Beijing Evercare Medical Technology Group Co., Ltd. 北京伊美爾醫療科技

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

Application Proof of

Beijing Evercare Medical Technology Group Co., Ltd. 北京伊美爾醫療科技集團股份公司 (the “Company”) (A joint stock company incorporated in the People’s Republic of China with limited liability)

WARNING

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

This Application Proof is in draft form. The information contained in it is incomplete and is subject to change which can be material. By viewing this document, you acknowledge, accept and agree with the Company, its sole sponsor, 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 Exchange’s website does not give rise to any obligation of the Company, its sole sponsor, advisers or members of the underwriting syndicate to proceed with an offering in Hong Kong or any other jurisdiction. There is no assurance that the Company will proceed with the offering;

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

(d) the Application Proof is not the final listing document and may be updated or revised by the Company from time to time in accordance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited;

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

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

(g) neither the Company nor any of its affiliates, 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 Exchange and the Commission may accept, return or reject the application for the subject public offering and/or listing.

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

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

北京伊美爾醫療科技集團股份公司 BEIJING EVERCARE MEDICAL TECHNOLOGY GROUP CO., LTD. (A joint stock company incorporated in the People’s Republic of China with limited liability) [REDACTED] Number of [REDACTED] under the : [REDACTED] H Shares (subject to the [REDACTED] [REDACTED]) Number of [REDACTED] : [REDACTED] H Shares (subject to reallocation) Number of [REDACTED] : [REDACTED] H Shares (subject to reallocation and the [REDACTED]) Maximum [REDACTED] : HK$[REDACTED] per H Share, plus brokerage of 1%, SFC transaction levy of 0.0027% and Hong Kong Stock Exchange trading fee of 0.005% (payable in full on application in Hong Kong dollars and subject to refund) Nominal Value : RMB[REDACTED] per H Share Stock Code : [REDACTED]

Sole Sponsor

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Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this document, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document. A copy of this document, having attached thereto the documents specified in “Appendix VII – Documents Delivered to the Registrar of Companies and Available for Inspection,” has been registered by the Registrar of Companies in Hong Kong as required by Section 342C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Chapter 32 of the Laws of Hong Kong. The Securities and Futures Commission of Hong Kong and the Registrar of Companies in Hong Kong take no responsibility as to the contents of this document or any other documents referred to above. The [REDACTED] is expected to be determined by agreement between the [REDACTED] (on behalf of the [REDACTED]) and our Company on the [REDACTED]. The [REDACTED] is expected to be on or around [REDACTED] (Hong Kong time) and, in any event, not later than [REDACTED] (Hong Kong time). The [REDACTED] will not be more than HK$[REDACTED] per [REDACTED] and is currently expected to be not less than HK$[REDACTED] per [REDACTED]. If, for any reason, the [REDACTED] is not agreed by [REDACTED] (Hong Kong time) between the [REDACTED] (on behalf of the [REDACTED]) and our Company, the [REDACTED] will not proceed and will lapse. The [REDACTED], on behalf of the [REDACTED], may, where considered appropriate and with our consent, reduce the number of [REDACTED] and/or the indicative [REDACTED] range below that is stated in this document (which is HK$[REDACTED] to HK$[REDACTED]) at any time prior to the morning of the last day for lodging applications under the [REDACTED]. In such case, notices of the reduction in the number of [REDACTED] and/or the indicative [REDACTED] range will be published on the website of our Company at www.evercarecn.com and on the website of the Hong Kong Stock Exchange at www.hkexnews.hk as soon as practicable following the decision to make such reduction, and in any event not later than the morning of the last day for lodging applications under the [REDACTED]. Further details are set forth in the sections headed “Structure of the [REDACTED]” and “How to Apply for [REDACTED]” in this document. We are incorporated, and a majority part of our businesses are located, in the PRC. Potential investors should be aware of the differences in the legal, economic and financial systems between the PRC and Hong Kong and that there are different risk factors relating to investment in PRC-incorporated businesses. Potential investors should also be aware that the regulatory framework in the PRC is different from the regulatory framework in Hong Kong and should take into consideration the different market nature of the H Shares. Such differences and risk factors are set out in the sections headed “Risk Factors,” “Regulatory Environment” and “Appendix V – Summary of Articles of Association” in this document. The obligations of the [REDACTED] under the [REDACTED] are subject to termination by the [REDACTED] (on behalf of the [REDACTED]) if certain events occur prior to 8:00 a.m. on the [REDACTED]. Please refer to the section headed “[REDACTED]” in this document. The [REDACTED] have not been and will not be registered under the U.S. Securities Act or any state securities law in the United States and may be offered and sold only (a)in the United States to “Qualified Institutional Buyer” in reliance on Rule 144A or another exemption from, or in a transaction not subject to, registration under the U.S. Securities Act and (b) outside the United States in offshore transactions in reliance on Regulation S under the U.S. Securities Act.

