Ebeauty Holdings (Cayman) Limited 悠可集團

DISCLAIMER STATEMENT

The Stock Exchange of Hong Kong Limited and the Securities and Futures Commission take no responsibility for the contents of this Post Hearing Information Pack, 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 Post Hearing Information Pack. Post Hearing Information Pack of

eBeauty Holdings (Cayman) Limited 悠可集團 (the “Company”) (incorporated in the Cayman Islands with limited liability) WARNING The publication of this Post Hearing Information Pack is required by The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) and the Securities and Futures Commission (the “SFC”) solely for the purpose of providing information to the public in Hong Kong. This Post Hearing Information Pack 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(s), advisers or members of the underwriting syndicate that:

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

(b) the publication of this document or supplemental, revised or replacement pages on the Stock Exchange’s website does not give rise to any obligation of the Company, its sponsor(s), 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) this document is not the final listing document and may be updated or revised by the Company from time to time in accordance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited;

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

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

(g) neither the Company nor any of its affiliates, advisers or members of the underwriting syndicate is offering, or is soliciting offers to buy, any securities in any jurisdiction through the publication of this document;

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

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

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

(k) the application to which this document relates has not been approved for listing and the Stock Exchange and the SFC may accept, return or reject the application for the subject public offering and/or listing.

If an offer or an invitation is made to the public in Hong Kong in due course, prospective investors are reminded to make their investment decisions solely based on the Company’s prospectus registered with the Registrar of Companies in Hong Kong, copies of which will be distributed to the public during the offer period. THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT IMPORTANT

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

eBeauty Holdings (Cayman) Limited 悠可集團 (incorporated in the Cayman Islands with limited liability)

[REDACTED] Number of [REDACTED] : [REDACTED] (subject to the under the [REDACTED] [REDACTED]) Number of [REDACTED] : [REDACTED] (subject to [REDACTED]) Number of [REDACTED] : [REDACTED] (subject to [REDACTED] and the [REDACTED]) Maximum [REDACTED] : [REDACTED] Nominal value : US$0.00002 per Share Stock code : [REDACTED]

Joint Sponsors, [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. [REDACTED]. The Securities and Futures Commission and the Registrar of Companies in Hong Kong take no responsibility for the contents of this document or any other document referred to above.

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Page

Important ...... [●]

Expected timetable ...... i

Contents ...... v

Summary ...... 1

Definitions ...... 27

Forward-looking statements ...... 39

Risk factors ...... 41

Waivers and exemptions ...... 94

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Information about this document and the [REDACTED] ...... 106

Directors and parties involved in the [REDACTED] ...... 110

Corporate information ...... 113

Industry overview ...... 115

History, reorganisation, and corporate structure ...... 130

Business ...... 155

Regulatory overview ...... 223

Relationship with our Controlling Shareholders ...... 242

Directors and senior management ...... 248

Substantial Shareholders ...... 260

Share capital ...... 262

Financial information ...... 266

Future plans and [REDACTED] ...... 350

[REDACTED] ...... 356

Structure of the [REDACTED] ...... 369

How to apply for [REDACTED] ...... 381

Appendix IA – Accountant’s report of the Group...... IA-1

Appendix IB – Accountant’s report of the financial information of Hangzhou UCO ...... IB-1

Appendix II – Unaudited pro forma financial information ...... II-1

Appendix III – Summary of the constitution of our Company and Cayman Islands company law ...... III-1

Appendix IV – Statutory and general information ...... IV-1

Appendix V – Documents delivered to the Registrar of Companies and available for inspection ...... V-1

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

WHO WE ARE

Rooted in serving premium beauty brands, powered by technologies and a consumer- centric mindset, we are the largest beauty brand e-commerce enablement service provider by GMV facilitated or generated in China, with a market share of 13.3% in 2020, according to the iResearch Report.

We advise and help execute our brand partners’ China online strategies while preserving their brand image, and deliver satisfactory sales and marketing results for them. We carefully assess each brand partner’s tonality, target consumers and strategic appetite. We then work with the brand partner to select from various influential e-commerce platforms, social media platforms and emerging channels to formulate and execute an effective marketing and operation plan most suitable for its go-to-market strategy.

Utilizing our beauty network and resources, we are also a leading third-party beauty brand incubation platform in China by GMV facilitated or generated in 2020, according to the iResearch Report. We define the GMV generated by our brand partners with the help of the services and solutions we provide under the service revenue method as the GMV facilitated by us, and the GMV transacted under the distribution revenue method as the GMV generated by us. Our beauty brand incubation platform identifies, selects and cultivates incubation brand partners, helping them to gain a competitive edge in navigating the beauty market in China.

We have a diverse and growing portfolio of brand partners across various origins and product categories. As of December 31, 2020, our brand partners included all of the top six beauty brand groups by revenues globally in 2019. As of the same date, we had a portfolio of 44 brand partners, including 33 enablement brand partners, such as Clarins, Clé de Peau Beauté, L’OCCITANE, Perfume GIVENCHY, Sisley and Valmont, and 11 incubation brand partners, such as Christian Louboutin, Penhaligon’s and Tatcha (in alphabetical order).

We launched our beauty brand e-commerce enablement service in the second quarter of 2010 to address a growing need from beauty brands to capture the then-nascent e-commerce opportunity and deliver a satisfying experience to consumers. Over the years, we have developed an understanding of how to deliver bespoke e-commerce experience to consumers in the beauty market, especially the premium beauty market. Our beauty brand e-commerce enablement service has evolved to include a full suite of services that complement our brand partners’ teams, including market entry, execution, fulfillment and after-sales services.

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We established our brand incubation platform through the aggregate of our extensive network, resource, know-hows and technologies in the beauty industry. Beauty brands benefit from our omni-channel e-commerce network, highly social and digitally native sales and marketing know-hows, data-driven brand and product selection capabilities, strong brand network, comprehensive and dedicated customer services, and innovative technological solutions.

MARKET OPPORTUNITIES AND CHALLENGES

China is the second largest beauty market in 2020 with total retail sales of RMB861.6 billion and a 5-year CAGR of 16.0% from 2015 to 2020, making it one of the most important markets for beauty brands, according to the iResearch Report. The per capita spending on the beauty market in China of US$49.5, however, is 4.7 times lower than that of the US in 2019, presenting massive growth potential, according to the same report.

China’s beauty ecosystem has developed rapidly with an evolving consumer base and increasing complexity in where consumers buy, what they buy, and how they engage with brands. At the same time, China’s beauty market has the highest online penetration rate of 45.5% in 2020, according to the iResearch Report, supported by a myriad of new tools for social media engagement and channels for brand storytelling. While beauty products tend to be highly standardized, the communication and consumer experience are nonetheless personalized and tailored to the individuals.

This dynamic and intricate ecosystem presents challenges to beauty brands, such as understanding consumers’ sophisticated and continuously changing preferences, navigating the highly competitive landscape and new consumer touchpoints, and delivering a bespoke beauty experience to each consumer, while adhering to brand ethos and image. These challenges mandate a unique approach to the beauty brand e-commerce enablement market, a subset of the brand e-commerce enablement market, that combines the art of understanding brand philosophies and consumers’ beauty needs, with the science of technology in e-commerce solutions.

OUR STRENGTHS

We believe that the following competitive strengths contribute to our success and differentiate us from our competitors.

• Market leader serving beauty brands in China;

• Established platform with full beauty value chain capabilities and resources;

• Trusted long-term strategic business partner for a diverse and growing portfolio of global beauty brands;

• Ability to deliver superior consumer experience;

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• Operating excellence and technology infrastructure driving scalability; and

• Experienced management team and vibrant young talent pool.

OUR GROWTH STRATEGIES

We intend to pursue the following strategies to achieve our mission and maintain our fast growth.

• Sustain and extend our blend of “Art and Science” capabilities to maintain leadership in the beauty market;

• Selectively expand our brand partner portfolio with high-growth potential names;

• Expand our capabilities along the beauty value chain and strengthen our platform ecosystem; and

• Enhance operating efficiencies through technology and innovation.

RISK FACTORS

Our operations and the [REDACTED] involve certain risks and uncertainties, which are set out in the section headed “Risk Factors.” You should read that section in its entirety carefully before you decide to [REDACTED] in our Shares. Some of the major risks we face include:

• Our success is substantially dependent upon the success of our existing and future brand partners.

• Failure to continue to attract and retain beauty brand partners, manage our relationship with them, or increase their stickiness to and reliance on our services and solutions could materially and adversely affect our business and prospects.

• We may be subject to restrictions, risks and challenges imposed by the operation of our beauty brand partners and their performance.

• Prospects of e-commerce market and beauty market in China are crucial to us. If these markets do not continue to grow, or do not grow as fast as we anticipate, the demand for our services and solutions could be adversely affected.

• Demand for our services and solutions may be adversely affected if the complexities and challenges of online sales faced by our brand partners diminish, or if our beauty brand partners increase their in-house capabilities or find alternatives to our services and solutions.

• We face risks and challenges in operating our brand incubation business line and taking new business initiatives in the beauty industry.

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• We have limited operating history since our Reorganisation, which makes it difficult to evaluate our business and prospects. We cannot guarantee that we will be able to maintain the growth rate we had in the past.

• We rely on a small number of beauty brand partners to generate a substantial portion of our revenues. A loss of any of these brand partners could negatively affect our business.

• If we fail to improve and enhance the functionality, performance, reliability, design, security and scalability of the online stores that we operate for our brand partners in a manner that responds to our brand partners’ evolving needs, our business may be adversely affected.

• We rely on the success of certain e-commerce platforms.

• We have granted share incentive awards under our Share Schemes, which may result in increased share-based compensation expenses.

• Impairment of our intangible assets could negatively affect our financial condition and results of operations.

• Our failure to comply with the agreements relating to our outstanding indebtedness, including those for which we have pledged shares of some of our subsidiaries, could result in an event of default that could materially and adversely affect our results of operations and our financial condition.

KEY ASPECTS OF OUR BUSINESS

Our Business Model

We provide comprehensive solutions to our brand partners for the purposes of facilitating their branding and marketing strategies and increasing their sales. We serve our brand partners under two business lines: e-commerce enablement and brand incubation. For enablement brand partners, we provide them with solutions and services to fulfil their go-to-market strategies, including marketing strategy advisory, digital marketing execution, omni-channel operations, customer services and order fulfillment. For incubation brand partners, we offer not only all of the services and solutions available for enablement brand partners, but also market discovery and entry solutions. Given our brand incubation business line mostly adopts the distribution revenue method, as we expand our brand incubation business line, we may bear increasing inventory risks. See “Risk Factors – Risks Related to Our Business and Industry – If we fail to manage our accounts receivable and inventories effectively, our results of operations, financial condition and liquidity may be materially and adversely affected.”

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Our Revenue Methods

We generate revenues under two different methods: (i) service method, where we charge our brand partners service fee primarily based on GMV or other variable factors such as number of orders fulfilled when providing services to our brand partners; and (ii) distribution method, where we generate revenue from selling beauty products of our brand partners to e-commerce platforms such as JD.com and Vipshop and other distributors for them to resell to end consumers, or sell to end consumers via official stores that we operate on e-commerce platforms, such as Tmall.

Our Key Operating Metrics

The table below sets forth our key operating metrics during the Track Record Period. As used in the following table and elsewhere in this [REDACTED], unless otherwise indicated, our operating data are prepared and presented on a combined basis, taking into account the results of operations of both the Group and our Predecessor Entity. We include such information because we believe that it will give the [REDACTED] a more meaningful way to analyze the results of our performance in the Track Record Period.

As of December 31, 2018 2019 2020

Number of Brand Partners by Business Line

E-commerce Enablement 25 36 33 Brand Incubation – 7 11

Total Number of Brand Partners 25 43 44

For the year ended December 31, GMV (RMB in million) 2018 2019 2020

E-commerce Enablement Service Method 3,547 9,149 15,454 Distribution Method 1,050 770 428 Subtotal – E-commerce Enablement 4,597 9,919 15,881

Brand Incubation Service Method – 8 110 Distribution Method – 36 352 Subtotal – Brand Incubation – 45 462

Total GMV 4,597 9,964 16,343

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The number of our brand partners generally increased during the Track Record Period. The number of our e-commerce enablement partners slightly decreased from 2019 to 2020, partially as we dropped certain brand partners who had relatively small contribution to our GMV. Our GMV, and in turn our revenue, generally increased during the Track Record Period as our business expanded. During the Track Record Period, the GMV and revenue from our distribution method decreased primarily due to the termination of cooperation with several brands under certain beauty group attributable to such beauty group’s adjustments in its e-commerce operations to start to mainly rely on its in-house e-commerce operation. See “Risk Factors – Risks Related to our Business and Industry – Our business may be adversely affected if our existing brand partners or other beauty brands operate their e-commerce operations in-house or engage alternative services and solutions” and “Business – Our Brand Partners.”

Our Key Financial Performance

The table below sets forth a breakdown of revenue by revenue method of Hangzhou UCO Cosmetics Co., Ltd. (our Predecessor Entity) and our Group for the Track Record Period. For details of our Predecessor Entity, see “– Our History” and “– Summary of Historical Financial Information – Presentation of Accountants’ Reports.”

Our Group For the Period from January 7, For the Year Our Predecessor Entity 2019 to Ended For the Year Ended December 31, December 31, December 31, 2018 2019 2020 2019 2020

Revenue (RMB in thousand) Service Method 419,163 714,712 702,384 727,906 1,044,651 Distribution Method 745,377 517,511 466,183 351,477 614,895

Total Revenue 1,164,540 1,232,223 1,168,567 1,079,383 1,659,546

From the period from January 7, 2019 to December 31, 2019 to the year ended December 31, 2020, the Groups’ revenue from distribution method grew from RMB351.5 million to RMB614.9 million, while revenue from service method grew from RMB727.9 million to RMB1,044.7 million. However, a period-to-period analysis for the results of our Group is of limited utility. The Group did not have significant operations prior to April 15, 2019, and the results of our Predecessor Entity are only consolidated into the Group’s for the period after April 15, 2019. The results of our Group for the period from January 7, 2019 to December 31, 2019 are also impacted by the acquisition of the Acquired Entities, further reducing the comparability of the results of the year ended December 31, 2020 and the period from January 7, 2019 to December 31, 2019.

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Revenue generated under service method by our Predecessor Entity increased by 70.5% from RMB419.2 million in 2018 to RMB714.7 million in 2019, primarily due to an increase in the GMV facilitated by our Predecessor Entity for its brand partners and expansion in its brand partner base. Revenue generated from service method by our Predecessor Entity decreased by 1.7% from RMB714.7 million in 2019 to RMB702.4 million in 2020, primarily due to an adjustment in the service offerings that we provided to certain beauty group, partially offset by our organic business growth for other beauty brands. Revenue generated under the distribution method by our Predecessor Entity decreased from RMB745.4 million in 2018 to RMB517.5 million in 2019 and further to RMB466.2 million in 2020, primarily due to the termination of cooperation with two beauty brands under a same beauty group for distribution to Tmall in April 2019 attributable to such beauty group’s adjustments in its e-commerce operations to start to mainly rely on its in-house e-commerce operation.

The table below sets forth a breakdown of gross profit and gross profit margin of our Predecessor Entity and our Group by revenue method for the Track Record Period.

Our Group For the Period from For the Our Predecessor Entity January 7, 2019 Year Ended For the Year Ended December 31, to December 31, December 31, 2018 2019 2020 2019 2020 RMB % RMB % RMB % RMB % RMB % (in thousands, except percentages)

Gross Profit Service 247,158 59.0 408,944 57.2 407,549 58.0 425,291 58.4 621,093 59.5 Distribution 142,060 19.1 106,352 20.6 160,911 34.5 74,438 21.2 219,366 35.7 Total 389,218 33.4 515,296 41.8 568,460 48.6 499,729 46.3 840,459 50.6

Notwithstanding the decrease in revenue generated under the distribution method of our Predecessor Entity, our Predecessor Entity recorded increasing gross profit and gross profit margin during the Track Record Period, primarily due to the increase in revenue generated from service method as a percentage of the total revenue, and to a lesser extent, the growth in the brand incubation business line. Both service method and brand incubation business line tend to have higher gross profit margin, see the immediately following paragraph, “Financial Information – Description of Major Components of Our Results Of Operations – Gross Profit Margin,” “Financial Information – Period-to-Period Comparison of Results of Operations – Our Predecessor Entity” for more detailed discussion.

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During the Track Record Period, the gross profit margin of service method tends to be higher than that of distribution method primarily due to differences in cost of revenue components. Specifically, cost of revenue under the distribution method include the cost of inventories sold, which accounted for the largest portion of our cost of revenues during the Track Record Period; while cost of revenue under the service method primarily consists of the direct costs relating to rendering services, such as employee benefits expenses, advertising promotion fees and fulfilment cost.

The table below sets forth a breakdown of our revenues generated from our cooperation with our top five brand group partners in terms of revenue contribution for each year during the Track Record Period.

For the year ended December 31, 2018 As a Revenue Percentage Generated of Total from Brand Revenues for Brand Group Partner Group Partner the Year (RMB in thousand)

Supplier A (Distribution) 618,800 53.1% Customer A (Service) 249,948 21.5% Customer D (Service) 59,456 5.1% Supplier C (Distribution) 46,653 4.0% Supplier C (Service) 7,887 0.7% Supplier C (Distribution + Service) 54,540 4.7% Customer E (Service) 44,752 3.8%

Total 1,027,496 88.2%

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For the year ended December 31, 2019 As a Revenue Percentage Generated of Total from Brand Revenues for Brand Group Partner Group Partner the Year (RMB in thousand)

Customer A (Distribution) 51,877 3.6% Customer A (Service) 453,081 31.7% Customer A (Distribution + Service) 504,958 35.3% Supplier A (Distribution) 421,975 29.5% Customer D (Distribution) 9,383 0.7% Customer D (Service) 74,095 5.1% Customer D (Distribution + Service) 83,478 5.8% Customer E (Service) 72,001 5.0% Customer F (Service) 70,686 4.9%

Total 1,153,098 80.5%

For the year ended December 31, 2020 As a Revenue Percentage Generated of Total from Brand Revenues for Brand Group Partner Group Partner the Year (RMB in thousand)

Customer A (Distribution) 46,566 2.8% Customer A (Service) 286,519 17.3% Customer A (Distribution + Service) 333,085 20.1% Supplier F (Distribution) 207,902 12.5% Customer F (Service) 175,184 10.6% Supplier A (Distribution) 136,422 8.2% Customer E (Service) 102,819 6.2%

Total 955,412 57.6%

For those that only show distribution or service method, we do not generate any revenue from them under the other revenue method.

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OUR CUSTOMERS

OUR SUPPLIERS

OUR HISTORY

Our Company was incorporated as an exempted company with limited liability under the laws of the Cayman Islands on January 7, 2019 with CITIC Capital Beauty as the 100% shareholder as at the incorporation date. During the period from January 7, 2019 to April 15, 2019 and prior to the acquisition of Hangzhou UCO, the Group had no significant operations.

On March 18, 2019, pursuant to a share subscription agreement dated March 18, 2019 and amended on September 16, 2019 entered into among our Company and each of the Management SPVs, our Company allotted 45,985,401 Shares in total to the Management SPVs, after which our Company was held by each of CITIC Capital Beauty and the Management SPVs as to 68.5% and 31.5%, respectively.

Establishment and acquisition of Hangzhou UCO, our Predecessor Entity

Establishment and development of Hangzhou UCO

At the time of its establishment on July 24, 2012, Hangzhou UCO, was owned as to 60% by Hangzhou e-Cosmetics Internet Technology Co., Ltd. (杭州網妝網絡科技有限公司) (“Hangzhou e-Cosmetics”), and 40% by Marco Polo E-Commerce (Holding) Limited (“Marco Polo Holding”). Mr. CHANG Che Hang owned 76% of the issued share capital of Marco Polo Holding, and has been the controlling shareholder and a director of Marco Polo Holding since its incorporation in 2010. Mr. Chang has also been an director of Hangzhou UCO since its establishment, during which he had been the general manager, and vice chairman between its establishment and December 2012, the chairman between December 2012 and April 2019, and has been acting as an executive director and general manager since April 2019.

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Between 2014 and 2017, through a series of transactions, Qingdao Kingking acquired 5.66% of the equity interest in Hangzhou UCO in March 2014, which was increased to 37% following a capital increase in Hangzhou UCO. It further acquired 63% of the equity interest in Hangzhou UCO in May 2017, after which Hangzhou UCO became a wholly-owned subsidiary of Qingdao Kingking.

Acquisition of Hangzhou UCO

On February 25, 2019, Qingdao Kingking, the then 100% equity owner of Hangzhou UCO, our Predecessor Entity, entered into a share sale agreement with Hangzhou UCO, Hangzhou Youmei Cosmetics Technology Development Co., Ltd. (杭州悠美妝科技開發有限公司)(“Hangzhou Youmei Cosmetics”) (which was a wholly-owned subsidiary of our Company at the time and was subsequently merged into Hangzhou UCO), Mr. Chang, and CITIC Capital Beauty, pursuant to which Qingdao Kingking agreed to transfer 100% of the equity interest in Hangzhou UCO to Hangzhou Youmei Cosmetics at the total consideration of RMB1.4 billion. The equity transfer was completed on April 15, 2019, after which Hangzhou UCO became an indirect wholly-owned subsidiary of our Company and its results were consolidated into those of our Group.

Acquisition of Youyue and Niwang

On April 30, 2019, our Company acquired Youyue and Niwang, two e-commerce enablement service providers, or the Acquired Entities, together with their respective businesses. The acquisition of Hangzhou UCO, Youyue and Niwang were funded by cash injection by our Company’s management and the Controlling Shareholders, a shareholder’s loan taken out from CITIC Capital Beauty and a bank loan. In December 2019, for the sake of mutual interests, CITIC Capital Beauty waived the shareholder’s loan in full. After the acquisition of Youyue and Niwang, the Company was held by each of CITIC Capital Beauty, Mr. Chang (through Innovative Beauty Venture Ltd., which is beneficially controlled by Mr. Chang and is one of the Management SPVs) and the other Management SPVs (excluding Mr. Chang) as to 68.5%, 20.79% and 10.71%, respectively.

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Our Founder and Shareholding Structure

We have been led by our founder, Mr. Chang, who has over 20 years of sales, marketing and general management experience in the information technology and internet industries. Mr. Chang has been integral to the success of our Company and has been materially responsible for the founding and growth of the our business. He has driven the strategic and operational development of our Company from its beginnings to a market-leading e-commerce company, and has helped establish the reputation of our Company in the industry.

Immediately prior to the completion of the [REDACTED], our Company is held as to 43.98% by CITIC Capital Beauty, 19.02% by Mr. Chang (through Innovative Beauty Venture Ltd.), 9.34% by the other Management SPVs (excluding Mr. Chang) and 27.66% by the Pre-[REDACTED] Investors. For further details on the corporate history and shareholding structure of our Group, please see “History, Reorganisation and Corporate Structure”.

PRE-[REDACTED] INVESTORS

We have entered into a round of financing and entered into agreements with our Pre-[REDACTED] Investors. Our base of Pre-[REDACTED] Investors consists of private equity funds, investment holding companies and strategic investors. For further details, see “History, Development and Corporate Structure – Pre-[REDACTED] Investments”.

OUR CONTROLLING SHAREHOLDERS

Immediately after completion of the [REDACTED] (assuming the [REDACTED]isnot exercised and no Shares are issued under the Share Schemes), CITIC Capital Group will be interested in and will control 334,840,510 Shares, being approximately [REDACTED]% of our issued Shares. Therefore, CITIC Capital Group will be our Controlling Shareholders. Apart from their interest in our Company, our Controlling Shareholders do not currently have any interest in a business that competes or is likely to compete, either directly or indirectly, with our Group’s business. [REDACTED]

SUMMARY OF HISTORICAL FINANCIAL INFORMATION

Presentation of Accountants’ Reports

The presentation of our financial information in this document is impacted by the acquisitions that have occurred during the Track Record Period.

• Our Predecessor Entity, through which the principal business of the Group was conducted during the Track Record Period, came under our control on April 15, 2019. Therefore, the financial information of our Predecessor Entity for the year ended December 31, 2018, 2019 and 2020 and the period from January 1, 2019 to April 15, 2019 is prepared and set forth in the financial statements in Appendix IB to this document.

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• Our Acquired Entities came under our control on April 30, 2019. In accordance with the requirement of Rule 4.05A of the Listing Rules, the pre-acquisition financial statements of Youyue and Niwang for the year ended December 31, 2018 and the period from January 1, 2019 to April 30, 2019 were set out as notes to the Accountants’ Report of our Group set forth in Appendix IA to this document.

This document therefore includes two Accountants’ Reports set forth as Appendices IA and IB, respectively. In particular:

• Appendix IA sets forth the consolidated financial statements of the Group, together with the accompanying notes, for the period from January 7, 2019, the date of the incorporation of the Company, to December 31, 2019 and for the year ended December 31, 2020, which includes the financial results of (i) the Predecessor Entity since its acquisition by the Company on April 15, 2019, and (ii) the Acquired Entities since their acquisition by the Company on April 30, 2019. Furthermore, set out as notes to the Accountants’ Report are the financial statements of Youyue and Niwang for the year ended December 31, 2018 and the period from January 1, 2019 to April 30, 2019; and

• Appendix IB sets forth the consolidated financial statements of our Predecessor Entity, together with the accompanying notes, for the years ended December 31, 2018, 2019 and 2020 and the period from January 1, 2019 to April 15, 2019, respectively.

The following tables summarize our consolidated financial results during the Track Record Period and should be read in conjunction with the section headed “Financial Information” of this document and the Accountants’ Reports set out in Appendix IA and Appendix IB to this document, together with the respective accompanying notes.

Summary Consolidated Statement of Comprehensive Income

The Group

The following table sets forth a summary of our Group’s consolidated statements of comprehensive income for the period from January 7, 2019, the date of the incorporation of the Company, to December 31, 2019, and the year ended December 31, 2020. Our Group’s revenue increased from RMB1,079.4 million in the 2019 Period to RMB1,659.5 million for the year ended December 31, 2020, mainly driven by the expansion of our business. Our Group’s cost of revenue, gross profit and profit for the corresponding periods also increased in line with revenue. However, period-to-period analysis for the results of our Group is of limited utility. The Group did not have significant operations prior to April 15, 2019, and the results of our Predecessor Entity are only consolidated into our Group’s for the period after April 15, 2019.

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The results of our Group for the 2019 Period are also impacted by the acquisition of the Acquired Entities, further reducing the comparability of the results of the year ended December 31, 2020 and the 2019 Period. For the Period from For the January 7, 2019 to Year Ended December 31, 2019 December 31, 2020 (RMB in thousands)

Revenue 1,079,383 1,659,546 Service 727,906 1,044,652 Distribution 351,477 614,895 Cost of revenue (579,654) (819,087) Service (302,615) (423,558) Distribution (277,039) (395,529)

Gross profit 499,729 840,459

Selling and distribution expenses (86,851) (200,617) General and administrative expenses (121,642) (187,375) Research and development expenses (14,051) (28,116) (Net impairment losses)/reversal of impairment losses on financial assets and contract assets (3,565) 2,582 Other income 7,925 37,070 Other expense – (25,287) Other gains – net 5,797 13,417

Operating profit 287,342 452,133

Finance income 398 2,145 Finance costs (22,041) (31,125) Finance costs – net (21,643) (28,980) Share of net profit of associates and joint ventures accounted for using the equity method (35) 1,318

Profit before income tax 265,664 424,471

Income tax expenses (61,813) (99,708) Profit for the period/year 203,851 324,763

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Our Predecessor Entity

The following table sets forth a summary of our Predecessor Entity’s consolidated statement of comprehensive income for the year ended December 31, 2018, 2019 and 2020 and the period from January 1, 2019 to April 15, 2019. For the Period from For the January 1, For the For the Year Ended 2019 to Year Ended Year Ended December 31, April 15, December 31, December 31, 2018 2019 2019 2020 (RMB in thousands)

Revenue 1,164,540 351,895 1,232,223 1,168,567 Service 419,163 157,496 714,712 702,384 Distribution 745,377 194,399 517,511 466,183 Cost of revenue (775,322) (211,261) (716,927) (600,107) Service (172,005) (55,655) (305,768) (294,835) Distribution (603,317) (155,606) (411,159) (305,272)

Gross profit 389,218 140,634 515,296 568,460

Selling and distribution expenses (87,421) (24,819) (65,857) (108,855) General and administrative expenses (48,509) (22,795) (109,843) (144,173) Research and development expenses (10,206) (4,335) (18,386) (28,116) (Net impairment losses)/reversal of impairment losses on financial assets and contract assets (934) 196 (2,449) 2,491 Other income 6,869 1,098 8,332 14,511 Other gains (loss) – net 3,580 409 4,297 3,510

Operating profit 252,597 90,388 331,391 307,828

Finance income 334 54 217 1,765 Finance costs (1,127) (196) (938) (14,619) Finance costs – net (793) (142) (721) 12,854 Share of net profit/(loss) of joint ventures accounted for using the equity method 30 12 (37) –

Profit before income tax 251,834 90,258 330,633 294,974

Income tax expenses (44,723) (15,894) (63,750) (62,987)

Profit for the year/period 207,111 74,364 266,883 231,987

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NON-IFRS MEASURE

To supplement our consolidated financial statements, which are presented in accordance with IFRSs, we also use adjusted profit (non-IFRS measure) as an additional financial measure, which is not required by, or presented in accordance with, IFRSs. We believe adjusted profit (non-IFRS measure) facilitates comparisons of operating performance from period to period and company to company by eliminating potential impacts of items which our management considers non-indicative of our operating performance.

We believe adjusted profit (non-IFRS measure) provides useful information to [REDACTED] and others in understanding and evaluating our results of operations in the same manner as they help our management. However, our presentation of adjusted profit (non-IFRS measure) may not be comparable to similarly titled measure presented by other companies. The use of adjusted profit (non-IFRS measure) has limitations as an analytical tool, and you should not consider it in isolation from, or as a substitute for an analysis of, our results of operations or financial condition as reported under IFRSs.

Adjusted profit (non-IFRS measure) for the year/period represents profit of the year/period excluding share-based compensation expenses and one-off listing expenses. We exclude these items because they are not expected to result in future cash payments that are recurring in nature and they are neither operating in nature nor indicative of our core operating results and business outlook. We account for the compensation cost from share-based payment transactions with employees based on the grant-date fair value of the equity instrument issued by our Company. The grant-date fair value of the award is recognized as compensation expense, net of forfeitures, over the period during which an employee is required to provide service in exchange for the award, which is generally the vesting period. Share-based payments are non-cash in nature and do not result in cash outflow, and the adjustment has been consistently made during the Track Record Period, which complies with GL103-19. In particular, because of varying valuation methodologies and assumptions and the variety of award types that different companies can use, we believe that excluding share-based payments allows [REDACTED] to make more meaningful comparisons between our operating results and those of other companies. Accordingly, we believe that excluding share-based payments provides [REDACTED] and management with greater visibility to the underlying performance of our business operations, facilitates comparison of our results with other periods, and may also facilitate comparison with the results of other companies in our industry.

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The following tables reconcile our adjusted profit (non-IFRS measure) of our Predecessor Entity and our Group for the indicated year/period, presented to the most directly comparable financial measure calculated and presented in accordance with IFRSs, which is profit for the year/period:

Our Predecessor Our Predecessor Entity Entity Our Group Our Group For the Period For the For the Period from January 7, For the Year Ended from January 1, 2019 to Year Ended December 31, 2019 to December 31, December 31, 2018 April 15, 2019 2019 2020 (RMB in thousands)

Reconciliation of profit for the year to adjusted profit (non-IFRS measure) for the year Profit for the year/period 207,111 74,364 203,851 324,763 Share-based compensation expenses – – 35,321 94,270 One-off Listing Expenses – – – 5,163

Adjusted profit (non-IFRS measure) for the year/period 207,111 74,364 239,172 424,196

Summary Consolidated Statement of Financial Position

The following table sets forth our summary consolidated statements of financial position as of the dates indicated: Our Predecessor Entity Our Group As of December 31, As of December 31, 2018 2019 2020 (RMB in thousands)

Total non-current assets 32,385 1,092,364 1,072,099 Total current assets 747,788 1,188,095 1,584,848

Total assets 780,173 2,280,459 2,656,947

Total non-current liabilities 55 596,952 145,128 Total current liabilities 376,321 364,579 774,534

Total liabilities 376,376 961,531 919,662

Share capital – 98 98 Paid in capital 40,000 – – Treasury share – (36,997) (36,997) Share premium – 238,092 238,092 Reserves 143,639 913,884 1,007,478 Retained earnings 220,158 203,851 528,614 Non-controlling interest – – – Total equity 403,797 1,318,928 1,737,285

Total equity and liabilities 780,173 2,280,459 2,656,947

Net current assets 371,467 823,516 810,314

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Our total non-current asset increased from RMB32.4 million as of December 31, 2018 to RMB1,092.4 million in December 31, 2019, primarily due to the increase in intangible assets from RMB16.7 million as of December 31, 2018 to RMB1,049.8 million as of December 31, 2019, which was primarily due to the goodwill as a result of the acquisition of our Predecessor Entity and Acquired Entities, as well as the customer relationship, distribution network, corporate brand and technology we obtained. Our total non-current liabilities increased from RMB55 thousand as of December 31, 2018 to RMB597.0 million as of December 31, 2019, and decreased to RMB145.1 million as of December 31, 2020, primarily as our Group recorded non-current borrowings of RMB442.2 million as of December 31, 2019 and nil as of December 31, 2020. See “Financial Information – Discussion of Selected Items from the Consolidated Statements of Financial Position.”

Summary Consolidated Cash Flow

The following sets forth the cash flow information of our Predecessor Entity and our Group for the periods indicated:

Our Predecessor Our Predecessor Entity Entity Our Group Our Group For the Period For the Year For the Period from January 7, For the Ended from January 1, 2019 to Year Ended December 31, 2019 to December 31, December 31, 2018 April 15, 2019 2019 2020 (RMB in thousands)

Net cash generated from operating activities 104,837 195,383 47,585 453,808 Net cash used in investing activities (134,062) (59,450) (1,421,983) (260,855) Net cash (used in) generated from financing activities (43,226) (141,448) 1,514,588 (200,666) Net change in cash and cash equivalents (72,451) (5,515) 140,190 (7,713) Cash and cash equivalents at the beginning of the year/period 112,860 41,022 – 140,993 Effect of foreign exchange on cash and cash equivalents 613 (274) 803 (2,139) Cash and cash equivalents at the end of the year/period 41,022 35,233 140,993 131,141

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KEY FINANCIAL RATIOS

Both of our net profit margin and adjusted net profit margin (non-IFRS measure) increased during the Track Record Period, primarily due to the increase in revenue generated from service method as a percentage of the total revenue, as the service method tend to have higher gross profit margin, as compared to the distribution method.

The following table sets forth the key financial ratios of our Group for the periods indicated or as of the dates indicated: For the For the Period from Year Ended January 7, 2019 to December 31, December 31, 2019 2020

Operating profit margin (%)(1) 26.6 27.2 Net profit margin (%)(2) 18.9 19.6 Adjusted net profit margin (non-IFRS measure)(%)(3) 22.2 25.6

As of December 31, 2019 2020

Current ratio(%)(4) 325.9 204.6 Debt to equity ratio(%)(5) 38.7 23.6

Notes:

(1) Represents operating profit for the year/period as a percentage of total revenue of such year/period.

(2) Represents net profit for the year/period as a percentage of total revenue of such year/period.

(3) Represents adjusted net profit (non-IFRS measure) for the year/period as a percentage of total revenue of such year/period. For details of the adjusted net profit (non-IFRS measure) of the year/period, see “– Non-IFRS Measure.”

(4) Represents total current assets as a percentage of total current liabilities as of the end of the year.

(5) Represents total borrowing as a percentage of the total equity as of the end of each year.

DIVIDENDS AND DIVIDEND POLICY

During the Track Record Period, no dividends have been paid or declared by our Company.

On April 12, 2018, our Predecessor Entity declared a cash dividend of RMB70.0 million to its shareholders, which has been fully paid in April 2018. On September 30, 2018, our Predecessor Entity declared a cash dividend of RMB200.0 million to its shareholders, which has been paid in March and April 2019.

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Before the Listing, we plan to declare a special dividend in the aggregate amount of US$160 million to the then existing shareholders of our Company on or around [June 24], 2021 and make payment on or around [July 9], 2021. US$120 million of such special dividend is expected to be funded by a term loan facility obtained from a syndicate of banks, with the remaining US$40 million to be funded by the Group’s cash on hand. For details of the term loan facility, see “– Recent Developments.”

We are a holding company incorporated under the laws of the Cayman Islands. Any future determination to pay dividends will be made at the discretion of our Directors and may be based on a number of factors, including the availability of dividends received from our subsidiaries, our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that our Directors may deem relevant. PRC laws require that dividends can be paid only out of the profit for the year of the PRC entities calculated according to PRC accounting principles. PRC laws also require foreign-invested enterprises to set aside at least 10% of its after-tax profits, if any, to fund its statutory reserves unless these reserves have reached 50% of the registered capital of the enterprises. These reserves are not distributable as cash dividends. Dividend distribution to our shareholders is recognized as a liability in the period in which the dividends are approved by our shareholders or Directors, where appropriate. [REDACTED] should not purchase our shares with the expectation of receiving cash dividends. We do not anticipate paying any cash dividends to the [REDACTED]inthe[REDACTED] in the foreseeable future.

[REDACTED]

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RECENT DEVELOPMENTS

On February 28, 2021, Hangzhou UCO entered into an asset purchase agreement (“Asset Purchase Agreement”) with certain shareholders of Shanghai Protime Internet Technology Co., Ltd. (上海點正互聯網科技有限公司) (“Protime”) to purchase its e-marketing and data analytics business for a total consideration of RMB63,000,000 in cash. Pursuant to the Asset Purchase Agreement, Hangzhou UCO has the right to acquire 100% of the equity interest in Protime, with such right being exercisable before December 31, 2021.

As of the Latest Practicable Date, we granted 2,282,932 restricted stock units of our Company to the members of management of Protime, who became employees of our Company or its subsidiary after the acquisition, in February 2021. We had also conditionally granted options to 516 participants under the 2019 ESOP between July 1, 2019 and March 20, 2021 (both days inclusive). As a result, we have incurred significant amount of share-based compensation expenses in the first quarter of 2021, and expect to continue to do so in 2021. Due to the expected significant increase in share-based expenses, our profit of the year ended December 31, 2021 may be significantly lower than that in the Track Record Period. See “Statutory and general information – Share Schemes” in Appendix IV.

On June 3, 2021, we entered into a term loan facility agreement with a principal amount of US$125 million (the “Facility Agreement”) with a syndicate of banks including The Hongkong and Shanghai Banking Corporation Limited primarily to finance the payment of the special dividend we plan to declare before the Listing. Subject to certain customary conditions precedent, the term loan is available for drawdown from the date of the Facility Agreement to and including the earlier of (i) the date falling six months after the date of the Facility Agreement, and the (ii) the date on which the Listing occurs. Once drawn, the tenor of the loan is 60 months after the initial drawdown date, with an interest rate of the applicable London Interbank Offered Rate plus a certain margin for the interest period. Pursuant to the Facility Agreement, a mandatory prepayment in an amount of not less than the lower of (i) [REDACTED]% of the [REDACTED] from the [REDACTED], and (ii) 50% of the total amount drawn under the Facility Agreement, is required to be made upon the Listing. We may make any voluntary prepayment for the whole or any part of the term loan. The Facility Agreement contains a set of covenants that are customary for commercial bank loans and requires us to meet certain financial ratio requirements such as maximum net debt-to-adjusted EBITDA ratio and minimum adjusted EBITDA-to-net cash interest costs ratio, calculated based on the pre-agreed formula specified therein. We do not expect the expected significant increase in share-based expenses described in the preceding paragraph will trigger the breach of any covenants or the financial ratio requirements. The term loan provides for multiple drawdowns which would provide flexibility for us to fund the payment of the special dividend using such combination of resources which is in the best interest of our Company and the Shareholders as a whole. Upon our request and subject to certain customary conditions precedents, one or more incremental term facilities could be established. We plan to drawdown the term loan facility in full on or around [July 8], 2021 and expect to use US$120 million to fund the special dividend to be declared and paid before the Listing. In connection with such term loan facility, we expect to incur total interest expense ranging from RMB20.8 million to RMB36.3 million during its tenor, depending on the actual payment schedule.

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Our Directors are of the view that, taking into account the [REDACTED] from the [REDACTED] and the financial resources available to us, including cash and cash equivalents, and cash flows from operating activities, the special dividend to be declared and paid before the Listing does not have a material adverse effect on our liquidity situation and we have sufficient working capital to meet our present requirements and for at least the next 12 months from the date of this document.

Had we taken into account (i) the successful drawdown of the term loan facility with the principal amount of US$125 million pursuant to the Facility Agreement in full, (ii) the receipt of the [REDACTED] of HK$[REDACTED] million from the [REDACTED], assuming an [REDACTED] of HK$[REDACTED] per Share, being the mid-point of the indicative [REDACTED] range, and assuming that the [REDACTED] is not exercised, and (iii) the distribution of special dividend of US$160 million, we would have remained net cash position as of December 31, 2020, and our net current asset as of April 30, 2021 would have increased from RMB1,218.3 million to RMB3,993.4 million.

Save as disclosed above, our Directors confirm that, as of the date of this [REDACTED], there has been no material adverse change in our financial, operation or trading position since December 31, 2020, being the date of our consolidated financial statements as set out in the Accountants’ Reports in Appendix IA and Appendix IB to this document, and up to the date of this document.

IMPACT OF COVID-19 ON OUR OPERATIONS

Our results of operations and financial condition have been and may continue to be affected by the spread of COVID-19. Although China had substantially controlled the spread of COVID-19 by the end of 2020, the extent to which COVID-19 impacts our results of operations will depend on the future developments of the outbreak which are highly uncertain.

In response to the initial spread of COVID-19, the Chinese government took a number of actions, which included compulsory quarantining arrangement, travel restrictions, remote work arrangement and public activities restrictions, among others. COVID-19 also resulted in temporary closure of many corporate offices, retail stores, manufacturing facilities and factories across China and around the world. We have also taken a series of measures in response to the initial outbreak, including, among others, remote working arrangements for some of our employees and temporary closure of some of our offices and warehouses from late January to late February 2020. These measures temporarily reduced the capacity and efficiency of our operations, which negatively affected our results of operations. The measures and timing for business resumption varied across different localities in the PRC, and our offices, warehouses and our logistics service providers closed and opened in accordance with measures adopted by their respective local government authorities. We have taken measures to reduce the impact of the COVID-19 outbreak, including strictly implementing self-quarantine and disinfection measures at our headquarters and warehouses in accordance with government- issued protocols. In April 2020, we had resumed substantially all of our businesses.

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At the start of the COVID-19 outbreak, the fulfillment process, especially the logistics services, was significantly disrupted primarily due to the nationwide lockdown imposed in the PRC. As the start of the COVID-19 outbreak occurred around Chinese New Year, we did not experience inventory or beauty product supply shortage due to the strategic stockpile we and our beauty brand partners prepared in anticipation of the Chinese New Year. However, we experienced disruption to other aspects of the fulfillment process. Our warehouses were temporarily closed in accordance with the measures imposed by local government authorities. We also experienced a temporary labor shortage in warehousing and logistics capabilities in January and February 2020. As the operation of the logistic service providers were also adversely affected by the COVID-19 related restrictions, we experienced disruption to courier collection and delivery by logistic service providers, causing delays in delivery of products to consumers. Affected by such disruption, many e-commerce platforms cancelled their shopping festivals or promotional events originally scheduled in January and February 2020, which negatively affected our GMV. As a result, our GMV in January 2020 decreased by 2% from December 2019, and our GMV in February 2020 further decreased by 34.6% from January 2020. The decrease in revenue of our Predecessor Entity in 2020, as compared to that in 2019, was partly due to the impact of the COVID-19 pandemic. Benefiting from the containment of the COVID-19 pandemic in China, the operations of e-commerce platforms, warehouses, logistics service providers, as well as our own operations gradually resumed normal starting from March 2020. During the COVID-19 pandemic, we have seen a decrease in demand for certain beauty products, primarily lips products, likely due to the COVID-19 containment measures such as wearing face masks and remote working arrangement, which to some extent discouraged people to use such beauty products as frequently as before. Such pattern has caused and may continue to cause decrease in our gross profit margin of our beauty brand partners that are known for their lips products, especially under the service method. We have not experienced any other material disruption caused by COVID-19 pandemic to all aspects of our business operations since April 2020 till the Latest Practicable Date. We have seen a swift resumption in our business growth starting from March 2020, led by major promotional events and shopping festivals re-launched by the e-commerce platforms. Our GMV in March 2020 increased by 117.3% from February 2020 and our GMV for the second quarter of 2020 increased by 29.0% from the first quarter of 2020. In addition, several government subsidy and support programs, such as subsidies for personnel recruitment in order to resume normal operations, office premises rent reduction and social insurance contributions reduction and exemption, also improved our financial performance in 2020.

As of April 30, 2021, we had cash and cash equivalents of RMB468.3 million and current financial assets at fair value through profit or loss of RMB374.7 million. Taking into account the financial resources available to us including our cash and cash equivalents on hand, current financial assets at fair value through profit or loss, and the estimated [REDACTED] from the [REDACTED], our Directors are of the view that we have sufficient working capital to meet our present requirements and for the next 12 months from the date of this document.

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Although we had not experienced and do not expect any material adverse impact on our ability to provide e-commerce enablement services to our brand partners or to sell and deliver beauty products to consumers due to COVID-19, in the worst case scenario where our operation and fulfilment is completely suspended and we cease to generate any revenue after April 30, 2021, we estimate that our existing financial resources as of April 30, 2021 plus [REDACTED]% of the expected [REDACTED] to be received from the [REDACTED] (representing the portion expected to be used for our working capital and general corporate purpose and the portion expected to be used to partially repay the term loan facility in association with the special dividend to be declared and paid before the Listing, based on the low end of the indicative [REDACTED] range), can sustain at least 17 months of our ordinary course of business and operation. This estimation is based on the following assumptions:

• we will suspend payments of employee salaries and benefits and incur only minimal costs and operating expenses to maintain minimum operations including compensation, which is estimated to be equal to approximately 6.5% of the operating cash outflow in 2020;

• we will pay off our existing borrowing with the lending banks according to the agreed repayment schedule;

• we will pay off our term loan facility in association with the special dividend according to the pre-agreed repayment schedule;

• there will be no major capital expenditure other than the committed payment as currently disclosed in the document;

• we estimate the settlement of trade receivables as of April 30, 2021 on a prudent basis by taking into account our historical settlement patterns and assume full settlement of our contract assets and trade payables as of April 30, 2021;

• there will be no internal or external financing activities from our shareholders or financial institutions; and

• there will be no distribution of dividends except for the special dividend disclosed in this document.

The analysis abovementioned is for illustrative purpose only and our Directors estimate that the likelihood of such situation is extremely remote.

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[REDACTED]

LISTING EXPENSES

Listing expenses to be borne by us are estimated to be approximately HK$[REDACTED] million (including [REDACTED] for the [REDACTED], assuming an [REDACTED]of HK$[REDACTED] per Share, being the mid-point of the indicative [REDACTED] range of HK$[REDACTED] to HK$[REDACTED] per Share), representing approximately [REDACTED]% of the [REDACTED]ofthe[REDACTED], assuming the [REDACTED]is not exercised and no shares are issued pursuant to the Share Schemes. Listing expenses of approximately RMB[REDACTED] million were incurred and charged to our consolidated income statements and approximately RMB[REDACTED] million were recorded as prepayments, other receivables and other assets during the Track Record Period. In 2021, approximately RMB[REDACTED] million is expected to be charged to our consolidated statements of profit or loss, and approximately RMB[REDACTED] million is expected to be accounted for as a deduction from equity upon the Listing. The listing expenses above are the latest practicable estimate for reference only, and the actual amount may differ from this estimate.

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[REDACTED]

We estimate that we will receive [REDACTED] from the [REDACTED]of approximately HK$[REDACTED] million after deducting the [REDACTED] and other estimated expenses payable by us in relation to the [REDACTED] and taking into account any additional [REDACTED] (assuming the full payment of the [REDACTED]), assuming an [REDACTED] of HK$[REDACTED] per Share, being the mid-point of the indicative [REDACTED] range of HK$[REDACTED] to HK$[REDACTED] per Share. We intend to use the [REDACTED] we will receive from the [REDACTED] for the following purposes:

• approximately [REDACTED]% (approximately HK$[REDACTED] million) for expanding marketing activities for our brand partners, enhancing our brand partnership and developing our brand incubation platform;

• approximately [REDACTED]% (approximately HK$[REDACTED] million) for expanding our upstream and downstream capabilities to enhance our platforms in order to realize our key growth strategies;

• approximately [REDACTED]% (approximately HK$[REDACTED] million) for the construction of our new headquarter, logistics center and self-operated warehouses;

• approximately [REDACTED]% (approximately HK$[REDACTED] million) for the upgrade and development of our technology capabilities and IT infrastructure;

• approximately [REDACTED]% (approximately HK$[REDACTED] million) for working capital and general corporate purposes; and

• approximately [REDACTED]% (approximately HK$[REDACTED] million) for loan repayment.

In the event that the [REDACTED] is set at the high point or the low point of the indicative [REDACTED] range, the [REDACTED]ofthe[REDACTED] will increase or decrease by approximately HK$[REDACTED] million, respectively. Under such circumstances, we will increase or decrease the allocation of the [REDACTED] to the above purposes on a pro-rata basis.

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In this document, unless the context otherwise requires, the following terms shall have the following meanings. Certain technical terms are explained in “Glossary of technical terms”.

“2019 ESOP” the 2019 Employee Equity Incentive Plan and the 2019 Management Equity Incentive Plan approved and adopted on May 7, 2019, the principal terms of which are set out in “Statutory and general information – Share Schemes” in Appendix IV

“2019 Period” the period from January 7, 2019 the date of incorporation of the Company, to December 31, 2019

“Accountants’ Report(s)” the audited consolidated financial statements of our Group for the Track Record Period, as included in Appendices IA and IB

“Acquired Entities” Youyue and Niwang

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

“Articles” or “Articles of the articles of association of our Company conditionally Association” adopted by special resolutions passed on [●] with effect from the Listing Date

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

“Board” the board of Directors

“Board Special Majority” shall mean the approval of at least two-thirds of all the Directors in office

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

“BVI” the British Virgin Islands

“Cayman Companies Act” the Companies Act, Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands

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[REDACTED]

“China” or “the PRC” the People’s Republic of China, and for the purposes of this document only, except where the context requires otherwise, references to China or the PRC exclude Hong Kong, the Macao Special Administrative Region of the People’s Republic of China and Taiwan

“CITIC Capital Beauty” CITIC Capital Beauty Investment Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands on January 7, 2019

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“CITIC Capital Group” the group comprising CITIC Capital Beauty Investment Limited, CITIC Capital China Partners IV, L.P., CCP IV, GP Ltd., CCP LTD, Trustar Capital Partners Limited, and CITIC Capital Holdings Limited

“Companies Ordinance” the Companies Ordinance (Chapter 622 of the Laws of Hong Kong)

“Companies (Winding Up and the Companies (Winding Up and Miscellaneous Miscellaneous Provisions) Provisions) Ordinance (Chapter 32 of the Laws of Hong Ordinance” Kong)

“Company”, “our Company”, or eBeauty Holdings (Cayman) Limited, an exempted “the Company” company with limited liability incorporated in the Cayman Islands on January 7, 2019

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

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

“Controlling Shareholder(s)” has the meaning ascribed to it under the Listing Rules and unless the context otherwise requires, refers to each of the entities within CITIC Capital Group

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

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

“Extreme Conditions” extreme conditions caused by a super typhoon as announced by the government of Hong Kong

“GMV” gross merchandise value; for the purpose of this document, our GMV is calculated by adding (i) the full value of our transactions directly with the end consumers under the service method and distribution B2C method through the channels operated by us, and (ii) the estimated retail value of all the transactions between other businesses and the Group, which is calculated by multiplying a coefficient, which is the estimated retail premium these businesses usually charge, to the transaction value of the beauty products that we sell under the distribution B2B method

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[REDACTED]

“Governmental Authority” any governmental, regulatory, or administrative commission, board, body, authority, or agency, or any stock exchange, self-regulatory organisation, or other non-governmental regulatory authority, or any court, judicial body, tribunal, or arbitrator, in each case whether national, central, federal, provincial, state, regional, municipal, local, domestic, foreign, or supranational

[REDACTED]

“Group”, “our Group”, “the the Company and its subsidiaries from time to time, and Group”, “we”, “us”, or “our” where the context requires, in respect of the period prior to our Company becoming the holding company of its present subsidiaries, such subsidiaries as if they were subsidiaries of our Company at the relevant time

“Hangzhou Meiba” Hangzhou Meiba Technology Co., Ltd. (杭州美巴科技有限公司), a company established in China with limited liability on October 14, 2010 and an indirect wholly- owned subsidiary of our Company

“Hangzhou Ningjiuwei” Hangzhou Ningjiuwei Commerce Co., Ltd. (杭州寧久微貿易有限公司), a company established in China with limited liability on May 6, 2010 and an indirect wholly- owned subsidiary of our Company

“Hangzhou UCO” or Hangzhou UCO Cosmetics Co., Ltd. (杭州悠可化妝品有 “Predecessor Entity” 限公司), a company established in China with limited liability on July 24, 2012 and an indirect wholly-owned subsidiary of our Company

“Hangzhou Youmei” Hangzhou Youmei Beauty Co., Ltd. (杭州悠美美妝有限公司), a company established in China with limited liability on November 26, 2019 and an indirect wholly- owned subsidiary of our Company

[REDACTED]

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[REDACTED]

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

“HK” or “Hong Kong” the Hong Kong Special Administrative Region of the People’s Republic of China

[REDACTED]

“Hong Kong Takeovers Code” or Codes on Takeovers and Mergers and Share Buy-backs “Takeovers Code” issued by the SFC

[REDACTED]

“IFRS” International Financial Reporting Standards, as issued by the International Accounting Standards Board

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“Independent Third Party(ies)” any entity or person who is not a connected person of our Company within the meaning ascribed to it under the Listing Rules

[REDACTED]

“iResearch” Shanghai iResearch Co., Ltd., China

“iResearch Report” the report prepared by iResearch

[REDACTED]

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“Joint Sponsors” the Joint Sponsors of the Listing as named in “Directors and parties involved in the [REDACTED]”

“KOL(s)” key opinion leader(s)

“Latest Practicable Date” March 21, 2021, being the latest practicable date for ascertaining certain information in this document before its publication

“Laws” all laws, statutes, legislation, ordinances, rules, regulations, guidelines, opinions, notices, circulars, directives, requests, orders, judgments, decrees, or rulings of any Governmental Authority (including the Stock Exchange and the SFC) of all relevant jurisdictions

“Listing” the listing of the Shares on the Main Board

“Listing Committee” the Listing Committee of the Stock Exchange

“Listing Date” the date, expected to be on or about [REDACTED]on which the Shares are to be listed and on which dealings in the Shares are to be first permitted to take place on the Stock Exchange

“Listing Rules” the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

“M&A Rules” the Regulations on 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》)

“Main Board” the stock exchange (excluding the option market) operated by the Stock Exchange which is independent from and operates in parallel with the Growth Enterprise Market of the Stock Exchange

“Management SPVs” Innovative Beauty Venture Ltd., Skyview Beauty Venture Limited, Myth Uni-Beauty Ltd., Beauty Angel Song Ltd., Yitian Ventures LTD. and Champion Warrior Ltd.

“MCN(s)” multi-channel network(s)

“Memorandum” or the memorandum of association of our Company “Memorandum of Association” conditionally adopted by special resolutions passed on [●], with effect from the Listing Date

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“MIIT” Ministry of Industry and Information Technology of the PRC (中華人民共和國工業和信息化部) (formerly known as the Ministry of Information Industry of the PRC (中華人民共和國信息產業部))

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

“MOFCOM” Ministry of Commerce of the PRC (中華人民共和國商務部) (formerly known as Ministry of Foreign Trade and Economic Cooperation of the PRC (中華人民共和國對外經濟貿易部))

“Niwang” Niwang E-Commerce (Hangzhou) Co., Ltd. (旎網電子商務(杭州)有限公司), a company established in China with limited liability on June 28, 2017 and a wholly-owned subsidiary of our Company

[REDACTED]

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[REDACTED]

“PRC Legal Adviser” Haiwen & Partners, our legal adviser on PRC laws

“Pre-[REDACTED] the investment(s) in our Company undertaken by the Investment(s)” Pre-[REDACTED] Investors prior to this [REDACTED], the details of which are set out in “History, reorganisation, and corporate structure”

“Pre-[REDACTED] Investor(s)” the investors in our Company prior to our Listing, as set out in “History, reorganisation, and corporate structure”, being YSC Glamour (BVI) Limited, Pingsheng International Limited, Magic World Holding Limited, Hygeian Growth Company Inc., Best Noble Investments Limited, Crest Ark Limited, Bilibili Inc., Mass Ave Global Partners Master Fund, LP, and Mass Ave Global Opportunities I, LP

[REDACTED]

“QIB” a qualified institutional buyer within the meaning of Rule 144A

“Regulation S” Regulation S under the U.S. Securities Act

“Relevant Persons” the Joint Sponsors, [REDACTED], any of their or the Company’s respective directors, officers, agents, or representatives or advisers or any other person involved in the [REDACTED]

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“Restricted Stock Units” 2,282,932 restricted stock units of our Company granted to members of management of Shanghai Protime Internet Technology Co., Ltd. (上海點正互聯網科技有限公司) (“Protime”), the principal terms of which are set out in “Statutory and general information – Share Schemes” in Appendix IV

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

“Rule 144A” Rule 144A under the U.S. Securities Act

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

“SAIC” State Administration of Industry and Commerce of the PRC (中華人民共和國國家工商行政管理總局), which has now been merged into State Administration for Market Regulation of the PRC (中華人民共和國國家市場監督管理總局)

“SAMR” State Administration for Market Regulation of the PRC (中華人民共和國國家市場監督管理總局)

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

“SFC” Securities and Futures Commission of Hong Kong

“SFO” or “Securities and Futures Securities and Futures Ordinance (Chapter 571 of the Ordinance” Laws of Hong Kong)

“Share(s)” ordinary share(s) in the share capital of our Company with a par value of US$0.00002 each following the Share Subdivision

“Share Award Scheme” the post-[REDACTED] share award scheme conditionally approved and adopted by our Company on [●], the principal terms of which are set out in “Statutory and general information – Share Schemes” in Appendix IV

“Share Schemes” the 2019 ESOP, the Restricted Stock Units and the Share Award Scheme

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“Share Subdivision” the subdivision of each share in the Company’s issued and unissued share capital with par value of US$0.0001 each into five shares of the corresponding class with par value of US$0.00002 each

[REDACTED]

“Stock Exchange” The Stock Exchange of Hong Kong Limited

“subsidiary” or “subsidiaries” has the meaning ascribed to it in section 15 of the Companies Ordinance

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

“Track Record Period” the three years ended December 31, 2018, 2019 and 2020

[REDACTED]

“U.S.”, “US” or “United States” the United States of America, its territories, its possessions and all areas subject to its jurisdictions

“U.S. dollars”, “US dollars” or United States dollars, the lawful currency of the United “US$” States

“U.S. SEC” the Securities and Exchange Commission of the United States

“U.S. Securities Act” United States Securities Act of 1933 and the rules and regulations promulgated thereunder

“VAT” value-added tax

“WFOEs”, each a “WFOE” Shenzhen Qianhai Youyi Beauty Investment Co., Ltd. (深圳前海悠意美麗投資有限公司), a company established in China on January 31, 2019 and an indirectly wholly- owned subsidiary of our Company; Youyue; Niwang; and ProA Supply Chain Management (Shanghai) Co., Ltd. (普埃供應鏈管理(上海)有限責任公司), a company established in China on January 3, 2020 and an indirectly wholly-owned subsidiary of our Company

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“Youyue” Hangzhou Youyue Brands Management Co., Ltd. (杭州悠悅品牌管理有限公司), a company established in China with limited liability on August 29, 2013 and a wholly- owned subsidiary of our Company

“%” per cent

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

Certain statements in this document are forward-looking statements that are, by their nature, subject to significant risks and uncertainties. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions, future events, or performance (often, but not always, through the use of words or phrases such as ‘will’, ‘expect’, ‘anticipate’, ‘estimate’, ‘believe’, ‘going forward’, ‘ought to’, ‘may’, ‘seek’, ‘should’, ‘intend’, ‘plan’, ‘projection’, ‘could’, ‘vision’, ‘goals’, ‘aim’, ‘aspire’, ‘objective’, ‘target’, ‘schedules’, and ‘outlook’) are not historical facts, are forward-looking and may involve estimates and assumptions and are subject to risks (including but not limited to the risk factors detailed in this document), uncertainties and other factors some of which are beyond our Company’s control and which are difficult to predict. Accordingly, these factors could cause actual results or outcomes to differ materially from those expressed in the forward- looking statements.

Our forward-looking statements have been based on assumptions and factors concerning future events that may prove to be inaccurate. Those assumptions and factors are based on information currently available to us about the businesses that we operate. The risks, uncertainties and other factors, many of which are beyond our control, that could influence actual results include, but are not limited to:

• our operations and business prospects;

• our business and operating strategies and our ability to implement such strategies;

• our ability to develop and manage our operations and business;

• our ability to control costs and expenses;

• our ability to identify and satisfy user demands and preferences;

• our ability to maintain good relationships with business partners;

• the actions and developments of our competitors;

• changes to regulatory and operating conditions in the industry and geographical markets in which we operate;

• all other risks and uncertainties described in “Risk factors”.

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Since actual results or outcomes could differ materially from those expressed in any forward-looking statements, we strongly caution [REDACTED] against placing undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which such statement is made, and, except as required by the Listing Rules, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. Statements of, or references to, our intentions or those of any of our Directors are made as of the date of this document. Any such intentions may change in light of future developments.

All forward-looking statements in this document are expressly qualified by reference to this cautionary statement.

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An [REDACTED] in our Shares involves significant risks. You should carefully consider all of the information in this document, including the risks and uncertainties described below, before making an [REDACTED] in our Shares. The following is a description of what we consider to be our material risks. Any of the following risks could have a material adverse effect on our business, financial condition and results of operations. In any such case, the [REDACTED] of our Shares could decline, and you may lose all or part of your [REDACTED].

These factors are contingencies that may or may not occur, and we are not in a position to express a view on the likelihood of any such contingency occurring. The information given is as of the Latest Practicable Date unless otherwise stated, will not be updated after the date hereof, and is subject to the cautionary statements in the section headed “Forward-looking Statements” in this document.

Additional risks and uncertainties that are presently not known to us or not expressed or implied below or that we currently deem immaterial could also harm our business, financial condition and operating results. You should consider our business and prospects in light of the challenges we face, including the ones discussed in this section.

Risks Related to our Business and Industry

Our success is substantially dependent upon the success of our existing and future brand partners.

Our success depends significantly on the success of our beauty brand partners. The beauty market and the e-commerce market are evolving rapidly and are highly competitive. We cannot assure you that the business of our beauty brand partners will not deteriorate. Our beauty brand partners may face challenges and difficulties, which may lead to decrease in GMV, loss of market share and financial difficulties. As a result, their demands for our services and solutions may decrease, which in turn could adversely affect our business and results of operations.

Failure to continue to attract and retain beauty brand partners, manage our relationship with them, or increase their stickiness to and reliance on our services and solutions could materially and adversely affect our business and prospects.

We generate revenues primarily via service method or distribution method. We identify and target potential new beauty partners that represent new opportunities for us to meet consumer demands. As part of our relationship management with our beauty brand partners, we enter into contractual agreements with them from time to time to renew our engagement or adjust contracted terms. Some of our beauty brand partners have a non-exclusive business relationships with us, and a number of our brand partner relationships have only been recently established.

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Under the service revenue method, our contract terms with brand partners are typically one year, and can be renewed at mutual consent of both parties. Under the distribution revenue method, our contract terms with our brand partners typically range from one to three years, and can be renewed at mutual consent of both parties. Currently, service revenue method contributes to a significant portion of our total revenue. Our brand partners may not renew their agreements with us on the same or more favorable terms to us, or may not renew their agreements with us at all. In particular, we are subject to the uncertainties of agreement renewal more frequently under the service method given the relatively short term of these agreements. In addition, our agreements with some brand partners include unilateral termination provision, which allows those brand partners to unilaterally terminate their agreements with us. Our ability to attract and retain beauty brand partners, manage our relationship with them, and increase their stickiness to our services and solutions is critical to the continued success and growth of our business. Such ability primarily depends on the effectiveness and sales results of our services and solutions as well as the overall experience we provide to our beauty brand partners.

To continue to attract beauty brand partners, we are required to provide customized and superior services and solutions, deliver satisfactory sales outcome and introduce innovative marketing and sales campaigns. However, we cannot assure you that our beauty brand partners will consider our services and solutions satisfactory or effective. For example, beauty brand partner that cannot accomplish its sales goal may attribute such failure to the ineffectiveness of our capabilities. In addition, some beauty brand partners may receive complaints from the end consumers for their experience with us. Newly added brand partners typically require a ramp-up period before they can fully utilize our services and solutions. If the ramp-up of operations for newly added brand partners takes a longer time than we expected, or the revenues we receive from newly added brands do not meet our expectations, our results of operation and financial condition may be materially and adversely impacted.

If we fail to address, among other things, any of the foregoing challenges, beauty brand partners may become frustrated by or dissatisfied with our services and solutions. As a result, they may seek an alternative to our services and solutions. Our beauty brand partners may adjust our service scope or terminate their business relationship with us purely due to the changes in their internal policy, which do not relate to any disagreement or dissatisfaction with our services or solutions. If such beauty brand partner terminates or does not renew its business relationship with us and we cannot find new brand partners or otherwise grow our beauty brand partner base, our GMV may decline significantly. During the Track Record Period, certain brand partners of ours made adjustments to their e-commerce operations, which affected their engagement with us and our service offerings to them. For example, Customer A engaged alternative fulfillment service solution in 2020 as a result of its change of internal policy to engage professional logistic providers for fulfilment services, causing a reduction in the fulfilment services we provided to Customer A. Also, three brand partners under one beauty group, who was our largest supplier in 2018, terminated cooperation with gradually in 2019 and 2020 because such beauty group started to rely on its in-house e-commerce operations. Such adjustments caused adverse impact to our results of operations during the Track Record Period. There can be no assurance that such situation will not happen again in the future. If we fail to effectively address those risks and challenges, our business, results of operations and financial condition could be materially and adversely affected.

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We may be subject to restrictions, risks and challenges imposed by the operation of our beauty brand partners and their performance.

Our beauty brand partners may compete with each other, in which case we may be perceived to have a conflict of interest in serving existing or future brand partners. Some of our contracts with existing brand partners contain non-compete provisions prohibiting us from selling products of, or providing similar services to, competitors of such brand partners. As such, we have taken some screening measures to mitigate the impact of such perceived conflict of interest. However, we cannot assure you that such screening measures will be effective or that our beauty brand partners will be satisfied with such screening measures. In addition, we cannot guarantee that none of our existing or future brand partners would bring claims against us for breach of non-compete provisions, in which case we may be subject to penalties for breach of contracts, or even early termination of contracts by our brand partners. In addition, other brand partners who do not currently have non-compete provisions with us may impose restriction to our services and solutions to potential competitors or incorporate non-compete provisions into their agreements with us. As a result, our service offerings may be limited, which may in turn adversely affect our business prospects and results of operations.

We may also be materially affected if our beauty brand partners decide to make significant strategy changes to their respective business models, policies, distribution focus that may impair their abilities, willingness, necessities to utilize our services and solutions in the e-commerce market in China. If that occurs, our beauty brand partners will re-evaluate the value of our services and solutions and may potentially terminate their relationships with us. Furthermore, we may have to devote additional resources, including management attention, capital and personnel, to adapt to the new business models, strategies and policies proposed by our beauty brand partners in order to retain them, which may materially and adversely affect our results of operations.

Prospects of e-commerce market and beauty market in China are crucial to us. If these markets do not continue to grow, or do not grow as fast as we anticipate, the demand for our services and solutions could be adversely affected.

Success and future growth of our business depend on those of the e-commerce market and the beauty market in China as these markets are a major driving force for the demand for our services and solutions. Even though the e-commerce market and the beauty market in China have experienced significant and rapid growth in the past, their long-term viability and prospects are subject to uncertainties and factors beyond our control, which include, among others:

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• shifting consumer behavior and preference for beauty products and their sales channels;

• diversification of marketing, social and distribution channels for beauty products;

• emergence of new brands and changes in the popularity of existing brands; and

• regulatory regime for the e-commerce market in China.

Additionally, our future results of operations will depend on a number of factors affecting the beauty market in China, including:

• changes in the spending power of consumers in China;

• changes in consumer demographics for beauty products in China;

• swiftly changing fashion and style trends that may affect the frequencies at which beauty products are purchased; and

• changes in the popularity of emerging beauty brands.

If the e-commerce market and beauty market in China do not continue to grow or do not grow at a rate we anticipated, the demand for our services and solutions and our business prospect could be adversely affected.

Demand for our services and solutions may be adversely affected if the complexities and challenges of online sales faced by our brand partners diminish, or if our beauty brand partners increase their in-house capabilities or find alternatives to our services and solutions.

One of our key value propositions to beauty brand partners is our capabilities to handle the complexities and difficulties experienced by beauty brand partners participating in e-commerce business in China. Some beauty brand lack e-commerce experience and are not familiar with consumer preference and effective marketing strategies in China. They also lack an understanding and awareness of the regulatory regime and requirements of e-commerce market and beauty market in China, which expose them to compliance risks. In addition, collaborating with numerous e-commerce platforms, which tend to have different sets of standards and rules, and managing the day-to-day operations of the online stores on those e-commerce platforms could be burdensome and not cost-effective for the beauty brand partners. Therefore, with our knowledge, experience and expertise in China’s beauty e-commerce market together with our omni-channel capabilities and technology infrastructure, we add value to such brand partners by helping them navigate through these complexities and changes and carry out effective marketing and sales strategies to help them succeed in the China market.

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However, if (i) the complexities and challenges faced by our brand partners diminish, or if (ii) our brand partners develop expertise and knowledge in China’s beauty e-commerce market, or choose to sell their products directly through third-party e-commerce platforms or if (iii) our brand partners establish their own omni-channel capabilities or outsource omni-channel operations to another third party, our services and solutions may become less important or attractive to our brand partners, and the demand for our solutions and services may decline. This may cause a decrease in our customer retention and our service scope to brand partners, which may, materially and adversely affect our business, financial condition and results of operations.

Our business may be adversely affected if our existing brand partners or other beauty brands operate their e-commerce operations in-house or engage alternative services and solutions.

Our business depends on the reliance on third-party operators of e-commerce of beauty brands. If existing brand partners develop their in-house capabilities of e-commerce operation, they may choose to decrease or terminate the extent to which they cooperate with us. Similarly, if more beauty brands decide to run their e-commerce operations in-house, our ability to attract more customers will be negatively affected, and our business and results of operations will be affected as well.

In 2020, three brand partners under the same partner group, Supplier A, who was our largest brand group partner in terms of revenues in 2018, terminated cooperation with us in 2020 because the brand group partner started to rely on its in-house e-commerce operations. In addition, there was a reduction in the fulfilment services provided to Customer A as a result of its change of internal policy to engage professional logistic providers for fulfilment services.

We face risks and challenges in operating our brand incubation business line and taking new business initiatives in the beauty industry.

In 2019, we rolled out our brand incubation business line. For incubation brand partners, we analyze market opportunities for them, help them establish a clear brand image and gain brand recognition. For certain incubation brand partners, we also establish joint ventures with them to enhance business collaboration. In order to expand our brand incubation business line, we need to carefully select and identify emerging brands with great potentials to work with. We are required to design effective marketing strategies for the incubation brand partners and empower them to execute the strategies using our beauty insights. We cannot guarantee that we will succeed in doing so, and the failure of which will negatively affect our reputation, results of operations and financial performance.

In addition, we may explore and expand into new businesses and extend our services and solutions to the full value chain of the beauty industry in which we may have limited experience and operating history, such as investment and acquisition along the beauty e-commerce value chain and development of our offline distribution capabilities. We may face additional challenges and risks during the process of our expansion. Our past results of operations should not be taken as indicative of our future performance, especially with respect

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We have limited operating history since our Reorganisation, which makes it difficult to evaluate our business and prospects. We cannot guarantee that we will be able to maintain the growth rate we had in the past.

We have limited operating history since our Reorganisation in 2019. Although our revenues have grown rapidly in the past few years, our past revenues and historical growth rate may not be indicative of our future performance, especially after our Reorganisation. The presentation of our financial information in this document is impacted by the acquisitions that have occurred during the Track Record Period. From January 7, 2019, the date of incorporation of our Company, to April 15, 2019, our Company had no significant operations. On April 15, 2019, our Company acquired Hangzhou UCO. On April 30, 2019, the Company acquired Youyue and Niwang, together with their respective businesses. For the period from January 7, 2019 to December 31, 2019, the results of our Company included the results of Hangzhou UCO, Youyue and Niwang starting from the dates that they came under our Company’s control. The results for the year ended December 31, 2020 include the results of Hangzhou UCO, Youyue and Niwang for the entire year. We cannot assure you that we will be able to grow at the same rate as we did in the past. As the market and our business develop, we may modify our business model as well as services and solutions offering. These changes may not achieve expected results and may have a material and adverse impact on our results of operations and financial condition. Rather than relying on our historical operating and financial results, you should consider our business prospects in light of the risks and difficulties we may encounter in rapidly evolving e-commerce market in China. We may not be able to successfully address these risks and difficulties, which could significantly harm our business, results of operations and financial condition.

We have granted share incentive awards under our Share Schemes, which may result in increased share-based compensation expenses.

We adopted Share Schemes for the purpose of granting share-based compensation awards to employees, directors and consultants to incentivize their performance and align their interests with ours. For the period from January 7, 2019 to December 31, 2019 and the year ended December 31, 2020, we recorded share-based compensation expenses of RMB35.3 million and RMB94.3 million, respectively. We believe the granting of share-based compensation is of significant importance to our ability to attract and retain key personnel and employees, and we will continue to grant share-based compensation to employees in the future. As a result, our expenses associated with share-based compensation may increase, which may have an adverse effect on our results of operations. As we may continue to record share-based compensation expenses in connection with the grants of share incentive awards under our Share

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Schemes, it may cause significant adverse impact to our results of operations. Subsequent to the completion of the [REDACTED], we expect to incur significant amount of share-based compensation expenses. As of the Latest Practicable Date, we had conditionally granted options to 516 participants under the 2019 ESOP. All the options under the 2019 ESOP were granted between July 1, 2019 and March 20, 2021 (both days inclusive) and our Company will not grant further options under the 2019 ESOP after the Listing. The exercise price of all the options granted under the 2019 ESOP is US$84.5 million. Due to the expected significant increase in share-based compensation expenses, our profit of the year ended December 31, 2021 may be significantly lower than those in the Track Record Period.

We rely on a small number of beauty brand partners to generate a substantial portion of our revenues. A loss of any of these brand partners could negatively affect our business.

A small number of beauty brand partners contributed to a significant portion of our total revenues. In 2018, 2019 and 2020, the revenue we generated from our largest brand partner accounted for 32.1%, 17.1% and 10.6% of our total revenues, respectively. Additionally, the total revenues we generated from our top five beauty brand partners accounted for approximately 70.4%, 55.8% and 39.3% of our total revenues in 2018, 2019 and 2020, respectively. While our relationships with these beauty brand partners were developed individually and each of them is managed by a separate team, our failure to maintain a good relationship with one of these brand partners may adversely affect our relationships with the rest of them. Furthermore, the loss of one or more of our largest brand partners may result in a material and adverse effect on our financial condition and results of operation.

If we fail to improve and enhance the functionality, performance, reliability, design, security and scalability of the online stores that we operate in a manner that responds to our brand partners’ evolving needs, our business may be adversely affected.

We believe the functionality, performance, reliability, design, security and scalability of the online stores that we operate are critical to our business. The markets that we operate in are subject to constant changes. Our success, in part, has been based on our ability to identify and anticipate the needs of our brand partners, develop reliable online e-commerce stores, provide customer services, to help them operate and grow their e-commerce businesses.

Brand partners using our services and solutions expect prompt responses to their inquiries and requests. We have developed close relationships with our brand partners and have dedicated team personnel for each brand partner. We routinely communicate with our brand partners to understand their specific needs. However, we may not have sufficient resources to keep up with the rapidly evolving market trends and brand partners’ needs, which could result in loss of business advantages and adversely affect the overall experience of brand partners using our services and solutions. Dissatisfied brand partners may discontinue using our services and solutions.

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Enhancements and improvements of functionality, performance, reliability, design, security and scalability of the online stores that we operate for our brand partners generally involve significant amount of time, human capital and financial resources. Moreover, there may be a ramp-up period after a change of business strategy or before the introduction of new features in response to brand partners’ needs to start to generate GMV, while we may incur additional costs and expenses in order to develop and promote such changes or features in the meantime. If we are unable to successfully improve and enhance the functionality, performance, reliability, design, security and scalability in response to our brand partners’ evolving needs, our ability to achieve success may be impaired. As a result, our reputation, business, results of our operations and financial condition may be adversely affected.

We rely on the success of certain e-commerce platforms.

A vast majority of our GMV is derived from beauty products sold or services provided on several reputable e-commerce platforms in China, including Tmall, Taobao, JD.com and Vipshop. We depend on those e-commerce platforms to sell or facilitate the sales of beauty products of our brand partners. The willingness of our beauty brand partners to sell their products on those e-commerce platforms and the resources they would like to devote to such e-commerce platforms depend on the popularity and reputation of those e-commerce platforms. As several of our key performance indicators evaluated by our brand partners are related to the GMV generated on those e-commerce platforms, if the utilization and popularity of those e-commerce platforms do not grow or do not grow as fast as we expected, the GMV generated on those e-commerce platform may not be satisfactory to our brand partners, thereby reducing the demand for our services and solutions. In addition, we rely on the functionality, performance and reliability of these e-commerce platforms to execute our brand partners’ go-to-market strategies.

E-commerce market and beauty market in China are rapidly evolving and we cannot assure you that we are able to respond to or adapt to the changes in business models, trends, technologies and regulations.

E-commerce market and beauty market in China are rapidly evolving and are subject to frequent changes in business models, fashion trends, technologies, regulations and other requirements for our brand partners. As their service provider, we have to respond to those changes and adapt to the most recent market trends. We may need to enhance and improve our existing solutions and develop innovative and trendy solutions to adapt to the changes in business models, fashion trends and technologies in a timely manner. However, we cannot assure you that we will be able to do so promptly. If we fail to address or satisfy the demands made by our brand partners according to the latest market trend and development, our reputation may be impaired and our brand partners may be reluctant to renew our services and solutions, which may in turn adversely affect our business, results of operations and financial condition.

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We rely on our marketing and promotional arrangements with online service providers, search engines, social media platforms and other platforms to entice consumers to our brand partners’ channels. If we are unable to enter into or properly maintain and manage these marketing and promotional arrangements, our ability to generate revenue could be adversely affected.

We have entered into marketing and promotional arrangements with online service providers, search engines, social media platforms and other platforms to provide content, advertising banners and other links to our e-commerce businesses. We count on these arrangements for bringing consumers to our e-commerce businesses and attracting new brand partners to our business. If these platforms fail to attract enough consumers, our profitability will be adversely affected. In addition, if we are unable to maintain these relationships or enter into new arrangements on acceptable terms, our ability to attract new brand partners and new consumers could be harmed. Furthermore, many of the parties with which we may have online advertising arrangements provide advertising services for other beauty brands. As a result, these parties may be reluctant to enter into or continue business relationships with us, thereby limiting our ability to market or promote their products.

Due to such marketing and promotional arrangements, we have incurred significant expenses on and devoted considerable resources to user traffic acquisition, and we may continue to do so in the future. The advertising promotion expenses incurred by our Predecessor Entity for 2018, 2019 and 2020 were RMB31.0 million, RMB52.2 million and RMB119.4 million, respectively, and we incurred advertising promotion expenses of RMB59.5 million in the 2019 Period and RMB194.4 million in 2020. We expect to continue to rely on those third-party traffic channels. If we are unable to maintain these relationships or renew our agreements with them from time to time, the e-commerce businesses of our brand partners may be adversely affected, which may in turn adversely affect our ability to attract new brand partners. Additionally, if we fail to effectively convert online traffic to transacting consumers and retain that consumer base, the significant expenses we incur and devote may be futile and our business, results of operations and financial condition may be materially and adversely affected.

The pricing model we adopted for our service method is in part based on the amount of GMV generated from our beauty brand partners. If our beauty brand partners no longer consider such pricing model effective or appealing, our business and results of operations may be adversely affected.

We have adopted a pricing model for our service method under which a majority portion of the revenues we generate from our brand partners depends on the GMV we facilitate. We believe such pricing model is effective and aligns our interest with that of our brand partners. However, if the GMV we facilitate declines, our brand partners may reconsider our pricing model. For example, they may ask for a fixed price model where our fees do not depend on GMV. Under a different pricing model, our revenues and profitability may decline.

