 Shenzhen Zhong Hai Hospital 13 Shenzhen Bao Xing Hospital 20 New Wind United Family Hospital

3 Renkang Hospital Shenzhen Longgang No.4 Hospital 5 Shenzhen Longji Hospital 14 Shenzhen Long Xiang Hospital 21

22 Shenzhen Wandong Hospital 4 Xuexiang Hospital 6 Shenzhen Jun Long Hospital 15 Shenzhen Overseas Chinese Hospital 7 Shenzhen Yi Ning Hospital 16 Shenzhen Pengcheng Hospital 23 Shenzhen Kang Ji Hospital

8 Shenzhen Wei Guang Hospital 17 Shenzhen Philanthropism Dawn Hospital 9 Shenzhen He Zheng Hospital

Jian’an Hospital

It has 25 competitors (including 13 hospitals, 1 outpatient department, 6 clinics and 5 community healthcare centers) within 10 kilometers of its service range. The competitive advantage of Jian’an Hospital included its strategical location near Shenzhenbei Station in Minzhi Subdistrict, which facilitated a high customer flow, with the access to approximately one million of residents in the area. It was also able to provide a more comprehensive medical service than clinics and a more streamlined treatment process than public hospitals. In addition, Jian’an hospital built its brand recognition through 16 years of operation in the district.

Xuexiang Hospital

It has 31 competitors (including 16 hospitals, 7 outpatient departments, 7 clinics and 1 community healthcare center) within 10 kilometers of its service range. The competitive advantage of Xuexiang Hospital was that it was the first hospital built in Jihua Subdistrict. Xuexiang Hospital also had in-depth cooperation with six Class III hospitals.

Luogang Hospital

It has 34 competitors (including 18 hospitals, 3 outpatient departments, 3 clinics and 10 community healthcare centers) within 10 kilometers of its service range. The competitive advantage of Luogang Hospital was its location near Shenzhendong Station and its large consumer base. Moreover, Luogang hospital had established various departments including TCM physical treatment, stomatology and physical examination, satisfying different needs of patients.

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Renkang Hospital

It has 27 competitors (including 16 hospitals, 3 outpatient departments, 3 clinics and 5 community healthcare centers) within 10 kilometers of its service range. In particular, Renkang Hospital is in cooperation with all the community healthcare centres within 5 kilometres of its service range with a focus to serve the local community by proving them medical transfer treatment and medical assistance. Other than its convenient location and established reputation, Renkang Hospital cooperated with experienced physicians of 3 Class III hospitals, which guaranteed the quality of its medical services and provided greater confidence for patients.

Zhongshan TCM Hospital

There is one private TCM hospital of our Group in Zhongshan: Zhongshan TCM Hospital. The following map highlights the location of the Group’s hospital and its competitors (only hospitals) locating within 10 kilometers.

It has 19 competitors (including 5 hospitals, 2 outpatient departments, 11 clinics and 1 community healthcare center) within 10 kilometers of its service range. The competitive advantage of Zhongshan TCM Hospital was that it is currently the only TCM hospital of Class II in Zhongshan.

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THE HOSPITAL MEDICAL DEPARTMENTS ESTABLISHMENT AND OPERATION SERVICE MARKET

Hospital medical departments establishment and operation services are solutions provided to comprehensively improve the clinical treatment and management capabilities of certain hospital departments, including medical equipment financing advisory services or solutions, high-tech medical equipment sourcing, advanced treatment technique introduction and talent cultivation. The government-leading healthcare reform has injected vitalities into the development of county-level hospitals, thereby boosting the medical departments establishment and operation services market. The reform aims at improving the clinical capacity of these hospitals by investing huge amount of capital in infrastructure upgrade and replacement. Furthermore, standardised requirements on the necessary medical devices and related techniques equipped by the county-level hospitals have been raised by the government.

In China, hospital medical departments establishment and operation services market reached RMB10,178 million in 2019, representing a CAGR of 59.4% from 2015 to 2019. Driven by stimulus policies for county-level hospitals and growing preference for hospital medical departments establishment and operation services, the market of China hospital department construction service is forecasted to expand to RMB78,054 million in 2024, growing at a CAGR of 50.3% from 2019 to 2024.

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Our business operations are subject to extensive supervision and regulation by the PRC government. This section sets out an introduction to a summary of the main applicable laws, rules, regulations and policies, which have a significant impact on the following key aspects of our business:

• those relating to the reform of healthcare institutions affect our ability to implement our current business strategy to expand our operations;

• those relating to the administration and classification of healthcare institutions, supervision over pharmaceuticals in healthcare institutions, medical equipment and treatment, medical personnel, environmental protection, and labor protection regulate our day-to-day operations and affect our compliance costs;

• those relating to medical malpractice and medical dispute that have an effect on our potential liabilities arising from day-to-day operations;

• those relating to foreign investment in China and that regulate the ability of our Company, as a foreign company, to conduct business in PRC; and

• those relating to taxation and foreign exchange matters have an impact on our operations and business.

LAWS AND REGULATIONS RELATED TO THE HEALTHCARE SERVICE SECTOR IN THE PRC

Categories of healthcare institutions in the PRC

Healthcare institutions in the PRC are mainly identified as not-for-profit medical institutions (“NMIs”) and for-profit medical institutions (“PMIs”). Key basis for identifying either type of the two medical institutions include business purpose, service task and applicable financial, tax and pricing policies and accounting standards. NMIs do not aim at generating profit for their investors. Positive accounting balance resulting from operations must be used for self-development. NMIs are eligible for preferential tax policies and financial subsidies from local governments. On the other hand, NMIs must comply with the pricing guidance for medical service stipulated by governments from time to time, and the rules and policies issued by the NHFPC, including Hospital Finance System and Hospital Accounting System. PMIs may distribute their profit to their investors as economic returns. Based on its marketing needs, PMIs have the discretion to set the fees and prices for their medical and healthcare services. In establishing internal control system, they may apply the finance and accounting system and other policies suitable for corporate enterprise. When applying for approval, registration and verification in connection with their incorporation, a healthcare institution must state its business nature to healthcare administrative authorities and must specify on its practice registration as “not-for-profit” or “for-profit”.

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Regulations on the reform of healthcare institutions

Opinions of the Central Committee of the Communist Party of China and the State Council on Promoting Further Reform of the Healthcare System

The Opinions of the Central Committee of the Communist Party of China and the State Council on Promoting Further Reform of the Healthcare System《中共中央、國務院關於深化醫藥衛生體制改革 ( 的意見》), which were promulgated by the State Council and the Central Committee of the PRC on 17 March 2009, advocate a range of measures to reform healthcare institutions in the PRC and establish a basic healthcare system covering both urban and rural residents. Measures aimed at reforming healthcare institutions include the separation of: (i) government agencies from public healthcare institutions; (ii) PMI from NMI; (iii) sponsorship from operations of public hospitals; and (iv) pharmaceutical dispensing from pharmaceutical prescription. The opinions include proposals for the establishment and improvement of corporate governance systems of public healthcare institutions, and checks and balances in decision-making, execution and supervision processes between owners and operators of public healthcare institutions. The opinions also encourage private capital to invest in healthcare institutions (including investments by foreign investors), the development of private healthcare institutions and the reform of public healthcare institutions (including those established by state-owned enterprises) through private capital investment.

Notice on Further Encouraging and Guiding Private Capital to Invest in Healthcare Institutions

The Notice of the General Office of the State Council on Forwarding the Opinions of the National Development and Reform Commission of the PRC (“NDRC”), the NHFPC and other Departments on Further Encouraging and Guiding Private Capital to Invest in Healthcare Institutions《國務院辦公廳轉 ( 發發展改革委衛生部等部門關於進一步鼓勵和引導社會資本舉辦醫療機構意見的通知》), which was promulgated by the General Office of the State Council on 26 November 2010, sets out the following measures with respect to expanding the scope for social capital to set up healthcare institutions, including: social capital is permitted and encouraged to set up various medical facilities. Social capital may apply for establishing and operating either PMIs or NMIs according to its purposes; priority shall be given to social capital when adjusting or increasing medical and health resources; to reasonably determine the scope of practice for NMIs; social capital is encouraged to participate in the restructuring of the public hospitals; overseas medical institutions, enterprises and other economic organisations are permitted to establish medical institutions together with domestic medical institutions, enterprises or other economic organisations in the form of equity or cooperation joint venture. The restrictions on maximum equity that can be owned by overseas capital in domestic medical institutions will be lifted step by step. The practice of allowing qualified overseas capital to set up wholly foreign owned medical institutions within the PRC will be tested on a pilot basis and then be gradually expanded; and to simplify and standardise the approval procedures for medical institutions by overseas capital. The establishment of sino-foreign equity joint venture and sino-foreign cooperative joint venture medical institutions can be approved by provincial level health authority and commerce authority. In addition, for encouraging and guiding social capital in setup of medical facilities, the notice also proposes on tax and price polices for the NMIs, entry policy for service providers under medical insurance plans, employment conditions and purchase of large medical equipment.

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Several Opinions on Promoting the Development of Healthcare Service Industry

Several Opinions of the State Council on Promoting the Development of Healthcare Service Industry《國務院關於促進健康服務業發展的若干意見》 ( ), which were promulgated by the State Council on 28 September 2013, encourage the private sector to invest in the healthcare service industry by various means including new establishment and participation in restructuring, and also encourage private capital investment in NMI for provision of basic health care services. The opinions propose the idea of the relaxation of the requirements for sino-foreign equity joint or cooperative joint healthcare institutions and expand eligibility in the pilot program for wholly foreign-invested healthcare institutions.

Decision on Several Important Issues relating to Promoting Overall Reform

The Decision of the Central Committee of the Communist Party of China on Several Important Issues relating to Promoting Overall Reform《中共中央關於全面深化改革若干重大問題的決定》 ( ), which was promulgated by the Central Committee of the Communist Party of China on 12 November 2013, encourages private investors to establish hospitals, and support shall be prioritized for the establishment of NMIs. Private investors are also encouraged to invest in underfunded service industries and participate in the restructuring of public hospitals by various means. The decision also permits physicians to practice in multiple medical institutions, and allows private-invested medical institutions to be included in the medical insurance system.

Several Opinions on Accelerating the Development of Healthcare Institutions with Social Capital

Several Opinions on Accelerating the Development of Healthcare Institutions with Social Capital 《關於加快發展社會辦醫的若干意見》( ), which were promulgated on 30 December 2013 by the NHFPC and the State Administration of Traditional Chinese Medicine (“SATCM”), stipulate the policies that support the development of private-invested healthcare institutions, including the (i) gradual relaxation of investment in healthcare institutions by foreign capital; (ii) relaxation of requirements for service sectors, allowing social capital’s investment in the areas which are not explicitly prohibited; (iii) relaxation of requirements for the deployment and use of large medical equipment in private hospitals; (iv) improvement of supporting policies for the development of private hospitals in aspects such as medical insurance and price control; and (v) acceleration of the approval processing regarding the establishment and operation of private hospitals.

The opinions also explicitly state that the government will (i) give prior support to the establishment of NMIs by social capitals, accelerate the formation of a healthcare institutions structure that consists of NMIs as principal body and PMIs as complementary; (ii) optimize allocation of medical resources by social capitals; (iii) strictly control the development size of public healthcare institutions and leave space for development of social capitals under the principles of scale controls, structure adjustment and appropriate scale; (iv) reduce limitations of applications and qualifications for applying for setting up a medical institution; (v) set up public, transparent, fair and normative entry permission system for establishing healthcare institutions by social capitals; and (vi) put reasonable requirements of share structure with respect to healthcare institutions invested by sino-foreign equity or cooperative joint venture. Healthcare administrative department at provincial level shall be responsible for the review and approval of setup of medical institution by sole proprietorship. For a better support of social capital’s investment in medical sector, limitations on service scope as well as the allocation of large medical equipment should be reduced, supporting polices should be improved and the approval process shall be accelerated. For a better service capacity of private healthcare institutions, the government will support the development of key medical specialists, introduction and training of talent, informationisation construction, multi-site practice and promotion of academic status.

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Guiding Opinions of the State Council on Innovating the Investment and Financing Mechanisms in Key Areas and Encouraging Social Investment

The Guiding Opinions of the State Council on Innovating the Investment and Financing Mechanisms in Key Areas and Encouraging Social Investment《國務院關於創新重點領域投融資機制 ( 鼓勵社會投資的指導意見》), which were promulgated on 16 November 2014 by the State Council, encourage the investment of social capital in certain key sectors. The opinions stipulate that the PRC government will continue to (i) promote the restructuring of eligible public healthcare institutions with the participation of social capital; (ii) encourage social capital’s participation in healthcare sector by means such as sole proprietorship, joint ventures, cooperative ventures, joint operations and leasing; (iii) improve the implementation of preferential tax policies on NMIs and the exemption policies of administrative and institutional fees on the constructions of NMIs or PMIs; (iv) implement the same price policy with regard to the utilization of electricity, water, gas and heat by both public and private healthcare institutions; and (v) relax the price control over the services provided by the private healthcare institutions.

Notice on Printing and Distributing the Outline of the National Medical and Healthcare Service System Plan (2015-2020)

The Notice of the General Office of the State Council on Printing and Distributing the Outline of the National Medical and Healthcare Service System Plan (2015-2020)《國務院辦公廳關於印發全國醫 ( 療衛生服務體系規劃綱要(2015-2020年)的通知》), which was promulgated by the General Office of the State Council on 6 March 2015, stipulates that private medical institutions are significant and integral parts of the medical and healthcare service system as well as an effective approach to fulfilling people’s multilevel and diversified medical and healthcare service needs. Private medical institutions may provide basic medical services, compete with public medical institutions in an orderly manner, provide top quality services to fulfill extra needs which are beyond basic needs and provide services in great demand such as rehabilitation and geriatric services to complement public medical institutions.

Up to 2020, planning shall be reserved for private medical institutions ensuring that each one thousand residents are entitled to no less than 1.5 hospital beds. Reservation shall also be made for the setup of diagnosis and treatment subjects and the allocation of large medical equipment. Requirements for the qualifications of medical institution sponsors shall be reduced as well as the conditions of setup medical institution through sino-foreign equity/cooperative joint venture. The pilot scheme of establishment of medical institutions solely invested by qualified overseas capitals shall be expanded steps by steps. The requirements of service scope shall also be reduced and the social capitals shall be allowed to invest in areas not explicitly prohibited by the laws and regulations. NMIs are entitled to prior support. Private medical institutions shall be guided to develop into a high and large-scale level. Professional hospital management group shall be developed. Support shall be made to the allocation of large medical equipment of private medical institutions. The review and approval formalities shall be more efficient. Where the private medical institution is qualified, the corresponding approval shall be assumed and the process shall be simplified to improve such administrative efficiency.

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Several Policies and Measures Regarding the Promotion of Accelerating the Development of the Medical Institutions Invested by Private Capital

The Notice of the General Office of the State Council on Printing and Distributing Several Policies and Measures Regarding the Promotion of Accelerating the Development of the Medical Institutions Invested by Private Capital《國務院辦公廳印發關於促進社會辦醫加快發展若干政策措施的通知》 ( ), which were promulgated by the General Office of the State Council on 11 June 2015 and came into effect on the same day, stipulate that: (i) the elimination and cancellation of unreasonable preceding items for examination and approval and the reduction in the time required for making such examination and approval; (ii) the reasonable control of the number and scale of the public medical institutions and the exploration of the space for development of the medical institutions invested by private capital; (iii) the support for the listing and financing of such eligible and qualified for-profit medical institutions invested by private capital; and (iv) that private investors with managerial experience in medical institutions are encouraged to participate in the management of public medical institutions through various formats including hospital management groups and subject to the clear distribution of power and responsibilities.

Law of the PRC on the Promotion of Basic Medical Care, Hygiene and Health

The Law of the PRC on the Promotion of Basic Medical Care, Hygiene and Health《中華人民共 ( 和國基本醫療衛生與健康促進法》) (the “Basic Medical Care Law”) was promulgated by the SCNPC on 28 December 2019 and came into effect on 1 June 2020. Under the Basic Medical Care Law, citizens shall be entitled to basic medical and health services from the State and society in accordance with the law. Therefore the State shall establish basic medical and health systems and set up a sound medical and health service system to protect and realize citizens’ rights to receive basic medical and health services. The State shall vigorously develop traditional Chinese medicine, insist on the equal attention to both traditional Chinese medicine and Western medicine. Moreover, the State shall rationally plan and allocate medical and health resources with focusing on primary-level units and take multiple measures to give priority to supporting the development of medical and health institutions below the county level. The implementation of the tiered diagnosis and treatment system for basic medical services is emphasised, where non-emergency patients are guided to go to primary-level medical and health institutions first, gradually setting up a mechanism for first diagnosis at the primary level, two-way referral, separate treatment of acute and chronic diseases and vertical linkage, and connecting it with the basic medical insurance system. In connection with medical and health institutions established by social forces, the government shall encourage and regulate the establishment of such medical and health institutions, support and regulate various types of cooperation between medical and health institutions run by social forces and those run by the government in terms of medical business, disciplinary construction and personnel training, etc.

Law of the PRC on Traditional Chinese Medicine

According to the Law of the PRC on Traditional Chinese Medicine《中華人民共和國中醫 ( 藥法》), which was promulgated by the Standing Committee of the National People’s Congress (“SCNPC”) on 25 December 2016 and came into effect on 1 July 2017, the government supports the establishment of Traditional Chinese Medicine (“TCM”) medical institutions with private capital. TCM medical institutions established with private capital are entitled to identical rights as the TCM medical institutions sponsored by the government in respect of access, practice, basic medical insurance, scientific research and teaching, and medical personnel title assessment. TCM medical institutions shall be staffed by medical personnel who are mainly TCM professionals and mainly provide TCM services. TCM physicians who have obtained the physician qualification upon examination may, according to the relevant provisions of the government, adopt modern scientific and technical methods relating to their specialties in practice activities after receiving training and passing the examination.

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Regulations on the administration and classification of healthcare institutions

Administrative Measures on Medical Institutions and the Medical Institution Practicing Licence

The Administrative Measures on Medical Institutions《醫療機構管理條例》 ( ), which were promulgated on 26 February 1994 by the State Council and came into effect on 1 September 1994 and revised on 6 February 2016, and the Implementation Measures of the Administrative Measures on Medical Institutions《醫療機構管理條例實施細則》 ( ), which were promulgated by the NHFPC on 29 August 1994 and came into effect on 1 September 1994 and last revised on 21 February 2017 and became effective on 1 April 2017, stipulate that the establishment of medical institutions shall comply with the relevant regional planning requirements as well as the basic standards of medical institutions. Any entity or individual that intends to establish a medical institution must follow the application approval procedures and register with the relevant healthcare administrative authorities to obtain a Medical Institution Practicing Licence (醫療機構執業許可證).

Administrative Measures for the Examination of Medical Institutions (For Trial Implementation)

The Administrative Measures for the Examination of Medical Institutions (For Trial Implementation)《醫療機構校驗管理辦法 ( （試行）》), which were promulgated by the NHFPC and came into effect on 15 June 2009, stipulate that the Medical Institution Practicing Licence is subject to periodic examinations and verifications by the registration authorities, and will be revoked in the event that such healthcare institution fails to apply for or pass the examination.

Opinions on Implementing Classification Administration of Urban Medical Institutions

The Opinions on Implementing Classification Administration of Urban Medical Institutions (《關於城鎮醫療機構分類管理的實施意見》), which were jointly promulgated by the NHFPC, the SATCM, the Ministry of Finance of the PRC (“MOF”) and the NDRC on 18 July 2000 and came into effect on 1 September 2000, provide that NMIs and PMIs shall be classified based on their business objectives, service purposes and implementation of various financial, taxation, pricing and accounting policies. Also, governments shall not operate PMIs. Medical institutions shall file with relevant authorities of health written statements of their not-for-profit/for-profit status when they go through application, registration and re-examination procedures in accordance with relevant laws, and the handling authority of health shall, jointly with other relevant authorities, decide the not-for-profit/for-profit status for such medical institution based on the source of its investment and the nature of its business.

Categories of Healthcare Institutions in the PRC

According to the Basic Standards for Medical Institutions (For Trial Implementation)《醫療機構 ( 基本標準（試行）》) which was promulgated on 2 September 1994 and revised on 5 December 2011 and the Interim Measures for the Assessment of Medical Institutions《醫院評審暫行辦法》 ( ) promulgated by the NHFPC on 21 September 2011, medical institutions in the PRC can be graded into three classes (Class I, II and III) with regard to their medical practice conditions, including but not limited to, the amount of registered beds, treatment departments, personnel, properties, equipment as well as completeness of their internal rules and regulations. For example, according to the Basic Standards for Medical Institutions (For Trial Implementation), Class I (一級), Class II (二級) and Class III (三級) comprehensive medical institutions should have 20 to 99, 100 to 499 and more than 500 registered beds, respectively.

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In addition, according to the Basic Standards for Medical Institutions (For Trial Implementation) and the Interim Measures for the Assessment of Medical Institutions, the NHFPC and the Hospital Assessment Committee (衛生部醫院評審委員會) lead, organise and supervise the assessment of medical institutions conducted every four years. The assessment takes the form of written evaluation, medical information statistics evaluation, on-site evaluation and social impact evaluation, and the outcome of such assessment can be classified as grade A (excellent)(甲等), grade B (good)(乙等) and grade C (failure)(不合格). Hospitals that fail the assessment will be given three to six months to undertake rectification measures before they undergo re-assessment. As a result, the highest level of a medical institution is a Class IIIA Hospital (三級甲等醫院).