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[REDACTED] 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

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IMPORTANT NOTICE TO INVESTORS

This document is issued by us solely in connection with the [REDACTED] and the [REDACTED] and does not constitute an offer to sell or a solicitation of an offer to buy any security other than the [REDACTED] offered by this document pursuant to the [REDACTED]. This document may not be used for the purpose of making, and does not constitute, an offer or invitation in any other jurisdiction or in any other circumstances. No action has been taken to permit a public offering of the [REDACTED] in any jurisdiction other than Hong Kong and no action has been taken to permit the distribution of this document in any jurisdiction other than Hong Kong. The distribution of this document for purposes of a [REDACTED] and the [REDACTED] and sale of the [REDACTED] in other jurisdictions are subject to restrictions and may not be made except as permitted under the applicable securities laws of such jurisdictions pursuant to registration with or authorization by the relevant securities regulatory authorities or an exemption therefrom.

You should rely only on the information contained in this document to make your investment decision. The [REDACTED] is made solely on the basis of the information contained and the representations made in this document. We have not authorized anyone to provide you with information that is different from what is contained in this document. Any information or representation not contained nor made in this document must not be relied on by you as having been authorized by us, the Sole Sponsor, the [REDACTED], the [REDACTED], the [REDACTED], any of the [REDACTED], any of our or their respective directors, officers, employees, agents, or representatives of any of them or any other parties involved in the [REDACTED].

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Expected Timetable ...... i

Contents ...... v

Summary ...... 1

Definitions ...... 11

Glossary of Technical Terms ...... 31

Forward-Looking Statements ...... 34

Risk Factors ...... 36

Waivers from Strict Compliance with the Listing Rules ...... 63

Information about this Document and the [REDACTED]...... 67

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Directors, Supervisors and Parties Involved in the [REDACTED]...... 73

Corporate Information ...... 77

Industry Overview ...... 79

Regulatory Environment ...... 90

History and Corporate Structure ...... 113

Business ...... 133

Relationship with our Controlling Shareholders ...... 213

Directors, Supervisors and Senior Management ...... 217

Substantial Shareholders ...... 232

Share Capital ...... 234

Financial Information ...... 240

Future Plans and Use of [REDACTED]...... 302

[REDACTED]...... 304

Structure of the [REDACTED]...... 317

How to Apply for [REDACTED]...... 327

Appendix I – Accountants’ Report ...... I-1

Appendix II – Unaudited Pro Forma Financial Information ...... II-1

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

Appendix IV – Summary of Principal Legal and Regulatory Provisions . . IV-1

Appendix V – Summary of Articles of Association ...... V-1

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

Appendix VII – Documents Delivered to the Registrar of Companies and Available for Inspection ...... VII-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. You should read the whole document before you decide to invest in the H Shares. There are risks associated with any investment. Some of the particular risks in investing in the H Shares are set out in “Risk Factors” in this document. You should read that section carefully before you decide to invest in the H Shares.