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We face significant competition in our industry and we may not be able to maintain or grow our market share.

Similar to the beauty e-commerce market, the market for our services and solutions is highly competitive in China. We expect the competition will continue to intensify in the future. We compete for brand partners and for favorable terms with e-commerce platforms. We also compete to provide established full coverage distribution and service network at scale, to accumulate industry insights, know-how and expertise, to recruit, train and retain qualified talents and to develop big data analytics and our proprietary digital infrastructure.

Established companies in other market segments or geographic markets may expand into our market segments or geographic markets. In particular, other e-commerce enablement services and solutions providers may expand into the beauty brand sub-segment. These current or potential competitors may have longer operating histories, greater brand recognition, better relationships with industry participants, stronger infrastructure, deeper industry insights, greater financial, and technical or marketing resources than we do. Competitors may leverage their brand recognition, experience and resources to compete with us in a variety of ways, including making investments and acquisitions for the expansion of their services and solutions. Some of our competitors may be able to secure more favorable terms from brand partners and e-commerce platforms, devote greater resources to marketing and promotional campaigns, adopt more aggressive pricing or inventory policies and devote substantially more resources to develop their technology capabilities.

In addition, new and enhanced technologies may increase the competition in the market we operate in. Increased competition may reduce our profitability, market share, brand partner base and brand recognition. There can be no assurance that we will be able to compete successfully against current or future competitors, and such competitive pressures may have a material and adverse effect on our growth, business, financial condition and results of operations.

We and our brand partners may fail to predict changes in consumers’ behavior patterns and shopping preferences and respond accordingly, which may materially and adversely affect our results of operations.

Our success depends, in part, upon our ability and our brand partners’ ability to anticipate and respond to consumers’ behavior patterns and shopping preferences with respect to products offered through the e-commerce stores that we operate. The GMV generated by such e-commerce stores is subject to frequent changes in consumers’ shopping preferences. Accurate prediction of the changes in such shopping preferences would enable us and our brand partners to stay abreast of emerging consumers’ preference, adjust product offering and merchandising of e-commerce stores and avoid overstocking or understocking products, which may appeal to existing and potential customers. We have dedicated operations team working closely with our brand partners to achieve such goal. However, we cannot assure you that we or our brand

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Our rapid growth in the past may bring challenges to our resource planning and management.

We have experienced rapid growth in recent years as the number of our brand partners, the GMV our Group facilitated or generated and the net revenues of our Group continue to grow. The GMV our Group facilitated or generated grew from RMB4.6 billion in 2018 to RMB10.0 billion in 2019, and further to RMB16.3 billion in 2020. As a result, our Predecessor Entity generated revenue of RMB1,164.5 million in 2018 and RMB351.9 million for the period from January 1, 2019 to April 15, 2019, and our Group generated revenue of RMB1,079.4 million for the period from January 7, 2019 to December 2019 and RMB1,659.5 million in 2020.

However, as we expect to continue to experience growth in our operations and expand our business, we may face risks and challenges. Our growth so far has placed, and the future growth will place, a significant strain on our management, administrative, operational and financial infrastructure. We will be required to continue to improve our operational and financial condition, and we may not be able to do so effectively. In addition, we will be required to scale our technology infrastructure and continue to improve our operational, financial and management control. Furthermore, failure to effectively address the risks imposed by our growth may result in difficulty or delay in attracting new brand partners or maintaining relationships with existing brand partners, decline in brand partners’ satisfaction, increases in operating costs, difficulties in improving and diversifying our service and solutions offerings, any of which may adversely affect our business, results of operations and financial condition.

From time to time we may evaluate and potentially consummate strategic investments and acquisitions or enter into strategic alliances, which may require significant management attention, disrupt our existing business operations and adversely affect our financial results.

We may evaluate and consider strategic investments and acquisitions or enter into strategic alliances to develop new services or solutions and enhance our competitive position. Investments or acquisitions involve numerous risks, including the potential failure to achieve the expected benefits of the investment or acquisition; difficulties in and the cost of, integrating operations, technologies, services and personnel; potential write-offs of acquired assets or investments; and negative effect on our operating results. These transactions may also divert management’s time and resources from our day-to-day operations and we may have to incur unexpected liabilities or expenses. We may also in the future enter into strategic alliances, which could subject us to risks associated with potential leakage of proprietary information, non-performance by the counterparties and an increase in expenses incurred in establishing new strategic alliances, any of which may materially and adversely affect our business.

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We rely on certain key operating metrics to evaluate the performance of our business, and any perceived inaccuracies in such metrics may harm our reputation and negatively affect our business.

We rely on certain key operating metrics, such as GMV, to evaluate the performance of our business. Our operating metrics may differ from estimates published by third parties or from similarly titled metrics used by other companies due to differences in methodology and assumptions. If these metrics are perceived to be inaccurate by [REDACTED], or [REDACTED] make [REDACTED] decisions based on operating metrics we disclosed but with their own methodology and assumptions or those published or used by third parties or other companies, our reputation may be harmed, which could negatively affect our business, and we may also face potential lawsuits or disputes.

Our results of operations are subject to seasonal fluctuations and other events.

We have experienced and expect to continue to experience seasonal fluctuations in our revenues, reflecting a combination of traditional retail seasonality patterns and new patterns associated with online retail in particular. These seasonal patterns have caused and will continue to cause fluctuations in our operating results. For example, we generally experience less user traffic and purchase orders during national holidays in China, particularly during the Chinese New Year holiday season in the first quarter of each year. Furthermore, sales in the retail industry are significantly higher in the fourth quarter of each calendar year than in the preceding three quarters, particularly in November when the “Double Eleven” promotional campaign boosts sales.

In anticipation of increased sales activity during peak seasons, we may increase our inventory levels and incur additional expenses in managing the expected increased sales. If our seasonal sales patterns become more pronounced in the future, this may strain our personnel, customer service operations, fulfillment operations and shipment activities and may cause a shortfall in revenues compared to expenses in a given period. As a result, our financial results may be materially and adversely affected. In addition to increasing our own inventory levels, we also rely on our brand partners to increase their inventory levels to match projected seasonal demand. If we and our brand partners do not increase inventory levels for popular products in sufficient amounts or if we are unable to restock popular products from our brand partners in a timely manner, we may fail to fulfill consumer demand. This may harm our reputation and damage the trust that consumers have in our business, which is a key successful factor of our business model. As a result, we may experience a material and adverse effect on our financial conditions and results of operations.

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If we fail to maintain our relationships with e-commerce platforms, or if e-commerce platforms otherwise curtail or inhibit our ability to integrate our services and solutions with their systems, our services and solutions would be less appealing to existing and potential beauty brand partners.

Our services and solutions are primarily provided on or in relation to e-commerce platforms. These e-commerce platforms have no obligation to do business with us or to allow us access to their platforms in the long term. E-commerce platforms may, at their own discretion, decide to terminate collaboration with us, deny our access to their platforms for numerous reasons or acquire similar capacities that we possess. We cannot assure you that we will be able to effectively maintain our relationship with those e-commerce platforms to avoid the occurrence of the foregoing. In addition, those platforms may curtail or inhibit our ability to integrate our services and solutions or initiate significant changes to their respective business models, policies or systems. Such changes may increase the difficulties of providing our services and solutions and we may incur significant expenses to adapt to the new changes. If the GMV we facilitate or generate for our beauty brand partners declines as a result, our services and solutions would seem less appealing to our beauty brand partners. Historically, Vipshop changed its policy so that a portion of the promotional discount in the sales price of beauty products that were previously assumed by Vipshop itself became to be borne by us, which resulted in decrease in gross profit margin of a few beauty brand partners whose products we primarily distributed to Vipshop. Even though such change of policy and corresponding decrease in gross profit margin of a few beauty brand partners did not materially affect our profitability as a whole, there can be no assurance that any future change of policy by e-commerce platforms of similar nature and effect will not cause material and adverse impact to us. As we rely on and have limited bargaining power against those e-commerce platforms in order to effectively and seamlessly execute services and solutions for our beauty brand partners, we are exposed to risks that we may not be able to keep our beauty brand partners satisfied if we fail to adapt to such change of policy and enhance their profitability in a timely manner or at all. Any of these could cause our beauty brand partners to re-evaluate the value of our solutions and services and they may potentially minimize our engagement or even terminate their relationship with us. Therefore, our business prospects, results of operations and financial condition may be materially and adversely affected.

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Any damage to reputation of our brand partners or us, including negative publicity against us, our brand partners, and the celebrities and KOLs we work with may materially and adversely affect our business operations and prospects.

We have cultivated a reputation of trustworthiness and excellence among our brand partners. We believe that our reputation is a key reason for brand partners to choose us to distribute their products and provide them with market insights and strategies. Existing and prospective beauty brand may choose not to engage in transactions with us if there is any negative publicity in connection with the use of our services or solutions, the operation of our business and other aspects about us. In addition, negative publicity about other market players or isolated incidents, regardless of whether or not it is factually correct or whether we have engaged in any inappropriate activities, may result in negative perception of our industry as a whole and undermine the credibility we have established. Negative developments in the market may lead to tightened regulatory scrutiny and limit the scope of our permissible business activities. We could lose significant number of beauty brand partners due to negative publicity with respect to us or the beauty e-commerce industry in general, which may materially and adversely affect our business, results of operations and financial condition. We may incur additional costs to recover from the impact caused by the negative publicity, which may divert management’s attention and other resources from our business and operations.

The reputation of our brand partners would also affect the sales of the products of our brand partners. If the reputation of our brand partners is impaired or our brand partners are subject to negative publicity, or the celebrities and KOLs that represent our brand partners’ image and promote sales of their products are subject to negative publicity, the sales of their products at the online stores we operate may decline significantly. Therefore, we depend on the reputation of our brand partners and us for the continued success of our business operations and for generating revenue.

However, we cannot be certain that we or our brand partners will be able to maintain positive reputation in the future. The reputation of our brand partners and us may be materially and adversely affected by a number of factors, many of which are beyond our control, including:

• negative developments or events relating to our services or the products of our brand partners which are sold on the channels that we operate;

• lawsuits and regulatory investigations against us or our brand partners or otherwise relating to products associated with us or our industry in general;

• improper or illegal conduct by our employees or brand partners that is not authorized by us; and

• adverse publicity associated with us, our brand partners and their products or our industry, whether founded or unfounded.

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Any damage to reputation of our brand partners or us as a result of these or other factors may cause our products to be perceived unfavorably by consumers, existing or potential brand partners or the Chinese beauty market in general, which may materially and adversely affect our reputation, results of operations and financial position.

We are subject to evolving regulatory requirements, failure to comply with which, or changes in which, may adversely affect our business and prospects.

Our business is subject to supervision and regulation by PRC government authorities such as the MOFCOM and the SAMR. These government authorities promulgate and enforce regulations that cover many aspects of operation of online retailing and distribution of beauty products, including entry into these industries, scope of permitted business activities, licenses, permits and filing records requisite for business operation, advertising, pricing. Meanwhile, the beauty brand partners we cooperate with are also obliged to hold licenses and meet regulatory requirements in order for them to sell products through our solutions. While we currently hold all material licenses, permits and filing records required for our business operations, we may have to renew these licenses and permits upon their expiration or to obtain new licenses or permits in the future as a result of our business expansion, change in our business operations or change in laws and regulations applicable to us.

As e-commerce business via internet is still evolving in China, new laws and regulations may be adopted from time to time, and substantial uncertainties exist regarding interpretation and implementation of current and future PRC laws and regulations applicable to our business operations. For example, in August 2018, the standing committee of the National People’s Congress promulgated the E-Commerce Law, which took effect in January 2019, proposing a series of requirements on e-commerce operators, including third-party e-commerce platform operators, registered product or service providers of e-commerce platforms, and product or services providers operating through a self-built website or any other network. We have to cooperate with e-commerce platforms and be in full compliance with E-Commerce Law in order to continue to operate on those e-commerce platforms. In addition, on June 16, 2020, the State Council promulgated the Regulations on the Supervision and Administration of Cosmetics (“the Cosmetics Regulation”), which became the major regulation on cosmetics in China and took effect on January 1, 2021. The Cosmetics Regulation, among other things, further strengthens the management of imported cosmetics, introduces new registration and notification requirements, and requires the importers to record the information of the imported cosmetics. We cannot assure you that our current business activities will not be found in violation of any future laws and regulations or any of the laws and regulations currently in effect due to changes in the relevant authorities’ interpretation of these laws and regulations.

If we fail to adapt to any new regulatory requirement or any competent government authority considers that we operate our business operation without any requisite license, permit or approval, or otherwise fails to comply with applicable regulatory requirements, we may be subject to administrative actions and penalties against us, including fines, confiscation of our incomes, revocation of our licenses or permits, or, in severe cases, cessation of certain business. In addition, if our beauty brand partners are found by government authorities to have

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As we expand into different business models and introduce new products and services to our consumers, we may be required to comply with additional laws and regulations that are yet to be determined. To comply with such additional laws and regulations, we may be required to obtain necessary certificates, licenses or permits, as well as allocate additional resources to monitor regulatory and policy developments. Our failure to adequately comply with such additional laws and regulations may delay, or possibly prevent, some of our products or services from being offered to brand partners or end consumers, which may have a material adverse effect on our business, financial condition and results of operations.

Our business, financial condition and results of operations may continue to be adversely affected by the COVID-19 pandemic.

Our business, results of operation and financial condition have been adversely affected by the COVID-19 outbreak. In response to intensifying efforts to contain the spread of COVID-19, the Chinese government took a number of actions, which included extending the Chinese New Year holiday, quarantining individuals in China who were COVID-19 infected, asking citizens to stay at home and to avoid gathering in public, and other actions. In light of such circumstances, our corporate office was closed for a certain period of time, which adversely affected our operating efficiency and productivity. We also experienced some disruption of our logistic service providers’ operations in the first quarter of 2020, resulting in delays in delivery of products to consumers. The COVID-19 global pandemic has resulted in, and may intensify, global economic distress, and the duration and extent of the impact of COVID-19 outbreak is highly uncertain at this time. The extent to which it may affect our results of operations, financial condition and cash flows will depend on the future development of the outbreak, which is also highly uncertain. Such uncertainty poses operational challenges to our operation. Our business and operations could be disrupted if any of our employees, distributors, retailers or manufacturers is suspected of having COVID-19 in our offices, since it could require all of the possible contact persons to be quarantined and/or their offices to be disinfected. In addition, our results of operations could be adversely affected to the extent that the outbreak harms the PRC economy in general.

Any failure to comply with PRC regulations regarding advertising may subject us to civil claims, fines and other legal or administrative sanctions.

In July 2016, SAIC promulgated the Interim Administrative Measures on Internet Advertising, or the Internet Advertising Measures, effective September 2016, pursuant to which internet advertisements are defined as any commercial advertising that directly or indirectly promotes goods or services through internet media in any form. PRC advertising laws, rules and regulations require advertisers, advertising operators and advertising distributors to ensure that the content of the advertisements they prepare or distribute is fair

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We have limited control over the operations of our distributors and we may be subject to risks relating to the acts of our distributors.

We work with distributors under the distribution revenue method, including e-commerce platforms, merchants and offline channels. We bulk sell beauty products to them for them to resell to end consumers. We manage the performance of our distributors by issuing strict policies, pricing guidelines and providing them with information in relation to our brand partners’ products. However, given that our distributors are independent third parties, especially that we do not have written agreements with most of our merchants, we have limited control over the acts of our distributors. We cannot guarantee that our distributors will carry out their business in full compliance with our policies and standards. In addition, our distributors’ operation of their sales channels must comply with the relevant PRC laws and regulations. Any illegal or incompliant activities by our distributors may subject us to reputational damage, and may potentially lead to our breach of contract liability under our agreements with our brand partners. If any of our distributors is required to suspend or cease its operations as a result of non-compliance with the relevant PRC laws and regulations, our business, results of operations, brand image and financial performance may be adversely affected. Furthermore, although we believe that, generally, beauty brands who are new to the China beauty market are likely to choose to cooperate with an experienced service provider or distributor like us rather than directly engage with various distributors by themselves, we cannot guarantee that beauty brands will not bypass us to cooperate with distributors directly, the occurrence of which will adversely affect our business, results of operations and financial condition.

If counterfeit, unauthorized or infringing products are sold in the stores we operate, our reputation and financial results could be materially and adversely affected.

We represent reputable beauty brands, and we source goods from our brand partners directly or through third-party procurement agents authorized by our brand partners. However, their measures of safeguarding against counterfeit, unauthorized or infringing products sold may not be adequate. We may be subject to allegations and lawsuits claiming that products listed or sold through the online stores that we operate are counterfeit, unauthorized, illegal, or otherwise infringe third-party copyrights, trademarks, patents or other intellectual property rights. Those allegations and lawsuits may adversely affect our sales results and we may suffer reputational harm. We may be subject to sanctions under applicable laws and regulations if we are deemed to have participated or assisted in infringement activities associated with

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We believe our reputation is extremely important to our success and our competitive position. The discovery of counterfeit products sold through online stores we operate may severally damage our reputation among brand partners, and they may refrain from using our services in the future, which would materially and adversely affect our business operations and financial results.

We may be subject to product liability claims that could be costly and time-consuming.

We sell products manufactured by third parties, some of which may be defective. If any product that we sell were to cause personal injury or injury to property, the injured party or parties could bring claims against us as the retailer of the product. Similarly, we could be subject to claims that consumers of the online stores operated by us were harmed due to their reliance on our product information, product selection guides, advice or instructions. Pursuant to the applicable PRC consumer protection laws and regulations, the injured party is entitled to request the manufacturer and the seller to bear tortious liability such as cessation of infringement, removal of obstruction, elimination of danger and others. In addition, the manufacturer and the seller shall bear tortious liability for the aggravated damage due to failure to adopt remedial measures promptly or adopting remedial measures ineffectively.

We do not maintain product liability insurance for products transacted on the channels that we operate, and any other insurance policies may not cover us, adequately or at all, for any liability we may incur. If a successful claim were brought against us, it could adversely affect our business. We may have the right under applicable laws, rules and regulations to recover from the relevant brand partners, manufacturers or distributors compensation that we are required to make to consumers in connection with a product liability, personal injury or a similar claim, if such relevant party is found responsible. However, there can be no assurance that we will be able to recover all or any amounts from these parties. Any product liability claim, regardless of its merit or success, could result in the expenditure of funds and management time and adverse publicity and could have a negative impact on our business.

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If we fail to manage our accounts receivable and inventories effectively, our results of operations, financial condition and liquidity may be materially and adversely affected.

We generally grant a credit period of 0-75 days to our customers under the distribution method and we normally charge service fees from our brand partners with a credit period of 30-150 days. The trade receivables and contract assets of our Group were RMB622.8 million and RMB524.6 million as of December 31, 2019 and 2020, respectively. The trade receivables and contract assets turnover days of our Group were 110 and 125 in 2019 and 2020, respectively. If the amount and turnover days of our accounts receivables and inventories continues to increase, it would be challenging for us to manage our working capital effectively and our results of operations, financial condition and liquidity may be materially and adversely affected.

In addition, in order to operate our business, we must maintain a certain level of inventory to ensure prompt deliveries when required. Under our distribution method, we hold inventories for our operations and are subject to inventory risks. As of December 31, 2019 and 2020, our inventories amounted to RMB101.9 million and RMB130.9 million, respectively.

Generally, we forecast consumer demand by relying on a number of factors, including:

• the purchase history of consumers;

• market intelligence, including intelligence on products and target consumers;

• changes in consumer spending patterns; and

• event-driven factors, such as cyclical demands and promotional events on e-commerce platforms.

However, forecasts are inherently uncertain and demands for the products we sell can change significantly between the inventory order date and the projected sale date. In addition, the acquisition of certain types of inventories may require significant lead time and prepayment and they may not be returnable. If we overestimate demand, we may be exposed to increased inventory risks due to accumulated excess inventory. Prolonged periods of excess inventory may lead to pressures on our warehousing system and fulfillment capabilities, increases in inventory holding costs and the risk of inventory obsolescence. In addition, if we fail to manage our inventory effectively, we may experience a decline in inventory values and significant inventory write-downs or write-offs due to product expiration. Moreover, we may be required to lower sale prices in order to reduce inventory levels, which may lead to lower gross margins. Conversely, if we underestimate demand, or if our brand partners fail to supply quality products in a timely manner, we may experience inventory shortages, which might result in lost revenues and diminished consumer satisfaction, which could harm our business and reputation. We deploy various strategies and measures to track demands across China and make adjustments to our inventories management in order to minimize the possibilities of excessive inventories and control procurement costs. However, we cannot assure you that our management strategies and measures will be effective.

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Our business and results of operations may be harmed by any failure to maintain and enhance the value of our brand.

Market recognition of our brand is critical for us to remain competitive. Our ability to maintain and enhance brand recognition and reputation depends primarily on the perceived effectiveness and quality of services and solutions provided by us. We may also engage in branding efforts, such as marketing campaigns. Our branding efforts, however, may not be successful or receive anticipated results, and we may incur significant branding costs along the way. If we are unable to maintain and further enhance our brand recognition and reputation and promote awareness of our services and solutions, we may not be able to maintain our current level of brand partners, and our results of operations may be materially and adversely affected. Furthermore, any negative or malicious publicity relating to our company, our services and solutions could harm our brand image and in turn materially and adversely affect our business and results of operations.

Software failures or human errors could cause our services and solutions to oversell our brand partners’ inventory or misprice their offerings, which would hurt our reputation, adversely affect our results of operations and reduce demand for our services and solutions.

Some of our brand partners rely on our services and solutions to automate the allocation of their inventories simultaneously across multiple online platforms and to ensure that their sales comply with the policies of each platform. In many instances, our personnel operates our solutions on behalf of our brand partners. In the event that our services and solutions do not function properly, or if there are human errors on the part of our service staff, our brand partners might inadvertently sell more inventories than they actually have in stock or make sales that violate e-commerce platform policies. Overselling their inventories could force our brand partners to cancel orders, which may negatively affect customer experience. Errors in our software or human error could cause transactions to be incorrectly processed that would cause GMV and, as a result, our fees to be overstated. We may experience such errors in the future and our brand partners may seek recourse against us in these cases, which may result in significant amount of damages payable by us. Such instances could also reduce demand for our solutions and hurt our business reputation.

Failure to maintain satisfactory performance or proper functioning of technology platform could materially and adversely affect our business and reputation.

The satisfactory performance and proper functioning of our technology platform is critical to the customer experience and our ability to attract and retain brand partners and provide quality customer services. Any system interruptions caused by telecommunications failures, errors encountered during system upgrades or system expansions, computer viruses, hacking or other attempts to harm our systems resulting in unavailability or slowdown of our technology platform, degraded order fulfillment performance, or additional shipping and handling costs may, individually or collectively, materially and adversely affect our business, reputation, financial condition and results of operations.

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In addition, any system failure or interruption could cause material damage to our reputation and brand image if our systems are perceived to be insecure or unreliable. Our servers may also be vulnerable to computer viruses, physical or electronic break-ins and similar disruptions, which could lead to system interruptions, website slowdown or unavailability, delays or errors in transaction processing, loss of data or the inability to accept and fulfill consumers’ orders. Security breaches, computer viruses and hacking attacks have become more prevalent in our industry.

Additionally, we must continue to upgrade and improve our technology infrastructure to support our business growth, and failure to do so could impede our growth. However, we cannot assure you that we will be successful in executing these system upgrades and improvement strategies. In particular, our systems may experience interruptions during upgrades, and the new technologies or infrastructures may not be fully integrated with the existing systems on a timely basis, or at all. If our existing or future technology platform does not function properly, it could cause system disruptions and slow down response time, affecting data transmission, which in turn could materially and adversely affect our business, financial condition and results of operations.

Any interruption in our fulfillment operations for an extended period may have an adverse impact on our business.

Our ability to process and fulfill orders accurately depends on the smooth operation of our fulfillment and logistics network. Our fulfillment and logistics infrastructure may be vulnerable to damage caused by fire, flood, power outage, telecommunications failure, break-ins, earthquake, human error and other events. If any of our fulfillment and logistics infrastructure were rendered incapable of operations, we may be unable to fulfill any orders. We do not carry business interruption insurance, and the occurrence of any of the foregoing risks could have a material adverse effect on our business, prospects, financial condition and results of operations.

We depend on a combination of third-party delivery service providers and our in-house fulfilment workforce to deliver products to consumers. If either fails to provide reliable services, our business and reputation may be materially and adversely affected.

We have established our logistics network and warehousing capacity to fulfill consumer orders, supported by our proprietary transport management system. We also rely on third-party delivery service providers to deliver products to consumers. Any major interruptions to or failures in our own order fulfillment system or third parties’ delivery services could prevent the timely or successful delivery of products. These interruptions may be due to unforeseen events that are beyond our control, such as inclement weather, natural disasters, transportation interruptions or labor unrest or shortage. If products are not delivered on time or are delivered in a damaged state, consumers may refuse to accept products and may claim refund from us or our brand partners, and brand partners may have less confidence in our services. As a result, we may lose brand partners, and our financial condition and reputation could suffer.

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Failure to effectively manage our warehouse capacity and utilization could have a material adverse effect on our business and results of operation.

As of the Latest Practicable Date, we operated 15 leased warehouses with an aggregate gross floor area of approximately 95,576 square meters across China, including in Hangzhou, Shanghai and Jiaxing. Managing these facilities is complex and our successful management of warehouse capacity and utilization is important to our profitability. If we under-utilize our warehouse facilities, our costs will rise as a percentage of revenue. Conversely, if we do not have sufficient warehouse capacity, our revenues may not meet expectations. Either of the aforementioned situation will negatively affect our business and results of operations.

We are subject to third-party payment processing related risks.

Under the distribution method, we accept payments using a variety of methods, including online payments with credit cards and debit cards issued by major banks in China, payment through third-party online payment platforms such as Alipay and Tenpay, and payment on delivery. For certain payment methods, including credit and debit cards, we pay interchange fees and other applicable fees, which may increase over time and raise our operating costs and lower our profitability. We may also be subject to fraud and other illegal activities in connection with the various payment methods we offer, including online payment and payment on delivery options. We are also subject to various laws, regulations, rules and requirements, regulatory or otherwise, governing electronic funds transfers, which could change or be interpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or requirements, we may be subject to fines and higher transaction fees and lose our ability to accept credit and debit card payments from consumers, process electronic funds transfers or facilitate other types of online payments, and our business, financial condition and results of operations could be materially and adversely affected.

If we are subject to higher than expected product return rates, our business, financial condition and results of operations may be materially and adversely affected.

Purchases of beauty products over the internet may be subject to higher return rates than merchandise sold at physical stores. If we are unable to efficiently manage our product return rates, or if our product return rates increase or are higher than expected, our revenues and costs may be negatively impacted. In addition, as we may not be able to return some products to our brand partners pursuant to our contracts with them. If return rates for such products increase significantly, we may experience an increase in our inventory balance, inventory impairment and fulfillment costs, which may materially and adversely affect our working capital. As a result, our business, financial condition and results of operations may be materially and adversely affected.

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If we are unable to provide high-quality customer service, our business and results of operations may be materially and adversely affected.

We depend on our online customer service representatives to provide live assistance to online shoppers. Since a substantial portion of our beauty brand partners are premium brands, their standards for customer service are high and the customer service representatives may be asked to provide beauty products recommendations and suggestions to the customers. If our online customer service representatives fail to satisfy the individual needs of customers or the requirements set by our brand partners, our brand partners’ sales could be negatively affected, and we may lose potential or existing brand partners, which could have a material adverse effect on our business, financial condition and results of operations.

We have limited experience in international markets. If we fail to rise to the challenges presented by our strategy to penetrate into international markets, our business, financial condition and results of operations may be materially and adversely affected.

We intend to extend our operational capabilities beyond China with a strategic focus on Southeast Asia in the short term. We intend to help global beauty brands establish their presence on e-commerce platforms in international markets, which exposes us to a number of risks, including:

• compliance with applicable foreign laws and regulations, including but not limited to e-commerce business, foreign exchange controls, cash repatriation restrictions, intellectual property protection rules and data privacy requirements;

• challenges in identifying appropriate local business partners and establishing and maintaining good working relationships with them. Our business partners primarily include warehousing and logistics partners, marketing partners and third parties that provide us technology support;

• challenges in formulating effective marketing strategies targeting brand partners from various jurisdictions and cultures, who have a diverse range of preferences and demands;

• local competition;

• local employment laws and practices;

• fluctuations in currency exchange rates;

• exposure to different tax jurisdictions that may subject us to greater fluctuations in our effective tax rate and assessments in multiple jurisdictions on various tax-related assertions, including transfer pricing adjustments and permanent establishment; and

• increased costs associated with doing business in foreign jurisdictions.

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Any negative impact from our international business expansion could negatively impact our business, results of operations and financial condition as a whole.

Our business generates and processes a large amount of data. Any breaches to our securities measures, failure to protect the confidential information of our beauty brand partners or consumers, or the improper use or disclosure of such data may subject us to the liabilities imposed by data privacy and protection laws and regulations, negatively impact our reputation and deter our beauty brand partners from using our services and solutions.

We store and possess certain personal and other sensitive data provided by our beauty brand partners and consumers, including customer purchase transaction data, such as product information, transaction information, customers’ prior purchase activities and customer service history. We also have access to warehouse and logistics related data generated from our supply chain services. This makes us an attractive target and potentially vulnerable to cyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions. While we have taken steps to protect our database, our security measures could still be breached. Because techniques used to sabotage or obtain unauthorized access to systems change frequently and generally are not recognized until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Any accidental or willful security breaches or other unauthorized access to our database could cause confidential information to be stolen and used for criminal purposes. Security breaches or unauthorized access to confidential information could also expose us to liability related to the loss of the information, time-consuming and expensive litigation and negative publicity. If security measures are breached because of third-party action, employee error, malfeasance or otherwise, or if design flaws in our technology infrastructure are exposed and exploited, our relationships with consumers could be severely damaged, we could incur significant liability and our business and operations could be adversely affected. In 2020, we underwent a security breach by hackers who accessed certain personal information of our consumers. The hackers reached certain consumers who had purchased on certain Tmall stores of our brand partners, pretending to be customer service representatives to defraud consumers for economic interests. After a thorough internal investigation, we reported the system breach to Qiantang Branch of the Hangzhou Municipal Public Security Bureau. The public security bureau later arrested the suspect and transferred the case to prosecution. We cannot guarantee that we will not experience similar attacks and unexpected interruptions in the future. Also, we can provide no assurance that our current security mechanisms will be sufficient to protect our IT systems from any third-party intrusions, viruses or hacker attacks, information or data theft or other similar activities. Any such future occurrences could materially and adversely affect our business, reputation, financial condition and results of operations.

There are numerous laws regarding privacy and the storing, sharing, use, disclosure and protection of personally identifiable information and data. Specifically, personally identifiable and other confidential information is increasingly subject to legislation and regulations in numerous domestic and international jurisdictions. PRC government authorities have enacted a series of laws and regulations relating to the protection of privacy and personal information, under which internet service providers and other network operators are required to clearly indicate the purposes, methods and scope of any information collection and usage, to obtain

–64– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT RISK FACTORS appropriate user consent and to establish user information protection systems with appropriate remedial measures. However, this regulatory framework for privacy issues in China and worldwide is currently evolving and is likely to remain uncertain for the foreseeable future.

The PRC Cyber Security Law, effective on June 1, 2017, stipulates that a network operator, including internet information service provider among others, must adopt technical measures and other necessary measures in accordance with applicable laws and regulations as well as compulsory national and industrial standards to safeguard the safety and stability of network operations, effectively respond to network security incidents, prevent illegal and criminal activities and maintain the integrity, confidentiality and availability of network data. We are making efforts to comply with the applicable laws, regulations and standards, there can be no assurance that our measures will be effective and sufficient under the PRC Cyber Security Law. If we were found by the regulatory authorities to have failed to comply with the PRC Cyber Security Law, we would be subject to warnings, fines, confiscation of illegal revenue, revocation of licenses, cancellation of filings, shutdown of the online stores that we operate for our brand partners or even criminal liability and our business, results of operations and financial condition would also be adversely affected. In addition, in light of the evolving regulatory framework of China for the protection of information in cyberspace, we may be subject to uncertainties of and adjustments to our business practices, which may incur additional operating expenses and adversely affect our results of operations and financial condition. We cannot assure you that our existing privacy and personal protection system and technical measures will be considered sufficient under applicable laws and regulations. We could be adversely affected if legislation or regulations in China are expanded to require changes in business practices or privacy policies, or if the PRC governmental authorities interpret or implement their legislation or regulations in ways that negatively affect our business, financial condition and results of operations.

In addition to laws, regulations and other applicable rules regarding privacy and privacy advocacy, industry groups or other private parties may propose new and different privacy standards. Because the interpretation and application of privacy and data protection laws and privacy standards are still uncertain, it is possible that these laws or privacy standards may be interpreted and applied in a manner that is inconsistent with our practices. Any inability to adequately address privacy concerns, even if unfounded, or to comply with applicable privacy or data protection laws, regulations and privacy standards, could result in additional cost and liability for us, damage our reputation, inhibit the visit to the online stores that we operate for our brand partners and harm our business.

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We may face intellectual property infringement claims and other claims of third-party rights, which may be expensive to defend and may disrupt our business and operations.

We cannot assure you that our operations, our services and solutions, or any aspects of our business do not or will not infringe upon or violate intellectual property rights (including but not limited to trademarks, patents, copyrights, know-how) or other rights (including but not limited to portraiture rights) owned or held by third parties. We may also be subject to legal or administrative proceedings and claims relating to intellectual property rights or other rights of third parties in the future.

There may be certain unauthorized third-party content on the online stores operated by us, content we distribute or other aspects of our business may infringe third-party intellectual property rights, portraiture rights or other rights without our awareness. To the extent that our employees use intellectual property owned by others or unauthorized portraits in their work for us, disputes may arise as to the rights in related know-how and inventions, portraits and other proprietary assets. Holders of such intellectual property rights or other rights may seek to enforce such rights against us in China or other jurisdictions. If any third-party infringement claims are brought against us, we may be forced to divert management’s time and other resources from our business and operations to defend against these claims, regardless of their merits.

The application and interpretation of China’s intellectual property right laws and the procedures and standards for granting trademarks, patents, copyrights, know-how or other intellectual property rights in China and the laws governing personal rights are still evolving and remain uncertain. We cannot assure you that PRC courts or regulatory authorities would agree with our analysis. If we were found to have violated the intellectual property rights of others, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property or relevant contents and we may incur licensing or usage fees or be forced to develop alternatives of our own. As a result, our reputation may be harmed and our business and financial performance may be materially and adversely affected.

We may not be able to prevent others from making unauthorized use of our intellectual property, and may incur increasing costs to protect us against such infringements. If we fail to protect our intellectual property rights, our brand and business may suffer.

We regard our software registrations, trademarks, domain names, know-how, proprietary technologies and similar intellectual property as critical to our success, and we depend, to a large extent, on our ability to develop and maintain the intellectual property rights relating to our technologies.

We primarily rely on a combination of intellectual property laws and contractual arrangements, including confidentiality and non-compete agreements with our management, employees and others, as well as the contractual arrangements with third-party consultants in connection with product or learning content development, to protect our proprietary rights. See “Business – Intellectual Property.” However, we cannot assure you that such existing measures

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It is often difficult to maintain and enforce intellectual property rights in China. Statutory laws and regulations are subject to judicial interpretation and enforcement and may not be applied consistently due to the lack of clear guidance on statutory interpretation. Confidentiality, invention assignment and non-compete agreements may be breached by counterparties, and there may not be adequate remedies available to us for any such breach. Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce our contractual rights in China. Monitoring and preventing any unauthorized use of our intellectual property is difficult and costly and the steps we take may be inadequate to prevent the misappropriation of our intellectual property. In the event that we resort to litigation to enforce our intellectual property rights, such litigation could result in substantial costs and a diversion of our managerial and financial resources. We can provide no assurance that we will prevail in such litigation. In addition, our trade secrets may be leaked or otherwise become available to, or be independently discovered by, our competitors. Any failure in protecting or enforcing our intellectual property rights could have a material adverse effect on our business, results of operations and financial condition.

We are subject to risks associated with other parties with which we collaborate. If we cannot effectively cooperate with such other parties, or if such other parties fail to perform their obligations, provide reliable or satisfactory services, or operate their businesses, in each case in compliance with applicable laws and regulations, our business, financial condition and results of operations may be materially and adversely affected.

We collaborate with certain other parties, including warehouse and logistics service providers, in providing services and solutions to our beauty brand partners. These parties may not be able to properly perform their duties under their agreements with us. Any failure by these parties to continue with good business operations, comply with applicable laws and regulations or any negative publicity on these parties could damage our reputation, expose us to significant penalties and decrease our total revenues and profitability. Also, if we fail to retain existing or attract new parties to collaborate with us, the normal operations of our business may be affected and our beauty brand partners may lose confidence in our services and solutions. In addition, certain of these other parties that we collaborate with have access to our consumer data to a limited extent in order to provide their services. If these other parties engage in activities that are negligent, illegal or otherwise harmful to the trustworthiness and security of our system, including the leak or negligent use of data, or if our beauty brand partners and consumers are otherwise dissatisfied with their service quality, we could suffer reputational harm, even if these activities are not related to, attributable to or caused by us.

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Impairment of our intangible assets could negatively affect our financial condition and results of operations.

Our Predecessor Entity had intangible assets of RMB16.7 million as of December 31, 2018. Our Group had intangible assets of RMB1,049.8 million as of December 31, 2019 and RMB979.0 million as of December 31, 2020. Our intangible assets consist mainly of goodwill as a result of the acquisition of our Predecessor Entity and Acquired Entities as well as the customer relationship, distribution network, corporate brand and technology that we obtained. Customer relationship refers to the relationships between the Company and brand partners under its service method; distribution network is the network of relationships between the Company and brand partners under its distribution method. Corporate brand refers to the Company’s brand “UCO”; technology refers to several software systems such as backend system integration, customer service system, finance management system and system of warehousing and logistics operations tailored for cosmetics. Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. We cannot guarantee that we will not record impairment losses of intangible assets in the future. Material impairment of intangible assets could negatively affect our financial condition and results of operations.

We may be exposed to credit risk due to customer defaults.

We generally provide a credit period of 90 days to our non-individual customers. Our Predecessor Entity had trade receivables of RMB111.0 million as of December 31, 2018, and our Group had trade receivables of RMB194.0 million as of December 31, 2019 and RMB210.0 million as of December 31, 2020. Our Predecessor Entity made provision for impairment of trade receivables of RMB82 thousand as of December 31, 2018, and our Group made provision for impairment of trade receivables of RMB222 thousand as of December 31, 2019 and RMB142 thousand as of December 31, 2020. In addition, our Predecessor Entity also had contract assets of RMB181.6 million as of December 31, 2018, and our Group also had contract assets of RMB428.8 million as of December 31, 2019 and RMB314.6 million as of December 31, 2020. Contract assets represent our right to consideration in exchange for E-commerce services that we have transferred to brand partners, which is subject to further negotiation and reconciliation with the brand partners. Our Predecessor Entity made provision for impairment of contract assets of RMB1.1 million as of December 31, 2018, and our Group made provision for impairment of contract assets of RMB3.0 million as of December 31, 2019, and RMB0.2 million as of December 31, 2020. The trade receivables and contract assets turnover days of our Group in the 2019 Period, being the average of the beginning trade receivables and contract assets balance as of April 15, 2019, the date the Group obtained control over our Predecessor Entity, and the ending trade receivables and contract assets balance as of December 31, 2019 divided by total revenue for the 2019 Period and multiplied by the number of days during the period from April 15, 2019 to December 31, 2019, was 110 days. The trade receivables and contract assets turnover days of our Group in 2020, being the average of the beginning and

–68– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT RISK FACTORS ending trade receivables balance in 2020 divided by total revenue in 2020 by the number of days in 2020, was 125 days. Our management regularly reviews the recoverability of trade receivables and contract assets using the expected credit loss model. See Note 3(b) to the Accountant’s Report in Appendix IA and Note 3(b) to the Accountants’ Report in Appendix IB to this document. We cannot assure you that all of our customers will not default on their obligations to us in the future, despite our efforts to conduct credit assessment on them.

Fluctuation of our financial assets at fair value through profit or loss has affected our results of operations during the Track Record Period and may continue to affect our results of operations in the future. We may also be subject to the uncertainty in valuation of such financial assets due to the use of unobservable inputs.

Fluctuation of fair value change of our financial assets at fair value through profit or loss, which primarily consist of the short-term wealth investment products we purchased, may affect our results of operations. Our Predecessor Entity recorded current financial assets at fair value through profit or loss of RMB55.0 million as of December 31, 2018, and our Group recorded current financial assets at fair value through profit or loss of RMB216.1 million and RMB433.7 million as of December 31, 2019 and 2020, respectively. The wealth investment products we purchased were issued by reputable commercial banks without guaranteed returns. The expected rates of return for such wealth management products range from 3.00% to 3.45% per annum for the year ended December 31, 2018, 3.00% to 3.86% for the 2019 Period and 2.66% to 3.52% per annum for the year ended December 31, 2020. We are exposed to credit risk in relation to our investments in those wealth investment products, which may adversely affect the net changes in their fair value. We cannot assure you that market conditions and regulatory environment will create fair value gains on the wealth investment products we invest in or we will not incur any fair value losses on our investments in those products in the future. If we incur such fair value losses, our results of operations, financial condition and prospects may be adversely affected. In addition, we are subject to risks associated with the fair value change of our non-current financial assets at fair value through profit or loss, consist of the fair value of equity investments in an unlisted entity. Our Predecessor Entity recorded non-current financial assets at fair value through profit or loss of nil as of December 31, 2018, and our Group recorded non-current financial assets at fair value through profit or loss of nil and RMB13.1 million as of December 31, 2019 and 2020, respectively. We use unobservable inputs to assess the fair value of our wealth investment products and our equity investments in the unlisted entity. We use our judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at the respective valuation dates. These valuation methodologies that we use involve a significant degree of management judgment and are inherently uncertain. Changes in these unobservable inputs and other estimates and judgments could affect the fair value of our financial assets at fair value through profit or loss, which in turn may adversely affect our results of operations.

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We may be the subject of anti-competitive, harassing or other detrimental conduct by third parties including complaints to regulatory agencies, negative blog postings and the public dissemination of malicious assessments of our business that could harm our reputation and cause us to lose consumers and revenues and adversely affect the price of our Shares.

We may be the target of anti-competitive, harassing, or other detrimental conduct by third parties. Such conduct includes complaints, anonymous or otherwise, to regulatory agencies. We may be subject to government or regulatory investigation as a result of such third-party conduct and may be required to spend significant time and incur substantial costs to address such third-party conduct, and there is no assurance that we will be able to conclusively refute each of the allegations within a reasonable period of time, or at all. Additionally, allegations, directly or indirectly against us, may be posted in internet chat-rooms or on blogs or websites by anyone, whether or not associated with us, on an anonymous basis. Consumers value readily available information concerning retailers, manufacturers and their goods and services and often act on such information without further investigation or authentication and without regard to its accuracy. The availability of information on social media platforms and devices is virtually immediate, as is its impact. Social media platforms and devices immediately publish the content their subscribers and participants post, often without filters or checks on the accuracy of the content posted. Information posted may be inaccurate and adverse to us, and it may harm our financial performance, prospects or business. The harm may be immediate without affording us an opportunity for redress or correction. Our reputation may be negatively affected as a result of the public dissemination of anonymous allegations or malicious statements about our business, which in turn may cause us to lose market share, consumers and revenues and adversely affect the price of our Shares.

Some aspects of our solutions include open source software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business.

Some aspects of our solutions include software covered by open source licenses. Open source license terms are often ambiguous, and there is little or no legal precedent governing the interpretation of many of the terms of certain of these licenses. Therefore, the potential impact of such terms on our business is somewhat unknown. If portions of our proprietary software are determined to be subject to an open source license, we could be required to publicly release the affected portions of our source code, re-engineer all or a portion of our technologies or otherwise be limited in the licensing of our technologies, each of which could reduce or eliminate the value of our technologies and loan products. There can be no assurance that efforts we take to monitor the use of open source software to avoid uses in a manner that would require us to disclose or grant licenses under our proprietary source code will be successful, and such use could inadvertently occur. This could harm our intellectual property position and have a material adverse effect on our business, results of operations, cash flows and financial condition. In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of the software. Many of the risks associated with the use of open source software cannot be eliminated and could adversely affect our business.

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Our success depends on the continued efforts of our senior management. If one or more of our key executives were unable or unwilling to continue in their present positions, our business may be severely disrupted.

Our business operations depend on the continued services of our senior management, particularly our founder and the executive officers named in this document. While we have provided various incentives to our management, we cannot assure you that we can continue to retain their services. If one or more of our key executives were unable or unwilling to continue in their present positions, we may not be able to find suitable replacements, our future growth may be constrained, our business may be severely disrupted and our financial condition and results of operations may be materially and adversely affected. In addition, although we have entered into confidentiality and non-competition agreements with our management, there is no assurance that any member of our management team will not join our competitors or form a competing business. If any dispute arises between our current or former officers and us, we may have to incur substantial costs and expenses in order to enforce such agreements in China or we may not be able to enforce them at all.

If we are unable to recruit, train and retain qualified personnel or if we fail to do so in a cost-efficient manner, our business may be materially and adversely affected.

We believe our future success depends on our continued ability to attract, develop, motivate and retain qualified and skilled employees. Competition for personnel with expertise in our industry is intense in China. We may not be able to hire and retain these personnel at compensation levels consistent with our existing compensation and salary structure. Some of the companies with which we compete for experienced employees have greater resources than we do and may be able to offer more attractive terms of employment. In addition, we invest significant time and resources in training our employees, which increases their value to our competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training new employees and our ability to provide services and solutions to our beauty brand partners could diminish, resulting in a material adverse effect to our business.

We face risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt our operations.

Our business could be materially and adversely affected by natural disasters, health epidemics or other public safety concerns affecting the PRC and particularly Hangzhou. Natural disasters may give rise to server interruptions, breakdowns, system failures, technology platform failures or internet failures, which could cause the loss or corruption of data or malfunctions of software or hardware as well as adversely affect our ability to operate the online stores that we operate for our brand partners and provide services and solutions. Our business could also be adversely affected if our employees are affected by health epidemics. In addition, our results of operations could be adversely affected to the extent that any health epidemic harms China’s economy in general. Our headquarter is located in Hangzhou, where most of our management and employees currently reside. Our servers are hosted in the data

–71– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT RISK FACTORS centers located in Hangzhou. Consequently, if any natural disasters, health epidemics or other public safety concerns were to affect Hangzhou, our operation may experience material disruptions, which may materially and adversely affect our business, financial condition and results of operations.

Misconduct or errors by our employees or their failure to perform their duties could harm our business and reputation.

We are exposed to the risk of misconduct and errors by our employees. Our business depends on the reliable operation of our employees. We could be materially and adversely affected if the transactions were redirected, misappropriated or otherwise improperly executed, if personal information was disclosed to unintended recipients or if an operational breakdown or failure in the processing of transactions occurred, whether as a result of human error, purposeful sabotage or fraudulent manipulation of our operations or systems. It is not always possible to identify and deter misconduct or errors by our employees and the precautions we take to detect and prevent such activities may not be effective in controlling unknown or unmanageable risks or losses. If any of our employees commit fraud or other misconduct or fail to follow our rules and procedures when interacting with our beauty brand partners, we could be liable for damages and subject to regulatory actions and penalties. We could also be perceived to have facilitated or participated in the illegal activities and therefore be subject to civil or criminal liability. Any of these occurrences could result in our diminished ability to operate our business, potential liability to beauty brand partners or e-commerce platforms, inability to attract beauty brand partners, reputational damage, regulatory intervention and financial harm, which could negatively impact our business, financial condition and results of operations.

We may be subject to legal proceedings in the ordinary course of our business. Any adverse outcome of these legal proceedings could have a material adverse effect on our business, results of operations and financial condition.

We may from time to time be involved in disputes with various parties involved in the ordinary course of business. These disputes may lead to protests or legal or other proceedings and may result in damage to our reputation, substantial costs to our operations and diversion of our management’s attention. In addition, we may disagree with regulatory bodies in certain aspects in the course of our operations, which may subject us to administrative proceedings and unfavorable decrees that result in liabilities and cause delays to our proper developments. We have not been involved in legal proceedings or disputes that have material adverse effect on our business in the ordinary course of business. We cannot assure you that we will not be involved in any other major legal proceedings in the future. Any involvement on these disputes may materially and adversely affect our business, financial condition and results of operations.

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We may not be able to obtain additional capital when desired, on favorable terms or at all.

We may make investments from time to time in facilities, hardware, software, technological systems and other projects to remain competitive. Due to the unpredictable nature of the capital markets and our industry, there can be no assurance that we will be able to raise additional capital on terms favorable to us, or at all, if and when required, especially if we experience disappointing results of operations. If adequate capital is not available to us as required, our ability to fund our operations, take advantage of unanticipated opportunities, develop or enhance our infrastructure or respond to competitive pressures could be significantly limited. If we do raise additional funds through the issuance of equity or convertible debt securities, the ownership interests of our shareholders could be significantly diluted. These newly issued securities may have rights, preferences or privileges senior to those of existing shareholders.

Our insurance coverage may not be adequate, which could expose us to significant costs and business disruptions.

The insurance industry in China is still in an early stage of development and insurance companies in China currently offer limited business-related insurance products. We do not maintain business interruption insurance or general third-party liability insurance, nor do we maintain product liability insurance or key-man insurance. We consider this practice to be reasonable in light of the nature of our business and the insurance products that are available in China and in line with the practices of other companies in the same industry of similar size in China. Any uninsured risks may result in substantial costs and the diversion of resources, which could adversely affect our results of operations and financial condition.

Failure to comply with PRC labor laws and make adequate contributions to various employee benefits plans as required by PRC regulations may subject us to penalties.

Companies operating in China are required to register with governmental authorities and participate in various government-sponsored employee benefit plans, including certain social insurance, housing funds and other welfare-oriented payment obligations and contribute to the plans in amounts equal to certain percentages of salaries, including bonuses and allowances, of employees up to a maximum amount specified by the local government from time to time at locations where our employees are based. The requirement of employee benefit plans has not been implemented consistently by the local governments in China given the different levels of economic development in different locations. We have not made adequate employee benefit payments in strict compliance with the relevant PRC regulations for and on behalf of our employees. Our failure in making contributions to various employee benefit plans in strict compliance with applicable PRC labor-related laws may subject us to late payment penalties and we could be required to make up the contributions for these plans as well as to pay late fees and fines. See “Business – Employees.”

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Our operations depend on the performance of the public communications infrastructure in China.

Almost all access to the internet in China is maintained through state-owned telecommunication operators under the administrative control and regulatory supervision of the MIIT. We primarily rely on a limited number of telecommunications service providers regarding data communications capacity through local telecommunications lines and internet data centers to host our servers. We have limited access to alternative networks or services in the event of disruptions, failures or other problems with China’s internet infrastructure or the fixed telecommunications networks provided by telecommunications service providers. With the expansion of our business, we may be required to upgrade our technology and infrastructure to keep up with the increasing traffic on the online stores that we operate for our brand partners. We cannot assure you that the public communications infrastructure in China will be able to support the demands associated with the continued growth in internet usage.

In addition, we have no control over the costs of the services provided by telecommunications service providers. If the prices we pay for telecommunications and internet services rise significantly, our financial performance may be adversely affected. Furthermore, if internet access fees or other charges to internet users increase, our user traffic may decline and our business may be harmed.

Increases in labor costs in China may adversely affect our business and results of operations.

The economy in China has experienced increases in inflation and labor costs in recent years. As a result, average wages in China are expected to continue to increase. In addition, we are required by PRC laws and regulations to pay various statutory employee benefits, including pension, housing fund, medical insurance, workrelated injury insurance, unemployment insurance and maternity insurance to designated government agencies for the benefit of our employees. The relevant government agencies may examine whether an employer has made adequate payments to the statutory employee benefits and those employers who fail to make adequate payments may be subject to late payment fees, fines and/or other penalties. We expect that our labor costs, including wages and employee benefits, will continue to increase. Unless we are able to control our labor costs or pass on these increased labor costs to our beauty brand partners by increasing the fees for our services, our financial condition and results of operations may be adversely affected.

A severe or prolonged downturn in Chinese or global economy could materially and adversely affect our business and financial condition.

The global macroeconomic environment is facing challenges, including US-China trade tensions. China’s economy has shown slower growth since 2012 compared to the previous decade and the trend may continue. There have been concerns over unrest and terrorist threats in the Middle East, Europe and Africa, which have resulted in market volatility in oil and other markets and over the expansion of terrorist activities into Europe and other regions. There have also been concerns on the relationship between China and other countries, including the surrounding Asian countries, which may potentially have economic effects.

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The U.S. government has made statements and taken certain actions that may lead to potential changes to U.S. and international trade policies, including recently-imposed tariffs affecting certain products manufactured in China, sanctions imposed by the U.S. Department of Treasury on certain officials of the Hong Kong Special Administrative Region and the PRC central government and the executive orders issued by the U.S. government that prohibit certain transactions with certain selected Chinese technology companies, and the Executive Order 13959 issued in November 2020 targeting transactions by U.S. persons in certain securities of designated “Communist Chinese military companies.” Although we currently only provide services to domestic e-commerce market in China, it is hard to predict the effect that any new tariffs or regulations would affect the business of our beauty brand partners and the demand of consumers. If any new tariffs, legislation and/or regulations are implemented, or if existing trade agreements are renegotiated or, in particular, if the U.S. government takes retaliatory trade actions due to the recent U.S.-China trade tension, such changes could have an adverse effect on our business, financial condition, results of operations.

Economic conditions in China are sensitive to global economic conditions, as well as changes in domestic economic and political policies and the expected or perceived overall economic growth rate in China. Our business and operations are primarily based in China and substantially all of our revenues are derived from our operations in China. Accordingly, our financial results have been and are expected to continue to be, affected by the economy and online consumer finance industry in China. While the economy in China has grown significantly over the past decades, growth has been uneven, both geographically and among various sectors of the economy and the rate of growth has been slowing down. Any severe or prolonged slowdown in the global or domestic economy may materially and adversely affect our business, results of operations and financial condition.

We face certain risks relating to the real properties that we lease.

We lease offices and warehouses from third parties for our operations in China. Any defects in lessors’ title to the leased properties may disrupt our use of our offices or warehouses, which may, in turn, adversely affect our business operations. Some of our lessors have not provided us with documentation evidencing their title to the relevant leased properties. In addition, we utilize some of the leased properties as warehouses, which is inconsistent with the legally specified use of the properties as provided in their titles. We cannot assure you that title to the properties we currently lease or our usage of the properties will not be challenged by any third party or governmental authority. Moreover, we have not registered some of our lease agreements with the relevant PRC governmental authorities as required by PRC law and although failure to do so does not in itself invalidate the leases, we may not be able to defend these leases against bona fide third parties and may be subject to fines of RMB1,000 to RMB10,000. Furthermore, one of the warehouses we leased was mortgaged by its owner to a commercial bank prior to the commencement of our lease. Under applicable PRC laws and regulations, in the event the mortgagee decides to foreclose the mortgage on such warehouse, we may not be able to protect our leasehold interest and our lease may be terminated, which could materially and adversely affect our business and results of operations. We are not aware of any actions taken by the mortgagee on such warehouse, any

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Risks Relating to the Reorganisation and our Relationship with our Controlling Shareholder

We may have conflicts of interest with our Controlling Shareholders or any of their controlling shareholders and, because of our Controlling Shareholders’ controlling ownership interest in our company, we may not be able to resolve such conflicts on terms favorable to us.

Immediately after completion of the [REDACTED] (assuming the [REDACTED]isnot exercised and no Shares are issued under the Share Schemes), CITIC Capital Group will be entitled to exercise voting rights of approximately [REDACTED]% of our issued Shares. Accordingly, our Controlling Shareholders will continue to be our controlling shareholder immediately upon the completion of this [REDACTED] and may have significant influence in determining the outcome of any corporate actions or other matters that require shareholder approval, such as mergers, consolidations, change of our name and amendments of our memorandum and articles of association.

The concentration of ownership and voting power may cause transactions to occur in a way that may not be beneficial to you as a holder of our Shares and may prevent us from doing transactions that would be beneficial to you. Conflicts of interest may arise between our Controlling Shareholders or any of their controlling shareholders and us in a number of areas relating to our past and ongoing relationships. Potential conflicts of interest that we have identified include the following:

• Our board members or executive officers may have conflicts of interest. Two of our directors also serve as directors of or hold executive positions with our Controlling Shareholders. These overlapping relationships could create, or appear to create, conflicts of interest when these persons are faced with decisions with potentially different implications for our Controlling Shareholders and us.

• Sale of shares or assets in our company. Upon expiration of the lock-up period and subject to certain restrictions under relevant securities laws and stock exchange rules, as well as other relevant restrictions, our Controlling Shareholders may decide to sell all or a portion of our shares that they hold to a third party, thereby giving that third party substantial influence over our business and our affairs. Such a sale of our shares could be contrary to the interests of our employees or our other

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shareholders. In addition, our Controlling Shareholders may also discourage, delay, or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and might reduce the price of our Shares.

• Allocation of business opportunities. Business opportunities may arise that both we and our Controlling Shareholders find attractive and which would complement our respective businesses. Our Controlling Shareholders may discourage, delay, or prevent a profitable investment opportunity before our board of directors or shareholders and subsequently decide to pursue investment opportunities or take business opportunities for themselves, which would prevent us from taking advantage of those opportunities. These actions may be taken even if they are opposed by our other shareholders, including those who [REDACTED] our Shares in this [REDACTED].

We expect to operate, for as long as our Controlling Shareholders are our controlling shareholders, as an affiliate of our Controlling Shareholders. Our Controlling Shareholders may from time to time make strategic decisions that it believes are in the best interests of their business as a whole, including our company. These decisions may be different from the decision that we would have made on our own. Our Controlling Shareholders’ decisions with respect to us or our business may be resolved in ways that favor our Controlling Shareholders and therefore our Controlling Shareholders’ own shareholders, which may not coincide with the interests of our other shareholders. We may not be able to resolve any potential conflicts and even if we do so, the resolution may be less favorable to us than if we were dealing with a non-controlling shareholder. Even if both parties seek to transact business on terms intended to approximate those that could have been achieved among unaffiliated parties, this may not succeed in practice.

Our leverage could adversely affect our financial condition, our ability to raise additional capital to fund our operations, our ability to operate our business, our ability to react to changes in the economy or our industry or our ability to pay our debts and could divert our cash flow from operations to debt payments.

As of December 31, 2020, the total amount of our debt was approximately RMB410.2 million. On March 22, 2021, we repaid RMB200.0 million of our debt. Subject to the limits contained in the credit agreements that govern our debts, we may be able to incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. If we do so, the risks related to our high level of debt could increase. Specifically, our high level of debt could have important consequences, including the following:

• making it more difficult for us to satisfy our obligations with respect to our debt;

• limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements;

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• requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes;

• restricting us or our subsidiaries from making distributions;

• increasing our vulnerability to general adverse economic and industry conditions;

• limiting our flexibility in planning for and reacting to changes in the industry in which we compete;

• placing us at a disadvantage compared to other, less leveraged competitors; and

• increasing our cost of borrowing.

Additionally, we are a holding company and our consolidated assets are owned by, and our business is conducted through, our subsidiaries. Revenue from these subsidiaries is our primary source of funds for debt payments and operating expenses. If our subsidiaries are restricted from making distributions, our ability to meet our debt service obligations or otherwise fund our operations may be impaired. As a result, although a subsidiary of ours may have cash, we may not be able to obtain that cash to satisfy our obligation to service our outstanding debt or fund our operations.

Our failure to comply with the agreements relating to our outstanding indebtedness, including those for which we have pledged shares of some of our subsidiaries, could result in an event of default that could materially and adversely affect our results of operations and our financial condition.

If there were an event of default under any of the agreements relating to our outstanding indebtedness, the holders of the defaulted debt could cause all amounts outstanding with respect to that debt to be due and payable immediately. We cannot assure you that our assets or cash flows would be sufficient to fully repay borrowings under our outstanding debts if accelerated upon an event of default. Further, if we are unable to repay, refinance or restructure our indebtedness under our secured debt, the holders of such debt could proceed against the collateral securing that indebtedness. In particular, the syndicated loan succeeded by Hangzhou UCO, provided by China Merchants Bank and Bank of China, are secured by Meiba, Shenzhen Qianhai, Youyue, and Niwang, and pledge of the 100% shares of Shenzhen Qianhai, Hangzhou Youmei Cosmetics (acquired by Hangzhou UCO), Hangzhou UCO, Youyue and Niwang. If the pledgee enforces the share pledge in any of our aforementioned subsidiaries through which we operate our business in China, we will lose control in these subsidiaries, which will have a material adverse effect on our business, results of operations and financial performance. In addition, any event of default or declaration of acceleration under one debt instrument could also result in an event of default under one or more of our other debt instruments.

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Risks Relating to Doing Business in China

Adverse changes in China economic, political and social conditions as well as laws and government policies may materially and adversely affect our business, financial condition, results of operations and growth prospects.

Substantially of our assets and operations are located in China. Accordingly, our business, financial condition, results of operations and prospects may be influenced to a significant degree by political, economic and social conditions in China generally. The PRC economy differs from the economies of most developed countries in many respects, including the level of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the PRC government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition, the PRC government continues to play a significant role in regulating industry development by imposing industrial policies.

The PRC government also exercises significant control over China’s economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Historically, some of our PRC subsidiaries received subsidies or other favorable governmental treatments from local governments in connection to the local governments’ efforts in promoting local economy. The subsidies and grants are subject to the sole discretion of the relevant governmental authorities, thus may be changed or terminated. We cannot assure you that we will continue to enjoy such government subsidies and other favorable treatments in the future.

While the PRC economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy and the rate of growth has been slowing since 2012. Any adverse changes in economic conditions in China, in the policies of the PRC government or in the laws and regulations in China could have a material adverse effect on the overall economic growth of China. Such developments could adversely affect our business and operating results, lead to reduction in demand for our services and adversely affect our competitive position. The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall PRC economy, but may have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations.

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Failure to obtain or maintain any of the preferential tax treatments and government subsidies or imposition of any additional taxes and surcharges could adversely affect our financial condition and results of operations.

Under the PRC Enterprise Income Tax Law and its implementation rules, the statutory enterprise income tax rate is 25%, but certain “High and New Technology Enterprises” are qualified for a preferential enterprise income tax rates subject to certain qualification criteria. The status as a “High and New Technology Enterprise,” which is reassessed by the government every three years, entitles the relevant company to a favorable income tax rate of 15%. In 2020, Hangzhou Meiba Technology Co., Ltd., obtained its certificate of “High and New Technology Enterprise” and is entitled to enjoy a preferential income tax rate of 15% for the tax filing of fiscal years from 2020 to 2022. However, if it fails to maintain its qualified status, experiences any increase in the enterprise income tax rate, or faces any discontinuation, retroactive or future reduction or refund of any of the preferential tax treatments currently enjoyed, our business, financial condition and results of operations could be materially and adversely affected. There can be no assurance that such preferential tax treatment or any other preferential tax treatment or government subsidies will be recurring. Further, in the ordinary course of our business, we are subject to complex income tax and other tax regulations, and significant judgment is required in the determination of a provision for income taxes. Although we believe our tax provisions are reasonable, if the PRC tax authorities successfully challenge our position and we are required to pay tax, interest and penalties in excess of our tax provisions, our financial condition and results of operations would be materially and adversely affected.

The PRC legal system is evolving and has inherent uncertainties that could limit the legal protection available to you.

The PRC legal system is a civil law system based on written statutes. Unlike common law systems, it is a system in which prior court decisions have limited value as precedents. Since 1979, the PRC government has promulgated laws and regulations governing economic matters in general, such as foreign investment, corporate organization and governance, commerce, taxation and trade. Due to the limited volume of published cases and their non-binding nature, interpretation and enforcement of these laws and regulations involve greater uncertainties than those in other jurisdictions. We cannot predict the effect of future developments in China legal system, including the promulgation of new laws, changes to existing laws, or the interpretation or enforcement thereof, or the pre-emption of local regulations by national laws.

Our business and operations in China are governed by the PRC legal system that is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value. Some of the laws and regulations are still in the developmental stage and are therefore subject to policy changes. Many laws, regulations, policies and legal requirements have only been recently adopted by PRC central or local government agencies, and their implementation, interpretation and enforcement may involve uncertainty due to the lack of established practice available for reference. As a result, there is substantial uncertainty as to the legal protection available to us and our Shareholders. Furthermore, due to the limited volume of published cases and the non-binding nature of prior court decisions, the outcome of

–80– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT RISK FACTORS dispute resolution may not be as consistent or predictable as in other more developed jurisdictions, which may limit the legal protection available to us. In addition, any litigation in China may be protracted and result in substantial costs and the diversion of resources and management attention

PRC regulations of loans to, and direct investment in, PRC entities by offshore holding companies and governmental control of currency conversion may restrict or prevent us from using the [REDACTED] from the [REDACTED] to make loans to our PRC subsidiaries or to make additional capital contributions to our PRC subsidiaries, which may materially adversely affect our liquidity and our ability to fund and expand our business.

In utilizing the [REDACTED] we receive from the [REDACTED] in the manner described in “Future Plans and [REDACTED]”, as an offshore holding company with PRC subsidiaries, we may (i) make additional capital contributions to our PRC subsidiaries, (ii) establish new PRC subsidiaries and make capital contributions to these new PRC subsidiaries, (iii) make loans to our PRC subsidiaries, or (iv) acquire offshore entities with business operations in China in offshore transactions. However, most of these uses are subject to PRC regulations and approvals. For example: capital contributions to our PRC subsidiaries, whether existing or newly-established ones, are subject to the requirement of necessary registration with and information submission to the relevant governmental authorities in China; loans by us to our PRC subsidiaries, which are foreign-invested enterprises, to finance their activities, cannot exceed statutory limits and must be registered with the State Administration of Foreign Exchange (“SAFE”), or its local branches.

On March 30, 2015, SAFE promulgated the Circular on Reforming the Management Approach Regarding the Foreign Exchange Capital Settlement 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) (the “SAFE Circular 19”). SAFE Circular 19 reforms the administration of the settlement of the foreign exchange capital of foreign-invested enterprises by allowing foreign-invested enterprises to settle their foreign exchange capital at their discretion, but it continues to prohibit foreign-invested enterprises from using RMB funds converted from their foreign exchange capital for expenditures beyond their business scope. On June 9, 2016, SAFE promulgated the Circular on Reforming and Standardizing the Administrative Provisions over Capital Account Foreign Exchange (國家外匯管理局關於改革和規範資本項目結匯管理政策的通知) (the “SAFE Circular 16”). SAFE Circular 16 continues to prohibit foreign-invested enterprises from using the RMB funds converted from its foreign exchange capital for expenditures beyond their business scope, investment and financing (except for securities investment or non-guaranteed bank products), providing loans to non-affiliated enterprises or constructing or purchasing real estate other than for self-use. SAFE Circular 19 and SAFE Circular 16 may significantly limit our ability to transfer and use in China the [REDACTED] from this [REDACTED], which may adversely affect our business, financial conditions and results of operations.

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We expect that PRC laws and regulations may continue to limit our use of [REDACTED] or from other financing sources. We cannot assure you that we will be able to obtain these government registrations or approvals on a timely basis, if at all, with respect to future loans or capital contributions by us to our entities in China. If we fail to receive such registrations or approvals, our ability to use the [REDACTED] and to capitalize our PRC operations may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our business.

The PRC Government’s control over currency conversion and changes in the exchange rate between Renminbi and other currencies could negatively affect our financial condition, results of operations and our ability to pay dividends.

Substantially all of our revenue is denominated and settled in Renminbi. The PRC government imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions, can be made in foreign currencies without prior approval by SAFE provided that we satisfy certain requirements. However, approval from SAFE or its local counterpart is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions.

Since a significant amount of our future cash flows from operations will be denominated in Renminbi, any existing and future restrictions on currency exchange may limit our ability to purchase goods and services outside of China or otherwise fund our business activities that are conducted in foreign currencies. This could affect our ability to obtain foreign exchange through debt or equity financing, including by means of loans or capital contributions from us.

Fluctuations in exchange rates could have a material and adverse effect on our results of operations and the value of your [REDACTED].

The conversion of RMB into foreign currencies, including Hong Kong dollars and U.S. dollars, is based on rates set by the PBOC. It is difficult to predict how market forces or government policies may impact the exchange rate between the RMB and the Hong Kong dollars, the U.S. dollar or other currencies in the future. The value of RMB against the Hong Kong dollars, U.S. dollar and other currencies is affected by changes in China’s political and economic conditions and by China’s foreign exchange policies, among other things. We cannot assure you that RMB will not appreciate or depreciate significantly in value against Hong Kong dollars and the U.S. dollar in the future.

Any significant appreciation or depreciation of RMB may materially and adversely affect our revenues, earnings and financial position, and the value of, and any dividends payable on, our Shares. For example, to the extent that we need to convert Hong Kong dollars and U.S. dollars we receive into RMB to pay our operating expenses, appreciation of RMB against the

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Hong Kong dollars and the U.S. dollar would have an adverse effect on the RMB amount we would receive from the conversion. Conversely, a significant depreciation of RMB against the Hong Kong dollars and the U.S. dollar may significantly reduce the Hong Kong dollars or the U.S. dollar equivalent of our earnings, which in turn could adversely affect the price of our Shares.

Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert RMB into foreign currency. As a result, fluctuations in exchange rates may have a material adverse effect on your [REDACTED].

Failure to comply with PRC regulations regarding the registration requirements for employee share ownership plans or share option plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.

In February 2012, the SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plans of Overseas Publicly-Listed Companies (境內個人參與境外上市公司股權激勵計劃外匯管理有關問題的通知) (the “Stock Option Rules”). Under the Stock Option Rules and other relevant rules and regulations, PRC residents who participate in stock incentive plan in an overseas publicly-listed company are required to register with the SAFE or its local branches and complete certain other procedures. Participants of a stock incentive plan who are PRC residents must retain a qualified PRC agent, which could be a PRC subsidiary of the overseas publicly-listed company or another qualified institution selected by the PRC subsidiary, to conduct the SAFE registration and other procedures with respect to the stock incentive plan on behalf of its participants. The participants must also retain an overseas entrusted institution to handle matters in connection with their exercise of stock options, the purchase and sale of corresponding stocks or interests and fund transfers. In addition, the PRC agent is required to amend the SAFE registration with respect to the stock incentive plan if there is any material change to the stock incentive plan, the PRC agent or the overseas entrusted institution or other material changes. We and our PRC employees who have been granted share options will be subject to these regulations upon the completion of the [REDACTED]. Failure of our PRC share option holders to complete their SAFE registrations may subject these PRC residents to fines and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiaries, limited our PRC subsidiaries’ ability to distribute dividends to us, or otherwise materially and adversely affect our business, financial conditions and results of operations.

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It may be difficult to effect service of process upon our Directors or executive officers who live in China or to enforce in China any judgments obtained from non-PRC courts.

Substantially all of our operations are conducted in China. As of the Latest Practicable Date, substantially all of our executive Directors and senior management personnel resided within China, and substantially all of our assets and some assets of such persons were located in China. Therefore, it may not be possible for [REDACTED] to effect service of process upon such persons in China or to enforce against us or such persons in China any judgments obtained from non-PRC courts. The PRC does not have treaties or arrangements providing for the recognition and enforcement of civil judgments of the courts of the United Kingdom, the United States or other western countries. Therefore, recognition and enforcement in China of judgments obtained in such jurisdictions may be difficult. On July 14, 2006, the PRC and Hong Kong signed the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region Pursuant to the Choice of Court Agreements Between Parties Concerned (關於內地與香港特別行政區法院相互認可和執行當事人協議管轄的民商事案件判決的安排) (the “2006 Arrangement”). However, pursuant to the 2006 Arrangement, only a party with a final judgement rendered by a Hong Kong court requiring payment of money in a civil and commercial case pursuant to a choice of court agreement in writing may apply for recognition and enforcement of the judgement in China. Similarly, only a party with a final judgement rendered by a PRC court requiring payment of money in a civil and commercial case pursuant to a choice of court agreement in writing may apply for recognition and enforcement of the judgement in Hong Kong pursuant to such arrangement.

On January 18, 2019, the Supreme Court of the People’s Republic of China and the Department of Justice under the Government of the Hong Kong Special Administrative Region signed the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region (關於內地與香港特別行政區法院相互認可和執行民商事案件判決的安排) (the “2019 Arrangement”). The 2019 Arrangement, for the reciprocal recognition and enforcement of judgments in civil and commercial matters between the courts in mainland China and those in the Hong Kong Special Administrative Region, stipulates the scope and particulars of judgments, the procedures and ways of the application for recognition or enforcement, the review of the jurisdiction of the court that issued the original judgment, the circumstances where the recognition and enforcement of a judgment shall be refused, and the approaches towards remedies, among others. After a judicial interpretation has been promulgated by the Supreme People’s Court and the relevant procedures have been completed by the Hong Kong Special Administrative Region, both sides shall announce a date on which the 2019 Arrangement shall come into effect. The 2019 Arrangement shall apply to any judgment made on or after its effective date by the courts of both sides. The 2006 Arrangement shall be terminated on the same day when the 2019 Arrangement comes into effect. If a “written choice of court agreement” has been signed by parties according to the 2006 Arrangement prior to the effective date of the 2019 Arrangement, the 2006 Arrangement shall

–84– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT RISK FACTORS still apply. Although the 2019 Arrangement has been signed, its effective date has yet to be announced. Therefore, there are still uncertainties about the outcomes and effectiveness of enforcement or recognition of judgements under the 2019 Arrangement.

Dividends payable by us to our foreign investors and gain on the sale of our Shares may become subject to taxes under PRC tax laws.

Under the Income Tax Law issued by the Standing Committee of the National People’s Congress and its implementation rules issued by the State Council, PRC income tax at the rate of 10% is applicable to dividends payable to investors that are deemed “non-resident enterprises”; in other words, those who do not have an establishment or place of business in China, or who have such an establishment or place of business but whose relevant income is not effectively connected with the establishment or place of business, to the extent such dividends are sourced from within China. Similarly, any gain realized on the transfer of Shares by such investors is also subject to 10% PRC income tax if such gain is regarded as income derived from sources within China. If we are considered a PRC “resident enterprise”, it is unclear whether dividends we pay with respect to our Shares, or the gain our Shareholders may realize from the transfer of our Shares, will be treated as income derived from sources within China and be subject to PRC tax. If we are required under the Income Tax Law to withhold PRC income tax on dividends payable to our non-PRC investors that are “non-resident enterprises”, or if our Shareholders are required to pay PRC income tax on the transfer of our Shares, the value of our Shareholders’ [REDACTED] in our Shares may be materially adversely affected.

If we are classified as a PRC “resident enterprise”, we would be subject to PRC income tax at the rate of 25% on our worldwide income and holders of our Shares may be subject to a PRC withholding tax upon the dividends payable by us and upon gain from the sale of our Shares.

Under the EIT Law and its implementation rules, if an enterprise incorporated outside the PRC has its “de facto management bodies” located within China, such enterprise may be recognized as a PRC tax resident enterprise and be subject to the unified enterprise income tax rate of 25% on its worldwide income. Under the implementation rules for the EIT Law, “de facto management bodies” is defined as the bodies that have material and overall management control over the business, personnel, accounts and properties of an enterprise. Since all of our management is currently located in China, we may be recognized as a PRC tax resident enterprise for the purpose of the EIT Law and therefore we would be subject to PRC income tax at the rate of 25% on our worldwide income. In such event, our income tax expenses may increase significantly and our net profit and profit margin could be materially and adversely affected.

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In addition, pursuant to the EIT Law and its implementation rules, a 10% withholding tax is levied on dividends declared to foreign investors from the foreign investment enterprises established in Mainland China. The requirement is effective from January 1, 2008 and applies to earnings after December 31, 2007. A lower withholding tax rate may be applied if there is a tax treaty between the PRC and the jurisdiction of the foreign investors. For our Group, the applicable withholding tax rate is 10%. Therefore, foreign investors may be subject to a PRC withholding tax upon dividends distributed by us or upon gains from the sale of our Shares.

PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident Shareholders to personal liability and limit our ability to inject capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to distribute profits to us, or otherwise adversely affect our financial position.

SAFE has promulgated the Circular of the SAFE on Foreign Exchange Administration of Overseas Investment, Financing and Round-trip Investments Conducted by Domestic Residents through Special Purpose Vehicles (關於境內居民通過特殊目的公司境外投融資及返程投資外匯管理有關問題的通知) (the “SAFE Circular 37”), effective on July 4, 2014, that require PRC residents, including PRC institutions and individuals, to register with local branches of SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred to in Circular 37 as a “special purpose vehicle”. The term “control” under Circular 37 is broadly defined as the operation rights, beneficiary rights or decision-making rights acquired by the PRC residents in the offshore special purpose vehicles by such means as acquisition, trust, proxy, voting rights, repurchase, convertible bonds or other arrangements. Circular 37 further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as increase or decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material event.

We may not be informed of the identities of all the PRC residents holding direct or indirect interest in our Company, and we cannot provide any assurances that these PRC residents or our PRC subsidiaries will obtain all applicable registrations or comply with other requirements required by SAFE Circular 37 or other related rules. The failure or inability of our PRC resident Shareholders to make any required registrations or comply with other requirements under SAFE Circular 37 and other related rules, or failure by us to amend the foreign exchange registrations of our PRC subsidiaries, may subject such PRC residents or our PRC subsidiaries to fines and legal sanctions and may also limit our ability to contribute additional capital into or provide loans to (including using the [REDACTED] from the [REDACTED]) our PRC subsidiaries, limit our PRC subsidiaries’ ability to pay dividends or otherwise distribute profits to us, or otherwise adversely affect our financial position.

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We face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.

The State Administration of Taxation issued the Bulletin on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC Resident Enterprises on February 3, 2015, or SAT Bulletin 7, and amended on October 17, 2017 and December 29, 2017, which partially replaced and supplemented previous rules under the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises, or SAT Circular 698, which was issued by the State Administration of Taxation in 2009. Pursuant to SAT Bulletin 7, an “indirect transfer” of assets, including equity interests in a PRC resident enterprise, by non-PRC resident enterprises may be re-characterized and treated as a direct transfer of PRC taxable assets, if the arrangement does not have a reasonable commercial purpose and was established for the purpose of avoiding payment of PRC enterprise income tax. As a result, gains derived from the indirect transfer may be subject to PRC enterprise income tax. According to SAT Bulletin 7, “PRC taxable assets” include assets attributed to an establishment in China, immovable properties located in China, and equity investments in PRC resident enterprises. Gains derived from the transfer of PRC taxable assets by a direct holder that is a non-PRC resident enterprise is subject to PRC enterprise income taxes. When determining whether an arrangement has a “reasonable commercial purpose,” the following factors are considered:

• whether the value of the equity interest of the relevant offshore enterprise is mainly derived from PRC taxable assets;

• whether the assets of the relevant offshore enterprise mainly consist of direct or indirect investment in China;

• whether the income of the relevant offshore enterprise is mainly generated from China;

• whether the offshore enterprise and its subsidiaries directly or indirectly holding PRC taxable assets have real commercial nature as evidenced by actual function and risk exposure;

• for how long the existing business model and organizational structure of the relevant offshore enterprise has existed;

• the replicability of the arrangement by direct transfer of PRC taxable assets; and

• the tax situation of such indirect transfer and applicable tax treaties or similar arrangements.

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Gains derived from an indirect offshore transfer of assets of a PRC establishment or place of business are to be included in the enterprise income tax filing of the PRC establishment or place of business, and are subject to a PRC enterprise income tax rate of 25%. In case of a transfer of immovable properties located in China or of equity investments in a PRC resident enterprise, which is not related to a PRC establishment or place of business of a non-resident enterprise, a PRC enterprise income tax rate of 10% applies, subject to available preferential tax treatment under applicable tax treaties or similar arrangements. The party who is obligated to pay for the transfer has the withholding obligation with respect to the transfer. Where the payor fails to withhold sufficient tax, the transferor is required to declare and pay such tax to the tax authority by itself within the statutory time limit. Late payment of applicable tax will subject the transferor to default interest. SAT Bulletin 7 does not apply to sales of shares by investors through a public stock exchange if the shares were acquired by the investors through a public stock exchange.

We face uncertainties as to the application of SAT Bulletin 7 and previous rules under SAT Circular 698, including reporting and other obligations with respect to certain past and future transactions where PRC taxable assets are involved, such as offshore restructuring, sale of the shares in our offshore subsidiaries or investments. We may be subject to filing obligations or taxed as the transferor, or subject to withholding obligations as the transferee, in the transactions. For transfer of our shares by investors that are non-PRC resident enterprises, our PRC subsidiaries may be requested to assist in filings under SAT Circular 698 and SAT Bulletin 7. We may be required to allocate valuable resources to comply with SAT Circular 698 and SAT Bulletin 7, to request relevant transferors from whom we purchase taxable assets to comply with these rules, or to establish that we should not be taxed under these rules, which may have a material adverse effect on our financial conditions and results of operations.