• General Hospitals of Class III

The Accreditation Standard of Hospitals of Class III (2020)《三級醫院評審標準 ( （2020年版）》), promulgated and implemented by the National Health Commission of the PRC on 21 December 2020, provide detailed provisions for accreditation standards for hospitals of Class III. The Accreditation Standard of General Hospitals of Class III (2020) sets 183 accreditation standards and inspection indicators, which are used to conduct on-site appraisal for general hospitals of Class III and are also used by hospitals for self-evaluation and improvement, and 240 monitoring indices, which are used for monitoring, tracing and evaluating the operation, the quality of medical treatment and safety index of Class III hospitals.

• General Hospitals of Class II

The Accreditation Standard of General Hospitals of Class II (2012)《二級綜合醫院評審標準 ( （2012年版）》), promulgated and implemented by the Ministry of Health on 30 December 2011, and the Implementing Rules Regarding the Accreditation Standard of General Hospitals of Class II (2012) 《二級綜合醫院評審標準實施細則( （2012年版）》), promulgated and implemented by the General Office of the Ministry of Health on 11 May 2012, provide detailed provisions for accreditation standards for Class II general hospitals. In addition to being used for the accreditation of general hospitals of Class II, these standards can be also used by any other type of hospitals of Class II as reference.

Class II hospitals are regional medical institutions that are mainly responsible for providing medical services for areas with multiple communities (with populations of about 100,000). These hospitals also provide health care, rehabilitation services and undertake certain teaching and scientific research tasks.

The Accreditation Standard of General Hospitals of Class II sets 356 accreditation standards and monitoring indices, including 321 accreditation standards that can be used by hospitals for self-evaluation and improvement and which are also used to conduct on-site appraisals for Class II general hospitals , and 35 monitoring indices, which are used for monitoring, tracing and evaluating the operation, the quality of medical treatment and safety index of Class II general hospitals. Similar to the basic rules for conducting the assessment of general hospitals of Class III, a five-grade assessment is used to present the results of the accreditation and the general hospitals of Class II that pass the assessment are divided into Class IIA (二級甲等醫院) and Class IIB (二級乙等醫院).

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• Traditional Chinese Medicine Hospital of Class III

The Accreditation Standard of Traditional Chinese Medicine Hospitals of Class III (2017)《三級 ( 中醫醫院評審標準（ 2017年版）》) promulgated and implemented by SATCM on 13 September 2017, and the Implementing Rules Regarding the Accreditation Standard of Traditional Chinese Medicine Hospitals of Class III (2017)《三級中醫醫院評審標準實施細則 ( (2017年版)》), promulgated and implemented by SATCM on 13 September 2017, provide detailed provisions for accreditation standards for TCM hospitals of Class III. The Implementing Rules Regarding the Accreditation Standard of Traditional Chinese Medicine Hospitals of Class III (2017) set a series of accreditation standards and the total score is 1100 points, including “Chinese Medicine Service Function” as the first part with 600 points, “Comprehensive Service Function” as the second part with 400 points, and “Party Construction” as the third part with 100 points. As a result of accreditation, the TCM hospitals of Class III that pass the assessment shall be divided into TCM Hospital of Class IIIA (三級甲等中醫醫院), which is the highest level of a TCM medical institution, and TCM Hospital of Class IIIB (三級乙等中醫醫院).

• Traditional Chinese Medicine Hospital of Class II

The Accreditation Standard of Traditional Chinese Medicine Hospitals of Class II (2018)《二級中 ( 醫醫院評審標準（2018年版）》) promulgated and implemented by SATCM on 29 May 2018, and The Implementing Rules Regarding the Accreditation Standard of Traditional Chinese Medicine Hospitals of Class II (2018)《二級中醫醫院評審標準實施細則 ( （2018年版）》), promulgated and implemented by SATCM on 29 May 2018, provide detailed provisions for accreditation standards for TCM hospitals of Class II. The Implementing Rules Regarding the Accreditation Standard of Traditional Chinese Medicine Hospitals of Class II (2018) set a series of accreditation standards and the total score is 1100 points, including “Chinese Medicine Service Function” as the first part with 600 points, “Comprehensive Service Function” as the second part with 400 points, and “Party Construction” as the third part with 100 points. As a result of accreditation, the TCM hospitals of Class II that pass the assessment shall be divided into TCM Hospital of Class IIA (二級甲等中醫醫院) and TCM Hospital of Class IIB (二級乙等中醫醫院).

According to the Notice on Carrying Out Classification Assessment Work of Medical Institutions of the Health, Population and Family Planning Commission of Shenzhen Municipality《深圳市衛生和 ( 人口計劃生育委員會關於開展醫療機構等級評審工作的通知》) promulgated on 23 March 2011 and the Implementation Rules for the Classification Assessment of Medical Institutions of the Health, Population and Family Planning Commission of Shenzhen Municipality (For Trial)《深圳市衛生和人口計劃生育 ( 委員會關於醫療機構等級評審的實施細則(試行)》) promulgated on 23 May 2011, the classification assessment of hospitals in Shenzhen shall be conducted among hospitals of Class II and Class III. Private hospitals with good operation performance that meet the scale of hospitals of Class II or Class III shall be encouraged to apply for classification assessment of respective class of hospitals.

Pursuant to the Notice on Further Strengthening Classification Assessment Work of Hospitals 《關於進一步加強醫院評審工作的通知》( ) jointly promulgated by the Health and Family Planning Commission of Guangdong Province and Traditional Chinese Medicine Bureau of Guangdong Province on 18 March 2014, the classification assessment of hospitals in Guangdong Province shall be proceeded steadily and advanced by steps according to categories of hospitals in consideration of the reality of the province. The classification assessment of hospitals of Class II or below will be handled by of health and family planning administrative authorities of city level according to the uniform standards published by the state. No classification assessment shall be conducted for hospitals without published accreditation standards.

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Under the Circular of the General Office of the Ministry of Health on Determining the Grades of Medical Institutions Established by Social Capital《衛生部辦公廳關於確定社會資本舉辦醫院級別的 ( 通知》,the“Circular on Determining the Grades of Medical Institutions”) and the Circular of Shenzhen HFPC on Further Regulating of Determination the Grades of Hospitals《市衛生計生委關於進 ( 一步規範醫院定級的通知》, the “Determination Circular”), the health administrative authority is responsible for approval of the classification of hospitals.

According to two accreditation notices issued by Shenzhen HFPC on 25 January 2016 and 19 July 2017, our four private hospitals in Shenzhen, together with some other hospitals in Shenzhen, were approved by Shenzhen HFPC as Class I general hospitals after evaluation by Shenzhen HFPC and/or experts in accordance with the Determination Circular and/or other relevant regulations.

As advised by our PRC Legal Advisers, Shenzhen HFPC was a competent authority to handle and approve the classification of hospitals in Shenzhen according to the Circular on Determining the Grades of Medical Institutions and the Determination Circular. Based on the abovementioned accreditation notices and consultation with Shenzhen HFPC, our four private hospitals in Shenzhen had been recognised as Class I general hospitals.

According to an accreditation notice issued by Zhongshan HFPB on 20 January 2020, Zhongshan TCM Hospital was approved by Zhongshan HFPB as a TCM hospital of Class II. As advised by our PRC Legal Advisers, Zhongshan HFPB is a competent authority to handle and approve such TCM hospital classification. As at the Latest Practicable Date, our four private hospitals in Shenzhen has been recognised by the Shenzhen HFPC as Class I general hospitals while our TCM hospital in Zhongshan City has been recognised by Zhongshan HFPB as a TCM hospital of Class II.

Regulations on medical insurance for urban employees

The Interim Measures for the Administration of the Designated Medical Institutions of the Basic Medical Insurance for Urban Employees《城鎮職工基本醫療保險定點醫療機構管理暫行辦法》 ( ), which was jointly promulgated by the Ministry of Human Resources and Social Security, the NHFPC and the SATCM on 11 May 1999, set out that medical institutions, which provide medical services to urban employees with basic medical insurance, shall obtain the Certificate of the Designated Medical Institutions of the Basic Medical Insurance (定點醫療機構資格證書) from the labor and social security regulatory authorities upon the examination of such authorities. According to the Guiding Opinions of Improving the Management of Designated Medical Institutions and Pharmacies of Basic Medical Insurance through Agreements《關於完善基本醫療保險定點醫藥機構協議管理的指導意見》 ( ) promulgated by the Ministry of Human Resources and Social Security of the PRC on 2 December 2015, the review system of the Designated Medical Institutions of Basic Medical Insurance has been replaced by the management through agreements executed between social insurance authority and medical institutions.

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Regulations on the supervision over pharmaceuticals and medical equipment in medical institutions

Measures for the Supervision and Administration of Pharmaceuticals in Medical Institutions (for Trial Implementation)

The Measures for the Supervision and Administration of Pharmaceuticals in Medical Institutions (for Trial Implementation)《醫療機構藥品監督管理辦法 ( （試行）》), which were promulgated by the State Food and Drug Administration (“CFDA”) and came into effect on 11 October 2011, stipulate that medical institutions shall purchase pharmaceuticals from enterprises qualified for the production or distribution of pharmaceuticals and comply with certain standards in respect of the storage, safekeeping, preparations and use of such pharmaceuticals.

Regulations on the Administration of Narcotic Pharmaceuticals and Psychotropic Substances

The Regulations on the Administration of Narcotic Pharmaceuticals and Psychotropic Substances 《麻醉藥品和精神藥品管理條例》( ), which were promulgated by the State Council on 3 August 2005 and came into effect on 1 November 2005, last revised on 6 February 2016, provide that, where a medical institution needs to use any narcotic pharmaceutical or Class I psychotropic substance, it shall, upon approval by the competent public health department, obtain the Seal Card for the Purchase and Use of Narcotic Pharmaceuticals and Class I Psychotropic Substances (麻醉藥品、第一類精神藥品購用印鑒卡).

Administrative Measures on the Radiotherapy

The Administrative Measures on the Radiotherapy《放射診療管理規定》 ( ), which were promulgated by the NHFPC on 24 January 2006 and came into effect on 1 March 2006 and revised on 19 January 2016, set out the basic statutory framework for healthcare institutions engaged in the clinical diagnosis and treatment using radioisotopes and radiation-emitting devices. Depending on the specific radiotherapy treatment, healthcare institutions shall apply for and obtain the Licence for Radiotherapy (放射診療許可證) issued by the competent public health administrative authorities. During the course of radiotherapy, medical institutions shall take protective measures in accordance with the relevant laws and regulations.

Regulations on the Safety and Protection of Radioisotopes and Radiation-emitting Devices

The Regulations on the Safety and Protection of Radioisotopes and Radiation-emitting Devices 《放射性同位素與射線裝置安全和防護條例》( ), which were promulgated by the State Council on 14 September 2005 and came into effect on 1 December 2005 and last revised on 2 March 2019, stipulate that any entity engaging in the production, sale or use of radioisotopes or radiation-emitting devices of different categories shall obtain a corresponding licence from the competent environment protection department.

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Administrative Measures on the Deployment and Use of Large Medical Equipment (for Trial Implementation)

The Administrative Measures on the Deployment and Use of Large Medical Equipment (for Trial Implementation)《大型醫用設備配置與使用管理辦法 ( （試行）》), which were jointly promulgated by the NHFPC and National Medical Products Administration on 22 May 2018 and came into effect on the same date, provide that the management of large medical equipment is subject to the allocation planning of the government and licensing system. Large medical equipment refers to large medical devices that adopt complex technology, require large capital investment, have high operation costs, have significant impact on medical expenses, and have been included in catalogue management. When a medical device user applies for the allocation of large medical equipment, it shall comply with the allocation plan, be adapted to its functional positioning and clinical service requirements, and have the corresponding technical conditions, supporting facilities and professional and technical personnel with appropriate qualifications and capabilities. After acquiring the Licence for the Allocation of Large Medical Equipment (大型醫用設備配置許可證), the medical device user shall allocate the corresponding large medical equipment in a timely manner, and submit the relevant information on the large medical equipment allocated to the licence issuer.

Laws and regulations on medical personnel of medical institutions

Law on Medical Practitioners of the PRC

The Law on Medical Practitioners of the PRC《中華人民共和國執業醫師法》 ( ), which was promulgated by SCNPC on 26 June 1998 and came into effect on 1 May 1999 and revised on 27 August 2009, provides that physicians in the PRC shall obtain qualification licences for their medical profession. Qualified physicians and qualified assistant physicians shall register with the relevant public health administrative authorities at or above county level. After registration, physicians may work at healthcare institutions in their registered location in the types of jobs and within the scope of medical treatment, disease-prevention or healthcare business as provided in their registration.

Notice on Printing and Distributing Several Opinions on Advancing and Regulating Physician’s Multisite Practice

The Notice on Printing and Distributing Several Opinions on Advancing and Regulating Physician’s Multisite Practice《關於印發推進和規範醫師多點執業的若干意見的通知》 ( ) which were jointly promulgated by the NHFPC, the NDRC, the Ministry of Human Resources and Social Security, the SATCM and the China Insurance Regulatory Commission on 5 November 2014 and came into effect on the same day, provide that clinical, stomatology and TCM physicians could conduct multisite practices at two or more medical institutions during the effective registration period. Physicians who conduct multisite practices should have intermediate or above technical qualification in medical care, be engaged in the same professional field for 5 years, be healthy and competent for multisite practices, and have no unqualified records within the last two assessment period.

The Administrative Measures of the Health and Family Planning Commission of Guangdong Province and the TCM Bureau of Guangdong Province Regarding Multisite Practice of Physicians 《廣東省衛生和計劃生育委員會、廣東省中醫藥局關於醫師多點執業的管理辦法》( ) promulgated by the Health and Family Planning Commission of Guangdong Province and the TCM Bureau of Guangdong Province on 24 August 2016 and came into effect on 1 October 2016 further relaxed the procedures on multisite practice of physicians. The measures stipulate that physicians should inform, and make the necessary filings with, their primary practice facility before engaging in multisite practice with other healthcare facilities. The relevant healthcare facilities are responsible for filing the multisite practice of the relevant physicians through a designated internet website.

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Regulations on Nurses

The Regulations on Nurses《護士條例》 ( ), which were promulgated by the State Council on 31 January 2008 and came into effect on 12 May 2008 and revised on 27 March 2020, provide that a nurse shall obtain a nurse’s Practicing Certificate (護士執業證書) issued by competent healthcare administrative authorities, which is valid for five years. A qualified nurse shall only practice in the medical institution where his/her Practicing Certificate registered.

Laws and regulations on medical malpractice

Tort Liability Law of the PRC

The Civil Code of the PRC (中華人民共和國民法典), which were promulgated by the NPC on 28 May 2020 and came into effect on 1 January 2021, provides that if a healthcare institution or its medical personnel are at fault for damage inflicted on a patient during the course of diagnosis and treatment, the healthcare institution will be liable for compensation. The damage caused to the patient by the failure of the medical personnel to fulfill their statutory obligations in the course of diagnosis and treatment will be paid by the healthcare institution. Healthcare institutions and their medical personnel will protect the privacy of their patients and will be liable for damage caused by divulging the patients’ private or medical records without consent.

Regulations on Handling Medical Malpractice

The Regulations on Handling Medical Malpractice《醫療事故處理條例》 ( ), which were promulgated by the State Council on 4 April 2002 and came into effect on 1 September 2002, provide a legal framework and detailed provisions regarding the prevention, identification, disposition, compensation and penalties of or relating to cases involving personal injury to patients caused by healthcare institutions or medical personnel due to malpractice.

Regulations on medical advertising in the PRC

Advertisement Law of the PRC

The Advertisement Law of the PRC《中華人民共和國廣告法》 ( ), which was promulgated by the SCNPC on 27 October 1994 and came into effect on 1 February 1995 and last revised on 26 October 2018, provides that advertisements shall not contain false statements and be deceitful or misleading to consumers. Advertisements legally required to receive censorship, including those that are relating to pharmaceuticals and medical devices, shall be reviewed by relevant authorities in accordance with relevant rules before being distributed by broadcasting, movies, television, newspapers, journals or otherwise. The advertisement for medical treatment, pharmaceuticals or medical devices shall not contain: (i) any assertion or guarantee for efficacy and safety; (ii) any statement on cure rate or effective rate; (iii) any comparison with the efficacy and safety of other pharmaceuticals or medical devices or with other healthcare institutions; (iv) any use of endorsements or testimonials; or (v) other items as prohibited by laws and administrative regulations.

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Interim Measures for the Administration of Internet Advertisement

The Interim Measures for the Administration of Internet Advertisement《互聯網廣告管理暫行辦 ( 法》), which were promulgated by the State Administration of Industry and Commerce on 4 July 2016 and came into effect on 1 September 2016, provides that internet advertisement shall be identifiable and clearly identified as an “advertisement” so that consumers will tell it is an advertisement. Paid search advertisements shall be clearly distinguished from natural search results. No entity and individual may publish any advertisement of prescription or tobacco by means of the internet. No advertisement of any medical treatment, medicines, foods for special medical purpose, medical apparatuses, pesticides, veterinary medicines, dietary supplement or other special commodities or services which are subject to review by advertisement review authorities as stipulated by laws and regulations shall be released unless it has passed such review.

Administrative Measures on Medical Advertisement

The Administrative Measures on Medical Advertisement《醫療廣告管理辦法》 ( ), which were jointly promulgated by the State Administration of Industry and Commerce and the NHFPC on 10 November 2006 and came into effect on 1 January 2007, require that medical advertisements shall be reviewed by relevant health authorities and obtain a Medical Advertisement Review Certificate (醫療廣告審查證明) before they may be released by a healthcare institution. Medical Advertisement Review Certificate has an effective term of one year and may be renewed upon application.

Regulations on environmental protection related to healthcare institutions

Law of PRC on Evaluation of Environmental Effects

According to the Law of PRC on Evaluation of Environmental Effects《中華人民共和國環境影響 ( 評價法》), which was promulgated by the SCNPC on 28 October 2002 and came into effect on 1 September 2003 and last revised on 29 December 2018, the State has established the system of Evaluation of Environmental Effects of Construction Projects. On the basis of the extent of the effects exerted on the environment by construction projects, the State exercises, in a classified manner, control over the evaluation of the effects of construction projects on the environment.

Specifically, where considerable effects may be exerted on the environment, a written report on environmental effects in which a comprehensive evaluation of the effects on the environment shall be made; where mild effects may be exerted on the environment, a statement on the effects in which an analysis or special evaluation of the effects shall be made; or where the effects on the environment are very little and therefore it is not necessary to make an evaluation of them, a registration form of environmental effects should be filled out. The document for evaluation of the environmental effects of a construction project shall, in accordance with the regulations of the State Council, be submitted by the construction unit for examination and approval to the competent administrative department for environment protection.

According to the Regulations on Administration of Environmental Protection Testing Acceptance on Completion of Construction Projects《建設項目竣工環境保護驗收管理辦法》 ( ), which was promulgated by the Ministry of Environmental Protection on 27 December 2001 and came into effect on 1 January 2002 and revised on 22 December 2010, upon the completion of a construction project, the construction unit shall apply with the competent administrative department of environmental protection for inspection and acceptance of the completed environmental protection of the construction project.

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Regulations on the Management of Medical Waste and its implementation measures

The Regulations on the Management of Medical Waste《醫療廢物管理條例》 ( ), which were promulgated by the State Council on 16 June 2003 and came into effect on the same day and revised on 8 January 2011, and the Implementation Measures of the Management of Medical Waste《醫療衛生機構 ( 醫療廢物管理辦法》), which were promulgated by the NHFPC on 15 October 2003 and came into effect on the same day, stipulate that healthcare institutions shall timely deliver medical waste to a specially designated location for centralised disposal of medical waste and categorise the medical waste in accordance with the Classified Catalogue of Medical Waste《醫療廢物分類目錄》 ( ). High-risk waste shall be sterilised on the spot before disposal. Sewage generated by any healthcare institution and excretion of its patients or patients suspected of infectious diseases must be sterilised in accordance with the relevant laws, rules and regulations, and shall not be discharged into sewage until the relevant standards are met.

Regulations on Urban Drainage and Sewage Treatment

The Regulations on Urban Drainage and Sewage Treatment《城鎮排水與污水處理條例》 ( ), which were promulgated by the State Council on 2 October 2013 and came into effect on 1 January 2014, require that urban entities and individuals shall dispose sewage through urban drainage facilities covering their geographical area in accordance with relevant rules. Companies or other entities engaging in medical activities shall apply for a Sewage Disposal Drainage Licence (污水排入排水管網許可證) before disposing sewage into urban drainage facilities. Sewage-disposing entities and individuals shall pay sewage treatment fee in accordance with relevant rules.

Laws and Regulations on Prices of Medical Services and Medicine

Notice of Issues Related to the Implementation of Market Price Adjustment by Non-Public Medical Institutions

The Notice of Issues Related to the Implementation of Market Price Adjustment by Non-Public Medical Institutions《關於非公立醫療機構醫療服務實行市場調節價有關問題的通知》 ( ), which were promulgated and implemented on 25 March 2014 by the NDRC, the NHFPC and the Ministry of Human Resources and Social Security, provides that the prices of medical services provided by non-public medical institutions shall be subject to market price adjustment scheme. NMIs in compliance with the relevant stipulations of Medical Insurance Designated Medical Institutions shall be included in the designated scope of services for the social insurances such as employees’ medical insurance, urban and rural residents’ medical insurance, new rural cooperative medical insurance, work-related injury insurance and maternity insurance in accordance with relevant procedures, and shall carry out the payment policy same as the public hospitals. The institutions handling the medical insurance shall, in compliance with the requirements of the reform on the means of payment for medical insurance, determine the specific means and standard of payment with the designated non-public medical institutions through negotiation to increase the application efficiency of the fund.