OUR MISSION Centering around our clients and sticking to the essence of medicine, we aspire to provide high-quality and one-stop aesthetic medical services with proven, safe and advanced technologies. OUR CORE VALUE We are dedicated to providing scientific, safe and proper aesthetic medical services that fit the needs of our clients. OVERVIEW We are a leading private aesthetic medical institution group in China. According to Frost & Sullivan, (i) we ranked first among all the private aesthetic medical institution groups1 in Northern China in terms of revenue from aesthetic medical services in 2020; and (ii) we ranked fourth among all the private aesthetic medical institution groups in China in terms of the same metric. Over our 22 years of operations, we endeavor to “make people beautiful in their own way (成人之美)” through continuously providing one-stop aesthetic medical services to beauty seekers (求美者) with a strategic focus on aesthetic non-surgical procedures. China is a large and fast growing market for aesthetic medical services. According to Frost & Sullivan, the total revenue of the aesthetic medical service market in China grew at a CAGR of 11.0% from RMB77.6 billion in 2016 to RMB117.6 billion in 2020, and is expected to grow at a CAGR of 19.7% from RMB135.3 billion in 2021 to RMB278.1 billion in 2025. China was the second largest aesthetic medical service market in terms of total revenue in 2019, while the penetration rate of aesthetic medical services in China was significantly lower than developed countries, according to Frost & Sullivan. Leveraging our leading market position, we believe we are well positioned to benefit from the fast growing aesthetic medical service market in China. We provide a broad range of (i) aesthetic non-surgical services, primarily comprising aesthetic injection procedures and aesthetic energy-based procedures; and (ii) aesthetic surgical services, primarily comprising aesthetic plastic procedures. We have been strategically focusing on aesthetic non-surgical procedures, which contributed the majority of our revenue during the Track Record Period. Compared to aesthetic surgical procedures, aesthetic non-surgical procedures generally have lower level of risk, higher affordability and shorter recovery time, and typically require repeated sessions over time, resulting in higher client stickiness. Therefore, their market acceptance and penetration have been increasing rapidly. In addition to their growing popularity, aesthetic non-surgical procedures can be relatively easier to standardize and implement centralized safety and quality control as well as client management, and therefore, are relatively more scalable and replicable. According to Frost & Sullivan, among the top five private aesthetic medical institution groups in China in terms of revenue from aesthetic medical services in 2020, we ranked first in terms of proportion of revenue from aesthetic non-surgical services. Beijing has been the focus of our business since our inception. We have also strategically expanded to, and will continue to expand our footprints in, the aesthetic medical service market in Northern China. As of the Latest Practicable Date, we owned and operated nine aesthetic medical institutions in five cities in Northern China, including five in Beijing, one in Tianjin, one in Qingdao, one in Jinan and one in Xi’an. One of our core competitive strengths that underpins our market leadership is our proprietary information technology infrastructure, which was developed in-house and has enabled us to digitalize, streamline and standardize substantially all aspects of our internal client and operational management and external aesthetic medical service offerings. We have adopted a unique OMO client outreach and acquisition strategy centered on our online marketing platform and our dedicated team of sales consultants. We believe our robust in-house sales and marketing capabilities differentiate us from other market players and allow us to gradually reduce our reliance on third-party client acquisition channels.

1 All references to market rankings in this document are based on revenue from continuing operations only.

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We are committed to incubating and nurturing a team of high-caliber physicians through our meticulously-designed multi-layered physician cultivation scheme which provides our physicians with a clear career track from young physician (青年醫生) to academic leader (學科帶頭人). We believe that our team of high-caliber physicians, combined with our stringent quality and safety controls, help us ensure the quality and safety of our aesthetic medical services. As of March 31, 2021, we had 157 physicians who practiced at our aesthetic medical institutions comprising continuing operations, including six chief physicians, 19 associate- chief physicians and 63 attending physicians. Among these 157 physicians, over 65% were cultivated on our own. Our active clients from continuing operations, defined as those who have purchased at least one aesthetic medical procedure in the relevant period, increased from 70,467 in 2018 to 86,629 in 2020, and from 22,097 for the three months ended March 31, 2020 to 45,694 for the three months ended March 31, 2021. In particular, our new clients from continuing operations, defined as those who have purchased at least one aesthetic medical procedure in the relevant period for the first time, increased from 38,928 in 2018 to 44,386 in 2020, and from 5,241 for the three months ended March 31, 2020 to 14,050 for the three months ended March 31, 2021; while our repeat clients from continuing operations, defined as who (i) are active clients; and (ii) have purchased at least one aesthetic medical procedure in the previous period, increased from 31,539 in 2018 to 42,243 in 2020, and from 16,856 for the three months ended March 31, 2020 to 31,644 for the three months ended March 31, 2021. Despite under the adverse impact of COVID-19 pandemic, our revenue from continuing operations increased from RMB661.1 million in 2018 to RMB811.2 million in 2020, representing a CAGR of 10.8%, showing a significantly faster growth than the private aesthetic medical service market in Northern China during the same period, according to Frost & Sullivan. Our revenue from continuing operations increased by 119.4% from RMB123.5 million for the three months ended March 31, 2020 to RMB271.0 million for the three months ended March 31, 2021. We recorded net loss from continuing operations of RMB38.5 million, RMB60.2 million and RMB15.2 million, respectively, for the years ended December 31, 2018 and 2019 and the three months ended March 31, 2020, while we recorded net profit from continuing operations of RMB32.2 million and RMB19.9 million, respectively, for the year ended December 31, 2020 and the three months ended March 31, 2021. OUR BUSINESS MODEL We generate revenue primarily from the provision of (i) aesthetic non-surgical services, primarily comprising aesthetic injection procedures and aesthetic energy-based procedures; and (ii) aesthetic surgical services, primarily comprising aesthetic plastic procedures. Aesthetic injection procedures help an individual improve his/her appearance with minimally-invasive penetration into body tissue and without surgical incisions, which mainly include the injection of botulinum toxin type A and fillers as well as mesotherapy. Aesthetic energy-based procedures are performed with various energy-based devices such as laser, radiofrequency, intense pulsed light and cryolipolysis. Aesthetic plastic procedures are surgical procedures which are invasive and are performed to alter the appearance of various parts of the face or body, such as eyelids, nose, breast and facial shape. OUR SUPPLIERS AND CUSTOMERS Our Suppliers The medical supplies required in our operations primarily include implants, injection materials, pharmaceuticals, skincare products and other medical consumables. We have a centralized procurement management team at the headquarters, which is responsible for formulating procurement budget, approving supply channels, and negotiating the contract terms for our medical devices and medical supplies. We believe centralized procurement allows us to obtain favorable terms, achieve economies of scale and to better control the quality of the supplies we procure. We select our suppliers based on stringent criteria and applicable laws and regulations to ensure the quality of our supplies. When selecting suppliers, we consider, among other things, their product offerings, pricing, reputation, service or product quality, delivery schedule and after-sales services. Our suppliers are required to possess all licenses and permits necessary to conduct their operations.