China’s M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of PRC companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China.

The Regulations on 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), or the M&A Rules, adopted by six PRC regulatory agencies in 2006 and amended in 2009, established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex. Such regulation requires, among other things, that the foreign investor should submit a declaration to the MOFCOM in advance of any change-of-control transaction in which a foreign investor acquires control of a PRC domestic enterprise and involves any of the following circumstances: (i) any important industry is concerned, (ii) such transaction involves factors that impact or may impact national economic security, or (iii) such transaction will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand. We do not expect that any of our further merger and acquisition will trigger the requirement to submit such declaration to MOFCOM under each of the above-mentioned circumstances or any review by other PRC government authorities. Moreover, the Anti-Monopoly Law (中華人民共和國反壟斷法) promulgated by the Standing

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Committee of the NPC which became effective in 2008 requires that transactions which are deemed concentrations and involve parties with specified turnover thresholds must be cleared by MOFCOM before they can be completed. In addition, Implementation of Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, effective in September 2011, requires acquisitions by foreign investors of PRC companies engaged in military related or certain other industries that are crucial to national security be subject to security review before consummation of any such acquisition. We may pursue potential strategic acquisitions that are complementary to our business and operations. Complying with the requirements of these regulations to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval or clearance from MOFCOM, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.

[REDACTED]

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[REDACTED]

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[REDACTED]

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[REDACTED]

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[REDACTED]

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In preparation for the Listing, we have sought the following waivers from strict compliance with the Listing Rules and exemptions from the Companies (Winding Up and Miscellaneous Provisions) Ordinance.

WAIVER IN RESPECT OF MANAGEMENT PRESENCE IN HONG KONG

Pursuant to Rule 8.12 of the Listing Rules, an issuer must have a sufficient management presence in Hong Kong. This will normally mean that at least two of its executive directors must be ordinarily resident in Hong Kong. We do not have sufficient management presence in Hong Kong for the purposes of Rule 8.12 of the Listing Rules.

Our Group’s management headquarters, senior management, business operations and assets are primarily based outside Hong Kong. Our Directors consider that the appointment of executive directors who will be ordinarily resident in Hong Kong would not be beneficial to, or appropriate for, our Group and therefore would not be in the best interests of our Company or the Shareholders as a whole.

Accordingly, we have applied for[, and the Stock Exchange has granted], a waiver from strict compliance with Rule 8.12 of the Listing Rules. We will ensure that there is an effective channel of communication between the Stock Exchange and us by way of the following arrangements:

(a) pursuant to Rule 3.05 of the Listing Rules, we have appointed and will continue to maintain two authorised representatives who shall act at all times as the principal channel of communication with the Stock Exchange. Each of our authorised representatives will be readily contactable by the Stock Exchange by telephone, facsimile and/or e-mail to deal promptly with enquiries from the Stock Exchange. Both of our authorised representatives are authorised to communicate on our behalf with the Stock Exchange. At present, our two authorised representatives are Mr. LIU Jiaqi and Mr. NG Cheuk Ming;

(b) pursuant to Rule 3.20 of the Listing Rules, each Director will provide their contact information to the Stock Exchange and to the authorised representatives. This will ensure that the Stock Exchange and the authorised representatives should have means for contacting all Directors promptly at all times as and when required;

(c) we will ensure that each Director who is not ordinarily resident in Hong Kong possesses or can apply for valid travel documents to visit Hong Kong and can meet with the Stock Exchange within a reasonable period; and

(d) pursuant to Rules 3A.19 of the Listing Rules, we have retained the services of Altus Capital Limited as compliance adviser (the “Compliance Adviser”), who will act as an additional channel of communication with the Stock Exchange.

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WAIVER IN RESPECT OF JOINT COMPANY SECRETARIES

Pursuant to Rules 3.28 and 8.17 of the Listing Rules, the company secretary must be an individual who, by virtue of their academic or professional qualifications or relevant experience, is, in the opinion of the Stock Exchange, capable of discharging the functions of company secretary.

Pursuant to Note 1 to Rule 3.28 of the Listing Rules, the Stock Exchange considers the following academic or professional qualifications to be acceptable:

(i) a member of The Hong Kong Institute of Chartered Secretaries;

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

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

Pursuant to Note 2 to Rule 3.28 of the Listing Rules, in assessing “relevant experience”, the Stock Exchange will consider the individual’s:

(i) length of employment with the issuer and other issuers and the roles they played;

(ii) familiarity with the Listing Rules and other relevant law and regulations including the Securities and Futures Ordinance, Companies Ordinance, Companies (Winding Up and Miscellaneous Provisions) Ordinance and the Takeovers Code;

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

(iv) professional qualifications in other jurisdictions.

Our Company appointed Mr. NG Cheuk Ming (吳卓明)(“Mr. Ng”) of Tricor Services Limited and Ms. HE Qiongxiu (何瓊秀)(“Ms. He”), as joint company secretaries. See “Directors and senior management – Joint company secretaries” for their biographies.

Mr. Ng is an associate member of both The Hong Kong Institute of Chartered Secretaries and The Chartered Governance Institute (formerly The Institute of Chartered Secretaries and Administrators),, and therefore meets the qualification requirements under Rule 3.28 Note 1 of the Listing Rules and is in compliance with Rule 8.17 of the Listing Rules.

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The Company’s principal business activities are outside Hong Kong. The Company believes that it would be in the best interests of the Company and the corporate governance of the Group to have as its joint company secretary a person such as Ms. He, who is an employee of the Company and who has day-to-day knowledge of the Company’s affairs. Ms. He has the necessary nexus to the Board and close working relationship with management of the Company in order to perform the function of a joint company secretary and to take the necessary actions in the most effective and efficient manner.

Accordingly, we have applied for[, and the Stock Exchange has granted], a waiver from strict compliance with Rules 3.28 and 8.17 of the Listing Rules for a three year period from the Listing Date on the conditions that (i) the waiver will be revoked immediately if Mr. Ng (being 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), ceases to provide assistance to Ms. He throughout the three year period, and (ii) the waiver can be revoked if there are material breaches of the Listing Rules by the Company.

WAIVER AND EXEMPTION IN RESPECT OF THE 2019 ESOP

Pursuant to Rule 17.02(1)(b) of, and paragraph 27 of Part A of Appendix 1 to, the Listing Rules, and paragraph 10 of Part I of the Third Schedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance, this document is required to include, among other things, details of the number, description and amount of any shares in or debentures of our Company which any person has, or is entitled to be given, an option to subscribe for, together with certain particulars of each option, namely the period during which it is exercisable, the price to be paid for shares or debentures subscribed for under it, the consideration (if any) given or to be given for it or for the right to it, the names and addresses of the persons to whom it or the right to it was given, and their potential dilution effect on the shareholding upon listing as well as the impact on the earnings per share arising from the exercise of such outstanding options.

As of the Latest Practicable Date, we had granted outstanding options under the 2019 ESOP to 516 grantees to subscribe for an aggregate of 144,761,085 Shares, representing [REDACTED]% of the total number of Shares in issue immediately after completion of the [REDACTED] (assuming the [REDACTED] is not exercised and no Shares are issued under Share Schemes and taking into account the Share Subdivision). See “Statutory and general information – Share Schemes” in Appendix IV for details.

Our Company has applied to the Stock Exchange and the SFC for (a) a waiver from strict compliance with Rule 17.02(1)(b) of, and paragraph 27 of Part A of Appendix 1 to, the Listing Rules, and (b) an exemption from strict compliance with paragraph 10 of Part I of the Third Schedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance, on the ground that strict compliance with the above requirements would be unduly burdensome for our Company for the following reasons:

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(i) given that 516 grantees are involved, strict compliance with such disclosure requirements in setting out full details of all the grantees under the 2019 ESOP in this document on an individual basis would be costly and unduly burdensome for our Company in light of a significant increase in cost and time for information compilation, disclosure preparation and printing;

(ii) strict compliance with such disclosure requirements in setting out full details of all the grantees requires our Company to seek and obtain consent from each of the 516 grantees, in order to comply with personal data privacy laws and principles, which would be significantly time consuming, and administratively burdensome and costly;

(iii) given the nature of the business of our Company, it is extremely important for our Company to recruit and retain talents, and the success of our Company’s long-term development plan will very much depend on the loyalty and contribution of the grantees, whereas the information relating to the share options granted to the grantees is highly sensitive and confidential;

(iv) as of the date of this document, only 3 grantees were Directors, senior management or connected persons of our Company, and the remaining 513 grantees were only employees of our Group; therefore disclosure of names, addresses and entitlements on an individual basis in this document will require a substantial volume of additional disclosure that does not provide any material information to the investing public;

(v) material information relating to the options under the 2019 ESOP will be disclosed in this document, including the total number of Shares subject to the 2019 ESOP, the exercise price per Share, the potential dilution effect on the shareholding and impact on the earnings per Share upon the full exercise of the options granted under the 2019 ESOP;

(vi) the proposed alternative disclosure contains such particulars and information which is necessary to enable an [REDACTED] to make an informed assessment of the activities, assets, liabilities, financial position, management and prospects of our Company; and

(vii) the grant and exercise in full of the options under the 2019 ESOP would not cause any material adverse impact on the financial position of our Company.

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The Stock Exchange [has granted] a waiver from strict compliance with Rule 17.02(1)(b) of, and paragraph 27 of Part A of Appendix 1 to, the Listing Rules on the conditions that:

(i) for grants under the 2019 ESOP to our Directors, the senior management of our Group and our connected persons, disclosure be made on an individual basis, including all the particulars required under Rule 17.02(1)(b) of, and paragraph 27 of Part A of Appendix 1 to, the Listing Rules, and paragraph 10 of Part I of the Third Schedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance;

(ii) for the remaining grantees under the 2019 ESOP, disclosure will be made on an aggregated basis, including (1) the aggregate number of other grantees and the number of Shares subject to the options granted to them under the 2019 ESOP, (2) the consideration paid for the grant of the options granted under the 2019 ESOP, and (3) the exercise period and the exercise price for the options granted under the 2019 ESOP;

(iii) the aggregate number of Shares underlying the options granted under the 2019 ESOP and the percentage of our Company’s total issued share capital represented by such number of Shares as of the Latest Practicable Date be disclosed;

(iv) the dilution effect and impact on earnings per Share upon the full exercise of the options granted under the 2019 ESOP be disclosed;

(v) a summary of the major terms of the 2019 ESOP be disclosed;

(vi) a full list of all grantees under the 2019 ESOP with all the particulars required under Rule 17.02(1)(b) of, and paragraph 27 of Part A of Appendix 1 to, the Listing Rules, and paragraph 10 of Part I of the Third Schedule to the Companies (Winging Up and Miscellaneous Provisions) Ordinance will be made available for public inspection;

(vii) the particulars of the waiver be disclosed; and

(viii) the grant of a certificate of exemption under the Companies (Winding Up and Miscellaneous Provisions) Ordinance from the Securities and Futures Commission exempting our Company from the disclosure requirements provided in paragraph 10 of Part I of the Third Schedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance.

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The SFC [has granted] a certificate of exemption from strict compliance with paragraph 10 of Part I of the Third Schedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance on the conditions that:

(i) for grants under the 2019 ESOP to our Directors, the senior management of our Group and our connected persons, disclosure be made on an individual basis, including all the particulars required under paragraph 10 of Part I of the Third Schedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance;

(iii) the particulars of the exemption be disclosed.

[REDACTED]

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[REDACTED]

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WAIVER IN RELATION TO BUSINESS OR SUBSIDIARY ACQUIRED AFTER THE TRACK RECORD PERIOD

Pursuant to Rules 4.04(2) and 4.04(4)(a), the Accountants’ Report to be included in a listing document must include the income statements and balance sheets of any subsidiary or business acquired, agreed to be acquired or proposed to be acquired since the date to which its latest audited accounts have been made up in respect of each of the three financial years immediately preceding the issue of the listing document.

Pursuant to Rule 4.02A, acquisitions of business include acquisitions of associates and any equity interest in another company. Pursuant to Note 4 to Rule 4.04, the Stock Exchange may consider granting a waiver of the requirements under Rules 4.04(2) and 4.04(4) on a case-by-case basis, and having regard to all relevant facts and circumstances and subject to certain conditions set out thereunder.

Investment in Airr Labs Pte. Ltd. (“Airr Labs”)

During the Track Record Period, our Group, through our wholly-owned subsidiary 2015A Hong Kong Limited, made an investment in Airr Labs by acquiring approximately 14.29% of the issued share capital of Airr Labs. 2015A Hong Kong Limited also entered into a shareholders agreement pursuant to which it had the option to further invest up to US$1,500,000 in Airr Labs by subscribing for and purchasing a further number of shares according to the calculation set out in the shareholders agreement.

After the Track Record Period, on January 28, 2021, 2015A Hong Kong Limited exercised its option under the shareholders agreement and invested a sum of US$1,500,000 for 125,006 Class B ordinary shares of Airr Labs (the “Airr Labs Investment”). Upon completion of this further investment and subscription on February 11, 2021, 2015A Hong Kong Limited owned approximately 22.58% of the issued share capital of Airr Labs.

We acquired equity interest in Airr Labs with a view to establish a presence in the South East Asia market for the distribution of international branded beauty products and to expand current market coverage.

Our Directors believe that the terms of the Airr Labs Investment are fair and reasonable and in the interests of the Shareholders as a whole. To the best of our Directors’ knowledge, information and belief, having made all reasonable enquiries, Airr Labs and its ultimate beneficial owners are third parties independent from our Company and its connected persons.

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Acquisition of Shanghai Protime Internet Technology Co., Ltd. (上海點正互聯網科技有限公司) (“Protime” or the “Target”)

Our Company, through Hangzhou UCO, acquired the e-marketing and data analytics business of the Target including all assets and liabilities and intellectual property (the “Acquisition”) for a total consideration of RMB63 million, which will be settled in cash. The consideration is based on arm’s length negotiations between the sellers and our Company, taking into account a number of factors including the earnings of the Target in 2020. We intend to use our internal resources to satisfy the cash consideration.

Our Company and the selling shareholders of the Target entered into the asset purchase agreement and its ancillary agreements dated February 28, 2021. No part of the cash consideration has been settled as at the Latest Practicable Date. The sellers are Independent Third Parties of our Company.

The Target commenced operations in 2016 and is engaged in marketing, data analysis, and media service related business. Our Company confirms that the Acquisition aligns with its business and growth strategy as stated in this document.

Our Directors believe that the terms of the Acquisition are fair and reasonable and in the interests of the Shareholders as a whole. To the best of our Directors’ knowledge, information and belief, having made all reasonable enquiries, the Target and its ultimate beneficial owners are third parties independent from our Company and its connected persons.

Waiver in respect of the Airr Labs Investment

We have applied for, [and the Stock Exchange has granted,] a waiver from strict compliance with Rules 4.04(2) and 4.04(4) of the Listing Rules in respect of the Airr Labs Investment on the following grounds:

(a) The percentage ratios of each investment are all less than 5% by reference to the most recent financial year of our Company’s Track Record Period

The percentage ratios as set out in Rule 14.07 of the Listing Rules for the Airr Labs Investment are all significantly less than 5% by reference to the most recent financial year of our Company’s Track Record Period.

Accordingly, our Company considers that the Airr Labs Investment is immaterial and does not expect it to have any material effect on the business, financial condition or operations of our Group.

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(b) Our Company entered into the Airr Labs Investment in the ordinary course of business

Our Company entered into the Airr Labs Investment to establish a presence in the South East Asia market for the distribution of international branded beauty products and to expand our current market coverage. This is complementary with our Company’s strategy of expanding our capabilities and strengthening our platform ecosystem. As a result, we are of the view that entering into the Airr Labs Investment is within the ordinary and usual course of business of our Company.

(c) The historical financial information of Airr Labs is not available or would be unduly burdensome to obtain or prepare

Our Company has a minority interest in Airr Labs and does not have any representation at the board of directors of Airr Labs, and is therefore unable to compel Airr Labs to disclose its historical financial information in our Company’s [REDACTED]. In addition, it will require considerable time and resources for our Company and its reporting accountant to fully familiarize itself with the management accounting policies of Airr Labs and compile the necessary financial information and supporting documents for disclosure in the listing document of our Company. As such, it would be impracticable within the tight timeframe for our Company to disclose the audited financial information of Airr Labs as required under Rules 4.04(2) and 4.04(4) of the Listing Rules.

In addition, having considered that the investment in Airr Labs is immaterial and does not expect to have any material effect on the business, financial condition or operations of our Group, it would not be meaningful and would be unduly burdensome for our Company to prepare and include the financial information of Airr Labs during the Track Record Period in the listing documents of our Company.

(d) Alternative disclosure in this document

Our Company has provided alternative information in this document in connection with the Airr Labs Investment. Such information include, where applicable, those which would be required for a discloseable transaction under Chapter 14 of the Listing Rules including, for example, reasons for the investments and a confirmation that the counterparties and the ultimate beneficial owners of the counterparties are independent third parties of our Company and its connected persons.

Our Company does not expect to use any [REDACTED] from the [REDACTED] to fund the Airr Labs Investment.

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Waiver in respect of the Acquisition

We have applied for, [and the Stock Exchange has granted,] a waiver from strict compliance with Rules 4.04(2) and 4.04(4) of the Listing Rules in respect of the Acquisition on the following grounds:

(a) The percentage ratios of the Acquisition are all less than 5% by reference to the most recent financial year of our Company’s Track Record Period

The percentage ratios as set out in Rule 14.07 of the Listing Rules for the Acquisition are all significantly less than 5% by reference to the most recent financial year of our Company’s Track Record Period.

(b) Our Company entered into the Acquisition in the ordinary course of business

Our Company entered into the Acquisition to explore data analytics solutions and business expansion opportunities for our Group’s brand clients. Protime is a leading Tmall independent software vendor which was recently recognized as one of the best partners of Tmall in 2020, and the e-marketing and data analytics business of Protime is complementary with the business of our Group and our strategy of enhancing our operating efficiencies through technology. As a result, we are of the view that entering into the Acquisition is within the ordinary and usual course of business of the Company.

Accordingly, our Company considers that the Acquisition is immaterial and does not expect it to have any material effect on the business, financial condition or operations of our Group.

(c) The historical financial information of the Target is not available or would be unduly burdensome to obtain or prepare

It will require considerable time and resources for our Company and its reporting accountant to fully familiarize itself with the management accounting policies of the Target and compile the necessary financial information and supporting documents for disclosure in the listing document of our Company. As such, it would be impracticable within the tight timeframe for our Company to disclose the audited financial information of the Target as required under Rules 4.04(2) and 4.04(4) of the Listing Rules.

In addition, having considered the Acquisition is immaterial and does not expect to have any material effect on the business, financial condition or operations of our Group, it would not be meaningful and would be unduly burdensome for our Company to prepare and include the financial information of the Target during the Track Record Period in the listing documents of our Company.

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(d) Alternative disclosure in this document

Our Company has provided alternative information in this document in connection with the Acquisition. Such information include, where applicable, those which would be required for a discloseable transaction under Chapter 14 of the Listing Rules including, for example, reasons for the investments and a confirmation that the counterparties and the ultimate beneficial owners of the counterparties are independent third parties of our Company and its connected persons.

Our Company does not expect to use any [REDACTED] from the [REDACTED] to fund the Acquisition.

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[REDACTED]

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[REDACTED]

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[REDACTED]

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[REDACTED]

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DIRECTORS

Name Address Nationality

Executive Directors

Mr. CHANG Che Hang Room 2416 Chinese (張子恆) Building 2 Oriental Grand Yue (Hong Kong) No. 88 Minxin Road Jianggan District, Hangzhou Zhejiang Province, China

Mr. LIU Jiaqi (劉佳琦) Room 1810, Yuesheng International Chinese Finance Building No. 972 Kejiguan Street Binjiang District, Hangzhou Zhejiang Province, China

Non-executive Directors

Ms. ZHAO Hanxi (趙涵曦) Room 516, No. 1500 Chinese Hami Road Changning District Shanghai, China

Ms. WAN Jiahui (萬佳惠) Room 701, No. 8 Lane 150 Chinese Qingshan Road Minhang District Shanghai, China

Independent non-executive Directors

Mr. WEI Chun-Hsien (韋俊賢) Suite 1005, No. 1690 Chinese Wuzhong Road (Hong Kong) Minhang District Shanghai, China

Ms. CHOW LOK Mei Ki 15A, No. 38 Broadwood Road Chinese Cindy (周駱美琪) Happy Valley (Hong Kong) Hong Kong

Mr. KIANG Shek Chau A602, Residences at Fashion Park, Chinese (姜錫岫) Lane 100 Jinhui Road, (Hong Kong) Minhang District, Shanghai, China

See “Directors and senior management” for further details.

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PARTIES INVOLVED IN THE [REDACTED]

Joint Sponsors CLSA Capital Markets Limited 18/F, One Pacific Place 88 Queensway Hong Kong

Credit Suisse (Hong Kong) Limited 88th Floor, International Commerce Centre 1 Austin Road West Kowloon, Hong Kong

[REDACTED]

Legal advisers to our Company As to Hong Kong and U.S. laws Skadden, Arps, Slate, Meagher & Flom and affiliates 42/F, Edinburgh Tower, The Landmark 15 Queen’s Road Central Central Hong Kong

As to PRC law Haiwen & Partners 20/F, Fortune Financial Center 5 Dong San Huan Central Road Chaoyang District Beijing PRC

As to Cayman Islands law Maples and Calder (Hong Kong) LLP 26th Floor, Central Plaza 18 Harbour Road Wanchai Hong Kong

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Legal advisers to the Joint Sponsors and As to Hong Kong and U.S. laws the [REDACTED] Freshfields Bruckhaus Deringer 55th Floor, One Island East Taikoo Place Quarry Bay Hong Kong

As to PRC law Zhong Lun Law Firm 6/10/11/16/17F, Two IFC No. 8 Century Avenue Pudong New Area Shanghai, China

Auditor and Reporting Accountant PricewaterhouseCoopers Certified Public Accountants and Registered Public Interest Entity Auditor 22/F Prince’s Building Central Hong Kong

Industry consultant Shanghai iResearch Co., Ltd., China R701 Tower B, Zhongjin International Caoxi North No. 333 Xuhui District Shanghai, China

[REDACTED]

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Headquarters 1-3F, No. 6 Building 600 21st Avenue Qiantang New District Hangzhou, China

Principal place of business in Hong Kong Level 54, Hopewell Centre 183 Queen’s Road East Hong Kong

Registered office in the Cayman Islands PO Box 309, Ugland House Grand Cayman KY1-1104 Cayman Islands

Company website www.uco.com (the information contained on this website does not form part of this document)

Joint company secretaries HE Qiongxiu 1-3F, No. 6 Building 600 21st Avenue Qiantang New District Hangzhou, China

NG Cheuk Ming (HKICS, ICSA) Level 54, Hopewell Centre 183 Queen’s Road East Hong Kong

Authorised representatives LIU Jiaqi 1-3F, No. 6 Building 600 21st Avenue Qiantang New District Hangzhou, China

NG Cheuk Ming Level 54, Hopewell Centre 183 Queen’s Road East Hong Kong

Audit committee Ms. CHOW LOK Mei Ki Cindy (Chairperson) Mr. WEI Chun-Hsien Ms. WAN Jiahui

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Remuneration committee Ms. CHOW LOK Mei Ki Cindy (Chairperson) Mr. KIANG Shek Chau Ms. ZHAO Hanxi

Nomination committee Mr. CHANG Che Hang (Chairperson) Mr. KIANG Shek Chau Mr. WEI Chun-Hsien

[REDACTED]

Compliance adviser Altus Capital Limited 21 Wing Wo Street Central Hong Kong

Principal bank Silicon Valley Bank 3003 Tasman Drive Santa Clara, CA 95054 United States of America

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The information presented in this section, unless otherwise indicated, is derived from various official government publications and other publications, and from the market research report prepared by iResearch, which was commissioned by us. We believe that the information has been derived from appropriate sources such as iResearch’s database, publicly available information sources, industry reports, as well as data obtained from surveys and other sources. We believe that we 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. The information has not been independently verified by us, [the Joint Sponsors, [REDACTED]] or any of our or their respective directors, officers, representatives, employees, agents or professional advisers, or any other person or party (except iResearch) involved in the [REDACTED], and no representation is given as to the completeness, accuracy, or fairness of such information. Accordingly, such information should not be unduly relied upon.

SOURCE OF INFORMATION

Founded in 2002, iResearch is an independent and a PRC-based market research institution that provides consumer insights and market data to companies in various industries, including mobile internet, big data, information technology, e-commerce, advertising, etc.

iResearch has agreed to be paid a commission fee of approximately RMB650,000 to issue a report (the “iResearch Report”) on China’s beauty market. The iResearch Report was compiled using both primary and secondary research conducted in China. The primary research involved interviews with industry participants. The secondary research utilized relevant economic data, industry data, information and statistics published by government departments, publications and studies by industry experts, public company annual and quarterly reports, iResearch’s other research reports, online resources and data from iResearch’s research database.

iResearch’s projection on the size of the related markets in China takes into consideration various factors, including (i) historical market size data, (ii) the public filings of, and other publicly available information regarding major e-commerce platforms and brand e-commerce enablement service providers and those companies’ projections of the related industries from iResearch’s interviews or communications with them, and (iii) iResearch’s views and estimates of industry developments. iResearch has prepared the iResearch Report on the assumptions that (i) the social, economic, political and technology environment is expected to remain stable, which ensures a sustainable and steady development of China’s beauty industry and brand e-commerce enablement service industry, (ii) the data quoted from authoritative agencies remain unchanged, (iii) key industry drivers are likely to continue to affect the market over the forecast period from 2021 to 2025, taking into consideration the potential impact of COVID-19, and (iv) there will be no subversive changes to the related industries. The reliability of the iResearch Report may be affected by the accuracy of the foregoing assumptions and factors.

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iResearch believes that the basic assumptions used in preparing the iResearch Report, including those used to make future projections, are factual, correct and not misleading. iResearch has independently analyzed the information, but the reliability of this report may be affected by the accuracy of the foregoing assumptions and factors.

OVERVIEW OF CHINA’S RETAIL BEAUTY MARKET

Market Definition and Size of China’s Retail Beauty Market

China is the second largest retail beauty market in the world, with a market size of RMB411 billion and RMB862 billion in 2015 and 2020, respectively, representing a 5-year CAGR of 16.0%, and is expected to reach RMB1,618 billion in 2025, representing a 5-year CAGR of 13.4%, according to the iResearch Report. The size of the retail beauty market is defined as the total retail sales of beauty retail products, including skin care, color cosmetics, perfume, personal care and others according to the iResearch Report. Given its beauty market’s size and growth, China is mission critical and a key sales driver for international and domestic beauty brands. The follow chart sets forth the historical and expected market size of China’s retail beauty market.

Market Size of China’s Retail Beauty Market (RMB billion)

1,618 1,474 2020-25E CAGR =1,331 13.4% 1,180 1,021 862 2015-20 CAGR = 16.0% 790 681 553 411 454

2015 2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E

Source: the iResearch Report

Key Growth Drivers of China’s Retail Beauty Market

Consumption upgrade and underpenetrated beauty spending

The secular trend in consumption upgrade in China, driven by the rise in per capita disposable income and individual consumption power, contributes to higher beauty spending per capita in China. According to the iResearch Report, annual disposal income per capita in China increased from RMB21,966.2 in 2015 to RMB32,189.0 in 2020, and is expected to further increase to RMB47,466.7 in 2025, representing 5-year CAGRs of 7.9% and 8.1%, respectively. However, China’s per capita spending on beauty products remains well below other mature markets, with per capita spending of US$49.5 in 2019, compared to US$253.0 in the U.K., US$282.9 the U.S. and US$308.1 in Japan during the same period, according to the iResearch Report, suggesting growth headroom of approximately five to six times. The following chart sets for the spending per capita on beauty products and premium beauty products in 2019 in respective countries.

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Beauty consumption and premium beauty consumption in 2019 (US$)

308.1 285.2 282.9

253.0

123.3 104.2 100.1 88.3

49.5 15.7

China Japan USA United Kingdom

Spending on beauty products per capita Spending on premium beauty products per capita Average spending on beauty products per capita (Japan, USA and the UK) Average spending on premium beauty products per capita (Japan, USA and the UK)

Note: Premium beauty products are products with retail prices over RMB200.

Source: the iResearch Report

Desire for premium brand products

Branding has a strong influence on consumer behavior in the beauty segment. For example, the top six beauty brand groups by revenues globally, namely L’Oréal, Unilever, Estee Lauder, P&G, Shiseido and Coty, accounted for 41% of the global beauty revenue in 2019, showing relative concentration in the market, according to the iResearch Report. Similarly, premium beauty brands in China had a 29.6% share of wallet in 2020, according to the iResearch Report. According to the same report, total retail sales from premium beauty brands in China reached RMB255 billion in 2020, representing a CAGR of 20.0% between 2015 and 2020, compared to the CAGR of 16.0% for total retail sales from beauty brands in China. Among the premium beauty brand groups in China, international brand groups account for 8 out of the top 10 premium beauty brand groups in terms of market share in 2019, representing 57.9% of the premium beauty market in China, according to the iResearch Report.

Resilient demand

The beauty segment in China is resilient to economic downturns with relatively affordable small-ticket items, according to the iResearch Report. During the impact of COVID-19, the beauty market in China showed a quick and strong rebound. According to the National Bureau of Statistics, beauty consumption in China had year-over-year growths of 15.6%, 17.7%, and 32.3% in the second, third and fourth quarters in 2020, respectively. These growth rates are higher than those of other consumer segments in China, such as food and beverage, 3C and electrical appliances (computer, communication, consumer electronic products and electrical appliances) and furniture during the same periods, according to the iResearch Report. The following chart sets forth the year-over-year growth rates of different consumer segments in China in the respective periods.

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YoY consumption growth in China (%)

40.0%

30.0%

20.0%

10.0%

0.0%

-10.0%

-20.0% 2020Q2 2020Q3 2020Q4

Beauty products 3C and electrical appliances Furniture Apparel Food & beverage

Source: the iResearch Report

Ever-changing beauty trend driving purchase frequency

In recent years, increasing presence of beauty products on social media in China has led to growing consumer awareness of the segment, and in turn changes in beauty trends, according to the iResearch Report. In addition, as the consumer base for beauty products enlarges, consumers wish to differentiate themselves from others with diverse products, which further drives up purchase frequency, according to the iResearch Report. Based on a survey iResearch conducted in 2019 of 2,002 subjects, approximately 64% of the surveyed consumers had increased their purchase frequencies on beauty products in 2019, and over 57% of the surveyed consumers purchased beauty products at least once per month in 2019. According to iResearch report, average annual consumer purchasing frequency for beauty products in China increased from 7.4 times in 2017 to 8.6 times in 2019.

Growing consumer base

Increasing awareness and interest in beauty is driving the expansion of the consumer base for beauty products in China. The proliferation of social media is leading to greater awareness of beauty products, particularly for younger generations, lower-tier city consumers and males. Based on a survey iResearch conducted in 2019, approximately 83% of surveyed consumers under 25 spent more on beauty products in 2019. According to the iResearch Report, in the third quarter of 2020, the growth rate of video play times for male beauty products was 82% on Douyin, compared to 39% for all beauty products. In recent years, increased access to the internet and growth in disposable income has driven disproportionate growth in demand for beauty products from consumers in lower-tier cities in China.

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Growing popularity of emerging brands with diverse and differentiated positioning

New and emerging beauty brands have experienced increasing popularity in China in recent years driven by a growing consumer base. Emerging brands refer to brands with annual retail sales of less than RMB100 million in China, while brands with annual retail sales of no less than RMB100 million in China are known as established brands. Based on a survey iResearch conducted in 2019 of 2,002 subjects, approximately 60% of the surveyed consumers expressed that the proportion of their spending on emerging beauty brand products in their total beauty spending increased in 2019 compared to 2018, and among the surveyed consumers willing to spend more on emerging brands, 51.3% were aged between 26-35. Additionally, as demand for beauty products matures and diversifies, a growing number of Chinese consumers are expanding the categories and scope of beauty products they use, further stimulating the sales of beauty products.

Competitive landscape of the Retail and Wholesale Beauty Markets in China

For China’s retail beauty market, the main retail channels for beauty products include e-commerce channels, department stores, supermarkets, specialty beauty stores, and direct selling. 45.5% of the retail value was generated by e-commerce channels in 2020, according to the iResearch report. Our market share was less than 0.1% in China’s retail beauty market in 2020, and we mainly face competition from e-commerce channels, as we primarily sell beauty products directly to end consumers via official stores that we operate on e-commerce channels.

For China’s wholesale beauty market, the main distribution channels for beauty products include (1) distributors who re-sell to supermarkets, specialty beauty stores, and e-commerce platforms, (2) major B2C e-commerce platforms, such as Vipshop, JD.com and Jumei, and (3) supermarket chain stores, such as Walmart and Carrefour. More than 50% of sales in the wholesale beauty market in China was generated by distributors in 2020, according to the iResearch report. Our market share was less than 0.1% in 2020, and we mainly face competition from other distributors, as we sell beauty products to e-commerce platforms for them to re-sell to end consumers.

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OVERVIEW OF CHINA’S BEAUTY E-COMMERCE MARKET

Market Definition and Size of China’s Beauty E-Commerce Market

China is the world’s largest and rapidly growing e-commerce market, with beauty as one of the most well penetrated consumption categories in e-commerce with a penetration rate of 45.5% in 2020. According to the iResearch Report, the total retail sales of China’s beauty e-commerce market, defined as the total retail sales of beauty products on e-commerce channels, grew from RMB116.7 billion in 2015 to RMB392.0 billion in 2020, and is expected to reach RMB889.0 billion in 2025, representing CAGRs of 27.4% and 17.8%, respectively. By comparison, percentages of retail sales in the beauty industry conducted through e-commerce in 2020 is expected to be 18.7% in the U.S., 14.0% in the U.K. and 10.9% in Japan, according to the iResearch Report. The following chart sets forth the market sizes of China’s beauty e-commerce market and online penetration rate in the respective periods.

Market Size of China’s Beauty E-Commerce Market (RMB billion) and Online Penetration Rate (%)

54.9% 53.1% 51.2% 49.5% 48.0% 45.5% 41.7% 38.4% 36.4% 889 32.8% 782 28.4% 2020-25E CAGR = 68217.8% 584 490 2015-20 CAGR = 27.4% 392 329 261 201 149 117

2015 2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E

Note: Online penetration rate is defined as China’s beauty e-commerce market size divided by China’s beauty market size.

Source: the iResearch Report

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Key Growth Drivers of China’s Beauty E-Commerce Market

China’s beauty e-commerce market captures all the key drivers of the overall beauty market, plus additional propellants listed below.

Continual shift to e-commerce

Driven by the rise of social media e-commerce and beauty-focused KOLs, Chinese consumers are increasingly switching to e-commerce for beauty products, as it offers better convenience and broader selections. Additionally, COVID-19 has further accelerated online adoption.

Marketing, social and distribution channel diversification

China’s beauty retail landscape is evolving rapidly with emergence of new social and distribution channels both online and offline. There is a growing trend that consumers’ purchasing decisions are heavily influenced by contents on social media platforms, such as recommendations and reviews by KOLs, celebrities, and other platform users. According to the iResearch Report, the size of the China social e-commerce market, defined as the total GMV from group purchasing, membership-based and community-based social e-commerce platforms, reached RMB2.5 trillion in 2020 and is expected to reach RMB8.8 trillion in 2025, representing a CAGR of 28.7%. Although social and distribution channels such as Douyin, Kuaishou, Bilibili, Taobao, Tmall and JD.com, remain market leaders, long-tail social and distribution channels continue to gain traction. Beauty brands are expected to be increasing marketing budgets to stay on top of the latest channel developments to stay close to consumer and succeed in China.

Launch pad for new and emerging brands to satisfy diverse demographics and preferences

Emerging brands have experienced increasing popularity in China in recent years, especially among Gen-Z and millennials. By lowering entry barriers and costs of launches, e-commerce has given rise to emerging brands that satisfy customers’ individual tastes and preferences. According to the iResearch Report, in 2019, Tmall had attracted over 500 new brands into China, with 13 brands achieving retail sales of over RMB100 million in the same year. Total retail sales in China from emerging brands reached RMB344.6 billion in 2020 and is expected to reach RMB590.1 billion in 2025, representing a CAGR of 11.4%, according to the iResearch Report.

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Favorable regulatory environment for cross-border beauty e-commerce import

China’s cross-border e-commerce continues to gain traction, driven by favorable policies implemented by the Chinese government. In September 2016, the MOF and the SAT promulgated the Notice on the Adjustment to Policies of Consumption Tax on Cosmetics (《關於調整化妝品消費稅政策的通知》), which has provided supportive measures such as the consumption tax exemption on beauty and cosmetic products and lowering the tax rate on high-end beauty products, defined as products with duty-paid prices over RMB10/ml or RMB15/piece. In August 2020, the General Administration of Customs promulgated the Announcement on Adjusting the Supervision Requirements for Certain Import and Export Goods (《關於調整部分進出境貨物監管要求的公告》), which has also encouraged international brands to enter China with reduced licensing time and documentation requirements. The following chart sets forth a comparison between the general trade and cross-border import models.

Comparison of general trade import model and cross-border import model

Characters of Customs clearance Model Description imported goods Tariff process

General trade • sell goods that are • Original packaging • General imported • Complex custom stored within the labeled in Chinese skin care and clearance process border • Relatively higher cosmetic products with strict entry retail price subject to 14-19% requirements and comprehensive complex tariff rate, and procedures high-end imported skin care and cosmetic products subject to 34-40% comprehensive tariff rate • Various types of taxes are levied, including customs duty, VAT, consumption tax, etc. VAT is levied at a rate of 13%

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Characters of Customs clearance Model Description imported goods Tariff process

Cross-border • Direct import of • Goods subject • Skin care and • Simplified goods from outside to the list of cosmetic products registration and China Cross-border subject to filling procedures E-commerce Retail 9.1%-23.1% under preferential Imports《跨境電子 comprehensive policies 商務零售進口商品 tariff rate 清單》 • Zero tariffs subject • Same original to an upper limit packaging as to purchase goods sold in the amount country of origin • Preferential tariff • Relatively lower treatment retail prices

OVERVIEW OF CHINA’S BEAUTY BRAND E-COMMERCE ENABLEMENT SERVICE MARKET

The Burgeoning Beauty Brand E-Commerce Enablement Service Market in China

With the world’s highest penetration rate in 2020 according to the iResearch Report, China’s retail e-commerce industry has well-established and diverse social and distribution channels.

However, the complexity of China’s highly developed e-commerce industry has made it difficult to navigate, therefore, increasingly more brands have out-sourced their e-commerce operations to specialized brand e-commerce enablement service providers, defined as third-party service providers providing e-commerce enablement services, primarily including IT solutions, online store operation, marketing, customer services, and warehousing and fulfillment. According to the iResearch Report, the size of China’s brand e-commerce enablement service industry grew from RMB150.1 billion in 2015 to RMB691.1 billion in 2020, and is expected to reach RMB2,004.5 billion in 2025, representing 5-year CAGRs of 35.7% and 23.7%, respectively.

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Within China’s brand e-commerce enablement service market, beauty brand e-commerce enablement service is the largest segment, representing 17.8% of China’s brand e-commerce enablement service market in terms of GMV1 in 2020, among other categories, include apparel, electronics, appliances, food & health etc., according to iResearch. In addition, the beauty e-commerce industry is fast-evolving, with growing demands for more personalized marketing strategy, multi-channel operation capabilities and optimal technology solutions, all of which require beauty brands to engage service providers who offer a full spectrum of enablement services in the e-commerce value chain. The size of China’s beauty brand e-commerce enablement service industry was RMB123 billion in 2020 and is expected to reach RMB396 billion in 2025, representing a 5-year CAGR of 26.4%, which is higher than that of China’s brand e-commerce enablement service industry. The chart below sets forth the market size of China’s beauty brand e-commerce enablement service industry and penetration rate, defined as China’s beauty brand e-commerce enablement service industry size divided by China’s beauty e-commerce industry size, in the respective periods.

Market Size of China’s Beauty Brand E-Commerce Enablement Service Industry (RMB billion) and Penetration Rate (%)

43.4% 44.6% 40.8% 38.2% 34.1% 31.4% 27.8% 24.6% 21.6% 396 19.3% 17.7% 2020-25E CAGR = 26.4%339

279 223 2015-20 CAGR = 40.4% 167 123 91 64 43 23 26

2015 2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E

Note: Penetration rate is defined as China’s beauty brand e-commerce enablement service market size divided by China’s beauty e-commerce market size.

Source: the iResearch Report

Note:

1. For this section titled “Industry Overview”, the GMV is defined as the value of orders processed in the period, including value added tax and excludes (i) shipping charges, (ii) surcharges and other taxes, (iii) value of the goods that are returned and (iv) deposits for purchases that have not been settled.

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The revenue methods of brand e-commerce enablement service providers can be generally divided into the distribution method and the service method, with the former being further categorized into B2B business model and B2C business model. The key difference between the two revenue methods is that, under the distribution method, brand e-commerce enablement service providers are responsible for product procurement and subsequent sale to customers and thus are subject to inventory risk. In addition, the operating activities under distribution B2C model and service method include part or all of IT solution, online store operation, marketing, customer service, and warehousing and fulfilment. Such operating activities under distribution B2B model are often streamlined, which primarily include marketing, and warehousing and fulfilment. Brand e-commerce enablement service providers may cooperate with brand partners under either or both methods, and the service scope will may vary depending on the customer’s needs.

Revenue method Profit model Business model Customers Main features

Distribution method: price spread B2B model: E-commerce platforms Subject to inventory generate product Procure products Distributors risk sales revenue from brand partners More discretion or their authorized regarding products distributors, then selection and pricing distribute products Relatively higher to e-commerce working capital platforms or requirement distributors B2C model: End consumers Procure products from brand partners or their authorized distributors, then distribute products to end consumers

Service method: generate service fee Provide e-commerce Brand partners No inventory risk generate service fee minus direct cost enablement service Limited product revenue from fixed associated rendering to brand partners selection and pricing fees and/or variable such service discretion fees primarily based Limited working on GMV or other capital requirement variable factors

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Competitive Landscape of China’s Brand E-Commerce Enablement Service Industry and China’s Beauty Brand E-Commerce Enablement Service Industry

China’s brand e-commerce enablement service industry is still fragmented, given that the majority of service providers are small to medium-sized companies which can only provide limited e-commerce enablement services, and with the top three players representing a combined market share of 12.5% in 2020. We are the second largest brand e-commerce enablement service provider in China with a market share of 2.4% in terms of GMV facilitated or generated in 2020, according to the iResearch Report. The Competitor A, which is listed on Nasdaq Stock Market and Hong Kong Stock Exchange, represents a market share of 8.1% in terms of GMV in 2020. The Competitor B, which is listed on the Shenzhen Stock Exchange, represents a market share of 2.0% in terms of GMV in 2020.

According to the iResearch Report, China’s beauty brand e-commerce enablement service industry is relatively fragmented with the top 4 market players accounting for a total market share of 34.8%. We are the largest beauty brand e-commerce enablement service provider in China in terms of GMV facilitated or generated in 2020, and with the highest GMV growth rate of 64.0% among the top 4 beauty brand e-commerce enablement service providers, according to the iResearch Report. The chart below sets forth the market share by GMV and ranking of the beauty brand e-commerce enablement service industry in China.

Ranking by Established and Ranking GMV growth emerging brands Established brands by GMV between in 2020 in 2020 in 2020 2019 and 2020

Company 13.3% 24.8% 1 1 Competitor B(1) 10.0% 17.6% 2 4 Competitor C(2) 7.0% 12.7% 3 2 Competitor D 4.5% 8.1% 4 3 Others 65.2% 36.8%NA NA

Source: the iResearch Report

Notes:

(1) Competitor B is listed on the Shenzhen Stock Exchange.

(2) Competitor C is listed on the Shanghai Stock Exchange.

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Key Success Factors of China’s Beauty Brand E-Commerce Enablement Service Providers

The following key success factors are vital to players in China’s beauty brand e-commerce enablement service industry.

Established full coverage distribution. With the rapid development of emerging sales channels, the sources of e-commerce traffic has become increasingly fragmented and the distribution of consumers more dispersed, increasing the difficulty of effective marketing. The ability of beauty brand e-commerce enablement service providers to efficiently cover multiple channels is crucial and will become a competitive advantage against other beauty brand e-commerce enablement service providers.

Established service network at scale. As China’s beauty e-commerce market has evolved at a rapid pace, brands have strong demand for e-commerce enablement service providers who can offer comprehensive and personalized service offerings at scale across the beauty retail value chain.

Deep industry insights, know-how and expertise. Leveraging deep grasp of China’s beauty ecosystem, branding philosophies, and existing capabilities, beauty brand e-commerce enablement service providers that specialize in the beauty vertical are well-equipped to deliver customized services at scale for brands. Also, based on existing marketing resources, brand e-commerce enablement service providers typically have better understanding of KOLs and celebrities on social media platforms. Therefore, brand e-commerce enablement service providers can improve marketing efficiency and customized marketing strategy for brands.

Long-term and trusted relationships with brands. Beauty brands, especially global beauty brands, are inclined to stay with incumbent beauty brand e-commerce enablement service providers to maintain long-term relationships, given the significant switching costs and potential risks of business interruption, which form a natural barrier.

Top talents. The successful operation of brand e-commerce enablement service providers usually requires experienced technology personnel with strong data analytic capabilities, as well as deep insight into consumer demands and preferences, and industry development trend. These skill sets are specialized and typically developed through incumbent service providers.

Big data analytics. Data-driven decision making and operations can empower beauty brand e-commerce enablement service providers to conduct and upgrade their services. They may integrate big-data resources and offer value-added services to brand partners, such as market trend forecast based on data analytics capabilities. Besides, brand e-commerce enablement service providers can help brands optimize their KOL marketing on social media platforms by analyzing fully-integrated consumer data.

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Proprietary technology infrastructure. Strong technology capabilities are essential to omni-channel operations and premium technology-empowered services, such as cloud-based store operations, AI and big data-driven marketing solutions, and multi-category and integrated inventory information and warehousing services.

Key Challenges to China’s Beauty Brand E-Commerce Enablement Service Providers

Listed below are the key challenges to China’s beauty brand e-commerce enablement service providers.

Providing premium user experience. Compared to offline retail, e-commerce represents a shift between brand and user relationship dynamics, with fewer touch points available to cultivate the traditional premium user experience. Therefore, e-commerce enablement service providers need to employ new and innovative marketing, sales and customer service strategies to maintain the premium user experience across different social and distribution channels.

Personalization at scale. According to the iResearch Report, China’s retail e-commerce market is the largest in the world in terms of GMV in 2020, which presents a scale challenge for e-commerce operations, especially for beauty brands, whose consumers have come to expect highly personalized services. Dedicated operations with strong technology infrastructure along the value chain from targeted marketing to fulfillment and post-sales service is required to tackle this challenge.

Preserving brand equity for brand partner. China’s beauty e-commerce market is difficult to navigate but with high growth opportunity. However, rapid expansion can potentially dilute brand equity, if it is done through misaligned social and distribution channels, aggressive price cuts or compromised service quality. Beauty brand e-commerce enablement service providers therefore need to have deep understanding of the brand partners’ brand philosophies and image.

Key Growth Drivers of China’s Beauty Brand E-Commerce Enablement Service Industry

Listed below are the key growth drivers of China’s beauty brand e-commerce enablement service industry.

Rapidly growing beauty market. Riding on the growth of the China beauty e-commerce market, beauty brand e-commerce enablement service providers enjoy faster growth than general goods e-commerce enablement service providers, primarily driven by two main factors. First, as the key category benefiting from the consumption upgrade trend in China, beauty market is expected to maintain resilient growth. Second, the beauty e-commerce industry has higher demand for e-commerce enablement services, given the more sophisticated operation requirements and highly-personalized marketing strategies compared to e-commerce industry of general goods.

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Expansion into integrated online-offline coverage. Driven by technological advances such as big data, augmented reality and virtual reality, consumers are increasingly expecting an integrated online and offline services to deliver a consistent and cohesive consumer experience.

Closer brand and service provider relationships. The fast-evolving beauty e-commerce market requires brands and brand e-commerce enablement service providers to react more quickly, and sometimes even instantaneously, to shifting consumer trends and satisfy impulse consumptions. Therefore, brands and brand e-commerce enablement service providers with close operational relationships, such as shared ERP or CRM systems, are able to detect and address consumers’ demands faster while delivering a customized experience.

Brand incubation. With growing acceptance and demand, an increasing number of emerging brands are eager to establish presence in China to capture this opportunity. As brand e-commerce enablement service providers accumulate more experience in beauty brand e-commerce through serving more brands and consumers, it becomes increasingly difficult for brands, in particular emerging brands, to possess an in-house competitive edge in brand e-commerce, thus creating an opportunity for brand e-commerce enablement service providers to provide an increasing range of services ranging from market discovery to fulfilment. The brand e-commerce enablement service providers with strong brand incubation capabilities have better advantages of acquiring new brand partners, thus creating new growth driver.

Technology-driven innovations. With continuing investment in cutting-edge technologies, beauty brand e-commerce enablement service providers are expected to introduce more innovative and bespoke products and service offerings to address brand partners’ evolving business needs and optimize marketing strategy. Such service offerings may include market insights and targeted marketing evaluation utilizing advanced artificial intelligence, or AI, and big-data driven analytics solutions provided by brand e-commerce enablement service providers.

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OVERVIEW

Rooted in serving premium beauty brands, powered by technologies and with a consumer-centric mindset, we are the largest beauty brand e-commerce enablement service provider by GMV facilitated or generated in China, with a market share of 13.3% in 2020, according to the iResearch Report.

Utilizing our comprehensive beauty network and resources, we are also a leading third-party beauty brand incubation platform in China by GMV facilitated or generated in 2020, according to the iResearch Report. Our beauty brand incubation platform identifies, selects and cultivates incubation brand partners, helping them gain a unique and effective competitive edge in navigating the beauty market in China.

Our history began in 2010 with the establishment of Hangzhou Ningjiuwei, which is currently an indirect wholly-owned subsidiary of our Company, and in 2012 Hangzhou UCO, our main operating entity in the PRC, was established. In 2017, Hangzhou UCO was acquired by Qingdao Kingking Applied Chemistry Co., Ltd. (青島金王應用化學股份有限公司) (SZSE:002094) (“Qingdao Kingking”). Our Company was incorporated in 2019 as an investment holding company for our Group and acquired Hangzhou UCO from Qingdao Kingking in the same year.

We have been led by our founder, Mr. CHANG Che Hang, who has over 20 years of sales, marketing and general management experience in the information technology and internet industries. Mr. Chang has been integral to the success of the Company and has been materially responsible for the founding and growth of the Company’s business. He has driven the strategic and operational development of the Company from its beginnings to a market-leading e-commerce company, and has helped establish the reputation of the Company in the industry.

The following is a summary of our key business development milestones:

Year Event

2010 Founding and commencement of business through establishment of Hangzhou Ningjiuwei by our founder, Mr. CHANG Che Hang

Commencement of collaboration with Tmall

2012 Establishment of Hangzhou UCO

Establishment of business partnership with Supplier A

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Year Event

2013 Establishment of business partnership with Customer A

Commencement of collaboration with Vipshop

Recognized and awarded “the Business Model of the Year for 2013” (“2013年度商業模式大獎”) by the BizMedia Group (“商界傳媒”), one of the most influential financial media group in China, for its innovative service model

2014 Commencement of collaboration with JD and Weixin

2015 Establishment of business partnership with a multinational beauty group headquartered in the U.S.

Commencement of collaboration with RED

2016 Recognized as Demonstration Enterprise in Hangzhou e-Commerce Demonstration Project (“杭州市電子商務示范創建工程示范企業”)

2017 Qingdao Kingking acquired Hangzhou UCO as a wholly owned subsidiary

2018 Awarded Tmall “Jinzhuang” 2018 Excellent Partner (“天貓金妝獎2018年度優秀合作伙伴”)

2019 Incorporation of our Company

Acquisition of Hangzhou UCO from Qingdao Kingking by our Group

Acquisition of Youyue and Niwang

Establishment of business partnership with a multinational beauty group headquartered in Japan and a multinational consumer commodity group headquartered in the U.S.

Awarded “Jinmei Award” 2019 Best JDP Operation (“京美獎2019最佳JDP 運營”) by JD.com

Awarded Tmall “Jinzhuang” 2019 Excellent Partner (“天貓金妝獎2019年度優秀合作伙伴”)

2020 Establishment of business partnership with a multinational consumer commodity group headquartered in the U.K.

Awarded 2020 The Most Influential Brand Management Organization (“2020年度最具影響力品牌管理機構”) by China Cosmetic Conference (“中國化妝品大會”)

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OUR MAJOR SUBSIDIARIES AND OPERATING ENTITIES

The principal business activities, date of incorporation and date of commencement of business of each member of our Group that made a material contribution to our results of operations during the Track Record Period, are shown below:

Date of Equity incorporation and interest held commencement of Company Principal business activities by our Group business

Hangzhou UCO (PRC) Distribution and retail of 100% July 24, 2012 beauty products and e-commerce services Hangzhou Meiba (PRC) E-commerce services 100% October 14, 2010 Hangzhou Youmei (PRC) Distribution and retail of 100% November 26, beauty products and 2019 e-commerce services Youyue (PRC) Brand management and internet 100% August 29, 2013 technology

ESTABLISHMENT AND DEVELOPMENT OF OUR GROUP

1. Commencement of our business and major shareholding changes of our onshore entities

We commenced operations with the establishment of Hangzhou Ningjiuwei in 2010 funded by the personal wealth of our founder, Mr. CHANG Che Hang. Mr. Chang has been the legal representative and executive director of Hangzhou Ningjiuwei since its incorporation.

On November 12, 2013, as part of our corporate reorganization, Hangzhou UCO acquired 100% of the equity interest in Hangzhou Ningjiuwei at a total consideration of RMB100,000 (which was determined on the basis of the registered capital of Hangzhou Ningjiuwei), after which Hangzhou Ningjiuwei became a wholly-owned subsidiary of Hangzhou UCO.

2. Establishment of Hangzhou UCO (our “Predecessor Entity”)

At the time of its establishment on July 24, 2012, Hangzhou UCO was owned as to 60% by Hangzhou e-Cosmetics, which was engaged in the business of distribution of domestic cosmetics products and the ultimate beneficial owners of which are Independent Third Parties, and 40% by Marco Polo Holding. Mr. Chang owned 76% of the issued share capital of Marco Polo Holding, and has been the controlling shareholder and a director of Marco Polo Holding since its incorporation in 2010. Mr. Chang has also been an director of Hangzhou UCO since its establishment, during which he had been the general manager, and vice chairman between its establishment and December 2012, the chairman between December 2012 and April 2019, and has been acting as an executive director and general manager since April 2019.

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On December 12, 2013, Hangzhou e-Cosmetics transferred 49.91%, 8.00% and 2.09% of the equity interest in Hangzhou UCO to Hangzhou Youfei Brand Management Partnership (杭州悠飛品牌管理合伙企業)(“Hangzhou Youfei”) and Hangzhou Youjv Brand Management Partnership (杭州悠聚品牌管理合伙企業)(“Hangzhou Youjv”), which are affiliates of Hangzhou e-Cosmetics and the ultimate beneficial owners of which are Independent Third Parties, and Marco Polo Holding at the consideration of HK$7.99 million, HK$1.28 million and HK$334,000 respectively. Such consideration was determined based on arm’s length negotiations between the parties and taking into account the then registered capital of Hangzhou UCO.

On March 11, 2014, the registered capital of Hangzhou UCO was increased from HK$16,000,000 to HK$23,303,233.32, which was increased through an investment by Qingdao Kingking, an Independent Third Party. On the same date, pursuant to a share sale agreement entered into between Qingdao Kingking and Marco Polo Holding, Marco Polo Holding transferred its 5.66% of the equity interest in Hangzhou UCO to Qingdao Kingking at the total consideration of RMB23.21 million. Such consideration was determined based on arm’s length negotiations between the parties, taking into account an asset evaluation report prepared by an independent and qualified financial adviser in the PRC. After the capital increase and the transfer, Qingdao Kingking owned 37% of the equity interest in Hangzhou UCO.

On October 20, 2016, Qingdao Kingking entered into an asset purchase agreement with Hangzhou Youfei, Marco Polo Holding and Hangzhou Youjv, pursuant to which Hangzhou Youfei, Marco Polo Holding and Hangzhou Youjv agreed to transfer their remaining 63% of the equity interest in total in Hangzhou UCO to Qingdao Kingking for a total consideration of RMB680.15 million. Such consideration was determined based on arm’s length negotiations between the parties, taking into account an asset evaluation report prepared by an independent and qualified financial adviser in the PRC. On May 18, 2017, the equity transfer was completed, after which Hangzhou UCO became a wholly-owned subsidiary of Qingdao Kingking.

3. Acquisition of Hangzhou UCO

On February 25, 2019, Qingdao Kingking entered into a share sale agreement with Hangzhou UCO, Hangzhou Youmei Cosmetics Technology Development Co., Ltd. (杭州悠美妝科技開發有限公司)(“Hangzhou Youmei Cosmetics”) (which was a wholly-owned subsidiary of our Company at the time and was subsequently merged into Hangzhou UCO), Mr. CHANG Che Hang, and CITIC Capital Beauty, pursuant to which Qingdao Kingking agreed to transfer 100% of the equity interest in Hangzhou UCO to Hangzhou Youmei Cosmetics at the total consideration of RMB1.4 billion. Such consideration was determined based on arm’s length negotiations between the parties, taking into account an asset evaluation report prepared by an independent and qualified financial adviser in the PRC. The equity transfer was completed on April 15, 2019, after which Hangzhou UCO became an indirect wholly-owned subsidiary of our Company and its results were consolidated into those of our Group.

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On November 15, 2019, as part of an intra-group transaction and reorganization, Hangzhou UCO entered into a merger agreement with Hangzhou Youmei Cosmetics and Shenzhen Qianhai Youyi Beauty Investment Co., Ltd. (深圳前海悠意美麗投資有限公司) (“Shenzhen Qianhai”), pursuant to which Hangzhou Youmei Cosmetics agreed to be merged into Hangzhou UCO and the 100% of the equity interest in Hangzhou UCO held by Hangzhou Youmei Cosmetics was to be held by Shenzhen Qianhai, an indirect wholly-owned subsidiary of our Company.

Our Company did not conduct any business prior to the Hangzhou Youmei Cosmetics’ acquisition of Hangzhou UCO, our Predecessor Entity, given its purpose is to hold the Predecessor Entity for the Listing. As such, no revenues, no cost of sales and only insignificant general administrative expenses were recognized in the consolidated financial statements of our Group, which then consisted only of our Company, for the period from January 7, 2019, being the date of incorporation of our Company, to April 15, 2019, being the date of acquisition of the Predecessor Entity by our Group.

4. Acquisition of Youyue and Niwang (the Acquired Entities)

At the beginning of the Track Record Period, Youyue was owned as to 100% by Mr. LAN Hongliang, who was the legal representative of Youyue, and Niwang was owned as to 100% by Mr. CHEN Chao, who was the founder, and legal representative of Niwang, both of which are Independent Third Parties.

In July 2018, Mr. Lan transferred all of his shareholding interest in Youyue, and Mr. Chen transferred all of his shareholding interest in Niwang, to Next Ventures Ltd., an Independent Third Party. After completion of the transfer, both Youyue and Niwang were wholly-owned by Next Ventures Ltd..

Mr. Lan left Youyue after completion of our acquisition of Youyue from Next Ventures Ltd., and does not have any roles in our Group. Mr. Chen became an employee of our Group following completion of our acquisition of Niwang from Next Ventures Ltd., and currently holds the position of Senior Director in Youyue, responsible for business development of brand projects on Tmall and other e-commerce platforms.

To the best of the Company’s knowledge, the ultimate beneficial owners of Next Ventures Ltd. do not have any relationship with Mr. LAN Hongliang, Mr. CHEN Chao or the Group, and there are no other relationships (i) between Mr. LAN Hongliang, Mr. CHEN Chao or the ultimate beneficial owner(s) of Next Ventures Ltd., and (ii) the Group, the Controlling Shareholders, directors and senior management, and any of their respective associates.

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On February 25, 2019, Next Ventures Ltd. entered into an equity transfer agreements with our Company, pursuant to which Next Ventures Ltd. agreed to transfer 100% of the equity interest in Youyue and Niwang to our Company, at the total consideration of the US dollar equivalent of RMB100 million. Such consideration was determined based on arm’s length negotiations between the parties taking into account the price-to-earnings ratio and price-to- sales ratio of other comparable companies in the e-commerce sector and the operating performance, financial performance and cashflow of Youyue and Niwang. The equity transfer was completed on April 30, 2019, after which Youyue and Niwang became wholly-owned subsidiaries of our Company and their results were consolidated into those of our Group. The acquisitions of the Acquired Entities are considered as major acquisitions for the purpose of Rule 4.05A of the Listing Rules.

The acquisition of Hangzhou UCO, Youyue and Niwang were funded by cash injection by our Company’s management and the Controlling Shareholders, a shareholder’s loan taken out from CITIC Capital Beauty and a bank loan. In December 2019, for the sake of mutual interests, CITIC Capital Beauty waived the shareholder’s loan in full.

Please refer to Appendix IA for the Accountants’ Report for the Acquired Entities since their acquisition by our Group on April 30, 2019 (with information for the year ended December 31, 2018 and the period from 1 January to the date of their acquisition included in the notes of the financial statements).

At the time after the acquisitions in Hangzhou UCO, Youyue and Niwang, the Company was held by each of CITIC Capital Beauty and the Management SPVs as to 68.5% and 31.5%, respectively.

OTHER ACQUISITIONS AND INVESTMENTS OF OUR GROUP

Investment in Airr Labs

Pursuant to a share purchase agreement dated January 22, 2020 entered into by and among Airr Labs Pte. Ltd. (“Airr Labs”) and certain of its subsidiaries and an associate (including Airr Labs (Thailand) Co. Ltd. (“Airr TH”)), Robin Mah Wei Ping and Donna Tan Barcelon (being shareholders of Airr Labs) and 2015A Hong Kong Limited, 2015A Hong Kong Limited acquired an aggregate of 166,725 class B ordinary shares of Airr Labs for a cash consideration of US$1,000,000, representing approximately 14.29% of the issued share capital of Airr Labs and an aggregate of 4,250 shares of Airr TH for a cash consideration of 425,000 baht, representing approximately 8.5% of the issued share capital of Airr TH. The consideration was determined after arm’s length negotiations between the parties taking into account the terms of comparable deals on the market. The consideration was fully paid on March 20, 2020. Each of the other parties under the share purchase agreement was an Independent Third Party.

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The then shareholders of Airr Labs, including 2015A Hong Kong Limited, also entered into a shareholders agreement dated March 20, 2020, pursuant to which 2015A Hong Kong Limited had the option to purchase, during a twelve month period following the closing of the share purchase agreement, to invest up to US$1,500,000 in Airr Labs to subscribe for and purchase a further number of shares of Airr Labs according to the calculation set out in the shareholders agreement.

On January 28, 2021, 2015A Hong Kong Limited exercised its option under the shareholders agreement to invest a sum of US$1,500,000 for 125,006 class B ordinary shares of Airr Labs. The consideration was fully paid on February 10, 2021 and the issuance was completed on February 11, 2021, after which 2015A Hong Kong Limited owned approximately 22.58% of the issued share capital of Airr Labs.

Airr Labs is engaged in e-commerce management, content design, digital marketing and brand incubation, mainly in South East Asia. We acquired equity interest in Airr Labs with a view to establish a presence in the South East Asia market for the distribution of international branded beauty products and to expand our current market coverage.

Our Company confirms that the counterparties and the ultimate beneficial owners of the counterparties of the abovementioned transactions relating to Airr Labs are Independent Third Parties of our Company and its connected persons.

Acquisition of business of Protime

Shanghai Protime Internet Technology Co., Ltd. (上海點正互聯網科技有限公司) (“Protime”) is a company established under the laws of the PRC on June 13, 2016, which carries out e-marketing and data analytics business (“Target Business”), and was an Independent Third Party prior to the acquisition.

Asset Purchase Agreement

Hangzhou UCO entered into an asset purchase agreement dated February 28, 2021 (the “Asset Purchase Agreement”) with Protime and Mr. WANG Yao, Mr. LU De, Mr. LI Chen, Mr. PAN Yimin, Mr. LI Shenshen, and Mr. XU Lei (the aforementioned individuals being the “Selling Shareholders”) whereby it purchased the entire Target Business of Protime. Pursuant to the Asset Purchase Agreement:

(i) Protime agreed to transfer and assign to Hangzhou UCO, and Hangzhou UCO agreed to purchase and assume, all the assets of (a) Protime, (b) the Selling Shareholders, and (c) the related parties of Protime and Selling Shareholders (including but not limited to Shanghai Putai Information Consulting Studio (上海普太信息諮詢工作室) and Shanghai Shangshi Technology Co., Ltd. (上海商視科技有限公司), being affiliated companies of Protime) related to the Target Business of Protime, at the total consideration of RMB63,000,000 in cash. The assets acquired under the Asset Purchase Agreement include (i) all tangible assets (including fixed assets and

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accounts receivable); (ii) intellectual property (including software copyrights and domain names); (iii) business contracts of Protime; and (iv) relevant documents (including account books, customer information, after-sales service records and other business records and correspondence documents);

(ii) Hangzhou UCO has the right to request for a transfer of Protime’s employee(s) that shall be determined by Hangzhou UCO, to Hangzhou UCO or any entity designated by it (the “Transfer Employees”) by serving Protime a written notice, upon which Protime will procure the Transfer Employees to enter into, among relevant agreements, a new employment contract in form and substance satisfactory to Hangzhou UCO;

(iii) The consideration in cash is to be settled in two instalments, the first instalment of RMB31,500,000 being due by five business days after December 31, 2021 and the remaining instalment of RMB31,500,000 being due eighteen months after the date of the agreement (being 28 February 2021), respectively; and

(iv) Hangzhou UCO has the right to acquire 100% of the equity interest in Protime, with such right being exercisable before December 31, 2021. The cash consideration for the asset purchase shall be deemed to include the consideration for the acquisition of the equity interest, and Hangzhou UCO does not need to pay any additional consideration for this acquisition of equity interest.

The consideration was based on arm’s length negotiations between the Selling Shareholders and our Company, taking into account a number of factors including the audited net profit of approximately RMB13.5 million of Protime in 2020, the low price-to-earnings and price-to-sales ratio compared to other comparable transactions in the market, and the digital market capabilities of Protime, and Protime’s client profile, which is complementary to our Company’s business. The settlement arrangement for the cash consideration was determined pursuant to commercial negotiations in order to account for the time required to complete the transfer of all acquired assets to Hangzhou UCO. No part of the cash consideration has been settled as at the Latest Practicable Date.

The Asset Purchase Agreement was a framework agreement setting out the various assets to be acquired by the buyer. In addition to the Asset Purchase Agreement, the parties to the Asset Purchase Agreement also entered into following ancillary agreements dated February 28, 2021, which set out the specifics of the transfers of different types of assets as agreed in the Asset Purchase Agreement.

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As a framework agreement, the Asset Purchase Agreement stipulates the various assets acquired by the buyer under the Asset Purchase Agreement. The specific transfer of the different types of assets agreed upon shall be specified in the specific transfer contract:

• Hangzhou UCO and Protime entered into an asset transfer agreement, pursuant to which Protime agreed to transfer and assign to Hangzhou UCO, and Hangzhou UCO agreed to purchase and assume, the tangible assets and intellectual property as set out therein;

• Hangzhou UCO and Protime entered into a contract interest transfer agreement, pursuant to which Protime agreed to transfer and assign to Hangzhou UCO, and Hangzhou UCO agreed to purchase and assume, all the economic interest, including all payments, amounts and other economic benefits, of the contracts set out therein; and

• Hangzhou UCO, Protime and the Selling Shareholders entered into a management services agreement in order to protect the interests of Hangzhou UCO and enable it to operate the business of Protime during the transition period and process of transferring the acquired assets to Hangzhou UCO, pursuant to which:

(i) Protime appointed Hangzhou UCO as its exclusive service provider, to provide Protime with managing services comprising comprehensive business support, management operations, technical services and consulting services;

(ii) Hangzhou UCO would enjoy exclusive and proprietary rights and interests in all rights, ownership, interests and intellectual property rights arising from the performance of the management services agreement, including but not limited to copyrights, patents, patent applications, trademarks, software, technical secrets, trade secrets and others, regardless of whether invented by Hangzhou UCO or Protime; and

(iii) Protime and the Selling Shareholders granted Hangzhou UCO complete powers to operate and manage Protime’s daily operations and business, and undertook to ensure that Protime would carry out its business operations in accordance with Hangzhou UCO’s requirements and instructions from time to time.

Our Company acquired the Target Business of Protime in order to acquire talent in data analytics, brand strategic analysis and media spending planning and leverage the potential of Protime’s management for the growth of the Group. With this acquisition, our Company aims to explore data analytics solutions that may add further value for our Group’s brand clients and a charging model that is more scalable and proportional to business result, as well as leverage our Group’s client base to provide business expansion opportunities.

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Our Company acquired the Target Business of Protime instead of equity interest as our Company would like to consolidate such business (including the tangible assets, intellectual property and business contracts) into the existing Group which are valuable to our business without at the same time engaging in prolonged legal due diligence and assuming potential liability arising from any non-compliance of Protime prior to our acquisition for which we should not be held responsible, if any. Our PRC Legal Adviser has advised that if our Company purchases the business of a company instead of equity interest in China, the PRC subsidiaries of our Company would not be imposed any liability or penalty by relevant government authority only as a result of historical legal non-compliance of such target company, if any.

Our Company confirms that the counterparties and the ultimate beneficial owners of the counterparties of the abovementioned transactions in relation to Protime are Independent Third Parties of our Company and its connected persons.

Our Company has applied for, [and the Stock Exchange has granted], a waiver from strict compliance with Rules 4.04(2) and 4.04(4) in relation to the investment in Airr Labs and acquisition of the Target Business of Protime, both being transactions after the Track Record Period. For details, please see “Waivers and Exemptions – Waiver in relation to business or subsidiary acquired after the Track Record Period”.

Apart from the above, our Company had no major acquisitions or disposals during the Track Record Period.

Our PRC Legal Adviser has confirmed that all necessary approvals or filings have been obtained or made, as applicable, for the capital increases, equity transfers and acquisitions in China in respect of the abovementioned transactions and members of our Group, and all such capital increases, equity transfers and acquisitions have complied with relevant PRC laws and regulations in all material aspects.

Incorporation of our Company and holding structure and offshore shareholding changes

Our Company

Our Company was incorporated as an exempted company with limited liability in the Cayman Islands on January 7, 2019. Upon its incorporation, the authorised share capital of our Company was US$50,000 divided into 50,000 shares with a par value of US$1 each. At the time of incorporation, our Company issued 1 share with a par value of US$1 to an Independent Third Party, which was transferred to CITIC Capital Beauty on the same day. Also on the same day, CITIC Capital Beauty additionally subscribed for 999 shares with a par value of US$1 each.

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On March 5, 2019, our Company effected a share sub-division such that our authorised share capital was re-designated to US$50,000 divided into 500,000,000 shares with a par value of US$0.0001 each. The shares held by CITIC Capital Beauty as at that date was cancelled and 10,000,000 shares with a par value of US$0.0001 each were allotted to it to reflect the share subdivision on March 5, 2019.

On March 14, 2019, our Company allotted 90,000,000 shares with a par value of US$0.0001 each to CITIC Capital Beauty for cash consideration of US$30,000,000. Such consideration was determined based on the acquisition consideration for Hangzhou UCO, Youyue and Niwang and the amount of shareholder’s loans injected into our Company by CITIC Capital Beauty. The shares held by CITIC Capital Beauty in total as at that date was 100,000,000 shares. The Shareholder’s loan from CITIC Capital Beauty was waived in full in December 2019.

On March 18, 2019, pursuant to a share subscription agreement dated March 18, 2019 and amended on September 16, 2019 entered into among our Company and each of the Management SPVs, being entities beneficially controlled by certain of our Group’s directors and employees, our Company allotted 45,985,401 shares in total with a par value of US$0.0001 each to the Management SPVs, as set out below, for an aggregate consideration of US$5,373,608.80. Such consideration was determined based on arm’s length commercial negotiations between management and CITIC Capital Beauty:

• 30,350,365 shares were allotted to Innovative Beauty Venture Ltd., which is a company incorporated under the laws of the British Virgin Islands and is beneficially controlled by Mr. CHANG Che Hang, our executive Director, chairman and chief executive officer.

• 4,598,540 shares were allotted to Skyview Beauty Venture Limited, which is a company incorporated under the laws of the British Virgin Islands and is beneficially controlled by Mr. WONG Long Sing. Mr. Wong is our Information Technology Research & Development Director and is responsible for all in-house software development and the growth of the research and development team.

• 2,759,124 shares were allotted to each of Myth Uni-Beauty Ltd., Beauty Angel Song Ltd., Champion Warrior Ltd., and Yitian Ventures LTD., all of which are companies incorporated under the laws of the British Virgin Islands. Myth Uni-Beauty Ltd. is beneficially controlled by Ms. GUO Xiaorong, our vice president of business operations; Beauty Angel Song Ltd. is beneficially controlled by Mr. WANG Genping, our vice president of business development; Champion Warrior Ltd. is beneficially controlled by Mr. LIU Jing, our vice president of human resources; and Yitian Ventures LTD. is beneficially controlled by Mr. LIU Jiaqi, our Executive Director and chief financial officer.

For further details of our Company’s directors and senior management, please refer to “Directors and senior management”.

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2015A Hong Kong Limited

2015A Hong Kong Limited was incorporated as a limited liability company under the laws of Hong Kong on June 7, 2016 with a share capital of 1 share at HK$1. The founding member was 2015A Cayman Limited a wholly-owned subsidiary of an investment fund affiliated with CITIC Capital Holdings Limited as at that date, which transferred its entire shareholding in 2015A Hong Kong Limited to our Company on January 18, 2019, after which our Company has remained as the sole shareholder of 2015A Hong Kong Limited. eBeauty Holdings (Hong Kong) Limited

eBeauty Holdings (Hong Kong) Limited was incorporated as a limited liability company under the laws of Hong Kong on January 24, 2019 with a share capital of US$1,000 divided into 1,000 shares of US$1 each. Our Company was the sole founding member and remains the sole shareholder.

UCO Cosmetic Limited

UCO Cosmetic Limited was incorporated as a limited liability company under the laws of Hong Kong on May 27, 2015 with a share capital of HK$10,000,000 divided into 10,000,000 shares of HK$1 each. Hangzhou UCO was the sole founding member and on November 30, 2019 Hangzhou UCO transferred its entire shareholding in UCO Cosmetic Limited to 2015A Hong Kong Limited for a consideration of RMB11,059,313.88 pursuant to an equity transfer agreement dated November 1, 2019, as part of an intra-group reorganization. The transfer was completed on November 30, 2019.

Marco Polo Cosmetic E-commerce Limited

Marco Polo Cosmetic E-commerce Limited was incorporated as a limited liability company under the laws of Hong Kong on July 27, 2010 with a share capital of HK$10,000 divided into 10,000 shares of HK$1 each. Its shareholders at the beginning of the Track Record Period were UCO Cosmetic Limited and Harmay (Hong Kong) Co., Limited, an Independent Third Party. On January 1, 2020, each of these shareholders transferred their shareholdings in Marco Polo Cosmetic E-commerce Limited to 2015A Hong Kong Limited for a consideration of HK$12,356.24 each. Such consideration was determined based on arm’s length negotiations between the parties, taking into account the net assets of Marco Polo Cosmetic E-commerce Limited. The transfer was completed on January 1, 2020.

SHARE SUBDIVISION

On [●] 2021, our Shareholders resolved to, among other things, conduct the Share Subdivision pursuant to which each share in our then issued and unissued share capital was split into five shares of the corresponding class with par value of US$0.00002 each, effective upon the conditions of the [REDACTED] being fulfilled, following which our share capital will be divided into 2,500,000,000 Shares with par value of US$0.00002 each.

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PRE-[REDACTED] INVESTMENTS

Principal terms of the Pre-[REDACTED] Investments

The below table summarises the principal terms of the Pre-[REDACTED] Investments. We, CITIC Capital Beauty, the Management SPVs and the Pre-[REDACTED] Investors entered into several share purchase and subscription agreements dated January 4 to January 15, 2021, pursuant to which the Pre-[REDACTED] Investors agreed to subscribe for shares issued by us and purchase shares sold by CITIC Capital Beauty and the Management SPVs.

The details of the subscription of shares issued by us to Pre-[REDACTED] Investors is set out below:

Total Total number of consideration shares issued to the Date on which Cost per paid by the investors (without consideration share paid Discount Date of investors for the taking into account was fully by the to the investment issued shares Investors the Share Subdivision) settled investors [REDACTED](1)

January 4-15, 2021 US$50 million YSC Glamour (BVI) 2,804,019 February 23, US$7.97 [REDACTED]% Limited 2021 Pingsheng International 1,308,542 Limited Magic World Holding 934,671 Limited Bilibili Inc. 141,891 Crest Ark Limited 280,650 Hygeian Growth Company 373,871 Inc. Best Noble Investments 373,871 Limited Mass Ave Global Partners 53,206 Master Fund, LP Mass Ave Global 2,805 Opportunities I, LP Total 6,273,526

Note:

(1) Assuming the [REDACTED] is HK$[REDACTED], being the mid-point of the indicative [REDACTED] range.

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Basis of consideration The basis of determination for the consideration for the Pre-[REDACTED] Investments was arm’s length negotiations between us and the Pre-[REDACTED] Investors after taking into consideration the timing of the investments, the status of our business and operating entities (including prospective incubation brand partners), historical earnings of the Company and stock market conditions.

Use of Proceeds from We plan to utilise the proceeds for the development and the Pre-[REDACTED] operation of the business of the members of our Group, Investments including but not limited to business expansion, capital expenditures, hiring of talent and marketing.

As of the Latest Practicable Date, none of the net proceeds from the Pre-[REDACTED] Investments by the Pre-[REDACTED] Investors have been utilised by our Group.

Strategic benefits of the At the time of the Pre-[REDACTED] Investments, our Pre-[REDACTED] Directors were of the view that in addition to providing investment working capital for our Group’s continued growth, our Company could also benefit from the expertise and industry experience of the Pre-[REDACTED] Investors. Moreover, our Directors were of the view that our Company could benefit from the Pre-[REDACTED] Investments as the Pre-[REDACTED] Investor’s investments demonstrated their confidence in, and served as an endorsement of, our Group’s performance, strength and prospects.

Our Company became acquainted with each of the Pre-[REDACTED] Investors through introduction by the Controlling Shareholder who is a reputable and seasoned private equity firm and became acquainted with the Pre-[REDACTED] Investors who are either private equity firms, investment funds, or companies with various private equity investors, during their ordinary course of business. Pursuant to the share purchase and subscription agreements underlying the Pre-[REDACTED] Investments as set out above, each of CITIC Capital Beauty

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Total number of Pre-[REDACTED] Investors shares purchased*

YSC Glamour (BVI) Limited 16,016,558 Pingsheng International Limited 7,474,394 Magic World Holding Limited 5,338,855 Hygeian Growth Company Inc. 2,135,539 Best Noble Investments Limited 2,135,539 Crest Ark Limited 1,603,075 Bilibili Inc. 810,490 Mass Ave Global Partners Master Fund, LP 303,914 Mass Ave Global Opportunities I, LP 16,015 Total 35,834,379

* The number of shares does not take into account the Share Subdivision.

The number of shares sold by each of CITIC Capital Beauty and the Management SPVs to the Pre-[REDACTED] Investors is as follows:

Number of shares sold to the Pre-[REDACTED] Shareholder Investors*

CITIC Capital Beauty Investment Limited 33,031,898 Innovative Beauty Venture Ltd. 1,392,020 Skyview Beauty Venture Limited 414,841 Myth Uni-Beauty Ltd. 248,905 Beauty Angel Song Ltd. 248,905 Champion Warrior Ltd. 248,905 Yitian Ventures LTD. 248,905 Total 35,834,379

* The number of shares sold by each of CITIC Capital Beauty and the Management SPVs to each Pre-[REDACTED] Investor was proportional to the allocation ratio of each Pre-[REDACTED] Investor. The number of shares does not take into account the Share Subdivision.

The total consideration paid by the Pre-[REDACTED] Investors in aggregate for the shares sold by CITIC Capital Beauty and the Management SPVs was approximately US$285.6 million, and the consideration was fully settled on February 24, 2021.

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For a summary of the shareholding of CITIC Capital Beauty, the Management SPVs and the Pre-[REDACTED] Investors after the Pre-[REDACTED] Investment and sale set out above, please refer to “Capitalisation” below.

Special rights of the Pre-[REDACTED] Investors

Certain special rights were granted to our Pre-[REDACTED] Investors under the shareholders agreement entered into among CITIC Capital Beauty, the Management SPVs, the Pre-[REDACTED] Investors and our Company dated February 17, 2021, and our existing memorandum and articles. Such special rights will be terminated upon the Listing in compliance with Guidance Letter HKEX-GL43-12.