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Guiding Price Catalog for Medical Services

The Notice Concerning the Standardisation of Price Management for Medical Services and Related Issues《關於規範醫療服務價格管理及有關問題的通知》 ( ) and National Medical Services Price Project Standardisation (2012 Version)(《全國醫療服務價格項目規範(2012年版》), which were promulgated by the NDRC, the NHFPC and the SATCM on 4 May 2012, provides that the price projects of medical services announced by the project standardization shall be the basis of the items charged by the various classes and types of NMIs for their medical services. Those project charges requiring merger or combination or the new medical service price projects shall be examined and approved by the provincial competent price department together with the departments including the health administration at the same grade.

According to the Implementation Opinions on Promotion of Reform in Medical Services and Medicine Prices of Guangdong Province《廣東省物價局、省衛生廳、省人力資源和社會保障廳關於 ( 推進我省醫療服務和藥品價格改革的實施意見》) promulgated and implemented on 23 July 2010, by the Bureau of Price of Guangdong Province, the Guangdong HFPC and the Ministry of Human Resources and Social Security of Guangdong Province, the prices for medical services in Guangdong Province are set based on the combination of government guidance prices and market-oriented prices. NMIs apply government guidance prices for the medical services they provide, while PMIs, and NMIs (for special medical services) apply market-oriented prices subject to filing with competent authorities. The Implementation Opinions also refer to reform on medicine prices in several pilot cities of Guangdong Province, with the purpose of establishing negotiation mechanism among supervisory agency of medical insurance, healthcare institutions (or hospital associations) and medicine suppliers, involving industrial agencies, social organizations and scientific research bodies in the formulation of medicine pricing policies, and improving the medicine pricing mechanism.

Circular on the Issuance of the Reform of the Pharmaceutical and Healthcare Services Price Formulation Mechanism

The Circular on the Issuance of the Reform of the Pharmaceutical and Healthcare Services Price Formulation Mechanism《關於印發改革藥品和醫療服務價格形成機制的意見的通知》 ( ), were promulgated by the NDRC, the NHFPC, and the Ministry of Human Resources and Social Security, and came into effect on 9 November 2009. It provides that government-directed price and market-based price shall apply to the provision of healthcare services: Price for basic healthcare services provided by NMIs shall be directed by government-directed pricing guidelines, while price for healthcare services provided by PMIs and certain special categories of healthcare services provided by NMIs can be determined by the market.

Regulations for the Implementation of the Pharmaceutical Administration Law

The Regulations for the Implementation of the Pharmaceutical Administration Law of the PRC 《中華人民共和國藥品管理法實施條例》( ), which were promulgated by the State Council on 4 August 2002, came into effect on 15 September 2002 and last revised on 2 March 2019, provide that pharmaceuticals provided to patients by medical institutions shall be within the scope of diagnoses and treatments and dispensed according to the prescriptions of licensed doctors or licensed assistant doctors. The scope of pharmaceuticals purchased and provided to patients by family planning technical service institutions shall be in conformity with the scope of services approved and the pharmaceuticals shall be dispensed according to the prescriptions of licensed doctors or licensed assistant doctors.

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Medicine Catalog for Medical Insurance and Payment Requirements

According to the Interim Measures for the Management of Medicine within the Scope of Basic Medical Insurance for Urban Employee《城鎮職工基本醫療保險用藥範圍管理暫行辦法》 ( ), promulgated and implemented on 12 May 1999 by the Ministry of Human Resources and Social Security, the NDRC, the MOFCOM, the MOF, the NHFPC, the CFDA, and the SATCM, the scope of essential medicine covered by medical insurance shall be managed through formulating the Essential Medicine Catalog for Medical Insurance (“Essential Medicine Catalog”). The medicine listed in the Essential Medicine Catalog includes western medicine, Chinese traditional medicine (including ethnic drug), ready-for-use Chinese herbs (including ethnic drug), with the western medicine and the Chinese traditional medicine listed in the medical catalog approved for payment by the basic medical insurance funds, and the ready-for-use Chinese herbs listed in the medical catalog disapproved for payment by the basic medical insurance funds. In the Essential Medicine Catalog, western medicine and Chinese traditional medicine are divided into “Class A Catalog” and “Class B Catalog”. The formulation of “Class A Catalog” shall be unified by the State and not be subject to local adjustment. The “Class B Catalog” formulated by the State may be subject to appropriate adjustment by various provinces, autonomous regions and municipalities directly under the central government. The sum for the increase and decrease of the varieties shall not exceed 15% of the total number of medicine varieties in the “Class B Catalog” formulated by the State.

Opinions on Promoting the Reform regarding the Pricing of Pharmaceuticals

The NDRC, the NHFPC, the Ministry of Human Resources and Social Security, the Ministry of Industry and Information Technology, the MOF, the Ministry of Commerce of the PRC (“MOFCOM”) and the CFDA promulgated the Opinions on Promoting the Reform regarding the Pricing of Pharmaceuticals《推進藥品價格改革的意見》 ( ) on 4 May 2015, according to which, the pricing scheme of pharmaceuticals shall be reformed from the following perspectives: (i) abolish the government pricing scheme and retail price ceilings with respect to the sale of pharmaceuticals other than narcotic drugs and Class I psychotropic substances, improve the pharmaceutical procurement mechanism, and bring out the price-controlling function of Basic Medical Insurance (基本醫療保險)(“BMI”), so that the actual price of pharmaceuticals can be determined through market competition; (ii) pharmaceuticals within the coverage of BMI. The authority in charge of BMI shall, together with relevant governmental departments, formulate regulations with respect to the procedures, standards and methods for the formulation of the payment standards for pharmaceuticals within the coverage of BMI and explore an effective price formation mechanism therefor; (iii) patent pharmaceuticals and pharmaceuticals of exclusive production. A transparent, fair and multilateral negotiation mechanism for the price formation shall be established; (iv) blood products not included in the national Reimbursed Drug List and pharmaceuticals for planned immunization of centralized procurement by the government, national AIDS antiviral treatment drugs, and contraceptives. The price shall be formed through bidding or negotiation; (v) narcotic drugs and Class I psychotropic substances. The producer price ceiling and the retail price ceiling shall still apply; (vi) other pharmaceuticals. The producer and operator of pharmaceuticals other than the above-mentioned may determine the price by itself.

Law of the PRC on Maternal and Infant Health Care

Law of the PRC on Maternal and Infant Health Care《中華人民共和國母嬰保健法》 ( ), which was promulgated by SCNPC on 27 October 1994, last revised on 4 November 2017 and became effective on 5 November 2017, and Measures for Implementation of the Law of the PRC on Maternal and Infant Health Care《中華人民共和國母嬰保健法實施辦法》 ( ), which was promulgated by the State Council on 20 June 2001 and last revised on 17 November 2017, provides that medical and health institutions that carry out pre-marital medical examination, genetic disease diagnosis and pre-natal diagnosis, ligation operations

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LAWS AND REGULATIONS RELATED TO FOREIGN INVESTMENT IN THE PRC

Company Law of the PRC

The Company Law of the PRC《中華人民共和國公司法》 ( ), which was issued by the SCNPC on 29 December 1993, last revised and became effective on 26 October 2018, provides that companies established in the PRC may take form of company of limited liability or company limited by shares. Each company has the status of a legal person and owns its assets itself. Assets of a company may be used in full for the company’s liability. The Company Law applies to foreign-invested companies unless relevant laws provide otherwise.

Wholly Foreign-Owned Enterprise Law of the People’s Republic of China and its implementation measures

The Wholly Foreign-Owned Enterprise Law of the PRC《中華人民共和國外資企業法》 ( ), which was promulgated by the SCNPC and amended on 31 October 2000 and came into effect on the same day, and the Implementation Measures for the Wholly Foreign-Owned Enterprise Law《中華人民共和國外 ( 資企業法實施細則》), which were promulgated by the State Council and amended on 19 February 2014, stipulate that foreign enterprises and other economic organisations or individuals may establish wholly foreign-owned enterprises (“WFOE”) in the PRC. The application for the establishment of a WFOE is subject to the examination and approval by the competent commercial departments before an Approval Certificate is issued. The Decision of the SCNPC on Revising Four Laws including the Wholly Foreign-Owned Enterprise Law of the PRC《全國人大常委會關於修改 ( 〈中華人民共和國外資企業法〉等四部法律的決定》), which was promulgated by the Standing Committee of the State Council on 3 September 2016 and came into effect on 1 October 2016, changes the above requirement of examination and approval to filing for the WFOEs which do not involve any special administrative measure for admittance prescribed by the state.

The Foreign Investment Law of the PRC

The Foreign Investment Law of the PRC《中華人民共和國外商投資法》 ( ) was adopted by the National People’s Congress of the PRC on 15 March 2019, which came into effect as of 1 January 2020, repealing simultaneously the Sino-foreign Equity Joint Ventures Law of PRC, the Wholly Foreign-Owned Enterprise Law of the PRC and the Sino-foreign Cooperative Joint Ventures Law of PRC. Under the Foreign Investment Law of the PRC, the State shall implement the management systems of pre-establishment national treatment and negative list for foreign investment, according to which the treatment given to foreign investors and their investments during the investment access stage shall be not lower than that given to their domestic counterparts, and the State shall give national treatment to foreign investment beyond the negative list where special administrative measures for the access of foreign

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investment in specific fields is specified. Besides, the State shall protect foreign investors’ investment, earnings and other legitimate rights and interests within the territory of China in accordance with the law. The state will take measures to prompt foreign investment such as ensuring fair completion for foreign-invested enterprises to participate in government procurement activities, and protection of intellectual property rights of foreign investors and foreign-invested enterprises. In respect of administration of foreign investment, foreign investment shall go through relevant verification and record-filing formalities if required by relevant state laws and regulations. While the organisation form, institutional framework and standard of conduct of a foreign-funded enterprise shall be subject to the provisions of the Company Law or the Partnership Enterprise Law of the PRC, if applicable.

The Regulations on Implementing the Foreign Investment Law of the PRC《中華人民共和國外商 ( 投資法實施條例》, the “Implementing Regulations of Foreign Investment Law”) were issued by the State Council on 26 December 2019, which came into effect on 1 January 2020 and the Regulations on Implementing the Sino-Foreign Equity Joint Venture Enterprise Law of the PRC《中華人民共和國中外 ( 合資經營企業法實施條例》), Provisional Regulations on the Duration of Sino-Foreign Equity Joint Venture Enterprise Law《中外合資經營企業合營期限暫行規定》 ( ), the Regulations on Implementing the Wholly Foreign-Invested Enterprise Law of the PRC《中華人民共和國外資企業法實施細則》 ( ) and the Regulations on Implementing the Sino-foreign Cooperative Joint Venture Enterprise Law of the PRC 《中華人民共和國中外合作經營企業法實施細則》) were repealed simultaneously. The Implementing Regulations of Foreign Investment Law provide for detailed rules on relevant foreign investment issues. Investments made in Mainland China by investors from the Hong Kong Special Administrative Region and the Macao Special Administrative Region, and by Chinese citizens residing abroad shall be governed by the Foreign Investment Law of the PRC and the Implementing Regulations of Foreign Investment Law, unless otherwise provided by laws, administrative regulations or the State Council.

The Measures for the Reporting of Foreign Investment Information

The Measures for the Reporting of Foreign Investment Information《外商投資信息報告辦法》 ( ) were issued by the MOFCOM and the State Administration of Market Regulation on 30 December 2019, which came into effect on 1 January 2020 and replaced the Interim Administrative Measures for the Record-filing of the Incorporation and Change of Foreign-invested Enterprises《外商投資企業設立及 ( 變更備案管理暫行辦法》). Since 1 January 2020, for foreign investors carrying out investment activities directly or indirectly in China, the foreign investors or foreign-invested enterprises shall submit investment information to the commerce authorities pursuant to these measures.

Catalogue of Industries for Guiding Foreign Investment

The Catalogue of Industries for Encouraged Foreign Investment (2020 Edition)《鼓勵外商投資產 ( 業目錄(2020年版)》)(“Catalogue”) was promulgate on 27 December 2020 by the NDRC and the MOFCOM, and entered into force from 27 January 2021, which sets out industries where foreign investment is encouraged in the whole country and priority industries for foreign investment in the central-western region of the PRC. The Special Administrative Measures for Access of Foreign Investment (Negative List) (2020 Edition)《外商投資准入特別管理措施 ( （負面清單）(2020年版)》) (“Negative List 2020”), was promulgate on 23 June 2020 by the NDRC and the MOFCOM, and entered into force from 23 July 2020. The Negative List 2020 sets out specific administrative measures in relation to the access of foreign investment such as the equity or management requirements. Fields not included in the Negative List 2020 shall be managed under the principle that domestic investment and foreign investment are treated uniformly. Under the Negative List 2020, medical institutions are classified as restricted foreign investment industries which permit foreign investment by way of a Sino-foreign equity joint venture.

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On 9 November 2018, our PRC Legal Advisers and the PRC legal advisers to the Sponsor conducted an interview with Qianhai Administration of Shenzhen Municipality, a competent governmental authority responsible for the administration of foreign investment, which confirmed that it would defer to the health administrative authority as to foreign investment in Guodan SZ. On 5 March 2019 and 12 April 2019, our PRC Legal Advisers and the PRC legal advisers to the Sponsor conducted an interview with Shenzhen HFPC and Guangdong HFPC respectively, all of which confirmed that the shareholding in Guodan SZ by Guodan HK would be in compliance with relevant regulations relating to foreign investment in medical institutions. As advised by our PRC Legal Advisers, Qianhai Administration of Shenzhen Municipality, Shenzhen HFPC and Guangdong HFPC were competent governmental authorities which had the appropriate authority to make the abovementioned confirmation.

Additionally, according to the Circular of the National Health and Family Planning Commission and the Ministry of Commerce on Carrying out the Pilot Program of the Establishment of Wholly Foreign-Owned Hospitals《國家衛生計生委、商務部關於開展設立外資獨資醫院試點工作的通知》 ( ) promulgated on 25 July 2014, foreign investors are allowed to set up wholly foreign-owned hospitals, through incorporation or merger and acquisition, in seven provinces or municipalities including Guangdong Province. Further, Shenzhen municipal people’s government issued the Circular on Measures for Further Expanding the Scale and Improving the Quality of Using Foreign Investment《關於進一步擴 ( 大利用外資規模提升利用外資品質若干措施的通知》) on 10 April 2017, which provides that foreign investors may establish foreign wholly-owned enterprises in Shenzhen in industries such as medical institutions, commercial e-commerce, gas stations, etc.

LAWS AND REGULATIONS RELATED TO LABOR PROTECTION IN THE PRC

Labor Law of the PRC

The Labor Law of the PRC《中華人民共和國勞動法》 ( ), which was promulgated by the SCNPC on 5 July 1994 and came into effect on 1 January 1995, last revised and came into effect on 29 December 2018, provides that an employer shall develop and improve its rules and regulations to safeguard the rights of its workers. An employer shall develop and improve its labor safety and health system, stringently implement national protocols and standards on labor safety and health, conduct labor safety and health education for workers, guard against labor accidents and reduce occupational hazards. Labor safety and health facilities must comply with relevant national standards. An employer must provide workers with the necessary labor protection equipment that complies with labor safety and health conditions stipulated under national regulations, as well as provide regular health checks for workers that are engaged in operations with occupational hazards. Workers engaged in special operations shall have received specialized training and obtained the pertinent qualifications. An employer must develop a vocational training system. Vocational training funds must be set aside and used in accordance with national regulations and vocational training for workers must be carried out systematically based on the actual conditions of the company.

Labor Contract Law of the PRC and its implementation regulations

The Labor Contract Law of the PRC《中華人民共和國勞動合同法》 ( ), which was promulgated by the SCNPC on 29 June 2007, came into effect on 1 January 2008, and was amended on 28 December 2012, and the Implementation Regulations on Labor Contract Law of the PRC《中華人民共和國勞動合 ( 同法實施條例》) which were promulgated by the State Council on 18 September 2008 and came into effect on the same day, regulate employer and the employee relations and contain specific provisions involving the terms of the labor contract. Labor contracts must be made in writing and may, after reaching agreement upon due negotiations, be for a fixed-term, an un-fixed term, or conclude upon the completion of certain work assignments. An employer may legally terminate a labor contract and dismiss its employees after reaching an agreement upon due negotiations with the employee or by fulfilling the statutory conditions.

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Laws and Regulations on the Supervision over the Social Security and Housing Funds

Social Insurance Law of the PRC

In accordance with the Social Insurance Law of the PRC《中華人民共和國社會保險法》 ( ) issued by the SCNPC on 28 October 2010 and effective on 1 July 2011 and last revised on 29 December 2018, an employee shall participate in five types of social insurance funds, including pension insurance, medical insurance, unemployment insurance, maternity insurance and occupational injury insurance. The premiums for maternity insurance and occupational injury insurance are paid by the employer, while the premiums for pension insurance, medical insurance and unemployment insurance are paid by both the employer and the employee. If the employer fails to fully contribute to social insurance funds on time, the collection agency for such social insurance may demand the employer to make full payment or to pay the shortfall within a set period and collect a late charge. If the employer fails to pay after the due date, the relevant government administrative body may impose a fine on the employer.

Regulations on the Administration of Housing Provident Fund

The Regulations on the Administration of Housing Provident Fund《住房公積金管理條例》 ( ), which were promulgated by the State Council on 3 April 1999 and came into effect on the same day and last revised on 24 March 2019, stipulate that housing provident fund contributions paid by an individual employee and housing provident fund contributions paid by his or her employer all belong to the individual employee.

LAWS AND REGULATIONS RELATED TO TAXATION IN THE PRC

Enterprise Income Tax

According to the Enterprise Income Tax Law of PRC《中華人民共和國企業所得稅法》 ( )(“EIT”), which was issued by the SCNPC on 16 March 2007 and last revised on 29 December 2018, and the Regulation on the Implementation of the Enterprise Income Tax Law of PRC《中華人民共和國企業所 ( 得稅法實施條例》)(“EIT Regulation”), issued by the State Council on 6 December 2007 and became effective on 1 January 2008 and last revised on 23 April 2019, both domestic and foreign-invested enterprises established under the laws of foreign countries or regions whose “de facto management bodies” are located in the PRC are considered resident enterprises, and will generally be subject to the EIT at the rate of 25% of their global income. The defined “de facto management bodies” are “establishments that carry out substantial and overall management and control over production and operations, personnel, accounting, and properties” of the enterprise. If an enterprise is considered as a PRC resident enterprise under the above definition, its global income will be subject to enterprise income tax at the rate of 25%.

Withholding Tax and International Tax Treaties

According to the Treaty on the Avoidance of Double Taxation and Tax Evasion between Mainland and Hong Kong《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》 ( )(“Tax Treaty”), if the non-PRC parent company of a PRC enterprise is a Hong Kong resident which beneficially owns a 25% or more interest in the PRC enterprise, the 10% withholding tax rate applicable under the EIT Law may be lowered to 5% for dividends and 7% for interest payments once approvals have been obtained from the relevant tax authorities. The determination of beneficial ownership is clarified under the Notice on Understanding and Determining Beneficial Owners《國家稅務總局關於如何理解和認定稅收協定 ( 中“受益所有人”的通知》)(“Notice No.601”) issued by the State Administration of Taxation (“SAT”) on 27 October 2009, which expressly excludes from the definition of a beneficial owner any company not

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Pursuant to the Notice of the SAT on the Several Issues Relating to the Implementation of Dividend Clauses of Tax Treaty《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》 ( ), which was promulgated by the SAT and came into effect on 20 February 2009, the non-resident taxpayer or the withholding agent is required to obtain and keep sufficient documentary evidence proving that the recipient of the dividends meets the relevant requirements for enjoying a lower withholding tax rate under a tax treaty. Pursuant to the Administrative Measures for Tax Convention Treatment for Non-resident Taxpayers《非居民納稅人享受協定待遇管理辦法》 ( ), which was promulgated by the SAT on 14 October 2019 and came into effect on 1 January 2020, any non-resident taxpayer fulfilling conditions for enjoying the convention treatment may be entitled to the convention treatment on its own when filing a tax return or making a withholding declaration through a withholding agent, subject to collection and preservation of relevant materials for future reference in accordance with the measures and the subsequent administration by the tax authorities.

Value-Added Tax

According to the Provisional Regulations on Value-added Tax of the PRC《中華人民共和國增值 ( 稅暫行條例》)(“VAT Regulations”), which was promulgated by the State Council on 13 December 1993 and came into effect on 1 January 1994 and last revised on 19 November 2017, the Implementation Regulations to the VAT Regulations of the PRC《中華人民共和國增值稅暫行條例實施細則》 ( ), which was promulgated by MOF on 25 December 1993 and last revised on 28 October 2011, and the Notice of the MOF and the SAT on Overall Implementation of the Pilot Program of Replacing Business Tax with Value-added Tax《財政部、國家稅務總局關於全面推開營業稅改徵增值稅試點的通知》 ( )(“Pilot Program”) promulgated on 23 March 2016 and came into effect on 1 May 2016, entities or individuals engaging in sale of goods, provision of processing services, repairs and replacement services, sale of services, intangible assets, real property or importation of goods within the territory of the PRC shall pay value-added tax (“VAT ”). Furthermore, according to the Pilot Program, medical services provided by medical institutions, which are listed in the Specifications for Pricing Items of National Medical Services, shall be exempted from VAT.