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For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2021, purchases from our five largest suppliers collectively accounted for approximately 35.1%, 32.0%, 42.9% and 41.4% of our total purchases for the same periods, respectively, and purchases from our largest supplier accounted for approximately 17.9%, 21.7%, 20.4% and 18.2% of our total purchases for the same periods, respectively. Our five largest suppliers during the Track Record Period mainly comprised trading companies of pharmaceuticals, injection materials and other medical consumables. All of our five largest suppliers during the Track Record Period are Independent Third Parties, except one of our five largest suppliers in 2018 which is held as to 40% by an individual who served as a director of one of our principal subsidiaries during the past 12 months. We have had relationships with our five largest suppliers for one to nine years as of the Latest Practicable Date. To the best of the knowledge of our Directors, none of our Directors, their respective associates or any shareholder who owns more than 5% of our issued share capital had any interest in any of our five largest suppliers during the Track Record Period. Please see “Business – Suppliers and Procurement” for more details. Our Customers During the Track Record Period, all of our customers were individual retail clients, other than one corporate customer who was also one of our major suppliers. See “Business – Suppliers and Procurement – Top Suppliers.” The revenue contributed by our five largest customers collectively accounted for less than 2.0% of our total revenue from continuing operations in 2018, 2019 and 2020 and the three months ended March 31, 2021, respectively. Please see “Business – Our Customers” for more details. KEY OPERATIONAL DATA The following table sets forth some key operational data of our aesthetic medical institutions comprising continuing operations as of March 31, 2021: Number of: Date of Non- commencement Number of surgical Aesthetic medical Established/ of operations/ Number of other medical Operating Service service institution GFA Acquired acquisition physicians professionals(1) Classification(2) rooms rooms(3) beds (sq.m.) 1. Beijing Aikang 4,094.24 Acquired December 2010 31 33 I 6 52 28 Hospital 2. Beijing Xingfu 5,159.59 Established August 2007(4) 27 37 I 7 52 35 Hospital 3. Beijing Jianxiang 4,522.06 Established August 2009(5) 25 30 I 5 50 22 Hospital 4. Beijing Zizhu 1,133.21 Established September 2004 7 10 II 1 12 5 Hospital 5. Beijing Changdao 2,341.22 Established December 2006 5 15 II 2 27 11 Hospital 6. Tianjin Hospital 4,417.62 Established April 2004 20 52 I 7 44 35 7. Qingdao Hospital 6,695.19 Established August 2005 16 25 I 6 54 26 8. Jinan Hospital 2,305.00 Established August 2009 7 16 I 3 19 12 9. Xi’an Hospital 7,460.00 Established May 2019 19 41 I 8 45 27 Notes: (1) Includes nurses, pharmacists, radiographers, and laboratory technicians. (2) As of the Latest Practicable Date, among our nine aesthetic medical institutions, seven were aesthetic medical specialty hospitals and two were aesthetic medical specialty out-patient departments. I denotes an aesthetic medical specialty hospital and II denotes an aesthetic medical specialty outpatient department, while aesthetic medical specialty hospitals are allowed to perform more complex aesthetic plastic procedures than aesthetic medical specialty outpatient departments. See “Regulatory Environment – Regulations on the Aesthetic Medical Services – Classification Catalog of Aesthetic Medical Item.” (3) Service rooms include examination rooms (檢驗室), consultation rooms (諮詢室), non-surgical treatment rooms (非手術治療室), radiation rooms (放射室), cosmetic dental service rooms (口腔美容室) and other service rooms. (4) The hospital has been in existence since 2002 and was operated by its predecessor which transferred the operations to Beijing Xingfu Hospital after its establishment in 2007. (5) The hospital has been in existence since 1999 and was operated by its predecessors which transferred the operations to Beijing Jianxiang Hospital after its establishment in 2009. OUR COMPETITIVE STRENGTHS We believe we have the following competitive strengths: • Leading private aesthetic medical institution brand in China, well-positioned to benefit from the fast growing aesthetic medical service market in China • Superior client satisfaction underpinned by our high-quality, safe and tailor-made aesthetic medical solutions