[REDACTED]

As CITIC Capital Beauty and Innovative Beauty Venture Ltd. will each hold more than 10% of our Shares upon the Listing, and Yitian Ventures LTD. is beneficially controlled by Mr. LIU Jiaqi, our executive Director and chief financial officer, the Shares held by each of them will not be counted as [REDACTED]. The Shares held by the Pre-[REDACTED] Investors will constitute part of the [REDACTED].

Information on the Pre-[REDACTED] Investors

YSC Glamour (BVI) Limited is an investment holding company incorporated under the laws of British Virgin Islands as a limited liability company. YSC Glamour (BVI) Limited is partially owned by Genesis Capital II LP (“GCII LP”) and controlled by GCII LP, an exempted limited partnership registered in the Cayman Islands. The general partner of GCII LP is Genesis Capital II Ltd, whose issued share capital is wholly and ultimately owned by Mr. PENG Zhijian. GCII LP has over 30 limited partners and majority of its fund’s commitments are from pension funds, sovereign wealth funds, fund of funds, listed companies and family offices, etc. GCII LP invests in the growth of China’s economy and top teams and companies that leverage information technology to improve efficiency for consumers, and for businesses.

Pingsheng International Limited, a company incorporated under the laws of the British Virgin Islands, is a special purpose vehicle. The main shareholders of Pingsheng International Limited are Shanghai Bamao Investment Management Partnership (Limited Partnership) and PAOH Investment Holding I limited, which hold 49.29% and 44.08% of Pingsheng International Limited shares respectively. Shanghai Bamao Investment Management Partnership (Limited Partnership) is 97.09% indirectly owned by Ping An Insurance (Group) Company of China, Ltd. (HKEX: 2318), and PAOH Investment Holding I limited is indirectly wholly-owned by Ping An Insurance (Group) Company of China, Ltd.. Ping An Insurance (Group) Company of China, Ltd. indirectly hold 91.94% of Pingsheng International Limited share, is the ultimate controlling shareholder of Pingsheng International Limited. Ping An Insurance (Group) Company of China, Ltd. is a personal financial services provider who provides insurance, banking, investment, and Internet finance products and services.

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Magic World Holding Limited, a company incorporated and organized under the laws of British Virgin Islands, is a special purpose vehicle advised and managed by Jinyi Capital. Jinyi Capital is a private equity fund that focuses on new consumer and technology themes in China. The ultimate beneficial owners of Magic World Holding Limited are SONG Xiaowei and LI Shuai, who are Independent Third Parties and do not hold any executive or management position in the Company.

Hygeian Growth Company Inc., a company incorporated under the laws of Cayman Islands, is a limited liability company established and majority-owned by HL Partners II L.P., which is in turn controlled by HL GP II Company Limited and whose primary purpose is to make equity investments, with a focus on biotechnology, medical technology and consumer health. The general partner of HL Partners II L.P. is HL GP II Company Limited.

As of the Latest Practicable Date, V-Sciences Fund Investments Pte Ltd and Beijing Shunrong Investment Corporation (北京順榮投資有限公司), being the largest two limited partners, each held approximately 13% of the interests in HL Partners II L.P.. V-Sciences Fund Investments Pte Ltd principally engages in equity investment. Beijing Shunrong Investment Corporation (北京順榮投資有限公司) is a limited liability company incorporated in the PRC and is wholly owned by the State Council of the PRC. Beijing Shunrong Investment Corporation (北京順榮投資有限公司) principally engages in the equity investment, investment management and investment consulting. As of the Latest Practicable Date, the other limited partners of HL Partners II L.P. include corporate investors, institutional investors as well as individual investors, all of whom held minority interests in HL Partners II L.P..

HL GP II Company Limited is a limited liability company incorporated in the Cayman Islands. HL GP II Company Limited holds 2.5% of the interests in HL Partners II L.P. and is owned by Mr. WANG Stephen Hui, currently the sole director of HL GP II Company Limited, and Ms. WU Wei as to 91.25% and 8.75%, respectively. Mr. WANG Stephen Hui and Ms. WU Wei are Independent Third Parties and do not hold any executive or management position in the Company.

Best Noble Investments Limited is an investment holding company incorporated under the laws of the British Virgin Islands. Its ultimate beneficial owners are Mr. ZHOU Bo and Mr. WANG Peng. It principally engages in investment activities. Mr. ZHOU Bo and Mr. WANG Peng are Independent Third Parties and do not hold any executive or management position with our Group. Mr. ZHOU Bo has over multiple years of experience in investment and finance. Mr. Zhou joined Junchuan Capital in 2020, where he is responsible for investments in the beauty and skincare industry. Mr. WANG Peng is a serial entrepreneur who has participated in the founding of a number of technology companies and has extensive trading and investment experience in Internet, commerce and industrial development.

Crest Ark Limited is a limited liability company incorporated under the laws of the British Virgin Islands. As at the Latest Practicable Date, it is a wholly-owned subsidiary of Dragon Capital Fund I, L.P. (“Dragon Capital”) (an exempted limited partnership organised and existing under the laws of Cayman Islands). The general partner of Dragon Capital is Dragon

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Capital General Partner L.P. (an exempted limited partnership organised and existing under the laws of Cayman Islands). The general partner of Dragon Capital General Partner L.P. is Dragon GP Partner Co. (an exempted company with limited liability incorporated under the laws of Cayman Islands), whose issued share capital is wholly-owned by Mr. ZHAI Jun (翟隽). Dragon Capital has less than 10 limited partners which include institutional investors and high net worth individuals. Dragon Capital is a private equity fund with approximately US$300 million of assets under management, and offices in Hong Kong and Beijing. Dragon Capital specialises in investments within TMT, healthcare and consumer sectors.

Bilibili Inc. (Nasdaq:BILI; HKEX:9626) (“Bilibili”) is a company incorporated in the Cayman Islands. Bilibili is an iconic brand and a leading video community for young generations in China. Bilibili completed its secondary listing on the Stock Exchange in March 2021.

Mass Ave Global Partners Master Fund LP and Mass Ave Global Opportunities I LP are Cayman Islands exempted limited partnerships managed by Mass Ave Global, Inc., a Delaware corporation (together “Mass Ave”). Mass Ave is an investment manager that specializes in global equity markets focusing on technology, consumer, healthcare, and industrials sectors. Mass Ave deploys an investment approached based on deep fundamental analysis with a long-term partnership framework, to identify opportunities with disruptive innovation, strong underlying structural trends and visionary management teams. Mass Ave was founded in 2019 and has offices in New York and Hong Kong.

Mass Ave Global Partners Master Fund, LP is a master-feeder structure managed by Mass Ave Global Inc., an exempt registered advisor with the SEC, which has applied for registration as a Registered Investment Advisor with the SEC. Mass Ave Global GP, LLC is the General Partner of the master-feeder. The limited partners of Mass Ave Global Partners Master Fund, LP are Mass Ave Global Partners, LP and Mass Ave Global Partners (Cayman), Ltd. which own the entirety, of Mass Ave Global Partners Master Fund, LP. Mass Ave Global Partners, LP is a commingled onshore fund registered in the state of Delaware, USA. Mass Ave Global Partners (Cayman), Ltd. is a commingled CIMA-regulated offshore fund registered in the Cayman Islands. Mass Ave Global Opportunities I, LP is a commingled fund managed by Mass Ave Global, Inc. Mass Ave Global GP, LLC is the General Partner of the fund. The limited partners of Mass Ave Global Partners Master Fund LP and Mass Ave Global Opportunities I LP consist of banks and insurance companies, endowments, family offices and high net worth individuals, investment funds, and other partners and employees of the fund.

The General Partner of both funds, Mass Ave Global GP, LLC is controlled by Mr. Winston Feng and Mr. Justin Dew. Mr. Feng is an experienced investment manager with authority to act on behalf of and who controls 100% of the outstanding share capital of Mass Ave Global Partners GP, LLC. Mr. Dew is an experienced investment management company executive with authority to act on behalf of Mass Ave Global Partners GP, LLC.

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Save for certain shareholders of YSC Glamour (BVI) Ltd., which are limited partners of both Genesis Capital II LP, which controls YSC Glamour (BVI) Ltd., and CITIC Capital China Partners IV, L.P., one of our Controlling Shareholders, to the best knowledge of the Company, there is no past or present relationship (business, employment, family, financing or otherwise) between (i) each of the Pre-[REDACTED] Investors and their respective ultimate beneficial owners, investment manager and limited partners, where applicable, and (ii) the Company and its subsidiaries, their controlling shareholders, directors and senior management, and any of their respective associates.

Compliance with Stock Exchange guidance

On the basis that (i) the consideration for the Pre-[REDACTED] Investments was settled more than 28 clear days before the date of our first submission of the listing application form to the Stock Exchange in relation to the Listing and (ii) special rights granted to the Pre-[REDACTED] Investors in respect of our Company will be terminated upon Listing, the Joint Sponsors have confirmed that the Pre-[REDACTED] Investments are in compliance with the Interim Guidance on Pre-[REDACTED] Investments issued by the Stock Exchange in October 2010, as updated in March 2017, the Guidance Letter HKEX-GL43-12 issued by the Stock Exchange in October 2012 and as updated in July 2013 and March 2017 and the Guidance Letter HKEX-GL44-12 issued by the Stock Exchange in October 2012 and as updated in March 2017.

CAPITALISATION

The below table is a summary of the capitalisation of our Company following the Pre-[REDACTED] Investments and immediately after the Share Subdivision:

Ownership Ordinary percentage shares with a Ownership immediately par value of percentage as after completion US$0.00002 of the date of of the Shareholder each this document [REDACTED](1)

CITIC Capital Beauty Investment Limited 334,840,510 43.98 [REDACTED](2) Management SPVSs Innovative Beauty Venture Ltd. 144,791,725 19.02 [REDACTED](2) Skyview Beauty Venture Limited 20,918,495 2.75 [REDACTED] Myth Uni-Beauty Ltd. 12,551,095 1.65 [REDACTED] Beauty Angel Song Ltd. 12,551,095 1.65 [REDACTED] Champion Warrior Ltd. 12,551,095 1.65 [REDACTED] Yitian Ventures LTD. 12,551,095 1.65 [REDACTED](2) Pre-[REDACTED] Investors YSC Glamour (BVI) Limited (Genesis) 94,102,885 12.36 [REDACTED] Pingsheng International Limited (Ping An) 43,914,680 5.77 [REDACTED]

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Ownership Ordinary percentage shares with a Ownership immediately par value of percentage as after completion US$0.00002 of the date of of the Shareholder each this document [REDACTED](1)

Magic World Holding Limited (Jinyi Capital) 31,367,630 4.12 [REDACTED] Hygeian Growth Company Inc. (HLC Capital) 12,547,050 1.65 [REDACTED] Best Noble Investments Limited (Junchuan Capital) 12,547,050 1.65 [REDACTED] Crest Ark Limited (Dragon Capital) 9,418,625 1.24 [REDACTED] Bilibili Inc. 4,761,905 0.63 [REDACTED] Mass Ave Global Partners Master Fund, LP 1,785,600 0.23 [REDACTED] Mass Ave Global Opportunities I, LP 94,100 0.01 [REDACTED] Total 761,294,635 100.00 [REDACTED]

Note:

(1) Assuming that the [REDACTED] is not exercised and no shares are issued pursuant to the Share Schemes.

(2) These shares will not be counted towards the [REDACTED] upon Listing. For more information on Innovative Beauty Venture Ltd. and Yitian Ventures LTD., see the subsection headed “Incorporation of our Company and holding structure and offshore shareholding changes – Our Company” above.

COMPLIANCE WITH PRC LAWS

SAFE registration in the PRC

Under the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Roundtrip Investment Through Special Purpose Vehicles (國家外匯管理局關於境內居民通過特殊目的公司境外投融資及返程投資外匯管理有關問題的通知) (the “SAFE Circular 37”), which became effective on July 4, 2014:

(a) a PRC resident must register with the local SAFE branch before he or she contributes assets or equity interests in an overseas special purpose vehicle (the “Overseas SPV”) that is directly established or indirectly controlled by the PRC resident for the purpose of conducting investment or financing; and

(b) following the initial registration, the PRC resident is also required to register with the local SAFE branch for any major change, in respect of the Overseas SPV, including, among other changes, a change of the Overseas SPV’s PRC resident shareholder(s), the name of the Overseas SPV, terms of operation, or any increase or reduction of the Overseas SPV’s capital, share transfer or swap, and merger or division.

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Pursuant to the Circular of the SAFE on Further Simplifying and Improving Policies for the Foreign Exchange Administration on Direct Investment (國家外匯管理局關於進壹步簡化和改進直接投資外匯管理政策的通知), promulgated by SAFE and which became effective on June 1, 2015, the power to accept SAFE registration was delegated from local SAFE to local banks where the assets or interests in the domestic entity was located.

Our PRC Legal Adviser has advised that Ms. GUO Xiaorong (郭曉蓉), Mr. WANG Genping (汪艮平), Mr. LIU Jing (劉競) and Mr. LIU Jiaqi (劉佳琦) have completed their foreign exchange registration in respect of their respective incorporation of Beauty Fantasy Ltd., Beauty Intelligence Ltd., Second Warrior Ltd. and Yitian Tree Ventures LTD as required under the SAFE Circular 37 on April 8, 2019.

MOFCOM AND CSRC APPROVAL

Under the M&A Rules issued on August 8, 2006, effective as of September 8, 2006 and amended in June 2009, a foreign investor is required to obtain necessary approvals when it:

(a) acquires the equity of a domestic non-foreign invested enterprise thereby converting the domestic enterprise into a foreign-invested enterprise;

(b) subscribes for the increased capital of a domestic non-foreign invested enterprise so as to convert the domestic enterprise into a foreign-invested enterprise;

(d) purchases the assets of a domestic enterprise and injects those assets to establish a foreign-invested enterprise.

Our PRC Legal Adviser has advised that given that (i) the CSRC currently has not issued any definitive rule or interpretation concerning whether the [REDACTED] of our Company is subject to this regulation and (ii) our WFOEs and their PRC subsidiaries were not established through a merger or acquisition of a domestic company by PRC companies or individuals as defined under the M&A Rules that are the beneficial owners of our Company, the establishment of our WFOEs and their PRC subsidiaries is not subject to the M&A Rules, and the [REDACTED] of our Company does not require approvals from the CSRC and MOFCOM under the M&A Rules. However, there is uncertainty as to how the M&A Rules will be interpreted or implemented or whether the relevant government authorities would reach the same conclusion as above or promulgate any further requirements.

– 150 – CORPORATE STRUCTURE DOCUMENT THIS OF COVER MUST THE INFORMATION ON THE “WARNING” THAT HEADED AND CHANGE SECTION TO THE SUBJECT WITH AND CONJUNCTION INCOMPLETE IN FORM, READ DRAFT BE IN IS DOCUMENT THIS ITR,ROGNSTO,ADCROAESTRUCTURE CORPORATE AND REORGANISATION, HISTORY, Corporate structure before the [REDACTED] The following diagram illustrates the corporate and shareholding structure of our Group immediately prior to the completion of the [REDACTED] (assuming the [REDACTED] is not exercised and no Shares are issued under the Share Schemes):

Other CITIC Capital Mr. CHANG Pre-[REDACTED] Management Beauty(1) Che Hang(2) Investors SPVs(3)

43.98% 19.02% 9.34% 27.66%

The Company (Cayman)

100% 100%

2015A Hong Kong Limited eBeauty Holdings (Hong Kong) Limited (Hong Kong) (Hong Kong)

100% 100% 5 – 151 – Marco Polo Cosmetic UCO Cosmetic Limited E-commerce Limited (Hong Kong) (Hong Kong)

Off-shore

On-shore 100% 100% 100% 100%

Shenzhen Qianhai Youyi ProA Supply Chain Management Youyue Niwang Beautiful Investment Co., Ltd. (Shanghai) Co., Ltd. (深圳前海悠意美麗投資有限公司) (普埃供應鏈管理 (上海)有限責任公司) 100% 96.1% Ruitai (Shanghai) Supply Hangzhou UCO Chain Management Co., Ltd.(4) 銳太(上海)供應鏈管理有限公司(4)

100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

Shanghai ProA Hangzhou Ruitai Jiaxing Langning Xiwei Brand Shanghai Youni Brand Hangzhou Youpin Bengbu Youjing Information Technology Supply Chain Information Technology Management (Hangzhou) Management Co., Ltd. Technology Co., Ltd E-business Co., Ltd. Hangzhou Youmei Hangzhou Meiba Hangzhou Ningjiuwei Co., Ltd. Management Co., Ltd. Co., Ltd. Co., Ltd. (稀位品牌管理 (上海悠旎品牌管 (杭州悠品科技 (蚌埠市悠璟電子 (上海普埃信息科 (杭州銳太供應鏈 (嘉興朗寧信息 (杭州) 有限公司) 理有限公司) 有限公司) 商務有限公司) 技有限公司) 管理有限公司) 科技有限公司)

100% 100%

Shanghai Meiba Hangzhou Nimei E-business Co., Ltd. E-business Co., Ltd. (上海美巴電子商 (杭州市旎美電子務有限公司) 商務有限公司) THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT HISTORY, REORGANISATION, AND CORPORATE STRUCTURE

(1) CITIC Capital Beauty is part of CITIC Capital Group. See “Relationship with our Controlling Shareholders” for details.

(2) Mr. Chang is deemed interested in the shares held by Innovative Beauty Venture Ltd., which is wholly-owned by him.

(3) The Other Management SPVs are Skyview Beauty Venture Limited, Myth Uni-Beauty Ltd., Beauty Angel Song Ltd., Champion Warrior Ltd. and Yitian Ventures LTD. For more details, see the section headed “Incorporation of our Company and holding structure and offshore shareholding changes – Our Company” above.

(4) The other shareholder of Ruitai (Shanghai) Supply Chain Management Co., Ltd. is Mr. HUANG Zhanxiang (黃展翔), an Independent Third Party.

– 152 – Corporate structure immediately following the [REDACTED] DOCUMENT THIS OF COVER MUST THE INFORMATION ON THE “WARNING” THAT HEADED AND CHANGE SECTION TO THE SUBJECT WITH AND CONJUNCTION INCOMPLETE IN FORM, READ DRAFT BE IN IS DOCUMENT THIS ITR,ROGNSTO,ADCROAESTRUCTURE CORPORATE AND REORGANISATION, HISTORY, The following diagram illustrates the corporate and shareholding structure of our Group immediately following the completion of the [REDACTED] (assuming the [REDACTED] is not exercised and no Shares are issued under the Share Schemes):

Other [REDACTED] CITIC Capital Mr. CHANG Pre- [REDACTED](5) Management Beauty(1) Che Hang(2) Investors(5) SPVs(3)

[REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]%

The Company (Cayman)

100% 100%

2015A Hong Kong Limited eBeauty Holdings (Hong Kong) Limited (Hong Kong) (Hong Kong)

100% 100% Marco Polo Cosmetic UCO Cosmetic Limited

5 – 153 – E-commerce Limited (Hong Kong) (Hong Kong)

Off-shore

On-shore 100% 100% 100% 100%

100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

100% 100%

(1) CITIC Capital Beauty is part of CITIC Capital Group. See “Relationship with our Controlling Shareholders” for details.

(2) Mr. Chang is deemed interested in the shares held by Innovative Beauty Venture Ltd., which is wholly-owned by him.

(4) The other shareholder of Ruitai (Shanghai) Supply Chain Management Co., Ltd. is Mr. HUANG Zhanxiang (黃展翔), an Independent Third Party.

(5) These shares will count towards the [REDACTED] upon Listing.

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OUR MISSION

Our mission is to empower the dream of beauty.

OUR VISION

Our vision is to become the go-to partner in China for beauty brands, offer satisfying beauty experience to beauty consumers and attract the best talent in the beauty industry. We aspire to empower the entire beauty market value chain in China with technology and business innovation, and deliver greater value to both beauty brands and consumers.

WHO WE ARE

Utilizing our beauty network and resources, we are also a leading third-party beauty brand incubation platform in China by GMV facilitated or generated in 2020, according to the iResearch Report. Our beauty brand incubation platform identifies, selects and cultivates incubation brand partners, helping them to gain a competitive edge in navigating the beauty market in China.

We launched our beauty brand e-commerce enablement service in 2010 to address a growing need from beauty brands to capture the then-nascent e-commerce opportunity and deliver a satisfying experience to consumers. Over the years, we have developed an understanding of how to deliver bespoke e-commerce experience to consumers in the beauty market, especially the premium beauty market. Our beauty brand e-commerce enablement service has evolved to include a full suite of services that complement our brand partners’ teams, including market entry, execution, fulfillment and after-sales services.

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MARKET OPPORTUNITIES AND CHALLENGES

This dynamic and intricate ecosystem presents challenges to beauty brands, such as understanding consumers’ sophisticated and continuously changing preferences, navigating the highly competitive landscape and new consumer touchpoints, and delivering a bespoke beauty experience to each consumer, while adhering to brand ethos and image. These challenges mandate a unique approach that combines the art of understanding brand philosophies and consumers’ beauty needs, with the science of technology in e-commerce solutions.

WE ARE WELL-POSITIONED WITH OUR STRONG BLEND OF “ART AND SCIENCE” CAPABILITIES

We combine our experience in the beauty industry with advanced technologies through years of investment in proprietary operational, technology and data infrastructure. We believe our blend of “Art and Science” allows us to contribute to the evolution of the beauty market, and in turn benefit our brand partners. We believe we are well-positioned to meet beauty brands’ unique needs and to capture the market opportunities.

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Our beauty brand partners have achieved measurable positive results with us. We define the GMV generated by our brand partners with the help of the services and solutions we provide under the service revenue method as the GMV facilitated by us, and the GMV transacted under the distribution revenue method as the GMV generated by us. The total GMV we facilitated or generated increased by 255.5% from RMB4.6 billion in 2018 to RMB16.3 billion in 2020, representing a two-year CAGR of 88.5%. In 2020, four of our brand partners achieved GMV of over RMB1 billion each, and 16 of our brand partners achieved GMV of over RMB100 million each.

Having selected and worked with beauty brands across various origins and product categories since our inception, we have developed a deep understanding of each of their brand philosophies and heritages, including brand tonality, emotional positioning, target consumers, product portfolio, and key pain points and opportunities in China. Our experience enables us to translate our brand partners’ stories across different media, such as livestreaming and short videos. We create visual depiction of our brand partners’ ideas and effectively communicate them to end consumers, which convert audiences into customers. We also have extensive experience serving consumers for our beauty brand partners and delivering premium personalized online shopping experience to consumers. As a result, we have accumulated deep insights of this fast-changing sector. We believe our expertise and knowledge in the art of beauty is the secret ingredient that enables us to win the long-term trust of our brand partners.

We have developed a holistic, customizable and scalable beauty solution that we deliver through our e-commerce enablement service and brand incubation platform. Our solution empowers our beauty brand partners’ entire value chain, including market entry, execution, fulfillment and after-sales services, offering our brand partners one-stop experience covering all of their business needs. Utilizing data analytic technologies, we augment our brand partners’ operations and enable them to make informed decisions by analyzing consumer behaviors, preferences and transaction data. Our solution is also modularized, which allows us to customize services to each of our brand partners. Our solution can be integrated with our brand partners’ in-house digital systems, which lowers adoption cost and time and improves efficiency.

Our Financial Performance

We derive revenue from our beauty brand e-commerce enablement service business and brand incubation platform business. We generate revenue from two revenue methods: (i) service method, where we charge our brand partners service fee primarily based on GMV or other variable factors such as number of orders fulfilled when providing services to our brand partners; and (ii) distribution method, where we generate revenue from selling beauty products of our brand partners to e-commerce platforms such as JD.com and Vipshop and other distributors for them to re-sell to end consumers, or sell to end consumers via official stores that we operate on e-commerce platforms, such as Tmall.

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Our Group generated revenue of RMB1,079.4 million in the 2019 Period and RMB1,659.5 million in the year ended December 31, 2020. Our Group recorded a profit of RMB203.9 million in the 2019 Period and a profit of RMB324.8 million in 2020. In 2018, 2019 and 2020, our Predecessor Entity generated revenue of RMB1,164.5 million, RMB1,232.2 million and RMB1,168.6 million, respectively, and recorded profit of RMB207.1 million, RMB266.9 million and RMB232.0 million in the same periods, respectively.

Our Competitive Strengths

We believe the following competitive strengths contribute to our success and differentiate us from our competitors.

Market leader serving beauty brands in China

We are a beauty market leader in China serving a diverse and growing portfolio of beauty brands. We empower them through e-commerce enablement and brand incubation. We provide our brand partners with comprehensive offerings such as market entry, execution, fulfillment and after-sales services.

We are the largest beauty brand e-commerce enablement service provider by GMV in China with a market share of 13.3% in 2020. All of the top six beauty brand groups by revenues globally in 2019 engaged us to provide solutions to some of their brands in 2020, according to the iResearch Report. The transactions we facilitated accounted for 4.2% of the total e-commerce retail beauty market in China in 2020, according to the iResearch Report. We facilitated a total GMV of RMB4.6 billion, RMB10.0 billion and RMB16.3 billion in 2018, 2019 and 2020, respectively. We also operate two out of the top five beauty brand stores with annual GMV over RMB2.0 billion on Tmall in 2020, according to the iResearch Report.

With our desire to further integrate with the beauty value chain in China and empower beauty brands at early stages, we rolled out our brand incubation business in 2019. Our brand incubation platform is the aggregate of our extensive network, resources, know-hows and technologies in the beauty industry. We are a leading third-party brand incubation platform in China in terms of GMV facilitated or generated in 2020, according to the iResearch Report. Through our brand incubation business, we facilitated or generated GMV of over RMB462 million in 2020, compared to RMB45 million in 2019, showing our fast growth in the business.

Time and time again, we have been recognized as a trusted business partner to online retail channels. For example, we ranked first among China’s beauty brand e-commerce enablement service providers in facilitating skincare, color cosmetics, perfume and personal care product sales on Tmall in 2019 and 2020 in terms of GMV, according to the iResearch Report.

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Established platform with full beauty value chain capabilities and resources

Through our years of experience, we are deeply integrated in the beauty value chain with the following unique advantages.

• Deep knowledge of China’s beauty ecosystem. As an industry leader with extensive experience, we have accumulated a wealth of knowledge and network in China’s beauty market. Our extensive brand partner portfolio serves as our valuable asset and knowledge base. Seeing our track record, an increasing number of beauty brands come to us for their China solutions. We carefully select the brands that we partner with based on our industry insights. Serving these carefully selected brands further enriches our industry knowledge and insights, creating a virtuous cycle.

• Data-driven brand and product selection to identify next trend and opportunity.We sift through the vast amount of consumer preference, behavior and transaction data available to us from industry-leading platforms that we collaborate with to identify key trends and drivers of the industry and accurate predicative analytics. Through our network of online and offline distribution channels and industry knowledge, we identify, select and recruit brand partners with the best potential to succeed. Utilizing our data-drive decision process, we are able to provide brand partners with market predictions and consumer insights that are accurate and actionable, helping them select and invest in beauty products that are best-suited for Chinese consumers.

• Omni-channel network and resources with comprehensive service coverage. Our holistic services encompass all aspects of beauty brands’ business, from market entry and discovery to fulfillment. Brand partners can choose services that best suit their needs. Our omni-channel capabilities across both market-leading, such as Tmall, JD.com and Vipshop, and long-tail e-commerce platforms and social media channels offer brand partners access to an array of market opportunities, disseminating their products to a wide audience. We started a new initiative to collaborate with offline store distribution channels since December 2020. We believe the integration of our online and offline distribution channel would enable our brand partners to offer holistic shopping experiences to consumers.

• Robust and digitally native sales and marketing capabilities. We utilize China’s dynamic online social media scene to create the desired brand image, increase brand awareness and conduct targeted marketing for our brand partners. In 2020, our in-house studio produced more than 53,000 hours of livestreaming marketing- content. Through our know-hows in digitally native sales and marketing, and extensive network of resources, beauty brands have access to a wide array of key opinion leaders, or KOLs, and social media platforms to reach a wider audience and create more intimate relationships with consumers. As of December 31, 2020, we had engaged over 117 MCNs.

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• Technology platform empowering our brand partners. Built on years of serving beauty brands, our technology platform empowers our distribution and consumer- serving capabilities for our brand partners. Our accumulated know-how in the beauty industry in China combined with our industry-leading technology allow us to address the unique needs of beauty brands. Our technology solutions, such as our enterprise relationship management, or ERM, and customer relationship management, or CRM, systems are built to be scalable and modelized, making them easy to integrate with our incubation brand partners’ native systems, saving costs of system migration or development. We believe our platform is especially beneficial to incubation brand partners by offering them a one-stop infrastructure solution.

Trusted long-term strategic business partner for a diverse and growing portfolio of global beauty brands

We are trusted by and maintain long-term business relationships with our beauty brand partners and the brand groups behind these brands. We have enabled beauty brands to stay abreast of the latest developments in the beauty market, enhance their GMV growth, and strengthen their overall competitive edge in China. In 2020, four of our brand partners achieved GMV of over RMB1 billion each, and 16 of our brand partners achieved GMV of over RMB100 million each. As of December 31, 2020, the two-year CAGR of GMV we facilitated or generated was 88.5%.

The results we delivered to our brand partners foster deeper trust in us, further solidifying our position as their long-term business partner. Many of our brand partners have increased the number of their SKUs for us to manage, and, at times, given us new beauty brand referrals. For example, we started working with our largest beauty brand group partner in terms of revenue contribution during the Track Record Period, which we refer to as Customer A, since 2013, when we were engaged by Brand A of Customer A to provide beauty e-commerce enablement services with regard to certain products. Due to our success, we have been engaged by Customer A since 2014 to provide our e-commerce enablement services to various brands within its group. Our collaboration with Customer A and its brands gradually deepens and strengthens over time. As of December 31, 2020, we served as an e-commerce enabler in China for seven brands of Customer A.

Our portfolio of brands partners consists of 25, 43 and 44 beauty brands as of December 31, 2018, 2019 and 2020, respectively. We continue to recruit more emerging brands to expand our brand partner portfolio. As of December 31, 2020, we had 33 enablement brand partners, such as Clarins, Clé de Peau Beauté, L’OCCITANE, Perfume GIVENCHY, Sisley and Valmont, and 11 incubation brand partners, such as Christian Louboutin, Penhaligon’s, and Tatcha (in alphabetical order). We continually evaluate our brand portfolio in order to bring Chinese consumers beauty brands and products that meet their evolving needs.

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Ability to deliver superior consumer experience

We believe our brand partners value us for our ability to deliver on-brand premium personalized consumer experiences at scale. We accomplish this by utilizing our “Art and Science” capability with data analytics. We consistently sift through the vast amount of consumer preference, behavioral and transaction data available to us from industry-leading platforms that we collaborate with. Our knowledge in the art of beauty and technology-driven operations allows us to offer premium personalized experience to consumers at scale, engaging consumers with brands in an individualized and intimate manner.

Combining our experience in the beauty market with data analytics, we identify key trends and drivers of the industry and offer our brand partners accurate predicative analytics. Utilizing these insights, we help our brand partners to design premium personalized consumer experiences, including online store layout, exquisite gift packaging, customized greeting cards, free beauty samples and third-party beauty advisor chatbot that provide intelligent customer services.

For example, before sales, we utilize both human and AI beauty advisors, or BAs, to provide consumers with on-demand consultation services to guide their shopping process with professional advice. We have almost 40,000 call scripts that can be used by our BAs, which, combined with our data-driven BI system, offer bespoke and personalized communication experience to consumers. During sales, we are able to utilize our AI technology to recognize and process consumers’ personalized needs, such as gift cards, engraving and special packaging needs, automating the process from receiving requests to realizing them, offering personalized experience at scale. In 2020, we were able to fulfill more than 6 million personalized requests for consumers. Our after-sales capabilities include analyzing consumers’ behavior and preferences and sending them seasonal greetings and samples to increase loyalty and stickiness.

Operating excellence and technology infrastructure driving scalability

We have achieved significant growth as a result of our operating excellence and technology infrastructure. In 2020, we processed over 37.6 million orders, representing a growth of 230.0% from 12.4 million orders in 2018. The total GMV that we facilitated or generated increased by 255.5% from RMB4.6 billion in 2018 to RMB16.3 billion in 2020.

We believe a balance of human resources and technology innovation is what drives our sustainable growth. On the one hand, we meticulously improve the efficiency of our team by minimizing room for human errors and reducing redundancies through real-time monitoring, rigorous training programs conducted through UCO University, our in-house training program designed for all of our employees, and robust operating procedures. This has enabled us to maintain a lean and highly efficient team with an industry leading average GMV per headcount of RMB11.9 million in 2020, according to the iResearch Report.

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On the other hand, we have continuously enhanced our core capabilities, such as market entry, execution, fulfillment and after-sales services, with technologies to optimize and scale our operations and meet peak-period demand. For example, we processed 8.0 million orders during the Singles Day promotion on November 11, 2020, with a GMV of RMB4.6 billion, a 56.9% increase from the RMB3.0 billion in total GMV processed during the same event in 2019, with an accuracy rate of 99.97% and on-time shipping rate of 97.5%.

In 2020, approximately 20% to 30% of consumers who used our beauty advisor chatbot, built upon Ali Xiaomi provided by Tmall with our proprietary configuration, were transferred to human customer service representatives, lower than the industry average of over 50% for beauty stores on Tmall, according to the iResearch Report. The low rate of human customer service transfer enables us to scale our service more easily.

Experienced management team and vibrant young talent pool

Our senior management team’s experience spans across China’s beauty market, China’s online retail market, and global multinational corporations. This combination enables us to better serve global beauty brands in China. Our founder, chairman and chief executive officer, Mr. Arthur Chang, was previously a vice president of global sales of Alibaba (NYSE: BABA; HKEX: 9988) and has over 20 years of experience in internet and e-commerce. Other members of our senior management team are also veterans of various industries with backgrounds from global technology or beauty companies such as Amazon (NASDAQ: AMZN), Avon and Microsoft (NASDAQ: MSFT).

Our young talent pool, with an average age of 26.4 as of December 31, 2020, forms an indispensable part of our daily operations. We dedicate resources and have training and professional development programs to ensure that our employees find fulfilment at work.

Our Growth Strategies

We intend to pursue the following strategies to achieve our mission and maintain our fast growth.

Sustain and extend our blend of “Art and Science” capabilities to maintain leadership in the beauty market

To enable our brand partners to succeed and increase wallet share, we are committed to investing in our “Art and Science” capability.

On the art front, we will continue to deepen and broaden our insight of China’s beauty market and its consumers, and understanding of each of our brand partners. We will also expand our service offerings to provide our brand partners with more on-brand multimedia marketing and content productions. For example, as short-form video and live streaming become increasingly important sales medium in China especially for Gen Z and millennial

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On the science front, we strive to optimize and broaden our service offerings through the use of data and technology. We will continue to fine tune our data analytics business intelligence (BI) system to help us capture the changes in industry trends and consumer behavior. For example, as data and technological expertise become an increasingly critical component of e-commerce, we intend to offer our brand partners more technological offerings, such as our proprietary customer relationship management system and business intelligence systems. We also intend to enhance the integration capabilities of these systems to better work with our brand partners’ existing systems. In addition, we plan to optimize the utilization and analysis of third-party databases and broaden the applications of these databases in order to enhance our sales capabilities and increase our consumer reach to sustain and extend our leadership position. We will also broaden our solutions in marketing technologies to provide more targeted marketing and smart logistic solutions to accommodate the needs of our brand partners to offer personalized service offerings.

Selectively expand our brand partner portfolio with high-growth potentials

We intend to proactively pursue more opportunities with selected brands that exhibit high-growth potentials according to our market analysis, such as mass market, niche and local brands, to join our diverse and growing brand portfolio. We will continually leverage our accumulated experience and capabilities to provide them with high quality service and innovative solutions. We also intend to especially enhance our ability to discern and select emerging brands with high potential. As of the Latest Practicable Date, we have collaborated with 4 more incubation brand partners than as of December 31, 2020, increasing our incubation brand partner portfolio to 15. We are also exploring the possibility to deepen our partnerships with and invest in emerging brands.

Expand our capabilities along the beauty value chain and strengthen our platform ecosystem

To better serve our brand partners, we will continue to develop our capabilities throughout the beauty market ecosystem. In particular, we aim to expand our omni-channel distribution coverage and marketing reach to potential consumer bases. We will continually strengthen our strong online presence while exploring more offline opportunities to improve the integration and customization capabilities of our solutions. For example, we will seek to increase our offline distribution partners and increase our collaborations with brand partners on offline opportunities. We also intend to expand our marketing coverage through new ways of cooperation with more MCNs and KOLs in order to increase user traffic for our solution and enhance our brand building capabilities. For instance, we are exploring the possibility to collaborate with MCNs to incubate emerging brands. In April 2021, we have entered into an agreement to establish a joint venture with a reputable MCN to incubate a well-recognized American color cosmetics brand founded in 1994.

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We also intend to broaden our integration within the beauty value chain through partnerships with industry participants of all sizes. We intend to continually work with large platform partners to establish collaborations such as brand marketing and operations. We seek to explore the possibility of expanding our upstream and downstream presence in the beauty value chain through investments and acquisitions. For example, we may make minority investments in selected small and medium sized industry participants, such as emerging social channels and value-added service providers for e-commerce platforms. establish joint ventures with other participants in the beauty ecosystem to expand our capabilities.

Enhance operating efficiencies through technology and innovation

We will continue to invest in our technologies and digital infrastructure, particularly focusing on our order management system (OMS), CRM system and BI system.

By streamlining our OMS processes and implementing the latest digital technologies, we aim to optimize operating efficiency and scalability to further develop technology-enabled services and enable higher degrees of automation in our inventory forecasting and management, omni-channel fulfillment and logistics. We intend to cooperate with additional third-party software vendors to include pre-sales consumer solutions into our CRM system to enhance our targeted and personalized marketing and recommendations to consumers. We also intend to continually develop our BI system to capture retail, social channels and supply chain data and achieve omni-channel data collection, integration and analytics.

Our Business Model

We provide comprehensive solutions to our brand partners for the purposes of facilitating their branding and marketing strategies and increasing their sales. We advise and help execute our brand partners’ China online strategies while preserving their brand image, and deliver satisfactory sales and marketing results for them. We carefully assess each brand partner’s tonality, target consumers and strategic appetite. We then work with the brand partner to select from various influential e-commerce platforms, social media platforms and emerging channels to formulate and execute an effective marketing and operation plan most suitable for its go-to-market strategy. We customize our solutions specifically for each brand partner and integrate them with the brand partner’s operation and IT infrastructure. While we can navigate the competitive landscape of China beauty e-commerce, including for global beauty brands with limited experience in China, we can equally add value to global beauty brands with sophisticated knowledge of China.

We serve our brand partners under two business lines: e-commerce enablement and brand incubation. We started our business with supporting enablement brand partners, primarily established beauty brands, defined as beauty brands with annual retail sales in China, both online and offline, of no less than RMB100 million. Leveraging our in-depth expertise and experience in operating our e-commerce enablement business line in the China beauty market, in 2019, we rolled out our brand incubation business line, where we primarily serve emerging beauty brands, defined as beauty brands with annual retail sales in China, both online and

– 164 – THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT BUSINESS offline, of less than RMB100 million. We choose to work with different brand partners with either the e-commerce enablement business line or the brand incubation business line primarily based on each brand partner’s brand awareness amongst consumers and sales volume in the China beauty market. Once we start working with a brand partner under one business line, we do not switch the categorization, regardless of the brand partners’ evolving brand awareness and annual retail sales in China. For enablement brand partners, we provide them with solutions and services to fulfil their go-to-market strategies, including marketing strategy advisory, digital marketing execution, omni-channel operations, customer services and order fulfillment. For incubation brand partners, we offer not only all of the services and solutions available for enablement brand partners, but also market discovery and entry solutions. We provide incubation brand partners with a variety of resources which would otherwise be difficult for emerging brands to access, such as omni-channel network, cooperation opportunities with KOLs and expertise in consumer behavior and preference. We analyze market opportunities and help our incubation brand partners gain brand recognition more quickly. As of the Latest Practicable Date, we were the sole operator of all of our brand partners’ official online stores on the designated channels that they cooperate with us, regardless of business line or revenue methods.

Most of our enablement brand partners have entered the China beauty market for some time and have gained familiarity with the market to formulate their marketing strategies. When cooperating with enablement brand partners, we primarily execute the branding and marketing strategies that the brand partners have designed themselves, operating their official online stores, while in some cases we provide marketing strategy advisory to brand partners to help them formulate their marketing strategies. However, our incubation brand partners are relatively new to the China beauty market with limited local personnel arranged in China. Therefore, they tend to rely more on our resources and know-how. As a result, we generally have more discretion, and in many cases proactively drive, in the formation and execution of our incubation brand partners’ go-to-market strategies. We take a more dominant role in assisting our incubation brand partners regarding the market entry strategy, product launch, pricing, channels of operation, marketing, merchandising, and distribution of their products. We help identify for our incubation brand partners market opportunities that are aligned with their brand image, and help them achieve brand recognition and gain market share efficiently. For certain incubation brand partners, in order to enhance business collaboration with them, we plan to establish, together with the brand partners, joint ventures that engage in sales and marketing activities of the brand partners. Leveraging our industry know-how and data analytics capabilities, we carefully select prospective beauty brands newly entering the China market with high growth potentials to partner with. Under our cooperation with incubation brand partners, we typically possess exclusive distribution right on multiple online channels, and in some cases all channels, both online and offline, by owning and operating the incubation brand partners online and offline stores. Leveraging our extensive experience in serving enablement brand partners, deep understanding of consumers’ evolving preference and industry trends, we are capable of forming long term partnerships with our incubation brand partners throughout their growth and expansion in China and satisfying their business needs across various life stages, which we believe gives us an edge.

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Our Brand Partners

We are the largest beauty brand e-commerce enablement service provider and a leading third-party beauty brand incubation platform by GMV facilitated or generated in China in 2020, according to the iResearch Report. We serve a diverse and growing portfolio of beauty brand partners covering the full spectrum of global beauty brands ranging from mass market brand to premium brands, and from established brands with considerable brand recognition in China to emerging brands that are new to Chinese consumers. We provide e-commerce enablement services to enablement brand partners, primarily established beauty brands, and serve as a brand incubation platform to incubation brand partners, primarily emerging beauty brands. As of December 31, 2020, our brand partners including all of the top six beauty brand groups by revenues globally in 2019. We had a portfolio of 44 brand partners, including 33 enablement brand partners, such as Clarins, Clé de Peau Beauté, L’OCCITANE, Perfume GIVENCHY, Sisley and Valmont, and 11 incubation brand partners, such as Christian Louboutin, Penhaligon’s, and Tatcha (in alphabetical order).

Our brand partners cover a wide array of beauty brands at different scales. An increasing number of established global beauty brands have chosen us to be their trusted business partner for their go-to-market strategies. The beauty brand groups that we serve have entrusted us with more of their portfolio brands. For example, we started working with our largest beauty brand group partner in terms of revenue contribution during the Track Record Period, which we refer to as Customer A, since 2013. In 2013, we were engaged by Brand A of Customer A, a top global beauty brand of high-end skincare, cosmetics, toiletries and fragrances, to provide beauty e-commerce enablement services with regard to certain products. Due to the success we accomplished for Brand A, we have been engaged by Customer A since 2014 to provide our e-commerce enablement services to various brands within its group. Our collaboration with Customer A and its brands gradually deepens and strengthens over time. As of December 31, 2020, we served as an e-commerce enabler in China for seven brands of Customer A. Meanwhile, more and more emerging beauty brands have seen our capabilities in enhancing brand recognition and boosting sales in the China beauty market and as a result choose us as their trusted brand incubation platform.

We have established long-term cooperative relationship with our brand partners. As of December 31, 2020, the average length of cooperation with us of the top 20 enablement brand partners by GMV was four years. In addition to adding new brand partners to our portfolio, we expand our cooperation with existing brands and assist with their GMV growth. In 2020, our GMV expansion rate was approximately 65.2%. We define GMV expansion rate for any given year as the yearly rate of increase of GMV we facilitated or generated from brands who were our brand partners for both that year and the previous year.

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The following table sets forth the movement of the number of our brand partners during the Track Record Period. We continue to add in new brand partners to our brand portfolio. The brand partners who terminated their cooperation with us during the Track Record Period are primarily beauty brands with less than 1% of our GMV of the year, whom we ceased partnership with as a result of our active business adjustment and optimization of our brand partner portfolio. In order to optimize the allocation of our business resources, we regularly examine and analyze the operational and financial results of our cooperation with brand partners. We choose to terminate cooperation with brand partners that contribute rather insignificantly to our total GMV and revenues and brand partners whose focus is no longer compatible with our business strategies. Other than such brand partners, there were three brand partners under one brand group partner who terminated cooperation with us in 2020 because the brand group partner started to mainly rely on its in-house e-commerce operations. The aggregated GMV contributed by brand partners who terminated cooperation with us in each of 2018, 2019 and 2020 accounted for less than 5% of our total GMV for each of the respective year. During the Track Record Period, none of our brand partners unilaterally terminated their contracts with us without cause. During the Track Record Period, we did not have any material disagreements or disputes with the brand partners that we ceased cooperation with.

2018 2019 2020

Number of Brand Partners E-commerce Enablement Number of brands at the beginning of the year 25 25 36 Number of newly-added brands during the year 7 20 7 Number of brands terminated during the year (7) (9) (10)

Brands with annual GMV(1) more than 1% of our total GMV of the year (1) – (1) Brands with annual GMV(1) less than 1% of our total GMV of the year (6) (9) (9)

Number of brands at the end of the year 25 36 33

Brand Incubation Number of brands at the beginning of the year – – 7 Number of newly-added brands during the year – 8 7 Number of brands terminated during the year – (1) (3) Number of brands at the end of the year – 7 11 Total number of brands at the end of the year(2) 25 43 44

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Notes:

(1) Annual GMV of the brand partners who terminated their cooperation with us in a given year refers to the GMV we facilitated or generated under the cooperation with such brand in the previous full financial year before the termination.

(2) Number of brand partners under the service method was 20, 26 and 28 as at December 31, 2018, 2019 and 2020, respectively. Number of brand partners under the distribution method was 6, 19 and 17 as at December 31, 2018, 2019 and 2020, respectively. Some brand partners use both the service and distribution methods.

The following table sets forth the total GMV under our e-commerce enablement business line and brand incubation business line, respectively, during the Track Record Period. The GMV facilitated or generated through our e-commerce enablement increased by 115.8% from RMB4.6 billion in 2018 to RMB9.9 billion in 2019, and further increased by 60.1% to RMB15.9 billion in 2020. The GMV facilitated or generated through brand incubation increased by 934.5% from RMB45 million in 2019 to RMB462 million in 2020.

Year-on- Year-on- year growth year growth 2018 percentage 2019 percentage 2020

GMV (RMB in million)

E-commerce Enablement 4,597 115.8% 9,919 60.1% 15,881 Brand Incubation 0 N/A 45 934.5% 462 Total GMV 4,597 116.7% 9,964 64.0% 16,343

Case study – we helped an incubation brand partner quickly gain brand recognition in the China beauty market

Brand B was one of our earliest brand incubation partners. Founded in the late 1860s, Brand B is a well-known perfume house in Europe. After conducting our data-driven market analysis, we recognized huge potential of the fragrance market in China. In October 2019, Brand B started to work with us to establish and expand its presence in China. Understanding the brand value and heritage of Brand B and identified its huge market potential in China, which made us believe Brand B and its fragrances are well positioned to succeed in China.

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After carefully assessing the brand image and tonality of Brand B, we designed and formulated a precise online marketing strategy to cultivate brand awareness of Brand B among the potential consumer base with specific demographic attributes through online. We executed such strategy in collaboration with KOLs. In order to provide premium consumer experience, we provided personalized packaging to the consumers and optimized the inventory management and fulfillment process to ensure sufficient inventory and on-time delivery.

As a result, the total sales volume of Brand B on Tmall and Taobao increased approximately 234% within the first 15 months after we began to work with Brand B, and Brand B became one of the top three international emerging fragrance brand by sales volume on Tmall in 2020, according to the iResearch Report.

We carefully select prospective brand partners. We choose to work with both established and well-recognized brand partners in the beauty market and emerging and promising brand partners. For enablement brand partners, our screening process is mainly based on criteria such as projected annual GMV and service fees, commitment to China market and proposed duration of cooperation. For incubation brand partners, we focus more on analyzing category and product potential, brand commitment in the market, unique selling angle, strategy alignment, projected profitability, prospects of product categories expansion and growth potential.

Many of the contracts we entered into with our brand partners, both under the service method and the distribution method, contain an exclusivity provision, providing that we are the only service provider or distributor for the designated channel, such as operating the brand partner’s official store for the designated channel. In addition, under our cooperation with certain brand partners where the contracts do not contain an exclusivity provision, given that we operate the only official online channel of such brand partners, such as the Tmall official store or the brand partners’ official website, we are, as a matter of actual operations, the exclusive service provider or distributor for the brand partners’ designated channel despite the absence of exclusivity provisions in the relevant contracts. In 2018, 2019 and 2020, we acted as the exclusive service provider or distributor on certain designated channels pursuant to contract clauses for six, 14, and 21 brand partners, and we acted as the exclusive service provider or distributor due to the nature of our actual cooperation for 14, 24 and 24 brand partners. In 2018, 2019 and 2020, revenue generated from our cooperation with the brand partners where we are the exclusive service provider or distributor for certain designated channels, both pursuant to the contracts or due to the nature of our actual cooperation, accounted for 36.9%, 65.4% and 86.3% of our total revenue for the respective year. In 2018, 2019 and 2020, we acted as the exclusive service provider on certain designated channels to 20, 30 and 31 brand partners, respectively, under the service method, generating all of the total revenue generated under the service method for the respective year. In 2018, 2019 and 2020, we acted as the exclusive distributor on certain designated channels to one, 10 and 15 brand partners, respectively, under the distribution method, generating 1.4%, 9.3% and 63.1%, respectively, of the total revenue generated under the distribution method for the respective

– 169 – THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT BUSINESS year. Brand partners for whom we do not act as the exclusive service provider or distributor for a given channel can potentially distribute their products through other distributors or work with other service providers for the same channel. However, in practice, as we normally operate the brand partner’s official store on such channel, the possibility of the brand partner working with another distributor or service provider on the same channel is minimal. We do not believe it causes significant competition.

Some of our contracts with brand partners contain non-compete provisions prohibiting us from selling products of, or providing similar services to, competitors of such brand partners. As such, we have taken some screening measures to mitigate the impact of such perceived conflict of interest. We keep track of a list of the beauty brands that we are prohibited from cooperating with pursuant to our contracts with certain existing brand partners. Before the commencement of cooperation with a beauty brand, we would check and ensure the prospective brand partner is not on the list. Under certain circumstances where we identify potential conflict, we would proactively communicate with the relevant existing brand partner to resolve the conflict in a timely manner. During the Track Record Period, we had non-compete obligations under our contracts with nine brand partners. During the Track Record Period and up to the Latest Practicable Date, we complied with the non-compete arrangements we made with our brand partners. In 2018, 2019 and 2020, revenue generated from our cooperation with these brand partners accounted for 21.5%, 30.3% and 18.3% of our total revenue for the respective year.

Under our contract with a few brand partners, the brand partners have the right to unilaterally terminate the contract without cause. In 2018, 2019 and 2020, 74.9%, 62.2% and 39.1% of our total revenue, respectively, was generated under our contracts with brand partners pursuant to which the brand partners had rights to unilaterally terminate the contract without cause. We do not consider the risk of unilateral termination of the contracts by our brand partners who have the right of unilateral termination to be material for the following reasons: (i) during the Track Record Period, none of our brand partners unilaterally terminated their contracts with us during the contract terms; (ii) we maintain frequent dialogues with our brand partners to ensure we continue to fulfil their marketing strategies and add value to their business; (iii) our historical performance has showcased our ability to achieve optimal sales results for our brand partners, and we have been able to maintain good relationships with our brand partners.

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Our Revenue Methods

We generate revenues under two different methods, pursuant to our negotiation of contract terms with the brand partners that in turn are essentially depended on a brand partner’s positioning, China strategy and specific service demand. Depending on a given brand partner’s preference for different online channels, it can work with us under different revenue methods with regard to different channels. The two revenue methods are:

• service method, where we derive service fee revenue from fixed fees and/or variable fees primarily based on GMV or other variable factors such as number of orders fulfilled when providing services to our brand partners; and

• distribution method, where we generate revenue by directly selling beauty products of our brand partners to end consumers, or selling beauty products to e-commerce platforms or distributors for them to resell to end consumers.

Service method

The service method allows brand partners to leverage our expertise in the China beauty industry while retaining control of major aspects of their China strategies. Under the service method, we provide a suite of services and solutions to our brand partners, and charge fixed fees and/or variable fees primarily based on GMV or other variable factors such as number of orders fulfilled, depending on the specific service scope we provide and specific contract terms. Our brand partners are deemed as our customers under the service method. We do not handle the payment by consumers or refund to consumers under the service method.

As a service provider, we do not take ownership of beauty products. As a result, we do not bear inventory risk. We generally have limited control over pricing, selection, specification and suppliers of beauty products to be sold, on which our brand partners retain control. We are able to provide the brand partners with a suite of services catering to their marketing demands, including marketing strategy advisory, digital marketing execution, omni-channel operations, customer services, order fulfillment and market discovery and entry. The specific service scope, on the other hand, is negotiated between our brand partner and us. The pricing of our service is primarily based on pre-determined incentive indicators hinged on GMV or other consideration such as unit vale and daily sales records. We negotiate such pricing based on, amongst other factors, the scope of services that we offer to each brand partner. Under the service method, brand partners have the right to decide the types and quantities of the beauty products to be sold through the designated channel.

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Under the service method, we enter into operating service agreements with brand partners, which mainly stipulate (i) scope of service, such as maintaining the normal operations of the online store, the pre-sale and after-sale customer services, logistics and supply chain management services; (ii) fee charges, either as operating service fees at a fixed price on a regular basis or sales commission determined based on the sales volume multiplies a commission rate, as applicable; (iii) pricing right. Under the service method, we typically do not determine product prices, but may be able to adjust prices under certain circumstances subject to consent of the brand partners; (iv) logistics. Under the service method, products are either shipped from the brand partners or their distributors directly to the consumers without going through our warehouses, or shipped to us first, and then to the consumers, depending on whether our warehousing and delivery services are within the service scope pursuant to our agreements with the brand partners; (v) contract term, which is typically one year, and can be renewed through mutual agreement of both parties; and (vi) termination clause, which typically provides that a party is entitled to terminate the contract in the case of a material breach of the other party. Under the contracts with a few brand partners, the brand partner has the right to unilaterally terminate the contract without cause.

Distribution method

The distribution method largely relieves brand partners from the burden of implementing their marketing and distribution strategies while increasing the certainty of sales to them. Under the distribution method, we select and purchase beauty products from our brand partners directly or through their authorized distributors and resell these beauty products primarily to consumers through official online stores under the brand name of our brand partners that we operate. We typically have discretion over the types and quantities of beauty products that we distribute, while take ownership of beauty products before reselling to consumers or our distributors, and as a result, we bear general inventory risk. In 2018, 2019 and 2020, we owned and operated 15, 29 and 32 official online stores under the brand name of our brand partners, which generated 29.6%, 11.4% and 23.7% of the total revenues for the respective year. Certain brand partners offer us rebates if we purchase over a specified amount of value of products as an incentive for us. Depending on the different e-commerce platforms where the online stores are operated on and which brand partners the products are offered by, we may either sell the products directly to the end consumers, or bulk sell products to the e-commerce platforms first for them to resell to end consumers. We also distribute some beauty products to merchants, primarily Taobao shops that focus on beauty products and certain cross-board e-commerce platforms, or offline channels for resale to consumers without them going through the brand partners’ online stores. For a detailed discussion of our distributors under the distribution method, see “Our Distributors.” Therefore, our brand partners and/or their authorized distributors are deemed as our suppliers, and the consumers, e-commerce platforms, merchants or offline channels are deemed as our customers under the distribution method. In 2018, 2019 and 2020, revenue generated from distributing to end consumers directly accounted for 47.0%, 31.3% and 65.0%, respectively, of the total revenue generated from distribution method in the respective years. Under the distribution method, the products are shipped from the suppliers or their authorized distributors to our warehouses, or in some circumstances, third-party operated warehouses that we lease, and then to the consumers.

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Under the distribution method, we enter into distribution agreements with our brand partners, from whom we purchase beauty products. The agreements mainly cover (i) distribution arrangement, that we are entitled to sell the products through designated platforms or to our own distributors; (ii) purchasing price, generally based on a certain percentage of the suggested product retail price, as applicable; (iii) pricing right. Under the distribution method, we typically have certain discretion to set the retail prices, while in some cases we are obligated to price the products based on the suggested retail prices from brand partners; (iv) logistics. In the case where we sell products to consumers directly, we are in charge of the logistics and storage of the products. In the case where we sell the products to merchants or offline channels for resell, we will deliver the products to their warehouses; (v) contract term, which typically ranges from one to three years, and can be renewed through mutual agreement of both parties. Some of the distribution contracts contain automatic renewal clauses; and (vi) termination clause, which typically provides that a party is entitled to terminate the contract in the case of a material breach of the other party. A few contracts also provide that the brand partner has the right to early termination with a specified notice period, whereby the brand partner should repurchase all inventory we hold at the time of termination, or grant us a specified period of time to clear inventory. Under the contracts with a few brand partners, the brand partner has the right to unilaterally terminate the contract without cause.

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The table below sets forth a breakdown of GMV by channels of the two revenue methods under each of the e-commerce enablement business line and the brand incubation business line during the Track Record Period. The fluctuations of our GMV among different channels are in line with our overall business development trend, with increased operations in the brand incubation business line and the service method.

2018 2019 2020

GMV (RMB in million) E-commerce Enablement Service Method 3,547 9,149 15,454 Tmall 3,210 8,496 14,688 Vipshop 327 523 496 JD.com 1 4 – Others(1) 8 127 269 Distribution Method(2) 1,050 770 428 Vipshop 424 367 236 Tmall 371 107 98 JD.com (B2B) 170 235 63 JD.com (B2C) 3 1 – Others(1) 82 60 31 Subtotal – E-commerce Enablement 4,597 9,919 15,881 Brand Incubation Service – 8 110 Tmall – 8 110 Others(1) ––– Distribution(2) – 36 352 Tmall – 29 312 JD.com (B2B) – 1 3 JD.com (B2C) – – 0 Vipshop – 1 2 Others(1) –634 Subtotal – Brand Incubation – 45 462

Total GMV 4,597 9,964 16,343

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The table below sets forth a breakdown of our revenue by channels of the two revenue methods during the Track Record Period. In 2018, 2019 and 2020, we generated revenue from the e-commerce enablement business line of RMB1,164.5 million, RMB1,397.8 million and RMB1,343.3 million, respectively. In 2019 and 2020, we generated revenue from the brand incubation business line of RMB33.4 million and RMB316.2 million, respectively, of which RMB30.7 million and RMB307.2 million, respectively, were generated under the distribution method. The significant increase in the revenue generated from the brand incubation business line was primarily due to (i) the rapid growth of our brand incubation business line, since the inception of our brand incubation business line in 2019, we have been carefully selecting and identifying emerging brands with great potentials to work with and successfully enlarging our incubation brand partner base by engaging 8 and 7 new incubation brand partners in 2019 and 2020, respectively. As of December 31, 2020, we had 11 incubation brand partners; and (ii) the strong performance of our incubation brands. Apivita, Christian Louboutin, Martiderm and Penhaligon’s (in alphabetical order), as our key incubation brand partners, quickly penetrated into the China market and gained recognition, resulting in significant increase in revenue contribution. The strong performance of our incubation brand partners is evidenced by the total GMV we facilitated and generated for them, which increased from RMB45 million in 2019 to RMB462 million in 2020. We believe the prospects of our brand incubation business line will continue to be driven by those factors. The majority of revenue generated from our brand incubation business line in 2019 and 2020 was from the distribution method. This is primarily because we take a more dominant role in assisting our incubation brand partners who tend to rely us more given that they are generally new to the China beauty market. We typically choose to cooperate with our incubation brand partners under the distribution method, which generally gives us greater discretion in the market entry strategy, product launch, pricing, channels of operation, marketing, merchandising, and distribution of their products. The fluctuations of our revenue among different channels are in line with our overall business development trend, with increased operations in the brand incubation business line and the service method.

Our Group For the Period from January 7, For the Year Our Predecessor Entity 2019 to Ended For the Year Ended December 31, December 31, December 31, 2018 2019 2020 2019 2020

Revenue (RMB in thousand) Service Method Tmall 389,006 680,821 665,501 689,246 984,367 Vipshop 26,179 31,466 19,911 23,491 24,274 JD.com 278 758 – 420 – Others(1) 3,700 1,667 16,972 14,749 36,010

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Our Group For the Period from January 7, For the Year Our Predecessor Entity 2019 to Ended For the Year Ended December 31, December 31, December 31, 2018 2019 2020 2019 2020

Subtotal – Service Method 419,163 714,712 702,384 727,906 1,044,651 Distribution Method(2) Tmall 327,363 117,304 231,454 32,389 371,981 Vipshop 250,008 220,530 131,120 172,618 131,120 JD.com (B2B) 100,263 138,093 34,189 111,114 34,354 JD.com (B2C) 1,921 191 – 358 167 Others(1) 65,822 41,393 69,420 34,998 77,273 Subtotal – Distribution Method 745,377 517,511 466,183 351,477 614,895

Total Revenue 1,164,540 1,232,223 1,168,567 1,079,383 1,659,546

Note:

(1) “Others” include merchants, offline channels and e-commerce platforms other than Tmall, Vipshop and JD.com, such as RED and Amazon. We sell beauty products under both the B2B and B2C models through these channels.

(2) Under the distribution method, through Tmall, we sell beauty products under the B2C model; through Vipshop, we sell beauty products under the B2B model; through JD.com, we sell beauty products under both the B2B and B2C model, as we sell certain brand partners’ products to JD.com for it to resell, and at the same time operate the official JD POP store of these brand partners to increase sales volume for these brand partners.

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The table below sets forth a breakdown of our revenues generated from our cooperation with our top five brand partners in terms of revenue contribution for each year during the Track Record Period.

For the year ended December 31, 2018 As a Revenue Percentage Generated of Total from Brand Revenues for Brand Partner Partner the Year (RMB in thousand)

Brand 1 (Distribution) 373,568 32.1% Brand 2 (Distribution) 182,376 15.7% Brand 3 (Service) 112,556 9.7% Brand 4 (Service) 87,073 7.5% Brand 5 (Distribution) 62,878 5.4%

Total 818,451 70.4%

For the year ended December 31, 2019 As a Revenue Percentage Generated of Total from Brand Revenues for Brand Partner Partner the Year (RMB in thousand)

Brand 1 (Distribution) 244,654 17.1% Brand 3 (Service) 224,869 15.7% Brand 4 (Service) 146,919 10.3% Brand 2 (Distribution) 106,550 7.4% Brand 6 (Distribution) 51,877 3.6% Brand 6 (Service) 24,564 1.7% Brand 6 (Distribution + Service) 76,441 5.3%

Total 799,433 55.8%

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For the year ended December 31, 2020 As a Revenue Percentage Generated of Total from Brand Revenues for Brand Partner Partner the Year (RMB in thousand)

Brand 7 (Service) 175,184 10.6% Brand 3 (Service) 149,325 9.0% Brand 8 (Distribution) 134,093 8.1% Brand 9 (Service) 102,819 6.2% Brand 10 (Distribution) 89,964 5.4%

Total 651,385 39.3%

For those that only show distribution or service method, we do not generate any revenue from them under the other revenue method.

For the year ended December 31, 2018 As a Revenue Percentage Generated of Total from Brand Revenues for Brand Group Partner Group Partner the Year (RMB in thousand)

Total 1,027,496 88.2%

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For the year ended December 31, 2019 As a Revenue Percentage Generated of Total from Brand Revenues for Brand Group Partner Group Partner the Year (RMB in thousand)

Total 1,153,098 80.5%

For the year ended December 31, 2020 As a Revenue Percentage Generated of Total from Brand Revenues for Brand Group Partner Group Partner the Year (RMB in thousand)

Total 955,412 57.6%

For those that only show distribution or service method, we do not generate any revenue from them under the other revenue method.

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Our Services and Solutions

Our full-array solutions encompass all aspects of the China beauty e-commerce value chain catering to beauty brands at various life stages, including marketing strategy advisory, digital marketing execution, omni-channel operations, customer services and order fulfillment. We first identify the tonality, market positioning and strategies of a beauty brand. We then work with the brand partners to select an appropriate revenue method and determine the desirable scope of our capabilities to be used. Leveraging our extensive experience in servicing enablement brand partners, we extend our service offerings to market discovery and entry to serve incubation brand partners as a brand incubation platform.

Brand E-commerce incubation enablement

Market Marketing Digital Omni-Channel Customer Our Discovery and Strategy Marketing Order Fulfillment Operations Service Business Entry Advisory Execution Focuses

Omni-Channel Social Marketing and Industry Knowledge Operational Technology Network KOL Resources and Insights Know-how Infrastructure Our Platform Resources

Services in both brand Services in brand incubation and e-commerce incubation enablement

Marketing Strategy Advisory

We proactively share our beauty insights with our beauty brand partners and advise them on their China strategies before execution. We have established a deep understanding of the China beauty market and the consumer behavior and preference, which allows us to significantly improve the effectiveness of our brand partners’ China-specific marketing strategies.

Case study – our one-month marketing strategy advisory service brought GMV growth for an enablement brand partner

We have been serving Brand C, a premium brand with a specific consumer demographic, since 2018. We helped Brand C design marketing campaigns to efficiently reach its target consumer base with high sales conversion.

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We initiated a one-month marketing campaign for Product X, a new toner and moisturizer product of Brand C, and helped with its product launch in April 2019 through Tmall Hey Box, a popular portal of Tmall platform for launching new products. We cooperated with KOLs on the first day of our marketing campaign for Product X. We later announced collaboration with a popular Chinese artist to launch a Brand C-themed mini-game and received more than 600,000 times of play within the one month after its launch. We also placed flash advertisements across social media channels to stimulate excitement towards the product debut of Product X. On the last day of our one-month marketing campaign for Product X, we conduct the first promotional sales for Brand C on Tmall, which significantly increased exposure of Product X.

Throughout our marketing campaign for Product X, more than 23,000 Product X were sold and the GMV generated was nearly RMB36 million, among which 84% were contributed by first-time Brand C consumers of the Tmall official store of Brand C. After the event, Product X became a top-selling facial care product on Tmall with sustained and rapid growth in sales volume in 2019.

Digital Marketing Execution

Our digital marketing execution leverages our omni-channel capabilities and data-driven consumer insights. It is adaptable across multiple channels ranging from official marketplace stores on e-commerce platforms, social media, to content-based emerging platforms. Our digital marketing execution is results-oriented and provides our brand partners with flexibility.

• Marketing campaigns. We work closely with beauty brands to plan online marketing campaigns and to launch innovative marketing campaigns with creative ideas and frameworks for promotional events held by e-commerce platforms, such as Super Brand Day and Hey Box on Tmall. Leveraging our China beauty market expertise and data-driven consumer insights, we identify media platforms that could effectively reach our brand partners’ target audience and design online marketing campaigns accordingly. When planning marketing campaigns for beauty brands, we closely work with marketing or media teams of our brand partners to determine their target audience. As of 31 December 2020, we have successfully facilitated five events in total for two beauty brand partners to achieve GMV of more than RMB100 million during such events, demonstrating effective marketing capabilities of the Company.

Some of our contracts with brand partners contain payment arrangement pursuant to which we make payments on behalf of our brand partners in the ordinary course of our business, primarily consisting of advertising and marketing expenses paid to e-commerce platforms, in the event that the brand partners provide written consent that such expenses will be borne by them. We will then make payments on behalf of our brand partners, bill such expenses to them and settle those payments with them

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from time to time. Such payment arrangement allows us to quickly respond and adapt to the rapidly evolving e-commerce landscape and dynamics to provide high-quality services to our brand partners and deliver satisfactory results.

• Online traffic optimization. In addition to the arrangement of online marketing campaigns, we also help brand partners optimize online traffic allocation on a ongoing basis. We examine the logic and methodologies of general and specific search and feed services. We prioritize and customize specific textual or graphical content that are displayed or imbedded in the online stores that we operate to achieve higher rankings for these search and feed services. In February 2021, we were awarded the “2020 Annual Gold Medal Recommended Partners” from Alimama, Alibaba’s marketing technology platform, in recognition of our capabilities in marketing, business scale, market influence and innovation.

• Social and content marketing. We are well-connected with major social media platforms in China for word-of-mouth marketing among social circles of family, friends, colleagues and fans which provides an interactive experience that fosters a sense of online community, where consumers are encouraged to express themselves and interact with others regarding the beauty products. As of December 31, 2020, we collaborated with nine popular social media platforms in China. Once the target social media platforms are identified, we open and operate brand accounts on these social media platforms on behalf of our brand partners, publish content that is either provided by our brand partners or produced by our design team from time to time and respond to consumer comments and reviews to interact with and engage consumers. In 2020, we operated 13 in-house livestreaming studios and had created a total of more than 53,000 hours of livestreaming sessions for the Tmall flagship stores of a number of our brand partners. In 2020, one of our operated stores had the highest GMV generated from self-operated livestreaming session among all beauty stores on Tmall, and two of our operated stores ranked top five in the same category.

Case study – we drove a brand partner’s marketing campaign leveraging creative content marketing

Sisley is a new brand partner we started working with in 2020. As a leading skincare brand, its primary need was to further increase its brand awareness and maintain its global brand image in China. We leverage our deep understanding of the Sisley brand and engage targeted MCNs and/or KOLs on emerging channels to enable Sisley to achieve such goals.

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In May 2020, we launched the “618” marketing campaign for Sisley and cooperated with more than 60 KOLs. KOLs shared positive reviews with their respective fans via live streaming on Weibo and RED. After the live streaming event, they distributed testing samples to their respective fans. On May 16, 2020, two influential KOLs co-hosted a 10-minute live stream for Sisley with an online audience of 40 million and facilitated GMV of RMB3.9 million.

The number of followers of Sisley’s Flagship Store on Tmall increased by 31,000 within ten days after our launch of the “618” marketing campaign, obtained nearly 80 million views on Weibo and RED and achieved total sales of RMB4.5 million from the three livestreaming events we helped Sisley hold from May 2020 to June 2020.

• Collaboration with KOLs. We closely work with KOLs on online platforms, including many high-profile KOLs. We believe the user traffic of these channels are attracted to dynamic, fresh concepts and ideas, and influential KOLs on the emerging channels have an impact on the purchasing behaviors of consumers, especially the younger generations. We establish and maintain close working relationships with these KOLs to facilitate our brand partners’ marketing execution. We primarily cooperate with KOLs to promote the brand and product awareness of our brand partners, where the KOLs publish content in the form of graphic, video or livestreaming and we pay them fixed promotion service fees and, in some cases, commission fees as a certain percentage of the transaction price of products sold. The KOLs may also distribute the beauty products of our brand partners as a merchant through their own Taobao stores or their other channels. In either case, the KOLs earn the price difference between the price the products are sold to end consumers and the price they purchase from us.

Case study – we cooperated with KOLs on emerging channels to promote our brand partner’s product

Since 2014, we have worked closely with Customer D who engaged us to enhance the sales of its brand and enhance its customers’ experience in China. We have helped a skincare brand of the customer to successfully expand into China and build a significant online presence.

We collaborated with a famous KOL couple to introduce the brand’s products during their live-streaming sales event on Douyin, an emerging social channel, on January 8, 2021. The number of online audience peaked over 340,000. As a result of those efforts, we helped the brand set an all-time sales volume record in China through one single live-streaming sales event, and made the largest sales of a single product through one single live-streaming sales event.

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In March 2021, we acquired certain key assets of Protime, a leading Tmall independent software vendor which was recently recognized as one of the best partners of Tmall in 2020, to further enhance our digital marketing capabilities. The key assets we acquired include a series of precise decision-making data analytics tools, which enable more efficient target marketing and traffic conversion by accumulating consumer behavior insight and delivering feasible execution roadmaps and results.

Omni-channel Operations

We provide omni-channel operations solutions to facilitate our brand partners’ go-to- China strategies. We deploy dedicated operations teams to set up and manage online official or flagship stores and other channels on various e-commerce platforms and other emerging online channels for our brand partners. The operations teams primarily serve three functions: channel management, creative design and merchandising.

Channel Management

The operations teams are responsible for all aspects of the daily operations of channels, the operations teams work with our design team and marketing team to open and set up new online stores according to the relevant marketing strategies of brand partners. We maintain the technological integrity and aesthetic appeal of these online stores. We ensure these online stores are timely refreshed and synchronized with brand partners’ latest marketing plans to capture consumers’ ever-changing needs and preferences.

In addition to managing content on the relevant channels, we also systematically monitor, coordinate and help our brand partners to handle administrative work of promotional events on e-commerce and other emerging platforms where we operate online stores. We have dedicated staff to handle channel event application, registration and other procedures in batches with execution precision.

Creative Design

We have a dedicated design team to generate creative content to support our omni-channel operation. Our IT infrastructure ensures smooth transplant of creative content across platforms and systems. Our in-house design team is comprised of professional photographers, digital graphics engineers and content production professionals who create professional product display pictures, websites and documentation styles and other creative content for marketing campaigns and online store decorations. The design and displays of the online stores we operate are tailored to the brand partners’ brand image. We ensure consistent design and displays for our brand partners’ stores across various channels. For example, the store of a premium beauty brand tends to convey prestige and heritage of the brand, while the store of a mass market beauty brand strikes its target audience as approachable and presents good value for money.

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The pictures below present the screenshots of online stores of certain brand partners on Tmall:

Product details

Brand Product Product image

Key features

Merchandising

Our operations team manage merchandising to maintain an appropriate level of inventory for each channel we operate, either on behalf of brand partner or of our own. We also assist our brand partners in launching products, managing product listing and processing sales orders. We analyze historical sales data, and make forecast of necessary inventory level at each sales season throughout the year. We leverage our proprietary order management system and multi-platform inventory management system to optimize inventory management.

Customer services

We provide beauty advisory before and during sales, and customer services after sales.

Beauty advisory

We aim to create interactions with consumers before closing any sales. We believe that our emphasis on beauty advisory with beauty expertise, on top of traditional customer services, enhances our ability to maintain a loyal consumer base for our brand partners and to encourage repeat visits and purchases in the channels we operate.

We have developed UJ, our proprietary plug-in to Qianniu app, the customer chat service of Tmall. Our beauty advisors have been trained to use UJ to enhance the quality and effectiveness of consumer interaction in connection with sales and orders. UJ aggregates consumer information and enables our beauty advisors to create user tags and profiles for future references. Our beauty advisors interact with consumers via UJ to process order inquiries, placements, personalization, tracking, shipments, payments, changes and cancellations, as well as to resolve complaints and provide other after-sales services. UJ enables us to provide highly personalized services for consumers, and have been adopted by more than ten premium beauty brands to analyze consumer behavior, offer customized consumer experience, provide specialized advisory services and tailored marketing initiatives.

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We also use Ali Xiaomi, an AI-empowered chatbot, with our proprietary configuration to create our beauty advisor chatbot as a supplement to UJ. Utilizing our deep understanding of China beauty e-commerce industry and comprehensive consumer insights we accumulated through years of operations, we manage to configure Ali Xiaomi specifically to serve as real-time beauty advisor by delivering sensible conversions with consumers under complex scenarios and effectively respond to consumers’ product inquiries with proper recommendations. We maintained an average chatbot-to-human switching rate at 20% to 30% for the majority of the Tmall beauty stores we operate, compared with an average level of more than 50% chatbot-to-human switching rate at Tmall beauty stores in 2020, according to iResearch Report. Chatbot-to-human switching rate represents the number of consumers who switch from AI chatbot services to human customer representatives as a percentage of the total number of consumers engage the AI chatbot. A relatively low chatbot-to-human switching rate demonstrates our successful and effective application of Ali Xiaomi.

After-sales customer service

We maintain the quality of after-sales customer services by careful staff selection, training and regular performance assessment. To facilitate timely resolution of consumer complaints, we also train our staff to resolve complaints and remedy situations within a specified authorized transaction amount determined based on their seniority without having to get approval from their supervisors. With the help of Ali Xiaomi, our customer services team is available by online chat, phone and email from 8 am to 12 am every day, seven days a week. As of December 31, 2020, our customer services team had 562 team members.

Once a consumer submits a return or exchange application request online or by phone, we will review and process the request or contact the consumer by email or by phone if there are any questions relating to the request. For our brand partners who use our customer services, we work with them to provide hassle-free return and exchange services to the consumer. For our own online stores that we operate under the distribution method, upon receipt of the returned beauty product, we examine its condition and credit the consumer’s account with us or the original payment method with the purchase price or send another exchange product, where applicable.

In line with industry practice, we currently offer consumers from our brand partners’ online channels an unconditional right of return or exchange for a period of seven days upon receipt of products. Consumers can return beauty products purchased on our channels within seven days of receipt of the beauty products as long as the products are unused, unopen, undamaged and in their original packaging and in original condition. In addition, pursuant to our contracts with our brand partners under both service method and distribution method, our brand partners are obligated to provide quality warranty to the consumers with regard to their products. If consumers claim tortious liability of defective products against us, especially for products we sell under the distribution method, we will compensate the consumers first, and then seek recovery from relevant brand partners. During the Track Record Period, there was no material failure to seek recovery from the relevant brand partners.

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Order fulfillment

We have established a powerful logistics network and warehousing capacity supported by our proprietary supply chain management middle platform with nationwide coverage to help ensure positive shopping experience for consumers of our brand partners. We contract with leading nationwide and quality logistics service providers to facilitate reliable and timely delivery of beauty products.

All of our warehouses are leased properties. As of the Latest Practicable Date, we operated 15 leased warehouses with an aggregate gross floor area of approximately 95,576 square meters in Hangzhou, Jiaxing and Shanghai. During peak season, such as the Singles Day promotion in November and other promotional campaign in December, we temporarily lease warehouses to facilitate our order fulfilment demand. During peak season in 2020, we leased four more warehouses as compared to the Latest Practicable Date, with an aggregate gross floor area of approximately 61,767 more square meters. We provide value-added services to our brand partners, such as anti-counterfeit code protection and tailor-made packaging. We also provide customized or bespoke packaging for some of our brand partners if they choose to use this service.

Our proprietary transport management system enables us to closely monitor each step of the order fulfillment process from the time a purchase order is confirmed, up to when the product is delivered to the consumer. Our transport management system consists of three modules: courier selection, delivery tracking and freight audit. The courier selection module assists us in selecting the most efficient and appropriate courier services based on recipient location and preference, order information, cost and other pre-set protocols, subject to consumers’ specific requests. It optimizes our fulfillment costs and enhances consumer experiences by flexible selection of couriers, hazmat requirement check, minimum contracted volume requirement check, among various other functions. The delivery tracking module tracks the shipments and provides real-time data for monitoring. We are able to check exception orders and take remedial measures to prevent consumer complaints. The freight audit module calculates the shipment cost of each package based on pre-set formula and automatically compares against the relevant couriers’ bills. In addition, it is able to automatically record service fee incurred and deduct service fees from couriers’ bills.

Our supply chain management middle platform significantly enhances our order fulfillment capabilities. Shipments from our brand partners or other suppliers first arrive at one of our warehouses. At each warehouse, inventory is bar-coded and tracked through our warehouse management system, or WMS, allowing real-time monitoring of inventory levels across our logistics network and item tracking at each applicable delivery location. In our warehouses, we complete customized packaging catering to our brand partners’ specific marketing and promotional strategies, such as gifting, free sampling and other special packaging methods as required by our brand partners. Our WMS is specifically designed to support a large volume of inventory turnover. Our WMS processed approximately 11.38 million, 23.88 million and 37.55 million orders in 2018, 2019 and 2020, respectively. As of December 31, 2020, our WMS was capable of processing as many as 2.1 million outbound

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Market discovery and entry

In addition to the abovementioned services and solutions we offer to both enablement brand partners and incubation brand partners, we provide market discovery and entry solutions to incubation brand partners in particular. We help them identify target audiences, develop brand positioning based on market opportunity we observe, and hone their brand image and stories. Utilizing our deep industry insight, we assist incubation brand partners to select key products best suited for the Chinese consumers. We then proactively formulate marketing entry and growth strategies customized to their specific needs, including planning marketing events throughout a calendar year, select and negotiate with suitable launch channels, design brand marketing campaign and help them execute the strategies. These strategies help our incubation brand partners effectively establish brand awareness, attract online traffic, enhance sales conversion and increase sales. See “Case study—we helped an incubation brand partner quickly gain brand recognition in the China beauty market” for an example of how we helped an incubation brand partner enter into the China beauty market.

As our incubation brand partners typically only entered the China beauty market recently, we also provide them with other services supporting their market entry, such as registration requirements for beauty products with various relevant regulatory bodies.