The Notice on Relevant Tax Policies on Medical and Health Institutions《關於醫療衛生機構有關 ( 稅收政策的通知》) which was promulgated by the MOF and SAT on 10 July 2000 and came into effect on the same date and revised on 1 January 2009, provides that incomes of PMIs are taxable in accordance with relevant rules. Nevertheless, PMIs are granted a three years’ tax holiday commencing from the issuance of practising licence if the profit is directly used for improving the medical and health conditions, during which: (i) self-produced preparations for self-use by PMIs are exempted from value-added tax; and (ii) properties, land and vehicles for self-use by PMIs are exempted for property tax, urban land use tax and vehicle use tax. Pharmaceutical retail enterprises spun-off from drug stores of PMIs shall be subject to applicable taxations.

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LEGAL SUPERVISION OVER FOREIGN EXCHANGE IN THE PRC

The Regulations on the Control of Foreign Exchange

The Regulations on the Control of Foreign Exchange of the PRC《中華人民共和國外匯管理條 ( 例》), which were promulgated by the State Council on 29 January 1996, came into effect on 1 April 1996, and amended on 14 January 1997 and 5 August 2008, set out that foreign exchange receipts of domestic institutions or individuals may be transferred to the PRC or deposited abroad and that the State Administration of Foreign Exchange (“SAFE”) shall specify the conditions for transfer to the PRC or overseas and other requirements in accordance with the international receipts, payments status and requirements of foreign exchange control. Foreign exchange receipts for current account transactions may be retained or sold to financial institutions engaged in the settlement or sale of foreign exchange. Domestic institutions or individuals that make direct investments abroad or are engaged in the distribution or sale of valuable securities or derivative products overseas should register according to SAFE regulations. Such institutions or individuals subject to prior approval or record-filing with other competent authorities shall complete the required approval or record-filing prior to foreign exchange registration. The exchange rate for RMB follows a managed floating exchange rate system based on market demand and supply.

The Regulations on the Administration of the Settlement, Sale and Payment of Foreign Exchange 《結匯、售匯及付匯管理規定》( ), which were promulgated by the People’s Bank of China on 20 June 1996 and came into effect on 1 July 1996, provide that foreign exchange receipts under the current account of foreign-invested enterprises may be retained to the fullest extent specified by the foreign exchange bureau. Any portion in excess of such amount shall be sold to a designated foreign exchange bank or through a foreign exchange swap center.

The Notice on Further Improving and Adjusting Policies Relating to Foreign Exchange Administration in Direct Investment《國家外匯管理局關於進一步改進和調整直接投資外匯管理政策 ( 的通知》), which was promulgated by the SAFE on 19 November 2012 and came into effect on 17 December 2012 and last revised on 30 December 2019, improves foreign exchange administration in direct investment by repealing or adjusting certain approval items for foreign exchange administration in direct investment.

On 30 March 2015, SAFE promulgated the Circular on Reforming the Management Approach regarding the Settlement of Foreign Exchange Capital of Foreign-invested Enterprises《國家外匯管理 ( 局關於改革外商投資企業外匯資本金結匯管理方式的通知》)(“Circular 19”), which came into effect on 1 June 2015 and last revised on 30 December 2019. According to Circular 19, the foreign exchange capital of foreign invested enterprises shall be subject to the Discretional Foreign Exchange Settlement (意願結匯). The Discretional Foreign Exchange Settlement refers to the foreign exchange capital in the capital account of a foreign invested enterprise for which the rights and interests of monetary contribution has been confirmed by the local foreign exchange bureau (or the book-entry registration of monetary contribution by the banks) can be settled at the banks based on the actual operational needs of the foreign invested enterprise. The proportion of Discretional Foreign Exchange Settlement of the foreign exchange capital of a foreign invested enterprise is temporarily determined as 100%. The RMB converted from the foreign exchange capital will be kept in a designated account and if a foreign invested enterprise needs to make further payment from such account, it still needs to provide supporting documents and go through the review process with the banks. Furthermore, Circular 19 stipulates that the use of capital by foreign-invested enterprises shall follow the principles of authenticity and self-use within the business scope of enterprises. The capital of an foreign invested enterprise and capital in RMB obtained by the foreign invested enterprise from foreign exchange settlement shall not be used for the following purposes: (i) directly or indirectly used for the payment beyond the business scope of the enterprises or

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PRC LAWS AND REGULATIONS RELATING TO FIRE PROTECTION

Fire Protection Law of the PRC

Pursuant to Fire Protection Law of the PRC《中華人民共和國消防法》 ( ), which was promulgated by the SCNPC on 29 April 1998 and last revised on 23 April 2019, the fire protection design or construction of a construction project must conform to the national fire protection technical standards for project construction. The construction project fire safety design examination and acceptance system shall be implemented for a construction project that needs a fire protection design under the national fire protection technical standards for project construction.

Upon completion of construction of a development project which is required to apply for fire safety inspection and acceptance as stipulated by the housing and urban-rural development authority of the State Council, the developer shall apply to the housing and urban-rural development authority for fire safety inspection and acceptance. For development projects other than those stipulated in the preceding paragraph, the developer shall, after inspection and acceptance, report it to the housing and urban-rural development department for archival purposes, and the housing and urban-rural development department shall conduct a spot check. A construction project that is subject to a fire protection as-built acceptance according to law but fails to undergo or pass the fire protection as-built acceptance shall be forbidden to be put into use. Any other construction project that fails to pass a spot check shall cease to be used.

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OUR CORPORATE HISTORY

The history of our Group can be traced back to 2004 when Mr. Li first acquired Renkang Hospital and Luogang Hospital by his own funds generated through his 9 years of working experience in a shipping company and 6 years of experience in managing a medical company and became the beneficial owner of the two hospitals under various trust arrangements. Since then, Mr. Li has gradually built up wide connections in the medical industry and established a network of three other private hospitals in Shenzhen and Zhongshan, namely Xuexiang Hospital, Jian’an Hospital and Zhongshan TCM Hospital, and each of the five hospitals we currently operate has a history of providing hospital services for over 10 years and achieved satisfactory operating records. With the increasing demand of various types of medical services in the PRC, since 2017, our Group has further engaged in medical technological services and medical consulting services by the establishment of Guanghua Doctors and sale of medical appliances by the establishment of Zhouji Medical. Please refer to the paragraph headed “Our Group Members” below for further details.

Milestones in our business development

The following is a summary of the milestones in our business development:

Year Event

2004 – Renkang Hospital was acquired by our Group in June and commenced to provide general hospital services under our operation

– Luogang Hospital was acquired through auction by our Group in August and commenced to provide general hospital services under our operation

2005 – Xuexiang Hospital was acquired by our Group in August and commenced to provide general hospital services under our operation

2007 – Zhongshan TCM Hospital was established in the PRC by our Group in November and commenced to provide TCM hospital service under our operation

2016 – Jian’an Hospital was acquired by our Group in December and commenced to provide general hospital services under our operation

– Jian’an Hospital was recognized by Shenzhen HFPC as a Class I general hospital

2017 – Guanghua Doctors was established in the PRC by our Group in May and commenced to provide medical technological service and medical consulting services under our operation

– Zhouji Medical was established in the PRC by our Group in July and commenced to be engaged in the sale of medical appliances under our operation

– Renkang Hospital, Luogang Hospital and Xuexiang Hospital were recognized by Shenzhen HFPC as Class I general hospitals

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2018 – Our Group entered into an agreement with Heilongjiang Red Cross Hospital* (黑龍江省紅十字會醫院) in February to provide multi-level and diversified technical services for their operations

– Luogang Hospital, Xuexiang Hospital and Jian’an Hospital were respectively awarded 5-star credit hospital, 5-star credit hospital and 4-star credit hospital by Shenzhen Non-Public Medical Institutions Industry Association* (深圳市非公立醫療機構行業協會) in June

– Jian’an Hospital was certified by the Guangdong Province Chest Pain Center Certification Office* (廣東省胸痛中心認證辦公室) in June

– Guodan Medical became a member of the Shenzhen Luohu Medical Group Medical Association* (深圳羅湖醫院集團醫聯體) in September

2019 – Renkang Hospital, Luogang Hospital, Xuexiang Hospital and Jian’an Hospital were credit as A-level medical units by the Shenzhen Health and Wellness Committee* (深圳市衛生健康委員會) in April

– Guodan SZ was certified as a “Contract Honoring and Trustworthy Enterprise in Guangdong Province* (廣東省“守合同重信用”企業) for the year 2018” by the Shenzhen Market Supervision Administration (深圳市市場監督管理局) in June

2020 – Zhonghan TCM Hospital was approved by Zhongshan HFPB as a TCM hospital of Class II

OUR GROUP MEMBERS

Our Company was incorporated on 4 August 2017 in the Cayman Islands as an exempted company with limited liability in anticipation of the [REDACTED]. We have 11 subsidiaries, namely, Guodan BVI, Guodan HK, Guodan SZ, Guodan Medical, Renkang Hospital, Luogang Hospital, Xuexiang Hospital, Jian’an Hospital, Zhongshan TCM Hospital, Guanghua Doctors and Zhouji Medical.

The following sets forth the corporate development of each member of our Group since their respective dates of incorporation or establishment. We also underwent certain reorganisation steps in contemplation of the [REDACTED], particulars of which are set forth in the paragraph headed “Reorganisation” below.

Guodan BVI

Guodan BVI was incorporated in the BVI on 14 August 2017 to act as the intermediate holding company of our Group. Guodan BVI is authorised to issue a maximum of 10,000 shares of a single class of HK$0.01 each. Guodan BVI allotted and issued 10,000 shares to our Company on 14 August 2017 for cash at par value. As such, Guodan BVI became our wholly-owned subsidiary.

Since its incorporation, Guodan BVI has been an investment holding company.

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Guodan HK

Guodan HK, an indirect wholly-owned subsidiary of our Company, was incorporated in Hong Kong with limited liability on 29 August 2017. Upon its incorporation, Guodan HK allotted and issued one share for cash at par value to Guodan BVI as subscriber.

Since its incorporation, Guodan HK has been an investment holding company.

Guodan SZ

Guodan SZ (previously known as Shenzhen Xisi Holding Limited* (深圳市希思控股有限公司) and Shenzhen Guodan Holding Limited* (深圳市國丹控股有限公司)) was established in the PRC on 25 October 2013 with an initial registered capital of RMB50,000,000 and paid up capital of RMB10,000,000. Upon its establishment, Guodan SZ was held as to 90% by Mr. Li and 10% by Ms. Li.

On 25 December 2017, Mr. Li, Ms. Li, Mr. Huang, Mr. Zhou, Mr. Yang and Mr. Tan entered into the First Share Transfer Agreement, pursuant to which, Mr. Li agreed to transfer 16%, 1% and 1% of the equity interest in Guodan SZ to Mr. Huang, Mr. Yang and Mr. Tan at a consideration of RMB8,000,000, RMB500,000 and RMB500,000, respectively, and Ms. Li agreed to transfer 2% of the equity interest in Guodan SZ to Mr. Zhou at a consideration of RMB1,000,000, which was determined with reference to various factors including the then asset value and the business prospect of Guodan SZ after arm’s length negotiation among the parties and was in line with the valuation by an independent valuer. The transfers were registered with the competent PRC government authority on 27 December 2017. As advised by our PRC Legal Advisers, such transfers were properly and legally completed. Upon completion of such transfers, Guodan SZ was held as to 72% by Mr. Li, 8% by Ms. Li, 16% by Mr. Huang, 2% by Mr. Zhou, 1% by Mr. Yang and 1% by Mr. Tan. For details of the background of Mr. Huang, Mr. Zhou, Mr. Yang, Mr. Tan and their relationship with our Group, please refer to the paragraph headed “[REDACTED] Investments — Background of the [REDACTED] Investors” in this section below.

The registered capital of RMB50,000,000 was fully paid up by 6 March 2018, out of which Mr. Li, Ms. Li, Mr. Huang, Mr. Zhou, Mr. Yang and Mr. Tan had contributed RMB36,000,000, RMB4,000,000, RMB8,000,000, RMB1,000,000, RMB500,000 and RMB500,000, respectively.

Since its establishment, Guodan SZ has been an investment holding company.

Guodan Medical

Guodan Medical (previously known as Shenzhen Xisi Guodan Medical Company Limited* (深圳市希思國丹醫療有限公司)) was established in the PRC on 11 November 2013 with an initial registered capital of RMB30,000,000 and paid up capital of RMB10,000,000. Upon its establishment, Guodan Medical was wholly owned by Guodan SZ.

The registered capital of RMB30,000,000 was fully paid up by 18 December 2017 by Guodan SZ.

Since its establishment, Guodan Medical has been principally engaged in the provision of medical management services to hospitals and investment in medical projects, and was further engaged in the provision of medical management consultation service since March 2017.

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Renkang Hospital

Renkang Hospital was established by Shenzhen Aikangjian, an Independent Third Party, and commenced its operation in the PRC on 10 December 2003. On 17 June 2004, Shenzhen Aikangjian transferred its ownership of Renkang Hospital to Mr. Li for the consideration of RMB6,300,000, which was determined with reference to the then market price of general hospitals with a similar scale and qualifications after arm’s length negotiation between the parties. According to a trust arrangement between Mr. Li and Xisi Medical (with Mr. Li and Mr. Li JG being the then shareholders holding 90% and 10% of the then equity interest in Xisi Medical, respectively), since 17 June 2004, Xisi Medical was the registered owner holding the equity of Renkang Hospital on behalf of Mr. Li (the trust arrangement was released on 26 April 2016). The reason for such trust arrangement is that, as confirmed by our Directors, a PRC corporate owner was subject to simpler registration procedures and requirements with the relevant authorities. Our PRC Legal Advisers have confirmed that the said trust arrangement did not violate any laws or regulations in the PRC. On 10 March 2017, Xisi Medical was quoted on NEEQ (stock code: 871107) and is principally engaged in the provision of medical cosmetic services in the PRC. Please refer to the paragraph headed “Relationship with our Controlling Shareholders – Excluded Companies of our Controlling Shareholders” in this document for further details on Xisi Medical.

In accordance with the Notice on Commercial Registration of Profitable Medical Institutions* (關於營利性醫療機構商事登記的通知) issued by the Shenzhen HFPC, on 24 December 2015, Renkang Hospital was registered as a limited liability company in the PRC with an initial registered capital of RMB2,000,000 and no paid up capital. To the best knowledge of our Directors, the registration shall be assisted by the original registered owner of the hospital which shall be the registered shareholder of the limited liability company according to the general practice of the Luohu District Branch of Shenzhen Market Supervision Administration (深圳市市場監督管理局羅湖分局). As such, through negotiations between Shenzhen Aikangjian and Mr. Li, Shenzhen Aikangjian, being the first registered owner of Renkang Hospital when it was established in 2003, had registered to become the first registered shareholder of Renkang Hospital as a limited liability company on 24 December 2015. Shenzhen Aikangjian was merely the registered shareholder and did not enjoy any rights or bear any obligations associated with the equity interests in Renkang Hospital, which were still enjoyed and borne by Mr. Li. To reflect the actual ownership, the 100% equity interest of Renkang Hospital was transferred back to Xisi Medical from Shenzhen Aikangjian at a nominal consideration of RMB1 pursuant to an equity transfer agreement entered into between Shenzhen Aikangjian and Xisi Medical on 1 February 2016. The transfer was registered with the competent PRC government authority on 9 March 2016. As advised by our PRC Legal Advisers, the transfer was properly and legally completed.

By 15 March 2016, the paid up capital of Renkang Hospital was increased to RMB1,604,692.91, which was contributed by Xisi Medical.

On 26 April 2016, Xisi Medical (with Mr. Li and Mr. Li JG being the then shareholders holding 71.0227% and 14.2045% of the then equity interest in Xisi Medical, respectively, after a series of equity transfers between June 2004 and April 2016 among Mr. Li’s family members), as a trustee of Mr. Li and acted upon the direction of Mr. Li, entered into an equity transfer agreement with Guodan Medical, pursuant to which, Xisi Medical agreed to transfer its 100% equity interest in Renkang Hospital to Guodan Medical at a consideration of RMB1,610,000, which was determined with reference to the valuation report issued by an independent valuer on 25 December 2015. The transfer was registered with the competent PRC government authority on 22 June 2016. As advised by our PRC Legal Advisers, the transfer was properly and legally completed. Upon completion of such transfer, Renkang Hospital became wholly owned by Guodan Medical.

By 9 May 2019, the registered capital of Renkang Hospital was fully paid up by Guodan Medical.

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Since its establishment, Renkang Hospital has been principally engaged in the provision of general hospital services.

Luogang Hospital

Luogang Hospital was established by Longgang Economic, an Independent Third Party, and commenced its operation in the PRC on 25 September 1994. On 18 August 2004, Longgang Economic transferred its ownership of Luogang Hospital to Hainan Yongjin Properties Holding Limited* (海南永金置業股份有限公司)(“Hainan Yongjin”) (which was then owned as to 35% by Mr. Li and 15% by Ms. Li and 50% by Independent Third Parties) through auction for the consideration of RMB14,300,000. According to a trust arrangement between Mr. Li and Hainan Yongjin, since 1 September 2004, Hainan Yongjin was the registered owner holding the equity of Luogang Hospital on behalf of Mr. Li (the trust arrangement was released on 27 May 2016). The reason for such trust arrangement is that, as confirmed by our Directors, a PRC corporate owner was subject to simpler registration procedures and requirements with the relevant authorities. Our PRC Legal Advisers have confirmed that the said trust arrangement did not violate any laws or regulations in the PRC.

On 26 May 2014, Luogang Hospital was registered as a limited liability company in the PRC with an initial registered capital of RMB5,000,000 and no paid up capital. Under the direction of Mr. Li and as agreed by Hainan Yongjin (with Mr. Li and Ms. Li being the then shareholders holding 35% and 15% of equity interest in Hainan Yongjin, respectively; and as trustee for Mr. Li), upon registration as a limited liability company, Luogang Hospital was owned as to 60% by Hainan Yongjin and 40% by Guodan Medical.

By 1 April 2016, the paid up capital of Luogang Hospital was increased to RMB3,000,000, which was contributed by Hainan Yongjin.

On 27 May 2016, Hainan Yongjin (with Mr. Li and Ms. Li being the then shareholders holding 35% and 15% of equity interest in Hainan Yongjin, respectively), as a trustee for Mr. Li and acted upon the direction of Mr. Li, entered into an equity transfer agreement with Guodan Medical, pursuant to which, Hainan Yongjin agreed to transfer its 60% equity interest in Luogang Hospital to Guodan Medical at a consideration of RMB3,180,000, which was determined with reference to the valuation report issued by an independent valuer on 25 December 2015. The transfer was registered with the competent PRC government authority on 22 June 2016. As advised by our PRC Legal Advisers, the transfer was properly and legally completed. Upon completion of such transfer, Luogang Hospital became wholly owned by Guodan Medical.

Since its establishment, Luogang Hospital has been principally engaged in the provision of general hospital services.

Xuexiang Hospital

Xuexiang Hospital was established by Bolun Medical, an Independent Third Party, and commenced its operation in the PRC on 17 January 2005. On 4 August 2005, Bolun Medical transferred its ownership of Xuexiang Hospital to Mr. Li for the consideration of RMB3,000,000 which was determined with reference to the then market price of general hospitals with a similar scale and qualifications after arm’s length negotiation between the parties, and according to a trust agreement entered into between Mr. Li and Xisi Medical (with Mr. Li and Mr. Li JG being the then shareholders holding 90% and 10% of the then equity interest in Xisi Medical, respectively) earlier on 1 August 2005, Xisi Medical became the registered owner holding the equity of Xuexiang Hospital on behalf of Mr. Li (the trust arrangement was released on 26 April 2016). The reason for such trust arrangement is that, as

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In accordance with the Notice on Commercial Registration of Profitable Medical Institutions* (關於營利性醫療機構商事登記的通知) issued by the Shenzhen HFPC, on 22 February 2016, Xuexiang Hospital was registered as a limited liability company in the PRC with an initial registered capital of RMB2,000,000 and no paid up capital and was wholly owned by Xisi Medical.

By 1 March 2016, the registered capital of Xuexiang Hospital was fully paid up by Xisi Medical.

On 26 April 2016, Xisi Medical (with Mr. Li and Mr. Li JG being the then shareholders holding 71.0227% and 14.2045% of equity interest in Xisi Medical, respectively, after a series of equity transfers between August 2005 and April 2016 among Mr. Li’s family members), as a trustee of Mr. Li and acted upon the direction of Mr. Li, entered into an equity transfer agreement with Guodan Medical, pursuant to which, Xisi Medical agreed to transfer its 100% equity interest in Xuexiang Hospital to Guodan Medical at a consideration of RMB2,200,000, which was determined with reference to the valuation report issued by an independent valuer on 25 December 2015. The transfer was registered with the competent PRC government authority on 22 June 2016. As advised by our PRC Legal Advisers, the transfer was properly and legally completed. Upon completion of such transfer, Xuexiang Hospital became wholly owned by Guodan Medical.

Since its establishment, Xuexiang Hospital had been principally engaged in the provision of general hospital services. As Xuexiang Hospital commenced its relocation to a new site in late July 2020, it has suspended its operation from 24 July 2020 to 4 March 2021. It has resumed its operation on 5 March 2021 at its new site.

Jian’an Hospital

Jian’an Hospital was established by Shenzhen Nanda, then an Independent Third Party, and commenced its operation in the PRC on 1 February 2005. In accordance with the Notice on Commercial Registration of Profitable Medical Institutions* (關於營利性醫療機構商事登記的通知) issued by the Shenzhen HFPC, on 11 January 2016, Jian’an Hospital was registered as a limited liability company in the PRC with an initial registered capital of RMB3,000,000 and no paid up capital and was wholly owned by Shenzhen Nanda.