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• Unique OMO client outreach and acquisition strategy centered on robust in-house capabilities • Highly scalable business model empowered by our centralized, standardized and digitalized management system • Systematic physician cultivation scheme enabling us to incubate and retain a team of high-caliber physicians • Experienced senior management team with demonstrated execution capabilities and social responsibilities as well as strong support from our Shareholders OUR STRATEGIES We plan to implement the following strategies: • Expand our aesthetic medical institution network and further extend our leading market position • Continue to introduce new technologies and broaden our service offerings • Continue to enhance our client outreach and acquisition capabilities • Further upgrade our information technology infrastructure • Continue to recruit, cultivate and retain a high-quality talent pool and strengthen our human resources management system RISK FACTORS Our business faces risks including those set out in the section headed “Risk Factors.” As different investors may have different interpretations and criteria when determining the significance of a risk, you should read the “Risk Factors” section in its entirety before you decide to invest in our Shares. Some of the major risks that we face include: • Our success and continued growth depend significantly on our brand image, reputation and consumer perception. Any failure to maintain and enhance, or any damage to, our brand image, reputation or consumer perception could materially and adversely affect the level of market recognition of, and trust in, our services, and in turn, our business, results of operations, financial condition and prospects • We could become the subject of client complaints, claims or legal proceedings in the course of our operations, which could result in substantial costs and adversely and materially affect our brand image, reputation and results of operations • Our business, financial condition, results of operations and prospects may be adversely affected by an unfavorable market perception of the overall aesthetic medical service industry • We conduct our business in a heavily regulated industry and incur on-going compliance costs and face potential penalties for non-compliance • We operate in a highly competitive industry, and if we do not compete successfully against new or existing competitors, our business, financial condition and results of operations may be adversely affected • We may be adversely affected by a lack of growth in the overall consumer market or a general market downturn OUR CONTROLLING SHAREHOLDERS Our Controlling Shareholders are Mr. Wang and Mr. Wang Muyuan, being parties acting in concert, and their controlled corporations, namely Anjian Hengyuan and Meirui Shilan. Mr. Wang and Mr. Wang Muyuan entered into a concert party agreement to confirm and acknowledge the nature of their relationship. For details of the concert party agreement, please see the section headed “History and Corporate Structure – Our Corporate Development – Concert Party Agreement.” Immediately after the [REDACTED] (assuming the [REDACTED] is not exercised), our Controlling Shareholders will be collectively interested in and will control an aggregate of [REDACTED]% of our enlarged total share capital and will remain as our Controlling Shareholders upon [REDACTED]. For more details, please see the section headed “Relationship with Our Controlling Shareholders.” [REDACTED] INVESTORS In order to further develop our Group’s business and benefit from the institutional investors’ industry knowledge and experience, several [REDACTED] Investors, including Citrine HK, Zhuhai Yuehe, Huatai Ruihe, Suzhou Yuehan, CDH Giant Healthcare, CDH Jingchun, CDH Jingrun and Ruisheng Shunlian, were introduced to become shareholders of our Group. For details, please see the section headed “History and Corporate Structure – [REDACTED] Investments.” SUMMARY OF HISTORICAL FINANCIAL INFORMATION The following tables set forth summary financial data from our consolidated financial information for the Track Record Period, extracted from the Accountants’ Report set out in Appendix I to this document.