Channels

We currently provide China beauty e-commerce solutions on major e-commerce platforms that are relevant for beauty brands, well-received emerging channels and content platforms. We were one of the first e-commerce enabler companies to start cooperating with many of these channels, and have established extensive business cooperation with them. Across various online channels, we ensure consistent design and displays and high-quality customer services for our brand partners’ and our own stores. Starting from late 2020, we commenced cooperation with certain offline channels to expand our offline sales capabilities. We utilize all of them to realize omni-channel operations to achieve various goals of our brand partners, as well as boost our own revenue growth.

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E-commerce platforms

We believe we maintain close working relationships with substantially all major e-commerce platforms in China that are relevant for beauty brands. The prosperity of our e-commerce services ultimately benefits these platforms by attracting new brands. These e-commerce platforms are thus typically motivated to work with us to facilitate our ability to connect our brand partners to their systems. On the other hand, in order to deliver our e-commerce services effectively, we also need to adhere to the operating rules and policies promulgated by those e-commerce platforms and proactively adapt to and keep up with the updates and changes to such rules and policies, if any. Historically, Vipshop changed its policy so that a portion of the promotional discount in the sales price of beauty products that were previously assumed by Vipshop itself became to be borne by us, which resulted in decrease in gross profit margin of a few beauty brand partners whose products we primarily distributed to Vipshop. Even though such change of policy and corresponding decrease in gross profit margin of a few beauty brand partners did not materially and adversely affect our profitability as a whole in general, there can be no assurance that any future change of policy by e-commerce platforms of similar nature and effect will not cause material and adverse impact to us. See “Risk Factors – Risks Related to our Business and Industry – If we fail to maintain our relationships with e-commerce platforms, or if e-commerce platforms otherwise curtail or inhibit our ability to integrate our services and solutions with their systems, our services and solutions would be less appealing to existing and potential beauty brand partners.”

Under the service method, our brand partners enter into agreements with the e-commerce platforms to launch online stores on the platforms, and we help manage their online stores. Under the distribution method, we either bulk sell the products to e-commerce platforms for resale, or enter into platform entry agreements with e-commerce platforms to set up and maintain online stores on these channels.

Social media and emerging channels

Depending on our brand partners’ specific needs, we work with some of them to enhance their brand image and equity on social media and emerging channels such as content platforms. For example, we help our brand partners set up official accounts and mini-programs, design their interfaces on Weixin, and help regularly update these official accounts and mini-programs with brand stories. We also monitor consumer comments on our brand partner’s official accounts and help them respond or react appropriately. In addition, we help brand partners directly integrate their Weixin official accounts with their back-end systems across all e-commerce platforms to increase flexibility of arranging sales campaigns. We also help launch and maintain Weixin mini programs for our brand partners and operate their Weixin stores.

Consumer can also purchase the products of our brand partners through various emerging content platforms, such as Douyin and RED. The various emerging content platforms combine digital and community-driven marketing with opportunities for direct purchase. We cooperate with active KOLs and MCNs on these channels to promote sales order of our brand partners’ products. The KOLs and MCNs either publish content to promote the brand and product

– 189 – THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT BUSINESS awareness of our brand partners and charge fixed service fees, or in some cases, commission fees based on products sold or sell beauty products of our brand partners and charge price difference. In addition to brand and product promotion, we leverage the immense reach of these channels to the hundreds of millions active users to achieve stronger marketing and branding effects for our brand partners.

Offline channels

In addition to various online channels, we are also seeking expansion into offline markets to further enhance our omni-channel operations. We have obtained the exclusive offline distribution right of two incubation brand partners we work with. We help these incubation brand partners to identify the right match of offline channels and exploit online-offline integration opportunities to promote sales of their products and improve their brand influence. Certain established offline beauty collection retail chain stores, including SaSa and Afiona, also serve as our distributors to distribute the products of certain of our incubation brand partners.

Data and Technology

Data and technology are of paramount importance to our success in achieving business efficiency, improving consumer experiences and enabling innovation. Our information and technology infrastructure is standardized, integrated and built to have scalability to support our growth. We have developed a series of business applications to support our business and service offerings, including business operations for our internal operations and business applications for external use. In addition, we have developed strong in-house data analytics capabilities.

IT Infrastructure

We have built an efficient, scalable and stable IT infrastructure to support our technology systems. It is able to handle real-time complex order processing, including order review, courier selection, promotion engine, warehouse allocation and others simultaneously. Our IT infrastructure is capable of handling peak hour stress which is essential for beauty e-commerce industry players due to the particularly strong seasonality and complex promotion offerings. Our IT infrastructure is fully integrated with our computer environments and business requirements to serve as a powerful engine for business growth. As of December 31, 2020, our information technology infrastructure included a data center with over 100 servers. The system has demonstrated strong scalability and stability, showcased by the reliable operation of our IT infrastructure over the years, especially during peak seasons such as the Singles Day promotion on November 11.

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Scalability. Our technology systems are built to be scalable and work within our IT infrastructure. They can be easily expanded as data storage and processing requirements increase to support our centralized management of multi-brand, multi-platform operations. When need arises, we can conveniently increase number of servers and integrate them into our existing server clusters as either data nodes or processing nodes.

Stability. Our IT infrastructure has built-in redundancy and will automatically switch to backup layers if any error is detected. We implement a real-time data backup mechanism to ensure the reliability of our IT infrastructure. Our technology system are modularized with multiple integrated components, each of which can be independently upgraded and replaced without compromising the integrity of other components. We believe our IT infrastructure is highly stable and have not experienced any major interruption of our IT infrastructure since our inception.

Business Application Portfolio

Internal operation business applications

Customer relationship management system. Our customer relationship management system helps us enhance our targeted and personalized marketing and recommendations to consumers. Our system encompasses the entire customer service process, including before, during and after sales. Before sales, our customer relationship management system can quickly search customer information and order information to point at what the customer’s query is about, and accurately perform order operations. During sales, our customer relationship management system helps track logistics. After sales, our customer relationship management system can issue invoices and record order operations.

Business intelligence system. Our business intelligence system combines data processing and knowledge management with data analysis to evaluate and transform the complex data that we obtain from third-party platforms that we collaborate with into meaningful, actionable information. We apply our business intelligence system to capture retail, social channels and supply chain data for further analytics.

Customer service tools. A host of applications in the customer service module, including UJ, the customer chat service tool, RMA Management that handles customer returns and Case Management, helps our customer service representatives deliver superior customer experience. For example, there are different service policies for different brands, different products and even different customers, and the service flows are codified accordingly in our system. When a customer makes an inquiry about the status of an order, the system would provide a tailored response for the beauty advisory and customer service representatives depending on the order status, courier tracking information and whether it is the first time the customer asked about this order.

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Business applications for external use

The BusyBee APP. The BusyBee App, a warehouse operations tool on tablet computers, is a proprietary software solution we developed that enables various order fulfillment processes, such as batch picking, rebin wall, relay picking, box size recommendation and others, partially replacing the needs for expensive and inflexible hardware solutions. Tablet computer display also offers better visualizations and intuitive user experiences and simplifies staff training. This solution allows higher level of agility for our order fulfillment operations to cope with sales fluctuations without compromising cost and quality.

Order Management System. The Order Management System, or the OMS, is our core system effectively serving as the supply chain middle platform we designed and developed in 2011. The OMS supports multi-channel sales and omni-channel inventory sharing from day 1, with a robust promotion engine that meets the diverse sales campaign requirements for high-end beauty brands, a customer service module that supports personalized service, courier management functions for optimizing delivery experience, among others. All order and inventory data flow through the OMS, allowing our logistics team to have readily access to data for analytics and reporting. The centralized data management also enables accurate sales and inventory reconciliation across sales platforms and brands – a key requirement for service method to allow brands to have real-time visibility to their data.

Courier performance monitoring system. We developed and launched in 2012 a proprietary courier performance monitoring system that uses tracking information from couriers to identify delivery deviations. This technology allows our customer service representatives to proactively handle delivery problems and minimize customer complaints. It is one of the reasons why online stores we operate consistently enjoy high logistics ratings on Tmall.

In addition to the aforementioned business applications, we own the warehouse control system and have co-developed with hardware vendors features and functions such as A-frame picking machine, automated package labelling station, dimension-weight scanning system and parcel sorter. We have deployed automated guided vehicle robots in our warehouse and are working on the design of its next-generation fulfillment warehouse.

Data Technology

We access to and assess significant amount of data, including customer purchase transaction data, such as product information, transaction information, customers’ prior purchase activities and customer service history, primarily through third-party e-commerce platforms where we operate sales channels. We also have access to warehouse and logistics related data generated from our supply chain services. We analyze the data using third-party tools enhanced by our data analytics capabilities. We conduct both offline batch processing and online real-time processing through streaming processing technologies. Leveraging our extensive data analytics conducted on massive consumer behavior, preference and transaction data, we empower our beauty brand partners to make more informed marketing decisions.

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Our Service Providers

Payment Service Providers

Under the distribution method, to provide consumers with convenience and flexibility in payment methods, we offer a variety of payment options, including online payments with credit cards and debit cards issued by a variety of banks and payment through third-party payment service providers, such as Alipay and Weixin Pay.

Logistics and Warehousing Service Providers

We primarily rely on our self-operated leased warehouses. There are also a portion of our warehouses that are operated by third parties. We implement strict quality control on the third-party operated warehouses with regard to packaging and warehousing in order to ensure quality consumer experience. Orders placed on channels that we operate to all areas in China are delivered through reputable third-party logistics service providers with nationwide coverage, such as SF Express, STO Express, YTO Express, EMS and ZTO Express as well as other quality local couriers.

We believe that our scale of operations and reputation enable us to obtain favorable contractual terms from third-party logistics service providers. We typically negotiate and enter into annual logistics agreements with them, under which we agree to pay delivery fees based on the amount and the weight of the products to be delivered, as well as the destination of the delivery.

Competition

We face competition from other beauty brand e-commerce service providers in China, as well as brand e-commerce service providers in China without specific industry focus. We compete for brand partners and for favorable terms with e-commerce platforms. We also compete to provide established full coverage distribution and service network at scale, to accumulate industry insights, know-how and expertise, to recruit, train and retain qualified talents and to develop big data analytics and our proprietary digital infrastructure. We believe we compete on the basis of our rich experience and compelling expertise in the beauty industry, our long-term established relationship with our brand partners, our expansion into integrated online-offline coverage, our strong capabilities as a brand incubation platform, and our technology-driven innovations. See “Industry Overview – Competitive Landscape of China’s Brand E-Commerce Enablement Service Industry and China’s Beauty Brand E-Commerce Enablement Service Industry.”

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Although we are one of the leaders in the beauty brand e-commerce enablement service market in China, our PRC Legal Adviser has advised us that the PRC Anti-monopoly Law currently in effect will not have a material impact on our business based on the following reasons. First, according to the iResearch Report, China’s beauty brand e-commerce enablement service market is relatively fragmented with the top four market players accounting for a total market share of 34.8% in 2020, and our market share in such market was 13.3% in 2020, which is far below the thresholds generally presumed as a dominant position as defined under the PRC Anti-monopoly Law. Second, we have complied with the PRC Anti-monopoly Law in all material respects and have not been subject to any regulatory actions or investigations in connection with the PRC Anti-monopoly Law during the Track Record Period and up to the Latest Practicable Date.

Our Customers

Our customers primarily include (i) under the service method, our brand partners, to whom we provide services; (ii) under the distribution method, (a) e-commerce platforms to whom we bulk sell beauty products for them to resell on their platforms, such as JD.com and Vipshop; (b) end consumers, to whom we sell beauty products to directly; and (c) online merchants and offline channels, to who we sell beauty products for them to resell to end consumers. For each of the years ended December 31, 2018, 2019 and 2020, our top five customers accounted for approximately 60.5%, 66.9% and 48.0% of our total revenues, and revenue from our largest customer alone accounted for approximately 21.5%, 31.7% and 17.3% of our total revenue during each year. To the best of our knowledge, all of our five largest customers during the Track Record Period are independent third parties. None of our Directors, their respective associates or any shareholder who, to the knowledge of our Directors, owned more than 5% of our issued share capital as of the Latest Practicable Date, has any interest in any of our five largest customers during the Track Record Period.

– 194 – The tables below set forth the details of our five largest customers during the Track Record Period. DOCUMENT THIS OF COVER MUST THE INFORMATION ON THE “WARNING” THAT HEADED AND CHANGE SECTION TO THE SUBJECT WITH AND CONJUNCTION INCOMPLETE IN FORM, READ DRAFT BE IN IS DOCUMENT THIS

Year of Commencement of Percentage Business Nature of Revenue Product/ of Total Rank Customers Relationship Business Principal Business Method Service sold Revenue Revenue (RMB’000) (%)

For the year ended December 31, 2018 1 Customer B 2013 E-commerce Customer B is headquartered in Distribution Beauty Products 250,008 21.5% Platform Guangzhou, China and primarily Method engages in the provision of online products sales and distributions services through its BUSINESS 9 – 195 – online platform. It is listed on the New York Stock Exchange. 2 Customer A 2013 Brand Partner Customer A is headquartered in Service E-commerce 249,948 21.5% New York, USA and primarily Method Enablement engages in the development, Service manufacture, marketing and distribution of skin care, makeup, fragrance and hair care products. It is listed on the New York Stock Exchange. ERA NCNUCINWT H ETO EDD“ANN”O H OE FTI DOCUMENT THIS OF COVER MUST THE INFORMATION ON THE “WARNING” THAT HEADED AND CHANGE SECTION TO THE SUBJECT WITH AND CONJUNCTION INCOMPLETE IN FORM, READ DRAFT BE IN IS DOCUMENT THIS Year of Commencement of Percentage Business Nature of Revenue Product/ of Total Rank Customers Relationship Business Principal Business Method Service sold Revenue Revenue (RMB’000) (%)

3 Customer C 2014 E-commerce Customer C is headquartered in Distribution Beauty Products 100,263 8.6% Platform Beijing, China and primarily Method engages in the sale of electronics products and general merchandise products through its online platform as well as new businesses such as logistics services, technology services, BUSINESS

9 – 196 – online-to-offline (O2O) services among others. It is listed on the Nasdaq Stock Market and the Hong Kong Stock Exchange. 4 Customer D 2014 Brand Partner Customer D is headquartered in Service E-commerce 59,456 5.1% Seoul, South Korea and Method Enablement primarily engages in the Service production and sale of household goods and cosmetic products. It is listed on the Korea Stock Exchange. ERA NCNUCINWT H ETO EDD“ANN”O H OE FTI DOCUMENT THIS OF COVER MUST THE INFORMATION ON THE “WARNING” THAT HEADED AND CHANGE SECTION TO THE SUBJECT WITH AND CONJUNCTION INCOMPLETE IN FORM, READ DRAFT BE IN IS DOCUMENT THIS Year of Commencement of Percentage Business Nature of Revenue Product/ of Total Rank Customers Relationship Business Principal Business Method Service sold Revenue Revenue (RMB’000) (%)

5 Customer E 2013 Brand Partner Customer E is headquartered in Service E-commerce 44,752 3.8% Neuilly-sur-Seine, France and Method Enablement primarily engages in the Service development and distribution of beauty products worldwide.

Year of

Commencement of PercentageBUSINESS

9 – 197 – Business Nature of Revenue Product/ of Total Rank Customers Relationship Business Principal Business Method Service sold Revenue Revenue (RMB’000) (%)

For the year ended December 31, 2019 1 Customer A 2013 Brand Partner Customer A is headquartered in Service E-commerce 453,081 31.7% New York, USA and primarily Method Enablement engages in the development, Service manufacture, marketing and distribution of skin care, makeup, fragrance and hair care products. It is listed on the New York Stock Exchange. ERA NCNUCINWT H ETO EDD“ANN”O H OE FTI DOCUMENT THIS OF COVER MUST THE INFORMATION ON THE “WARNING” THAT HEADED AND CHANGE SECTION TO THE SUBJECT WITH AND CONJUNCTION INCOMPLETE IN FORM, READ DRAFT BE IN IS DOCUMENT THIS Year of Commencement of Percentage Business Nature of Revenue Product/ of Total Rank Customers Relationship Business Principal Business Method Service sold Revenue Revenue (RMB’000) (%)

2 Customer B 2013 E-commerce Customer B is headquartered in Distribution Beauty Products 220,530 15.4% Platform Guangzhou, China and primarily Method engages in the provision of online products sales and distributions services through its online platform. It is listed on the New York Stock Exchange.

3 Customer C 2014 E-commerce Customer C is headquartered in Distribution Beauty Products 138,093BUSINESS 9.6%

9 – 198 – Platform Beijing, China and primarily Method engages in the sale of electronics products and general merchandise products through its online platform as well as new businesses such as logistics services, technology services, online-to-offline (O2O) services among others. It is listed on the Nasdaq Stock Market and the Hong Kong Stock Exchange. ERA NCNUCINWT H ETO EDD“ANN”O H OE FTI DOCUMENT THIS OF COVER MUST THE INFORMATION ON THE “WARNING” THAT HEADED AND CHANGE SECTION TO THE SUBJECT WITH AND CONJUNCTION INCOMPLETE IN FORM, READ DRAFT BE IN IS DOCUMENT THIS Year of Commencement of Percentage Business Nature of Revenue Product/ of Total Rank Customers Relationship Business Principal Business Method Service sold Revenue Revenue (RMB’000) (%)

4 Customer D 2014 Brand Partner Customer D is headquartered in Service E-commerce 74,095 5.2% Seoul, South Korea and Method Enablement primarily engages in the Services production and sale of household goods and cosmetic products. It is listed on the Korea Stock Exchange.

5 Customer E 2013 Brand Partner Customer E is headquartered in Service E-commerce 72,001BUSINESS 5.0%

9 – 199 – Neuilly-sur-Seine, France and Method Enablement primarily engages in the Services development and distribution of beauty products worldwide. ERA NCNUCINWT H ETO EDD“ANN”O H OE FTI DOCUMENT THIS OF COVER MUST THE INFORMATION ON THE “WARNING” THAT HEADED AND CHANGE SECTION TO THE SUBJECT WITH AND CONJUNCTION INCOMPLETE IN FORM, READ DRAFT BE IN IS DOCUMENT THIS Year of Commencement of Percentage Business Nature of Revenue Product/ of Total Rank Customers Relationship Business Principal Business Method Service sold Revenue Revenue (RMB’000) (%)

For the year ended December 31, 2020 1 Customer A 2013 Brand Partner Customer A is headquartered in Service E-commerce 286,519 17.3% New York, USA and primarily Method Enablement engages in the development, Services manufacture, marketing and distribution of skin care, makeup, fragrance and hair care

products. It is listed on the New BUSINESS

0 – 200 – York Stock Exchange. 2 Customer F 2019 Brand Partner Customer F is headquartered in Service E-commerce 175,184 10.6% London, UK and primarily Method Enablement engages in the design, Services development and distribution of luxury goods, cosmetics products and other high-end consumer goods. ERA NCNUCINWT H ETO EDD“ANN”O H OE FTI DOCUMENT THIS OF COVER MUST THE INFORMATION ON THE “WARNING” THAT HEADED AND CHANGE SECTION TO THE SUBJECT WITH AND CONJUNCTION INCOMPLETE IN FORM, READ DRAFT BE IN IS DOCUMENT THIS Year of Commencement of Percentage Business Nature of Revenue Product/ of Total Rank Customers Relationship Business Principal Business Method Service sold Revenue Revenue (RMB’000) (%)

3 Customer B 2013 E-commerce Customer B is headquartered in Distribution Beauty products 131,120 7.9% Platform Guangzhou, China and primarily Method engages in the provision of online products sales and distributions services through its online platform. It is listed on the New York Stock Exchange.

4 Customer E 2013 Brand Partner Customer E is headquartered in Service E-commerce 102,819BUSINESS 6.2%

0 – 201 – Neuilly-sur-Seine, France and Method Enablement primarily engages in the Services development and distribution of beauty products worldwide. 5 Customer G 2018 Brand Partner Customer G is headquartered in Service E-commerce 100,349 6.0% Tokyo, Japan and primarily Method Enablement engages in the development, Services manufacture and distribution of cosmetics, skin care and hair care products. It is listed on the Tokyo Stock Exchange. THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT BUSINESS

Our Suppliers

Our suppliers primarily include (i) our brand partners and their authorized distributors for which we purchase their beauty products under the distribution method; and (ii) our service providers, including, among others, warehousing and logistics service providers, and KOLs and MCNs that provide us with marketing services. For each of the years ended December 31, 2018, 2019 and 2020, our top five suppliers accounted for approximately 65.8%, 45.8% and 29.2% of our purchases, and purchases from our largest supplier alone accounted for approximately 53.8%, 32.4% and 9.1% of our purchases during each year. To the best of our knowledge, all of our five largest suppliers during the Track Record Period are independent third parties. None of our Directors, their respective associates or any shareholder who, to the knowledge of our Directors, owned more than 5% of our issued share capital as of the Latest Practicable Date, has any interest in any of our five largest suppliers during the Track Record Period. Customer A had historically been a minority shareholder of Supplier C. In 2019, Customer A acquired the shares in Supplier C that it had not already beneficially owned, thereby becoming the 100% shareholder of Supplier C. Our cooperation with each of Customer A and Supplier C is based on fair negotiation at an arm’s length. During the Track Record Period, except for Supplier C, other than the aforementioned affiliate relationship between Customer A and Supplier C, there were no overlaps between our five largest suppliers and our five largest customers for each year.

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Year of Commencement Percentage of of Business Product/Service Purchase Total Rank Suppliers Relationship Nature of Business Principal Business Purchased Amount Purchase (RMB’000)

For the year ended December 31, 2018 1 Supplier A 2012 Brand Partner Supplier A is headquartered in Clichy, Beauty Products 496,155 53.8% France and primarily engages in the manufacture and sale of beauty and hair products. It is listed on the Paris Stock Exchange. 2 Supplier B 2013 Service Supplier Supplier B is headquartered in Warehouse & Logistics 33,780 3.7% Shenzhen, China and primarily Service engages in the provision of express logistics services. It is listed on the BUSINESS

0 – 203 – Shenzhen Stock Exchange. 3 Supplier C (wholly owned 2016 Brand Partner Supplier C is headquartered in Seoul, Beauty Products 31,029 3.4% subsidiary of Customer A) South Korea and primarily engages in the manufacturing and marketing of face creams and other cosmetics products. 4 Supplier D 2018 Service Supplier Supplier D is headquartered in Warehouse & Logistics 26,489 2.9% Shanghai, China and primarily Service engages in the provision of supply chain services, integrated warehouse and distribution services. 5 Supplier E 2011 Brand Partner Supplier E is headquartered in Seoul, Beauty Products 18,677 2.0% South Korea and primarily engages in the manufacturing and distribution of skin care, body care, hair care and makeup products. ERA NCNUCINWT H ETO EDD“ANN”O H OE FTI DOCUMENT THIS OF COVER MUST THE INFORMATION ON THE “WARNING” THAT HEADED AND CHANGE SECTION TO THE SUBJECT WITH AND CONJUNCTION INCOMPLETE IN FORM, READ DRAFT BE IN IS DOCUMENT THIS

Year of Commencement Percentage of of Business Product/Service Purchase Total Rank Suppliers Relationship Nature of Business Principal Business Purchased Amount Purchase (RMB’000)

For the year ended December 31, 2019 1 Supplier A 2012 Brand Partner Supplier A is headquartered in Clichy, Beauty Products 344,932 32.4% France and primarily engages in the manufacture and sale of beauty and hair products. It is listed on the Paris Stock Exchange. 2 Supplier B 2013 Service Supplier Supplier B is headquartered in Warehouse & Logistics 74,342 7.0% Shenzhen, China and primarily Service engages in the provision of express logistics services. It is listed on the Shenzhen Stock Exchange. 3 Supplier C (wholly owned 2016 Brand Partner Supplier C is headquartered in Seoul, Beauty Products 33,556 3.1% subsidiary of Customer A) South Korea and primarily engages in the manufacturing and marketing of BUSINESS face creams and other cosmetics

0 – 204 – products. 4 Supplier D 2018 Service Supplier Supplier D is headquartered in Warehouse & Logistics 25,254 2.4% Shanghai, China and primarily Service engages in the provision of supply chain services, integrated warehouse and distribution services. 5 Supplier F 2019 Brand Partner Supplier F is headquartered in Beauty Products 9,914 0.9% Barcelona, Spain and primarily engages in the development, marketing and distribution of beauty, fragrances and fashion brands. ERA NCNUCINWT H ETO EDD“ANN”O H OE FTI DOCUMENT THIS OF COVER MUST THE INFORMATION ON THE “WARNING” THAT HEADED AND CHANGE SECTION TO THE SUBJECT WITH AND CONJUNCTION INCOMPLETE IN FORM, READ DRAFT BE IN IS DOCUMENT THIS

Year of Commencement Percentage of of Business Product/Service Purchase Total Rank Suppliers Relationship Nature of Business Principal Business Purchased Amount Purchase (RMB’000)

For the year ended December 31, 2020 1 Supplier A 2012 Brand Partner Supplier A is headquartered in Clichy, Beauty Products 112,567 9.1% France and primarily engages in the manufacture and sale of beauty and hair products. It is listed on the Paris Stock Exchange. 2 Supplier F 2019 Brand Partner Supplier F is headquartered in Beauty Products 95,766 7.8% Barcelona, Spain and primarily engages in the development, marketing and distribution of beauty, fragrances and fashion brands. 3 Supplier G 2020 Brand Partner Supplier G is headquartered in Aix en Beauty Products 58,950 4.8% Provence, France and primarily engages in the research, development BUSINESS and distribution of dermatologic

0 – 205 – products including skin care, hair care and body care products. 4 Supplier B 2013 Service Supplier Supplier B is headquartered in Warehouse & Logistics 56,692 4.6% Shenzhen, China and primarily Service engages in the provision of express logistics services. It is listed on the Shenzhen Stock Exchange. 5 Supplier C (wholly-owned 2016 Brand Partner Supplier C is headquartered in Seoul, Beauty Products 35,396 2.9% subsidiary of Customer A) South Korea and primarily engages in the manufacturing and marketing of face creams and other cosmetics products. THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT BUSINESS

Our Distributors

Consistent with industry practice, we have been working with distributors under the distribution revenue method to expand our online and offline sales coverage, which help us increase sales orders and generate revenues. We believe the increase of sales also brings positive results of operations to our brand partners we work with under the distribution method, which in turn enhance our cooperative relationship with them. We work with three types of distributors: (i) e-commerce platforms such as JD.com and Vipshop where we own and operate online shops that sell beauty products of our brand partners, (ii) merchants, primarily Taobao shops that focus on beauty products and certain cross-board e-commerce platforms, most of whom do not have written agreements with us; and (iii) offline channels, including SaSa and Afiona. We bulk sell beauty products to them for them to resell to end consumers. In our relationship with our distributors, we act as the seller, and they act as the buyers. We believe the variety of distributors we work with has helped us establish a wide network of sales points from online to offline. As of December 31, 2020, we worked with six e-commerce platforms, 424 merchants and five offline channels.

We work with distributors designated by our brand partners, or in the case where the brand partners do not make such designation, we carefully select distributors based on a series of criteria, including their scale of operation, financial resources, market reputation, credit worthiness, management capabilities, compatibility with our brand partner’s brand image and tonality, pricing, target customers, market influence and competitiveness. We believe that, generally, beauty brands who just entered the Chinese market are likely to choose to cooperate with an experienced service provider or distributor like us, rather than directly engage in various distributors by themselves. In addition, in some cases, we have exclusive distribution right for designated channels. As a result, the brand partner cannot sell products to other distributors for the same channels. We believe the nature of our business combined with our expertise in the industry prevents disintermediation.

The following table sets forth a summary of the key terms we enter into with our distributors who have written agreements with us:

Merchants and offline Terms E-commerce platforms channels

Distribution We should provide the We should provide the arrangement products requested by the products based on the e-commerce platforms based product orders or distribution on the purchase order agreements

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Merchants and offline Terms E-commerce platforms channels

Fee charges and The e-commerce platforms The merchants typically pay payment typically pay us the price of us all or part of the price of the products within a certain the products upon order period ranging from 5 to 10 placement and before receipt business days after issuance of products of invoice The offline channels typically pay us the price within a certain period, typically 30 days upon receipt of products Pricing right We generally do not have the We generally have the right right to determine the retail to provide guidance to the price to end consumers for pricing of the products e-commerce platforms, but have the right to provide guidelines

Logistics We generally deliver the We generally deliver the products to the warehouse of products to the warehouse of the e-commerce platforms, the merchants or offline and they will then be in channels, and they will then charge of the logistics and be in charge of the logistics storage of the products, and and storage of the products, deliver the products to end and deliver the products at consumers designated place

Return policy Under some contracts with We generally do not offer e-commerce platforms, we return policy to merchants allow the e-commerce and offline channels, unless platforms to return the the products sold to them are products to us defective

Contract term Contract term is typically Contract term is typically one year, and can be renewed one year, and can be renewed through mutual agreement of through mutual agreement of both parties both parties

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Merchants and offline Terms E-commerce platforms channels

Termination clause Termination clause typically Termination clause typically provides that a party is provides that a party is entitled to terminate the entitled to terminate the contract in the case of a contract in the case of a material breach of the other material breach of the other party party A few contracts also provide that either party has the right to early termination with a specified notice period Sales target/incentives We typically do not set We typically do not set minimum sales targets or minimum sales targets or requirements requirements We offer incentives for large amount of purchase orders meeting certain threshold, such as a rebate or an extra discount to the product price

Others The contracts with the We only allow resale through e-commerce platforms are specified channels that we generally not on an exclusive consent to basis, but sometimes contain a provision prohibiting us from providing the same products to any other third parties with lower price

We manage the performance of our distributors with written agreements with us by issuing strict policies, pricing guidelines and providing them with information in relation to our brand partners’ products. Our return policy with regard to our distributors control the return rate at an appropriate level. Although we generally do not offer return policy to merchants and offline channels, unless the products sold to them are defective, under some contracts with e-commerce platforms, we allow the e-commerce platforms to return the products to us. The specified terms pursuant to which the e-commerce platforms are entitled to return products to us are negotiated and determined on a case-by-case basis. We typically do not set a maximum amount limit with regard to the distributors’ right to return products to us. In 2018, 2019 and 2020, the total amount of returned product value was RMB2.2 million, RMB2.4 million and

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RMB2.6 million, which remained stable and was considered immaterial to our business operations. All merchants and offline channels with written agreements with us are required to strictly follow our pricing policy with the aim to create uniform prices for our brand partners’ products. We provide recommended retail prices and recommended minimum prices to our distributors. We conduct periodic inspection of the pricing behavior of merchants and offline channels. If they set the retail price of products far below the recommended price to disrupt the market, we will demand that they rectify such pricing behavior immediately. In some contracts with distributors, we have the right to terminate the contract and demand compensation for losses in the case of a material breach of the contracts, including a material violation of our pricing policy. To manage inventory risk and/or detect any possible stuffing in the distribution channels, we pay close attention to the inventory level of our distributors. In particular, for the e-commerce platforms, we monitor their inventory level by analyzing their sales orders as shown in the relevant product page, as well as the information provided by them. For the merchants and offline channels, given that they are usually incentivized to report to us their sales performance and amounts of orders to obtain rebate, we monitor their inventory level and make commercially reasonable adjustments to the amount of products we sell to them. Our distributors are generally required to maintain sufficient inventory levels to meet the demands of consumers. In general, we regularly communicate with our distributors to check the inventory levels and to further mitigate the risk of inventory accumulation.

We rigorously manage our credit risk exposure to distributors. For merchants, we usually ask for full or partial prepayments from them before delivery. The e-commerce platforms typically pay us the price of the products within a certain period ranging from 5 to 10 business days after issuance of invoice. The offline channels typically pay us the price within a certain period, typically 30 days upon receipt of products. For e-commerce platforms and offline channels that do not make prepayments to us, we select only ones with credit worthiness as our distributors, and we only allow a short credit term, In addition, we closely monitor our trade receivables to prevent any outstanding receivables of significant amounts. We believe we are therefore not subject to any material credit risk associated with collecting receivables.

We have different arrangements with e-commerce platforms who cooperate with us as our distributors, negotiating with them on a case-by-case basis. In particular, for the online stores that we own and operate on Vipshop, control of goods is not transferred to Vipshop and we have the call back right until the goods are sold to end consumers. This is because Vipshop chose this particular arrangement to cooperate with us and we do not have similar arrangement with other e-commerce platforms. Pursuant to our agreement with Vipshop, when the goods inspected by Vipshop have been delivered to the consumer and the consumer confirms receipt, the goods are deemed to have been inspected and accepted by Vipshop, the title of the goods and the right to receive remuneration are then transferred from us to Vipshop, and the revenue derived from Vipshop and the corresponding cost of inventory is recognized. We monitor the changes in inventory and delivery status of the goods through weekly or monthly inspection of

– 209 – THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT BUSINESS the order records maintained by Vipshop. Vipshop pays us for the inventory sold on a weekly or monthly basis. As of December 31, 2020, the amount of unsold inventory that was consigned to Vipshop was RMB20.9 million, and was recorded as inventory in our financial statement.See “Financial Information – Significant Accounting Policies and Critical Accounting Estimates – Significant Accounting Policies – Revenue recognition – Distribution of brand partners’ products – B2B model.” When cooperating with JD.com, in most cases, we bulk sell products to JD.com for it to resell to end consumers. JD.com bears inventory risks for the products. However, under limited circumstances, we own and operate the official JD POP (“Platform Open Plan”) stores of our brand partners, the JD.com counterpart of self-operated stores, where we sell the products to end consumers directly. During the Track Record Period, the revenue generated by our Predecessor Entity from those JD POP stores amounted to RMB1.9 million in 2018, RMB191 thousand in 2019 and nil in 2020, and the revenue generated by our Group from those JD POP stores amounted to RMB358 thousand in the 2019 Period and RMB167 thousand in 2020.

During the Track Record Period, we experienced a gradual decrease in revenue generated from distributors, primarily due to the decrease in revenue generated from e-commerce platforms, acting as distributors.

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The table below sets forth the number of our distributors in each year during the Track Record Period.

Years ended December 31, 2018 2019 2020

Number of distributors at the beginning of the year E-commerce platforms 8 7 7 Merchants 89 82 78 Offline channels – – –

Subtotal – Distributors at the beginning of the year 97 89 85

Number of new distributors during the year E-commerce platforms – 2 1 Merchants 66 65 399 Offline channels – – 5

Subtotal – New distributors during the year 66 67 405

Number of distributors terminated during the year E-commerce platforms 1 2 2 Merchants 73 69 53 Offline channels – – –

Subtotal – Distributors terminated during the year 74 71 55

Number of distributors at the end of the year E-commerce platforms 7 7 6 Merchants 82 78 424 Offline channels – – 5

Subtotal – Distributors at the end of the year 89 85 435

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We consider merchants to have terminated cooperation with us when they fail to renew their cooperations with us in a timely manner, or when they have not placed any purchase order within a certain period, usually based on our year-end records. Our business relationships with them are usually governed by our standard terms and practice of product sales. As such, we did not inquire as to the specific reasons for their cessation to purchase from us. Our Directors are of the view that it is purely a commercial decision of the merchants as to whether to sign, extend or terminate the cooperations with us.

During the Track Record Period and up to the Latest Practicable Date, we did not have any material dispute with merchants which we terminated or with which we did not renew the respective cooperations. According to the iResearch Report, many merchants in this industry are medium or small enterprises, with features such as vulnerability to competition, changing business direction and low risk-bearing capacity. As a result, a high percentage of such merchants may adjust the course of business, switch to other channels for product procurement or exit the market every year and are replaced by new entrants. Accordingly, our Directors are of the view that the fluctuation of this kind of distributor is not uncommon for our industry in the PRC.

In 2020, because of the growth of our incubation business, which in turn made us the sole official source of these brands’ products, an increasing number of merchants purchased these products from us, resulting in an increase in the number of merchant distributors.

To the knowledge of our Directors, during the Track Record Period and up to the Latest Practicable Date, one of our Directors and officers held less than 1% equity interest in some of our e-commerce platform distributors that are public companies. To the best knowledge of our Directors, none of our Shareholders holding more than 5% of our Shares held any equity interest in our distributors that are public companies during the Track Record Period.

Entities Who are Our Customers and also Our Suppliers

During the Track Record Period, to the best knowledge and belief of our Directors, four of our major customers and/or their related group companies were also our suppliers. For the years ended 31 December 2018, 2019 and 2020, our sales to these four customers accounted for approximately 0.7%, 36.8% and 21.9%, respectively, of our total revenues. During the same period, our purchase from such four customers and/or their related companies accounted for approximately 4.0%, 5.3% and 17.5%, respectively, of our total cost of revenues. One, three and four out of the four were our customers/suppliers in 2018, 2019 and 2020, respectively. These four entities are our customers and also our suppliers mainly because they are brand groups with several brands as our brand partners, and we serve these brand partners under the same brand groups with different revenue methods. For one of these customers, we provide it with value-added packaging service but serve its brand with distribution method. Negotiations of the terms of our sales to and purchases from these four customers and/or their related group companies were conducted on individual basis and the sales and purchases were neither inter-connected nor inter-conditional with each other.

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Inventory Management

We provide inventory management service to our brand partners or manage our own inventory depending on whether we cooperate with the brand partners under the service method or the distribution method. We make forecast of the necessary inventory level mainly based on historical sales data and carefully formulate our procurement plans. For promotional events such as the Singles Day promotion on November 11, we pre-order sufficient level of inventory to meet surging demand under distribution method. We use proprietary order management system and multi-platform inventory management system to coordinate our order processing with inventory management. We launch new beauty products, index product categories and process orders of our sales channels through our order management system. This centralized system aggregates order information from all our channels and assigns orders to appropriate fulfillment facilities based on inventory levels and pre-set processing protocol. The order management system also tracks payment status, product return, product damages and other relevant information during the lifecycle of orders. The multi-platform inventory management system stores master inventory data and is synchronized with our order management system to maintain real-time tracking of inventory movements and levels, which are cross-referenced to corresponding order payments and product returns. Based on the inventory levels and our estimated demands, we will procure additional beauty products to be sold from time to time.

We adopt different strategies to manage our inventory under the distribution method in order to deal with non-seasonal and seasonal demands. We track our inventory from the point we receive the inventory to the point when an order is fulfilled. Once an order is shipped, our systems automatically update the inventory level for the relevant products to ensure that additional inventory will be ordered as needed. In order to maintain accurate inventory records, we conduct monthly inventory counts and address any problems immediately. We also conduct full inventory counts at year-end and assess the effectiveness of our historical inventory levels on a regular basis. In addition, we actively track the sales data on a real-time basis and make timely adjustments to our procurement plan in order to minimize the chance of excess unsold inventory. As a result, our obsolete inventory has not been significant.

Environmental, Social Responsibility and Corporate Governance

We have been highly committed to sustainable corporate responsibility projects through charitable endeavors, especially since we turned profitable in 2013. For example, in 2013, we donated RMB800,000 to Zhejiang Provincial Youth Development Foundation (“浙江青少年發展基金會”) for the establishment of Gansu Qingyang Ningxian Nanyixiang Gaocang UCO Hope Primary School (“甘肅慶陽市寧縣南義鄉高倉悠可希望小學”). In 2016, we conducted charity donation of school suppliers to UCO Hope Primary School in Gansu by us and our employees. In 2019, we donated teaching and study supplies to Wengju Primary School in Honghe, Yunnan and launched continuous charity activity of “Guard the Light of Childhood.” In 2020, we initiated two consecutive charity activities to purchase agricultural products in Hubei amid the COVID-19 pandemic, with 547 orders, 3,068 products and a total amount of RMB56,460 purchased.

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We are committed to carbon mitigation measures and will continue to explore ways to further improve energy efficiency. All our servers are compliant with industry energy efficiency standards in China, and we choose partners with a strong commitment to carbon emission reduction in our collaboration with third-party cloud servers. We ask our employees to be mindful of the environment when consuming office supplies.

We strive to provide employees with welfare benefits and a broad range of career development opportunities. We promote an open, transparent and inclusive work environment through an emphasis on communication and participation. We have established a sound talent cultivation mechanism and created an online-offline combined training platform. We also strive to help our employees balance their work and life. We have organized various recreational and sports activities to enrich the cultural life of employees.

We also value the gender equality and diversity at workplace, and we have taken initiatives to broaden the impact of female workers, and empower and encourage them to share their perspectives. We strive to create a diverse environment for our employees. Three out of our seven directors are female. As of December 31, 2020, approximately 70% of our employees were female. We also take great efforts to create a friendlier work environment for our pregnant female workers, including but not limited to the provision of supplementary maternity insurance, customized medical service packages and additional parental leave.

Risk Management and Internal Control Systems

Our business is exposed to various risks and we believe that risk management is essential to our growth and success. Key operational risks faced by us include, among other things, changes in general market conditions and perceptions of the macro-economic growth, changes of consumer preferences and demand for beauty products, and changes in the regulatory environment for the e-commerce business and the export and import of beauty products in China. Please refer to the section headed “Risk factors” in this document for disclosures on various risks we face. In addition, we also face numerous market risks, such as interest rate, credit, liquidity and currency risks that arise in the ordinary course of our business. For a discussion on these market risks, please see the section headed “Financial information” in this document.

We have devoted ourselves to establishing and maintaining risk management and internal control systems consisting of policies and procedures that we consider to be appropriate for our business operations, and we are dedicated to continuously improving these systems. We continually review the implementation of our risk management and internal control policies and procedures to enhance their effectiveness and sufficiency.

Our Board of Directors is responsible and has the general power to supervise the operations of our business, and is in charge of managing the overall risks of our company. It is responsible for considering, reviewing and approving any significant business decision involving material risk exposures. We maintain insurance coverage, which we believe is in line with customary practice in our industry.

We have designed and adopted strict internal procedures to ensure the compliance of our business operations with the relevant rules and regulations. Our internal control team works closely with our legal, finance and business departments to: (a) perform risk assessments and advise risk management strategies; (b) improve business process efficiency and monitor internal control effectiveness; and (c) promote risk awareness throughout our Company.

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We maintain internal procedures to ensure that we have obtained all material requisite licenses, permits and approvals for our business operation, and our internal control team conduct regular reviews to monitor the status and effectiveness of those licenses and approvals. Our in-house legal department works with relevant business departments to obtain requisite governmental approvals or consents, including preparing and submitting all necessary documents for filing with relevant government authorities within the prescribed regulatory timelines.

Data Security and Protection

We prioritize the maintenance, storage and protection of our important data such as business and financial data and other related information. We have implemented relevant internal procedures and controls to ensure that our data is protected and that leakage and loss of such data is avoided.

We have established an information system security management framework, including relevant internal control and risk management mechanisms to manage network security, data security, anti-virus measures, approval procedure for system changes, system monitoring, incident management and business continuity assurance system. We have also released clear standards and requirements for data backup and archive, and put in place a procedure of periodical data validity testing.

We provide regular company-wide training to ensure that not only our technology, research and development employees, but also our employees in business, legal and other departments are well aware of the significance of and the measures we adopt for data security. We also have an emergency response mechanism to evaluate critical risks, formulate disaster response plans and perform emergency drills on a regular basis. Our emergency response mechanism was developed based on ISO 27001 Information Security Management System. It helps with management of our company. It first establishes a business continuity emergency response center, establish rules and regulations such as business continuity management procedures, information system safety emergency response management specification and others. It then conducts business continuity and impact analysis and form business continuity plan.

Intellectual Property

We are licensed to use our brand partners’ names, URLs, QR codes, logos and other marks in connection with our operations of various solutions. These licenses are typically coterminous with the relevant business agreements with brand partners, primarily under the distribution revenue method.

We are licensed to use third-party technologies and also improve or customize some of them. These licenses may not continue to be available to us on commercially reasonable terms in the future. As a result, we may be required to obtain substitute technology.

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We rely on trademark, copyright and trade secret protection laws in China to protect our intellectual property rights. As of December 31, 2020, we had 65 registered trademarks in China, copyrights to 55 software programs in China and 24 registered domain names in China.

Employees

As of December 31, 2018, 2019 and 2020, we had 780, 1,057 and 1,369 full-time employees, respectively. All of our employees are based in China.

The following tables sets forth the number of our employees by function as of December 31, 2020.

Number of Function Employees Percentage

Brand services and store operations 446 32.6% Beauty advisory and customer service 562 41.0% Warehouse and logistics 176 12.9% Information technology and data application 80 5.8% General administration and support 105 7.7%

Total 1,369 100.0%

Our success depends on our ability to attract, retain and motivate qualified personnel. We offer employees competitive salaries, performance-based cash bonuses and equity-based incentives, comprehensive training and development programs and other fringe benefits and incentives. We believe that we maintain a good working relationship with our employees and we have not experienced any material labor disputes or work stoppages. No collective bargaining agreement has been put in place.

We enter into standard labor contracts with our employees. We also enter into standard confidentiality and non-compete agreements with all of our employees. The non-compete restricted period typically expires two years after the termination of employment and we may choose whether to implement the non-compete provisions. To perform the non-compete provisions, we agree to compensate the employee with a certain percentage of his/her pre-departure salary during the restricted period.

During the Track Record Period, social security insurance and housing provident fund contributions for some of our employees had not been made in full in accordance with the relevant PRC laws and regulations. Pursuant to relevant PRC laws and regulations, the under-contribution of social insurance within a prescribed period may subject us to a daily overdue charge of 0.05% of the delayed payment amount. If such payment is not made within the stipulated period, the competent authority may further impose a fine of one to three times of the overdue amount. Pursuant to relevant PRC laws and regulations, if there is a failure to

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As of the Latest Practicable Date, no administrative action or penalty had been imposed by the relevant regulatory authorities with respect to our social insurance and housing provident fund contributions, nor had we received any order to settle the deficit amount. Moreover, as of the Latest Practicable Date, we were not aware of any complaint filed by our employees regarding our social security insurance and housing provident fund policy.

In 2018, 2019 and 2020, the shortfall in our social insurance and housing provident fund contribution was approximately RMB13.1 million, RMB15.1 million and RMB19.0 million, respectively. Pursuant to the Urgent Notice on Enforcing the Requirement of the General Meeting of the State Council and Stabilizing the Levy of Social Insurance Payment (《關於貫徹落實國務院常務會議精神切實做好穩定社保費徵收工作的緊急通知》) promulgated on September 21, 2018 by the Ministry of Human Resources & Social Security, administrative enforcement authorities are strictly prohibited from organizing to collectively recover the historical social insurance arrears from enterprises. On March 9, 2021, with the assistance of our PRC Legal Adviser, we conducted a face-to-face interview with the local social insurance authority in Hangzhou, which confirmed that it will not take the initiate to require us to make up the outstanding social insurance or impose penalties on us if no material changes of national policies related to social insurance occurs or no complaint from the employees is received. On the same day, with the assistance of our PRC Legal Adviser, we also conducted a face-to-face interview with the local housing provident fund authority in Hangzhou, which confirmed that our PRC subsidiaries in Hangzhou could continue to pay housing provident fund on the basis of the current payment base if no material changes of national policies related to housing provident fund occurs.

Our Directors believe that such non-compliance would not have a material adverse effect on our business and results of operations, considering that: (i) we had not been subject to any administrative penalties during the Track Record Period and up to the Latest Practicable Date; (ii) we were neither aware of any employee complaints filed against us nor involved in any labor disputes with our employees with respect to social insurance and housing provident funds as of the Latest Practicable Date; (iii) as of the Latest Practicable Date, we had not received any notification from the relevant PRC authorities requiring us to pay for the shortfalls or any overdue charges with respect to social insurance and housing provident funds; and (iv) as advised by our PRC Legal Adviser, considering relevant regulatory policies and face-to-face interviews with the relevant authorities, the risk that the relevant social insurance authority and/or housing provident fund authority will take the initiative to recover the outstanding social insurance fund and/or housing provident fund from our subsidiaries in Hangzhou or to impose penalties on our subsidiaries in Hangzhou for failing to make full contributions to the social insurance fund is remote, and our Directors believe that such non-compliance will not

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Properties and Facilities

We are headquartered in Hangzhou, China and, as of the Latest Practicable Date, have leased an aggregate of approximately 7,948 square meters of office space as our headquarters. As of the Latest Practicable Date, we have also leased an aggregate of approximately 1,407 square meters of office space in Shanghai, Jiaxing and elsewhere in China, and 15 warehousing facilities with an aggregate floor area of approximately 95,576 square meters in Jiaxing, Hangzhou and Shanghai. Our lease term for warehouse facilities range from approximately 8 to 49 months.

As of the Latest Practicable Date, lessors of 4 of our leased properties in China, with a total gross floor area of approximately 19,339 square meters, had not provided us with valid title certificates or relevant authorization documents evidencing their rights to lease the properties to us. Such properties include 2 offices with a gross floor area of approximately 792 square meters, and 2 warehouses with a gross floor area of approximately 18,547 square meters. In addition, we utilize some of the leased properties as warehouses, which is inconsistent with the legally specified use of the properties as provided in their titles. Such properties has a gross floor area of approximately 76,477 square meters. As a result, these leases may not be valid, and there are risks that we may not be able to continue to use such properties. See “Risk Factors – Risks Related to Our Business and Industry – We face certain risks relating to the real properties that we lease.” Nevertheless, our Directors confirmed that the above-mentioned title defects would not materially and adversely affect our business operations because if we have to terminate the leases or relocate from such leased properties with title defects, we are able to locate qualified alternative premises within a short period of time under comparable terms without incurring substantial additional costs.

Pursuant to the applicable PRC laws and regulations, property lease contracts must be registered with the local branch of the Ministry of Housing and Urban-Rural Development of the PRC. As of the Latest Practicable Date, we had not obtained any lease registration for the 31 office leases with a gross floor area of 11,591 square meters, and 15 warehouses leases with a gross floor area of 95,576 square meters we leased in China, primarily due to the difficulty of procuring our lessors’ cooperation required to register such leases. We will take all practicable and reasonable steps to ensure that the unregistered leases are registered. Our PRC Legal Adviser has advised us that the above lack of registration of the lease contracts will not affect the validity of the lease agreements under PRC laws, and has also advised us that a maximum penalty of RMB10,000 may be imposed for non-registration of each lease. The estimated total maximum penalty is RMB460,000. As of the Latest Practicable Date, we have not received any administrative penalties in this regard.

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Seasonality

We experience seasonality in our business, reflecting a combination of seasonal fluctuations in consumer purchases, promotional events, and traditional retail seasonality patterns. For example, we generally experience less user traffic and purchase orders during national holidays in China, particularly during the Chinese New Year holiday season in the first quarter of each year. Furthermore, sales in the retail industry are significantly higher in the fourth quarter of each calendar year than in the preceding three quarters, particularly in November when the Singles Day promotion on November 11 boosts sales.

Insurance

We maintain various insurance policies to safeguard against risks and unexpected events, including property all risks insurance, professional liability insurance, cyber security liability insurance and public liability insurance. In addition to providing social security insurance for our employees as required by PRC law, we also provide supplemental commercial medical insurance for our employees who have worked for our company for over one year. We do not maintain business interruption insurance, nor do we maintain product liability insurance or key-man life insurance.

Awards and Certification

The table below sets out the major awards and certifications we have received:

Award/Certification Awarded by Year

Business Model of the Year for 2013 BizMedia Group 2013 (2013年度商業模式大獎) (“商界傳媒”) 2014 First Half Golden Partner Tmall 2014 (2014上半年金牌淘拍檔) 2014 Second Half Golden Partner Tmall 2014 (2014下半年金牌淘拍檔) Singles Day Shopping Festival Service Star Tmall 2014 (1111購物狂歡節服務之星) Best E-commerce Logistics Operation Global Supply Chain 2014 (最佳電商物流運作獎) Council 2015 First Half Operation Golden Award in Beauty Tmall 2015 (上半年運營服務淘拍檔美妝行業金牌) 2015 Second Half Operation Golden Award in Tmall 2015 Beauty (下半年運營服務淘拍檔美妝行業金牌) 2016 Tmall “Jinzhuang” Service Improvement Tmall 2016 Award (2016天貓金妝獎––品牌服務提升獎)

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Award/Certification Awarded by Year

Demonstration Enterprise in Hangzhou Hangzhou Joint 2016 e-Commerce Demonstration Project Meeting Office for (“杭州市電子商務示範創建工程示範企業”) E-Commerce Business Annual FMCG Contribution Award Tmall 2017 (2017年度快消行業貢獻獎) 2017 Annual Vipshop Supplier Excellent Vipshop 2017 Contribution Award (2017年唯品會年度供應商貢獻卓越獎) Tmall “Jinzhuang” 2018 Excellent Partner Tmall 2018 (“天貓金妝獎2018年度優秀合作夥伴”) Tmall “Jinzhuang” 2019 Excellent Partner Tmall 2019 (“天貓金妝獎2019年度優秀合作夥伴”) “Jingmei” 2019 Best JD Partner Operation Award JD.com 2019 (京美獎2019最佳JDP運營) Most Influential Brand Management Organization China Cosmetic 2020 (“2020年度最具影響力品牌管理機構”) Conference (“中國化妝品大會”) 2020 “Jingzhunag” Excellent Partner in Trade Tmall 2020 Partners(優秀合作夥伴TP類天貓金妝獎) Golden Advice Award (金牌建議獎) Tmall 2020 2020 Service Provider Livestreaming Sales Alimama and Taobao 2020 Competition – Influential Service Provider of Livestreaming the Year Consumer Operation Scenario Service Provider, Tmall 2020 JCGP-Full Link Marketing Service Provider 2020 Tmall Consumer Operation Excellent Partner Tmall 2020

Licenses and Permits

Our PRC Legal Adviser has advised that as of the Latest Practicable Date, we had obtained all licenses, permits and approvals that are material to our operations in China from the relevant government authorities in China.

The following table set forth the major licenses, permits and approvals for our business operations in the PRC as of the Latest Practicable Date.

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Expiration License/Permit Holder Issuing Authority Grant Dates Date

Archival Filing and Hangzhou UCO Archival Filing and 12 February 2019 N/A Registration Form of Registration of Foreign Foreign Trade Operators Trade Operators (對外貿易經營者備案登記 (Hangzhou, Zhejiang) 表) (對外貿易經營者備案登記(浙江杭州)) Registration Receipt of Hangzhou UCO Hangzhou Customs 2 April 2019 N/A Consignees and Consignors (杭州海關) of Import or Export Goods from the Customs (海關進出口貨物收發貨人備案回執) Archival Filing and Hangzhou Youmei Archival Filing and 8 February 2021 N/A Registration Form of Registration of Foreign Foreign Trade Operators Trade Operators (對外貿易經營者備案登記 (Jianggan, Hangzhou, 表) Zhejiang) (對外貿易經營者備案登記(浙江杭州江干)) Registration Receipt of Hangzhou Youmei Qianjiang Customs 23 February 2021 N/A Consignees and Consignors Comprehensive Business of Import or Export Goods Division III from the Customs (海關進 (錢江海關綜合業務三處) 出口貨物收發貨人備案回執) Archival Filing and Shanghai ProA Archival Filing and 4 December 2020 N/A Registration Form of Information Registration of Foreign Foreign Trade Operators Technology Co., Trade Operators (對外貿易經營者備案登記 Ltd. (Shanghai) (對外貿易經表) 營者備案登記(上海))

Registration Receipt of Shanghai ProA Qingpu Customs 8 January 2021 N/A Consignees and Consignors Information (青浦海關) of Import or Export Goods Technology Co., from the Customs (海關進 Ltd. 出口貨物收發貨人備案回執) Archival Filing and Ruitai (Shanghai) Archival Filing and 25 September 2020 N/A Registration Form of Supply Chain Registration of Foreign Foreign Trade Operators Management Trade Operators (對外貿易經營者備案登記 Co., Ltd. (Shanghai) (對外貿易經表) 營者備案登記(上海))

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Expiration License/Permit Holder Issuing Authority Grant Dates Date

Registration Receipt of Ruitai (Shanghai) Xinzhuang Customs 12 November 2020 N/A Consignees and Consignors Supply Chain (莘莊海關) of Import or Export Goods Management from the Customs (海關進 Co., Ltd. 出口貨物收發貨人備案回執)

We had not encountered any difficulties in renewing our major permits and licenses during the Track Record Period. Based on the advice from our PRC Legal Adviser, we do not foresee any legal impediment to renew our major permits and licenses as long as we comply with the requirements for renewing such permits and licenses.

For more information about the laws and regulations to which we are subject, see “Regulatory Overview.”

Legal Proceedings and Compliance

We may from time to time be subject to various legal or administrative claims and proceedings arising in the ordinary course of our business. As of the Latest Practicable Date, we were not a party to any material legal or administrative proceedings.

Litigation or any other legal or administrative proceeding, regardless of the outcome, is likely to result in substantial costs and diversion of our resources, including our management’s time and attention. For potential impact of legal or administrative proceedings on us, see “Risk Factors – Risks Related to Our Business and Industry – We may be subject to legal proceedings in the ordinary course of our business. Any adverse outcome of these legal proceedings could have a material adverse effect on our business, results of operations and financial condition.”

According to our PRC Legal Adviser, other than as disclosed in “Risk Factors – Risks Related to Our Business and Industry – Failure to comply with PRC labor laws and make adequate contributions to various employee benefits plans as required by PRC regulations may subject us to penalties,” “Risk Factors – Risks Related to Our Business and Industry – We face certain risks relating to the real properties that we lease,” “Business – Employees” and “Business – Properties and Facilities,” we have complied with PRC laws and regulations that are relevant to our PRC business in all material respects during the Track Record Period and up to the Latest Practicable Date.

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LAWS AND REGULATIONS RELATING TO COMPANY ESTABLISHMENT AND FOREIGN INVESTMENT

The incorporation, operation and management of corporate entities in the PRC is governed by the Company Law of PRC (《中華人民共和國公司法》) (the “PRC Company Law”), which was issued by the Standing Committee of the National People’s Congress (the “SCNPC”) on December 29, 1993, latest revised and became effective on October 26, 2018. Limited liability companies and stock limited companies established in the PRC shall be subject to the PRC Company Law. A foreign-invested company is also subject to the PRC Company Law unless otherwise provided by the foreign investment laws.

Foreign Investment

On March 15, 2019, the National People’s Congress (the “NPC”) promulgated the Foreign Investment Law of the PRC (《中華人民共和國外商投資法》) (the “Foreign Investment Law”), which became effective on January 1, 2020 and replaced 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》), 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》) and the Wholly Foreign-Invested Enterprise Law of the PRC (《中華人民共和國外資企業法》), and becomes the legal foundation for foreign investment in the PRC.

Pursuant to the Foreign Investment Law, “foreign investments” refer to investment activities conducted by foreign investors directly or indirectly in the PRC, which include any of the following circumstances: (i) foreign investors setting up foreign-invested enterprises in the PRC solely or jointly with other investors, (ii) foreign investors obtaining shares, equity interests, property portions or other similar rights and interests of enterprises within the PRC, (iii) foreign investors investing in new projects in the PRC solely or jointly with other investors, and (iv) investment of other methods as specified in laws, administrative regulations, or as stipulated by the State Council.

According to the Foreign Investment Law, foreign investment shall enjoy pre-entry national treatment, except for those foreign invested entities that operate in industries deemed to be either “restricted” or “prohibited” in the Negative List. The Foreign Investment Law provides that foreign invested entities operating in foreign “restricted” or “prohibited” industries will require entry clearance and other approvals. The Foreign Investment Law also provides several protective rules and principles for foreign investors and their investments in the PRC, which provide an all-around and multi-angle system to guarantee fair competition of foreign-invested enterprises in the market economy. Furthermore, the Foreign Investment Law provides that foreign invested enterprises established according to the previous laws regulating foreign investment may maintain their structure and corporate governance within five years after the implementing of the Foreign Investment Law, which means that foreign invested enterprises may be required to adjust the structure and corporate governance in accordance with the PRC Company Law and other laws and regulations governing the corporate governance. On December 26, 2019, the State Council promulgated the Implementation Rules

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The PRC Company Law, the Foreign Investment Law and the Implementation Rules to the Foreign Investment Law are the principal regulations governing distribution of dividends of foreign invested entities. Under these regulations, foreign invested entities may pay dividends only out of their accumulated after-tax profits, if any, and such profits could be freely remit out of China, in RMB or any other foreign currency provided that the procedures required by the relevant PRC laws and regulations have been complied with. In addition, foreign invested entities in the PRC are required to allocate at least 10% of their accumulated profits each year, if any, to fund certain reserve funds unless these reserves have reached 50% of the registered capital of the enterprises. These reserves are not distributable as cash dividends.

On December 30, 2019, the MOFCOM and the SAMR, jointly promulgated the Measures for Information Reporting on Foreign Investment (《外商投資信息報告辦法》), which became effective on January 1, 2020. Pursuant to the Measures for Information Reporting on Foreign Investment, where a foreign investor carries out investment activities in China directly or indirectly, the foreign investor or the foreign-invested enterprise shall submit the investment information to the competent commerce department through the enterprise registration system and the enterprise credit information publicity system.

According to the Measures for the Security Review of Foreign Investment (《外商投資安全審查辦法》) promulgated by the National Development and Reform Commission (the “NDRC”) and the MOFCOM on December 19, 2020 and became effective on January 18, 2021, any foreign investment that has or possibly has an impact on state security shall be subject to security review in accordance with the provisions hereof.

The Catalog for the Guidance of Foreign Investment Industries

Investment activities in the PRC by foreign investors and foreign-invested enterprises shall comply with the Special Administrative Measures (Negative List) for Foreign Investment Access (2020 version) (《外商投資准入特別管理措施(負面清單)(2020年版)》) (the “Negative List 2020”) and the Catalog of Industries for Encouraging Foreign Investment (2020 Version) (《鼓勵外商投資產業目錄(2020年版)》) (the “Encouraging Catalog 2020”) which were promulgated by the NDRC and the MOFCOM. Pursuant to the Encouraging Catalog 2020 and the Negative List 2020, foreign-invested projects are categorized as encouraged, restricted and prohibited. Foreign-invested projects that are not listed in the Negative List 2020 are permitted foreign invested projects.

As advised by our PRC Legal Adviser, according to the Negative List 2020, the business in which our PRC subsidiaries are primarily engaged does not fall into the category of foreign restricted or prohibited industries.

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LAWS AND REGULATIONS RELATING TO SELLING PRODUCTS AND PROVIDING SERVICES

E-commerce Activities

On January 26, 2014, the SAIC released the Administrative Measures for Online Transactions (《網絡交易管理辦法》) (the “Online Transactions Measures”), which took effect on March 15, 2014. Under the Online Transaction Measures, online business operators, online service providers and operators of third-party transaction platforms are required to register with SAMR or its local branches and obtain a business license, except where such business operator is an individual who does not have business license but has completed the registration of his or her true name through certain third-party transaction platforms. When selling products to, or providing services for, consumers, online business operators and service providers are required to disclose to consumers their business address and contact details, quantities, quality, and prices or fees of the goods or services, duration and manner of performance, methods of payment, product return and replacement policy, safety precautions and risk warnings, after-sales services, civil liabilities and other information according to the Online Transaction Measures. Online business operators and service providers are also required to procure the security and reliability of the transactions, and provide the products or services consistent with their commitments. On March 15, 2021, the SAMR released the Measures for the Supervision and Administration of Online Transactions (《網絡交易監督管理辦法》), which will take effect on May 1, 2021, providing more detailed requirements for the operators and platforms, such as clarifying the specific acts infringing consumers’ personal information in online transactions, the prohibited contents contained in the standard terms used by the operators, and elaborating the measures shall be applicable to the operating activities of selling goods or providing services through social network and network live-streaming.

On August 31, 2018, the SCNPC promulgated the E-Commerce Law of the PRC (《中華人民共和國電子商務法》) (the “E-Commerce Law”), which took effect on January 1, 2019. The E-Commerce Law established the basic legal framework for the development of China’s e-commerce business and proposes a series of requirements on e-commerce operators, including third-party e-commerce platform operators, registered product or service providers of platforms, and product or services providers operating through a self-built website or any other network. For example, the E-Commerce Law requires e-commerce operators to respect and equally protect consumers’ legitimate rights and provide options to consumers without targeting their personal characteristics, and also requires e-commerce operators to clearly point out to consumers their tie-in sales in which additional services or products are added by merchants to a purchase, and not to assume consumers’ consent to such tie-in sales by default. The E-Commerce Law also organized rules on e-commerce contact execution and performance between e-commerce product/service providers and customers.

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Product Quality

The Product Quality Law of the PRC (《中華人民共和國產品質量法》) promulgated by the SCNPC on February 22, 1993 and last amended on December 29, 2018 is the principal governing law relating to the supervision and administration of product quality, which clarified liabilities of the manufactures and sellers. Products for sale must satisfy relevant safety standards and sellers shall adopt measures to maintain the quality of products for sale. Sellers may not mix impurities or imitations into products, or pass counterfeit goods off as genuine ones, or defective products as good ones or substandard products as standard ones. For sellers, any violation of state or industrial standards for health and safety or other requirements may result in civil liabilities and administrative penalties, such as compensation for damages, fines, confiscation of products illegally manufactured or sold and the proceeds from the sales of such products illegally manufactured or sold and revoking business license; in addition, severe violations may subject the responsible individual or enterprise to criminal liabilities. Especially, sellers shall be responsible for the repair, replacement or return of the products and compensate for the losses caused to the consumers who bought the products if one of the following cases occurs: (i) products do not possess the properties for use and no prior explanation is given; (ii) products that do not conform to the standards specified on the products or on the packages thereof; or (iii) products that do not conform to the quality indicated by way of product descriptions or samples. After a seller has taken responsibility for repair, replacement or return of the products, or has borne liability for compensation for losses pursuant to the preceding sentence, if the manufacture is liable or another seller who provided the product to the seller (hereinafter referred to as the supplier) is liable, the seller shall have the right to recovery from the producer or the supplier. If product purchase and sale contracts and work contracts concluded between producers, between sellers or between producers and sellers stipulate otherwise, the parties to such contracts shall proceed pursuant to such contracts. If a defect in a product causes physical injury or damage to property other than the defective product, the manufacturers shall bear liability for compensation, unless they are able to prove that: (i) the product has not been put into circulation; (ii) the defects causing injuries or damage did not exist at the time when the product was circulated; or (iii) the science and technology at the time when the product was circulated were at a level incapable of detecting the defects. Where a defective product causes personal injury or damage to other properties, the victim may claim compensation from the manufacturer or from the seller of the product. If the seller pays compensation and it is the manufacturer that should bear the liability, the seller has a right of recourse against the manufacturer. Similarly, if the manufacturer pays compensation and it is the seller that should bear the liability, the manufacturer has a right of recourse against the seller.

Pursuant to the Civil Code of the PRC (《中華人民共和國民法典》) (the “Civil Code”), which was promulgated on May 28, 2020 and became effective on January 1, 2021, the infringed party may claim for compensation from the manufacturer or the seller of the relevant product in which the defects have caused damage. Where the product defects are caused by the producers, the sellers shall have the right to recover the same from the producers after paying compensation. If the products are defective due to the fault of the seller, the producer may, after paying compensation, claim the same from the seller.

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Consumer Protection

The Law on Protection of Consumers’ Rights and Interests (《消費者權益保護法》), which was promulgated by the SCNPC on October 31, 1993 and last amended on October 25, 2013 with effect from March 15, 2014, sets out the obligations of business operators and the rights and interests of the consumers. Business operators must guarantee the quality, function, usage and term of validity of the goods or services they sell or provide. The consumers whose interests have been damaged due to their purchase of goods or acceptance of services on online platforms may claim damages from the sellers or service providers. Moreover, if business operators deceive consumers when selling products or providing services, they should not only compensate consumers for their losses, but also pay additional damages equal to three times the price of the goods or services. If business operators knowingly sell defective products to the consumers and such products cause death of the consumers or other victims or cause severe damage to the health of the consumers or other victims, they should not only compensate victims for their loss, but also pay additional damages up to twice of the victims’ loss.

On January 6, 2017, the SAIC issued the Interim Measures for No Reason Return of Online Purchased Commodities within Seven Days (《網絡購買商品七日無理由退貨暫行辦法》), which came into effect on March 15, 2017, further clarifying the scope of consumers’ rights to make returns without a reason, including exceptions, return procedures and online marketplace platform providers’ responsibility to formulate seven-day no-reason return rules and related consumer protection systems, and supervise the merchants for compliance with these rules.

The Advertising Law of the PRC (《中華人民共和國廣告法》) (the “Advertising Law”), which was promulgated by the SCNPC on October 27, 1994 and last amended on October 26, 2018, requires advertisers, advertising operators and advertisement publishers shall be honest and trustworthy and compete in a fair manner in advertising business. Advertisements shall not contain false or misleading contents, and shall not deceive or mislead consumers. Advertisers shall be responsible for the veracity of their advertisement contents. The content of advertisements shall not contain prohibited information, including but not limited to information that contains wordings such as “national level”, “highest level” and “best”. Advertisements which deceive or mislead consumers with false or misleading contents shall constitute false advertising. The following advertisements are deemed as false advertising: (i) the goods or services do not exist; (ii) information on performance, function, place of origin, use, quality, specifications, ingredients, price, manufacturer, expiry date, sales or accolades of the goods, or information on contents, service provider, form, quality, price, sales or accolades of the services, as well as information on undertakings in relation to the goods or services, are inconsistent with the actual situation and have a substantial impact on purchase behavior; (iii) using fictitious, forged or non-verifiable scientific research findings, statistical information, survey findings, abstracts, citations etc. as proof materials; (iv) Fabricating the effects of use of goods or services; (v) any other circumstances of using false or misleading contents to deceive or mislead consumers. In the case of publishing of false advertisements against the

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Advertising Law, the administration for market regulation shall order the offender to stop distribution of advertisement and order the advertiser to eliminate impact within the corresponding scope, and impose a fine ranging from three to five times the amount of the advertising fee; where the offender has committed more than three illegal acts within two years or the case is serious, a fine ranging from five to ten times the amount of the advertising fee shall be imposed and the business license of the offender may be revoked.

Pursuant to the Regulations on the Supervision and Administration of Cosmetics (《化妝品監督管理條例》) (the “Cosmetics Regulations”), which was issued by the State Council on June 16, 2020 and became effective on January 1, 2021, the content of cosmetics advertisements shall be authentic and legal. No cosmetic advertisement may expressly or impliedly indicate that the product has any medical effect, contain any false or misleading information, or deceive or mislead consumers, any advertisement of cosmetics violates the provisions hereof, punishment shall be imposed in accordance with the provisions of the Advertising Law.

The Interim Measures for the Administration of Internet Advertising, or the Internet Advertising Measures, regulating the internet based advertising activities were adopted by the SAIC on July 4, 2016 and became effective on September 1, 2016. According to the Internet Advertising Measures, internet advertisers are responsible for the authenticity of the advertisements content and all online advertisements must be marked “Advertisement” so that viewers can easily identify them as such. Publishing and circulating advertisements through the internet shall not affect the normal use of the internet by users. It is not allowed to induce users to click on the content of advertisements by any fraudulent means, or to attach advertisements or advertising links in the emails without permission. In addition, the following internet advertising activities are prohibited: (i) providing or using any applications or hardware to intercept, filter, cover, fast forward or otherwise restrict any authorized advertisement of other persons, (ii) using network pathways, network equipment or applications to disrupt the normal data transmission of advertisements, alter or block authorized advertisements of other persons or load advertisements without authorization, or (iii) using fraudulent statistical data, transmission effect or matrices relating to online marketing performance to induce incorrect quotations, seek undue interests or harm the interests of others.

Foreign Trade and Customs

Pursuant to the Foreign Trade Law of the PRC (《中華人民共和國對外貿易法》) which was promulgated by the SCNPC on May 12, 1994 and most recently amended on November 7, 2016 and the Measures for the Filing and Registration of Foreign Trade Operators (《對外貿易經營者備案登記辦法》) which was promulgated by the MOFCOM on June 25, 2004 and most recently amended on November 30, 2019, foreign traders engaging in import and export of goods or technology shall complete the filing and registration with the MOFCOM or its delegated agencies. Where a foreign trade operator fails to complete the filing and registration, the customs will refuse to handle customs declaration and the clearance of goods imported or exported by the operator.

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Pursuant to the Customs Law of the PRC (《中華人民共和國海關法》) promulgated by the SCNPC on January 22, 1987 and most recently amended on November 4, 2017 and became effective on November 5, 2017, unless otherwise stipulated, the declaration of import and export goods may be made by consignees and consignors themselves, and such formalities may also be completed by their entrusted customs brokers that have registered with the Customs. The consignees and consignors for import or export of goods and the customs brokers engaged in customs declaration shall register with the Customs in accordance with the laws.

Pursuant to the Administrative Provisions of the Customs of the PRC (the “GACC”) on the Registration of Customs Declaration Entities (2018 Revision) (《中華人民共和國海關報關單位註冊登記管理規定》(2018修正)) promulgated by the General Administration of Customs on March 13, 2014 and most recently amended on May 29, 2018 and became effective on July 1, 2018, the registration of customs declaration entities comprises the registration of the customs declaration enterprise and the registration of the consignor or consignee of imported and exported goods. The consignor or consignee of imported and exported goods shall register with local customs in accordance with the laws.

Cosmetics Import

Pursuant to the Regulations Concerning the Hygiene Supervision over Cosmetics (《化妝品衛生監督條例》) (the “Cosmetics Hygiene Regulations”) promulgated by the former Ministry of Public Health of the PRC on November 13, 1989 and amended by the State Council on March 2, 2019 and became effective on the same day, the term “Cosmetics” referred to in the regulations means those daily used chemical products applied on the surface of any part of the human body (such as skin, hair, nails and lips) by way of smearing, spraying or other similar methods to keep the body clean, to get rid of undesirable smell, to protect the skin, to make up the face and to increase the beauty of the appearance; the term “Special Cosmetics” referred to in the regulations means those are used for hair nourishment, hair coloring, hair perm, hair removal, breast beauty, body building, deodorization, speckle removal and sun protection. When a special cosmetic product is imported for the first time, the importing unit is required to submit the relevant information such as the specifications, the quality standard, and the method of testing, and a sample of that cosmetics together with a production license issued by the official department of the exporting country (or region) to the Cosmetics Supervision and Administration Department of the State Council. Only after an approval by the Cosmetics Supervision and Administration Department of the State Council is obtained can the importing unit sign the import contract. Other cosmetic product, which is imported for the first time, shall be recorded in accordance with regulations. All imported cosmetics are subject to inspection by the relevant inspection and quarantine authorities. Only those qualified cosmetics are allowed to be imported. Those who import or sell imported cosmetics that have not been approved or examined shall be punished by having their goods and illegal earnings confiscated and by a fine 3 to 5 times of their illegal profits.

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Pursuant to the Cosmetics Regulations, which replaced the Cosmetics Hygiene Regulations, the state divides cosmetics into special cosmetics and ordinary cosmetics. The cosmetics that are used for hair coloring, hair perm, freckle removal and whitening, sun protection and hair loss prevention and those that claim new efficacy are special cosmetics. The cosmetics other than the special cosmetics are ordinary cosmetics. Special cosmetics may be manufactured and imported only after they are registered with the Medical Products Supervision and Administration Department of the State Council. The imported ordinary cosmetics shall be filed for the record with the Medical Products Supervision and Administration Department of the State Council. Imported cosmetics may be directly labeled in Chinese or be attached with Chinese labels; if labels in Chinese are attached, contents on the Chinese labels shall be consistent with those on the original labels. The importer shall truthfully record the information of imported cosmetics, and the record keeping period shall be no less than one year after expiration date, or be no less than two years if the expiration date is less than one year.

Pursuant to the Measures on Inspection, Quarantine, Supervision and Administration of Import and Export Cosmetics (《進出口化妝品檢驗檢疫監督管理辦法》) promulgated by General Administration of Quality Supervision, Inspection and Quarantine of the PRC on August 10, 2011 and most recently amended by GACC on November 23, 2018, imported cosmetics shall be subject to inspection and quarantine by the relevant customs authorities. Where imported cosmetics pass inspection and quarantine, the customs authority shall issue a Certificate of Inspection and Quarantine for Entry Goods (入境貨物檢驗檢疫證明). Imported cosmetics may not be sold or used unless they have obtained a Certificate of Inspection and Quarantine for Entry Goods.

LAWS AND REGULATIONS ON INFORMATION SECURITY AND INTERNET PRIVACY

The SCNPC promulgated the Cybersecurity Law (《中華人民共和國網絡安全法》)on November 7, 2016, which took effect from June 1, 2017. Construction, operation, maintenance and use of networks within the territory of the PRC will be subject to the law. Network operators in the PRC are required to perform the following obligations to ensure cyber security under a graded system of cyber security protection: (i) formulating internal security management systems and operation manual, to specify the person in charge of cyber security and to define responsibilities in cyber security protection; (ii) taking technical measures to prevent computer virus, network attacks, network intrusions and other activities that endanger cyber security; (iii) taking technical measures to monitor and record network operation and cyber security status, and maintaining relevant logs for no less than six months as required; (iv) taking measures such as data classification, and backup and encryption of important data, etc.; and (v) performing other obligations required by relevant laws and administrative regulations.

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In addition, the Cybersecurity Law specifies that network products and services shall satisfy the mandatory requirements set forth in applicable national standards. Any provider of network products or services shall not install malwares. In case of identifying any cyber security risk such as security defect or bug, relevant product/service provider is required to take immediate remedial actions, timely inform users of the risk, and report the event to the competent authority.

Furthermore, the Cybersecurity Law systematically specifies requirements on user information protection applicable to network operator, and requires that a network operator should establish and improve its user information protection system. Network operators shall collect, store, and use individual information with consent from such individuals by lawful and proper means on a necessary basis. Network operators cannot collect individual user information that is not relevant to the services it provides, or distort or destroy individual information collected by it. Network operators are prohibited from disclosing without permission or selling individual information unless individual specifics are unidentifiable or retrievable. In addition, a network operator shall strengthen its management of information released by its users. If it founds any information that is prohibited by laws and administrative regulations from release or transmission, it shall immediately cease transmission of such information, and take measures such as deletion of relevant information to prevent dissemination of the same, and shall keep relevant record, and report the event to competent authorities. Also, a network operator is required to establish network information security complaint and reporting mechanisms, and to release the complaint and reporting channels to promptly accept and settle complaints and reports concerning network information security.

LAWS AND REGULATIONS RELATING TO INTELLECTUAL RPOPERTY

China has enacted various laws and regulations relating to the protection of copyright. China is a signatory to some major international conventions on protection of copyright and became a member of the Berne Convention for the Protection of Literary and Artistic Works in October 1992, the Universal Copyright Convention in October 1992, and the Agreement on Trade-Related Aspects of Intellectual Property Rights upon its accession to the World Trade Organization in December 2001.

The Copyright Law of the PRC (《中華人民共和國著作權法》) (the “Copyright Law”) which was promulgated by the SCNPC on September 7, 1990 and last amended on February 26, 2010 provides that Chinese citizens, legal persons, or other organizations shall, whether published or not, enjoy copyright in their works, which include, among others, works of literature, art, natural science, social science, engineering technology and computer software. The purpose of the Copyright Law aims to encourage the creation and dissemination of works which is beneficial for the construction of socialist spiritual civilization and material civilization and promote the development and prosperity of Chinese culture.

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The Computer Software Copyright Registration Measures (《計算機軟件著作權登記辦法》) (the “Software Copyright Measures”), promulgated by the NCA on February 20, 2002, regulate registrations of software copyright, exclusive licensing contracts for software copyright and transfer contracts. The NCA shall be the competent authority for the nationwide administration of software copyright registration and the Copyright Protection Center of China (the “CPCC”), is designated as the software registration authority. The CPCC shall grant registration certificates to the Computer Software Copyrights applicants which conforms to the provisions of both the Software Copyright Measures and the Computer Software Protection Regulations (Revised in 2013) (《計算機軟件保護條例》(2013年修訂)).

Trademark

Trademarks are protected by the Trademark Law of the PRC (《中華人民共和國商標法》) which was promulgated on August 23, 1982 and last amended on April 23, 2019 as well as the Implementation Regulation of the PRC Trademark Law (《中華人民共和國商標法實施條例》) which was adopted by the State Council on August 3, 2002 and amended on April 29, 2014. In China, registered trademarks include commodity trademarks, service trademarks, collective marks and certification marks.

The PRC Trademark Office of National Intellectual Property Administration (the “Trademark Office”) is responsible for the registration and administration of trademarks throughout the PRC, and grants a term of ten years to registered trademarks. Trademarks are renewable every ten years where a registered trademark needs to be used after the expiration of its validity term. A registration renewal application shall be filed within twelve months prior to the expiration of the term. A trademark registrant may license its registered trademark to another party by entering into a trademark license contract. Trademark license agreements must be filed with the Trademark Office to be recorded. The licensor shall supervise the quality of the commodities on which the trademark is used, and the licensee shall guarantee the quality of such commodities. As with trademarks, the PRC Trademark Law has adopted a “first come, first file” principle with respect to trademark registration. Where trademark for which a registration application has been made is identical or similar to another trademark which has already been registered or been subject to a preliminary examination and approval for use on the same kind of or similar commodities or services, the application for registration of such trademark may be rejected. Any person applying for the registration of a trademark may not prejudice the existing right first obtained by others, nor may any person register in advance a trademark that has already been used by another party and has already gained a “sufficient degree of reputation” through such party’s use.