By 1 February 2016, the registered capital of Jian’an Hospital was fully paid up by Shenzhen Nanda.

On 29 December 2016, for the purpose of acquiring Jian’an Hospital, Mr. Li and Ms. Li entered into equity transfer agreements (as supplemented by supplemental equity transfer agreements dated 31 December 2016) with the two then shareholders of Shenzhen Nanda, who were both Independent Third Parties, pursuant to which, the two then shareholders of Shenzhen Nanda agreed to transfer 95% and 5% of the equity interest in Shenzhen Nanda to Mr. Li and Ms. Li respectively at a total consideration of RMB32,500,000 (the “Shenzhen Nanda Transfer”), which was determined after arm’s length negotiation between the parties taking into account the then market value of Jian’an Hospital with reference to the then market price of general hospitals with a similar scale and qualifications. The market value of Jian’an Hospital of RMB32,500,000 was in line with the valuation report issued by an independent valuer on 31 December 2016. On the same date of the Shenzhen Nanda Transfer, under the instruction from Mr. Li, Shenzhen Nanda entered into an equity transfer agreement with Guodan Medical, pursuant to which, Shenzhen Nanda agreed to transfer its 100% equity interest in Jian’an Hospital to

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Guodan Medical at a consideration of RMB32,500,000 (the “Jian’an Transfer”), which was also determined with reference to the then market value of Jian’an Hospital. The Shenzhen Nanda Transfer and the Jian’an Transfer were registered with the competent PRC government authority on 10 January 2019 and 12 January 2017, respectively. Our Directors confirm that, prior to the Shenzhen Nanda Transfer, Shenzhen Nanda was a holding company which held 100% equity interests in Jian’an Hospital and had no other substantial business. The Shenzhen Nanda Transfer and the Jian’an Transfer were entered into for the sole purpose of the acquisition of Jian’an Hospital and for Jian’an Hospital to become a member of our Group. As advised by our PRC Legal Advisers, the Shenzhen Nanda Transfer and the Jian’an Transfer were properly and legally completed. Upon completion of the Shenzhen Nanda Transfer and the Jian’an Transfer, Jian’an Hospital became wholly owned by Guodan Medical.

Since its establishment, Jian’an Hospital has been principally engaged in the provision of general hospital services.

Zhongshan TCM Hospital

Zhongshan TCM Hospital was established in the PRC on 13 November 2007 with an initial registered capital of RMB100,000 fully paid up. Upon its establishment, Zhongshan TCM Hospital was wholly owned by Zhongshan Investment (which was then owned as to 60% by Mr. Li and 40% by Mr. Li Guoyuan (李國園), a brother of Mr. Li). Since its establishment, Zhongshan Investment was the registered owner holding the equity interest of Zhongshan TCM Hospital on trust on behalf of Mr. Li. The reason for such trust arrangement is that, as confirmed by our Directors, a PRC corporate owner was subject to simpler registration procedures and requirements with the relevant authorities. Our PRC Legal Advisers have confirmed that the said trust arrangement did not violate any laws or regulations in the PRC.

On 14 July 2013, Zhongshan Investment (which was then wholly owned by Mr. Li JT after a series of equity transfers between November 2007 and July 2013 among Mr. Li’s family members), as a trustee of Mr. Li and acted upon the direction of Mr. Li, entered into an equity transfer agreement with Mr. Li JT, pursuant to which, Zhongshan Investment agreed to transfer 10% equity interest in Zhongshan TCM Hospital to Mr. Li JT, as share award to Mr. Li JT being a then employee and general manager of Zhongshan TCM Hospital, at a consideration of RMB10,000, which was determined based on 10% of the then paid-up capital. Mr. Li JT subsequently ceased to be an employee and general manager of Zhongshan TCM Hospital and Zhongshan Investment, under the direction of Mr. Li, acquired the 10% equity interest back from Mr. Li JT with the same transfer price of RMB10,000 on 5 May 2014. These transfers were registered with the competent PRC government authority on 22 July 2013 and 12 May 2014, respectively. As advised by our PRC Legal Advisers, these transfers were properly and legally completed. Upon completion of such transfers, Zhongshan TCM Hospital remained wholly owned by Zhongshan Investment.

On 11 March 2015, the registered capital of Zhongshan TCM Hospital was increased from RMB100,000 to RMB15,000,000 which needed to be fully paid up by 31 December 2040.

By 10 April 2015, the paid up capital of Zhongshan TCM Hospital was increased from RMB100,000 to RMB1,952,722 contributed by Zhongshan Investment.

On 17 April 2015, Zhongshan Investment (which was then wholly owned by Guodan Medical following a 100% equity transfer from Mr. Li JT on 5 May 2014), as a trustee of Mr. Li and acted upon the direction of Mr. Li, entered into an equity transfer agreement with Guodan Medical, pursuant to which, Zhongshan Investment agreed to transfer its 100% equity interest in Zhongshan TCM Hospital to Guodan Medical at a consideration of RMB1,960,000, which was determined with reference to the then paid up capital of Zhongshan TCM Hospital. The transfer was registered with the competent PRC government

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Since its establishment, Zhongshan TCM Hospital has been principally engaged in the provision of Chinese medical service.

Guanghua Doctors

Guanghua Doctors was established in the PRC on 8 May 2017 with an initial registered capital of RMB5,000,000 and no paid up capital. Upon its establishment, Guanghua Doctors was wholly owned by Guodan SZ.

Since its establishment, Guanghua Doctors has been principally engaged in the provision of medical technological service and medical consulting services.

Zhouji Medical

Zhouji Medical was established in the PRC on 21 July 2017 with an initial registered capital of RMB1,000,000 which was not paid up. Upon its establishment, Zhouji Medical was wholly owned by Guodan SZ.

On 24 February 2020, the registered capital of Zhouji Medical was increased from RMB1,000,000 to RMB5,000,000 which was not paid up.

Since its establishment, Zhouji Medical has been principally engaged in the sale of medical appliances.

Subsidiaries deregistered as at the Latest Practicable Date

Mengte Management

Mengte Management was established in the PRC as a limited liability company on 17 April 2014 with an initial registered capital of RMB5,000,000. Upon its establishment, Mengte Management was wholly owned by Guodan SZ and it was then intended that Mengte Management would engage in the provision of health and wellness management consultation services. Based on further commercial consideration of our Group, Mengte Management had not engaged in any business activity and had remained inactive since its establishment and was deregistered on 13 February 2019. As confirmed by our PRC Legal Advisers, the deregistration of Mengte Management by our Group was in compliance with the requirements of the PRC laws and regulations and our Group has performed all necessary legal procedures in relation thereto. Also, our Directors confirmed that (i) during the Track Record Period and up to the date of deregistration, no profit was attributable to Mengte Management and the deregistration of Mengte Management had no adverse impact on our financial performance or business operation; and (ii) Mengte Management had not been involved in any claim, complaint, sanctions or litigations prior to its deregistration.

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Mengte Technology

Mengte Technology was established in the PRC as a limited liability company on 24 April 2014 with an initial registered capital of RMB5,000,000. Upon its establishment, Mengte Technology was wholly owned by Guodan SZ and it was then intended that Mengte Technology would engage in biotechnology research and development. Based on further commercial consideration of our Group, Mengte Technology had not engaged in any business activity and had remained inactive since its establishment and was deregistered on 13 February 2019. As confirmed by our PRC Legal Advisers, the deregistration of Mengte Technology by our Group was in compliance with the requirements of the PRC laws and regulations and our Group has performed all necessary legal procedures in relation thereto. Also, our Directors confirmed that (i) during the Track Record Period and up to the date of deregistration, no profit was attributable to Mengte Technology and the deregistration of Mengte Technology had no adverse impact on our financial performance or business operation; and (ii) Mengte Technology had not been involved in any claim, complaint, sanctions or litigations prior to its deregistration.

Mengte Information

Mengte Information was established in the PRC as a limited liability company on 16 June 2014 with an initial registered capital of RMB5,000,000. Upon its establishment, Mengte Information was wholly owned by Guodan SZ and it was then intended that Mengte Information would engage in the provision of medical health and wellness management consultation services. Based on further commercial consideration of our Group, Mengte Information had not engaged in any business activity and had remained inactive since its establishment and was deregistered on 14 February 2019. As confirmed by our PRC Legal Advisers, the deregistration of Mengte Information by our Group was in compliance with the requirements of the PRC laws and regulations and our Group has performed all necessary legal procedures in relation thereto. Also, our Directors confirmed that (i) during the Track Record Period and up to the date of deregistration, no profit was attributable to Mengte Information and the deregistration of Mengte Information had no adverse impact on our financial performance or business operation; and (ii) Mengte Information had not been involved in any claim, complaint, sanctions or litigations prior to its deregistration.

[REDACTED] INVESTMENTS

Background of the [REDACTED] Investors

The [REDACTED] Investors include Mr. Huang, Mr. Zhou, Mr. Yang, Mr. Tan, Ms. Yuen, Union India, Zhengyuan International, Lifangxin Investment, Qianhai Hezhong and Richcome Pacific. Each of Union India, Zhengyuan International, Lifangxin Investment, Qianhai Hezhong and Richcome Pacific are wholly and beneficially owned by Mr. Huang, Mr. Zhou, Mr. Yang, Mr. Tan and Ms. Yuen respectively.

Mr. Huang, one of our non-executive Directors, has more than 30 years of experience in the electronic products manufacturing industry and details of his background are set out in the section headed “Directors and senior management” in this document. Mr. Zhou has more than 22 years of experience in the electronic products manufacturing industry. Mr. Yang has more than 25 years of experience in accounting, finance and management. Mr. Tan is a businessman and investor with about 5 years of experience in equity investment. Ms. Yuen has been working for a Hong Kong subsidiary of a leading biopharmaceutical company headquartered in California, the U.S. and listed on NASDAQ since 2014 and is currently an associate director of the marketing department of such company. To the best of our Directors’ knowledge, our Group and our Controlling Shareholders, Directors, senior management or their respective associates do not have any past or present business or financial relationship with such company. Mr. Huang, Mr. Zhou, Mr. Yang and Mr. Tan had known each other for many years, while Ms.

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Yuen was a family friend of Mr. Yang and became acquainted with Mr. Huang, Mr. Zhou and Mr. Tan through the introduction of Mr. Yang in or around early 2015.

In or around early 2015, Mr. Huang, Mr. Zhou, Mr. Yang, Mr. Tan and Ms. Yuen (together, the “Individual [REDACTED] Investors”) became acquainted with Mr. Li and Ms. Li through the introduction by Mr. Xu Shui, who was the financial controller of Xisi Medical and a personal friend of Mr. Tan. While some of the Individual [REDACTED] Investors did not have previous experience in the healthcare industry, to the best knowledge and belief of our Directors, each of them shared the optimistic view of Mr. Li and Ms. Li that the healthcare service market in Guangdong Province has ample of room for further growth in the near future, taking into account the demographic trends and economic development of the region. Thus, each of the Individual [REDACTED] Investors decided to invest in our Group through the [REDACTED] Investments in view of the long-term prospects and growth potential of our Group and funded his/her investment with personal resources.

When the Individual [REDACTED] Investors decided to make the [REDACTED] Investments in around late 2015, our Group was facing a challenging period in terms of both operation and finance. As at 1 January 2016, the total deficit position of our Group amounted to approximately RMB35.1 million. With an interest in the healthcare industry in the PRC and being optimistic in the long term prospect of our Group, the Individual [REDACTED] Investors often met with Mr. Li and other members of our management at that time to discuss and devise development strategies. With their respective experience and expertise in different areas, including operation management, finance and investment, the Individual [REDACTED] Investors agreed to provide their advices and recommendations on growth and expansion plans of our Group. The Individual [REDACTED] Investors intend to join Mr. Li and Ms. Li as proactive business partners instead of passive investors and provide financial support in the form of debt and equity investment as and when necessary. On 9 March 2017, Mr. Huang made an interest-free and unsecured loan in the amount of RMB15 million to Mr. Li. The loan was intended to be utilised for the expenses associated with group reorganisation and for strengthening the financial position of the Group. Mr. Huang also joined our Group as a Director on 4 August 2017.

When the Individual [REDACTED] Investors negotiated with Mr. Li and Ms. Li in late 2017 in relation to the consideration to be paid for the [REDACTED] Investments, a number of factors were taken into account, including (i) the aforementioned contributions made by the Individual [REDACTED] Investors; (ii) their intended roles of proactive business partners; (iii) the results of the due diligence exercises conducted by the [REDACTED] Investments; (iv) the total deficit position of the Group prior to the relevant time; and (v) the inherent risks and uncertainties of the [REDACTED] Investments. In view of the above, Mr. Li and Ms. Li agreed to accept relatively low prices for their investments. A detailed analysis of the cost per Share paid by the Individual [REDACTED] Investors and the discount per Share enjoyed by them is set out in the paragraphs headed “Summary of the [REDACTED] Investments” in this section. On 4 January 2018, Mr. Huang made another interest-free and unsecured loan in the amount of RMB15 million to Mr. Li. This additional loan was also intended to be utilised for the expenses associated with group reorganisation and for strengthening the financial position of the Group. As at the Latest Practicable Date, Mr. Li has utilised approximately RMB19.6 million out of the RMB30 million of loans from Mr. Huang by way of settling the amount due to the Group from him. The repaid amount were in turn utilised on, among other things, the payment of [REDACTED] and as general working capital of the Group.

The Directors have also confirmed that, save for disclosed in this document, our Company and the Directors did not, and to the best knowledge of our Directors, the Controlling Shareholders, the Company’s connected persons and their respective close associates also did not, have any arrangement or understanding, in whichever form, with the [REDACTED] Investors, in relation to the investment in our Company.

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Transfer of 20% equity interest in Guodan SZ (the “First Transfer”)

On 25 December 2017, Mr. Li, Ms. Li, Mr. Huang Mr. Zhou, Mr. Yang and Mr. Tan entered into the First Share Transfer Agreement, pursuant to which Mr. Li agreed to transfer 16%, 1% and 1% of the equity interest in Guodan SZ to Mr. Huang, Mr. Yang and Mr. Tan at a consideration of RMB8,000,000, RMB500,000 and RMB500,000, respectively, and Ms. Li agreed to transfer 2% of the equity interest in Guodan SZ to Mr. Zhou at a consideration of RMB1,000,000, which was determined with reference to various factors including the then asset value and the business prospect of Guodan SZ after arm’s length negotiation among the parties and was in line with the valuation by an independent valuer. The transfers were registered with the competent PRC government authority on 27 December 2017. As advised by the PRC Legal Advisers, such transfers were properly and legally completed. Upon completion of such transfers, Guodan SZ was held as to 72% by Mr. Li, 8% by Ms. Li, 16% by Mr. Huang, 2% by Mr. Zhou, 1% by Mr. Yang and 1% by Mr. Tan. The considerations for the First Transfer were fully paid by 9 January 2018.

Transfer of 1% equity interest in Guodan SZ and the Company to Richcome Pacific (the “Second Transfer”)

On 14 February 2019, Mr. Huang and Richcome Pacific entered into the Second Share Transfer Agreement, pursuant to which, Mr. Huang agreed to transfer 1% equity interest in Guodan SZ to Richcome Pacific at a consideration of RMB606,200. The consideration for the transfer was determined after arm’s length negotiation between the parties with reference to the valuation of Guodan SZ as at 30 September 2018 as advised by an independent valuer, and was fully paid by Richcome Pacific on 26 April 2019.

The transfer was registered with the competent administration for market regulation on 15 February 2019 and filed for record with the competent commercial authority on 5 March 2019. As advised by the PRC Legal Advisers, such transfer was properly and legally completed. Upon completion of such transfer, Guodan SZ became a sino-foreign owned enterprise and was held as to 72% by Mr. Li, 8% by Ms. Li, 15% by Mr. Huang, 2% by Mr. Zhou, 1% by Mr. Yang, 1% by Mr. Tan and 1% by Richcome Pacific.

On 24 April 2019, Union India transferred 100 Shares, representing 1% equity interest in the Company to Richcome Pacific for the consideration of HK$1 to reflect the shareholding in Guodan SZ. Please refer to the paragraph headed “Reorganisation — 7. Transfer of 1% equity interest in our Company by Union India to Richcome Pacific” below for details of such transfer.

Subscription of Shares

On 25 April 2019, Victory Universe, Union India, Zhengyuan International, Lifangxin Investment, Qianhai Hezhong, Richcome Pacific and the Company entered into a share subscription agreement (the “Subscription Agreement”), pursuant to which, Victory Universe, Union India, Zhengyuan International, Lifangxin Investment, Qianhai Hezhong and Richcome Pacific (the “Subscribers” and each a “Subscriber”) subscribed for an aggregate of 840 Shares representing 8.4% of the then issued share capital of the Company at a total consideration of HK$8.4 million (the “Subscriptions” and each a

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“Subscription”). The number of Shares subscribed, the consideration and the shareholding after the Subscription for each Subscriber are set out below:

Number of Number of Shares held Shares after Subscriber Consideration subscribed Subscription

Victory Universe HK$400,000 40 840 Union India HK$4,000,000 400 1,900 Zhengyuan International HK$200,000 20 220 Lifangxin Investment HK$1,400,000 140 240 Qianhai Hezhong HK$200,000 20 120 Richcome Pacific HK$2,200,000 220 320

The consideration for the Subscriptions was fully paid by the Subscribers on 25 April 2019.

The [REDACTED] Investors had not been granted any special rights pursuant to the First Share Transfer Agreement, the Second Share Transfer Agreement and the Subscription Agreement or any other agreement in relation to their investments in our Group.

Upon completion of the First Transfer, the Second Transfer and the Subscriptions, our Company was held as to 66.42% by Guodan Healthcare, 7.75% by Victory Universe, 17.53% by Union India, 2.03% by Zhengyuan International, 2.21% by Lifangxin Investment, 1.11% by Qianhai Hezhong and 2.95% by Richcome Pacific.

Zhengyuan International, Lifangxin Investment, Qianhai Hezhong and Richcome Pacific will hold [1.52]%, [1.66]%, [0.83]% and [2.21]% of the enlarged issued share capital of our Company after completion of the [REDACTED] (assuming that the [REDACTED] is not exercised). As each of Zhengyuan International, Lifangxin Investment, Qianhai Hezhong and Richcome Pacific is neither a substantial shareholder nor core connected person of our Company under the Listing Rules, the Shares held by them will be considered as part of the public float for the purposes of Rule 8.08(1)(a) of the Listing Rules.

We believe that the [REDACTED] Investments would strengthen and diversify the shareholders’ portfolio of our Company and serve as an endorsement of our operation, performance and prospects.

As at the Latest Practicable Date, the [REDACTED] from the [REDACTED] Investors under (i) the First Transfer have been received by Mr. Li and Ms. Li; (ii) the Second Transfer have been received by Mr. Huang; and (iii) the Subscriptions have been received by the Company and had been utilised.

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The following table sets forth a summary of the [REDACTED] Investments: ITR,ROGNSTO N OPRT STRUCTURE CORPORATE AND REORGANISATION HISTORY,

The First Transfer The Second Transfer The Subscription

Investors Mr. Huang, Mr. Zhou, Mr. Yang Richcome Pacific Union India, Zhengyuan International, and Mr. Tan Lifangxin Investment, Qianhai Hezhong and Richcome Pacific

Date of relevant agreement 25 December 2017 14 February 2019 25 April 2019

Amount of consideration Mr. Huang: RMB8,000,000 RMB606,200 Union India: HK$4,000,000 Mr. Zhou: RMB1,000,000 Zhengyuan International: HK$200,000 Mr. Yang: RMB500,000 Lifangxin Investment: HK$1,400,000 Mr. Tan: RMB500,000 Qianhai Hezhong: HK$200,000

4 – 140 – Richcome Pacific: HK$2,200,000

Payment date of 9 January 2018 26 April 2019 25 April 2019 consideration

[REDACTED] from the Retained by Mr. Li and Ms. Li Retained by For general working capital of the Group. [REDACTED] Mr. Huang The proceeds had been utilised at the Investments Latest Practicable Date.

Total number of Shares Union India: [REDACTED] held by the Zhengyuan International: [REDACTED] [REDACTED] Investors Lifangxin Investment: [REDACTED] after the [REDACTED] Qianhai Hezhong: [REDACTED] Richcome Pacific: [REDACTED] Cost per Share paid after Union India / Mr. Huang: approximately [REDACTED] per Share the [REDACTED] Zhengyuan International / Mr. Zhou: approximately [REDACTED] per Share Lifangxin Investment / Mr. Yang: approximately [REDACTED] per Share Qianhai Hezhong / Mr. Tan: approximately [REDACTED] per Share Richcome Pacific / Ms. Yuen: approximately [REDACTED] per Share ERA NCNUCINWT H ETO EDD“ANN”O H OE FTI DOCUMENT. THIS OF COVER THE ON “WARNING” HEADED MUST SECTION INFORMATION THE THE AND WITH CHANGE TO CONJUNCTION SUBJECT IN AND INCOMPLETE READ FORM, BE DRAFT IN IS DOCUMENT THIS

Discount to the Union India / Mr. Huang: a discount of approximately [REDACTED] [REDACTED] (Assuming Zhengyuan International / Mr. Zhou: a discount of approximately [REDACTED] an [REDACTED] of Lifangxin Investment / Mr. Yang: a discount of approximately [REDACTED] STRUCTURE CORPORATE AND REORGANISATION HISTORY, [REDACTED] per Share, Qianhai Hezhong / Mr. Tan: a discount of approximately [REDACTED] being the mid-point of Richcome Pacific / Ms. Yuen: a discount of approximately [REDACTED] the [REDACTED])

Benefit from the Our Directors are of the view that our Group can benefit from the [REDACTED] Investment as it provided [REDACTED] financial resources for our business development and served as an endorsement of our Group’s Investments performance, strength and prospects.