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Summary of Consolidated Statements of Profit or Loss Three months ended Year ended December 31, March 31, 2018 2019 2020 2020 2021 (RMB in thousands) (Unaudited) CONTINUING OPERATIONS Revenue 661,093 738,815 811,239 123,529 270,998 Gross profit 355,118 380,898 434,849 62,405 146,543 (Loss)/profit from continuing operations for the year/period (38,530) (60,247) 32,184 (15,244) 19,882 DISCONTINUED OPERATIONS Loss from discontinued operation, net of tax (61,881) (58,137) (23,898) (21,740) (9,829) (Loss)/profit for the year/period (100,411) (118,384) 8,286 (36,984) 10,053 Non-IFRS Measures – Continuing Operations Adjusted EBITDA 64,033 49,709 160,410 15,889 55,717 Adjusted net (loss)/profit (38,530) (60,247) 32,184 (15,244) 23,810 We incurred net losses from continuing operations of RMB38.5 million, RMB60.2 million and RMB15.2 million for the years ended December 31, 2018 and 2019 and the three months ended March 31, 2020, respectively, which was primarily due to (i) the commencement of operations of Xi’an Hospital in May 2019 as a new aesthetic medical institution generally has lower income and relatively higher operating costs during the initial stage of its operations; and (ii) our relatively higher level of selling and marketing expenses in 2018 and 2019 as we made considerable efforts to expand our dedicated team of sales consultants, with a view to decreasing our spending on traditional advertising and marketing channels, which took some time to show effect. Our net loss for the three months ended March 31, 2020 was also attributable to the adverse impact of COVID-19 pandemic. Revenue The following table sets forth our revenue from continuing operations by service offerings for the periods indicated: Year ended December 31, Three months ended March 31, 2018 2019 2020 2020 2021 %of %of %of %of %of RMB’000 revenue RMB’000 revenue RMB’000 revenue RMB’000 revenue RMB’000 revenue (Unaudited) Aesthetic non-surgical services Aesthetic injection procedures 329,783 49.9 362,997 49.1 353,632 43.6 55,076 44.6 127,500 47.0 Aesthetic energy-based procedures 103,408 15.6 137,003 18.5 232,036 28.6 25,399 20.6 75,515 27.9 Other aesthetic non-surgical services(1) 17,839 2.7 16,573 2.3 14,194 1.7 2,103 1.7 4,794 1.8 Sub-total 451,030 68.2 516,573 69.9 599,862 73.9 82,578 66.9 207,809 76.7 Aesthetic surgical services Aesthetic plastic procedures 166,770 25.2 174,553 23.6 173,285 21.4 35,894 29.0 50,915 18.8 Other aesthetic surgical services(2) 11,851 1.8 13,067 1.8 11,012 1.4 2,534 2.1 2,885 1.1 Sub-total 178,621 27.0 187,620 25.4 184,297 22.8 38,428 31.1 53,800 19.9 Others(3) 31,442 4.8 34,622 4.7 27,080 3.3 2,523 2.0 9,389 3.4 Total 661,093 100.0 738,815 100.0 811,239 100.0 123,529 100.0 270,998 100.0

Notes: (1) Other aesthetic non-surgical services primarily consist of aesthetic TCM services and other aesthetic dermatology services. (2) Other aesthetic surgical services primarily consist of (i) ancillary services in connection with our aesthetic plastic procedures, such as anesthesiology services, nursing services and examination services, and (ii) sales of pharmaceuticals used in connection with our aesthetic plastic procedures. (3) Others primarily comprise cosmetic dentistry services and sales of skincare products.