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Domain Names

Domain names are protected under the Administrative Measures on the Internet Domain Names (《互聯網域名管理辦法》) promulgated by the MIIT. The MIIT is the major regulatory body responsible for the administration of the PRC internet domain names, under supervision of which the China Internet Network Information Center (the “CNNIC”) is responsible for the daily administration of .cn domain names and Chinese domain names. CNNIC adopts the “first to file” principle with respect to the registration of domain names. In November 2017, the MIIT promulgated the Notice of the Ministry of Industry and Information Technology on Regulating the Use of Domain Names in Providing Internet-based Information Services (《工業和信息化部關於規範互聯網信息服務使用域名的通知》), which became effective on January 1, 2018. Pursuant to the notice, the domain name used by an internet-based information service provider in providing internet-based information services must be registered and owned by such provider in accordance with the law. If the internet-based information service provider is an entity, the domain name registrant must be the entity (or any of the entity’s shareholders), or the entity’s principal or senior manager.

Patent

Patents are protected by the Patent Law of the PRC (《中華人民共和國專利法》) which was promulgated on March 12, 1984 and amended on December 27, 2008 with effect from October 1, 2009. A patentable invention or utility model must meet three conditions: novelty, inventiveness and practical applicability. Patents cannot be granted for scientific discoveries, rules and methods for intellectual activities, methods used to diagnose or treat diseases, animal and plant breeds or substances obtained by means of nuclear transformation. The Patent Office under the National Intellectual Property Administration is responsible for receiving, examining and approving patent applications. A patent is valid for a twenty-year term for an invention and a ten-year term for a utility model or design. Except under certain specific circumstances provided by law, any third-party user must obtain consent or a proper license from the patent owner to use the patent, or else the use will constitute an infringement of the rights of the patent holder. The Patent Law of The PRC was recently amended on October 17, 2020 and the revised version come into effect on June 1, 2021.

LAWS AND REGULATIONS RELATING TO FOREIGN EXCHANGE

General Administration of Foreign Exchange

Under the PRC Foreign Currency Administration Rules (《中華人民共和國外匯管理條例》) promulgated by the State Council on January 29, 1996 and last amended on August 5, 2008 and various regulations issued by the SAFE and other relevant PRC government authorities, Renminbi is convertible into other currencies for the purpose of current account items, such as trade related receipts and payments, payment of interest and dividends. The conversion of Renminbi into other currencies and remittance of the converted foreign currency outside the PRC for the purpose of capital account items, such as direct equity investments, loans and repatriation of investment, requires the prior approval from the SAFE or its local

– 233 – THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT REGULATORY OVERVIEW branches. Payments for transactions that take place within China must be made in Renminbi. Unless otherwise provided by laws and regulations, PRC companies may repatriate foreign currency payments received from abroad or retain the same abroad. Foreign exchange proceeds under the current accounts may be either retained or sold to a financial institution engaging in settlement and sale of foreign exchange pursuant to relevant rules and regulations of China. For foreign exchange proceeds under the capital accounts, approval from the SAFE is required for its retention or sale to a financial institution engaging in settlement and sale of foreign exchange, except where such approval is not required under the relevant rules and regulations of China.

In November 2012, SAFE promulgated the Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment (《關於進一步改進和調整直接投資外匯管理政策的通知》), or SAFE Circular 59, which was further amended in May 2015. Pursuant to this circular, the opening of various special purpose foreign exchange accounts, such as pre-establishment expenses accounts, foreign exchange capital accounts and guarantee accounts, the reinvestment of RMB proceeds by foreign investors in the PRC, and remittance of foreign exchange profits and dividends by a foreign-invested enterprise to its foreign shareholders no longer require the approval or verification of SAFE, and multiple capital accounts for the same entity may be opened in different provinces, which was not possible previously. In addition, SAFE promulgated the Circular on Printing and Distributing the Provisions on Foreign Exchange Administration over Domestic Direct Investment by Foreign Investors and the Supporting Documents (關於印發《外國投資者境內直接投資外匯管理規定》及配套文件的通知) in May 2013, which was further revised in 2015, 2018 and 2019, which specify that the administration by SAFE or its local branches over direct investment by foreign investors in the PRC shall be conducted by way of registration and banks shall process foreign exchange business relating to the direct investment in the PRC based on the registration information provided by SAFE and its branches.

Regulations Relating to Offshore Investment

Pursuant to SAFE’s Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents to Engage in Financing and Inbound Investment via Overseas Special Purpose Vehicles (《關於境內居民通過境外特殊目的公司融資及返程投資外匯管理有關問題的通知》) (the “SAFE Circular 75”), which became effective on November 1, 2005, the domestic residents, including domestic individuals and domestic companies, must register with local branches of SAFE in connection with their direct or indirect offshore investment in an overseas special purpose vehicle (the “SPV”), for the purposes of overseas equity financing activities, and to update such registration in the event of any significant changes with respect to that offshore company. On July 4, 2014, the SAFE promulgated the Circular Concerning Relevant Issues on the Foreign Exchange Administration of Offshore Investing and Financing and Round-Trip Investing by Domestic Residents through Special Purpose Vehicles (《關於境內居民通過特殊目的公司境外投融資及返程投資外匯管理有關問題的通知》) (the “SAFE Circular 37”), which replaced SAFE Circular 75, for the purpose of simplifying the approval process, and for the promotion of the cross-border investment. SAFE Circular 37 supersedes the SAFE Circular 75 and revises and regulates the relevant matters

– 234 – THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT REGULATORY OVERVIEW involving foreign exchange registration for round-trip investment. Under SAFE Circular 37, a domestic resident must register with the local SAFE branch before he or she contributes assets or equity interests in an overseas SPV, that is directly established or indirectly controlled by the domestic resident for the purpose of conducting investment or financing. In addition, in the event of any change of basic information of the overseas SPV such as the individual shareholder, name, operation term, etc., or if there is a capital increase, decrease, equity transfer or swap, merge, spin-off or other amendment of the material items, the domestic resident shall complete the change of foreign exchange registration procedures for offshore investment. According to the procedural guideline as attached to SAFE Circular 37, the principle of review has been changed to “the domestic individual resident shall only register the SPV directly established or controlled (first level)”. At the same time, the SAFE has issued the Operation Guidance for the Issues Concerning Foreign Exchange Administration over Round-trip Investment (《返程投資外匯管理所涉業務操作指引》) with respect to the procedures for SAFE registration under SAFE Circular 37, which became effective on July 4, 2014 as an attachment to SAFE Circular 37. Under the relevant rules, failure to comply with the registration procedures set forth in SAFE Circular 37 may result in restrictions being imposed on the foreign exchange activities of the relevant onshore company, including the payment of dividends and other distributions to its offshore parent or affiliate, and may also subject relevant PRC residents to penalties under PRC foreign exchange administration regulations. PRC residents who hold any shares in the company from time to time are required to register with the SAFE in connection with their investments in the company.

On February 13, 2015, the SAFE promulgated the Notice on Simplifying and Improving the Foreign Currency Management Policy on Direct Investment (《國家外匯管理局關於進一步簡化和改進直接投資外匯管理政策的通知》), effective from June 1, 2015, which further amended SAFE Circular 37 by requiring domestic residents to register with qualified banks rather than the SAFE or its local branches in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing.

LAWS AND REGULATIONS RELATING TO TAX

Enterprise Income Tax

The Law of the People’s Republic of China on Enterprise Income Tax (《中華人民共和國企業所得稅法》) and The Regulations for the Implementation of the Law on Enterprise Income Tax (《中華人民共和國企業所得稅法實施條例》) (collectively, the “EIT Laws”) were promulgated on March 16, 2007 and December 6, 2007, respectively and were most recently amended on December 29, 2018 and April 23, 2019, respectively. According to the EIT Laws, taxpayers consist of resident enterprises and non-resident enterprises. Resident enterprises are defined as enterprises that are established in China in accordance with PRC laws, or that are established in accordance with the laws of foreign countries but whose actual or de facto control is administered from within China. Non-resident enterprises are defined as enterprises that are set up in accordance with the laws of foreign countries and whose actual administration is conducted outside China, but have established institutions or premises in China, or have no such established institutions or premises but have income generated from

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The Notice Regarding the Determination of Chinese-Controlled Offshore Incorporated Enterprises as People’s Republic of China Tax Resident Enterprises on the Basis of De Facto Management Bodies (《關於境外註冊中資控股企業依據實際管理機構標準認定為居民企業有關問題的通知》) (the “Circular 82”) promulgated by the SAT on April 22, 2009 and amended on January 29, 2014 and December 29, 2017, sets out the standards and procedures for determining whether the “de facto management body” of an enterprise registered outside of China and controlled by PRC enterprises or PRC enterprise groups is located within China.

According to Circular 82, a Chinese-controlled offshore incorporated enterprise will be regarded as a PRC tax resident by virtue of having a “de facto management body” in China and will be subject to PRC EIT on its worldwide income only if all of the following criteria are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholders meeting minutes are located or maintained in the PRC; and (iv) 50% or more of voting board members or senior executives habitually reside in the PRC.

The EIT Laws permit certain High and New Technologies Enterprises, or HNTEs, to enjoy a reduced 15% EIT rate subject to these HNTEs meeting certain qualification criteria. In addition, the relevant EIT laws and regulations also provide that entities recognized as Software Enterprises are able to enjoy a tax holiday consisting of a two-year-exemption commencing from their first profitable calendar year and a 50% reduction in ordinary tax rate for the following three calendar years, while entities qualified as key software enterprises can enjoy a preferential EIT rate of 10%.

The Bulletin on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC Resident Enterprises (《關於非居民企業間接轉讓財產企業所得稅若干問題的公告》) (the “Bulletin 7”) was issued by the SAT on February 3, 2015 and most recently amended pursuant to the Announcement on Issues Concerning the Withholding of Enterprise Income Tax at Source on Non-PRC Resident Enterprises (《關於非居民企業所得稅源泉扣繳有關問題的公告》) (the “Bulletin 37”), which was issued by the SAT on October 17, 2017 and became effective as of December 1, 2017. Pursuant to Bulletin 7, an “indirect transfer” of assets, including equity interests in a PRC resident enterprise, by non-PRC resident enterprises may be recharacterized and treated as a direct transfer of PRC taxable assets, if the arrangement does not have a reasonable commercial purpose and was established for the purpose of avoiding payment of PRC EIT. As a result, gains derived from an indirect transfer may be

– 236 – THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT REGULATORY OVERVIEW subject to PRC EIT. According to Bulletin 7, “PRC taxable assets” include assets attributed to an establishment or a place of business in China, immoveable properties in China, and equity investments in PRC resident enterprises. In respect of an indirect offshore transfer of assets of a PRC establishment or place of business, the relevant gain is to be regarded as effectively connected with the PRC establishment or a place of business and therefore included in its EIT filing, and would consequently be subject to PRC EIT at a rate of 25%. Where the underlying transfer relates to the immoveable properties in China or to equity investments in a PRC resident enterprise, which is not effectively connected to a PRC establishment or a place of business of a non-resident enterprise, a PRC EIT at 10% would apply, subject to available preferential tax treatment under applicable tax treaties or similar arrangements, and the party who is obligated to make the transfer payments has the withholding obligation. There is uncertainty as to the implementation details of Bulletin 7.

Value-Added Tax and Business Tax

Before August 2013 and pursuant to applicable PRC tax regulations, any entity or individual conducting business in the service industry is generally required to pay a business tax at the rate of 5% on the revenues generated from providing services. However, if the services provided are related to technology development and transfer, the business tax may be exempted subject to approval by the relevant tax authorities.

In November 2011, the MOF and the SAT promulgated the Pilot Plan for Imposition of Value-Added Tax to Replace Business Tax (《營業稅改徵增值稅試點方案》). In May and December 2013, April 2014, March 2016 and July 2017, the MOF and the SAT promulgated five circulars to further expand the scope of services that are to be subject to value-added tax (the “VAT”) instead of business tax. Pursuant to these tax rules, from August 1, 2013, a VAT was imposed to replace the business tax in certain service industries, including technology services and advertising services, and from May 1, 2016, VAT replaced business tax in all industries, on a nationwide basis. On November 19, 2017, the State Council further amended the Interim Regulation of the People’s Republic of China on Value Added Tax (《中華人民共和國增值稅暫行條例》) to reflect the normalization of the pilot program. The VAT rates generally applicable are simplified as 17%, 11%, 6% and 0%, and the VAT rate applicable to the small-scale taxpayers is 3%. Unlike business tax, a taxpayer is allowed to offset the qualified input VAT paid on taxable purchases against the output VAT chargeable on the revenue from services provided.

On April 4, 2018, the MOF and the SAT issued the Notice on Adjustment of VAT Rates (《關於調整增值稅稅率的通知》), which came into effect on May 1, 2018. According to the abovementioned notice, the taxable goods previously subject to VAT rates of 17% and 11% respectively become subject to lower VAT rates of 16% and 10%, respectively starting from May 1, 2018.

On March 20, 2019, the MOF, the SAT and the General Administration of Customs issued the Announcement on Policies for Deepening the VAT Reform (《關於深化增值稅改革有關政策的公告》) (the “Announcement 39”), which came into effect on 1 April 2019, to further

– 237 – THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT REGULATORY OVERVIEW slash VAT rates. According to Announcement 39, (i) for general VAT payers’ sales activities or imports previously subject to VAT at an existing applicable rate of 16% or 10%, the applicable VAT rate is adjusted to 13% or 9% respectively; (ii) for the agricultural products purchased by taxpayers to which an existing 10% deduction rate is applicable, the deduction rate is adjusted to 9%; (iii) for the agricultural products purchased by taxpayers for production or commissioned processing, which are subject to VAT at 13%, the input VAT will be calculated at a 10% deduction rate; (iv) for the exportation of goods or labor services that are subject to VAT at 16%, with the applicable export refund at the same rate, the export refund rate is adjusted to 13%; and (v) for the exportation of goods or cross-border taxable activities that are subject to VAT at 10%, with the export refund at the same rate, the export refund rate is adjusted to 9%.

Customs Duties

According to the Regulations of the People’s Republic of China on Import and Export Duties (《中華人民共和國進出口關稅條例》) promulgated on March 7, 1985 and last amended on March 1, 2017, all goods permitted to be imported into or exported out of and all articles allowed to enter into the PRC shall, unless otherwise provided for by laws and administrative regulations, be subject to payment of customs duties on imports or exports. Consignees of imports, consignors of exports and owners of the articles brought into the PRC shall pay customs duties. The tariff rates of the imported products are based on the type of the products and trade treaties, specifically provided by the Import and Export Tariff of the People’s Republic of China (《中華人民共和國進出口稅則》).

Consumption Tax

According to the Interim Regulations of the People’s Republic of China on Consumption Tax (《中華人民共和國消費稅暫行條例》) promulgated on December 13, 1993 and last amended on November 10, 2008, entities and individuals engaged in producing, commissioned processing or importing consumer goods as specified in the Regulations, within the territory of the PRC, and all other entities and individuals determined by the State Council to sell such consumer goods specified in the Regulations will be the taxpayers of consumption tax and must pay such consumption tax in accordance with the Regulations. The taxable items and tax rates of consumption tax will be subject to the “Schedule of Items and Rates of Consumption Tax” attached to the Regulations.

On September 30, 2016, the MOF and the SAT promulgated the Notice on the Adjustment to Policies of Consumption Tax on Cosmetics (《關於調整化妝品消費稅政策的通知》), which exempts consumption tax on ordinary cosmetics for beauty or makeup, changes the name of tax item for “cosmetics” into “high-end cosmetics”, and reduces tax rate to 15% for high-end cosmetics for beauty or makeup, high-end skincare cosmetics and complete set of cosmetics.

High-end cosmetics for beauty or makeup and high-end skincare cosmetics refer to cosmetics for beauty, makeup or skincare, for which the duty-paid prices (excluding VAT) at the manufacturing/import stage is at least RMB10/ml or RMB15/piece.

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Tax Duty Policy of Cross-border Retail E-Commerce

On March 24, 2016, the MOF, GACC and STA issued the Notice on the Import Tax and Customs Duty Policy of Cross-border Retail E-Commerce (《關於跨境電子商務零售進口稅收政策的通知》) (the “Notice”), which came into effect on April 8, 2016. According to the Notice, goods imported through the cross-border e-commerce retail are subject to customs duties, import VAT, and consumption tax based on the types of goods. Individuals purchasing any goods imported through cross-border e-commerce retail shall be taxpayers, and e-commerce enterprises, e-commerce transaction platform enterprises and logistics enterprises shall be the withholding agents. As for retail goods imported through cross-border e-commerce, a maximum of RMB2,000 per single transaction and a maximum of RMB20,000 per person per year will be allowed. For any imported goods whose transaction amount is within the thresholds, the tariffs shall be fixed at 0% temporarily; import VAT and consumption tax on such retail goods will no longer be exempted, and shall be temporarily levied at 70% of the statutory tax payable. On November 29, 2018, the MOF, GACC and STA issued the Notice on Improving the Import Tax Policy of Cross-border Retail E-commerce (《關於完善跨境電子商務零售進口稅收政策的通知》), which came into effect on January 1, 2019, further improving the single transaction limit for retail goods imported through cross-border e-commerce from RMB2,000 to RMB5,000, and the annual transaction limit from RMB20,000 to RMB26,000. In each of 2018, 2019 and 2020, cross-border import accounted for less than 3% of the total GMV we facilitated or generated in the respective year.

LAWS AND REGULATIONS RELATING TO EMPLOYMENT AND SOCIAL WAREFARE

The Labor Contract Law

According to the Labor Law of the People’s Republic of China (《中華人民共和國勞動法》) promulgated on July 5, 1994 and last amended on December 29, 2018, enterprises and institutions shall establish and improve their system of workplace safety and sanitation, strictly abide by state rules and standards on workplace safety, educate laborers in labor safety and sanitation in China. Labor safety and sanitation facilities shall comply with state-fixed standards. Enterprises and institutions shall provide laborers with a safe workplace and sanitation conditions which are in compliance with state stipulations and the relevant articles of labor protection. The Labor Contract Law of the PRC (《中華人民共和國勞動合同法》) (the “Labor Contract Law”), which was implemented on January 1, 2008 and amended on December 28, 2012, is primarily aimed at regulating employee/employer rights and obligations, including matters with respect to the establishment, performance and termination of labor contracts. Pursuant to the Labor Contract Law, labor contracts shall be concluded in writing if labor relationships are to be or have been established between enterprises or institutions and the laborers. Enterprises and institutions are forbidden to force laborers to work beyond the time limit and employers shall pay laborers for overtime work in accordance with the laws and regulations. In addition, labor wages shall not be lower than local standards on minimum wages and shall be paid to laborers in a timely manner.

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Social Insurance and Housing Fund

As required under the Regulation of Insurance for Labor Injury (《工傷保險條例》) implemented on January 1, 2004 and amended on December 20, 2010, the Provisional Measures for Maternity Insurance of Employees of Corporations (《企業職工生育保險試行辦法》) implemented on January 1, 1995, the Decisions on the Establishment of a Unified Program for Basic Old-Aged Pension Insurance of the State Council (《國務院關於建立統一的企業職工基本養老保險制度的決定》) issued on July 16, 1997, the Decisions on the Establishment of the Medical Insurance Program for Urban Workers of the State Council (《國務院關於建立城鎮職工基本醫療保險制度的決定》) promulgated on December 14, 1998. The Unemployment Insurance Measures (《失業保險條例》) promulgated on January 22, 1999 and the Social Insurance Law of the People’s Republic of China (《中華人民共和國社會保險法》) implemented on July 1, 2011 and amended on December 29, 2018, enterprises are obliged to provide their employees in China with welfare schemes covering pension insurance, unemployment insurance, maternity insurance, labor injury insurance and medical insurance. These payments are made to local administrative authorities and any employer that fails to contribute may be fined and ordered to make up within a prescribed time limit.

In accordance with the Regulations on the Management of Housing Funds (《住房公積金管理條例》) which was promulgated by the State Council on April 3, 1999 and last amended on March 24, 2019, enterprises must register at the competent managing center for housing funds and upon the examination by such managing center of housing funds, these enterprises shall complete procedures for opening an account at the relevant bank for the deposit of employees’ housing funds. Enterprises are also required to pay and deposit housing funds on behalf of their employees in full and in a timely manner.

LAWS AND REGULATIONS RELATING TO REAL PROPERTY

Leasing

Pursuant to the Law on Administration of Urban Real Estate (《城市房地產管理法》) which took effect in January 1995 with the latest amendment on August 26, 2019, which became effective on January 1, 2020, lessors and lessees are required to enter into a written lease contract, containing such provisions as the term of the lease, the use of the premises, rental price, liability for repair, and other rights and obligations of both parties. Both lessor and lessee are also required to file for registration and record the lease contract with the real estate administration department. Pursuant to implementing rules stipulated by certain provinces or cities, if the lessor and lessee fail to go through the registration procedures, both lessor and lessee may be subject to fines. According to the Civil Code, the lessee may sublease the leased premises to a third party, subject to the consent of the lessor. Where the lessee subleases the premises, the lease contract between the lessee and the lessor remains valid. The lessor is entitled to terminate the lease contract if the lessee subleases the premises without the consent of the lessor. In addition, if the ownership of the leased premises changes during the lessee’s possession in accordance with the terms of the lease contract, the validity of the lease contract shall not be affected.

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Pursuant to the Civil Code, if the mortgaged property has been leased and transferred for occupation prior to the establishment of the mortgage right, the original tenancy shall not be affected by such mortgage right. According to the Interpretation of the Supreme People’s Court on Several Issues concerning the Application of Law in the Trial of Cases about Disputes Over Lease Contracts on Urban Buildings (2020 version) (《最高人民法院關於審理城鎮房屋租賃合同糾紛案件具體應用法律若干問題的解釋(2020修正)》), which took effect on January 1, 2021, if the ownership of the leased premises changes during lessee’s possession in accordance with the terms of the lease contract, and the leasee requests the assignee to continue to perform the original lease contract, the PRC court shall support it, except that the mortgage right has been established before the lease of the leased premises and the ownership changes due to the mortgagee’s realization of the mortgage right.

Fire Security

Pursuant to the Fire Protection Law of the PRC (《中華人民共和國消防法》) which was latest revised on April 23, 2019, and the Measure for Supervision on and Inspection of Fire Protection (《消防監督檢查規定》) amended in 2012, enterprises shall implement a fire safety accountability system, install firefighting facilities and equipment, conduct a yearly comprehensive inspection of firefighting facilities and keep the inspection records for future reference, and perform other fire safety measures as well as other fire safety and protection responsibilities. Pursuant to Interim Provisions on the Administration of Fire Protection Design Review and Final Inspection of Construction Projects (《建設工程消防設計審查驗收管理暫行規定》) (“Interim Provisions Regarding Fire Protection”) effective on June 1, 2020, a special construction project as stipulated in the Interim Provisions Regarding Fire Protection shall be subject to fire protection design review before such project was commenced construction and shall be subject to fire protection inspection before such project was put into used. Other construction projects other than a special construction project shall be subject to fire protection inspection recordation, and the competent department of housing and urban-rural development shall conduct a random fire protection inspection thereof. If the project fails to pass the random fire protection inspection, such project shall be ceased to use.

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OUR CONTROLLING SHAREHOLDERS

The following simplified diagram illustrates the ultimate beneficial interest and shareholding structure of CITIC Capital Group in our Company, immediately following completion of the [REDACTED] (assuming the [REDACTED] is not exercised and no Shares are issued under the Share Schemes):

CITIC Capital Holdings Limited(1)

51.00%

Trustar Capital Partners Limited

100%

CCP LTD

100%

CCP IV, GP Ltd.

General Partner CITIC Capital China Partners IV, L.P. 100% CITIC Capital Beauty Investment Limited [REDACTED]%

The Company

Note:

(1) To the best knowledge of the Company, no individual or entity holds more than 30% of the shareholding of CITIC Capital Holdings Limited.

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CITIC Capital Holdings Limited (“CCHL”) is a global alternative investment management and advisory company whose core businesses include private equity, real estate, structured investment and finance, special situations, and asset management. Its assets under management comes from institutional investors in North America, Europe, Asia and the Middle East. As of the Latest Practicable Date, the single largest group of shareholders of CCHL was its management team, which held an aggregate of 20.75% of CCHL individually and through a trustee and two investment vehicles. CITIC Limited (HKEX:267) also holds 19.9% of CCHL through its indirect wholly-owned subsidiary Forever Glory Holdings Ltd..

[REDACTED]

Our Group operates independently of our Controlling Shareholders. Apart from their interest in our Company, our Controlling Shareholders do not currently have any interest in a business that competes or is likely to compete, either directly or indirectly, with our Group’s business.

INDEPENDENCE FROM OUR CONTROLLING SHAREHOLDERS

Management independence

Our business is managed and conducted by our Board and senior management. Our Board comprises two executive Directors, two non-executive Directors and three independent non-executive Directors.

Our non-executive Directors hold positions at CITIC Capital Group or its associates:

(a) Ms. ZHAO Hanxi, our non-executive Director, is a senior managing director of CITIC Capital Holdings Limited and a managing partner of Trustar Capital Partners Limited.

(b) Ms. WAN Jiahui, our non-executive Director, is an executive director of Trustar Capital Partners Limited.

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Our Directors consider that our Board and senior management will function independently of our Controlling Shareholders because:

(a) Both Ms. Zhao and Ms. Wan serve on our Board in a non-executive capacity;

(b) each Director is aware of their fiduciary duties as a director which require, among others, that they acts for the benefit and in the interest of our Company and do not allow any conflict between their duties as a Director and their personal interests;

(c) our daily management and operations are carried out by a senior management team, all of whom have substantial experience in the industry in which our Company is engaged, and will therefore be able to make business decisions that are in the best interests of our Group;

(d) we have three independent non-executive Directors and certain matters of our Company must always be referred to the independent non-executive directors for review;

(e) in the event that there is a potential conflict of interest arising out of any transaction to be entered into between our Group and our Directors or their respective associates, the interested Director(s) is(are) required to declare the nature of such interest before voting at the relevant Board meeting; and

(f) we have adopted other corporate governance measures to manage conflicts of interest, if any, between our Group and our Controlling Shareholders, as detailed in “– Corporate governance measures”.

Based on the above, our Directors believe that our business is managed independently of our Controlling Shareholders.

Operational independence

Our Group holds all relevant licenses and owns all relevant intellectual properties and research and development facilities necessary to carry on our business. We have sufficient capital, facilities, equipment and employees to operate our business independently from our Controlling Shareholders. We also have independent access to our customers and an independent management team to operate our business.

Based on the above, our Directors believe that our business is operationally independent of our Controlling Shareholders.

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Financial independence

Our Group has an independent financial system and makes financial decisions according to our Group’s own business needs. We have an independent internal control and accounting system and also have an independent finance department responsible for discharging the treasury function. We are capable of obtaining financing from third parties, if necessary, without reliance on our Controlling Shareholders.

There are no outstanding loans or guarantees provided by, or granted to, our Controlling Shareholders or their respective associates.

Based on the above, our Directors believe that our business is financially independent of our Controlling Shareholders.

TRANSACTION ENTERED INTO BEFORE LISTING WHICH WOULD OTHERWISE CONSTITUTE A CONNECTED TRANSACTION

We have entered into the following transaction with Shanghai Jingrong Industry Development Co., Ltd. (上海靜融實業發展有限公司)(“Shanghai Jingrong”), which is an associate of CITIC Capital Holdings Limited, one of our Controlling Shareholders, and will therefore, upon Listing, become our connected person. The transaction was entered into before Listing and is accounted for as one-off in nature under IFRS 16. If this transaction were entered into after Listing, such transaction would have constituted a connected transaction for our Group.

Leasing Agreement

On September 9, 2020, Shanghai Meiba E-Commerce Co., Ltd. (上海美巴電子商務有限公司)(“Shanghai Meiba”), an indirect wholly-owned subsidiary of our Group, entered into a leasing agreement with Shanghai Jingrong (the “Leasing Agreement”), pursuant to which Shanghai Meiba leased an office space from Shanghai Jingrong. The term of the Leasing Agreement is from September 20, 2020 to September 19, 2023. The total amount of rental paid by Shanghai Meiba to Shanghai Jingrong under the Leasing Agreement was approximately RMB473 thousand for the year ended December 31, 2020.

As at the Latest Practicable Date, the premise leased by Shanghai Meiba is 378.01 square meters of office space at Room A, 18th Floor, No. 758, Nanjing West Road, Jing’an District, Shanghai, PRC.

Our Group has consistently adopted IFRS 16 to our Group’s combined financial statements throughout the Track Record Period, pursuant to which, at the commencement date of a lease, our Group as lessee shall recognise a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. Accordingly, the lease transaction under the Leasing Agreement would be regarded as an acquisition of an asset by the tenant for the purpose of the Listing Rules.

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Although the Lease Agreement was subsisting as at the Latest Practicable Date, and we expect to make further payments to Shanghai Jingrong pursuant to the terms of the Leasing Agreement, given the Leasing Agreement was entered into prior to Listing and the transaction thereunder is accounted for as one-off in nature under HKFRS 16, the transaction (including further rental payments to be made by us pursuant to the terms of the Leasing Agreement) will not be classified as a notifiable transaction under Chapter 14 of the Listing Rules or connected transactions or continuing connected transactions under Chapter 14A of the Listing Rules, and will not be subject to any of the reporting, announcement, circular and independent Shareholders’ approval requirements under Chapters 14 and 14A of the Listing Rules. In the event of any material changes to the terms and conditions of the Leasing Agreement, we shall comply with Chapters 14 and 14A of the Listing Rules (as applicable) in respect of such changes as and when appropriate. Following Listing, in the event that we renew the Leasing Agreement with Shanghai Jingrong, we shall comply with Chapters 14 and 14A of the Listing Rules (as applicable).

Our Directors (including our independent non-executive Directors), confirm that the transaction contemplated under the Leasing Agreement is in the ordinary and usual course of business of our Group, on normal commercial terms or better, and fair and reasonable and in the interests of our Company and Shareholders as a whole.

CORPORATE GOVERNANCE MEASURES

Our Directors recognise the importance of good corporate governance in protecting our Shareholders’ interests. We have adopted/will adopt the following corporate governance measures to resolve actual or potential conflict of interests between our Group and our Controlling Shareholders:

(a) under the Articles, where a Shareholders’ meeting is held to consider proposed transactions in which our Controlling Shareholders or any of their associates is, under the Listing Rules, required to abstain, our Controlling Shareholder(s) shall abstain from voting and their votes shall not be counted in respect of such transactions;

(b) our Company has established internal control mechanisms to identify connected transactions, and we will comply with the applicable Listing Rules if we enter into connected transactions with our Controlling Shareholders or any of their associates after Listing;

(c) the independent non-executive Directors will review, on an annual basis, whether there is any conflict of interests between our Group and our Controlling Shareholders (the “Annual Review”) and provide impartial and professional advice to protect the interests of our minority Shareholders;

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(d) our Controlling Shareholders will undertake to provide all information necessary or requested by the independent non-executive Directors for the Annual Review, including all relevant financial, operational and market information;

(e) where our Directors reasonably request the advice of independent professionals, such as financial advisers, the appointment of such independent professionals will be made at our Company’s expense;

(f) we have appointed Altus Capital Limited as our compliance adviser to provide advice and guidance to us in respect of compliance with the applicable laws and regulations, as well as the Listing Rules, including various requirements relating to corporate governance; and

(g) we have established our audit committee, remuneration committee, and nomination committee with written terms of reference in compliance with the Listing Rules and the Code of Corporate Governance and Corporate Governance Report in Appendix 14 to the Listing Rules.

Based on the above, our Directors believe that sufficient corporate governance measures have been put in place to manage conflicts of interest between our Group and our Controlling Shareholders, and to protect minority Shareholders’ interests after the Listing.

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DIRECTORS

Upon Listing, our Board will consist of 7 Directors, including 2 executive Directors, 2 non-executive Directors and 3 independent non-executive Directors, namely:

Date of Roles and Date of joining appointment as Name Age Position responsibilities our Group Director

Mr. CHANG 54 Executive Director, Overall strategic April 2010 March 18, 2019 Che Hang (張 chairman, chief planning, business 子恆) executive officer direction and management

Mr. LIU Jiaqi 37 Executive Director, Finance, legal, August 2016 March 18, 2019 (劉佳琦) chief financial investment and officer investor relations functions

Ms. ZHAO 48 Non-executive Provide professional March 2019 March 18, 2019 Hanxi (趙涵 Director advice, opinion, and 曦) guidance to our Board

Ms. WAN Jiahui 35 Non-executive Provide professional [●][●] (萬佳惠) Director advice, opinion, and guidance to our Board

Mr. WEI Chun- 63 Independent Supervising and Listing Date Listing Date Hsien (韋俊賢) non-executive providing Director independent judgment to our Board

Ms. CHOW 50 Independent Supervising and Listing Date Listing Date LOK Mei Ki non-executive providing Cindy (周駱美 Director independent 琪) judgment to our Board

Mr. KIANG 52 Independent Supervising and Listing Date Listing Date Shek Chau (姜 non-executive providing 錫岫) Director independent judgment to our Board

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Save as may be disclosed below, none of our Directors and members of senior management are related to other Directors or members of senior management.

Executive Directors

Mr. CHANG Che Hang (張子恆), also known as Mr. Arthur Chang, aged 54, is our founder, executive Director, chairman and chief executive officer. Mr. Chang is primarily responsible for the overall strategic planning, business direction and management of our Group. He is also an executive director of Hangzhou UCO and serves as director or executive director in a number of our subsidiaries.1

Mr. Chang has over 20 years of sales, marketing and general management experience in the information technology and internet industries. Prior to founding our Group in 2010, Mr. Chang served as the Vice President of Global Sales at Alibaba.com Limited, a leading e-commerce company in China which was listed on the Stock Exchange with stock code 1688 prior to its privatization (“Alibaba.com”). Before joining Alibaba.com in January 2008, Mr. Chang was an executive director and chief executive officer of Green Tomato Limited, a company specializing in mobile enterprise solutions. Prior to that, he was Managing Director, Asia Pacific at VeriSign (Nasdaq: VRSN) from 1999 to 2002 and General Manager at General Data Systems Co. Ltd., a joint venture of GEIS International Inc..

Mr. Chang received a bachelor’s degree in computer studies from the University of Hong Kong and a master’s degree in business administration (MBA) from the Chinese University of Hong Kong in Hong Kong, in November 1988 and December 1996 respectively.

During the past three years, Mr. Chang has not been a director of any listed companies.

Mr. LIU Jiaqi (劉佳琦), aged 37, is our executive Director and chief financial officer. Mr. Liu is primarily responsible for finance, legal, investment and investor relations functions of our Group. He is also the chief financial officer of Hangzhou UCO.

Mr. Liu served as vice president of finance at Jia.com, a subsidiary of Qeeka Home (Cayman) Inc. (HKEX:1739), which is an interior online and construction platform in China, from April 2015 to August 2016. He also served as finance director at Anjuke Inc., an online real estate marketplace, from October 2013 to March 2015. He was a senior executive in the leadership team at these two roles and primarily responsible for overseeing strategic finance. Prior to that, Mr. Liu served as senior manager of TESCO China, a multinational groceries and general merchandise retailer, from September 2011 to September 2013 and internal control manager of UTStarcom, Inc., a global telecom infrastructure provider, from June 2010 to September 2011. Mr. Liu worked at PricewaterhouseCoopers from August 2005 to June 2010, where he held the position of senior associate prior to his departure.

1 ProA Supply Chain Management (Shanghai) Co., Ltd., Hangzhou UCO, Ruitai (Shanghai) Supply Chain Management Co., Ltd., Hangzhou Youmei, Xiwei Brand Management (Hangzhou) Co., Ltd., Shanghai Youni Brand Management Co., Ltd., Hangzhou Ningjiuwei, Hangzhou Youpin Technology Co., Ltd., Shanghai ProA Information Technology Co., Ltd., Hangzhou Ruitai Supply Chain Management Co., Ltd., Jiaxing Langning Information Technology Co., Ltd., Hangzhou Nimei E-business Co., Ltd., UCO Cosmetic Limited.

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Mr. Liu received his bachelor’s degree in finance from Tongji University in China in July 2005. Mr. Liu has been a Chartered Global Management Accountant and an Associate of Chartered Institute of Management Accountants in the United Kingdom since May 2017 and a Forensic Certified Public Accountant of the Forensic CPA Society since May 2012.

During the past three years, Mr. Liu has not been a director of any listed companies.

Non-executive Directors

Ms. ZHAO Hanxi (趙涵曦), aged 48, is a non-executive Director of our Company. Ms. Zhao is primarily responsible for providing professional advice, opinion, and guidance to our Board.

Ms. Zhao has over twenty-five years of experience in business strategy and finance. Ms. Zhao joined CITIC Capital Holdings Limited, an alternative investment management and advisory company, in September 2007 and is currently a senior managing director of CITIC Capital Holdings Limited and a managing partner of Trustar Capital Partners Limited, where she is responsible for private equity investments in beauty, other consumer, healthcare and industrial sectors. Prior to that, Ms. Zhao worked in Strategy Planning and Marketing for Dow Jones & Company, a publishing firm, in the United States and Asia from July 2003 to September 2007. Previously, Ms. Zhao served as a consultant at The Boston Consulting Group in United States from June 2002 to June 2003, and as a brand manager at Procter & Gamble (NYSE: PG), a multinational consumer goods corporation, in China from October 1995 to June 2000.

Ms. Zhao received her bachelor’s degrees in language art and economics from Wuhan University in July 1994 in China and a master’s degree in business administration (MBA) from Harvard Business School in June 2002 in the United States.

During the past three years, Ms. Zhao has not been a director of any listed companies.

Ms. WAN Jiahui (萬佳惠), aged 35, is a non-executive Director of our Company. Ms. Wan is primarily responsible for providing professional advice, opinion, and guidance to our Board.

Ms. Wan has over ten years of experience in business strategy and finance. Ms. Wan joined CITIC Capital Holdings Limited in October 2011 and is currently an executive director of Trustar Capital Partners Limited, where she is responsible for private equity investments in consumer, lifestyle and healthcare sectors. Prior to that, Ms. Wan worked at CPE Capital as an analyst from July 2010 to October 2011.

Ms. Wan received her bachelor’s degree in financial management from Hua Zhong University of Science and Technology in June 2008 and a master’s degree in finance from Peking University in July 2010 in China.

During the past three years, Ms. Wan has not been a director of any listed companies.

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Independent non-executive Directors

Mr. WEI Chun-Hsien (韋俊賢), aged 63, is an independent non-executive Director of our Company. Mr. Wei is primarily responsible for supervising and providing independent judgment to our Board.

Mr. Wei served as chairman of the board and executive director of Dachan Food (Asia) Limited (HKEX: 3999) since March 2021. Mr. Wei is an independent director of Taiwan Ta Ya Electric Wire & Cable Company Limited (TWSE: 1609) since June 2012, and a senior consultant of the Tingyi Holding (HKEX: 0322). Mr. Wei served as the chief executive officer of Tingyi Holding from January 2015 to December 2020 and the chief executive officer of food business of Tingyi Food from January 2013 to December 2014. Prior to joining Tingyi Holding, Mr. Wei was a senior advisor of CVC Capital Asia Pacific from January 2012 to December 2012. From June 2009 to December 2011, he was the executive director and the president of the Asian region of Beiersdorf Aktiengesellschaft Group (BEI.F). From June 2003 to April 2009, he served as the senior vice president of Asia Pacific region of Avon Products Inc., where he was responsible for the operations in 10 markets, including Japan, Taiwan, Australia, Philippines and India. Before that, Mr. Wei spent 19 years at Procter & Gamble (NYSE: PG) since 1984 where he was promoted to become the vice president and general manager of Greater China region, overseeing the company’s health and beauty care business in that region.

In addition, Mr. Wei also served as a non-executive director of Li Ning Co., Ltd. (HKEX: 2331) from September 2007 to August 2013 and an independent non-executive director of Tsann Kuen (China) Enterprise Co., Ltd. (SZSE: 200512) from May 2003 to May 2008.

Mr. Wei received his bachelor’s degree in electrical engineering from National Taiwan University in Taiwan in June 1979 and his master’s degree in Business Administration (MBA) from the University of Chicago Booth School of Business in the United States in June 1984.

Ms. CHOW LOK Mei Ki Cindy (周駱美琪), aged 50, is an independent non-executive Director of our Company. Ms. Chow is primarily responsible for supervising and providing independent judgment to our Board.

Ms. Chow is currently serving as an executive director of the HK Entrepreneurs Fund, a not-for-profit initiative of Alibaba Group Holding Limited (NYSE:BABA, HKEX:9988) (“Alibaba Group”), where she is responsible for planning and strategizing programs to fulfil the mission of the Fund. Prior to that, Ms. Chow had been with Alibaba Group as Senior Director of International Finance since July 2007, where she was responsible for financial planning and reporting. Before joining Alibaba Group, Ms. Chow was a senior manager at Hutchison Whampoa Limited (previously listed on the Main Board of the Stock Exchange with stock code 13) where she was responsible for the management reporting and planning of the group from 2001 to 2007. She also served as a vice president and company secretary of ICG Asia Limited from 2000 to 2001 (previously listed on the Main Board of the Stock Exchange with stock code 715) and was in charge of all of the group’s financial and statutory reporting.

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Ms. Chow received her bachelor’s degree in business administration majored in professional accountancy from the Chinese University of Hong Kong in December 1992 and her master’s degree in Business Administration (MBA) from the Hong Kong University of Science and Technology in November 2002. Ms. Chow has been a Certified Public Accountant of the Hong Kong Institute of Certified Public Accountants since October 1995.

During the past three years, Ms. Chow has not been a director of any listed companies.

Mr. KIANG Shek Chau (姜錫岫), aged 52, is an independent non-executive Director of our Company. Mr. Kiang is primarily responsible for supervising and providing independent judgment to our Board.

Mr. Kiang is currently the vice president of IBM Great China Group, a world-leading technology and tech consulting company, and is responsible for the overall technology. Mr. Kiang joined IBM (China) Company Limited in July 1990 and held various positions consecutively since then, such as marketing manager, executive of small & medium Business, executive of system etc., he was promoted as the vice president of system department in 2006 and he has served as the general manager for Greater China South region of IBM Great China Group from July 2014, for Technology Partnership from July 2015, and for Strategic Initiatives from November 2018, where he was promoted to become the vice president overseeing the operations and strategy of the group in March 2020.

Mr. Kiang received a bachelor’s degree of science in engineering from the University of Hong Kong in Hong Kong in December 1990, with a major in electrical & electronics engineering.

During the past three years, Mr. Kiang has not been a director of any listed companies.

SENIOR MANAGEMENT

The senior management team of our Group comprises the following:

Date of appointment as Roles and Date of joining senior Name Age Position responsibilities our Group management

Mr. CHANG 54 Executive Director, Overall strategic April 2010 April 2010 Che Hang (張 chairman, chief planning, business 子恆) executive officer direction and management

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Date of appointment as Roles and Date of joining senior Name Age Position responsibilities our Group management

Mr. LIU Jiaqi 37 Executive Director, Finance, legal, August 2016 August 2016 (劉佳琦) chief financial investment and officer investor relations functions

Mr. WONG 43 Vice president of Supply chain and August 2011 August 2011 Long Yeung supply chain and logistics functions (黃朗陽) logistics

Ms. GUO 35 Vice president of E-commerce May 2010 May 2010 Xiaorong business enablement business (郭曉蓉) operations and brand incubation

Mr. WANG 32 Vice president of Business development April 2014 April 2014 Genping business and client (汪艮平) development management

Mr. WANG Yew- 52 General manager Technology and IT November 2020 November 2020 Ton (王耀東) of IT management

Mr. LIU Jing 43 Vice president of Human resources April 2016 April 2016 (劉競) human resources function

Ms. NI Min (倪 48 Vice president of Sales management and April 2012 April 2012 敏) online beauty training advisor and customer service

Mr. CHANG Che Hang and Mr. LIU Jiaqi are executive Directors. See the section headed “– executive Directors” above for their biographies.

Mr. WONG Long Yeung (黃朗陽), aged 43, is the vice president of supply chain and logistics of our Group. He is responsible for overseeing our Group’s supply chain and logistics functions. Mr. Wong is also the Chairman of Ruitai (Shanghai) Supply Chain Management Co., Ltd.,2 a member of our Group, where he is responsible for the overall business.

2 銳太(上海)供應鏈管理有限公司

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Before joining our Group in August 2011, Mr. Wong served as director for North Asia of Manhattan Associates Software (Shanghai) Co., Ltd., a leading supply chain software provider, from October 2010 to April 2011, where he was responsible for professional service operation in the region, and Assistant to the CEO of Shanghai Metersbonwe Fashion & Accessories Co., Ltd., a leading casualwear apparel company in China, from October 2009 to August 2010, where he led its logistics operations. Previously, Mr. Wong served as vice president of PPG Direct Merchant Co., Ltd. from May 2007 to September 2008 and director of Amazon.com, a multinational technology company, from August 2004 to May 2007. Mr. Wong also worked as manager of KPMG Consulting from February 1999 to August 2002.

Mr. Wong received his bachelor’s degree in computer science from University of Texas at Austin in December 1998 and his master’s degree in business administration from the Sloan School of Management at the Massachusetts Institute of Technology in June 2004, both in the United States.

Ms. GUO Xiaorong (郭曉蓉), aged 35, is the vice president of business operations of our Group and is primarily responsible for overseeing our Company’s e-commerce enablement business and brand incubation.

Prior to joining our Group in May 2010, Ms. Guo worked as a sales representative in the global sales department at Alibaba.com from September 2007 to April 2010, where she was responsible for management of and marketing to members. Ms. Guo also worked at Tianjin Aosai Software Technology Co., Ltd. (天津奧賽軟件技術有限公司), a subsidiary of ExperExchange, Inc., a software company and professional IT solutions provider in China, from 2006 to 2007, where she was primarily responsible for overseas project management and client management.

Ms. Guo received her bachelor’s degree in business English from the Tianjin University of Finance and Economics in June 2006 in China.

Mr. WANG Genping (汪艮平), aged 32, is the vice president of business development of our Group and is responsible for overseeing our Company’s business development and client management. Prior to that, Mr. Wang served as a business director and assistant to the chairman of our Group since July 2014, and was primarily responsible for business development and client management.

Prior to joining our Group, Mr. Wang co-founded Hangzhou Liangyan Technology Co., Ltd., an information technology and services company, in July 2011 and worked there from July 2011 to June 2014 as a founding partner responsible for strategic planning and business management. Prior to that, Mr. Wang worked at Huawei Technologies Co., Ltd. from July 2009 to July 2011.

Mr. Wang received his bachelor’s degree in automation from Zhejiang University in June 2009 in China.

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Mr. WANG Yew-Ton (王耀東), aged 52, is the general manager of IT of our Group and is responsible for overseeing our Company’s technology and IT management.

Mr. Wang served as chief technology officer of Daniel Wellington, a Swedish watch brand, from July 2018 to November 2020, technology director of Capillary Technology, an software product company for retailers and brands, from April 2017 to June 2018, and chief technology officer of Primary Group from January 2015 to March 2017. He was primarily responsible for product and technology development and strategy in these roles. Prior to that, Mr. Wang was the IT director of Arvato Bertelsmann, a global services company, from September 2013 to December 2014, managing director of MegaData Solutions, an IT solutions provider, from April 2011 to September 2013, and senior manager of Autodesk Inc.(NASDAQ: ADSK), a multinational software corporation, from June 2007 to April 2011.

Mr. Wang received his bachelor’s degree in computer science from Oklahoma State University in December 1992 and his master’s degree in computer science from University of New Orleans in December 1994, both in the United States.

Mr. LIU Jing (劉競), aged 43, is a vice president of human resources of our Group and is responsible for overseeing our Company’s human resources function.

Mr. Liu served as the senior director of Anzheng Fashion Group (SHSE: 603839), a fashion apparel company, from October 2013 to April 2016, where he was primarily responsible for human resources management. Previously, Mr. Liu served as human resources manager of WOO Scarf Fashion Group and Shanghai Metersbonwe Fashion & Accessories Co., Ltd., from October 2012 to September 2013 and from December 2009 to September 2012 respectively. Mr. Liu served as general manager of Shanghai Putian Co., Ltd., a communications equipment manufacturer in China, from January 2009 to January 2010, and a senior partner and project director of Shanghai Shenggao Consulting Co., Ltd, a human resources and professional management consulting company, from June 2003 to November 2008.

Mr. Liu received his bachelor’s degree in industry automation in July 1999 and his master’s degree in economics in April 2003, both from Xi’an Jiaotong University in China.

Ms. NI Min (倪敏), aged 48, is the vice president of online beauty advisor and customer service of our Group and is responsible for overseeing our Company’s sales management and training.

Prior to joining our Company in April 2012, Ms. Ni served as the training manager of Avon Products (China) Co., Ltd., a leading beauty and cosmetics company in China, from July 2004 to November 2010. She was primarily responsible for in-house training and development and releases of new products.

Ms. Ni received her bachelor’s degree in business administration from Open University of China in China in 2010.

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JOINT COMPANY SECRETARIES

Ms. HE Qiongxiu (何瓊秀), aged [38], joined us in April 2021 as General Counsel and has been appointed as our joint company secretary since [●]. Prior to joining us, Ms. He joined AsiaInfo Technologies Limited (HKEX:01675) in June 2017, serving as legal director, joint company secretary and senior director in charge of legal and internal audit department respectively from June 2017 to January 2021. Prior to that, Ms. He served as the legal director of 21Vianet Group, Inc. (NASDAQ: VNET) from January 2016 to May 2017, and as head of legal department of Visual China Group Co., Ltd. (SZSE: 000681). Ms. He obtained a Master of Laws degree from China University of Political Science and Law in January 2013.

Mr. NG Cheuk Ming (吳卓明) has been appointed as our Company Secretary. He is a Manager of Corporate Services of Tricor Services Limited (“Tricor”), an Asia’s leading business expansion specialist. Mr. Ng has over 6 years of experience in the corporate secretarial field. He has been providing professional corporate services to Hong Kong listed companies as well as multinational, private and offshore companies. Mr. Ng is currently the joint company secretary of JOINN Laboratories (China) Co., Ltd. 北京昭衍新藥研究中心股份有限公司(HKEX:6127).

Mr. Ng is a Chartered Secretary and Chartered Governance Professional, and an Associate of both The Hong Kong Institute of Chartered Secretaries (HKICS) and The Chartered Governance Institute (CGI) (formerly “The Institute of Chartered Secretaries and Administrators” (ICSA)). Mr. Ng obtained a Bachelor of Business Administration (Hons) degree (major in Corporate Governance) from Hong Kong Shue Yan University in 2013 and a Master of Science in Professional Accounting and Corporate Governance degree from City University of Hong Kong in 2016.

MANAGEMENT AND CORPORATE GOVERNANCE

Board Committees

Audit committee

We have established an audit committee with written terms of reference in compliance with Rule 3.21 of the Listing Rules and the Corporate Governance Code set out in Appendix 14 to the Listing Rules. The primary duties of the audit committee are to review and supervise the financial reporting process and internal controls system of our Group, review and approve connected transactions and provide advice and comments to the Board. The audit committee comprises three members, namely Ms. CHOW LOK Mei Ki Cindy, Mr. WEI Chun-Hsien and Ms. WAN Jiahui as the members of the audit committee, with Ms. CHOW Lok Mei Ki as chair of the audit committee.

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Remuneration committee

We have established a remuneration committee with written terms of reference in compliance with Rule 3.25 of the Listing Rules and the Corporate Governance Code set out in Appendix 14 to the Listing Rules. The primary duties of the remuneration committee are to review and make recommendations to the Board on the terms of remuneration packages, bonuses and other compensation payable to our Directors and other senior management. The remuneration committee comprises three members, namely Ms. CHOW LOK Mei Ki Cindy, Mr. KIANG Shek Chau and Ms. ZHAO Hanxi, with Ms. CHOW LOK Mei Ki Cindy as chair of the remuneration committee.

Nomination committee

We have established a nomination committee with written terms of reference in compliance with the Code on Corporate Governance in Appendix 14 to the Listing Rules. The primary duties of the nomination committee are to make recommendations to our Board on the appointment of Directors and management of Board succession. The nomination committee comprises three members, namely Mr. CHANG Che Hang, Mr. KIANG Shek Chau and Mr. WEI Chun-Hsien, with Mr. CHANG Che Hang as chair of the nomination committee.

Corporate Governance Code

We aim to achieve high standards of corporate governance which are crucial to our development and safeguard the interests of our Shareholders. In order to accomplish this, we expect to comply with the Corporate Governance Code set out in Appendix 14 to the Listing Rules save for the below.

Code provision A.2.1 of the Corporate Governance Code and Corporate Governance Report in Appendix 14 to the Listing Rules, recommends, but does not require, that the roles of chairman and chief executive should be separate and should not be performed by the same person. Our Company deviates from this provision because Mr. CHANG Che Hang performs both the roles of the Chairman of the Board and the chief executive officer of our Company. Mr. Chang is the founder of our Group and has extensive experience in the business operations and management of our Group. Our Board believes that vesting the roles of both chairman and chief executive officer to Mr. Chang has the benefit of ensuring consistent leadership within our Group and enables more effective and efficient overall strategic planning. This structure will enable our Company to make and implement decisions promptly and effectively. Our Board considers that the balance of power and authority will not be impaired due to this arrangement. In addition, all major decisions are made in consultation with members of the Board, including the relevant Board committees, and three independent non-executive Directors. Our Board will reassess the division of the roles of chairman and the chief executive officer from time-to-time, and may recommend dividing the two roles between different people in the future, taking into account the circumstances of our Group as a whole.

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Board diversity

Our Company has adopted a board diversity policy which sets out the approach to achieve diversity of the Board. Our Company recognizes and embraces the benefits of having a diverse Board and sees increasing diversity at the Board level, including gender diversity, as an essential element in maintaining our Company’s competitive advantage and enhancing its ability to attract, retain and motivate employees from the widest possible pool of available talent. Pursuant to the board diversity policy, in reviewing and assessing suitable candidates to serve as a director of our Company, the nomination committee will consider a number of factors, including but not limited to gender, age, cultural and educational background, professional qualifications, skills, knowledge, and industry experience. Pursuant to the board diversity policy, the nomination committee will discuss periodically and when necessary, agree on the measurable objectives for achieving diversity, including gender diversity, on the Board and recommend them to the Board for formal adoption.

Management presence

Accordingly, we have applied for[, and the Stock Exchange has granted], a waiver from strict compliance with Rule 8.12 of the Listing Rules. See “Waivers and exemptions” for further details.

REMUNERATION

Our Directors receive remuneration, including salaries, allowances and benefits in kind, including our contribution to the pension plan on their behalf.

The aggregate amount of remuneration (including basic salaries, housing allowances, other allowances and benefits in kind, contributions to pension plans and discretionary bonuses) for our Directors for the years ended December 31, 2018, 2019 and 2020 was approximately RMB3.14 million, RMB18.65 million and RMB49.52 million, respectively. None of our Directors waived any remuneration during the aforesaid periods.

The five highest paid individuals of our Group for the year ended December 31, 2018, 2019 and 2020 included 1, 1 and 2 Directors, respectively. The aggregate amount of remuneration (including basic salaries, housing allowances, other allowances and benefits in kind, contributions to pension plans and discretionary bonuses) for the remaining highest paid individuals for the years ended December 31, 2018, 2019 and 2020 was approximately RMB8.29 million, RMB26.82 million and RMB12.34 million, respectively.

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Save as disclosed above, no other payments have been paid or are payable, in respect of the years ended December 31, 2018, 2019 and 2020 by our Company to our Directors.

No remuneration was paid to our Directors or the five highest paid individuals as an inducement to join, or upon joining, our Group. No compensation was paid to, or receivable by, our Directors or past directors for the Track Record Period for the loss of office as director or any member of our Group or of any other office in connection with the management of the affairs of any member of our Group. None of our Directors waived any emoluments during the same period.

COMPLIANCE ADVISER

We have appointed Altus Capital Limited as our Compliance Adviser pursuant to Rule 3A.19 of the Listing Rules. The Compliance Adviser will provide us with guidance and advice as to compliance with the requirements under the Listing Rules and applicable Hong Kong laws. Pursuant to Rule 3A.23 of the Listing Rules, the Compliance Adviser will advise our Company, among others, in the following circumstances:

(a) before the publication of any regulatory announcement, circular, or financial report;

(b) where a transaction, which might be a notifiable or connected transaction, is contemplated, including share issues and share repurchases;

(c) where we propose to use the [REDACTED]ofthe[REDACTED] in a manner different from that detailed in this document or where the business activities, development or results of our Group deviate from any forecast, estimate or other information in this document; and

(d) where the Stock Exchange makes an inquiry to our Company regarding unusual movements in the price or trading volume of its listed securities or any other matters in accordance with Rule 13.10 of the Listing Rules.

The term of appointment of the Compliance Adviser shall commence on the Listing Date and is expected to end on the date on which we comply with Rule 13.46 of the Listing Rules in respect of our financial results for the first full financial year commencing after the Listing Date.

DISCLOSURE UNDER RULE 8.10 OF THE LISTING RULES

Each of our Directors confirms that as of the Latest Practicable Date, he or she did not have any interest in a business which competes or is likely to compete, either directly or indirectly, with our Company’s business, and requires disclosure under Rule 8.10 of the Listing Rules.

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SUBSTANTIAL SHAREHOLDERS

So far as our Directors are aware, immediately following completion of the [REDACTED] (assuming the [REDACTED] is not exercised and no Shares are issued under the Share Schemes), the following persons will have an interest or short position in our Shares or underlying Shares which would fall to be disclosed to us under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, will be, directly or indirectly, interested in 10% or more of the issued voting shares of any class of shares of our Company or any other member of our Group:

Substantial shareholders of our Company

Approximate % of shareholding of our Capacity/Nature of Number of Company after the Name of Shareholder interest Shares(1) [REDACTED](1)

Innovative Beauty Beneficial owner 144,791,725 [REDACTED]% Venture Ltd.(2) Mr. CHANG Che Hang(2) Interest in a controlled 144,791,725 [REDACTED]% corporation Beneficial owner 89,015,490 [REDACTED]% CITIC Capital Beauty Beneficial owner 334,840,510 [REDACTED]% Investment Limited(3) CITIC Capital China Interest in a controlled 334,840,510 [REDACTED]% Partners IV, L.P.(3) corporation CCP IV, GP Ltd.(3) Interest in a controlled 334,840,510 [REDACTED]% corporation CCP LTD(3) Interest in a controlled 334,840,510 [REDACTED]% corporation Trustar Capital Partners Interest in a controlled 334,840,510 [REDACTED]% Limited(3) corporation CITIC Capital Holdings Interest in a controlled 334,840,510 [REDACTED]% Limited(3) corporation YSC Glamour (BVI) Beneficial owner 94,102,885 [REDACTED]% Limited(4) Genesis Capital II LP(4) Interest in a controlled 94,102,885 [REDACTED]% corporation

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Notes:

(1) The table above assumes (i) [REDACTED] becomes unconditional and the [REDACTED] are issued pursuant to the [REDACTED], (ii) the [REDACTED] is not exercised and no Shares are issued under the Share Schemes, (iii) no Shares are issued or cancelled and no other potential changes to the share capital materialise as described in “– Potential changes to share capital” below, and (iv) the Share Subdivision is completed.

(2) Innovative Beauty Venture Ltd. is wholly owned by Mr. Chang. Therefore Mr. Chang is deemed to be interested in the shares held by Innovative Beauty Venture Ltd.. Mr. Chang also holds options underlying 89,015,490 Shares (taking into account the Share Subdivision) granted to him under the 2019 ESOP in which he has a beneficial interest.

(3) CITIC Capital Beauty Investment Limited is wholly-owned by CITIC Capital China Partners IV, L.P., of which the general partner is CCP IV, GP Ltd. CCP IV, GP Ltd. is wholly-owned by CCP LTD, which is in turn wholly-owned by Trustar Capital Partners Limited (formerly known as CITIC Capital Partners Limited). Trustar Capital Partners Limited is owned as to 51% by CITIC Capital Holdings Limited. Therefore under the SFO, CITIC Capital China Partners IV, L.P., CCP IV, GP Ltd., CCP LTD, Trustar Capital Partners Limited and CITIC Capital Holdings Limited are deemed to be interested in the Shares held by CITIC Capital Beauty Investment Limited. To the best knowledge of the Company, no individual or entity holds more than 30% of the shareholding of CITIC Capital Holdings Limited.

(4) YSC Glamour (BVI) Limited is a non-wholly owned subsidiary of Genesis Capital II LP. Therefore under the SFO, Genesis Capital II LP is deemed to be interested in the Shares held by YSC Glamour (BVI) Limited.

Except as disclosed above, our Directors are not aware of any other person who will, immediately following completion of the [REDACTED] (assuming the [REDACTED]isnot exercised and no Shares are issued under the Share Schemes), have an interest or short position in our Shares or underlying Shares which would fall to be disclosed to us under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, will be, directly or indirectly, interested in 10% or more of the issued voting shares of any class of shares of our Company or any other member of our Group.

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AUTHORISED AND ISSUED SHARE CAPITAL

The following is a description of our authorised share capital and the amount in issue and to be issued as fully paid or credited as fully paid immediately prior to and following completion of the [REDACTED].

Share capital as at the date of this document and before the Share Subdivision

Authorised share capital

Aggregate Number Description of shares nominal value

ordinary shares with a par value of US$0.0001 500,000,000 each US$50,000.00 Total US$50,000.00

Issued, fully paid, or credited to be fully paid

Aggregate Number Description of shares nominal value

ordinary shares with a par value of US$0.0001 152,258,927 each US$[15,225.89] Total US$[15,225.89]

Share Capital immediately following completion of the Share Subdivision

Authorised share capital

Aggregate Number Description of share nominal value

ordinary share with a par value of US$0.00002 2,500,000,000 each US$[50,000.00] Total US$50,000.00

Issued, fully paid, or credited to be fully paid

Aggregate Number Description of share nominal value

ordinary share with a par value of US$0.00002 761,294,635 each US$[15,225.89] Total US$[15,225.89]

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Share capital immediately following completion of the [REDACTED]

Authorised share capital

Aggregate Number Description of shares nominal value

2,500,000,000 ordinary shares with a par value of US$0.00002 US$50,000.00 each Total US$50,000.00

Issued, fully paid, or credited to be fully paid

Aggregate Number Description of shares nominal value

[761,294,635] Shares in issue after the Share Subdivision US$[15,225.89] [REDACTED] Shares to be issued pursuant to the [REDACTED]US$[REDACTED] Total US$[REDACTED]

Assumptions

The above table (i) assumes that the [REDACTED] becomes unconditional and Shares are issued pursuant to the [REDACTED], (ii) does not take into account any Shares that may be issued or canceled or any other potential change to the share capital as described in “– Potential changes to share capital” below, (iii) assumes no shares are issued under the Share Schemes.

Ranking

The [REDACTED] are ordinary shares in our share capital and rank equally with all Shares currently in issue or to be issued as mentioned in this document and, in particular, will rank in full for all dividends or other distributions declared, made or paid on the Shares in respect of a record date which falls after the date of this document.

POTENTIAL CHANGES TO SHARE CAPITAL

Circumstances under which general meeting and class meeting are required

Our Company may by ordinary resolution (i) increase its share capital by the creation of new shares; (ii) consolidate and divide all or any of its share capital into shares of a larger amount than its existing shares; (iii) cancel any shares which at the date of the passing of the resolution have not been taken or agreed to be taken by any person; and (iv) sub-divide its shares or any of them into shares of smaller amount. In addition, our Company may by special resolution reduce its share capital or any capital redemption reserve subject to any conditions prescribed by the Cayman Companies Act.

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See “Summary of the constitution of our Company and Cayman Islands company law – Articles of Association – Alteration of capital” in Appendix III for further details.

If at any time the share capital of our Company is divided into different classes of shares, all or any of the rights attached to any class of shares for the time being issued (unless otherwise provided for in the terms of issue of the shares of that class) may, subject to the provisions of the Cayman Companies Act, be varied or abrogated only with (in addition to a special resolution to amend the Memorandum or the Articles) the consent in writing of the holders of not less than three-fourths in nominal value of the issued shares of that class or with the sanction of a resolution passed at a separate meeting of the holders of the shares of that class by members holding shares representing three-fourths in nominal value of the shares present and voting at such meeting.

See “Summary of the constitution of our Company and Cayman Islands company law – Articles of Association – Variation of rights of existing shares or classes of shares” in Appendix III for further details.

[General mandate to issue Shares]

Subject to the [REDACTED] becoming unconditional, our Directors were granted a general mandate to allot, issue and deal with any Shares or securities convertible into Shares of not more than the sum of:

• 20% of the total number of Shares in issue immediately following completion of the [REDACTED], assuming no Shares are issued under the Share Schemes; and

• the total number of Shares repurchased by our Company pursuant to the authority referred to in “– General mandate to repurchase Shares” below.

This general mandate to issue Shares will remain in effect until the earliest of:

• the conclusion of the next annual general meeting of our Company unless, by ordinary resolution passed at that meeting, the authority is renewed, either unconditionally or subject to condition;

• the expiration of the period within which the next annual general meeting of our Company is required to be held under any applicable laws of the Cayman Islands or the memorandum and the articles of association of our Company; and

• the passing of an ordinary resolution by our Shareholders in a general meeting revoking or varying the authority.

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[General mandate to repurchase Shares]

Subject to the [REDACTED] becoming unconditional, our Directors were granted a general mandate to repurchase our own Shares up to 10% of the total number of Shares in issue immediately following completion of the [REDACTED] (assuming no Shares which are issued under the Share Schemes).

This mandate only relates to repurchases on the Stock Exchange or on any other stock exchange on which the securities of our Company may be listed and which is recognised by the SFC and the Stock Exchange for this purpose, and in accordance with all applicable laws and the requirements under the Listing Rules or equivalent rules or regulations of any other stock exchange.

This general mandate to repurchase Shares will remain in effect until the earliest of:

• the conclusion of the next annual general meeting of our Company unless, by ordinary resolution passed at that meeting, the authority is renewed, either unconditionally or subject to condition;

• the passing of an ordinary resolution by our Shareholders in a general meeting revoking or varying the authority.

See “Statutory and general information – Further information about our Group – Explanatory statement on repurchase of our own securities” in Appendix IV for further details of this general mandate to repurchase Shares.

Share schemes

We have adopted the 2019 ESOP and on [●] adopted the Share Award Scheme. See “Statutory and general information – Share schemes” in Appendix IV for further details.

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The following discussion should be read in conjunction with the consolidated financial statements of the Group, together with the accompanying notes, for the 2019 Period and the year ended December 31, 2020, set forth in Appendix IA to this document and the consolidated financial statements of our Predecessor Entity together with the accompanying notes, for the year ended December 31, 2018, 2019 and 2020 and the period from January 1, 2019 to April 15, 2019, respectively, set forth in Appendix IB to this document. The financial statements included in the Accountants’ Reports in Appendices IA and IB have been prepared in accordance with IFRS.

The following discussion and analysis contain forward-looking statements that reflect our current views with respect to future events and financial performance. These statements are based on our assumptions and analysis in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate under the circumstances. However, whether actual outcomes and developments will meet our expectations and predictions depends on a number of risks and uncertainties, many of which we cannot control or foresee. In evaluating our business, you should carefully consider all of the information provided in this document, including “Risk Factors” and “Business.”

OVERVIEW

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We established our brand incubation platform through the aggregate of our extensive network, resource, know-hows and technologies in the beauty industry. Beauty brands benefit from our superior omni-channel e-commerce network, highly social and digitally native sales and marketing know-hows, data-driven brand and product selection capabilities, world-class brand network, comprehensive and dedicated customer services, and innovative technological solutions.

We derive revenue from our beauty brand e-commerce enablement service business and brand incubation platform business. Our financial performance was impacted by the acquisitions that have occurred during the Track Record Period. Our Group generated revenue of RMB1,079.4 million in the 2019 Period and RMB1,659.5 million in the year ended December 31, 2020. Our Group recorded a profit of RMB203.9 million in the 2019 Period and a profit of RMB324.8 million in 2020. In 2018, 2019 and 2020, our Predecessor Entity generated revenue of RMB1,164.5 million, RMB1,232.2 million and RMB1,168.6 million, respectively, and recorded net profit of RMB207.1 million, RMB266.9 million and RMB232.0 million in the same periods, respectively.

BASIS OF PRESENTATION

History of our Company

Our Company was incorporated as an exempted company with limited liability under the laws of the Cayman Islands on January 7, 2019. During the period from January 7, 2019 to April 15, 2019, the Group had no significant operations. On April 15, 2019, the Company acquired the Predecessor Entity. On April 30, 2019, the Company acquired Youyue and Niwang, the Acquired Entities, together with their respective businesses. For a summary of the history of our Company, please see “History, Reorganization, and Corporate Structure.”

The presentation of our financial information in this document is impacted by the acquisitions that have occurred during the Track Record Period.

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The following diagram presents the presentation of our financial information as a result of the acquisition of our Predecessor Entity and the Acquired Entities:

2018 2019 2020

Our Group January 7, 2019, date of incorporation Predecessor Entity April 15, 2019

Acquired Entities April 30, 2019

This document includes two Accountants’ Reports set forth as Appendices IA and IB, respectively. In particular:

• Appendix IB sets forth the consolidated financial statements of our Predecessor Entity, together with the accompanying notes, for the year ended December 31, 2018, 2019 and 2020 and the period from January 1, 2019 to April 15, 2019, respectively.

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) and interpretations issued by the IFRSs Interpretations Committee applicable to companies reporting under IFRS. The consolidated financial statements comply with IFRSs as issued by the International Accounting Standards Board (“IASB”). The Group’s financial information has been prepared under the historical cost convention, as modified by the revaluation of financial assets at fair value through profit or loss, which are carried at fair value.

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The IASB has issued a number of new and revised IFRS during the Track Record Period. For the purpose of preparing the Group’s Financial Information, the Group has adopted all applicable new and revised IFRSs including IFRS 9 Financial Instruments (“IFRS 9”), IFRS 15 Revenue from Contracts with Customers (“IFRS 15”) and IFRS 16 Leases (“IFRS 16”) throughout the Track Record Period except for any new standards or interpretation that are not yet effective for the reporting period ended December 31, 2020.

The preparation of the Group’s financial information in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Group’s financial information are disclosed in Note 6 to each of the Accountants’ Report included in Appendix IA and Appendix IB to this document.

MAJOR FACTORS AFFECTING OUR RESULTS OF OPERATIONS

Our business, results of operations and financial condition have been and will continue to be affected by the development of the overall beauty and retail industries in China, which is in turn driven by changes in the spending power of consumers in China, changes in consumer demographics for beauty products in China, swiftly changing fashion and style trends that may affect the frequencies at which beauty products are purchased, and changes in the popularity of emerging beauty brands. Unfavorable changes in any of these general industry conditions could negatively affect the demand for our solutions and adversely and materially affect our results of operations.

While our business is influenced by general factors affecting the overall beauty and retail industries in China, we believe our results of operations are more directly affected by company-specific factors, including the following major factors:

• Our ability to attract and retain our brand partners;

• Our ability to drive growth for our brand partners and grow our revenue;

• The mix of our revenue methods;

• Our ability to manage our cost of revenue; and

• Our ability to improve operating efficiency.

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Our Ability to Attract and Retain our Brand Partners

Our business depends on our ability to attract and retain our brand partners. As our revenue is primarily derived from the service fees that we charge our brand partners and the beauty products of our brand partners sold by us, our brand partner portfolio and their engagement with us directly affect our results of operation. Since our inception, we have won the trust and engagement of a diverse and growing beauty brand portfolio, and maintained long-term trusted relationship with brand partners. As of December 31, 2020, we had a portfolio of brands partners across various origins and product categories, including all of the top six global beauty brand groups by revenues in 2019. As of December 31, 2020, the average length of cooperation with us of the top 20 enablement brand partners by GMV was four years.

The growth and retention of our brand partner base and the increase of their engagement with us were driven by a range of factors, guided by our in-depth insights and business intelligence in the beauty industry and consumer behavior as well as our technology infrastructure. Benefiting from our continuous innovation of and improvements in our services and solutions, robust performance and results we deliver to our brand partners as well as premium personalized experience we provide to end consumers, we were the largest beauty brand e-commerce enablement service provider by GMV in China with a market share of 13.3% in 2020, according to the iResearch Report. We expect our brand partner base to further grow and their engagement level with us to further expand and deepen. Our results of operations may also be affected by the scope of engagement by our brand partners with us.

In addition, we rolled out our brand incubation platform business in 2019. We carefully select prospective incubation beauty brands newly entering the China market with high growth potentials to partner with and provide them with comprehensive offerings such as market analysis, opportunity discovery, and brand discovery and identification, further expanding our brand partner base. As of December 31, 2020, we collaborated with 11 incubation brand partners and helped their expansion into China.

As a long-term strategy, we plan to continuously offer innovative and diversified services and solutions to meet the interests and demands of our brand partners and to further improve their experience and trust with our services and solutions to achieve a sustained high level of satisfaction and engagement with us.

Our Ability to Drive Growth for our Brand Partners and Grow our Revenue

Our revenue growth is primarily driven by our ability to drive growth for our brand partners, which in turn is significantly dependent on the effectiveness of our services and solutions offering to our brand partners. Therefore, our ability to drive GMV increases, deliver superior consumer experience while maintain brand image and brand tonality for our brand partners through our services and solutions is and will continue to be crucial for our business growth, financial performance and prospects.

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We have been able to increase the GMV facilitated or generated by us for our brand partners rapidly. The total GMV we facilitated or generated increased by 255.5% from RMB4.6 billion in 2018 to RMB16.3 billion in 2020, representing an average CAGR of GMV of 88.5% from 2018 to 2020. According to the iResearch Report, China is the second largest beauty market in the world, with a market size of RMB862 billion in 2020, and is expected to reach RMB1,618 billion in 2025, representing a CAGR of 13.4%. There remains a significant opportunity to further drive growth for our brand partners in China. As a result, during the Track Record Period, our business experienced significant growth. Our Group generated revenue of RMB1,079.4 million in the 2019 Period and RMB1,659.5 million in the year ended December 31, 2020, our Predecessor Entity generated revenues of RMB1,164.5 million in 2018 and RMB351.9 million for the period from January 1, 2019 to April 15, 2019.

As part of our efforts to further drive growth for our brand partners and grow our revenue, our brand incubation platform helps stimulate and is likely to realize the high growth potentials of the incubation brands that we partner with, positioning us well to achieve significant growth in our revenue and elevated profitability.

The Mix of our Revenue Methods

We currently generate revenue from our e-commerce enablement services and brand incubation platform based on two revenue methods: service method and distribution method. We derive service revenue under the service method where we primarily charge variable service fees based on GMV or other variable factors such as number of orders fulfilled. We derive revenue under distribution method when we sell products to consumers under the distribution method.

Our results of operations, in particular our gross profit margins, are affected by the revenue mix of our service method and distribution method. Our gross profit margin tends to be higher under the service method compared with that of the distribution method as operations under the distribution method generally incur higher costs, primarily relating to the purchase of beauty products. Our total revenue and our profitability could vary depending on the mix of our distribution revenue and service revenue. The revenue mix may fluctuate from time to time, depending on how we structure our engagement and economics with our brand partners.

Our Ability to Manage our Cost of Revenue

Our ability to manage costs of revenue directly affects our profitability. Our cost of revenue primarily consists of cost of acquiring beauty products that we sell directly under our distribution method as well as the direct cost in connection with our service offering under the service method, such as fulfillment costs and advertising promotion fees. Our cost of revenue may be subject to various factors, such as fluctuations in beauty products purchase price, our spending on fulfillment, advertising promotion and labor costs.

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As our business further grows in scale, we expect to continue to incur those costs to operate our business and to maintain high-quality service offerings to our brand partners. At the same time, we expect to stabilize and improve our gross margin as a result of economies of scale and our accumulated knowledge and experience related to serving brand partners. In addition, as we synergize with all aspects of China beauty e-commerce value chain through our services and solutions, we also create value to those participants along the value chain. We believe these value propositions will help us deepen our relationships with, and obtain favorable terms from, them and further reduce our costs.

Our Ability to Improve Operating Efficiency

Our ability to maintain and improve profitability is dependent on our ability to further improve our operational efficiency by controling our operating expense spending. Selling and distribution expenses, primarily consisting of advertising promotion fees, fulfillment expenses, and employee salaries and benefits expenses of personnel engaged in sales and distribution activities under the distribution method, have historically represented the largest portion of our total operating expenses. Our ability to minimize the impact of our operating expenses to our profitability primarily depends on our ability to improve operating efficiency, such as optimizing fulfillment process management, automating certain tasks manually performed by us or fulfillment service providers and deploying marketing resources in a cost-effective manner.

As our business grows further, we expect to improve the efficiency and utilization of our personnel and technology infrastructure. We also expect to leverage our scale to achieve greater operating leverage and economies of scale.

IMPACT OF COVID-19 ON OUR OPERATIONS

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Although we had not experienced and do not expect any material adverse impact on our ability to provide e-commerce enablement services to our brand partners or to sell and deliver beauty products to consumers due to COVID-19, in the worst case scenario where our operation and fulfilment is completely suspended and we cease to generate any revenue after April 30, 2021, we estimate that our existing financial resources as of April 30, 2021 plus [REDACTED]% of the expected [REDACTED] to be received from the [REDACTED] (representing the portion expected to be used for our working capital and general corporate purpose and the portion expected to be used to partially repay the term loan facility in association with the special dividend to be declared and paid before the Listing, based on the low-end of the indicative [REDACTED] range), can sustain at least 17 months of our ordinary course of business and operation. This estimation is based on the following assumptions:

• we will pay off our existing borrowing with the lending banks according to the agreed repayment schedule;

• we will pay off our term loan facility in association with the special dividend according to the pre-agreed repayment schedule;

• there will be no major capital expenditure other than the committed payment as currently disclosed in the document;

• there will be no internal or external financing activities from our shareholders or financial institutions; and

• there will be no distribution of dividends except for the special dividend disclosed in this document.

The analysis abovementioned is for illustrative purpose only and our Directors estimate that the likelihood of such situation is extremely remote.

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SIGNIFICANT ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES

Some of our accounting policies require us to apply estimates and assumptions as well as complex judgments relating to accounting items. The estimates and assumptions we use and the judgments we make in applying our accounting policies have a significant impact on our financial position and results of operations. Our management continually evaluates such estimates, assumptions and judgments based on past experiences and other factors, including expectations of future events that are believed to be reasonable under the circumstances. There has not been any material deviation between our management’s estimates or assumptions and actual results, and we have not made any material changes to these estimates or assumptions during the Track Record Period. We do not expect any material changes in these estimates and assumptions in the foreseeable future.

Set forth below are discussions of the accounting policies that we believe are of critical importance to us or involve the most significant estimates, assumptions and judgments used in the preparation of our financial statements. Other significant accounting policies, estimates, assumptions and judgments, which are important for understanding our financial condition and results of operations, are set forth in detail in notes 2 and 6 to the Accountants’ Report in Appendix IA and notes 2 and 6 to the Accountants’ Report in Appendix IB to this document.

Significant Accounting Policies

Revenue recognition

Revenue is recognised when or as the control of the goods or services is transferred to a customer. Depending on the terms of the contract and the laws that apply to the contract, control of the goods and services may be transferred over time or at a point in time. Control of the goods and services is transferred over time if the Group’s performance:

• provides all of the benefits received and consumed simultaneously by the customer;

• creates and enhances an asset that the customer controls as the Group performs; or

• does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date.

If control of the goods and services transfers over time, revenue is recognised over the period of the contract by reference to the progress towards complete satisfaction of that performance obligation. Otherwise, revenue is recognised at a point in time when the customer obtains control of the goods and services.

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Contracts with customers may include multiple performance obligations. For such arrangements, the Group allocates revenue to each performance obligation based on its relative standalone selling price. The Group generally determines standalone selling prices based on the prices charged to customers. If the standalone selling price is not directly observable, it is estimated using expected cost plus a margin or adjusted market assessment approach, depending on the availability of observable information. Assumptions and estimations have been made in estimating the relative selling price of each distinct performance obligation, and changes in judgements on these assumptions and estimates may impact the revenue recognition.

A contract asset is the Group’s right to consideration in exchange for goods and services that the Group has transferred to a customer. A receivable is recorded when the Group has an unconditional right to consideration. A right to consideration is unconditional if only the passage of time is required before payment of that consideration is due.

If a customer pays consideration or the Group has a right to an amount of consideration that is unconditional, before the Group transfers a good or service to the customer, the Group presents the contract liability when the payment is made or a receivable is recorded (whichever is earlier). A contract liability is the Group’s obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer.

The following is a description of the accounting policy for the principal revenue streams of the Group.

Distribution of brand partners’ products

The Group generates product sales revenues primarily through selling products to consumers under the distribution method. Revenue under the distribution method is recognized on a gross basis and presented as product sales on the consolidated statements of comprehensive income, because (i) the Group rather than the brand partner, is primarily responsible for fulfilling the promise to provide the specified good to consumers; (ii) the Group controls the goods purchased from brand partners before transferring to consumers, and bears the physical and general inventory risk once the products are delivered to its warehouse; and (iii) the Group generally has discretion in establishing price.