Shareholding upon the Union India: [REDACTED] [REDACTED] Zhengyuan International: [REDACTED] Lifangxin Investment: [REDACTED] Qianhai Hezhong: [REDACTED]

4 – 141 – Richcome Pacific: [REDACTED]

Lock-Up Period The [REDACTED] Investors are not subject to any lock-up as set out in the First Share Transfer Agreement, the Second Share Transfer Agreement and the Subscription Agreement. THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. HISTORY, REORGANISATION AND CORPORATE STRUCTURE

Sponsor’s confirmation

The Sponsor considers that the [REDACTED] Investments by the [REDACTED] Investors are in compliance with the “Interim Guidance on [REDACTED] Investments” and “Guidance on [REDACTED] Investments” issued by the Listing Committee in January 2012 (updated in March 2017) and October 2012 (updated in July 2013 and March 2017), respectively, for the following reasons: (i) the relevant considerations under the [REDACTED] Investments were fully and irrevocably settled and received by us on or before 26 April 2019, which was more than 28 clear days before the date of the first submission of the first [REDACTED] application form to the Stock Exchange in relation to the [REDACTED]; and (ii) no special right was granted to the [REDACTED] Investors in the [REDACTED] Investments.

REORGANISATION

Our Group underwent the Reorganisation prior to the [REDACTED] to rationalise our Group’s structure in preparation for the [REDACTED]. Set out below is the corporate structure of our Group immediately prior to the Reorganisation:

Mr. Li Ms. Li Mr. Huang Mr. Zhou Mr. Yang Mr. Tan

72% 8% 16% 2% 1% 1%

100% Guodan SZ (The PRC)

100% 100% 100% Guanghua Guodan Zhouji Doctors Medical Medical (The PRC) (The PRC) (The PRC)

100% 100% 100% 100% 100% Zhongshan Luogang Xuexiang Jian’an Renkang TCM Hospital Hospital Hospital Hospital Hospital (The PRC) (The PRC) (The PRC) (The PRC) (The PRC)

Note: Mengte Management, Mengte Technology and Mengte Information, which were deregistered on 13 February 2019, 13 February 2019 and 14 February 2019 respectively, are not included in the above chart. For details of the three companies, please refer to the paragraph headed “Our Group members — Subsidiaries deregistered as at the Latest Practicable Date” above in this section.

The Reorganisation involves the following steps:

1. Incorporation of our Company

Our Company was incorporated as an exempted company in the Cayman Islands on 4 August 2017 with limited liability with an authorised share capital of HK$100 divided into 10,000 Shares of par value HK$0.01 each. Upon its incorporation, one Share was subscribed at par value by Vistra (Cayman) Limited, an Independent Third Party, which was then transferred to Guodan Healthcare on the same date. On the same day, our Company allotted and issued 7,999 Shares, 1,600 Shares, 200 Shares, 100 Shares and 100 Shares to Guodan Healthcare, Union India, Zhengyuan International, Lifangxin Investment and Qianhai Hezhong, respectively at par value.

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2. Incorporation of Guodan BVI

Guodan BVI was incorporated in the BVI on 14 August 2017 with limited liability and was authorised to issue a maximum of 10,000 shares of a single class of par value of HK$0.01 each. Since its incorporation, Guodan BVI has been wholly owned by our Company.

3. Incorporation of Guodan HK

Guodan HK was incorporated in Hong Kong with limited liability on 29 August 2017. Upon its incorporation, Guodan HK allotted and issued 1 share credited as fully paid to Guodan BVI as subscriber, with an issued share capital of HK$1.

4. Share transfer to Richcome Pacific

Pursuant to the Second Share Transfer Agreement, Mr. Huang completed the transfer of 1% equity interest in Guodan SZ to Richcome Pacific on 5 March 2019. Please refer to the paragraph headed “[REDACTED] Investments — Transfer of 1% of the equity interest in Guodan SZ and the Company to Richcome Pacific” above. After the aforesaid transfer, Guodan SZ was held as to 72% by Mr. Li, 8% by Ms. Li, 15% by Mr. Huang, 2% by Mr. Zhou, 1% by Mr. Yang, 1% by Mr. Tan and 1% by Richcome Pacific.

5. Transfer of 100% equity interest in Guodan SZ to Guodan HK

On 16 April 2019, each of Mr. Li, Ms. Li, Mr. Huang, Mr. Zhou, Mr. Yang, Mr. Tan and Richcome Pacific entered into a share transfer agreement with Guodan HK (each of which, other than the one between Richcome Pacific and Guodan HK, was supplemented by a supplemented share transfer agreement dated 12 July 2019 entered into between the same parties), pursuant to which, each of Mr. Li, Ms. Li, Mr. Huang, Mr. Zhou, Mr. Yang, Mr. Tan and Richcome Pacific agreed to transfer his/her/its equity interest in Guodan SZ to Guodan HK at a consideration of RMB43,645,600, RMB4,849,500, RMB9,092,800, RMB1,212,400, RMB606,200, RMB606,200 and RMB606,200 respectively. The consideration for each of the transfers was determined after arm’s length negotiation between the parties with reference to the valuation of Guodan SZ as at 30 September 2018 as advised by an independent valuer. The transfer was filed for record with the competent commercial authority on 16 April 2019 and registered with the competent administration for market regulation on 17 April 2019. As advised by the PRC Legal Advisers, such transfer was properly and legally completed. Upon completion of such transfer, Guodan SZ became a wholly-owned foreign enterprise and was wholly owned by Guodan HK.

6. Transfer of 8% equity interest in our Company by Guodan Healthcare to Victory Universe

In order to reflect the shareholding in Guodan SZ, on 24 April 2019, Guodan Healthcare transferred 8% equity interest in our Company to Victory Universe by way of gift. Upon completion of such transfer, our Company was held as to 72% by Guodan Healthcare, 8% by Victory Universe, 16% by Union India, 2% by Zhengyuan International, 1% by Lifangxin Investment and 1% by Qianhai Hezhong.

7. Transfer of 1% equity interest in our Company by Union India to Richcome Pacific

In order to reflect the equity interest transfer in Guodan SZ from Mr. Huang to Richcome Pacific as set out in step 4 above and thus the shareholding in Guodan SZ, on 24 April 2019, Richcome Pacific, Guodan HK and Mr. Huang entered into a settlement agreement (the “Settlement Agreement”), pursuant to which Mr. Huang shall assume Guodan HK’s obligation (the “Payment Obligation”) to pay Richcome Pacific RMB606,200, being the agreed consideration for the transfer of 1% equity interest in Guodan SZ

– 143 – THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. HISTORY, REORGANISATION AND CORPORATE STRUCTURE by Richcome Pacific to Guodan HK under the share transfer agreement dated 16 April 2019 between Richcome Pacific and Guodan HK. Pursuant to the Settlement Agreement, Mr. Huang shall settle the Payment Obligation by procuring Union India to transfer 1% equity interest in our Company to Richcome Pacific at the nominal consideration of HK$1. Accordingly, on 24 April 2019, Union India transferred 100 Shares, representing 1% equity interest in our Company to Richcome Pacific for the consideration of HK$1. Upon completion of such transfer, our Company was held as to 72% by Guodan Healthcare, 8% by Victory Universe, 15% by Union India, 2% by Zhengyuan International, 1% by Lifangxin Investment, 1% by Qianhai Hezhong and 1% by Richcome Pacific.

8. Increase in share capital of our Company

On 24 April 2019, the authorised share capital of our Company was increased from HK$100 to HK$380,000 by the creation of an additional 37,990,000 Shares.

9. Subscription of Shares

Pursuant to the Subscription Agreement, Victory Universe, Union India, Zhengyuan International, Lifangxin Investment, Qianhai Hezhong and Richcome Pacific subscribed for an aggregate of 840 Shares, representing 8.4% of the then issued share capital of our Company at a total consideration of HK$8.4 million. Please refer to the paragraph headed “[REDACTED] Investments — Subscription of Shares” above.

The Reorganisation steps set out above were properly completed in compliance with all relevant laws and regulations.

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The following chart sets out our shareholding and corporate structure upon completion of the Reorganisation but immediately before completion of the [REDACTED] and the [REDACTED] (without taking into account any Shares which may be allotted and issued pursuant to the exercise of the [REDACTED] or any options which may be granted under the Share Option Scheme):

Mr. Li Ms. Li Mr. Huang Mr. Zhou Mr. Yang Mr. Tan Ms. Yuen

100% 100% 100% 100% 100% 100% 100%

Guodan Victory Union Zhengyuan Lifangxin Qianhai Richcome Healthcare Universe India International Investment Hezhong Pacific (BVI) (BVI) (BVI) (BVI) (BVI) (BVI) (BVI)

66.42% 7.75% 17.53% 2.03% 2.21% 1.11% 2.95%

Our Company (Cayman Islands)

100%

Guodan BVI (BVI) 100%

Guodan HK (Hong Kong) 100%

Guodan SZ (The PRC)

100% 100% 100% Guanghua Guodan Zhouji Doctors Medical Medical (The PRC) (The PRC) (The PRC)

100% 100% 100% 100% 100% Zhongshan Luogang Xuexiang Jian’an Renkang TCM Hospital Hospital Hospital Hospital Hospital (The PRC) (The PRC) (The PRC) (The PRC) (The PRC)

PRC REGULATORY REQUIREMENTS

The Rules on Mergers and Acquisitions of Domestic Enterprise by Foreign Investors in the PRC

According to the Provisions Regarding Mergers and Acquisitions of Domestic Enterprises by Foreign Investors《關於外國投資者併購境內企業的規定》 ( ) (the “M&A Rules”) jointly issued by the MOFCOM, the State-owned Assets Supervision and Administration Commission of the State Council (國務院國有資產管理監督委員會), the SAT, the CSRC, State Administration of Industry and Commerce and the SAFE on 8 August 2006 and effective as at 8 September 2008 and amended in June 2009, a foreign investor is required to obtain necessary approvals from the MOFCOM or its local counterpart when it: (i) acquires the equity of a domestic enterprise so as to convert the domestic enterprise into a foreign-invested enterprise; (ii) subscribes the increased capital of a domestic enterprise so as to convert the domestic enterprise into a foreign-invested enterprise; (iii) establishes a foreign-invested enterprise through which it purchases the assets of a domestic enterprise and operates these assets; or (iv) purchases the assets of a domestic enterprise, and then invests such assets to establish a foreign invested enterprise.

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Where a domestic company, enterprise or natural person intends to acquire its/his/her related domestic company in the name of an offshore company which it/he/she lawfully established or controls, the acquisition shall be subject to the examination and approval of the MOFCOM, and an offshore special purpose vehicle formed for listing purposes and controlled directly or indirectly by PRC companies or individuals shall obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange, in the event that the special purpose vehicle acquires equity interests in PRC companies using shares of offshore companies as the consideration.

Pursuant to the Interim Administrative Measures for the Record-filing of the Incorporation and Change of Foreign-invested Enterprises(外商投資企業設立及變更備案管理暫行辦法) (the “Circular 6”) which was promulgated on 8 October 2016, effective on the same date, and amended on 30 July 2017, and 29 June 2018, Where a non-foreign-invested enterprise changes into a foreign-invested enterprise due to acquisition, consolidation by merger or otherwise, it shall complete the record-filing formalities with competent commerce departments if incorporation of such foreign-invested enterprise does not involve the implementation of special access administrative measures prescribed by the state.

As advised by our PRC Legal Advisers, with respect to the share transfer between Mr Huang and Richcome Pacific in 2019, which turned Guodan SZ into a Sino-foreign joint venture, Guodan SZ has completed necessary record-filing formalities in accordance with M&A Rules and Circular 6. Please refer to the paragraphs headed “Reorganisation — 4. Share transfer to Richcome Pacific” above for further details. Aside from that, the Reorganisation did not involve any merger and acquisition as mentioned in M&A Rules and the acquisition of Guodan SZ by Guodan HK did not need to obtain the approval of the MOFCOM, the CSRC or other PRC government authorities.

SAFE Registration in the PRC

On 4 July 2014, the SAFE issued the Circular of the State Administration of Foreign Exchange on the Administration of Foreign Exchange Involved in Overseas Investment, Financing and Round-trip Investment Conducted by Chinese Mainland Residents via Special-purpose Companies (Hui Fa [2014] No. 37)《關於境內居民通過特殊目的公司境外投融資及返程投資外匯管理有關問題的通知》 ( ) (the “SAFE Circular No. 37”), which came into effect on the same date. On 13 February 2015, the SAFE issued the Circular of the State Administration of Foreign Exchange on Further Simplifying and Improving Policies for Foreign Exchange Administration for Direct Investment (Hui Fa [2015] No. 13) （《關於進一步簡化和改進直接投資外匯管理政策的通知》）(the “SAFE Circular No. 13”), which came into effect on 1 June 2015. According to the SAFE Circular No.37 and SAFE Circular No.13, PRC residents shall apply to the relevant bank for foreign exchange registration before making capital contribution to offshore special purpose vehicles with legitimate holdings of domestic or overseas assets or interests.

As advised by our PRC Legal Advisers, each of Mr. Li, Ms. Li, Mr. Huang, Mr. Zhou, Mr. Yang and Mr. Tan has completed all relevant foreign exchange registration under the SAFE Circular No. 37 and SAFE Circular No. 13 in April 2019.

In relation to the Reorganisation and all the transfers of equity interests, investments and increases in registered capital in our subsidiaries established in the PRC as described in this section, our PRC Legal Advisers confirmed that all requisite approvals and/or registrations from the PRC authorities have been obtained and the Reorganisation and all the aforementioned transfers of equity interests, investments and increases in registered capital are legally valid and binding under PRC laws.

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INCREASE IN AUTHORISED SHARE CAPITAL OF OUR COMPANY AND THE [REDACTED]

Pursuant to the written resolutions of all our Shareholders passed on [●] 2021, the authorised share capital of our Company was increased from HK$380,000 to HK$[30,000,000] by the creation of [2,962,000,000] new Shares. Our Company will also issue [374,989,160] Shares upon capitalisation of certain sums standing to the credit of the share premium account of our Company. Details of the Shareholders’ written resolutions are referred to in the section headed “Statutory and general information — Further information about our Group — 3. Resolutions in writing of all our Shareholders passed on [●] 2021” in Appendix V to this document.

The following chart sets out our shareholding and corporate structure immediately upon completion of the [REDACTED] and the [REDACTED] (without taking into account any Shares which may be allotted and issued pursuant to the exercise of the [REDACTED] or any options which may be granted under the Share Option Scheme):

Mr. Li Ms. Li Mr. Huang Mr. Zhou Mr. Yang Mr. Tan Ms. Yuen

100% 100% 100% 100% 100% 100% 100%

Guodan Victory Union Zhengyuan Lifangxin Qianhai Richcome Other Public Healthcare Universe India International Investment Hezhong Pacific Shareholders (BVI) (BVI) (BVI) (BVI) (BVI) (BVI) (BVI)

[49.82]% [5.81]% [13.15]% [1.52]% [1.66]% [0.83]% [2.21]% [25]%

Our Company (Cayman Islands) 100%

Guodan BVI (BVI) 100%

Guodan HK (Hong Kong) 100%

Guodan SZ (The PRC)

100% 100% 100% Guanghua Guodan Zhouji Doctors Medical Medical (The PRC) (The PRC) (The PRC)

100% 100% 100% 100% 100% Zhongshan Luogang Xuexiang Jian’an Renkang TCM Hospital Hospital Hospital Hospital Hospital (The PRC) (The PRC) (The PRC) (The PRC) (The PRC)

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OVERVIEW

We own and operate a network of five private for-profit hospitals in Guangdong Province in the PRC, four of which are general hospitals located in Shenzhen and the remaining one is a TCM hospital located in Zhongshan City. Hospitals in China are ranked into three classes (Class I, II and III, with Class III being the highest class) based on the assessment of competent authorities. Class III hospitals are typically larger in scale and have larger number of beds compared to Class I and Class II hospitals. Apart from abovementioned hospitals ranked into Class I, II and III, there are clinics and community healthcare centres in China which generally are less sophisticated in the provision of medical treatments and specialised diagnostic and treatment facilities for tertiary care patients are not generally available. As the majority of our hospitals are Class I general hospitals, we focus on the treatment of common diseases, frequently-occurring diseases and chronic diseases and generally provide healthcare services to residents in the local communities, where severe disease and injuries that require more sophisticated treatment are transferred to Class III hospitals. During the Track Record Period, Renkang Hospital owned 41 registered beds and 41 beds in operation; Luogang Hospital owned 99 registered beds and 78 beds in operation; Xuexiang Hospital owned 99 registered beds and 99 beds in operation prior to its relocation in late July 2020; Jian’an Hospital owned 60 registered beds and 60 beds in operation; and Zhongshan TCM Hospital owned 90 registered beds and 90 beds in operation. In aggregate, we owned 389 registered beds, of which there were 368 beds in operation during the Track Record Period (Xuexiang Hospital commenced its relocation to a new site in late July 2020, please refer to the paragraph headed “Business — Properties — Relocation of Xuexiang Hospital” in this document). Upon Xuexiang Hospital’s relocation, Xuexiang Hospital owned 40 registered beds and 40 beds in operation at its new site as at the Latest Practicable Date. Accordingly, we owned 330 registered beds and 309 beds in operation as at the Latest Practicable Date. During the three years ended 31 December 2020, the total number of outpatient visits of our hospitals amounted to 522,906, 614,428 and 484,648, respectively, and the total number of inpatient visits of our hospitals amounted to 11,372, 10,645, 7,118 and 5,334, respectively for the same periods. According to the F&S Report, Guangdong Province’s hospital market is highly competitive and we accounted for a small market share, which was approximately 0.8% in terms of revenue of healthcare services of general hospitals in Guangdong in 2019.

We own and operate the four Class I general hospitals recognised by Shenzhen HFPC in Shenzhen and a TCM hospital of Class II in Zhongshan City. Based on consultation with Shenzhen HFPC and the accreditation notices issued by Shenzhen HFPC on 25 January 2016 and 19 July 2017, our four private hospitals in Shenzhen, together with some other hospitals in Shenzhen, were recognised by Shenzhen HFPC as Class I general hospitals. According to an accreditation notice issued by Zhongshan HFPB on 20 January 2020, Zhongshan TCM Hospital was approved by Zhongshan HFPB as a TCM hospital of Class II. During the Track Record Period, all of our hospitals were “designated” hospitals under the social insurance programmes. Due to the urban transformation of the community where Xuexiang Hospital was located, Xuexiang Hospital commenced its relocation to a new site in late July 2020 and has resumed its operation on 5 March 2021 at its new site. Its operation accordingly has been suspended from 24 July 2020 to 4 March 2021. During the Track Record Period, the relevant social insurance fund authorities conducted sampling reviews on our hospitals. There were in aggregate 277, 8 and 10 medical cases (each involving one inpatient visit) respectively for each year of the Track Record Period in breach of the designated medical institution service agreement. For details of the breaches of the designated medical institution service agreement, please refer to the paragraph headed “Business — Customers — Social Insurance Programmes — Sampling reviews conducted by the Social Insurance Fund Administrations/Healthcare Security Bureaux” in this document. However, we have maintained the “designated” status since 2005 when we first entered into the “designated” agreements with the local social insurance fund administrations and, save for Zhongshan TCM Hospital whose agreement with the local social insurance fund administration has been renewed, the designated medical institution service agreements of our other hospitals are under renewal for 2021.

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Four of our hospitals in Shenzhen, namely Renkang Hospital, Luogang Hospital, Xuexiang Hospital and Jian’an Hospital, are located in Longgang District, Longhua District and Luohu District. Despite Luogang Hospital locates in Longgang District and Renkang Hospital locates in Luohu District, the distance between Luogang Hospital and Renkang Hospital is only approximately 1.9 kilometers apart and the scope of services provided by each of them is similar. Therefore, the close proximity of Luogang Hospital and Renkang Hospital may affect their respective patient visits and revenue, please refer to the section “Risk factors” for details. Save for the proximity between Luogang Hospital and Renkang Hospital, the distances between each of the four hospitals of our Group in Shenzhen, namely Luogang Hospital, Renkang Hospital, Xuexiang Hospital and Jian’an Hospital are more than 4.1 kilometers and they mainly serve different patient groups in the local communities, we believe that there is no direct competition among them. The four hospitals strategically joined the medical consortium (醫療聯合體) led by Shenzhen Luohu Medical Group* (深圳羅湖醫院集團), a pilot work and a benchmark of deepening medical reform in the healthcare industry in Shenzhen. Zhongshan TCM Hospital, located in the Torch High-tech Development Zone in Zhongshan City, is a TCM hospital specialised in osteology related diseases, gynaecology related diseases and rehabilitation treatment while also providing general medical services. It complements our service scope both in service type and geographic coverage. According to the F&S Report, Zhongshan TCM Hospital ranked as the largest TCM hospital in terms of hospital revenue among the private TCM hospitals in Guangdong Province in 2019, accounting for approximately 14.4% of the market share.

We are committed to providing quality healthcare services to our patients and their families. Through over a decade of operations, we have accumulated extensive experience and developed detailed management and operational procedures in operating private hospitals. During the Track Record Period, we maintained a satisfactory treatment records for our patients and had a low rate of medical disputes or proceedings. Our hospitals were accredited as “Integrity Private Hospitals” and other recognitions, which we believe is a representation of the trust we won from the public.