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The following table sets forth the number of aesthetic medical procedures performed by the continuing operations and the average spending per procedure during the Track Record Period: Three months ended Year ended December 31, March 31, 2018 2019 2020 2020 2021 Aesthetic non-surgical services Aesthetic injection procedures Number of procedures performed 110,434 149,373 163,858 23,130 63,542 Average spending per procedure (RMB) 2,986 2,430 2,158 2,381 2,007 Aesthetic energy-based procedures Number of procedures performed 99,465 125,532 121,941 16,904 41,022 Average spending per procedure (RMB) 1,040 1,091 1,903 1,503 1,841 Aesthetic surgical services Number of procedures performed(1) 23,474 23,293 24,074 4,911 6,914 Average spending per procedure (RMB) 7,104 7,494 7,198 7,309 7,364 Total Number of procedures performed 233,373 298,198 309,873 44,945 111,478 Average spending per procedure (RMB) 2,571 2,262 2,449 2,589 2,278 Note: (1) For each aesthetic plastic procedure, our services generally comprise various components, including pre-procedure medical examination, application of anesthetics, performance of the procedure and post-procedure care, such as observing wounds, changing medication and removing stitches (if necessary), which are all highly relevant and are counted as one procedure. The increases in the number of aesthetic medical procedures performed during the Track Record Period were primarily due to (i) organic growth of our existing aesthetic medical institutions; (ii) our in-house sales and marketing efforts; (iii) the recovery from the adverse impact of COVID-19 pandemic in the first quarter of 2020; and (iv) newly established aesthetic medical institution whose operations ramped up. The decreases in average spending per aesthetic injection procedure during the Track Record Period were primarily due to greater discounts we offered in light of the decreases in industry pricing level. The increases in average spending per aesthetic energy-based procedure during the Track Record Period were primarily due to a change in the mix of services. The higher average spending per aesthetic plastic procedure in 2019 was primarily due to a change in the mix of services. The following table sets forth the contribution of our aesthetic medical institutions to our revenue from continuing operations for the periods indicated: Year ended December 31, Three months ended March 31, 2018 2019 2020 2020 2021 %of %of %of %of %of RMB’000 revenue RMB’000 revenue RMB’000 revenue RMB’000 revenue RMB’000 revenue (Unaudited) Beijing Aikang Hospital 109,437 16.6 146,660 19.9 169,221 20.9 26,386 21.4 58,531 21.6 Beijing Xingfu Hospital 106,329 16.1 114,029 15.4 149,265 18.4 20,339 16.5 48,957 18.1 Beijing Jianxiang Hospital 79,962 12.1 102,916 13.9 106,461 13.1 13,772 11.1 35,576 13.1 Beijing Zizhu Hospital 27,370 4.1 28,916 3.9 26,650 3.3 4,577 3.7 6,871 2.5 Beijing Changdao Hospital –(1) –(1) –(1) –(1) 4,348(1) 0.5(1) –(1) –(1) 5,640 2.1 Tianjin Hospital 188,696 28.5 188,414 25.6 173,148 21.4 29,323 23.7 51,846 19.1 Qingdao Hospital 106,478 16.1 104,915 14.2 106,657 13.1 18,555 15.0 33,107 12.2 Xi’an Yanta Hospital/Xi’ an Hospital(2) 18,342 2.8 25,462 3.4 46,841 5.8 5,556 4.5 19,925 7.4 Jinan Hospital 24,479 3.7 27,503 3.7 28,648 3.5 5,021 4.1 10,545 3.9 Total 661,093 100.0 738,815 100.0 811,239 100.0 123,529 100.0 270,998 100.0 Notes: (1) Prior to June 1, 2020 when we disposed of Ruilishi Beijing, Beijing Changdao Hospital was wholly owned by Ruilishi Beijing. Therefore, revenue generated from Beijing Changdao Hospital before June 1, 2020 was included in revenue from discontinued operations, while revenue generated from Beijing Changdao Hospital since June 1, 2020 was included in revenue from continuing operations. Please see “History and Corporate Structure – Our Corporate Development – Business Reorganization– Disposal of hair transplantation business” and “Financial Information – Description of Key Statement of Profit or Loss Items – Discontinued Operation.” (2) Xi’an Yanta Hospital ceased operations in May 2019 and Xi’ an Hospital commenced operations in the same month.

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Gross Profit and Gross Profit Margin The following table sets forth a breakdown of our gross profit and gross profit margin from continuing operations by service offerings for the periods indicated: Year ended December 31, Three months ended March 31, 2018 2019 2020 2020 2021 Gross Gross Gross Gross Gross Gross Profit Gross Profit Gross Profit Gross Profit Gross Profit Profit Margin Profit Margin Profit Margin Profit Margin Profit Margin (RMB in thousands, except percentages) (Unaudited) Aesthetic non-surgical services Aesthetic injection procedures 159,492 48.4% 170,748 47.0% 169,862 48.0% 25,017 45.4% 59,907 47.0% Aesthetic energy-based procedures 72,775 70.4% 93,720 68.4% 149,096 64.3% 15,997 63.0% 50,798 67.3% Other aesthetic non-surgical services(1) 12,432 69.7% 12,531 75.6% 11,563 81.5% 1,561 74.2% 4,018 83.8%

Sub-total 244,699 54.3% 276,999 53.6% 330,521 55.1% 42,575 51.6% 114,723 55.2% Aesthetic surgical services 100,363 56.2% 94,854 50.6% 97,994 53.2% 20,017 52.1% 28,650 53.3% Others(2) 10,056 32.0% 9,045 26.1% 6,334 23.4% (187) (7.4)% 3,170 33.8%