Product sales, net of discounts, return allowances, value added tax and related surcharges are recognized at the point in time when customers accept the products upon delivery. Revenues are measured as the amount of consideration the Group expects to receive in exchange for transferring products to consumers. Return allowances, which reduce revenue, are estimated utilizing the expected value method based on historical data the Group has maintained and its analysis of returns by categories of products.

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The Group sells products to E-commerce platforms and other sales distributors (collectively the “Distributors”), which is Business to Business (“B2B”) model, or sells products to end customers through Distributors, which is Business to Customer (“B2C”) model.

B2B Model

The Group sells goods to certain Distributors and delivers the goods to their designated warehouses, and the Distributors are responsible for selling the goods directly to end customers. The Distributors take physical possession and legal title of the products upon goods delivery and acceptance, and the Distributors have the pricing discretion and have the ability to direct the use of the products. They have a present obligation to pay at this time. The above factors demonstrate that control of the products has been transferred to the Distributors upon goods delivered and accepted by the Distributors and revenue can be recognized at that point in time, accordingly.

Under the Group’s cooperation with Vipshop, control of goods is not transferred to Vipshop until the goods are sold to end customers. The Group has the call back right and controls the goods before end customers confirm acceptance.

B2C Model

Under B2C model, the Distributor act as agents of the Group as the Distributors’ responsibilities are limited to offering an online marketplace that enables the Group to sell products to end customers. The end customers are identified as the customers of the Group. The Group is primarily obligated in selling products to end customers and is subject to inventory risk. When the products are physically received by the end customers, control of the products are transferred and revenue can be recognized by the Group. Commission paid to platforms, which are considered as incremental costs of obtaining a contract, are expenses as incurred because the amortization period of the asset is less than one year.

Rendering of Services

The Group provides a variety of E-commerce services including IT solutions, marketing strategy advisory, digital marketing, execution, omni-channel operations, customer services, order fulfilment and market discovery and entry services which brand partners may elect to use all or some of them that best fit their needs. Each category of the service provided is considered as one performance obligation as they are distinct from each other. Most of the Group’s service contracts including multiple performance obligations as they include provision of a combination of various services based on the brand partner’s requirements. The Group charges its brand partners a combination of fixed fees and/or variable fees based on the value of merchandise sold or other variable factors such as number of orders fulfilled. The transaction price is allocated to each performance obligation using the relative stand-alone selling price. The Group generally determines the stand-alone selling price based on the prices charged to comparable customers or expected cost plus margin.

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Revenue generated from one-time online store design and IT solutions such as setup services is recognized at a point in time when the final deliverables are provided to the customers while revenue generated from other services are recognized over the period of time during the service term.

The Group acts as the principal in its service provision, and therefore, revenue generated from these service arrangements is recognized on a gross basis and presented as services revenue on the consolidated statements of comprehensive income. Contract assets represent the Group’s right to consideration in exchange for E-commerce services that the group has transferred to brand partners, which is subject to further registration and reconciliation with brand partners.

Business combination

The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the:

• fair values of the assets transferred

• liabilities incurred to the former owners of the acquired business

• equity interests issued by the Group

• fair value of any asset or liability resulting from a contingent consideration arrangement, and

• fair value of any pre-existing equity interest in the subsidiary.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets.

Acquisition-related costs are expensed as incurred.

The excess of the

• consideration transferred,

• amount of any non-controlling interest in the acquired entity, and

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• acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired, is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised directly in profit or loss as a bargain purchase.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value, with changes in fair value recognised in profit or loss.

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from such remeasurement are recognised in profit or loss.

Intangible assets

Goodwill

Goodwill is measured as described in Note 2.23 to the Accountants’ Report in Appendix IA and Note 2.23 to the Accountants’ Report in Appendix IB to this document. Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill is not amortised but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. The units or groups of units are identified at the lowest level at which goodwill is monitored for internal management purposes, being the operating segments.

Trademarks

Separately acquired trademarks are shown at historical cost. Trademarks have a finite useful life and are subsequently carried at cost less accumulated amortisation and impairment losses. Amortisation is calculated using the straight-line method to allocate the cost of trademarks over their estimated useful lives of 10 years.

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Software

Costs associated with maintaining software programmes are recognised as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets where the following criteria are met:

• It is technically feasible to complete the software so that it will be available for use;

• Management intends to complete the software and use or sell it;

• There is an ability to use or sell the software;

• It can be demonstrated how the software will generate probable future economic benefits;

• Adequate technical, financial and other resources to complete the development and to use or sell the software are available; and

• The expenditure attributable to the software during its development can be reliably measured.

Directly attributable costs that are capitalised as part of the software include employee costs and an appropriate portion of relevant overheads.

Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use.

Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring the specific software into usage. These costs are amortised using the straight-line method. Costs associated with maintaining computer software programs are recognised as expense as incurred.

Other intangible assets

Other intangible assets mainly include brand, distribution network, customer relationship and technology. They are initially recognised and measured at cost or fair value if they are acquired in business combinations. Other intangible assets are amortized over their estimated useful lives using the straight-line method which reflects the pattern in which the intangible asset’s future economic benefits are expected to be consumed.

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Amortisation methods and useful lives

The Group amortises intangible assets with a limited useful life, using the straight-line method over the following periods:

Trademarks 10 years Software 10 years Brand 10 years Distribution network 5 – 10 years Customer relationship 5 – 10 years Technology 5 years

The estimated useful life is based on the estimated beneficial period of each corresponding intangible assets.

Our management determined the trademarks related to Hangzhou UCO and its subsidiaries to have a useful life of 10 years because Hangzhou UCO and its subsidiaries will continue to use these trademarks and the valid period is 10 years in accordance with the trademark registration certificates.

Our management determined the software to have a useful life of 10 years because Hangzhou UCO and its subsidiaries will continue to use these software, with continuous exploitation or upgrade.

We recorded amortisation of intangible assets resulting from acquisition of our Predecessor Entity and Acquired Entities of RMB48.7 million in 2019 and RMB68.8 million in 2020. Such amortisation of intangible assets resulting from acquisition of our Predecessor Entity and Acquired Entities would be RMB36.5 million in 2019 and RMB51.6 million in 2020, if taking into account the relevant tax impact.

Employee benefits

Short-term obligations

Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.

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Pension obligations

In accordance with the rules and regulations in the PRC, the PRC based employees of the Group participate in various defined contribution retirement benefit plans organized by the relevant municipal and provincial governments in the PRC under which the Group and the employees are required to make monthly contributions to these plans calculated as a percentage of the employees’ salaries, subject to certain ceiling. The municipal and provincial governments undertake to assume the retirement benefit obligations of all existing and future retired PRC based employees’ payable under the plans described above. Other than the monthly contributions, the Group has no further obligation for the payment of retirement and other post-retirement benefits of its employees. The assets of these plans are held separately from those of the Group in an independent fund managed by the PRC government. The Group’s contributions to these plans are expensed as incurred.

Housing funds, medical insurances and other social insurances

Employees of the Group in the PRC are entitled to participate in various government- supervised housing funds, medical insurances and other social insurance plan. The Group contributes on a monthly basis to these funds based on certain percentages of the salaries of the employees, subject to certain ceiling. The Group’s liability in respect of these funds is limited to the contributions payable in each year. Contributions to the housing funds, medical insurances and other social insurances are expensed as incurred.

Share-based payments

Equity-settled share-based payment transactions

Share-based compensation arrangement represents the Group receives services from employees as consideration for equity instruments (options and shares) of the Company. The fair value of the employee services received in exchange for the grant of the equity instruments is recognized as an expense, with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the equity instruments granted:

• including any market performance conditions (for example, an entity’s share price);

• excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period); and

• including the impact of any non-vesting conditions (for example, the requirement for employees to save or holding shares for a specified period of time).

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The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting and service conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity.

Share-based payment transaction among group entities

The grant by the Company of shares/options over its equity instrument to the employees of subsidiaries in the Group is treated as a capital contribution. The fair value of employee service received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiaries undertaking with a corresponding credit to equity in separate financial statements of the Company.

Leases as lessee

The Group’s leasing activities and how these are accounted for

The Group leases warehouses and buildings as lessee. Rental contracts are typically made for fixed periods of 1 months to 5 years.

Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

• fixed payments (including in-substance fixed payments), less any lease incentives receivable

• variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date

• amounts expected to be payable by the Group under residual value guarantees

• the exercise price of a purchase option if the Group is reasonably certain to exercise that option, and

• payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.

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The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.

To determine the incremental borrowing rate, the Group:

• where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received

• uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Group, which does not have recent third-party financing and makes adjustments specific to the lease, eg term, country, currency and security.

Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Right-of-use assets are measured at cost comprising the following:

• the amount of the initial measurement of lease liability

• any lease payments made at or before the commencement date less any lease incentives received, and any initial direct costs.

Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life.

Payments associated with short-term leases of warehouses and buildings are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less without a purchase option.

Significant Accounting Estimates and Judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

We make estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.

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Impairment assessment of trade receivables and contract assets

We have used provision matrix to calculate expected credit loss (“ECL”) for the trade receivables and contract assets. The provision rates are based on internal credit ratings as groupings of various debtors that have similar loss patterns. The provision matrix is based on the Group’s historical default rates, taking into consideration forward-looking information that is reasonable and supportable, available without undue costs or effort. At every reporting date, the historical observed default rates are reassessed and changes in the forward-looking information are considered.

The provision of ECL is sensitive to changes in estimates. The information about the ECL and the Group’s trade receivables and contract assets is disclosed in Note 3(b) to the Accountants’ Report in Appendix IA and Note 3(b) to the Accountants’ Report in Appendix IB to this document.

Net realisable value of inventories

Net realisable value of inventories is the estimated selling price in the ordinary course of business, less estimated cost to completion and selling expenses. These estimates are based on the current market condition and the historical experience of manufacturing and selling products of similar nature. Management reassesses the estimation at the end of each reporting period.

Current and deferred income tax

The Group is subject to income taxes in a number of jurisdictions. Significant judgement is required in determining the provision for income taxes in various jurisdictions. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.

Recognition of share-based compensation expenses

The Company set up the 2019 ESOP and granted options to management members and employees of the Group. The fair value of the options is determined by the binominal option-pricing model at the grant date, and is expected to be expensed over the respective vesting period. Significant estimates on assumptions, including underlying equity value, risk-free interest rate, expected volatility, dividend yield, and terms, are made by management and third-party valuers.

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DESCRIPTION OF MAJOR COMPONENTS OF OUR RESULTS OF OPERATIONS

The following sets forth the description of major components of results of operations of our Predecessor Entity and our Group. The results of operations of our Predecessor Entity and those of our Group differ in several important aspects, including but not limited to the acquisition of the Acquired Entities, the period of financial results of Predecessor Entity and Acquired Entities included in the Group’s results of operation, the impact of amortization of intangible assets resulting from acquisitions, and differences in business operation focus. Therefore, you should not compare the results of operations of our Predecessor Entity with the ones of our Group for the same year and should not consider such comparison as a substitute for an analysis of the results of operations of our Predecessor Entity and our Group during the Track Record Period.

Our Predecessor Entity

The following table sets forth a summary of our Predecessor Entity’s consolidated statement of comprehensive income for the year ended December 31, 2018, 2019 and 2020 and the period from January 1, 2019 to April 15, 2019. Results for the year ended December 31, 2018, 2019 and 2020 and the period of January 1, 2019 to April 15, 2019 are presented in compliance with Rule 4.04(l) and 4.05 of The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”). The operating results of the Predecessor Entity in any historical period may not be indicative of the results that may be expected by us in any future period.

For the For the Period from For the For the Year Ended January 1, Year Ended Year Ended December 31, 2019 to December 31, December 31, 2018 April 15, 2019 2019 2020 (RMB in thousands)

Revenue 1,164,540 351,895 1,232,223 1,168,567 Cost of revenue(1) (775,322) (211,261) (716,927) (600,107)

Gross profit 389,218 140,634 515,296 568,460

Selling and distribution expenses(1) (87,421) (24,819) (65,856) (108,855) General and administrative expenses(1) (48,509) (22,795) (109,843) (144,173) Research and development expenses(1) (10,206) (4,335) (18,386) (28,116) (Net impairment losses)/reversal of impairment losses on financial assets and contract assets (934) 196 (2,449) 2,491

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For the For the Period from For the For the Year Ended January 1, Year Ended Year Ended December 31, 2019 to December 31, December 31, 2018 April 15, 2019 2019 2020 (RMB in thousands)

Other income 6,869 1,098 8,332 14,511 Other gains – net 3,580 409 4,297 3,510

Operating profit 252,597 90,388 331,391 307,828

Finance income 334 54 217 1,765 Finance costs (1,127) (196) (938) (14,619)

Finance costs – net (793) (142) (721) (12,854)

Share of net profit/(losses) of joint ventures accounted for using the equity method 30 12 (37) –

Profit before income tax 251,834 90,258 330,633 294,974 Income tax expenses (44,723) (15,894) (63,750) (62,987)

Profit for the year/period 207,111 74,364 266,883 231,987

Notes:

(1) Including share-based compensation expenses that relate to the options that we granted under the 2019 ESOP. Our share-based compensation expenses were allocated as follows:

For the Period from For the January 1, For the For the Year Ended 2019 to Year Ended Year Ended December 31, April 15, December 31, December 31, 2018 2019 2019 2020 (RMB in thousands)

Cost of revenue – – 5,007 16,567 Selling and distribution expenses – – 2,313 4,119 General and administrative expenses – – 21,024 57,223 Research and development expenses – – 3,010 8,283

Total – – 31,354 86,192

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Our Group

The following table sets forth a summary of our Group’s consolidated statements of comprehensive income for the period from January 7, 2019, the date of the incorporation of the Company, to December 31, 2019, and the year ended December 31, 2020. Operating results in any historical period may not be indicative of the results that may be expected in any future period.

For the Period from January 7, For the 2019 to Year Ended December 31, December 31, 2019 2020 (RMB in thousands)

Revenue 1,079,383 1,659,546 Cost of revenue(1) (579,654) (819,087)

Gross profit 499,729 840,459

Selling and distribution expenses(1) (86,851) (200,617) General and administrative expenses(1) (121,642) (187,375) Research and development expenses(1) (14,051) (28,116) (Net impairment losses)/reversal of impairment losses on financial assets and contract assets (3,565) 2,582 Other income 7,925 37,070 Other expense – (25,287) Other gains – net 5,797 13,417

Operating profit 287,342 452,133

Finance income 398 2,145 Finance costs (22,041) (31,125)

Finance costs – net (21,643) (28,980)

Share of net (losses)/profit of associates and joint ventures accounted for using the equity method (35) 1,318

Profit before income tax 265,664 424,471

Income tax expenses (61,813) (99,708) Profit for the period/year 203,851 324,763

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Notes:

(1) Including share-based compensation expenses that relate to the options that we granted under the 2019 ESOP. Our share-based compensation expenses were allocated as follows:

For the Period from January 7, For the 2019 to Year Ended December 31, December 31, 2019 2020 (RMB in thousands)

Cost of revenue 6,446 22,748 Selling and distribution expenses 2,833 5,177 General and administrative expenses 23,032 58,062 Research and development expenses 3,010 8,283

Total 35,321 94,270

Non-IFRS Measure

We believe adjusted profit (non-IFRS measure) provides useful information to investors and others in understanding and evaluating our results of operations in the same manner as they help our management. However, our presentation of adjusted profit (non-IFRS measure) may not be comparable to similarly titled measure presented by other companies. The use of adjusted profit (non-IFRS measure) has limitations as an analytical tool, and you should not consider it in isolation from, or as a substitute for an analysis of, our results of operations or financial condition as reported under IFRSs.

Adjusted profit (non-IFRS measure) represents profit of the year/period excluding share-based compensation expenses and one-off listing expenses. We exclude these items because they are not expected to result in future cash payments that are recurring in nature and they are neither operating in nature nor indicative of our core operating results and business outlook. We account for the compensation cost from share-based payment transactions with employees based on the grant-date fair value of the equity instrument issued by our Company. The grant-date fair value of the award is recognized as compensation expense, net of forfeitures, over the period during which an employee is required to provide service in exchange for the award, which is generally the vesting period. Share-based payments are non-cash in nature and do not result in cash outflow, and the adjustment has been consistently made during the Track Record Period, which complies with GL103-19. In particular, because

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The following tables reconcile our adjusted profit (non-IFRS measure) of our Predecessor Entity and our Group for the year/period presented to the most directly comparable financial measure calculated and presented in accordance with IFRSs, which is profit for the year/period:

Our Our Predecessor Predecessor Entity Entity Our Group Our Group For the For the Period from Period from For the January 1, January 7, For the Year Ended 2019 to 2019 to Year Ended December 31, April 15, December 31, December 31, 2018 2019 2019 2020 (RMB in thousands)

Adjusted profit (non-IFRS measure) for the year/period 207,111 74,364 239,172 424,196

Revenue

During the Track Record Period, we generated revenue from (i) service fees under the service method, and (ii) product sales under the distribution method.

In 2018, 2019 and 2020, the total revenue of our Predecessor Entity were RMB1,164.5 million, RMB1,232.2 million and RMB1,168.6 million, respectively. During the Track Record Period, the service revenue of our Predecessor Entity accounted for an increasing proportion of its total revenue, representing 36.0%, 58.0% and 60.1% of the total revenue of our Predecessor Entity for 2018, 2019 and 2020, respectively.

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In the 2019 Period and the year ended December 31, 2020, the total revenue of our Group increased from RMB1,079.4 million to RMB1,659.5 million. Service revenue remained the majority contributor of the total revenue of our Group during such period, accounted for 67.4% of the total revenue of our Group in the 2019 Period and 62.9% of the total revenue of our Group in 2020.

The following table sets forth a breakdown of revenue by revenue method of our Predecessor Entity and our Group both in absolute amount and as a percentage of the total revenue for the periods presented.

Revenue Services 419,163 36.0 714,712 58.0 702,384 60.1 727,906 67.4 1,044,651 62.9 Distribution 745,377 64.0 517,511 42.0 466,183 39.9 351,477 32.6 614,895 37.1 Total 1,164,540 100.0 1,232,223 100.0 1,168,567 100.0 1,079,383 100.0 1,659,546 100.0

Service revenue

We provide a variety of services, at our brand partners’ selection, and charge fixed fees and/or variable fees primarily based on GMV or other variable factors such as number of orders fulfilled. In particular, variable fees based on GMV are calculated using a pre-determined ratio that we have negotiated with our brand partners, which may vary depending on factors such as the type and extent of the service we render, our brand partners’ GMV scale and its growth and other commercial considerations. Under such revenue method, we do not control the products before they are transferred to the consumers. We do not bear physical or general inventory risk and has no discretion in determining the price for beauty products sold. We also do not process the payment from the end consumers for beauty products.

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Distribution revenue

We derive distribution revenue through selling beauty products to end consumers, e-commerce platforms, merchants and offline channels. Our distribution revenue is recognized on a gross basis, net of discounts, return allowances, value added tax and related surcharges. We select and purchase beauty products from our brand partners directly or through their authorized distributors and resell these beauty products to end consumers through e-commerce platforms or to e-commerce platforms directly. We also distribute these beauty products directly to e-commerce platforms and other merchants for resale to consumers. Under such revenue method, we are primarily responsible for fulfilling the promise to provide the specified beauty products to customers. We also control the beauty products purchased from brand partners and bear physical and general inventory risk once the beauty products are delivered to our warehouse. In addition, we also have discretion in determining the price of beauty products sold.

Cost of Revenue

Our cost of revenue during the Track Record Period primarily consisted of (i) cost of inventories sold, representing the cost of purchasing the beauty products we sold to generate revenue under the distribution method, which accounted for the largest portion of our cost of revenue during the Track Record Period, and (ii) the direct costs relating to rendering services to our brand partners under the service method, including employee benefits expenses, advertising promotion fees and fulfillment cost, while such costs and expenses of similar nature under the distribution method are recognized as operating expenses. Among those direct costs relating to the service method, the advertising promotion fees primarily represented costs incurred from the value-added advertising promotion services we provide to our brand partners, such as collaboration with KOLs for promotion events. The spending of such advertising promotion fees was primarily event-driven and campaign-driven. Our advertising promotion spending is event-driven, and we tend to incur more advertising promotion fees when we participate in new promotion campaigns and introduce new incubation brands.

In 2018, 2019 and 2020, the cost of revenue of our Predecessor Entity were RMB775.3 million, RMB716.9 million and RMB600.1 million, respectively. In the 2019 Period and the year ended December 31, 2020, the cost of revenue of our Group were RMB579.7 million and RMB819.1 million.

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The following table sets forth a breakdown of cost of revenue of our Predecessor Entity and our Group by nature both in absolute amount and as a percentage of our total cost of revenue for the periods indicated:

Cost of revenue Cost of inventories sold 598,631 77.2 408,861 57.0 302,074 50.3 276,403 47.7 393,254 48.0 Fulfillment 80,226 10.3 136,272 19.0 91,215 15.2 121,092 20.9 98,906 12.1 Employee benefits expenses 43,407 5.6 70,762 9.9 88,181 14.7 72,720 12.5 116,426 14.2 Advertising promotion fees 19,222 2.5 44,207 6.2 73,678 12.3 56,172 9.7 126,032 15.4 Tax 5,026 0.6 6,120 0.9 5,490 0.9 5,734 1.0 8,316 1.0 Others 28,810 3.8 50,705 7.0 39,469 6.6 47,533 8.2 76,153 9.3 Total 775,322 100.0 716,927 100.0 600,107 100.0 579,654 100.0 819,087 100.0

The following set forth a breakdown of cost of revenue of our Predecessor Entity and our Group by revenue method both in absolute amount and as a percentage of the total cost of revenue for the periods presented.

Cost of Revenue Services 172,005 22.2 305,768 42.6 294,835 49.1 302,615 52.2 423,558 51.7 Distribution 603,317 77.8 411,159 57.4 305,272 50.9 277,039 47.8 395,529 48.3 Total 775,322 100.0 716,927 100.0 600,107 100.0 579,654 100.0 819,087 100.0

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Gross Profit Margin

The following set forth a breakdown of gross profit margin of our Predecessor Entity and our Group by revenue method for the periods presented. During the Track Record Period, the gross profit margin of service method tends to be higher than that of distribution method primarily due to differences in cost of revenue components. Specfically, cost of revenue under the distribution method include the cost of inventories sold, which accounted for the largest portion of our cost of revenues during the Track Record Period; while cost of revenue under the service method consists of the direct costs relating to rendering services, such as employee benefits expenses, advertising promotion fees and fulfilment cost.

Our Group For the Period from January 7, For the Year Our Predecessor Entity 2019 to Ended For the Year Ended December 31, December 31, December 31, 2018 2019 2020 2019 2020 %%%%%

Gross Profit Margin 33.4 41.8 48.6 46.3 50.6 Services 59.0 57.2 58.0 58.4 59.5 Distribution 19.1 20.6 34.5 21.2 35.7

Selling and Distribution Expenses

Our selling and distribution expenses primarily consist of (i) advertising promotion fees, (ii) employee benefits expenses, (iii) fulfillment expenses, (iv) platform commission, and (v) others. Different from cost of revenue, the advertising promotion fees, employee benefits expenses and fulfillment expenses recognized as selling and distribution expenses primarily relate to the expenses incurred under the distribution method, while those costs and expenses under the service method are recognized as cost of revenue. The advertising promotion fees primarily consisted of general spending in marketing and advertising activities under the distribution method in connection with the beauty products we sold. The amortisation of intangible assets primarily related to the amortization of customer relationship and distribution network that our Group obtained from the acquisition of our Predecessor Entity and Acquired Entities.

In 2018, 2019 and 2020, the selling and distribution expenses of our Predecessor Entity were RMB87.4 million, RMB65.9 million and RMB108.9 million, respectively, primarily consisting of (i) advertising promotion fees, (ii) employee benefits expenses, (iii) fulfillment expenses, and (iv) platform commissions.

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In the 2019 Period and the year ended December 31, 2020, the selling and distribution expenses of our Group were RMB86.9 million and RMB200.6 million, respectively, primarily consisting of (i) advertising promotion fees, (ii) employee benefits expenses, (iii) fulfillment expenses, and (iv) amortization of purchase price allocation.

The following table sets forth a breakdown of selling and distribution expenses of our Predecessor Entity and our Group both in absolute amount and as a percentage of our total selling and distribution expenses for the periods indicated:

Selling and Distribution Expenses Advertising promotion fee 11,778 13.5 8,037 12.2 45,754 42.0 3,288 3.8 68,349 34.1 Employee benefits expenses 17,603 20.1 24,648 37.4 20,552 18.9 23,893 27.5 31,112 15.5 Fulfillment 24,028 27.5 12,548 19.1 17,691 16.3 7,170 8.3 25,763 12.8 Platform commission 16,061 18.4 6,234 9.5 10,073 9.3 5,776 6.7 17,954 8.9 Amortisation of intangible assets – – – – – – 28,114 32.4 39,847 19.9 Others 17,952 20.5 14,390 21.8 14,785 13.5 18,610 21.3 17,592 8.8 Total 87,422 100.0 65,857 100.0 108,855 100.0 86,851 100.0 200,617 100.0

General and Administrative Expenses

In 2018, 2019 and 2020, the general and administrative expenses of our Predecessor Entity were RMB48.5 million, RMB109.8 million and RMB144.2 million, respectively, primarily consisting of employee benefits expenses.

In the 2019 Period and the year ended December 31, 2020, the administrative expenses of our Group were RMB121.6 million and RMB187.4 million, respectively, primarily consisting of employee benefits expenses and amortization of brand and technology.

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The following table sets forth a breakdown of general and administrative expenses of our Predecessor Entity and our Group both in absolute amount and as a percentage of our total general and administrative expenses for the periods indicated:

General and Administrative Expenses Employee benefits expenses 32,198 66.4 82,121 74.8 115,735 80.2 75,466 62.0 121,082 64.6 Amortisation of intangible assets – – – – – – 21,901 18.0 30,959 16.5 Consulting service fee 2,277 4.7 10,265 9.3 1,102 0.8 14,909 12.3 971 0.5 Listing expense – – – – – – – – 5,163 2.8 Others 14,034 28.9 17,457 15.9 27,336 19.0 9,366 7.7 29,200 15.6 Total 48,509 100.0 109,843 100.0 144,173 100.0 121,642 100.0 187,375 100.0

The amortisation of intangible assets related to the corporate brand, technology and goodwill that our Group obtained from the acquisition of our Predecessor Entity and Acquired Entities.

Research and Development Expenses

In 2018, 2019 and 2020, the research and development expenses of our Predecessor Entity were RMB10.2 million, RMB18.4 million and RMB28.1 million, respectively. In the 2019 Period and 2020, the research and development expenses of our Group were RMB14.1 million and RMB28.1 million, respectively.

During the Track Record Period, the research and development expenses of our Predecessor Entity and our Group primarily consisted of employee benefits expenses.

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Other Income

In 2018, 2019 and 2020, other income of our Predecessor Entity were RMB6.9 million, RMB8.3 million and RMB14.5 million, respectively, primarily consisting of government grants relating to customized tax refund and subsidies, which were generally of recurring nature during the Track Record Period.

In the 2019 Period and 2020, other income of our Group were RMB7.9 million and RMB37.1 million, respectively, primarily consisting of other income derived from warehousing and logistics services provided to certain third-parties in addition to our ordinary course of business in 2020 and government grants relating to customized tax refund and subsidies, which were generally of recurring nature during the Track Record Period.

Finance Costs

Our finance costs primarily consisted of interest expenses on interest-bearing bank loans and other borrowings, including finance costs in connection with the acquisition of our Predecessor Entity of RMB19.9 million in 2019 and RMB26.5 million in 2020. Such finance costs in connection with the acquisition of our Predecessor Entity would be RMB19.9 million in 2019 and RMB14.9 million in 2020, if taking into account the relevant tax impact.

TAXATION

We are subject to various rates of income tax under different jurisdictions. The following summarizes major factors affecting our applicable tax rates in the Cayman Islands, Hong Kong and China.

Cayman Islands

The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or after execution, brought within the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties that are applicable to any payments made to or by our Company. There are no exchange control regulations or currency restrictions in the Cayman Islands.

Payments of dividends and capital in respect of the shares will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend or capital to any holder of the Shares, nor will gains derived from the disposal of the shares be subject to Cayman Islands income or corporation tax.

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Hong Kong

On March 21, 2018, the Hong Kong Legislative Council passed The Inland Revenue (Amendment) (No. 7) Bill 2017, which introduces the two-tiered profits tax rates regime. Such bill was later signed into law on March 28, 2018 and was gazetted on the following day. Under the two-tiered profits tax rates regime, the first HK$2 million of profits of the qualifying group entity will be taxed at 8.25%, and profits above HK$2 million will be taxed at 16.5%. The profits of our subsidiaries incorporated in Hong Kong that are not qualified for the two-tiered profits tax rates regime will continue to be taxed at a flat rate of 16.5%. Accordingly, the Hong Kong profits tax of our subsidiaries incorporated in Hong Kong that are qualified is calculated at 8.25% on the first HK$2 million of the estimated assessable profits and at 16.5% on the estimated assessable profits above HK$2 million.

China

Under the PRC Enterprise Income Tax Law, or the EIT Law, the standard enterprise income tax rate for domestic enterprises and foreign invested enterprises is 25%. Most of our PRC subsidiaries are subject to the statutory income tax rate of 25%. Hangzhou Meiba Technology Co., Ltd. obtained its certificate of “High and New Technology Enterprises,” or HNTE, with a valid period of three years in 2020. It is therefore eligible to enjoy a preferential tax rate of 15% for its taxable income in fiscal years from 2020 to 2022 to the extent it has taxable income under the PRC Enterprise Income Tax Law, as long as it maintains the HNTE qualification and duly conducts relevant enterprise income tax filing procedures with the relevant tax authority.

The new EIT Law also provides that an enterprise established under the laws of a foreign country or region but whose “de facto management body” is located in the PRC be treated as a resident enterprise for PRC tax purposes and consequently be subject to the PRC income tax at the rate of 25% for its global income. The Implementing Rules of the EIT Law merely define the location of the “de facto management body” as “the place where the exercising, in substance, of the overall management and control of the production and business operation, personnel, accounting, property, etc., of a non-PRC company is located.” Based on a review of surrounding facts and circumstances, we do not believe that it is likely that its operations outside of the PRC should be considered a resident enterprise for PRC tax purposes.

The new EIT law also imposes a withholding income tax of 10% on dividends distributed by an FIE to its immediate holding company outside of China, if such immediate holding company is considered as a non-resident enterprise without any establishment or place within China or if the received dividends have no connection with the establishment or place of such immediate holding company within China, unless such immediate holding company’s jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement. According to the arrangement between Mainland China and Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of

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Fiscal Evasion in August 2006, dividends paid by an FIE in China to its immediate holding company in Hong Kong will be subject to withholding tax at a rate of no more than 5% (if the foreign investor owns directly at least 25% of the shares of the FIE).

PERIOD-TO-PERIOD COMPARISON OF RESULTS OF OPERATIONS

Our Group

We present the following results of operations of our Group for the year ended December 31, 2020 and the period from January 7, 2019 to December 31, 2019. However, the period-to-period analysis for the results of our Group is of limited utility. The Group did not have significant operations prior to April 15, 2019, and the results of our Predecessor Entity are only consolidated into the Group’s for the period after April 15, 2019. The results of our Group for the period from January 7, 2019 to December 31, 2019 are also impacted by the acquisition of the Acquired Entities, further reducing the comparability of the results of the year ended December 31, 2020 and the period from January 7, 2019 to December 31, 2019.

Our Group – Year Ended December 31, 2020

Revenue

Total revenue of our Group was RMB1,659.5 million in the year ended December 31, 2020, consisting of revenue generated from distribution method by our Group of RMB614.9 million and revenue generated from service method by our Group of RMB1,044.7 million in 2020.

Cost of revenue

The cost of revenue of our Group was RMB819.1 million in the year ended December 31, 2020, primarily consisting of cost of inventories sold of RMB393.3 million, advertising promotion fees of RMB126.0 million, employee benefits expenses of RMB116.4 million, and fulfillment expenses of RMB98.9 million.

Gross profit and gross profit margin

As a result of the foregoing, our Group recorded a gross profit of RMB840.5 million in the year ended December 31, 2020, representing a gross profit margin of 50.6%. The gross profit of our Group under the service method and the distribution method was RMB621.1 million and RMB219.4 million in 2020, representing gross profit margin of 59.5% and 35.7%, respectively.

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Selling and distribution expenses

The selling and distribution expenses of our Group was RMB200.6 million in the year ended December 31, 2020, primarily consisting of (i) advertising promotion fees of RMB68.3 million, (ii) amortization of intangible assets of RMB39.8 million, (iii) employee benefits expenses of RMB31.1 million, and (iv) fulfillment expenses of RMB25.8 million.

General and administrative expenses

The general and administrative expenses of our Group was RMB187.4 million in the year ended December 31, 2020, primarily consisting of (i) employee benefits expenses of RMB121.1 million, including share-based compensation expenses of RMB58.1 million, (ii) amortization of intangible assets of RMB31.0 million, and (iii) other administrative expenses of RMB29.2 million.

Research and development expenses

The research and development expenses of our Group was RMB28.1 million in the year ended December 31, 2020, primarily consisting of employee benefits expenses of RMB26.0 million.

Other income

Our Group had other income of RMB37.1 million in the year ended December 31, 2020, primarily consisting of other income derived from warehousing and logistics services provided to certain third-parties in addition to our ordinary course of business in 2020 of RMB21.1 million and government grants of RMB15.5 million.

Other gains – net

Our Group had other gains – net of RMB13.4 million in the year ended December 31, 2020, primarily consisting of fair value gain on debt investments at fair value through profit or loss of RMB14.9 million, partially offset by foreign exchange losses – net of RMB2.5 million.

Other expense

Our Group had other expense of RMB25.3 million in the year ended December 31, 2020 in connection with the expenses relating to the warehousing and logistics services provided to certain third-parties in addition to our ordinary course of business in 2020.

Finance income

The finance income of our Group was RMB2.1 million in the year ended December 31, 2020, representing interest income generated from term deposits and bank balances.

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Finance costs

The finance costs of our Group was RMB31.1 million in the year ended December 31, 2020, primarily consisting of interest expense on bank loans and other borrowings of RMB26.3 million.

Income tax expenses

The income tax expenses of our Group was RMB99.7 million in the year ended December 31, 2020.

Profit for the year

As a result of the foregoing, our Group generated a profit of RMB324.8 million in the year ended December 31, 2020.

Our Group – Period from January 7, 2019 to December 31, 2019

Revenue

Total revenue of our Group was RMB1,079.4 million in the 2019 Period, consisting of revenue generated from distribution method by our Group of RMB351.5 million and revenue generated from service method by our Group of RMB727.9 million in the 2019 Period.

Cost of revenue

The cost of revenue of our Group was RMB579.7 million in the 2019 Period, primarily consisting of cost of inventories sold of RMB276.4 million, fulfillment costs of RMB121.1 million, employee benefits expenses of RMB72.7 million and advertising promotion fees of RMB56.2 million.

Gross profit and gross profit margin

As a result of the foregoing, our Group recorded a gross profit of RMB499.7 million in the 2019 Period, representing a gross profit margin of 46.3%. The gross profit of our Group under the service method and the distribution method was RMB425.3 million and RMB74.4 million in the 2019 Period, representing gross profit margin of 58.4% and 21.2%, respectively.

Selling and distribution expenses

The selling and distribution expenses of our Group was RMB86.9 million in the 2019 Period, primarily consisting of (i) employee benefits expenses of RMB23.9 million, (ii) amortization of intangible assets of RMB28.1 million, (iii) fulfillment expenses of RMB7.2 million, and (iv) platform commission of RMB5.8 million.

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General and administrative expenses

The general and administrative expenses of our Group was RMB121.6 million in the 2019 Period, consisting of (i) employee benefits expenses of RMB75.5 million, including share- based compensation expenses of RMB23.0 million, (ii) amortization of intangible assets of RMB21.9 million, and (iii) consulting service fee of RMB14.9 million primarily due to the incurrence of legal, audit and financial consulting services in connection with the acquisitions of our Predecessor Entity and Acquired Entities and proposed financing activities.

Research and development expenses

The research and development expenses of our Group was RMB14.1 million in the 2019 Period, primarily consisting of employee benefits expenses of RMB13.2 million.

Other income

Our Group had other income of RMB7.9 million in the 2019 Period primarily consisting of government grants of RMB7.7 million.

Other gains – net

Our Group had other gains – net of RMB5.8 million in the 2019 Period, primarily consisting of fair value gain on debt investments at fair value through profit or loss of RMB5.5 million.

Finance income

The finance income of our Group was RMB0.4 million in the 2019 Period, representing interest income generated from term deposits and bank balances.

Finance costs

The finance costs of our Group was RMB22.0 million in the 2019 Period, primarily consisting of interest expense on bank loans and other borrowings.

Income tax expenses

The income tax expenses of our Group was RMB61.8 million in the 2019 Period.

Profit for the year

As a result of the foregoing, our Group generated a profit of RMB203.9 million in the 2019 Period.

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Our Predecessor Entity

We present the following year-over-year comparison of results of operations of our Predecessor Entity for the year ended December 31, 2018, 2019 and 2020.

Our Predecessor Entity – Year Ended December 31, 2020 Compared to Year Ended December 31, 2019

Revenue

Total revenue of our Predecessor Entity decreased by 5.2% from RMB1,232.2 million in 2019 to RMB1,168.6 million in 2020. The decrease in the total revenue of our Predecessor Entity was primarily due to changes in the engagement of the brand partners with our Predecessor Entity. Revenue generated from distribution method by our Predecessor Entity decreased by 9.9% from RMB517.5 million in 2019 to RMB466.2 million in 2020, primarily due to the termination of cooperation with two beauty brands under Supplier A beauty group for distribution to JD.com and Vipshop in April 2020, attributable to such beauty group’s adjustments in its e-commerce operations to start to mainly rely on its in-house e-commerce operation. The revenue contributed by those two beauty brands in 2020 and 2019 amounted to RMB70.2 million and RMB351.2 million, representing 6.0% of the total revenue of our Predecessor Entity in 2020 and 28.5% of the total revenue of our Predecessor Entity in 2019, respectively. Those two beauty brands under Supplier A beauty group previously terminated cooperation with our Predecessor Entity for distribution to Tmall in April 2019 for the same reason. The impact of such termination was partially offset by the growth of the brand incubation business line of our Predecessor Entity. Revenue generated from service method by our Predecessor Entity also decreased by 1.7% from RMB714.7 million in 2019 to RMB702.4 million in 2020, primarily due to an adjustment in the service offerings that we provided to certain beauty group, partially offset by our organic business growth for other beauty brands.

The revenue of our Predecessor Entity was also impacted by the business reorganization within the Group, in accordance with which a large portion of brand incubation business line previously operated under our Predecessor Entity was migrated out from our Predecessor Entity to other entities within our Group. Such business reorganization within the Group also adversely affected the growth trend of our Predecessor Entity’s revenue.

Cost of revenue

The cost of revenue of our Predecessor Entity decreased by 16.3% from RMB716.9 million in 2019 to RMB600.1 million in 2020. The decrease was primarily due to decreases in cost of inventories sold and fulfillment cost. The decrease in cost of inventories sold from RMB408.9 million in 2019 to RMB302.1 million in 2020 was generally in line with the decrease in revenue generated from the distribution method. The fulfillment cost related to the service method decreased from RMB136.3 million in 2019 to RMB91.2 million in 2020 primarily due to a reduction in the fulfilment services to Customer A as a result of its change of internal policy to engage professional logistic providers for fulfilment services.

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Gross profit and gross profit margin

As a result of the foregoing, our Predecessor Entity recorded a gross profit of RMB515.3 million in 2019, representing a gross profit margin of 41.8%, and a gross profit of RMB568.5 million in 2020, representing a gross profit margin of 48.6%. The increase in the gross profit margin was primarily due to the increase in revenue generated from service method as a percentage of the total revenue and the growth in the brand incubation business line, both of which tends to have higher gross profit margin.

The gross profit of our Predecessor Entity under the service method was RMB407.5 million in 2020, as compared to RMB408.9 million in 2019, representing a gross profit margin for service method of 58.0% in 2020 and 57.2% in 2019.

The gross profit of our Predecessor Entity under the distribution method was RMB160.9 million in 2020, as compared to RMB106.4 million in 2019, representing a gross profit margin for distribution method of 34.5% in 2020 and 20.6% in 2019. The increase in gross profit margin for the distribution method was primarily due to the rapid growth of the brand incubation business line, which tends to have relatively higher gross profit margin than e-commerce enablement business, primarily due to our deep involvement and collaboration with brand partners under such business line benefiting from the exclusive distribution rights and operational discretion that lead to enhanced monetization.

Selling and distribution expenses

The selling and distribution expenses of our Predecessor Entity increased by 65.3% from RMB65.9 million in 2019 to RMB108.9 million in 2020. The increase was primarily due to increases in advertising promotion fees and fulfillment expenses, primarily attributable to the rapid expansion of the scale of brand incubation business. The advertising promotion fees increased from RMB8.0 million in 2019 to RMB45.8 million in 2020 primarily due to increased advertising and marketing activities for brand incubation business. The fulfillment expenses increased from RMB12.5 million in 2019 to RMB17.7 million in 2020 primarily due to the rapid expansion of the brand incubation business, partially offset by the decrease in fulfilled beauty products as a result of the termination of cooperation with two beauty brands under Supplier A beauty group for distribution to JD.com and Vipshop in April 2020, attributable to such beauty group’s adjustments in its e-commerce operations to start to mainly rely on its in-house e-commerce operation.

General and administrative expenses

The general and administrative expenses of our Predecessor Entity increased by 31.3% from RMB109.8 million in 2019 to RMB144.2 million in 2020. The increase was primarily due to an increase in employee benefits expenses from RMB82.1 million in 2019 to RMB115.7 million in 2020, among which share-based compensation expenses increased from RMB21.0 million in 2019 to RMB57.2 million in 2020.

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Research and development expenses

The research and development expenses of our Predecessor Entity increased by 52.7% from RMB18.4 million in 2019 to RMB28.1 million in 2020. The increase was primarily due to increases in employee benefits expenses from RMB17.3 million in 2019 to RMB26.0 million in 2020, among which share-based compensation expenses increased from RMB3.0 million in 2019 to RMB8.3 million in 2020.

Other income

Our Predecessor Entity had other income of RMB14.5 million in 2020, as compared to RMB8.3 million in 2019. Among which, the amount of government grants increased from RMB7.1 million in 2019 to RMB12.5 million in 2020.

Other gains – net

Our Predecessor Entity had other gains – net of RMB3.5 million in 2020, as compared to other gains – net of RMB4.3 million in 2019. The decrease in other gains – net was primarily due to an increase in foreign exchange losses, net from RMB0.6 million in 2019 to RMB2.9 million in 2020.

Finance income

The finance income of our Predecessor Entity increased from RMB0.2 million in 2019 to RMB1.8 million in 2020, primarily due to an increase in interest income from term deposits and bank balances.

Finance costs

The finance costs of our Predecessor Entity increased from RMB0.9 million in 2019 to RMB14.6 million in 2020, primarily due to an increase in interest expenses on bank loans and other borrowings.

Income tax expenses

The income tax expenses of our Predecessor Entity was RMB63.8 million in 2019 and RMB63.0 million in 2020. The higher effective tax rate for 2020, as compared to that for 2019, was primarily due to an increase in non-deductible share-based compensation expenses.

Profit for the year

As a result of the foregoing, our Predecessor Entity generated a profit of RMB266.9 million in 2019 and a profit of RMB232.0 million in 2020.

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Our Predecessor Entity – Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

Revenue

Total revenue of our Predecessor Entity increased by 5.8% from RMB1,164.5 million in 2018 to RMB1,232.2 million in 2019. The increase in the total revenue of our Predecessor Entity was primarily due to an increase in revenue generated under service method, partially offset by a decrease in revenue generated under distribution method. Revenue generated under service method by our Predecessor Entity increased by 70.5% from RMB419.2 million in 2018 to RMB714.7 million in 2019, primarily due to an increase in the GMV facilitated by our Predecessor Entity for its brand partners and expansion in its brand partner base. The increase in revenue generated under service method was partially offset by the decrease in revenue generated under distribution method. Revenue generated under the distribution method by our Predecessor Entity decreased by 30.6% from RMB745.4 million in 2018 to RMB517.5 million in 2019, primarily due to the termination of cooperation with two beauty brands under Supplier A beauty group for distribution to Tmall in April 2019 attributable to such beauty group’s adjustments in its e-commerce operations to start to mainly rely on its in-house e-commerce operation. The revenue contributed by those two beauty brands in 2019 and 2018 amounted to RMB351.2 million and RMB555.9 million, representing 28.5% of the total revenue of our Predecessor Entity in 2019 and 47.7% of the total revenue of our Predecessor Entity in 2018, respectively.

Cost of revenue

The cost of revenue of our Predecessor Entity decreased by 7.5% from RMB775.3 million in 2018 to RMB716.9 million in 2019. The decrease was primarily due to the decrease in cost of inventories sold under the distribution method, partially offset by increases in fulfillment costs, employee benefits expenses and advertising promotion fees. The cost of inventories sold decreased from RMB598.6 million in 2018 to RMB408.9 million in 2019, in line with the decrease in revenue generated from distribution method. The increases in (i) fulfillment costs from RMB80.2 million in 2018 to RMB136.3 million in 2019, (ii) employee benefits expenses from RMB43.4 million in 2018 to RMB70.8 million in 2019, and (iii) advertising promotion fees from RMB19.2 million in 2018 to RMB44.2 million in 2019 were all primarily due to the business growth under the service method.

Gross profit and gross profit margin

As a result of the foregoing, our Predecessor Entity recorded a gross profit of RMB389.2 million in 2018, representing a gross profit margin of 33.4%, and a gross profit of RMB515.3 million in 2019, representing a gross profit margin of 41.8%. The increase in the gross profit margin was primarily due to the increase in service revenue as a percentage of the total revenue, as the service method tends to have higher gross profit margin.

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The gross profit of our Predecessor Entity under the service method was RMB408.9 million in 2019, as compared to RMB247.2 million in 2018, representing a gross profit margin for service method of 57.2% in 2019 and 59.0% in 2018.

The gross profit of our Predecessor Entity under the distribution method was RMB106.4 million in 2019, as compared to RMB142.1 million in 2018, representing a gross profit margin for distribution method of 20.6% in 2019 and 19.1% in 2018.

Selling and distribution expenses

The selling and distribution expenses of our Predecessor Entity decreased by 24.7% from RMB87.4 million in 2018 to RMB65.9 million in 2019. The decrease was primarily attributable to decreases in (i) fulfillment expenses, (ii) platform commission, and (iii) advertising promotion fees, partially offset by an increase in employee benefits expenses. The decreases in (i) fulfillment expenses from RMB24.0 million in 2018 to RMB12.5 million in 2019, (ii) platform commission from RMB16.1 million in 2018 to RMB6.2 million in 2019, and (iii) advertising promotion fees from RMB11.8 million in 2018 to RMB8.0 million in 2019, were all primarily due to the termination of cooperation with two beauty brands under Supplier A beauty group for distribution to Tmall in April 2019 attributable to such beauty group’s adjustments in its e-commerce operations to start to mainly rely on its in-house e-commerce operation. Such decreases were partially offset by an increase in employee benefits expenses from RMB17.6 million in 2018 to RMB24.6 million in 2019.

General and administrative expenses

The general and administrative expenses of our Predecessor Entity increased by 126.4% from RMB48.5 million in 2018 to RMB109.8 million in 2019. The increase was primarily due to (i) an increase in employee benefits expenses, and (ii) an increase in consulting service fee. The employee benefits expenses increased from RMB32.2 million in 2018 to RMB82.1 million in 2019, including an increase in share-based compensation expenses from nil in 2018 to RMB21.0 million in 2019. The consulting service fee increased from RMB2.3 million in 2018 to RMB10.3 million in 2019, primarily due to the incurrence of legal and financial consulting services recognized as transaction costs in connection with the acquisition by the Group of our Predecessor Entity in April 2019.

Research and development expenses

The research and development expenses of our Predecessor Entity increased by 80.4% from RMB10.2 million in 2018 to RMB18.4 million in 2019. The increase was primarily attributable to an increase in employee benefits expenses. The employee benefits expenses increased from RMB9.3 million in 2018 to RMB17.3 million in 2019, including an increase in the share-based compensation expenses from nil in 2018 to RMB3.0 million in 2019.

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Other income

Our Predecessor Entity had other income of RMB8.3 million in 2019, as compared to RMB6.9 million in 2018. The increase was primarily due to an increase in government grants from RMB5.3 million in 2018 to RMB7.1 million in 2019.

Other gains – net

Our Predecessor Entity had other gains – net of RMB4.3 million in 2019, as compared to RMB3.6 million in 2018. The increase in other gains – net was primarily due to an increase in fair value gains on debt investments at fair value through profit or loss of RMB3.4 million in 2018 to RMB5.2 million in 2019.

Finance income

The finance income of our Predecessor Entity, representing the interest income from term deposits and bank balances, was RMB0.3 million in 2018 and RMB0.2 million in 2019.

Finance costs

The finance costs of our Predecessor Entity was RMB1.1 million in 2018 and RMB0.9 million in 2019. The change was primarily due to a decrease in interest expense on bank loans and other borrowings from RMB1.0 million in 2018 to RMB0.3 million in 2019, partially offset by an increase in interest expense on lease liabilities from RMB0.2 million in 2018 to RMB0.7 million in 2019.

Income tax expenses

The income tax expenses of our Predecessor Entity was RMB44.7 million in 2018 and RMB63.8 million in 2019.

Profit for the year

As a result of the foregoing, our Predecessor Entity generated a profit of RMB207.1 million in 2018 and RMB266.9 million in 2019.

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DISCUSSION OF SELECTED ITEMS FROM THE CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Current Assets/Liabilities

The following table sets forth our current assets and current liabilities as of the dates indicated.

Our Predecessor Entity Our Group Our Group As of As of December 31, As of December 31, April 30, 2018 2019 2020 2021 (unaudited) (RMB in thousands)

Current assets: Inventories 93,332 101,857 130,942 148,752 Contract assets 181,596 428,830 314,644 191,503 Trade receivables 110,965 193,993 209,923 154,414 Prepayments, other receivables and other assets 265,873 106,362 272,490 315,807 Financial assets at fair value through profit or loss 55,000 216,060 433,708 374,710 Restricted cash – – 92,000 92,000 Cash and cash equivalents 41,022 140,993 131,141 468,294

Total current assets 747,788 1,188,095 1,584,848 1,745,480

Current liabilities: Contract liabilities 1,298 121 252 1,924 Borrowing – current 30,000 68,704 410,249 210,363 Trade payables 16,623 9,965 27,226 20,332 Accruals and other payables 277,195 187,870 208,466 177,038 Lease liabilities, current 2,031 6,189 19,956 24,275 Current income tax payables 49,174 91,730 108,385 93,247

Total current liabilities 376,321 364,579 774,534 527,179

Net current assets 371,467 823,516 810,314 1,218,301

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Our Predecessor Entity had net current asset position as of December 31, 2018 and our Group had net current asset positions as of December 31, 2019 and 2020 and April 30, 2021. The net current assets position as of each of these dates was primarily attributable to our large balance of inventories, contract assets, trade receivables, financial assets at fair value through profit or loss, restricted cash and cash and cash equivalents, partially offset by borrowing, accruals and other payables, and current income tax payables.

Our Predecessor Entity recorded net current assets of RMB371.5 million as of December 31, 2018 and our Group recorded net current assets of RMB823.5 million as of December 31, 2019 and RMB810.3 million as of December 31, 2020.

Inventories

Our inventories include beauty products available for sale and packing materials and others, while packing materials and others make up an insignificant portion of our inventories. The following table sets forth a summary of balance of inventories as of the dates indicated:

Our Predecessor Entity Our Group As of December 31, As of December 31, 2018 2019 2020 (RMB in thousands)

Inventories: Products 93,284 103,040 131,012 Packing materials and others 3,459 1,569 2,647 Less: inventory allowance (3,411) (2,752) (2,717)

Total 93,332 101,857 130,942

Our Predecessor Entity had inventories of RMB93.3 million as of December 31, 2018 and our Group had inventories of RMB101.9 million as of December 31, 2019 and RMB130.9 million as of December 31, 2020. The increases in inventories as of the dates presented were primarily due to the increase in scale of our business under the distribution method.

The inventory turnover days of our Group in the 2019 Period, being the average of the beginning inventory balance as of April 15, 2019, the date the Group obtained control over our Predecessor Entity, and the ending inventory balance as of December 31, 2019 divided by cost of inventories sold for the 2019 Period and multiplied by the number of days during the period from April 15, 2019 to December 31, 2019, was 91 days. The inventory turnover days of our Group in 2020, being the average of the beginning and ending inventory balance in 2020 divided by cost of inventories sold in 2020 by the number of days in 2020, was 109 days. Comparison of inventory turnover days for the 2019 Period with that for the year ended

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December 31, 2020 may not be meaningful because our Group had actual business operations only from April 15, 2019, the date of the acquisition of our Predecessor Entity, to December 31, 2019, and was also impacted by the acquisition of the Acquired Entities, further reducing the comparability of such results.

As of April 30, 2021, RMB86.3 million, or 65.9% of our inventory balance as of December 31, 2020 had been sold or utilized.

Contract assets and Trade Receivables

Contract assets

Our contract assets primarily relate to our rights to consideration for goods and services that we have transferred or provided to to a customer but not yet billed at the reporting date. Contract assets represent our right to consideration in exchange for E-commerce services that we have transferred to brand partners, which is subject to further negotiation and reconciliation with the brand partners. The contract assets are transferred to trade receivables when the rights become unconditional. The following table sets forth a summary of balance of contract assets as of the dates indicated:

Our Predecessor Entity Our Group As of December 31, As of December 31, 2018 2019 2020 (RMB in thousands)

Contract assets Current contract assets 182,708 431,793 314,859 Less: loss allowance (1,112) (2,963) (215)

Total 181,596 428,830 314,644

Our Predecessor Entity had contract assets of RMB181.6 million as of December 31, 2018 and our Group had contract assets of RMB428.8 million as of December 31, 2019 and RMB314.6 million as of December 31, 2020. The increase in contract assets from RMB181.6 million as of December 31, 2018 to RMB428.8 million as of December 31, 2019 was primarily due to our acquisition of the Acquired Entities and delayed administrative process of new brand partners in the fourth quarter of 2019.

As of April 30, 2021, RMB298.9 million, or 94.9% of our contract assets as of December 31, 2020 had been billed.

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Trade Receivables

Our trade receivables represent amounts due from customers for goods sold or services performed in the ordinary course of business. If collection of such trade receivables is expected to occur within one year, they are classified as current assets. The following table sets forth trade receivables as of the dates indicated:

Our Predecessor Entity Our Group As of December 31, As of December 31, 2018 2019 2020 (RMB in thousands)

Trade receivables Amount due from third parties 111,047 193,891 210,065 Amount due from related parties(1) – 324 – Less: loss allowance (82) (222) (142)

Total 110,965 193,993 209,923

Note:

(1) Representing the trade receivables due from Marco Polo, which was later diminished due to the consolidation of Marco Polo by our Group.

Our Predecessor Entity had trade receivables of RMB111.0 million as of December 31, 2018 and our Group had trade receivables of RMB194.0 million as of December 31, 2019 and RMB210.0 million as of December 31, 2020. The increases in trade receivables as of December 31, 2018, 2019 and 2020 were primarily due to the increase in trade receivables from brand partners driven by our business growth.

The trade receivables turnover days of our Group in the 2019 Period, being the average of the beginning trade receivables balance as of April 15, 2019, the date the Group obtained control over our Predecessor Entity, and the ending trade receivables balance as of December 31, 2019 divided by total revenue for the 2019 Period and multiplied by the number of days during the period from April 15, 2019 to December 31, 2019, was 31 days. The trade receivables turnover days of our Group in 2020, being the average of the beginning and ending trade receivables balance in 2020 divided by total revenue in 2020 by the number of days in 2020, was 44 days. Comparison of trade receivables turnover days for the 2019 Period with that for the year ended December 31, 2020 may not be meaningful because our Group had actual business operations only from April 15, 2019, the date of the acquisition of our Predecessor Entity, to December 31, 2019, and was also impacted by the acquisition of the Acquired Entities, further reducing the comparability of such results.

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We generally allow a credit period of 90 days. Trade receivables are generally settled in accordance with the terms of the respective contracts. The following table sets forth aging analysis of trade receivables as of the dates indicated:

Our Predecessor Entity Our Group As of December 31, As of December 31, 2018 2019 2020 (RMB in thousands)

Trade receivables 0-180 days 111,047 194,215 209,821 180-360 days – – 244 Above 360 days – – –

Less: loss allowance (82) (222) (142) Total 110,965 193,993 209,923

The trade receivables and contract assets turnover days of our Group in the 2019 Period, being the average of the beginning trade receivables and contract assets balance as of April 15, 2019, the date the Group obtained control over our Predecessor Entity, and the ending trade receivables and contract assets balance as of December 31, 2019 divided by total revenue for the 2019 Period and multiplied by the number of days during the period from April 15, 2019 to December 31, 2019, was 110 days. The trade receivables and contract assets turnover days of our Group in 2020, being the average of the beginning and ending trade receivables and contract assets balance in 2020 divided by total revenue in 2020 by the number of days in 2020, was 125 days. The changes in the trade receivables and contract assets turnover days were primarily due to the extended reconciliation time needed as a result of the increased amount of contract assets and trade receivables. Comparison of trade receivables and contract assets turnover days for the 2019 Period with that for the year ended December 31, 2020 may not be meaningful because our Group had actual business operations only from April 15, 2019, the date of the acquisition of our Predecessor Entity, to December 31, 2019, and was also impacted by the acquisition of the Acquired Entities, further reducing the comparability of such results.

As of April 30, 2021, RMB191.8 million, or 91.3% of our trade receivables as of December 31, 2020 had been settled.

Prepayments, other receivables and other assets

Our current prepayments, other receivables and other assets primarily consist of prepayment, amount paid on behalf of brand partners, and loans to related parties.

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The following table sets forth our current prepayments, other receivables and other assets as of the dates indicated:

Our Predecessor Entity Our Group As of December 31, As of December 31, 2018 2019 2020 (RMB in thousands)

Current prepayments, other receivables and other assets Amount due from related parties(1) 1,016 32 1,403 Paid on behalf of brand partners(2) 47,955 14,711 128,437 Prepayment 81,296 57,222 79,221 Loans to related parties 112,000 – – Value-added tax recoverable 17,677 23,437 26,116 Deposits 3,701 6,542 18,015 Warehousing and logistics services receivable – – 13,721 Prepaid customs duties and sales tax – 1,815 3,110 Employee advances 1,086 2,530 1,842 Prepaid income taxes 725 – – Prepaid listing expenses – – 1,291 Others 885 1,481 2,563 Less: loss allowance (108) (94) (321) Less: non-current deposits and employee advance (360) (1,314) (2,908)

Total 265,873 106,362 272,490

Notes:

(1) Representing the other receivables from Nisi Culture Creative Shanghai Co., Ltd.

(2) Representing payments that we incurred on behalf of certain brand partners in our ordinary course of business, primarily consisting of advertising and marketing expenses paid to e-commerce platforms.

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Our Predecessor Entity had current prepayments, other receivables and other assets of RMB265.9 million as of December 31, 2018. Our Group had current prepayments, other receivables and other assets of RMB106.4 million as of December 31, 2019 and RMB272.5 million as of December 31, 2020. The current prepayments, other receivables and other assets decreased from RMB265.9 million as of December 31, 2018 to RMB106.4 million as of December 31, 2019 primarily due to a decrease in balance of loans to related parties as a result of the repayment of the underlying loans, prepayment and a decrease in balance of amount paid on behalf of brand partners. The current prepayments, other receivables and other assets increased from RMB106.4 million as of December 31, 2019 to RMB272.5 million as of December 31, 2020 primarily due to an increase in the amount paid on behalf of brand partners primarily consisting of advertising and marketing expenses paid to e-commerce platforms, which was in our ordinary course of business. The increase in the amount paid on behalf of brand partners from RMB14.7 million as of December 31, 2019 to RMB128.4 million as of December 31, 2020 was primarily attributable to the balance amount for the payment made by us on behalf of a French luxury fashion house of RMB100.3 million as of December 31, 2020. The incurrence of the payment on behalf of such brand partner was primarily due to (i) change in advertising and marketing expenses payment arrangement between such brand partner and us as such brand partner previously made such payment to e-commerce platforms on its own, and (ii) increased advertising and marketing efforts, resulting in the increase in the underlying expenses. Generally speaking, the fluctuation of the balance of amount paid on behalf of brand partners is primarily subject to factors such as change in advertising and marketing expenses payment arrangement, our business expansion, timing of payment settlement and credit period granted to those brand partners. We have been and will continue to deepen our cooperation with existing brand partners and to enlarge our brand partner base in order to expand our business. Similar to the abovementioned brand partner, other brand partners may also change their original arrangement with respect to advertising and marketing expenses payment and engage us to make such payment on their behalf so that we can quickly respond and adapt to the rapidly evolving e-commerce landscape and dynamics to provide high-quality services to our brand partners and deliver satisfactory results. Also, as the demands for advertising and marketing efforts increases in line with such business expansion, we may incur an increasing amount for advertising and marketing fees paid by us on behalf of our brand partners to e-commerce platforms. Such payments are generally made at various times during a given year, depending on the demands of our brand partners and the availability of advertising space or resources, and we normally grant a credit period of 30-180 days to those brand partners for settlement of those payments made by us on their behalf, which attributes to a variety of settlement cycle among our brand partners. Those factors would collectively contribute to material fluctuations in the balance amounts for payments made on behalf of our brand partners. As of April 30, 2021, RMB120.2 million, or 93.6% of our balance of amount paid on behalf of brand partners as of December 31, 2020 had been settled.

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Financial Assets at Fair Value through Profit or Loss

Our current financial assets at fair value through profit or loss primarily consist of the short-term wealth investments products we purchased to improve returns on our excess liquidity. The wealth investments products we purchased were issued by reputable commercial banks without guaranteed return. The expected rates of return for such wealth management products range from 3.00% to 3.45% per annum for the year ended December 31, 2018, 3.00% to 3.86% for the 2019 Period and 2.66% to 3.52% per annum for the year ended December 31, 2020. We manage and evaluate the performance of investments in accordance with our risk management and investment strategy.

In relation to the valuation of financial assets at fair value through profit or loss categorized within level 3 of fair value measurement (“level 3 financial assets”), our Directors adopted the following procedures: (i) selected qualified persons with adequate knowledge and conducted valuation on the investments in privately held companies and financial instruments without readily determinable fair value; (ii) engaged independent competent third-party valuer (the “Valuer”) to appraise the fair value of certain investments that are significant; (iii) reviewed and agreed on the valuation approaches adopted and key assumptions used, based on the knowledge and understanding of the industrial data statistics and development, and the commercial strategies of the investee business; and (iv) approved the results if the procedures were deemed satisfactory. Based on the above procedures, our Directors are of the view that the valuation analysis performed by us is fair and reasonable, and the fair value measurements of level 3 financial assets in our financial statements are properly prepared.

Details of the fair value measurement of financial assets, particularly the fair value hierarchy, the valuation techniques and key inputs, including significant unobservable inputs, the relationship of unobservable inputs to fair value are disclosed in Note 5 of the Accountant’s Report in Appendix IA and IB which were issued by the Reporting Accountant in accordance with Hong Kong Standard on Investment Circular Reporting Engagement 200 “Accountants’ Report on Historical Financial Information in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants. The Reporting Accountant’s opinions on the Historical Financial Information of the Group and our Predecessor Entity for the relevant periods as a whole are set out on page IA-2 of Appendix IA and IB-3 of Appendix IB to this document.

In relation to the valuation of level 3 financial assets of the Group, the Joint Sponsors have: (i) obtained information on the credentials of the Valuer and the background, qualifications and work experience of its core team members; (ii) obtained and reviewed the valuation reports issued by the Valuer; (iii) discussed with the Company and the Valuer on the key assumptions and methodologies adopted for the valuation of the level 3 financial assets; and (iv) discussed with the Reporting Accountants to understand the work they have performed in relation to the valuation of the Level 3 Financial Assets for the purpose of reporting on the Historical Financial Information of the Group as a whole. Based on the foregoing, the Joint Sponsors believe that appropriate steps have been taken by the Company in carrying out the fair value valuation of the level 3 financial assets and that the Company has not unduly relied on the valuation reports prepared by the Valuer.

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In assessing a proposal to invest in wealth investments products, a number of criteria must be met, including, but not limited to: (i) investment in high risk products, representing products that may likely to be subject to material fluctuation and cause principal loss, are prohibited; (ii) the primary objectives of investment activities are safety, liquidity and reasonable yield, benchmarking a return rate higher than the checking account interest rate; (iii) the proposed investment must not interfere with our business operations or capital expenditures; and (iv) the wealth investments products should be issued by a reputable bank.

Our Predecessor Entity Our Group As of December 31, As of December 31, 2018 2019 2020 (RMB in thousands)

Current financial assets at fair value through profit or loss: Short-term bank wealth investments 55,000 216,060 432,710 Short-term derivatives(1) – – 998

Note:

(1) Representing a call option that entitles us, but does not oblige us, to subscribe and purchase additional ordinary shares of Airr Labs, in which we previously made investment for a maximum aggregate consideration of US$1.5 million within the twelve-month period commencing from our initial investments. See “History, Reorganization, and Corporate Structure – Other acquisitions and investments of the Group – Investment in Airr Labs.“

Our Predecessor Entity had current financial assets at fair value through profit or loss of RMB55.0 million as of December 31, 2018 and our Group had current financial assets at fair value through profit or loss of RMB216.1 million as of December 31, 2019 and RMB433.7 million as of December 31, 2020. The increase in the current financial assets at fair value through profit or loss was primarily due to purchase of short- term wealth management products.

Cash, Cash Equivalents and Restricted Cash

Our cash and cash equivalents represents cash on hand, deposits held at call with financial institutions. Our Predecessor Entity had cash and cash equivalents of RMB41.0 million as of December 31, 2018. Our Group had cash and cash equivalents of RMB141.0 million as of December 31, 2019 and RMB131.1 million as of December 31, 2020.

Our Group had restricted cash of RMB92.0 million as of December 31, 2020, representing restricted deposits of RMB30.0 million held by a bank for a letter of guarantee and restricted deposits of RMB62.0 million pledged to secure a loan facility of EUR1.4 million from China CITIC Bank Co., Ltd..

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Borrowings

Our current borrowings primarily consist of guaranteed and secured bank loans. Our Predecessor Entity recorded borrowings of RMB30.0 million as of December 31, 2018, representing guaranteed bank loans. Our Group recorded current borrowings of RMB68.7 million as of December 31, 2019, consisting of unsecured bank loan of RMB20.0 million and guaranteed and secured bank loans of RMB48.7 million. Our Group recorded current borrowings of RMB410.2 million as of December 31, 2020, representing guaranteed and secured bank loans. For more information, see “– Indebtedness – Borrowing.”

Trade Payables

Trade payables represents liabilities for good and services provided to us prior to the end of the fiscal year that are unpaid. The following table sets forth the trade payables as of the dates indicated:

Our Predecessor Entity Our Group As of December 31, As of December 31, 2018 2019 2020 (RMB in thousands)

Trade payables Trade payables due to third parties 16,623 9,936 13,853 Trade payables due to related parties – 29 13,373

Total 16,623 9,965 27,226

Our Predecessor Entity had trade payables of RMB16.6 million as of December 31, 2018 and our Group had trade payables of RMB10.0 million as of December 31, 2019 and RMB27.2 million as of December 31, 2020. The decrease in the trade payables from RMB16.6 million as of December 31, 2018 to RMB10.0 million as of December 31, 2019 was primarily due to the decrease in purchase of beauty products as a result of the adustment in e-commerce operation by certain beauty group. The significant increase in trade payables from RMB10.0 million as of December 31, 2019 to RMB27.2 million as of December 31, 2020 was due to (i) an increase in trade payables due to related parties in connection with certain marketing services provided to us, and (ii) an increase in trade payables due to third parties, primarily attributable to longer and more favorable payment terms with new brand partners under distribution method.

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The following table sets forth the aging analysis of our trade payables as of the dates indicated:

Our Predecessor Entity Our Group As of December 31, As of December 31, 2018 2019 2020 (RMB in thousands)

Trade payables Up to six months 16,620 9,126 18,381 Over six months 3 839 8,845

Total 16,623 9,965 27,226

The trade payable turnover days of our Group in the 2019 Period, being the average of the beginning trade payables balance as of April 15, 2019, the date of our Group obtained control over our Predecessor Entity, and the ending trade payables balance as of December 31, 2019 divided by cost of inventories sold for the 2019 Period and multiplied by the number of days during the period from April 15, 2019 to December 31, 2019, was 21 days. The trade payable turnover days of our Group in 2020, being the average of the beginning and ending trade payables balance in 2020 divided by cost of inventories sold in 2020 by the number of days in 2020, was 17 days. Comparison of trade payable turnover days for the 2019 Period with that for the year ended December 31, 2020 may not be meaningful because our Group had actual business operations only from April 15, 2019, the date of the acquisition of our Predecessor Entity, to December 31, 2019, and was also impacted by the acquisition of the Acquired Entities, further reducing the comparability of such results.

As of April 30, 2021, RMB17.0 million, or 62.4% of our trade payables as of December 31, 2020 had been settled.

During the Track Record Period, we did not have any material default on our trade payable.

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Accruals and other payables

The following table sets forth our other payables as of the dates indicated.

Our Predecessor Entity Our Group As of December 31, As of December 31, 2018 2019 2020 (RMB in thousands)

Accruals and other payables Subscription price received – 37,488 35,062 Accrued employee benefits 28,026 58,214 59,053 Other tax payables 20,406 44,110 51,868 Amount due to related parties 248 – 4,354 Accrued logistics expenses 13,926 20,731 19,200 Accrued professional fee 1,402 9,515 7,604 Accrued administrative expenses 320 2,039 8,777 Accrued marketing expenses 4,253 3,497 8,695 Packing materials payables – 3,654 3,255 Interest payables 42 840 644 Dividends payable 200,000 – – Others 8,572 7,782 9,954

Total 277,195 187,870 208,466

Our Predecessor Entity had accruals and other payables of RMB277.2 million as of December 31, 2018. Our Group had accruals and other payables of RMB187.9 million as of December 31, 2019 and RMB208.5 million as of December 31, 2020.

The decrease in accruals and other payables from RMB277.2 million as of December 31, 2018 to RMB187.9 million as of December 31, 2019 was primarily due to a decrease in dividend payable, partially offset by increases in (i) subscription price received, (ii) accrued employee benefits, and (iii) other tax payables.

The increase in accruals and other payables from RMB187.9 million as of December 31, 2019 to RMB208.5 million as of December 31, 2020 was primarily due to increases in (i) other tax payables, (ii) accrued administrative expenses, and (iii) accrued marketing expenses, partially offset by decreases in subscription price received and accrued professional fee.

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Non-Current Assets/Liabilities

The following table sets forth our non-current assets and non-current liabilities as of the dates indicated.

Our Predecessor Entity Our Group As of December 31, As of December 31, 2018 2019 2020 (RMB in thousands)

Non-current assets: Property, plant and equipment 9,369 10,891 13,524 Right-of-use assets 3,125 26,335 48,916 Intangible assets 16,707 1,049,761 979,026 Financial assets at fair value through profit or loss – – 13,145 Investments accounted for using the equity method 134 111 6,562 Deferred tax assets 2,690 3,952 8,018 Other receivables 360 1,314 2,908

Total non-current assets 32,385 1,092,364 1,072,099

Non-current liabilities: Borrowings – 442,211 – Lease liabilities 55 18,662 26,256 Deferred tax liabilities – 136,079 118,872 Total non-current liabilities 55 596,952 145,128

Intangible assets

Our Predecessor Entity had intangible assets of RMB16.7 million as of December 31, 2018. Our Group had intangible assets of RMB1,049.8 million as of December 31, 2019 and RMB979.0 million as of December 31, 2020. The increase in intangible assets from RMB16.7 million as of December 31, 2018 to RMB1,049.8 million as of December 31, 2019 was primarily due to the goodwill as a result of the acquisition of our Predecessor Entity and Acquired Entities through, as well as the customer relationship, distribution network, corporate brand and technology that we obtained. The decrease in intangible assets from RMB1,049.8 million as of December 31, 2019 to RMB979.0 million as of December 31, 2020 was primarily due to amortization of those intangible assets.

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Our Group’s intangible assets mainly including brand, distribution network, customer relationship, and technology which were all derived from the acquisition of our Predecessor Entity, Youyue and Niwang by our Group, while our Predecessor Entity’s intangible assets mainly include software. Based on the iResearch Report, our Group’s brand is notable in the industry and market, being the largest beauty brand e-commerce enablement service provider and a leading third-party beauty brand incubation platform in 2020 in China. Our Group targets to maintain leadership in the beauty brand e-commerce enablement service market, and enlarge its business and market share by expanding the brand partner portfolio with high-growth potential names, with the current customers remaining stable under both service and distribution methods. The management uses its best estimate on the future economic benefits which will be received by our Group and the beneficial period as the basis of the estimated useful life of brand, customer relationship, and distribution network. As for technology, it has an expected life cycle of 5 years. In addition, based on industry experience and investigations of public cases, the estimated useful life of each type of intangible assets falls in the reasonable range. Therefore, the amortization period of brand, distribution network, customer relationship, and technology that our Group adopts is about 10, 5-10, 5-10, and 5 years, respectively.

Goodwill

As of December 31, 2018, our Predecessor Entity had goodwill of RMB2.6 million, mainly resulted from its acquisition of Hangzhou Meiba in 2016. As of December 31, 2019 and 2020, our Group had goodwill of RMB492.2 million and RMB492.2 million, respectively. On April 15, 2019, our Group acquired a 100% equity interest in our Predecessor Entity for a cash consideration of RMB1.4 billion and recorded goodwill of RMB488.1 million. On April 30, 2019, our Group acquired a 100% equity interest in Youyue for a cash consideration of RMB65.0 million and recorded goodwill of RMB1.5 million. On April 30, 2019, our Group acquired a 100% equity interest in Niwang for a cash consideration of RMB35.0 million and recorded goodwill of RMB2.5 million. The acquisition of our Predecessor Entity, Youyue and Niwang resulted in an aggregate goodwill of RMB492.2 million. As a result of the acquisition, the operation and work force of our Predecessor Entity and Acquired Entities fully integrated into our Group, therefore the goodwill is regarded as attributable to the sole reportable segment of our Group as a whole.

We determine whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units (“CGU”) to which the goodwill is allocated, which refers to our Group as a whole. Estimating the value in use requires our Group to make an estimate of the expected future cash flows from the CGU and also to choose a suitable pre-tax discount rate in order to calculate the present value of those cash flows. The value-in-use calculations use cash flow projections based on financial budgets approved by

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As of December 31, 2019 2020

Revenue growth 10.0% – 53.3% 10.0% – 51.6% Gross margin 50.7% – 56.6% 56.7% – 57.7% Cash flows beyond the budget period growth rate 3.0% 2.5% Pre-tax discount rate 20.2% 19.0%

According to the above assessment, the recoverable amount of the CGU is significantly higher than the carrying amounts of the CGU including goodwill, hence no impairment is required.

As of December 31, 2019 and 2020, the recoverable amount calculated based on value-in-use exceeded carrying value by RMB4,882.5 million and RMB8,311.1 million, respectively. Had the estimated profit during the forecast period been 5% lower or the discount rate been 1% higher, the remaining headroom would be decreased to RMB3,873.4 million and RMB6,811.0 million, respectively. A reasonably possible change in key assumptions used in the impairment test of goodwill would not likely cause the carrying amount to exceed its recoverable amount as of December 31, 2019 and 2020.

Excluding goodwill, other intangible assets of our Predecessor Entity as of December 31, 2018 was RMB14.1 million, primarily consisting of software. Excluding goodwill, other intangible assets of our Group as of December 31, 2019 and 2020 was RMB557.6 million and RMB486.8 million, respectively, primarily consisting of customer relationship, brand, technology and distribution network. The increase in those other intangible assets from RMB14.1 million as of December 31, 2018 to RMB557.6 million as of December 31, 2019 was primarily due to the acquisition of the Acquired Entities. The decrease in those other intangible assets from RMB557.6 million as of December 31, 2019 to RMB486.8 million as of December 31, 2020 was primarily due to their amortization.

Investments accounted for using the equity method

In 2016, UCO Cosmetic Limited acquired 50% equity interests of Marco Polo Holding. Marco Polo Holding was a joint venture rather than a subsidiary of our Group then. As the financing and operating activities of Marco Polo Holding should be jointly approved by UCO Cosmetic Limited and other shareholder, UCO Cosmetic Limited therefore started to account for this investment under equity methods from June 22, 2016 and share the results of Marco Polo Holding accordingly. Our Predecessor Entity recorded investments accounted for using the equity method of RMB134 thousand as of December 31, 2018 and our Group recorded investments accounted for using the equity method of RMB111 thousand as of December 31, 2019, representing its interest in Marco Polo Holding, respectively.

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In 2020, UCO Cosmetic Limited transferred 50% equity interests of Marco Polo Holding to 2015A Hong Kong Limited for a consideration of HK$12 thousand. Together with the acquisition of the remaining 50% equity interests of Marco Polo Holding by 2015A Hong Kong Limited, Marco Polo Holding became a wholly owned subsidiary of 2015A Hong Kong Limited. In 2020, Marco Polo Holding acquired 40% equity interests of Nisi Cultural Creativity (Hangzhou) Co., Ltd., of RMB5.5 million. As Marco Polo Holding is able to exercise significant influence in the form of ordinary shares of the investee, Marco Polo Holding therefore started to account for this investment under equity methods from September 27, 2020 and share the results of Nisi Cultural Creativity (Hangzhou) Co., Ltd., accordingly. As a result, an addition of RMB5.5 million was recorded as the movement of investments accounted for using the equity method, causing the investments accounted for using the equity method to increase to RMB6.6 million as of December 31, 2020.

Borrowing

Our Predecessor Entity recorded non-current borrowings of nil as of December 31, 2018. Our Group recorded non-current borrowings of RMB442.2 million as of December 31, 2019 and nil as of December 31, 2020. For more information, see “– Indebtedness – Borrowing.”

Deferred tax liabilities

Our Predecessor Entity recorded deferred tax liabilities of nil as of December 31, 2018, and our Group recorded RMB136.1 million and RMB118.9 million as of December 31, 2019 and 2020. The changes in the deferred tax liabilities as of December 31, 2019 and 2020 were primarily attributable to the decrease in deferred tax liabilities to be recovered after more than 12 months.

KEY FINANCIAL RATIOS

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

For the Period from January 7, For the 2019 to Year Ended December 31, December 31, 2019 2020

Operating profit margin (%)(1) 26.6 27.2 Net profit margin (%)(2) 18.9 19.6 Adjusted net profit margin (non-IFRS measure) (%)(3) 22.2 25.6

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As of December 31, 2019 2020

Current ratio (%)(4) 325.9 204.6 Debt to equity ratio (%)(5) 38.7 23.6

Notes:

(1) Represents operating profit for the year/period as a percentage of total revenue of such year/period.

(2) Represents net profit for the year/period as a percentage of total revenue of such year/period.

(3) Represents adjusted net profit margin (non-IFRS measure) for the year/period as a percentage of total revenue of such year/period. For details of the adjusted net profit margin (non-IFRS measure) for the year/period, see “– Non-IFRS Measure.”

(4) Represents total current assets as a percentage of total current liabilities as of the end of the year.

(5) Represents total borrowing as a percentage of the total equity as of the end of each year.

LIQUIDITY AND CAPITAL RESOURCES

During the Track Record Period and up to the Latest Practicable Date, we funded our cash requirements principally from cash generated from operating activities, deemed contribution from shareholders and financing through issuances of shares in a private placement transaction. Our cash and cash equivalents represents cash and bank balances. We had cash and cash equivalents of RMB41.0 million, RMB141.0 million and RMB131.1 million as of December 31, 2018, 2019 and 2020, respectively.

The following table sets forth the cash flows of our Group for the periods indicated:

Our Predecessor Entity Our Group Our Group For the Period from For the January 7, For the Year Ended 2019 to Year Ended December 31, December 31, December 31, 2018 2019 2020 (RMB in thousands)

Net cash generated from operating activities 104,837 47,585 453,808 Net cash used in investing activities (134,062) (1,421,983) (260,855) Net cash (used in) generated from financing activities (43,226) 1,514,588 (200,666)

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Our Predecessor Entity Our Group Our Group For the Period from For the January 7, For the Year Ended 2019 to Year Ended December 31, December 31, December 31, 2018 2019 2020 (RMB in thousands)

Net change in cash and cash equivalents (72,451) 140,190 (7,713) Cash and cash equivalents at the beginning of the year/period 112,860 – 140,993 Effect of foreign exchange on cash and cash equivalents 613 803 (2,139) Cash and cash equivalents at the end of the year/period 41,022 140,993 131,141

Net Cash Generated from Operating Activities

Net cash generated from operating activities primarily comprises our profit for the year/period and non-cash and non-operating items, and adjusted by changes in working capital.