Our healthcare professionals consist of qualified and experienced doctors, licensed nurses and other supporting staff. We are committed to retaining experienced healthcare professionals in the healthcare sector to consistently maintain the high quality of the healthcare services provided by our hospitals. As at 31 December 2020, we had a total of 431 healthcare professionals (excluding multi-site practice doctors), with whom we generally entered into direct employment agreements. In addition, as at 31 December 2020, we had a total of 13 doctors who engage in multi-site practice. For further details, please refer to the paragraph headed “Our healthcare professionals — multi-site practice doctors” in this section. Through the operational and financial performance of our hospitals during the Track Record Period, we have demonstrated our capability in operating the private for-profit general hospitals. We will continue to utilise our competitive strengths to ensure effective execution of our strategies for our future development.

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COMPETITIVE STRENGTHS

We believe that the following competitive strengths have enabled us to differentiate us from our competitors:

We have established a network of five private hospitals to provide healthcare services to the local communities in Shenzhen and Zhongshan City in Guangdong Province

We have established a network of five private hospitals, including four private general hospitals in Shenzhen and one private TCM hospital in Zhongshan City. Each of the five hospitals we own had a history of over 10 years and achieved satisfactory operating records. We believe that we have accumulated extensive experience in operating private hospitals and gained sound understanding of the markets that we are in and the needs and preferences that our patients have. For FY2019, the four general hospitals of our Group recorded revenue of approximately RMB182 million, accounting for approximately 7.3% of the market share of the private general hospitals market in Shenzhen in 2019. Zhongshan TCM Hospital, the TCM hospital in our Group, ranked as the largest TCM hospital in terms of the hospital revenue among the private TCM hospitals in Guangdong Province in 2019, accounting for approximately 14.4% of the market share, according to F&S Report.

In China, with rapid economic development, accelerating ageing population and rising prevalence of chronic diseases, public hospitals are unable to fully satisfy the rapid growing demand for healthcare services, requiring private hospitals to play an essential role in addressing deficiencies in coverage. Also, as all hospitals in our Group are “designated” hospitals under the social insurance programmes with the local social insurance fund administrations/local healthcare security bureaux during the Track Record Period, the healthcare services we provide for our patients under the social insurance programmes are charged at fair and economical level taking into account pricing controls and pricing ceilings imposed by various PRC laws and regulations, resulting in a stable demand for such healthcare services while entitling our Group to have substantial support from the government.

It provides experienced private hospitals group operators like us with an opportunity to achieve consistent and long-term growth in the private hospital market. We believe that the track records that we have made position us well in identifying and capturing the future growth opportunities in the private hospital sector in the PRC.

We own and operate general hospitals which enable us to capture opportunities arising from China’s healthcare reforms and meet the increasing demand for fundamental healthcare services

Under the current administrative measures on healthcare institutions promulgated by the NHFPC, hospitals in the PRC are graded into three levels (Class I, II and III) and three sub-levels (Grade A, B and C) based on the assessment of competent authorities, with the highest standard being Class III Grade A (三級甲等). The assessment itself is not a requisite for a healthcare institution to carry out its business. Class III hospitals are structured and built to treat critical and complex diseases and to conduct medical research and development, hence the medical resources allocation mechanism of Class III hospitals limits the resources they can allocate to fulfill the increasing demand for the treatment of common diseases,

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In the plan on healthcare and medical system reform for the National 13th Five-Year Plan period (2016-2020) and the subsequent notices issued by the State Council, the Chinese government pledges to promote healthcare industries, allocating more resources to local hospitals and encouraging private capital and social organisations to provide healthcare services and develop new medicines and medical facilities. The Chinese government has also advocated to improve basic healthcare system in the National 12th Five-Year Plan (2011-2015) with its pressing forward the tiered medical treatment (分級診療) and two-way transfers (雙向轉診) system to allocate the healthcare resources more reasonably to meet different patients’ demands for healthcare services.

As one of the leading provinces conducting healthcare reform in the PRC, Guangdong Province has promulgated a series of policies aiming to accelerate the development of private hospitals. In particular, Shenzhen has provided a more friendly medical policy environment for the development of private hospitals. For example, in 2017, Shenzhen government promulgated the implementing rules for 13 financial support projects for the development of private hospitals, such as basic medical subsidy, basic public health service subsidy and basic medical bed award. Over the past few years, Shenzhen government has also strived to launch pilot reforms in promoting tiered medical treatment and family doctors by allocating more quality medical resources to the primary hospitals and community healthcare centres (社區健康服務中心) to better serve the general public in the local communities. Benefit from such government policies, we believe we are able to access more medical resources as a primary private hospitals group.

We believe that by owning and operating the general hospitals group that serves the local communities, we are able to capture more opportunities arising from China’s healthcare reforms and meet the increasing demand for fundamental healthcare services.

We actively explore cooperation opportunities with public Class III hospitals in the upstream part of the value chain of healthcare industry as well as with community healthcare centres in the downstream part of the value chain

In large cities which administer several districts, the public Class III hospitals or hospitals with strong operational capabilities are required to take the lead and cooperate with the surrounding community healthcare centres (社區健康服務中心), nursing homes and professional rehabilitation institutions in the region to form a public platform to provide medical services for patients, forming the management mode of resource sharing and division of labour cooperation with the ultimate goal of protecting the general public’s health. Medical consortium (醫療聯合體) refers to the joint organisation of medical institutions formed by the integration of vertical or horizontal medical resources of medical institutions of different levels and categories, which is conducive to optimising the structure of medical resources, improving efficiency of medical services, implementing better graded diagnosis and treatment, and resolving the difficulty of getting medical services. Under this circumstance, Shenzhen Luohu Medical Group* (深圳羅湖醫院集團) was established as a pilot work and a benchmark of deepening medical reform in the healthcare industry in Shenzhen. Members in the medical group share their services, responsibilities, interests and management with each other.

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Four of our hospitals in Shenzhen strategically joined the medical consortium (醫療聯合體) led by Shenzhen Luohu Medical Group* (深圳羅湖醫院集團), providing an advanced platform for us to collaborate with public hospitals of large scale which are generally equipped with top-class medical techniques and skills after we become a member of the medical consortium. We are able to have cooperation with them in respect of, among others, the two-way transfers (雙向轉診), technical support, talents development and resources sharing. With the support from Shenzhen Luohu Medical Group* (深圳羅湖醫院集團), we enjoy a competitive strength in establishing and expanding our healthcare business and improving our performances. During the Track Record Period, no joining fee, referral fee or membership fee was paid to Shenzhen Luohu Medical Group. At this initial stage of cooperation, no patient has been referred to us by other members of the medical consortium during the Track Record Period.

We foster cooperation with community healthcare centres (社區健康服務中心) which are generally less sophisticated in the provision of medical treatments and where specialised diagnostic and treatment facilities for tertiary care patients are not generally available. We actively provide them medical transfer treatment and medical assistance. These community healthcare centres (社區健康服務中心) recognise our medical capability and regularly refer patients to us, in particular patients with critical conditions requiring specialised care or complicated diseases that do not respond to their available treatment protocols. During the time of medical treatments, the patient shall provide the referral certificate provided by the community healthcare centres. During the Track Record Period and up to the Latest Practicable Date, Renkang Hospital cooperated with seven community healthcare centres with a focus on serving patients in the local community.

We have experienced management team and healthcare professionals

We believe that a team of stable and dedicated healthcare professionals, led by our management team with in-depth industry expertise and strategic vision, is a key factor to our success. Our key management team, comprising our executive directors and senior management, have more than 10 years of relevant industry experience in general.

Mr. Li, our chairman, chief executive officer and executive Director, has over 20 years of experience working in the medical industry and is a pioneer in investing and operating private hospitals in the PRC. Our senior management members had diversified industry experience covering hospital operation and medical practice. Mr. Luo Jian, member of our senior management, has 24 years of experience in hospital management. The dean of some of our hospitals have chief physician or associate-chief physician titles and have worked in other hospitals or medical institutions as administrators or held other important management positions before joining our Group. We rely on our experienced management team to generate synergies among the hospitals in our network.

Our healthcare professionals team is conducive to our operations and maintaining our presence and reputation in the healthcare market. As at 31 December 2020, we had a total of 41 chief and associate chief doctors, 118 attending doctors, resident doctors and assistant doctors, and 285 other healthcare professionals (excluding multi-site practice doctors). Some of our healthcare professionals are specialist to provide quality healthcare services to our patients, which is critical to our success in attracting and retaining patients.

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BUSINESS STRATEGIES

Please refer to the paragraph headed “Future plans and [REDACTED] — Business strategies and future plans” in this document for details of our business strategies.

OUR HOSPITALS

As at the Latest Practicable Date, we owned and operated five private for-profit hospitals registered in the form of limited liability company in Guangdong Province, the PRC, namely (i) Renkang Hospital; (ii) Luogang Hospital; (iii) Xuexiang Hospital; (iv) Jian’an Hospital; and (v) Zhongshan TCM Hospital. Zhongshan TCM Hospital is a TCM hospital of Class II in Zhongshan City, and the other four hospitals are Class I general hospitals recognised by Shenzhen HFPC in Shenzhen, the special economic zone of the PRC. For more details on classifications of hospitals in the PRC, please refer to the paragraph headed “Regulatory overview — Laws and regulations related to the healthcare service sector in the PRC — Regulations on the administration and classification of healthcare institutions” in this document.

The following table sets forth certain key information of our hospitals as at 31 December 2020:

Operation Number of by our registered Number of Group No. Hospital Hospital type (1) Location GFA beds (2) doctors (3) since (sq.m.)

1 Renkang Hospital General hospital Luohu District, Shenzhen 4,234.10 41 20 2004 2 Luogang Hospital General hospital Longgang District, Shenzhen 2,226.55 99 35 2004 3 Xuexiang General hospital Longgang District, Shenzhen 9,469.42(4) 99(4) 26 2005 Hospital 4 Jian’an Hospital General hospital Longhua District, Shenzhen 4,000.00 60 47 2016 5 Zhongshan TCM TCM hospital Torch High-tech 18,059.40 90 21 2007 Hospital Development Zone, Zhongshan City

Notes:

(2) It refers to the number of beds that were registered in the hospital’s practising licence.

(3) It represents the total number of doctors who only work at our hospitals, which does not include the number of multi-site practice doctors.

(4) These figures represent the GFA and number of registered beds prior to Xuexiang Hospital’s relocation in later July 2020. As at the Latest Practicable Date, the GFA of Xuexiang Hospital was 4,474 sq. m. and the number of registered beds was 40 for Xuexiang Hospital’s new site.

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The geographical locations of our hospitals are shown in the map as below:

Xuexiang Hospital 龍崗區龍華區 Jian’an Hospital Zhongshan TCM Hospital Luogang Hospital Renkang Hospital 中山火炬發展區羅湖區

香港

1. Renkang Hospital

Renkang Hospital is a Class I general hospital recognised by Shenzhen HFPC and has a history of over 15 years and adheres to the service tenet of “all for patients and all from quality control” (病人為中心、嚴把質量關) to serve the local communities with whole commitments. It commenced operation in 2003, was acquired by our Group in 2004 and registered in the form of limited liability company in 2015.

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Geographic location

Renkang Hospital is located at Dongxiao Subdistrict (東曉街道), Luohu District (羅湖區)in Shenzhen. Dongxiao Subdistrict covered an area of approximately 3.5 sq.km.. There is 12 communities with resident population of approximately 0.2 million, accompanied by different recreational park and well known enterprises. The surrounding transportation is convenient with Guangshen Railway. The proximity with Caobu Railway Station (草埔站) adds convenience to patients communing to Renkang Hospital.

Operational capacity

As at 31 December 2020, Renkang Hospital had 41 beds in operation 84 full-time staff, 58 of which are healthcare professionals and a leased GFA of 4,234.10 sq.m..

The table below sets forth certain key information of Renkang Hospital for the periods indicated:

FY2018 FY2019 FY2020

Revenue (RMB’000) 36,580 35,643 31,341 Cost of revenue (RMB’000) 19,355 19,395 15,816 Gross profit (RMB’000) 17,225 16,248 15,525 Gross profit margin (%) 47.1 45.6 49.5

Inpatient hospital services Number of registered beds(1) 41 41 41 Number of beds in operation(2) 41 41 41 Effective service capacity(3) 14,965 14,965 15,006 Inpatient visits(4) 1,746 1,000 799 Inpatient bed-days (days)(5) 12,484 7,333 6,079 ALOS (days)(6) 7.15 7.33 7.61 Utilisation rate (%)(7) 83.4 49.0 40.5 Average spending per visit (RMB)(8) 7,254.4 7,830.0 7,540.2 – Social Insurance Programmes Insured Patients(13) 7,935.1 8,805.3 8,265.7 – Self-pay and Corporate Customers(14) 4,879.8 5,165.9 5,338.3 Revenue (RMB’000)(9) 12,666 7,830 6,025 Cost of revenue (RMB’000) 5,844 4,824 2,997 Gross profit (RMB’000) 6,822 3,006 3,028 Gross profit margin (%) 53.9 38.4 50.3

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FY2018 FY2019 FY2020

Outpatient hospital services Outpatient visits(10) 80,798 70,555 45,231 – Outpatient clinic visits 79,498 69,645 43,527 – Physical examination visits – Individual patients 1,164 801 1,704 – Group patients 136 109 – Average spending per visit (RMB)(8) 296.0 394.2 559.7 – Social Insurance Programmes Insured Patients(13) 330.9 432.7 575.3 – Self-pay and Corporate Customers(14) 261.3 352.7 542.9 Revenue (RMB’000)(9) 23,914 27,813 25,316 Cost of revenue (RMB’000) 13,512 14,571 12,818 Gross profit (RMB’000) 10,403 13,242 12,498 Gross profit margin (%) 43.5 47.6 49.4

Surgical operations Number of day surgeries performed(11) 1,356 1,951 1,292 Number of inpatient surgeries performed(12) 733 473 344

Physical examination Average spending per visit (RMB)(15) 73.5 76.5 78.2 – Individual patients 74.1 79.0 78.2 – Group patients 68.2 58.3 N/A

Revenue (RMB’000) 95 69 133 – Individual patients 86 63 133 – Group patients 96–

Gross profit (RMB’000)(16) N/A N/A N/A – Individual patients N/A N/A N/A – Group patients N/A N/A N/A

Gross profit margin (%)(16) N/A N/A N/A – Individual patients N/A N/A N/A – Group patients N/A N/A N/A

Sales of Pharmaceuticals Revenue (RMB’000)(17) 10,024 9,520 5,885 Cost of revenue (RMB’000) 9,350 9,003 5,620 Gross profit (RMB’000) 674 517 265 Gross profit margin (%) 6.7 5.4 4.5

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Notes:

(1) It represents the number of beds that were registered in the hospital’s practising licence as at the end of the relevant period.

(2) It represents the number of beds that are deployed for operation as at the end of the relevant period.

(3) It represents the estimated inpatient service capacity during the given period, calculated as the number of beds deployed for operation as at the end of the relevant period multiplied by the number of days in such period.

(4) It represents the total number of inpatients (with hospital stay) in the hospital.

(5) It represents the total number of bed-days of the hospital.

(6) It represents the average number of days an inpatient stays in the hospital.

(8) It represents the average spending per inpatient visit/outpatient visit calculated by dividing sum of the revenue from inpatient hospital services/outpatient hospital services of the hospital and the sale of pharmaceuticals after provision of the relevant hospital services by the number of inpatient visits/outpatient visits of the hospital, where applicable.

(9) It represents the revenue of inpatient hospital services/outpatient hospital services of the hospital and the sale of pharmaceuticals after provision of the relevant inpatient hospital services/outpatient hospital services, where applicable.

(10) It represents the total number of outpatients (without hospital stay) in the hospital.

(11) It represents the number of day surgeries performed at the hospital.

(12) It represents the number of inpatient surgeries performed at the hospital.

(13) It represents the patients which are insured by the Social Insurance Programmes where part of their payments or entire of their payments are directly settled by the Shenzhen Social Insurance Fund Administration (深圳市社會保險基金管理局).

(14) It includes the patients where their payments are entirely (i) from patients who finance their medical treatments by themselves (including their settlement of the self-pay portion of their medical bills that were not covered by the social insurance programmes); (ii) from the commercial insurance providers which reimbursed the patients according to their commercial insurance policies; and (iii) business corporations, which purchase our Group’s healthcare services, such as physical examination and work-related injuries services, for their designated persons, normally being their employees.

(15) It represents the average spending per physical examination visit calculated by dividing sum of the revenue from physical examination of the hospital by the number of physical examination patient visits, where applicable.

(16) Renkang Hospital did not have a physical examination department during the Track Record Period. Physical examination of Renkang Hospital was handled by several clinical departments. Therefore, relevant cost for physical examination services was incurred across different clinical departments and it was not plausible to delineate the cost of revenue for physical examination and the relevant gross profit and gross profit margin.

(17) It represents the revenue of the sale of pharmaceuticals after the provision of the relevant inpatient hospital services/outpatient hospital services, where applicable.

During FY2020, the average spending per patient for our outpatient services increased from approximately RMB394.2 per visits for FY2019 to approximately RMB559.7 per visits for FY2020 which is mainly due to the decrease in outpatient visits from patients which generally have a relatively lower average spending per visit as a result of the outbreak of COVID-19, where patients with less severe illness such as cold and mild symptoms of flu are reluctant to visit hospitals.

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During FY2019, the utilisation rate of beds in operation decreased from approximately 83.4% for FY2018 to approximately 49.0% for FY2019 which is mainly due to our tightening up of our inpatient admission standards. For details, please refer to the paragraph headed “Financial information — Period to period comparison of results of operations — FY2019 compared to FY2018 — Gross profit and gross profit margin”.

During FY2020, the utilisation rate of beds in operation had further decreased to approximately 40.5%. Our Directors believe that the decrease is mainly due to the outbreak of COVID-19 where patients generally were reluctant to stay in hospitals unless they suffered from severe illness of which inpatient treatments were necessary.

The gross profit margin for the sale of pharmaceuticals for Renkang Hospital remained relatively stable at approximately 6.7%, 5.4% and 4.5%, respectively, for the three years ended 31 December 2020. Our Directors believe that according to the Group’s pricing policy, the gross profit margin for the sale of pharmaceuticals depends on various factors, including the payer sources of our patients, type of disease, treatment of the patient and the types of pharmaceuticals provided for our patients. Our Directors believe that Renkang Hospital generally has a relatively higher portion of Social Insurance Programmes Insured Patients as compared to the Group’s other hospital and thus generally led to a relatively lower gross profit margin from the sale of pharmaceuticals according to the Group’s pricing policy. As a result, the stable gross profit margin for Renkang Hospital is consistent with the proportion of sale of pharmaceuticals from Social Insurance Programmes Insured Patients remained stable at approximately 69.5%, 67.6% and 68.1% of the total sale of pharmaceuticals, respectively, for the three years ended 31 December 2020.

The following table set forth a breakdown of the revenue of Renkang Hospital based on our Group’s internal record by clinical departments during the Track Record Period:

FY2018 FY2019 FY2020 RMB’000 RMB’000 RMB’000

Obstetrics 2,088 1,894 1,807 Paediatrics 824 776 323 Gynaecology 8,219 6,387 4,285 Stomatology 4,930 5,943 7,379 Internal medicine 7,604 7,832 4,561 Physical examination (note 2) ––– General surgery 7,533 5,674 5,175 ENT 421 111 – Chinese medicine 1,361 1,266 2,051 Others (note 1) 3,600 5,760 5,760

36,580 35,643 31,341

Note:

1. Others mainly represents the income from the cooperation with the community healthcare centres.

2. Since Renkang Hospital does not have a physical examination department during the Track Record Period, physical examination services are provided to its patients are mainly conducted in its internal medicine department.

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The following table set forth a breakdown of the gross profit and gross profit margin of Renkang Hospital based on our Group’s internal record by clinical departments during the Track Record Period:

Gross Gross Gross profit profit profit FY2018 margin FY2019 margin FY2020 margin RMB’000 % RMB’000 % RMB’000 %

Obstetrics 983 47.1 574 30.3 674 37.3 Paediatrics (note 1) 112 13.6 114 14.7 (20) N/A Gynaecology 4,183 50.9 3,177 49.7 1,916 44.7 Stomatology 3,310 67.1 3,965 66.7 4,247 57.6 Internal medicine 1,420 18.7 1,020 13.0 719 15.8 Physical examination (note 3) –N/A–N/A–N/A General surgery 3,665 48.7 1,796 31.7 1,880 36.3 ENT (note 1) 231 54.9 2 1.4 – N/A Chinese medicine (note 1) (279) N/A (160) N/A 349 17.1 Others (note 2) 3,600 100.0 5,760 100.0 5,760 100.0

17,225 47.1 16,248 45.6 15,525 49.5

Note:

1. Our Directors believe that the gross loss recorded for such department is mainly due to the fact that the revenue generated from such department is unable to cover the fixed cost, such as staff cost, for the department.

2. Others mainly represents the income from the cooperation with the community healthcare centres.

3. Since Renkang Hospital does not have a physical examination department during the Track Record Period, physical examination services are provided to its patients are mainly conducted in its internal medicine department.

Renkang Hospital recorded gross profit margin of approximately 47.1%, 45.6% and 49.5%, respectively, for the three years ended 31 December 2020. Our gross profit margin for Renkang Hospital is mainly affected by the level of income recorded from the cooperation with the community healthcare centres where the costs for the outpatient related assistance and advice provided to the community healthcare centres are entirely reimbursed by the relevant community healthcare centres. Excluding such income from the community healthcare centres, Renkang Hospital would record gross profit margin of approximately 41.3%, 35.1% and 38.2%, respectively, for the three years ended 31 December 2020. In which the decrease in gross profit margin from approximately 41.3% for FY2018 to 35.1% for FY2019 is mainly due to the decrease in the gross profit margin recorded from Renkang Hospital’s general surgery department which was mainly a result of the decrease in the level of gross profit recorded for its inpatient services from such department as a result of the decrease in inpatient visits while inpatient services from such department generally have a higher gross profit margin since such department focuses on performing diagnosis and surgeries where relatively lower amount of cost for medical consumables and pharmaceuticals is needed for its inpatient services. The gross profit margin excluding the income from the community healthcare centres increased from approximately 35.1% for FY2019 to approximately 38.2% for FY2020 which was mainly due to increase in gross profit and gross profit margin contributed by Renkang Hospital’s general surgery department where such department generally has a higher gross profit margin as it focuses on performing diagnosis and surgeries where relatively lower amount of cost for medical consumables and pharmaceuticals is needed.

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Key recognitions

Since its commencement of operation in 2003, Renkang Hospital was awarded the following recognitions:

• a “designated” hospital under the social insurance programmes in Shenzhen (深圳市社會保險定點醫院) and accredited with AA+ in 2015 and 2017, and AAA in 2019;

• a member of Red Cross Society of China, Shenzhen Branch (深圳市紅十字會會員單位);

• an institution in providing technical services for maternal and child healthcare; and

• a most “Integrity Fair-Price Hospital” in the Shenzhen Medical Institution Brands List in 2006.

Cooperation with external institutions

Renkang Hospital is a cooperative unit with Guangzhou Huayin Inspection and Testing Centre (廣州華銀醫學檢驗中心) and Guangzhou Huayin Pathology Diagnosis Centre (廣州華銀病理診斷中心) affiliated with Southern Medical University (南方醫科大學). Through the collaboration with these institutions, Renkang Hospital strengthened its medical technology disciplines to provide support for its healthcare services.

2. Luogang Hospital

Luogang Hospital was established by Longgang Economic and commenced its operation in the PRC on 25 September 1994. Luogang Hospital was acquired by our Group in 2004. We adhere to the patients-oriented principle for quality controls and standards setting when operating Luogang Hospital as a Class I general hospital recognised by Shenzhen HFPC.

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Geographic location

Luogang Hospital is located at Buji Subdistrict (布吉街道), formerly known as Buji Town (布吉鎮) in Longgang District (龍崗區) in the middle of Shenzhen. Buji Subdistrict covered an area of approximately 11.6 sq.km. and had a population of approximately 0.5 million. There are 17 communities and dozens of industrial parks in Buji Subdistrict. The surrounding transportation is convenient with Guangshen Railway, Metro Lines 3 and 5, Lines 10 and 14 under construction, together with various expressways such as Jihe Expressway (機荷高速), Shuiguan Expressway (水官高速) and Qingping Expressway (清平高速). Shenzhen East Railway Station (深圳東站), situated in close proximity to Luogang Hospital, has been one of the major transportation hubs in Shenzhen since its operation commenced in December 2012. Luogang Hospital primarily serves the local communities in Buji Subdistrict (布吉街道).

Operational capacity

As at 31 December 2020, Luogang Hospital had 78 beds in operation, 134 full-time staff, 91 of which are healthcare professionals, and a leased GFA of 2,226.55 sq.m.. Luogang Hospital is licensed to deploy up to 99 beds for operation.

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The table below sets forth certain key information of Luogang Hospital for the periods indicated:

FY2018 FY2019 FY2020

Revenue (RMB’000) 40,745 39,920 37,224 Cost of revenue (RMB’000) 28,757 26,372 22,206 Gross profit (RMB’000) 11,988 13,548 15,018 Gross profit margin (%) 29.4 33.9 40.3

Inpatient hospital services Number of registered beds(1) 99 99 99 Number of beds in operation(2) 78 78 78 Effective service capacity(3) 28,470 28,470 28,548 Inpatient visits(4) 2,022 1,209 1,010 Inpatient bed-days (days)(5) 14,358 8,241 8,958 ALOS (days)(6) 7.1 6.8 8.9 Utilisation rate (%)(7) 50.4 28.9 31.4 Average spending per visit (RMB)(8) 6,222.4 8,278.1 9,724.0 – Social Insurance Programmes Insured Patients(13) 7,880.3 11,851.1 11,726.9 – Self-pay and Corporate Customers(14) 4,445.6 4,554.2 6,169.4 Revenue (RMB’000)(9) 12,582 10,008 9,821 Cost of revenue (RMB’000) 8,015 7,371 5,152 Gross profit (RMB’000) 4,566 2,637 4,669 Gross profit margin (%) 36.3 26.4 47.5

Outpatient hospital services Outpatient visits(10) 92,190 120,399 100,880 – Outpatient clinic visits 86,249 78,544 48,493 – Physical examination visits – Individual patients 2,407 2,646 5,850 – Group patients 3,534 39,209 46,537 Average spending per visit (RMB)(8) 305.5 248.4 271.6 – Social Insurance Programmes Insured Patients(13) 320.2 323.1 462.0 – Self-pay and Corporate Customers(14) 292.4 211.4 205.3 Revenue (RMB’000)(9) 28,163 29,912 27,403 Cost of revenue (RMB’000) 20,742 19,001 17,055 Gross profit (RMB’000) 7,421 10,911 10,348 Gross profit margin (%) 26.4 36.5 37.8

Surgical operations Number of day surgeries performed(11) 3,967 3,933 2,638 Number of inpatient surgeries performed(12) 743 537 428

Physical examination Average spending per visit (RMB)(15) 65.9 51.1 119.1 – Individual patients 74.5 103.5 141.9 – Group patients 60.0 47.6 116.3

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FY2018 FY2019 FY2020

Revenue (RMB’000) 391 2,139 6,240 – Individual patients 179 274 830 – Group patients 212 1,865 5,410

Gross profit (RMB’000)(16) 171 1,151 3,856 – Individual patients 90 211 564 – Group patients 81 940 3,292

Gross profit margin (%)(16) 43.5 53.8 61.8 – Individual patients 50.1 77.20 67.9 – Group patients 38.0 50.40 60.8

Sales of Pharmaceuticals Revenue (RMB’000)(17) 11,186 10,730 7,728 Cost of revenue (RMB’000) 10,228 10,018 7,312 Gross profit (RMB’000) 958 712 417 Gross profit margin (%) 8.6 6.6 5.4

Notes:

(1) It represents the number of beds that were registered in the hospital’s practising license as at the end of the relevant period.

(2) It represents the number of beds that are deployed for operation as at the end of the relevant period.

(4) It represents the total number of inpatients (with hospital stay) in the hospital.

(5) It represents the total number of bed-days of the hospital.

(6) It represents the average number of days an inpatient stays in the hospital.

(8) It represents the average spending per inpatient visit/outpatient visit calculated by dividing the sum of the revenue from inpatient hospital services/outpatient hospital services of the hospital and the sale of pharmaceuticals after provision of the relevant hospital services by the number of inpatient visits/outpatient visits of the hospital, where applicable.

(10) It represents the total number of outpatients (without hospital stay) in the hospital.

(11) It represents the number of day surgeries performed at the hospital.

(12) It represents the number of inpatient surgeries performed at the hospital.

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(16) The physical examination department for Luogang Hospital was only established in FY2018. Prior to the establishment of the physical examination department of Luogang Hospital, physical examination for Luogang Hospital was handled by several clinical departments. Therefore, relevant cost for physical examination services was incurred across different clinical departments and it was not plausible to delineate cost of revenue for physical examination and the relevant gross profit and gross profit margin for FY2017.

(17) It represents the revenue of the sale of pharmaceuticals after the provision of the relevant inpatient hospital services/outpatient hospital services, where applicable.

During FY2019, our average spending per patient for our inpatient hospital services increased from approximately RMB6,222.4 per visits for FY2018 to approximately RMB8,278.1 per visits for FY2019 which is mainly due to Luogang Hospital benefiting from the increase in reimbursement amount of inpatient visit under Shenzhen social insurance programmes, which led to an increase in the average spending per inpatient visits from insured patients from approximately RMB7,880.3 per inpatient visits for FY2018 to approximately RMB11,851 per inpatient visits for FY2019.

During FY2020, the average spending per patient for our outpatient services increased from approximately RMB248.4 per visits for FY2019 to approximately RMB271.6 per visits for FY2020 which is mainly due to the decrease in outpatient visits from patients which generally have a relatively lower average spending per visit as a result of the outbreak of COVID-19, for example, patients with illnesses which do not require urgent treatments such as cold and flu were reluctant to visit hospitals.

During FY2019, the number of physical examination visits increased from 5,941 patient visits for FY2018 to 41,855 patient visits for FY2019. Such increase was mainly driven by the increase in physical examination visits from group customers which increased from 3,534 patient visits for FY2018 to 39,209 patient visits for FY2019, amounting to approximately 59.5% and approximately 93.7% of the total number of physical examination visits for FY2018 and FY2019, respectively. Our Director’s believe that the increase in the number of group customers is mainly driven by the increase in corporate customers who engaged Luogang Hospital for orientation health check for their new employees and/or health check for it’s existing employees as a result of the increasing marketing effort of Luogang Hospital.

During FY2019, the average spending per physical examination visits decreased from approximately RMB65.9 per physical examination visit for FY2018 to approximately RMB51.1 per physical examination visits for FY2019. Such decrease was mainly due to the decrease in average spending per physical examination visits for our group customers which decreased from approximately RMB60.0 per physical examination visit for FY2018 to approximately RMB47.6 per physical examination visit for FY2019. Our Directors believe that such decrease was due to the increase in visits from corporate customers for the reasons mentioned above who generally participated in basic physical examination services, which generally includes our basic physical

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examination services such as blood pressure test, blood cell analysis, hepatic function test and the chest radiograph test, which were generally at a lower price.

During FY2020, Luogang Hospital began to carry out nucleic acid test for COVID-19 for its patients and thus (i) the magnitude of decrease in the number of physical examination visits was lower than other hospitals of our Group during such period; and (ii) its average spending per physical examination visit increased from approximately RMB51.1 per physical examination visit for FY2019 to approximately RMB119.1 per physical examination visit for FY2020 where the unit price for such nucleic acid test is generally higher than Luogang Hospital’s basic physical examination services.

During FY2019, the gross profit margin for our physical examination services increased from approximately 43.5% for FY2018 to approximately 53.8% for FY2019. Our Directors believe that such increase was mainly driven by the increase in the number of physical examination visits which enabled us to generate a relatively higher level of profitability and gross profit margin for our physical examination department after covering the fixed costs for such department, in particular the staff costs for the healthcare professionals.

During FY2020, the gross profit margin for our physical examination services increased from approximately 53.8% for FY2019 to approximately 61.8% for FY2020 which was mainly due to the increase in physical examination patients who carry out nucleic acid test for COVID-19 which are with a relatively higher gross profit margin.

During FY2019, the utilisation rate of beds in operation decreased from approximately 50.4% for FY2018 to approximately 28.9% for FY2019 which is mainly due to the tightening up of our inpatient admission standards. For details, please refer to the paragraph headed “Financial Information — Period to period comparison of results of operations — FY2019 compared to FY2018 — Gross profit and gross profit margin”.

During FY2020, the utilisation rate of beds in operation have increased to approximately 31.4%. Our Directors believe that the increase is mainly due to the combined effect of (i) the increase in patients after the first quarter of 2020 that have delayed medical treatment for their mild or chronic diseases due to the outbreak of COVID-19; and (ii) the decrease in patients in the first quarter of 2020 due to the outbreak of COVID-19 where patients generally were reluctant to stay in hospitals unless they suffered from severe illnesses of which inpatient treatments were necessary.

The gross profit margin for the sale of pharmaceuticals for Luogang Hospital remained relatively stable at approximately 8.6%, 6.6% and 5.4%, respectively, for the three years ended 31 December 2020. Our Directors believe that according to the Group’s pricing policy, the gross profit margin for the sale of pharmaceuticals depends on various factors, including the payer sources of our patients, type of disease, treatment of the patient and the types of pharmaceuticals provided for our patients. Our Directors believe that Luogang Hospital generally has a relatively higher portion of Social Insurance Programmes Insured Patients as compared to the Group’s other hospitals and thus generally led to a relatively lower gross profit margin from the sale of pharmaceuticals according to the Group’s pricing policy. As a result, the stable gross profit margin for Luogang Hospital is mainly due to the proportion of sale of pharmaceuticals from Social Insurance Programmes Insured Patients remained stable at approximately 57.7%, 59.2% and 58.5% of the total sale of pharmaceuticals, respectively, for the three years ended 31 December 2020.

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The following table set forth a breakdown of the revenue of Luogang Hospital based on our Group’s internal record by clinical departments during the Track Record Period:

FY2018 FY2019 FY2020 RMB’000 RMB’000 RMB’000

Obstetrics 3,665 2,038 135 Paediatrics 1,542 2,040 757 Gynaecology 5,051 5,382 5,390 Stomatology 5,803 6,376 6,013 Internal medicine 10,331 11,527 7,917 Physical examination 392 2,139 6,240 General surgery 11,091 8,005 9,100 ENT 1,534 1,461 1,218 Chinese medicine 1,336 952 454 Others – – –

40,745 39,920 37,224

The following table set forth a breakdown of the gross profit and gross profit margin of Luogang Hospital based on our Group’s internal record by clinical departments during the Track Record Period:

Gross Gross Gross profit profit profit FY2018 margin FY2019 margin FY2020 margin RMB’000 % RMB’000 % RMB’000 %

Obstetrics 1,439 39.3 513 25.2 4 2.9 Paediatrics 79 5.1 311 15.3 5 0.6 Gynaecology 2,099 41.6 2,591 48.1 2,199 40.8 Stomatology 3,456 59.6 4,079 64.0 3,447 57.3 Internal medicine 826 8.0 2,037 17.7 1,504 19.0 Physical examination 170 43.5 1,151 53.8 3,856 61.8 General surgery 3,457 31.2 2,528 31.6 3,812 41.9 ENT 653 42.5 673 46.1 556 45.7 Chinese medicine (Note 1) (191) N/A (335) N/A (365) N/A Others – N/A – N/A – N/A

11,988 29.4 13,548 33.9 15,018 40.3

Note:

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Luogang Hospital recorded gross profit margin of approximately 29.4%, 33.9% and 40.3%, respectively, for the three years ended 31 December 2020. Our gross profit margin for Luogang Hospital for FY2018 and FY2019 is mainly affected by its stomatology department where the diagnosis and treatment of common diseases in the oral cavity normally involved a relatively lower amount of cost for medical consumables and pharmaceutical, except dental implant services. As a result, our Directors believe that the fluctuation in the gross profit margin recorded for our stomatology department is largely dependent on actual services performed for such department according to our patient’s need.

Luogang Hospital’s gross profit margin increased from approximately 33.9% for FY2019 to approximately 40.3% for FY2020 which was mainly due to the increase in gross profit margin and gross profit from Luogang Hospital’s physical examination department which offered nucleic acid tests for COVID-19 where the number of physical examination visits increased from 41,855 patient visits for FY2019 to 52,387 patient visits for FY2020 which generated a relatively higher level of profitability and gross profit margin after covering the fixed costs for Luogang Hospital’s physical examination department, in particular the staff costs for the healthcare professionals.

Key recognitions

Luogang Hospital is recognised by Shenzhen Social Insurance Fund Administration (深圳市社會保險基金管理局)/Healthcare Security Bureau of Shenzhen Municipality (深圳市醫療保障局)asa “designated” hospital under the social insurance programmes in Shenzhen (深圳市社會保險定點醫院) and accredited with AA in 2019, and emergency centre in the national emergency hotline “120” network (120急救中心). Also, Luogang Hospital was awarded as a five-star “Integrity Private Hospital” (誠信民營醫院) accredited by the Shenzhen Association for Non-government Medical Institutions (深圳市非公立醫療機構行業協會) in 2018.

Cooperation with external institutions

Luogang Hospital joined Shenzhen Cardiovascular Specialty Discipline Association* (深圳市心血管專科聯盟) by entering into a cooperative agreement with Shenzhen Sun Yat-sen Cardiovascular Hospital* (深圳市孫逸仙心血管醫院), a public not-for-profit Class III Grade A specialty hospital in Shenzhen. To better provide the healthcare services for women and children, Luogang Hospital also entered into a memorandum of strategic cooperation in specialty with Shenzhen Luohu District Maternity & Child Healthcare Hospital* (深圳市羅湖區婦幼保健院), a public not-for-profit Class III maternity & child healthcare hospital in Shenzhen.

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3. Xuexiang Hospital

Xuexiang Hospital was established by Bolun Medical and having commenced operations in 2005 by our Group, Xuexiang Hospital offers multi-disciplinary general healthcare services to inpatients and outpatients in the local communities. Xuexiang Hospital is a Class I general hospital recognised by Shenzhen HFPC.

Geographic location

Prior to its relocation, Xuexiang Hospital was situated in Bantian Subdistrict (坂田街道), Longgang District (龍崗區), at the juncture of three districts in Shenzhen. There are 12 communities with resident population of approximately 0.6 million in the local area, accompanied by hundreds of high-tech enterprises in telecommunication and IT industries, some of which are famous industry leaders. Bantian Bus Station (坂田汽車站), as a transportation hub, connects to other districts in Shenzhen as well as cities in the proximity and offers added convenience to patients communing to Xuexiang Hospital. During the Track Record Period, most of the patients that Xuexiang Hospital received and treated were citizens residing in Bantian Subdistrict. The new site of Xuexiang Hospital is located at Jihua Subdistrict (吉華街道), which is approximately 5 km to the south-east of the old site, at the juncture of two districts in Shenzhen. There are seven communities with resident population of approximately 0.3 million in the local area, accompanied by hundreds of industrial and high-tech enterprises. The subdistrict had established transport network with three major horizontal and two vertical highway, including Nanping Expressway (南坪快速路) that connects Nanshan District (南山區) and Pingshan District (坪山區) in Shenzhen, as well as two subways with five stations within the subdistrict.

For details of the relocation of Xuexiang Hospital, please refer to the paragraph headed “Properties — Relocation of Xuexiang Hospital” below in this section.

Operational capacity

Prior to its relocation in late July 2020, Xuexiang Hospital had 99 beds in operation and a leased GFA of approximately 9,469.42 sq.m.. As at 31 December 2020, Xuexiang Hospital had 69 full time staff, 37 of which are healthcare professionals. Xuexiang Hospital resumed operation at its new site on 5 March 2021, and had 40 beds in operation and a leased GFA of approximately 4,474 sq.m..

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The table below sets forth certain key information of Xuexiang Hospital for the periods indicated:

FY2018 FY2019 FY2020

Revenue (RMB’000) 38,441 36,120 11,192 Cost of revenue (RMB’000) 24,974 23,347 7,477 Gross profit (RMB’000) 13,467 12,773 3,715 Gross profit margin (%) 35.0 35.4 33.2

Inpatient hospital services Number of registered beds(1) 99 99 99 Number of beds in operation(2) 99 99 99 Effective service capacity(3) 36,135 36,135 21,087 Inpatient visits(4) 1,907 1,137 254 Inpatient bed-days (days)(5) 15,252 7,783 1,653 ALOS (days)(6) 8.0 6.8 6.5 Utilisation rate (%)(7) 42.2 21.5 7.8 Average spending per visit (RMB)(8) 6,764.5 7,017.1 12,960.7 – Social Insurance Programmes Insured Patients(13) 8,017.4 9,235.5 13,377.5 – Self-pay and Corporate Customers (14) 5,561.8 5,712.8 12,765.5 Revenue (RMB’000)(9) 12,900 7,978 3,292 Cost of revenue (RMB’000) 6,245 4,985 1,838 Gross profit (RMB’000) 6,655 2,993 1,454 Gross profit margin (%) 52.6 37.5 44.2

Outpatient hospital services Outpatient visits(10) 101,066 107,797 31.313 – Outpatient clinic visits 76,557 67,381 18,334 – Physical examination visits – Individual patients 13,096 14,374 5,445 – Group patients 11,413 26,042 7,534 Average spending per visit (RMB)(8) 252.7 261.0 252.3 – Social Insurance Programmes Insured Patients(13) 306.8 313.1 361.2 – Self-pay and Corporate Customers(14) 234.4 246.4 224.9 Revenue (RMB’000)(9) 25,541 28,142 7,900 Cost of revenue (RMB’000) 18,729 18,362 5,638 Gross profit (RMB’000) 6,812 9,780 2,262 Gross profit margin (%) 26.7 34.7 28.6

Surgical operations Number of day surgeries performed(11) 3,546 2,929 996 Number of inpatient surgeries performed(12) 856 800 207

Physical Examination Average spending per visit (RMB)(15) 47.5 56.6 57.6 – Individual patients 48.7 50.7 59.1 – Group patients 46.2 59.8 56.5

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FY2018 FY2019 FY2020

Revenue (RMB’000) 1,164 2,286 747 – Individual patients 637 728 322 – Group patients 527 1,558 425

Gross profit (RMB’000) 711 1,549 466 – Individual patients 395 466 204 – Group patients 316 1,083 262

Gross profit margin (%) 61.1 67.8 62.3 – Individual patients 62.0 64.0 63.3 – Group patients 60.0 69.5 61.6

Sales of Pharmaceuticals Revenue (RMB’000)(16) 7,956 7,759 1,872 Cost of revenue (RMB’000) 6,585 6,656 1,684 Gross profit (RMB’000) 1,371 1,103 188 Gross profit margin (%) 17.2 14.2 10.0