In 2020, net cash generated from operating activities by our Group was RMB453.8 million, which was primarily attributable to the profit before income tax of our Group of RMB424.5 million, as adjusted by (i) non-cash and non-operating items, which primarily consisted of share-based compensation expense of RMB94.3 million and amortization of intangible assets of RMB70.9 million, (ii) changes in working capital, which primarily resulted from an increase in other receivables of RMB142.7 million, partially offset by a decrease in trade receivable and contract assets of RMB101.1 million, (iii) interest received of RMB2.1 million, and (iv) income tax paid of RMB104.3 million.

In the 2019 Period, net cash generated from operating activities by our Group was RMB47.6 million, which was primarily attributable to the profit before income tax of our Group of RMB265.7 million, as adjusted by (i) non-cash and non-operating items, which primarily consisted of amortisation of intangible assets of RMB50.1 million, share-based compensation expenses of RMB35.3 million and interest expense of RMB20.8 million, (ii) changes in working capital, which primarily resulted from an increase in trade receivable and contract assets of RMB282.4 million, an increase in prepayment of RMB34.4 million and a decrease in trade payable of RMB26.4 million, partially offset by an increase in other payables of RMB63.0 million, (iii) interest received of RMB0.5 million, and (iv) income tax paid of RMB47.7 million.

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In 2018, net cash generated from operating activities by our Predecessor Entity was RMB104.8 million, which was primarily attributable to the profit before income tax of our Predecessor Entity of RMB251.8 million, as adjusted by (i) non-cash and non-operating items, which primarily consisted of depreciation of right-of-use assets of RMB3.6 million and depreciation of property, plant and equipment of RMB3.5 million, (ii) changes in working capital, which primarily resulted from an increase in trade receivables of RMB101.7 million and an increase in prepayment of RMB55.6 million, partially offset by an increase in other payables of RMB20.5 million, (iii) interest received of RMB1.8 million, and (iv) income tax paid of RMB26.5 million.

Net Cash Used in Investing Activities

In 2020, net cash used in investing activities by our Group was RMB260.9 million, which was primarily attributable to payments for purchase of financial assets at fair value through profit or loss of RMB2.2 billion, partially offset by proceeds from disposal of financial asset at fair value through profit or loss of RMB2.0 billion.

In the 2019 Period, net cash used in investing activities by our Group was RMB1.4 billion, which was primarily attributable to payments for purchase of financial assets at fair value through profit or loss of RMB2.3 billion and payment for acquisition of subsidiary, net of cash acquired, of RMB1.4 billion, partially offset by proceeds from disposal of financial asset at fair value through profit or loss of RMB2.3 billion.

In 2018, net cash used in investing activities by our Predecessor Entity was RMB134.1 million, which was primarily attributable to payments for purchase of financial assets at fair value through profit or loss of RMB1.3 billion, partially offset by proceeds from disposal of financial assets at fair value through profit or loss of RMB1.3 billion.

Net Cash (Used in)/Generated from Financing Activities

In 2020, net cash used in financing activities by our Group was RMB200.7 million, which was primarily attributable to repayment of borrowings of RMB130.6 million.

In the 2019 Period, net cash generated from financing activities by our Group was RMB1.5 billion, which was primarily attributable to shareholder’s loan from the controlling shareholder of RMB791.0 million and proceeds from borrowings of RMB520.0 million. The shareholder’s loan from the controlling shareholder of RMB791.0 million was later waived and was deemed as contribution to the Group.

In 2018, net cash used in financing activities was by our Predecessor Entity was RMB43.2 million, which primarily consisted of a repayment of borrowings of RMB74.3 million, a dividend paid the owners of our Predecessor Entity of RMB70.0 million, partially offset by proceeds from borrowings of RMB84.3 million.

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INDEBTEDNESS

The following table sets forth the breakdown of our financial indebtedness as of the dates indicated.

As of As of December 31, April 30, 2019 2020 2021 (unaudited) (RMB in thousands)

Current Bank borrowings 68,704 410,249 210,363 Lease liabilities 6,189 19,956 24,275

Non-current Bank borrowings 442,211 – – Lease liabilities 18,662 26,256 28,884

Total 535,766 456,461 263,522

Borrowings

The following table sets forth our borrowings as of the dates indicated:

Our Predecessor Entity Our Group As of As of December 31, As of December 31, April 30, 2018 2019 2020 2021 (unaudited) (RMB in thousands)

Borrowings – current Unsecured bank loans – 20,000 – – Guaranteed bank loans 30,000––– Guaranteed and secured bank loans – 48,704 410,249 210,363

Borrowings – non current Guaranteed and secured bank loans – 442,211 – – Total borrowings 30,000 510,915 410,249 210,363

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In 2018, our Predecessor Entity borrowed loans amounted to RMB14.3 million from Bank of Hangzhou at the interest rate of 5.00% per annum, loans amounted to RMB40.0 million from Bank of China at the interest rate of 4.79%-5.00% per annum and loans amounted to RMB30.0 million from China Merchants Bank at the interest rate of 4.57% per annum. All of the borrowings are guaranteed by Qingdao Kingking Applied Chemistry, which was the then ultimate controlling company of our Predecessor Entity. The borrowing of RMB30.0 million was fully paid in 2019, and the rest of the loans were all repaid in 2018 already.

In May 2019, for general working capital and the acquisition of our Predecessor Entity and the Acquired Entities, CITIC Capital Beauty Investment Limited granted shareholders a loan of US$130.9 million to us. The Group used RMB100.0 million in connection with the acquisition of the Acquired Entities. In December 2019, for the sake of mutual interests, CITIC Capital Beauty Investment Limited waived the shareholders loan with full amount.

In 2019, our Group borrowed loans amounted to an aggregate amount of RMB20.0 million from Hangzhou Bank and Industrial and Commercial Bank of China, respectively, at the interest rate of 4.35%-5.00%, which were repaid in January 2020.

As of December 31, 2019 and 2020, we had the syndicated loan with the balance of RMB490.9 million and RMB399.2 million, respectively. The syndicated loan was provided by China Merchants Bank and Bank of China, and bears interest at CHIBOR floating rate with 10% premium per annum. All of the borrowings are secured by Meiba, Shenzhen Qianhai, Youyue, and Niwang, and pledge of the 100% shares of Shenzhen Qianhai, Hangzhou Youmei Cosmetics (acquired by Hangzhou UCO), Hangzhou UCO, Youyue and Niwang. The carrying amount of the borrowings were adjusted for loan syndication fees which were amortized using the effective interest method over the term of the borrowings. As of December 31, 2020, the carrying value of the borrowing is RMB399.2 million. On March 22, 2021, we repaid borrowing of RMB200.0 million. As of April 30, 2021, the carrying value of our borrowing was RMB199.5 million. We have repaid such bank borrowing in full in June 2021, and the guarantee and pledge provided by the aforementioned entities will be released before the Listing accordingly.

As of April 30, 2021, we had not utilized any of our unsecured banking facilities, and had RMB289.6 million unutilized banking facilities.

In 2020, the Group borrowed loans amounted of EUR1.4 million (equivalent to RMB11.1 million) from China CITIC Bank at an interest rate of 1.55% per annum. The borrowing is guaranteed by financing facility guarantee, which is secured by deposit receipt amounted to RMB62.0 million pledged by our Predecessor Entity. As of December 31, 2020, the carrying value of the borrowing is EUR1.4 million. We have repaid such bank borrowing in full in June 2021, and the guarantee and pledge provided by our Predecessor Entity will be released before the Listing accordingly.

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The following table sets forth the breakdown of the carrying amount repayable by time of repayment as of the dates indicated.

As of As of December 31, April 30, 2019 2020 2021 (unaudited) (RMB in thousands)

Carrying amount repayable: Within one year 68,704 410,249 210,363 Within a period of more than one year 442,211 – –

Total 510,915 410,249 210,363

Lease Liabilities

The following table sets forth our lease liabilities as of the dates indicated. All the lease liabilities are non-trade in nature.

As of As of December 31, April 30, 2019 2020 2021 (unaudited) (RMB in thousands)

Current 6,189 19,956 24,275 Non-current 18,662 26,256 28,884

Total 24,851 46,212 53,159

Except as discussed above, we did not have any material mortgages, charges, debentures, loan capital, debt securities, loans, bank overdrafts or other similar indebtedness, finance lease or hire purchase commitments, liabilities under acceptances (other than normal trade bills), acceptance credits, which are either guaranteed, unguaranteed, secured or unsecured, or guarantees or other contingent liabilities as of April 30, 2021.

On June 3, 2021, we entered into a term loan facility agreement with a principal amount of US$125 million with a syndicate of banks primarily to finance the payment of the special dividend we plan to declare before the Listing. For details of the term loan facility, see “– Recent Developments and Material Adverse Change.”

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CONTINGENT LIABILITIES OR GUARANTEES

As of December 31, 2018, 2019 and 2020 and April 30, 2021, we did not have any material contingent liabilities or guarantees.

CAPITAL EXPENDITURES AND LONG-TERM INVESTMENTS

The following table sets forth our capital expenditures for the year/period indicated:

For the Period from January 7, For the 2019 to Year Ended December 31, December 31, 2019 2020 (RMB in thousands)

Payments for purchase of intangible assets (747) (180) Payments for purchase of property, plant and equipment (3,596) (10,244) Proceeds from disposal of property, plant and equipment 1,169 914

Total (3,174) (9,510)

Our capital expenditures in the 2019 Period and the year ended December 31, 2020 were RMB3.2 million and RMB9.5 million, respectively, primarily attributable to payments for purchase of property, plant and equipment.

We expect that our capital expenditures in 2021 will primarily consist of payments for purchase of property and equipment and intangible assets, and partially offset by proceeds from disposal of property, plant and equipment. We intend to fund our future capital expenditures and long-term investments with our existing cash balance, cash generated from operating activities, and [REDACTED] from the [REDACTED]. See the section headed “Future Plan and [REDACTED]” for more details. We may reallocate the fund to be utilized on capital expenditure and long-term investments based on our ongoing business needs.

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CONTRACTUAL OBLIGATIONS

Capital Commitments

The following table sets forth our capital commitments as of the dates indicated.

As of As of December 31, December 31, 2019 2020 (RMB in thousands)

Contractual but not provided for – Property, plant and equipment – 300,000

In February 2020, we entered into a strategic cooperation agreement with two third parties, pursuant to which all parties agreed that we should purchase a property and our total commitment to the property is around RMB300.0 million. The property is targeted to be delivered to us by 2024. We have paid RMB30.0 million as the cash guarantee.

Operating Lease Commitments

Our commitments primarily relate to the leases of buildings and warehouses under non-cancellable leases expiring within one month to eight years. Our future aggregate minimum lease payments under non-cancellable operating leases are as follows:

For the Period from January 7, For the 2019 to Year Ended December 31, December 31, 2019 2020 (RMB in thousands)

Within 1 year 156 509

OFF-BALANCE SHEET COMMITMENTS AND ARRANGEMENTS

As of the Latest Practicable Date, we have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties, and we have not entered into any derivative contracts that are indexed to our shares and classified as shareholders’ equity or that are not reflected in our consolidated financial statements. Furthermore, as of the Latest Practicable Date, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity, and we do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us.

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MATERIAL RELATED PARTY TRANSACTIONS

For a discussion of related party transactions, see note 37 to the consolidated financial statements of the Group included in the Accountants’ Report set forth in Appendix IA to this document and note 38 of the consolidated financial statements of our Predecessor Entity included in the Accountants’ Report set forth in Appendix IB to this document.

Our Directors believe that our transactions with the related party during the Track Record Period were conducted on an arm’s length basis, and they did not distort our results of operations or make our historical results not reflective of our future performance.

All the non-trade balances with related parties and the pledge/guarantee provided by/to related parties will be settled/released before the Listing.

FINANCIAL RISK DISCLOSURE

We are exposed to a variety of market risks, including currency risk, credit risk and liquidity risk. We manage and monitor these exposures to ensure appropriate measures are implemented on a timely and effective manner. Our overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on our financial performance. Risk management is carried out by our senior management.

Foreign Exchange Risk

Foreign exchange risk arises when future commercial transactions or recognized assets and liabilities are denominated in a currency that is not the Group entities’ functional currency. Functional currency of the Group’s entities are RMB, HKD and USD. We manage our foreign exchange risk by performing regular reviews of our net foreign exchange exposures and tries to minimize these exposures through natural hedges, wherever possible, and may enter into forward foreign exchange contracts, when necessary.

Our businesses are principally conducted in RMB, which is exposed to foreign currency risk with respect to transactions denominated in currencies other than RMB. Foreign exchange risk arises from recognized assets and liabilities and net investments in foreign operations. We did not enter into any forward contract to hedge our exposure to foreign currency risk for the period from January 7, 2019 to December 31, 2019 and for the year ended December 31, 2020.

Credit Risk

Credit risk mainly arises from cash and cash equivalents, restricted cash, trade and other receivables, contract assets and financial assets at fair value through profit or loss. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the consolidated balance sheet.

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To manage this risk, deposits and financial assets at fair value through profit or loss are mainly placed with state-owned or reputable financial institutions in the PRC and reputable international financial institutions outside of the PRC. There has been no recent history of default in relation to these financial institutions. Management does not expect any losses from non-performance by these financial institutions, therefore, the expected credit loss for cash and bank balances and financial assets at fair value through profit or loss is minimal. We do not have policy to limit the amount of credit exposure to any financial institutions.

We have no significant concentration of credit risk, with exposure spread over a number of counterparties and customers.

Liquidity Risk

We aim to maintain sufficient cash and cash equivalents. Due to the dynamic nature of the underlying businesses, our policy is to regularly monitor our liquidity risk and to maintain adequate cash and cash equivalents to meet our liquidity requirements.

The tables below analyses our non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the end of each reporting period to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Within Total Carrying Contractual maturities of 1 year or Between 1 contractual amount financial liabilities on demand and 2 years Over 2 years cash flows liabilities RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

As of December 31, 2019 Non-derivatives Trade payables 9,965 – – 9,965 9,965 Other payables (excluding accrued employee benefits and other taxes payables) 85,546 – – 85,546 85,546 Lease liabilities 7,258 6,190 14,075 27,523 24,851 Borrowings 94,736 71,991 426,325 593,052 510,915

Total non-derivatives 197,505 78,181 440,400 716,086 631,277

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As of December 31, 2020 Non-derivatives Trade payables 27,226 – – 27,226 27,226 Other payables (excluding accrued employee benefits and other taxes payables) 97,545 – – 97,545 97,545 Lease liabilities 21,688 16,645 10,789 49,122 46,212 Borrowings 419,845 – – 419,845 410,249

Total non-derivatives 566,304 16,645 10,789 593,738 581,232

DIVIDENDS AND DIVIDEND POLICY

During the Track Record Period, no dividends have been paid or declared by our Company.

Before the Listing, we plan to declare a special dividend in the aggregate amount of US$160 million to the then existing shareholders of our Company on or around [June 24], 2021 and make payment before the Listing, currently expected to be on or around [July 9], 2021. US$120 million of such special dividend is expected to be funded by a term loan facility obtained from a syndicate of banks, with the remaining US$40 million to be funded by the Group’s cash on hand. For details of the term loan facility, see “– Recent Developments and Material Adverse Change.”

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WORKING CAPITAL CONFIRMATION

Taking into account the financial resources available to us, including our cash and cash equivalents on hand and the estimated [REDACTED] from the [REDACTED], our Directors are of the view that we have sufficient working capital to meet our present needs and for the next twelve months from the date of this document.

DISTRIBUTABLE RESERVES

As of December 31, 2020, we had distributable reserves of RMB1.1 billion.

LISTING EXPENSE

UNAUDITED PRO FORMA STATEMENT OF ADJUSTED NET TANGIBLE ASSETS

The unaudited pro forma statement of our adjusted consolidated net tangible assets attributable to owners of our Company prepared in accordance with Rule 4.29 of the Listing Rules is set out below to illustrate the effect of the [REDACTED] on our audited consolidated tangible assets less liabilities attributable to owners of our Company as of December 31, 2020, as if the [REDACTED] had taken place on that date.

The unaudited pro forma statement of our adjusted net tangible assets attributable to owners of our Company has been prepared for illustrative purposes only and, because of its hypothetical nature, it may not give a true picture of our net tangible assets, had the [REDACTED] been completed as of December 31, 2020 or at any future dates.

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The following unaudited pro forma statement of our adjusted net tangible assets attributable to owners of our Company is prepared based on our audited tangible assets less liabilities attributable to owners of our Company as of December 31, 2020 as derived from the Accountants’ Report in Appendix IA to this document, and adjusted as described below.

Unaudited pro Audited forma adjusted consolidated net consolidated net tangible assets tangible assets of the Group of the Group attributable to attributable to the equity the equity holders of the Estimated holders of the Company as at [REDACTED] Company as at Unaudited pro forma 31 December from the 31 December adjusted consolidated net 2020 [REDACTED] 2020 tangible assets per Share (Note 1) (Note 2) (Note 3) (Note 5) RMB’000 RMB’000 RMB’000 RMB HK$

Based on an [REDACTED]of HK$[REDACTED] per Share 758,259 [REDACTED][REDACTED][REDACTED][REDACTED]

Notes:

(1) The audited consolidated net tangible assets of the Group attributable to the equity holders of the Company as at 31 December 2020 is extracted from the Accountant’s Report set out in Appendix I to this [REDACTED], which is based on the audited consolidated net assets of the Group attributable to the equity holders of the Company as at 31 December 2020 of approximately RMB1,737,285,000, with adjustment for intangible assets as at 31 December 2020 of approximately RMB979,026,000.

(2) The estimated [REDACTED] from the [REDACTED] are based on the indicative [REDACTED]of HK$[REDACTED] and HK$[REDACTED] per share, being the low and high end of the indicative [REDACTED] range, respectively, after deduction of the [REDACTED] and other related expenses (excluding listing expenses of approximately RMB5,163,000 which have been accounted for in the consolidated statements of comprehensive income of the Group prior to 31 December 2020) paid/payable by the Company, and takes no account of any Shares which may be allotted and issued pursuant to the exercise of the [REDACTED], any options which may be granted under the Share Option Scheme or any Shares which may be issued or repurchased by the Company pursuant to the general mandates given to the Directors for issue and allotment of Shares as described in the section headed “Share Capital” in this [REDACTED].

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(3) The unaudited pro forma net tangible assets per Share is arrived at after the adjustments referred to in the preceding paragraph and on the basis that [REDACTED] Shares were in issue, assuming that the [REDACTED] and the Share Subdivision had been completed on 31 December 2020 but takes no account of (i) the [6,273,526] shares issued to Pre-[REDACTED] investor subsequent to 31 December 2020; (ii) the 2,282,932 restricted stock units of the Company granted to the members of management of Protime subsequent to 31 December 2020; and (iii) any Shares which may be allotted and issued pursuant to the exercise of the options which may be granted under the Share Option Scheme and any Shares which may be issued or repurchased by the Company pursuant to the general mandates given to the Directors for issue and allotment of Shares as described in the section headed ‘Share Capital” in this [REDACTED].

(4) No adjustment has been made to reflect any trading result or other transactions of the Group entered into subsequent to 31 December 2020. In particular, the unaudited pro forma adjusted consolidated net tangible assets attributable to owners of the Company does not take into account (i) the [6,273,526] shares issued to Pre-[REDACTED] investor subsequent to 31 December 2020; and (ii) the proposed special dividend of US$160,000,000 which was declared subsequent to 31 December 2020 on [date]. Had such issue of Shares and proposed special dividend been taken into account, the unaudited pro forma adjusted net tangible assets per Share would be HK$[REDACTED] and HK$[REDACTED], assuming the [REDACTED] range of HK$[REDACTED] per Share and HK$[REDACTED] per Share respectively and on the basis that [REDACTED] shares were in issue assuming that the [REDACTED] and the Share Subdivision had been completed on 31 December 2020 without taking into account of any Shares which may be allotted and issued pursuant to the exercise of the [REDACTED], any options which may be granted under the Share Option Scheme or any Shares which may be issued or repurchased by the Company pursuant to the general mandates granted to the Directors for issue or allotment of Shares as described in “Share Capital” in this [REDACTED].

(5) For the purpose of this unaudited pro forma adjusted consolidated net tangible assets, the amounts stated in RMB are converted into Hong Kong dollars at a rate of RMB1.00 to HK$[1.1929]. No representation is made that RMB amounts have been, could have been or may be converted to Hong Kong dollars, or vice versa, at that rate.

RECENT DEVELOPMENTS AND MATERIAL ADVERSE CHANGE

On February 28, 2021, Hangzhou UCO entered into an Asset Purchase Agreement with certain shareholders of Shanghai Protime Internet Technology Co., Ltd. (上海點正互聯網科技有限公司) (“Protime”) to purchase its e-marketing and data analytics business for a total consideration of RMB63,000,000 in cash. Pursuant to the Asset Purchase Agreement, Hangzhou UCO has the right to acquire 100% of the equity interest in Protime, with such right being exercisable before December 31, 2021.

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On June 3, 2021, we entered into a term loan facility agreement with a principal amount of US$125 million (the “Facility Agreement”) with a syndicate of banks including The Hongkong and Shanghai Banking Corporation Limited primarily to finance the payment of the special dividend we plan to declare before the Listing. Subject to certain customary conditions precedent, the term loan is available for drawdown from the date of the Facility Agreement to and including the earlier of (i) the date falling six months after the date of the Facility Agreement, and the (ii) the date on which the Listing occurs. Once drawn, the tenor of the loan is 60 months after the initial drawdown date, with an interest rate of the applicable London Interbank Offered Rate plus a certain margin for the interest period. Pursuant to the Facility Agreement, a mandatory prepayment in an amount of not less than the lower of (i) [REDACTED]% of the [REDACTED] from the [REDACTED], and (ii) 50% of the total amount drawn under the Facility Agreement, is required to be made upon the Listing. We may make any voluntary prepayment for the whole or any part of the term loan. The Facility Agreement contains a set of covenants that are customary for commercial bank loans and requires us to meet certain financial ratio requirements such as maximum net debt-to-adjusted EBITDA ratio and minimum adjusted EBITDA-to-net cash interest costs ratio, calculated based on the pre-agreed formula specified therein. We do not expect the expected significant increase in share-based expenses described in the preceding paragraph will trigger the breach of any covenants or the financial ratio requirements. The term loan provides for multiple drawdowns which would provide flexibility for us to fund the payment of the special dividend using such combination of resources which is in the best interest of our Company and the Shareholders as a whole. Upon our request and subject to certain customary conditions precedents, one or more incremental term facilities could be established. We plan to drawdown the term loan facility in full on or around [July 8], 2021. In connection with such term loan facility, we expect to incur total interest expense ranging from RMB20.8 million to RMB36.3 million during its tenor, depending on the actual payment schedule.

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After performing sufficient due diligence work which our Directors consider appropriate and after due and careful consideration, save as disclosed above in this section, the Directors confirm that, up to the date of this document, there has been no material adverse change in our financial or trading position or prospects since December 31, 2020, which is the end date of the periods reported on in the Accountant’s Reports included in Appendices IA and IB to this document, and there is no event since December 31, 2020 that would materially affect the information as set out in the Accountant’s Reports included in Appendices IA and IB to this document.

DISCLOSURE UNDER RULES 13.13 TO 13.19 OF THE LISTING RULES

Our Directors confirm that, except as otherwise disclosed in this document, as of the Latest Practicable Date, there was no circumstance that would give rise to a disclosure requirement under Rules 13.13 to 13.19 of the Listing Rules.

ADDITIONAL FINANCIAL INFORMATION OF YOUYUE AND NIWANG FOR THE PRE-ACQUISITION PERIOD

Youyue and Niwang were acquired by the Group in April 2019. Following is the financial information of Youyue and Niwang for the year ended December 31, 2018 and the period from January 1, 2019 to April 30, 2019.

Youyue

The table below sets forth the consolidated statements of comprehensive income of Youyue for the year ended December 31, 2018 and the period from January 1, 2019 to April 30, 2019 derived from the consolidated statements of comprehensive income of Youyue set out in the Accountants’ Report included in Appendix IA to this document.

For the For the Period from Year Ended January 1, December 31, 2019 to 2018 April 30, 2019 (RMB in thousands)

Revenue 110,910 32,474 Cost of revenue (36,825) (13,788)

Gross profit 74,085 18,686

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For the For the Period from Year Ended January 1, December 31, 2019 to 2018 April 30, 2019 (RMB in thousands)

Selling and distribution expenses (21,571) (6,342) General and administrative expenses (8,011) (1,581) (Net impairment losses)/reversal of impairment losses on financial assets and contract assets 4 (9) Other income 261 119 Other gains – net 201 192

Operating profit 44,969 11,065

Finance income 24 5 Finance costs (92) (26)

Finance costs – net (68) (21) Profit before income tax 44,901 11,044

Income tax expenses (11,239) (2,762)

Profit for the year 33,662 8,282

For the Period from January 1, 2019 to April 30, 2019

Revenue

Total revenue of Youyue was RMB32.5 million for the period from January 1, 2019 to April 30, 2019, consisting of revenue generated under the distribution method by Youyue of RMB23.2 million and revenue generated under the service method by Youyue of RMB9.3 million for the period from January 1, 2019 to April 30, 2019.

Cost of revenue

The cost of revenue of Youyue was RMB13.8 million for the period from January 1, 2019 to April 30, 2019, primarily consisting of cost of inventories sold, fulfillment expenses, employee benefits expenses and advertising promotion fees.

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Gross profit and gross profit margin

As a result of the foregoing, Youyue recorded a gross profit of RMB18.7 million for the period from January 1, 2019 to April 30, 2019, representing a gross profit margin of 57.5%.

Selling and distribution expenses

The selling and distribution expenses of Youyue was RMB6.3 million for the period from January 1, 2019 to April 30, 2019, primarily consisting of employee benefits expenses, fulfillment expenses, and other selling and distribution expenses.

General and administrative expenses

The general and administrative expenses of Youyue was RMB1.6 million for the period from January 1, 2019 to April 30, 2019, consisting of employee benefits expenses and other administrative expenses.

For the Year Ended December 31, 2018

Revenue

Total revenue of Youyue was RMB110.9 million in 2018, consisting of revenue generated funder the distribution method by Youyue of RMB90.6 million and revenue generated under the service method by Youyue of RMB20.3 million in 2018.

Cost of revenue

The cost of revenue of Youyue was RMB36.8 million in 2018, primarily consisting of cost of inventories sold, fulfillment expenses, employee benefits expenses and advertising promotion fees.

Gross profit and gross profit margin

As a result of the foregoing, Youyue recorded a gross profit of RMB74.1 million in 2018, representing a gross profit margin of 66.8%.

Selling and distribution expenses

The selling and distribution expenses of Youyue was RMB21.6 million in 2018, primarily consisting of employee benefits expenses, fulfillment expenses, and other selling and distribution expenses.

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General and Administrative expenses

The general and administrative expenses of Youyue was RMB8.0 million in 2018, consisting of employee benefits expenses and other administrative expenses.

The following table sets forth Youyue’ cash flows for the year ended December 31, 2018 and the period from January 1, 2019 to April 30, 2019 set out in the Accountants’ Report included in Appendix IA to this document.

For the Period from For the January 1, Year Ended 2019 to December 31, April 30, 2018 2019 (RMB in thousands)

Cash flows from operating activities Cash generated from/(used in) operations 39,527 (3,156) Interest received 148 5 Income tax paid (10,239) (4,090)

Net cash generated from/(used in) operating activities 29,436 (7,241)

Cash flows from investing activities Payments for purchases of property, plant and equipment (3,845) (9) Proceeds from disposal of property, plant and equipment 22 – Payments for purchase of financial assets at fair value through profit or loss (51,500) (26,000) Proceeds from disposal of financial assets at fair value through profit or loss 36,345 36,592 Loan to related parties (9,800) – Proceeds from repayment of loans to related parties 9,800 –

Net cash (used in)/generated from investing activities (18,978) 10,583

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For the Period from For the January 1, Year Ended 2019 to December 31, April 30, 2018 2019 (RMB in thousands)

Cash flows from financing activities Principal elements of lease payments (1,374) (349) Dividends paid (11,500) –

Net cash used in financing activities (12,874) (349)

Net increase/(decrease) in cash and cash equivalents (2,416) 2,993 Cash and cash equivalents at the beginning of the year/period 4,242 1,826

Cash and cash equivalents at the end of the period/year 1,826 4,819

Net cash generated from/(used in) operating activities

For the period from January 1, 2019 to April 30, 2019, net cash used in operating activities by Youyue was RMB7.2 million, which was primarily attributable to the profit before income tax of Youyue of RMB11.0 million, as adjusted by (i) interest received of RMB5 thousand, (ii) income tax paid of RMB4.1 million, (iii) non-cash and non-operating items, which primarily consisted of depreciation of property, plant and equipment of RMB0.8 million and depreciation of right-of-use assets of RMB0.5 million, and (iv) changes in working capital, which primarily resulted from an increase in inventories of RMB8.7 million and an increase in trade receivable and contract assets of RMB6.4 million.

In 2018, net cash generated from operating activities by Youyue was RMB29.4 million, which was primarily attributable to the profit before income tax of Youyue of RMB44.9 million, as adjusted by (i) interest received of RMB0.1 million, (ii) income tax paid of RMB10.2 million, (iii) non-cash and non-operating items, which primarily consisted of depreciation of property, plant and equipment of RMB1.9 million and depreciation of right-of-use assets of RMB1.3 million, (iv) changes in working capital, which primarily resulted from an increase in trade receivables and contract assets of RMB2.5 million, a decrease in contract liabilities of RMB1.8 million and a decrease in other payables of RMB1.8 million.

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Net cash (used in)/generated from investing activities

For the period from January 1, 2019 to April 30, 2019, net cash generated from investing activities was RMB10.6 million, which was primarily attributable to proceeds from disposal of financial assets at fair value through profit or loss of RMB36.6 million, partially offset by payments for purchase of financial assets at fair value through profit or loss of RMB26.0 million.

In 2018, net cash used in investing activities was RMB19.0 million, which was primarily attributable to proceeds from disposal of financial assets at fair value through profit or loss of RMB51.5 million, partially offset by payments for purchase of financial assets at fair value through profit or loss of RMB36.3 million.

Net cash used in financing activities

For the period from January 1, 2019 to April 30, 2019, net cash used in financing activities was RMB0.3 million, which was attributable to principal elements of lease payments.

In 2018, net cash used in financing activities was RMB12.9 million, which was primarily attributable to dividends paid of RMB11.5 million.

Niwang

The table below sets forth the consolidated statements of comprehensive income of Niwang for the year ended December 31, 2018 and the period from January 1, 2019 to April 30, 2019 derived from the consolidated statements of comprehensive income of Niwang set out in the Accountants’ Report included in Appendix IA to this document.

For the Period from For the January 1, Year Ended 2019 to December 31, April 30, 2018 2019 (RMB in thousands)

Revenue 36,721 15,300 Cost of revenue (9,553) (3,073)

Gross profit 27,168 12,227

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For the Period from For the January 1, Year Ended 2019 to December 31, April 30, 2018 2019 (RMB in thousands)

General and administrative expenses (301) (771) Net impairment losses on financial assets and contract assets (14) (18) Other gains – net – 88

Operating profit 26,853 11,526

Finance income 6 1 Finance costs (124) –

Finance costs – net (118) 1

Profit before income tax 26,735 11,527

Income tax expenses (6,684) (2,882)

Profit for the year 20,051 8,645

For the Period from January 1, 2019 to April 30, 2019

Revenue

Total revenue of Niwang was RMB15.3 million for the period from January 1, 2019 to April 30, 2019, all of which were generated from service method by Niwang.

Cost of revenue

The cost of revenue of Niwang was RMB3.1 million for the period from January 1, 2019 to April 30, 2019, primarily consisting of cost of inventories sold, employee benefits expenses and advertising promotion fees.

Gross profit and gross profit margin

As a result of the foregoing, Niwang recorded a gross profit of RMB12.2 million for the period from January 1, 2019 to April 30, 2019, representing a gross profit margin of 79.7%.

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General and administrative expenses

The General and administrative expenses of Niwang was RMB0.8 million for the period from January 1, 2019 to April 30, 2019, consisting of employee benefits expenses and other administrative expenses.

For the Year Ended December 31, 2018

Revenue

Total revenue of Niwang was RMB36.7 million in 2018, all of which were generated from service method by Niwang.

Cost of revenue

The cost of revenue of Niwang was RMB9.6 million in 2018, primarily consisting of cost of inventories sold, employee benefits expenses and advertising promotion fees.

Gross profit and gross profit margin

As a result of the foregoing, Niwang recorded a gross profit of RMB27.2 million in 2018, representing a gross profit margin of 74.1%.

General and administrative expenses

The General and administrative expenses of Niwang was RMB0.3 million in 2018, consisting of employee benefits expenses and other administrative expenses.

The following table sets forth Niwang’ cash flows for the year ended December 31, 2018 and the period from January 1, 2019 to April 30, 2019 set out in the Accountants’ Report included in Appendix IA to this document.

For the Period from For the January 1, Year Ended 2019 to December 31, April 30, 2018 2019 (RMB in thousands)

Cash flows from operating activities Cash generated from operating activities 13,364 6,805 Interest received 6 1 Income tax paid (3,170) (5,058)

Net cash generated from operating activities 10,200 1,748

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For the Period from For the January 1, Year Ended 2019 to December 31, April 30, 2018 2019 (RMB in thousands)

Cash flows from investing activities Payments for purchases of property, plant and equipment (236) – Payments for purchase of financial assets at fair value through profit or loss (9,000) (10,000) Proceeds from disposal of financial assets at fair value through profit or loss – 8,588 Net cash used in investing activities (9,236) (1,412)

Cash flows from financing activities Proceeds from borrowings from related parties 9,800 – Repayment of borrowings from related parties (9,800) – Interest paid on borrowings (124) –

Net cash used in financing activities (124) –

Net increase in cash and cash equivalents 840 336 Cash and cash equivalents at the beginning of the year/period – 840

Cash and cash equivalents at the end of the period/year 840 1,176

Net cash generated from operating activities

For the period from January 1, 2019 to April 30, 2019, net cash generated from operating activities by Niwang was RMB1.7 million, which was primarily attributable to the profit before income tax of Niwang of RMB11.5 million, as adjusted by (i) interest received of RMB1 thousand, (ii) income tax paid of RMB5.1 million, and (iii) changes in working capital, which primarily resulted from an increase in trade receivable of RMB5.1 million.

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In 2018, net cash generated from operating activities by Niwang was RMB10.2 million, which was primarily attributable to the profit before income tax of Niwang of RMB26.7 million, as adjusted by (i) interest received of RMB6 thousand, (ii) income tax paid of RMB3.2 million, (iii) changes in working capital, which primarily resulted from an increase in trade receivables of RMB14.4 million.

Net cash used in investing activities

For the period from January 1, 2019 to April 30, 2019, net cash used in investing activities was RMB1.4 million, which was primarily attributable to payments for purchase of financial assets at fair value through profit or loss of RMB10.0 million, partially offset by proceeds from disposal of financial assets at fair value through profit or loss of RMB8.6 million.

In 2018, net cash used in investing activities was RMB9.2 million, which was primarily attributable to payments for purchase of financial assets at fair value through profit or loss of RMB9.0 million.

Net cash used in financing activities

For the period from January 1, 2019 to April 30, 2019, net cash used in financing activities was nil.

In 2018, net cash used in financing activities was RMB0.1 million, which was primarily attributable to repayment of borrowings from related parties of RMB9.8 million, offset by proceeds from borrowings from related parties of RMB9.8 million.

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FUTURE PLANS

See “Business – Our Strategies” in this document for a detailed description of our future plans.

[REDACTED]

Assuming an [REDACTED] of HK$[REDACTED] per Share (being the mid-point of the [REDACTED] Range of between HK$[REDACTED] and HK$[REDACTED] per Share), we estimate that we will receive [REDACTED] of approximately HK$[REDACTED] million from the [REDACTED] after deducting the [REDACTED] and other estimated expenses payable by us in connection with the [REDACTED].

[REDACTED]

In line with our strategies, we intend to use our [REDACTED] from the [REDACTED] for the purposes and in the amounts set forth below:

• approximately [REDACTED]% of the [REDACTED], or approximately HK$[REDACTED] million, is expected to be applied to expanding marketing activities for our incubation brand partners, enhancing our brand partnership and developing our brand incubation platform. As of the Latest Practicable Date, we have signed with four new incubation brand partners and have identified three potential incubation brand partners. Our intended [REDACTED] include:

• approximately [REDACTED]% of the [REDACTED], or approximately HK$[REDACTED] million for expanding our marketing channel engagement and brand marketing activities for our incubation brand partners. We plan to devote more resources to on-brand multimedia marketing and content productions, especially in online social medial channels such as short-from video, live streaming, KOLs and Weixin public accounts, and to create desired brand image and increase brand awareness, thus facilitating the growth of GMV of our brand partners in China. We expect to spend approximately RMB20 million – RMB50 million on average per year for each incubation brand’s brand building and marketing activities, subject to each brand’s strategy and requirement, and plan to allocate approximately HK$100.0 million, HK$200.0 million, and HK$300.0 million in 2021, 2022 and 2023, respectively;

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• approximately [REDACTED]% of the [REDACTED], or approximately HK$[REDACTED] million for establishing joint ventures with incubation brand partners in China, which will function as the brands’ representative entities in China and be dedicated to brand marketing, operations, talent recruitment, supply chain management and order fulfillment. In such collaborations, the role of the joint ventures will be the sole and exclusive online and offline representatives of the relevant brands in China, while we provide our expertise in the local operation and management for the brands and provide product strategy development and planning. We would also provide trainings and R&D consultation to the brands. Such joint ventures would be beneficial to us as it provide us with long-term relationships with our brand partners, which better secure our business with them and allow us to execute long-term strategies. We plan to establish approximately five to six joint ventures with beauty brands in China by the end of 2023. We will primarily focus on the brands that are (i) international or foreign local beauty brands with good performance in foreign markets, but with limited presence (for example, GMV less than RMB100 million) and good potentials in Chinese market, and (ii) Chinese local brands which we believe are on the right track of beauty trend and have good potentials on online channels. We expect to spend less than RMB100 million on the establishment of each joint venture. We believe setting-up China joint venture with brands will help us develop long-term relationships with them. According to the iResearch Report, currently there are more than 50 beauty brands that meet our selection criteria;

• approximately [REDACTED]% of the [REDACTED], or approximately HK$[REDACTED] million for investing into international or local, e-commerce enablement or incubation brand partners, that we view as with high potentials to help them to grow in China market to ensure a long-term partnership. We expect to use this amount in a prudent and sustainable manner within a period of 12 to 48 months from Listing, subject to market conditions and the opportunities available. The number of investment targets will depend on the scale of the target business. We will leverage our strong industry knowledge, experience and network to identify and execute the investment and may also engage external advisors to assist us with identifying and executing potential transactions. According to the iResearch Report, currently there are more than 200 beauty brands that meet our selection criteria.

• approximately [REDACTED]% of the [REDACTED], or approximately HK$[REDACTED] million, is expected to be applied to expanding our upstream and downstream capabilities to enhance our platforms in order to realize our key growth strategies, through our internal development as well as investment and acquisitions, including:

• approximately [REDACTED]% of the [REDACTED], or approximately HK$[REDACTED] million for downstream expansion such as recruitment of talents and investment or acquisition of the companies with talents and expertise that are complementary to our current business, including but not

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limited to digital marketing, social marketing network and channels, smart logistics and fulfillment service providers, to continue expanding the depth and breadth of our services and capabilities. We will primarily look for targets that are top participants in their respective areas, preferably with fitting company cultures to ours. We will also look into a potential target’s growth momentum, team composition and valuation benchmark. According to the iResearch Report, currently there are more than 130 potential investment or acquisition targets that meet our selection criteria;

• approximately [REDACTED]% of the [REDACTED], or approximately HK$[REDACTED] million for investment in areas that can strengthen our brand incubation platform ecosystem and our upstream capabilities to identify and grow a brand from minimal scale, including but not limited to deeper partnership of emerging channels so we can have a better data analytics of consumer profile to provide more wanted products, targeted marketing and customized customer services. For example, we plan to establish collaboration or joint ventures with high-profile MCNs or KOLs. The main objective of such joint ventures is to better serve brands in our incubation business line. Joint ventures would allow us to better and more quickly leverage resources and establish brand awareness for our brand partners. Joint ventures are also one of our experimental approaches to the complex goal of growing a brand from minimal market awareness. Our role and responsibilities in such joint ventures will remain largely the same as our main business, with MCNs bringing more efficient marketing resources. Our services and roles provided to our brand partners will also remain categorically the same, while with enhanced social media and KOL marketing capabilities. Such joint ventures also allow us to share risks of incubating new brands with MCNs. According to the iResearch Report, currently there are more than 120 potential high profile MCN and KOL investment targets that meet our selection criteria;

• approximately [REDACTED]% of the [REDACTED], or approximately HK$[REDACTED] million for investment or acquisition of other ecommerce service enablement companies inside and outside of China market for horizontal expansion. In particular, we will look for companies that are complementary to our overseas market entry strategies, who are top players in their receptive local markets with extensive local knowledge and good track records, to strengthen our presence overseas. The overseas markets we will consider to enter through acquisition and investment include Southeast Asia, Japan and South Korea. According to the iResearch Report, currently there are more than 20 potential investment or acquisition targets that meet our selection criteria.

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As of the Latest Practicable Date, we have not identified any target of potential acquisitions. After the [REDACTED] and with the receipt of the [REDACTED], we plan to increase our focus on identifying desirable acquisition targets and related business opportunities. We will designate specific internal personnel to focus on sourcing, evaluating and executing potential investments for the Group. We plan to proactively engage in regular dialogues with our shareholders, business partners, and external advisors such as investment banks to assist us with identifying and executing potential investment transactions. With these efforts, we will aim to quickly seize opportunities and secure acquisitions of suitable potential targets, through leveraging our strong industry knowledge, financial capabilities and execution capabilities, in accordance with the strategies and criteria described above. We will seek to make investment or acquisition of suitable target businesses when such opportunities arise within a period of 12 to 48 months from the Listing, subject to market conditions and the opportunistic nature of business acquisitions and investments.

• approximately [REDACTED]% of the [REDACTED], or approximately HK$[REDACTED] million, is expected to be applied to the construction of our new headquarter, logistics center and self-operated warehouses, including:

• approximately [REDACTED]% of the [REDACTED], or approximately HK$[REDACTED] million for the construction of our new headquarter and operation center. Currently, our offices are scattered across different locations in Hangzhou. We believe an expanded headquarter can bring our employees together, enhance operational efficiency, support our business growth, and create a sense of belonging for our employees. In February 2020, we have entered into a strategic cooperation agreement, pursuant to which we will purchase a property located in Jianggan District, Hangzhou, China, with gross floor area of approximately 20,000 square meter. The property will be used as our headquarter and operation center. Our total commitment to the property is expected to be around RMB300,000,000 and we have paid RMB30,000,000 as the cash guarantee as at the Latest Practicable Date. We expect the property to reach the completion stage and delivered to us by 2024;

• approximately [REDACTED]% of the [REDACTED], or approximately HK$[REDACTED] million for the construction of logistics center and warehouses. We plan to purchase and construct by phase a logistics center customized for luxury beauty omni-channel fulfillment in or near the Hangzhou metropolitan area, with total gross floor area reaching approximately 100,000 square meter upon full completion. The first phase is estimated to be with a gross floor area of approximated 30,000 square meter. We intend to plan the timing of the construction so that the logistics center can be operational around the end of lease of our current facilities to minimize rental cost. We believe this construction will supplement our demand for warehouses. As of the Latest Practicable Date, we operated 15 leased warehouses with an aggregate gross floor area of approximately 95,576 square

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meters in Hangzhou, Jiaxing and Shanghai. During peak season in 2020, we leased four extra warehouses with an aggregate gross floor area of approximately 61,767 more square meters. We also plan to deploy logistics robotic system to most of our self-operated warehouses in order to further strengthen our supply chain capabilities to facilitate demand for our fast- growing fulfillment services, and improve operating efficiency.

• approximately [REDACTED]% of the [REDACTED], or approximately HK$[REDACTED] million, is expected to be applied to the upgrade and development of our technology capabilities and IT infrastructure, including:

• investments in the research and development for advanced visual AI, neural networks, and neuro-linguistic programing to be able to identify and recommend similar items, improve search results and understand intuitive queries, as well as to accurately predict and offer hyper-personalized product recommendations in real-time, creating compelling consumer experiences;

• development of AI-based chabot to enable 24x7 personalized beauty advice and recommendations, improving the consumer experience and purchase willingness while significantly reducing our labor cost for consumer services;

• development of a recommendation engine that has a self-taught engine at its core, making smart offers based on the preferences of other similar consumers with the assistance of AI and machine learning algorithms; development of smart warehouse utilizing the up-to-date internet-of-things technology to better operate and manage the warehouse;

• development of machine learning solutions to automate various forecasting such as sales, inventory, replenishment, and supply chain based on the validated data models and big data capabilities;

• investment in the latest cloud technology, such as API-based storage and serverless infrastructure, to make our infrastructure more scalable, maintainable, and cost-effective, which in turn maximizes the business value.

We expect to use this amount in a prudent, sustainable manner within a period of 12 to 36 months from the Listing.

• approximately [REDACTED]% of the [REDACTED], or approximately HK$[REDACTED] million, is expected to be used for working capital and general corporate purposes.

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• approximately [REDACTED]% of the [REDACTED], or approximately HK$[REDACTED] million is expected to be used to repay the bank borrowings. We entered into a Facility Agreement with a principal amount of US$125 million on June 3, 2021 with a syndicate of banks. We plan to use our [REDACTED]to partially repay such loan upon the Listing, with the remaining to be repaid by our internal resources and cash generated from operations. See “Financial Information – Recent Developments and Material Adverse Change” for more details on such term loan facility.

In the event that the [REDACTED] is set at the Maximum [REDACTED]orthe Minimum [REDACTED] of the indicative [REDACTED] range, the [REDACTED]ofthe[REDACTED] will increase or decrease by approximately HK$[REDACTED] million, respectively. If we make an upward or downward [REDACTED] adjustment to set the final [REDACTED] to be above or below the mid-point of the [REDACTED] Range, we will increase or decrease the allocation of the [REDACTED] to the above purposes on a pro rata basis.

To the extent that the [REDACTED] from the [REDACTED] are either more or less than expected, we may adjust our allocation of the [REDACTED] for the above purposes on a pro rata basis.

To the extent that the [REDACTED]ofthe[REDACTED] are not immediately required for the above purposes or if we are unable to put into effect any part of our plan as intended, we will hold such funds in short-term deposits with licensed banks or authorized financial institutions so long as it is deemed to be in the best interests of the Company. In such event, we will comply with the appropriate disclosure requirements under the Listing Rules.

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Undertakings to the Stock Exchange pursuant to the Listing Rules

(A) Undertakings by our Company

Pursuant to Rule 10.08 of the Listing Rules, our Company has undertaken to the Stock Exchange that it will not exercise its power to issue any further Shares, or securities convertible into Shares (whether or not of a class already listed) or enter into any agreement to such an issue within six months from the Listing Date (whether or not such issue of our Shares or securities will be completed within six months from the Listing Date), except (a) pursuant to the [REDACTED] or (b) under any of the circumstances provided under Rule 10.08 of the Listing Rules.

[REDACTED]

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The following is the text of a report set out on pages IA-1 to IA-2, received from the Company’s reporting accountant, PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this [REDACTED]. It is prepared and addressed to the directors of the Company and to the Joint Sponsors pursuant to the requirements of HKSIR 200 Accountants’ Reports on Historical Financial Information in Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants.

[Letterhead of PricewaterhouseCoopers] [DRAFT]

ACCOUNTANT’S REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE DIRECTORS OF EBEAUTY HOLDINGS (CAYMAN) LIMITED AND CLSA CAPITAL MARKETS LIMITED AND CREDIT SUISSE (HONG KONG) LIMITED

Introduction

We report on the historical financial information of eBeauty Holdings (Cayman) Limited (the “Company”) and its subsidiaries (together, the “Group”) set out on pages IA-3 to IA-104, which comprises the consolidated balance sheets as at December 31, 2019 and 2020, the Company’s balance sheets as at December 31, 2019 and 2020, and the consolidated statements of comprehensive income, the consolidated statements of changes in equity and the consolidated statements of cash flows for the period from January 7, 2019 (date of incorporation) to December 31, 2019 and for the year ended December 31, 2020 (the “Relevant Periods”) and a summary of significant accounting policies and other explanatory information (together, the “Historical Financial Information”). The Historical Financial Information set out on pages IA-3 to IA-104 forms an integral part of this report, which has been prepared for inclusion in the [REDACTED] of the Company dated [date] (the “[REDACTED]”) in connection with the [REDACTED] of shares of the Company on the Main Board of The Stock Exchange of Hong Kong Limited.

Directors’ responsibility for the Historical Financial Information

The directors of the Company are responsible for the preparation of Historical Financial Information that gives a true and fair view in accordance with the basis of presentation and preparation set out in Notes 1.2 and 2.1 to the Historical Financial Information, and for such internal control as the directors determine is necessary to enable the preparation of Historical Financial Information that is free from material misstatement, whether due to fraud or error.

Reporting accountant’s responsibility

Our responsibility is to express an opinion on the Historical Financial Information and to report our opinion to you. We conducted our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 200, Accountants’ Reports on Historical Financial Information in Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). This standard requires that we comply with ethical standards and plan and perform our work to obtain reasonable assurance about whether the Historical Financial Information is free from material misstatement.

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Our work involved performing procedures to obtain evidence about the amounts and disclosures in the Historical Financial Information. The procedures selected depend on the reporting accountant’s judgement, including the assessment of risks of material misstatement of the Historical Financial Information, whether due to fraud or error. In making those risk assessments, the reporting accountant considers internal control relevant to the entity’s preparation of Historical Financial Information that gives a true and fair view in accordance with the basis of presentation and preparation set out in Notes 1.2 and 2.1 to the Historical Financial Information in order to design procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our work also included evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the Historical Financial Information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion, the Historical Financial Information gives, for the purposes of the accountant’s report, a true and fair view of the financial position of the Company as at December 31, 2019 and 2020 and the consolidated financial position of the Group as at December 31, 2019 and 2020 and of its consolidated financial performance and its consolidated cash flows for the Relevant Periods in accordance with the basis of presentation and preparation set out in Notes 1.2 and 2.1 to the Historical Financial Information.

REPORT ON MATTERS UNDER THE RULES GOVERNING THE LISTING OF SECURITIES ON THE STOCK EXCHANGE OF HONG KONG LIMITED (THE “LISTING RULES”) AND THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE

Adjustments

In preparing the Historical Financial Information, no adjustments to the Underlying Financial Statements as defined on page IA-3 have been made.

Dividends

We refer to note 38 to the Historical Financial Information which states that no dividends have been paid by eBeauty Holdings (Cayman) Limited in respect of the Relevant Periods.

No statutory financial statements for the Company

No statutory financial statements have been prepared for the Company since its date of incorporation.

[PricewaterhouseCoopers] Certified Public Accountants Hong Kong [Date]

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I. HISTORICAL FINANCIAL INFORMATION OF THE GROUP

Preparation of Historical Financial Information

Set out below is the Historical Financial Information which forms an integral part of this accountant’s report.

The financial statements of the Group for the Relevant Periods, on which the Historical Financial Information is based, were audited by PricewaterhouseCoopers in accordance with International Standards on Auditing issued by the IAASB (“Underlying Financial Statements”).

The Historical Financial Information is presented in Renminbi and all value are rounded to the nearest thousand (RMB’000) except when otherwise indicated.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the period from January 7, 2019 to Year ended Notes December 31, 2019 December 31, 2020 RMB’000 RMB’000

Revenue 7 1,079,383 1,659,546 Cost of revenue 10 (579,654) (819,087)

Gross profit 499,729 840,459

Selling and distribution expenses 10 (86,851) (200,617) General and administrative expenses 10 (121,642) (187,375) Research and development expenses 10 (14,051) (28,116) (Impairment losses)/reversal of impairment losses on financial assets and contract assets, net (3,565) 2,582 Other income 8 7,925 37,070 Other expense 8 – (25,287) Other gains – net 9 5,797 13,417

Operating profit 287,342 452,133

Finance income 12 398 2,145 Finance costs 12 (22,041) (31,125)

Finance costs – net (21,643) (28,980)

Share of net (losses)/profit of joint ventures accounted for using the equity method 33 (35) 1,318

Profit before income tax 265,664 424,471

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For the period from January 7, 2019 to Year ended Notes December 31, 2019 December 31, 2020 RMB’000 RMB’000

Income tax expenses 13 (61,813) (99,708)

Profit for the period/year 203,851 324,763

Profit attributable to owners of the Company 203,851 324,763

Other comprehensive loss: Items that may be reclassified to profit or loss Currency translation difference (2,420) (676)

Total comprehensive income for the period/year 201,431 324,087

Total comprehensive income for the period/year attributable to owners of the Company 201,431 324,087

Earnings per share for profit attributable to the ordinary equity holders of the Company: Basic earnings per share (in RMB per share) 14 2.42 3.25

Diluted earnings per share (in RMB per share) 14 1.63 2.19

The above consolidated statements of comprehensive income should be read in conjunction with the accompanying notes.

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CONSOLIDATED BALANCE SHEETS

As at As at December 31, December 31, Notes 2019 2020 RMB’000 RMB’000

ASSETS

Non-current assets Property, plant and equipment 15 10,891 13,524 Right-of-use assets 16 26,335 48,916 Intangible assets 17 1,049,761 979,026 Financial assets at fair value through profit or loss 18 – 13,145 Investment accounted for using the equity method 33 111 6,562 Deferred tax assets 24 3,952 8,018 Prepayments, other receivables and other assets-non-current 21 1,314 2,908

Total non-current assets 1,092,364 1,072,099

Current assets Inventories 19 101,857 130,942 Contract assets 20 428,830 314,644 Trade receivables 21 193,993 209,923 Prepayments, other receivables and other assets-current 21 106,362 272,490 Financial assets at fair value through profit or loss 18 216,060 433,708 Restricted cash 22 – 92,000 Cash and cash equivalents 22 140,993 131,141

Total current assets 1,188,095 1,584,848

Total assets 2,280,459 2,656,947

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As at As at December 31, December 31, Notes 2019 2020 RMB’000 RMB’000

LIABILITIES

Non-current liabilities Borrowings 23 442,211 – Lease liabilities 16 18,662 26,256 Deferred tax liabilities 24 136,079 118,872

Total non-current liabilities 596,952 145,128

Current liabilities Contract liabilities 7 121 252 Borrowings 23 68,704 410,249 Trade payables 25 9,965 27,226 Accruals and other payables 26 187,870 208,466 Lease liabilities 16 6,189 19,956 Current income tax liabilities 91,730 108,385

Total current liabilities 364,579 774,534

Total liabilities 961,531 919,662

EQUITY

Share capital 27 98 98 Treasury share 28 (36,997) (36,997) Share Premium 27 238,092 238,092 Reserves 28 913,884 1,007,478 Retained earnings 29 203,851 528,614

1,318,928 1,737,285

Total equity 1,318,928 1,737,285

Total equity and liabilities 2,280,459 2,656,947

The above consolidated balance sheets should be read in conjunction with the accompanying notes.

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BALANCE SHEETS OF THE COMPANY

As at As at December 31, December 31, Notes 2019 2020 RMB’000 RMB’000

ASSETS

Non-current assets Investments in subsidiaries 31 1,181,673 1,201,677

Total non-current assets 1,181,673 1,201,677

Current assets Prepayments and other receivables 21 – 13,103 Cash and cash equivalents 38,070 3,081

Total current assets 38,070 16,184

Total assets 1,219,743 1,217,861

LIABILITIES

Current liabilities Accruals and other payables 26 71,871 56,419

Total current liabilities 71,871 56,419

Total liabilities 71,871 56,419

EQUITY

Share capital 27 98 98 Treasury share 28 (36,997) (36,997) Share Premium 27 238,092 238,092 Reserves 28 957,220 979,099 Accumulated deficit (10,541) (18,850)

1,147,872 1,161,442

Total equity 1,147,872 1,161,442

Total equity and liabilities 1,219,743 1,217,861

The above balance sheet should be read in conjunction with the accompanying notes.

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CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Attributable to owners of the company Share Treasury Share Retained Total Notes capital share Premium Reserves earnings equity RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Balance at January 7, 2019 ––––––

Profit for the period 29 ––––203,851 203,851 Other comprehensive loss for the period 28 – – – (2,420) – (2,420)

Total comprehensive income for the period – – – (2,420) 203,851 201,431

Issuance of ordinary shares 98 – 238,092 – – 238,190 Share-based compensation 32 – – – 35,321 – 35,321 Share held for management 27 – (36,997) – – – (36,997) Deemed contribution to the Company from controlling shareholder 28(i) – – – 880,983 – 880,983 Balance at December 31, 2019 98 (36,997) 238,092 913,884 203,851 1,318,928

Attributable to owners of the company Share Treasury Share Retained Total Notes capital share Premium Reserves earnings equity RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Balance at January 1, 2020 98 (36,997) 238,092 913,884 203,851 1,318,928

Profit for the year 29 ––––324,763 324,763 Other comprehensive loss for the year 28 – – – (676) – (676) Total comprehensive income for the year – – – (676) 324,763 324,087

Share-based compensation 32 – – – 94,270 – 94,270

Balance at December 31, 2020 98 (36,997) 238,092 1,007,478 528,614 1,737,285

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

For the period from January 7, 2019 to Year ended Notes December 31, 2019 December 31, 2020 RMB’000 RMB’000

Cash flows from operating activities Cash generated from operations 94,786 555,989 Interest received 484 2,145 Income tax paid (47,685) (104,326)

Net cash generated from operating activities 30(a) 47,585 453,808

Cash flows from investing activities Payments for purchase of intangible assets 17 (747) (180) Payments for purchases of property, plant and equipment 15 (3,596) (10,244) Proceeds from disposal of property, plant and equipment 30(b) 1,169 914 Payments for purchase of financial assets at fair value through profit or loss 5 (2,274,440) (2,219,205) Proceeds from disposal of financial assets at fair value through profit or loss 5 2,314,388 2,003,360 Investment in an associate 33 – (5,500) Payment for acquisition of subsidiary, net of cash acquired 34(d) (1,368,772) – Payment for letter of guarantee 22 – (30,000) Loans to Hangzhou UCO before acquisition (90,000) – Loans to related parties 37 (2,676) – Proceeds from borrowings from related parties 37 2,691 –

Net cash used in investing activities (1,421,983) (260,855)

Cash flows from financing activities Proceeds from capital contribution 27 238,190 – Shareholder’s loan from the controlling shareholder 28, 34 790,983 – Proceeds from borrowings 30(d) 520,000 27,699 Repayment of borrowings 30(d) (10,189) (130,633) Payment for pledge guarantee 22 – (62,000) Interest paid on borrowings (18,997) (24,061) Lease payments 16, 30(d) (5,399) (11,671)

Net cash generated from/(used in) financing activities 1,514,588 (200,666)

Net increase/(decrease) in cash and cash equivalents 140,190 (7,713) Cash and cash equivalents at beginning of the period/year – 140,993 Exchange gains/(losses) on cash and cash equivalents 803 (2,139)

Cash and cash equivalents at end of the period/year 22 140,993 131,141

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

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II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION

1 GENERAL INFORMATION, ACQUISITION AND BASIS OF PRESENTATION

1.1 General information

eBeauty Holdings (Cayman) Limited (the “Company”) was incorporated in Cayman Island on January 7, 2019 as an exempted company with limited liability under the Company Law of the Cayman Islands.

During the period from January 7, 2019 to December 31, 2019 and the year ended December 31, 2020, the Company is an investment holding company. The Company, together with its subsidiaries listed in Note 1.2 (collectively referred to as the “Group”), are principally engaged in providing its customers with end-to-end E-commerce solutions including the sales of cosmetics, online store design and setup, online store operations, customer services, supply chain services, visual merchandising and marketing, warehousing and order fulfillment (together “the Listing Business”) in the People’s Republic of China (the “PRC”).

The Company is controlled by CITIC Capital Beauty Investment Limited, a subsidiary of CITIC Capital Holdings Limited (Hong Kong), which is considered as the ultimate holding company of the Company.

The Financial Information is presented in Renminbi (“RMB”), unless otherwise stated.

1.2 Basis of Presentation

Acquisition of Listing Business

Prior to the incorporation of the Company, the Listing Business was owned and operated by Hangzhou UCO Cosmetic Limited (“Hangzhou UCO”), Hangzhou Youyue Brands Management Co., Ltd. (“Youyue”) and Niwang E-Commerce (Hangzhou) Co., Ltd. (“Niwang”) (together, the “Acquired Companies”).

Hangzhou UCO, Youyue and Niwang were incorporated in Hangzhou on July 24, 2012, August 29, 2013 and June 28, 2017, respectively, with limited liability under the Companies Law of the People’s Republic of China (the “PRC”), and are principally engaged in providing its customers with end-to-end E-commerce solutions including the sales of cosmetics, online store design and setup, online store operations, customer services, warehousing and order fulfillment.

On April 15, 2019, Hangzhou Youmei Cosmetics Technology Development Co., Ltd., (“Hangzhou Youmei Cosmetics”) a wholly-owned subsidiary of the Company, completed its acquisition of 100% of the equity interest in Hangzhou UCO, and thereby the operation of its Listing Business.

On April 30, 2019, the Company completed the acquisitions of the 100% equity interests in Youyue and Niwang, and thereby the operation of their Listing Business (refer to Note 34 for details).

Upon completion of the Reorganization and as of the date of this report, the Company have direct or indirect interests in the following major subsidiaries:

Date of Place of incorporation or Name of entity incorporation Ownership interest held by the Group as at Issued capital Paid-up capital Principal activities acquisition As at As at As at December 31, December 31, March 29, 2019 2020 2021 % % % ’000 ’000 Directly held – 2015A Hong Kong Limited Hong Kong 100 100 100 HKD0.001 USD150,114 Investment holding Incorporated on (“2015A”) (f) June 7, 2016 eBeauty Holdings (Hong Kong) Hong Kong 100 100 100 USD1 USD1 Investment holding Incorporated on Limited (f) January 24, 2019 Hangzhou Youyue Brands PRC 100 100 100 RMB5,000 RMB5,000 Providing Acquired on April Management Co., Ltd. (“Youyue”) E-commerce 30, 2019 (d) solutions Niwang E-Commerce (Hangzhou) PRC 100 100 100 RMB5,000 – Providing Acquired on April Co., Ltd. (“Niwang”) (d) E-commerce 30, 2019 solutions

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Indirectly held – Marco Polo Cosmetic E-commerce Hong Kong N/A 100 100 HKD0.1 HKD0.1 Providing Acquired on January Limited (“Marco Polo”, the E-commerce 1, 2020 subsidiary of 2015A) (e) solutions Shenzhen Qianhai Youyi Beauty PRC 100 100 100 RMB1,500,000 RMB1,004,182 Investment holding Incorporated on Investment Co., Ltd. (“Shenzhen January 31, 2019 Qianhai”) (d) Hangzhou Youmei Cosmetics (a) PRC 100 – – N/A N/A Software Incorporated on development and February 12, 2019 consulting Hangzhou UCO (d) PRC 100 100 100 RMB40,000 RMB40,000 Providing Acquired on April E-commerce 15, 2019 solutions Hangzhou Ningjiuwei Commerce Co., PRC 100 100 100 RMB21,000 RMB21,000 Providing Acquired on April Ltd. (“Hangzhou Ningjiuwei”, the E-commerce 15, 2019 subsidiary of Hangzhou UCO) (d) solutions Indirectly held – Hangzhou Meiba Technology Co., PRC 100 100 100 RMB5,000 RMB5,000 Software Acquired on April Ltd. (“Hangzhou Meiba”, the development and 15, 2019 subsidiary of Hangzhou UCO) (d) consulting UCO Cosmetic Limited Hong Kong 100 100 100 HKD10,000 HKD10,000 Providing Acquired on April (“UCO HK”) (e) E-commerce 15, 2019 solutions Hangzhou Youpin Cosmetic Limited PRC 100 – – N/A N/A Providing Acquired on April (“Youpin”) (b) E-commerce 15, 2019 solutions Hangzhou Youmei Beauty Co., Ltd. PRC 100 100 100 RMB5,000 RMB5,000 Providing Incorporated on (“Hangzhou Youmei”) E-commerce November 26, solutions 2019 Shanghai Youni Brand Management PRC 100 100 100 RMB5,000 – Providing Incorporated on Co., Ltd (“Youni”) E-commerce December 2, 2019 solutions Shanghai Meiba E-business Co., Ltd PRC – 100 100 RMB5,000 – Providing Incorporated on (“Shanghai Meiba”) E-commerce August 8, 2020 solutions Haining Beifen Information PRC 100 – – N/A N/A Providing Acquired on April Technology Limited (“Beifen”, the warehousing and 30, 2019 subsidiary of Youyue) (c) logistic services ProA Supply Chain Management PRC – 100 100 RMB5,000 – Investment holding Incorporated on (Shanghai) Co., Ltd (d) January 3, 2020 Ruitai (Shanghai) Supply Chain PRC – 100 100 RMB5,000 – Providing Incorporated on Management Co., Ltd (d) warehousing and January 14, 2020 logistic services Shanghai ProA Information PRC – 100 100 RMB5,000 – Providing Incorporated on Technology Co., Ltd. (d) warehousing and August 21, 2020 logistic services Hangzhou Ruitai Supply Chain PRC – 100 100 RMB5,000 – Providing Incorporated on Management Co., Ltd. (d) warehousing and March 17, 2020 logistic services Jiaxing Langning Information PRC – 100 100 RMB5,000 – Providing Incorporated on Technology Co., Ltd (d) warehousing and April 20, 2020 logistic services Hangzhou Youpin Technology Co., PRC – 100 100 RMB5,000 – Software Incorporated on Ltd. (“Youpin Tech”) (d) development and December 4, 2020 consulting

(a) Upon acquisition on April 15, 2019, Hangzhou UCO was wholly owned by Hangzhou Youmei Cosmetics, an indirect subsidiary of the Company. In order to complete the merger of immediate holding company, the following transactions were undergone:

On October 20, 2020, Hangzhou UCO acquired the entire assets and liabilities in Hangzhou Youmei Cosmetics from Shenzhen Qianhai, the then immediate parent company of Hangzhou Youmei Cosmetics. The considerations were settled through the issuance of RMB40 million in registered capital to Shenzhen Qianhai by Hangzhou UCO.

Hangzhou UCO merged Hangzhou Youmei Cosmetics, and became the wholly owned subsidiary of Shenzhen Qianhai. Hangzhou Youmei Cosmetics handled company cancellation registration, dissolution and cancellation.

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(b) The statutory financial statements of Youpin for the years ended December 31, 2019 was audited by Zhejiang Zhengda Certified Public Accountants. On September 30, 2020, the Group terminated the operation of Youpin and Youpin was liquidated.

(c) The statutory financial statements of Beifen for the years ended December 31, 2019 was audited by Zhejiang Zhengda Certified Public Accountants. On October 21, 2020, the Group terminated the operation of Beifen and Beifen was liquidated.

(d) The statutory financial statements for the year ended December 31, 2019 and 2020 were audited by Zhejiang Zhengda Certified Public Accountants.

(e) The statutory financial statements of Marco Polo and UCO HK for the years ended December 31, 2019 and 2020 were audited by Huizhi Certified Public Accountants.

(f) No statutory audit was required.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the year and the period presented, unless otherwise stated.

2.1 Basis of preparation

(i) Compliance with IFRS

The preparation of the Group’s Financial Information in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Group’s Financial Information are disclosed in Note 6.

(ii) Historical cost convention

The Group’s Financial Information has been prepared under the historical cost convention, as modified by the revaluation of financial assets at fair value through profit or loss, which are carried at fair value.

(iii) New and amended standards adopted by the group

The IASB has issued a number of new and revised IFRS during the Relevant Periods. For the purpose of preparing the Group’s Financial Information, the Group has adopted all applicable new and revised IFRSs including IFRS 9 Financial Instruments (“IFRS 9”), IFRS 15 Revenue from Contracts with Customers (“IFRS 15”) and IFRS 16 Leases (“IFRS 16”) throughout the Relevant Periods except for any new standards or interpretation that are not yet effective for the reporting period ended 31 December 2020.

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(iv) New standards and interpretations not yet adopted

Standards, amendments and interpretations that have been issued but not yet effective and not been early adopted by the Group during the Relevant Periods are as follows:

Effective for annual periods beginning on New standards, amendments or after

IFRS 17 Insurance contracts January 1, 2023 IFRS 17 (amendments) Insurance contracts January 1, 2023 Amendments to IAS39, Interests Rate Benchmark Reform – Phase 2 January 1, 2021 IFRS4, IFRS7, IFRS9 and IFRS16 IFRS 10 and IAS 28 Sale or contribution of assets between an To be determined (amendments) investor and its associates or joint venture Amendments to IAS 1 Classification of Liabilities as Current or January 1, 2023 Non-current Amendments to IFRS 3 Reference to the Conceptual Framework January 1, 2022 Amendments to IAS 37 Onerous Contracts – Cost of Fulfilling a January 1, 2022 Contract Amendment to IAS 16 Property, Plant and Equipment: Proceeds January 1, 2022 before intended use Annual improvements to IFRS standards January 1, 2022 2018-2020 Amendments to IAS 1 Disclosure of Accounting Policies January 1, 2023 and IFRS Practice Statement 2 Amendments to IAS 8 Definition of Accounting Estimates January 1, 2023

The Group has already commenced an assessment of the impact of these new or revised standards and interpretations, and amendments, certain of which are relevant to the Group’s operations. According to the preliminary assessment made by the Directors, no significant impact on the financial performance and financial position of the Group is expected when they become effective.

2.2 Principles of consolidation and equity accounting

(i) Subsidiaries

Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity where the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The acquisition method of accounting is used to account for business combinations by the Group. (refer to Note 2.23)

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

(ii) Associates

Associates are all entities over which the Group has significant influence but not control or joint control. This is generally the case where the Group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting (see (iv) below), after initially being recognised at cost.

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(iii) Joint arrangements

Under IFRS 11 Joint Arrangements, investments in joint arrangements are classified as either joint operations or joint ventures. The classification depends on the contractual rights and obligations of each investor, rather than the legal structure of the joint arrangement.

Joint ventures

Interests in joint ventures are accounted for using the equity method (see (iv) below), after initially being recognised at cost in the consolidated balance sheets.

(iv) Equity method

Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses of the investee in profit or loss, and the Group’s share of movements in other comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates and joint ventures are recognised as a reduction in the carrying amount of the investment.

Where the Group’s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity.

Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of equity-accounted investees have been changed where necessary to ensure consistency with the policies adopted by the Group.

The carrying amount of equity-accounted investments is tested for impairment in accordance with the policy described in Note 2.7.

(v) Changes in ownership interests

Transactions with non-controlling interests that do not result in a loss of control are accounted for as equity transactions – that is, as transactions with the owners of the subsidiary in their capacity as owners. The difference between fair value of any consideration paid or received and the relevant share acquired or disposed of the carrying amount of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

When the Group ceases to consolidate or equity account for an investment because of a loss of control, joint control or significant influence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognized in profit or loss. This fair value becomes the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified to profit or loss.

If the ownership interest in a joint venture or an associate is reduced but joint control or significant influence is retained, only a proportionate share of the amounts previously recognized in other comprehensive income are reclassified to profit or loss where appropriate.

2.3 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker (“CODM”). The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer that makes strategic decisions.

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2.4 Foreign currency translation

(i) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Renminbi (“RMB”), which is the Company’s and Group’s presentation currency.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions, and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates, are generally recognised in profit or loss. They are deferred in equity if they relate to qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation.

Foreign exchange gains and losses that relate to cash and cash equivalents and borrowings are presented in the statement of profit or loss, within finance costs. All other foreign exchange gains and losses are presented in the statement of profit or loss on a net basis within other gains-net.

Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss, and translation differences on non-monetary assets such as equities classified as at fair value through other comprehensive income are recognised in other comprehensive income.

(iii) Group companies

The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

• income and expenses for each statement of profit or loss and statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and

• all resulting exchange differences are recognised in other comprehensive income.

On consolidation, exchange differences arising from the translation of any net investment in foreign entities, are recognised in other comprehensive income. When a foreign operation is sold, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

2.5 Property, plant and equipment

Property, plant and equipment is stated at historical cost less accumulated depreciation and accumulated impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

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Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.

Depreciation on property, plant and equipment is calculated using the straight-line method to allocate the cost of the assets, net of their residual values, over their estimated useful lives as follows:

Electronic devices 3 years Vehicle 4 years Furniture and office equipment 5 years Machinery 3 years Leasehold improvements Over the shorter of the expected life of leasehold improvements or the lease term

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (Note 2.7).

Other gains/losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss.

Construction in progress represents leasehold improvements under construction or machinery under installation, and is stated at cost less provision for impairment losses. Cost includes the costs of construction and acquisition as well as capitalised borrowing costs minus the government grants received as a compensation to the interest expenses spent. When the assets concerned are available for use, the costs are transferred to property, plant and equipment and depreciated in accordance with the policy as stated above.

2.6 Intangible assets

(i) Goodwill

Goodwill is measured as described in Note 2.23. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

(ii) Trademarks

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(iii) Software

– It is technically feasible to complete the software so that it will be available for use;

– Management intends to complete the software and use or sell it;

– There is an ability to use or sell the software;

– It can be demonstrated how the software will generate probable future economic benefits;

– Adequate technical, financial and other resources to complete the development and to use or sell the software are available; and

– The expenditure attributable to the software during its development can be reliably measured.

Directly attributable costs that are capitalised as part of the software include employee costs and an appropriate portion of relevant overheads.

Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use.

(iv) Other intangible assets

(v) Amortisation methods and useful lives

The Group amortises intangible assets with a limited useful life, using the straight-line method over the following periods:

Trademarks 10 years Software 10 years Brand 10 years Distribution network 5 – 10 years Customer relationship 5 – 10 years Technology 5 years

The estimated useful life is based on the estimated beneficial period of each corresponding intangible assets.

2.7 Impairment of non-financial assets

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

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2.8 Investments and other financial assets

(i) Classification

The Group classifies its financial assets in the following measurement categories:

those to be measured subsequently at fair value (either through other comprehensive income (“OCI”) or through profit or loss), and

those to be measured at amortised cost.

The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.

For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI).

The Group reclassifies debt investments when and only when its business model for managing those assets changes.

(ii) Recognition and derecognition

Regular way purchases and sales of financial assets are recognised on trade date, being the date on which the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

(iii) Measurement

At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.

Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.

Debt instruments

Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the cash flow characteristics of the asset. There are two measurement categories into which the Group classifies its debt instruments:

• Amortised cost: Assets that are held for collection of contractual cash flows, where those cash flows represent solely payments of principal and interest, are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains together with foreign exchange gains and losses. Impairment losses are presented as separate line item in the statement of profit or loss.

• FVPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is subsequently measured at FVPL is recognised in profit or loss and presented net within other gains – net in the period in which it arises.

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(iv) Impairment

The Group assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

For contract assets and trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables, see Note 3(b) for further details.

(v) Derecognition

The Group derecognizes a financial asset, if the part being considered for derecognition meets one of the following conditions: (i) the contractual rights to receive the cash flows from the financial asset expire; or (ii) the contractual rights to receive the cash flows of the financial asset have been transferred, the Group transfers substantially all the risks and rewards of ownership of the financial asset; or (iii) the Group retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to the eventual recipient in an agreement that meets all the conditions of de-recognition of transfer of cash flows (“pass through” requirements) and transfers substantially all the risks and rewards of ownership of the financial asset.

Where a transfer of a financial asset in its entirety meets the criteria for derecognition, the difference between the two amounts below is recognized in profit or loss:

• the carrying amount of the financial asset transferred; and

• the sum of the consideration received from the transfer and any cumulative gain or loss that has been recognized directly in equity.

If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group continues to recognize the asset to the extent of its continuing involvement and recognizes an associated liability.

(vi) Other financial liabilities

A financial liability is derecognized when the obligation under the liability is discharged, cancelled, or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability, and the difference between the respective carrying amounts is recognized in profit or loss.

(vii) Offsetting financial instruments

Financial assets and liabilities are offset and the net amount is reported in the consolidated balance sheets where the Group currently has a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.

2.9 Inventories

Inventories, including products and packing materials are valued at the lower of cost or net realizable value. Cost of inventories is determined using the weighted average cost method. Costs of purchased inventory are determined after deducting rebates and discounts. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

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2.10 Trade receivables

Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. If collection of trade and other receivables is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets. The majority of these customers are with credit terms of 5 to 120 days.

Trade receivables are recognised initially at the amount of consideration that is unconditional, unless they contain significant financing components when they are recognised at fair value. The Group holds the trade receivables with the objective of collecting the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method. See Note 3(b) for further information about the Group’s accounting for trade receivables.

2.11 Cash and cash equivalents

For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

2.12 Share capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

2.13 Trade payables and accruals and other payables

Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of the financial year which are unpaid. The amounts are unsecured and are usually paid within 60 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.

2.14 Borrowings and borrowing costs

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in consolidated statements of comprehensive income over the period of the borrowings using the effective interest method.

Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings, pending their expenditure on qualifying assets, is deducted from the borrowing costs eligible for capitalisation.

Other borrowing costs are expensed in the period in which they are incurred.

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2.15 Current and deferred income tax

The income tax expense or credit for the period is the tax payable on the current period’s taxable income, based on the applicable income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

(i) Current income tax

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company and its subsidiaries and joint ventures operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and considers whether it is probable that a taxation authority will accept an uncertain tax treatment. The Group measures its tax balances either based on the most likely amount or the expected value, depending on which method provides a better prediction of the resolution of the uncertainty.

(ii) Deferred income tax

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that, at the time of the transaction, affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in foreign operations where the Company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and liabilities and where the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

2.16 Employee benefits

(i) Short-term obligations

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(ii) Pension obligations

(iii) Housing funds, medical insurances and other social insurances

Employees of the Group in the PRC are entitled to participate in various government-supervised housing funds, medical insurances and other social insurance plan. The Group contributes on a monthly basis to these funds based on certain percentages of the salaries of the employees, subject to certain ceiling. The Group’s liability in respect of these funds is limited to the contributions payable in each year. Contributions to the housing funds, medical insurances and other social insurances are expensed as incurred.

(iv) Share-based payments

(a) Equity-settled share-based payment transactions

– including any market performance conditions (for example, an entity’s share price);

– excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period); and

– including the impact of any non-vesting conditions (for example, the requirement for employees to save or holding shares for a specified period of time).

(b) Share-based payment transaction among group entities

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2.17 Revenue recognition

• provides all of the benefits received and consumed simultaneously by the customer;

• creates and enhances an asset that the customer controls as the Group performs; or

• does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date.

The following is a description of the accounting policy for the principal revenue streams of the Group.

(i) Distribution of brand partners’ products

The Group generates product sales revenues primarily through selling products to consumers under the distribution model. Revenue under the distribution model is recognized on a gross basis and presented as product sales on the consolidated statements of comprehensive income, because (i) The Group rather than the brand partner, is primarily responsible for fulfilling the promise to provide the specified good to consumers; (ii) The Group controls the goods purchased from brand partners before transferring to consumers, and bears the physical and general inventory risk once the products are delivered to its warehouse; (iii) The Group generally has discretion in establishing price.

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B2B Model

For certain Distributors, control of goods is not transferred to the Distributors until the goods are sold to end customers. The Group has the call back right and controls the goods before end customers confirm acceptance.

B2C Model

Under B2C model, the platforms act as agents of the Group as the platforms’ responsibilities are limited to offering an online marketplace that enables the Group to sell products to end customers. The end customers are identified as the customers of the Group. The Group is primarily obligated in selling products to end customers and is subject to inventory risk. When the products are physically received by the end customers, control of the products are transferred and revenue can be recognized by the Group. Commission paid to platforms, which are considered as incremental costs of obtaining a contract, are expenses as incurred because the amortization period of the asset is less than one year.

(ii) Rendering of Services

The Group provides a variety of E-commerce services including IT solutions, marketing strategy advisory, digital marketing execution, omni-channel operations, customer services, order fulfilment and market discovery and entry services which brand partners may elect to use all or some of them that best fit their needs. Each category of the service provided is considered as one performance obligation as they are distinct from each other. Most of the Group’s service contracts including multiple performance obligations as they include provision of a combination of various services based on the brand partner’s requirements. The Group charges its brand partners a combination of fixed fees and/or variable fees based on the value of merchandise sold or other variable factors such as number of orders fulfilled. The transaction price is allocated to each performance obligation using the relative stand-alone selling price. The Group generally determines the stand-alone selling price based on the prices charged to comparable customers or expected cost plus margin.

The Group acts as the principal in its service provision, and therefore, revenue generated from these service arrangements is recognized on a gross basis and presented as services revenue on the consolidated statements of comprehensive income. Contract assets represent the Group’s right to consideration in exchange for E-commerce services that the group has transferred to brand partners, which is subject to further negotiation and reconciliation with brand partners.

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2.18 Leases as lessee

(i) The Group’s leasing activities and how these are accounted for