Total 355,118 53.7% 380,898 51.6% 434,849 53.6% 62,405 50.5% 146,543 54.1%

Notes: (1) Other aesthetic non-surgical services primarily consist of aesthetic TCM services and other aesthetic dermatology services. (2) Others primarily comprise cosmetic dentistry services and sales of skincare products. The gross profit margin of aesthetic injection procedures decreased from 48.4% for the year ended December 31, 2018 to 47.0% for the year ended December 31, 2019, primarily due to (i) a decrease in average spending per procedure, while cost of injection materials, a major component of the cost of sales of aesthetic injection procedures, remained relatively stable; and (ii) an increase in staff costs mainly attributable to (a) the commencement of operations of Xi’an Hospital in May 2019; and (b) increased headcount in anticipation of the future development of our other aesthetic medical institutions. The gross profit margin of aesthetic injection procedures remained relatively stable at 47.0% for the year ended December 31, 2019 and 48.0% for the year ended December 31, 2020. The gross profit margin of aesthetic injection procedures increased from 45.4% for the three months ended March 31, 2020 to 47.0% for the three months ended March 31, 2021, primarily due to the greater economies of scale we enjoyed due to increased number of procedures performed, mainly attributable to recovery from the adverse impact of COVID-19 pandemic. The gross profit margin of aesthetic energy-based procedures decreased from 70.4% for the year ended December 31, 2018 to 68.4% for the year ended December 31, 2019, primarily due to an increase in staff costs mainly attributable to (i) the commencement of operations of Xi’an Hospital in May 2019; and (ii) increased headcount in anticipation of the future development of our other aesthetic medical institutions. The gross profit margin of our aesthetic energy-based procedures decreased from 68.4% for the year ended December 31, 2019 to 64.3% for the year ended December 31, 2020, primarily due to a change in the mix of services, for example, an increase in the number of procedures performed using Thermage, which have lower gross profit margins than other aesthetic energy-based procedures mainly because it requires a disposable probe for each procedure which is relatively costly. The gross profit margin of our aesthetic energy-based procedures increased from 63.0% for the three months ended March 31, 2020 to 67.3% for the three months ended March 31, 2021, primarily due to the greater economies of scale we enjoyed due to increased number of procedures performed, mainly attributable to recovery from the adverse impact of COVID-19 pandemic. The gross profit margin of our aesthetic surgical services decreased from 56.2% for the year ended December 31, 2018 to 50.6% for the year ended December 31, 2019, primarily due to an increase in staff costs mainly attributable to (i) the commencement of operations of Xi’an Hospital in May 2019; and (ii) increased headcount in anticipation of the future development of our other aesthetic medical institutions. The gross profit margin of our aesthetic surgical services increased from 50.6% for the year ended December 31, 2019 to 53.2% for the year ended December 31, 2020, primarily due to (i) a change in the mix of services, for example, a decrease in the revenue generated from breast surgeries, which have lower gross profit margins than other aesthetic plastic

–7– 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 SUMMARY procedures mainly as a result of their higher cost of implants; and (ii) a decrease in staff costs mainly attributable to a decrease in social security contributions as we enjoyed a reduction or exemption of social security contributions in 2020 in response to the outbreak of the COVID-19 pandemic. The gross profit margin of our aesthetic surgical services increased from 52.1% for the three months ended March 31, 2020 to 53.3% for the three months ended March 31, 2021, primarily due to the greater economies of scale we enjoyed due to increased number of procedures performed, mainly attributable to recovery from the adverse impact of COVID-19 pandemic. For discussion of our consolidated statements of profit and loss, see “Financial Information – Period to Period Comparison of Results of Operations from Continuing Operations” and “Financial Information – Description of Key Statement of Profit or Loss Items.” Summary of Consolidated Statements of Financial Position The following table sets forth a summary of our consolidated statements of financial position for the periods indicated: As of As of December 31, March 31, 2018 2019 2020 2021 (RMB’000) (RMB’000) Total current assets 271,868 287,603 539,995 578,669 Total non-current assets 568,222 622,914 467,654 456,834 Total current liabilities 535,899 678,520 842,680 865,590 Total non-current liabilities 347,317 393,222 294,951 289,814 Total assets 840,090 910,517 1,007,649 1,035,503 Net current liabilities (264,031) (390,917) (302,685) (286,921) Total deficits (43,126) (161,225) (129,982) (119,901) We recorded net current liabilities and negative equity during the Track Record Period, which were primarily due to the increases in contract liabilities which represent advanced payments from our clients while the underlying services have not been provided. For further details, see “Financial Information – Net Current Liabilities.” Summary of Consolidated Statements of Cash Flows The following table sets forth a summary of our cash flows for the periods indicated: Three months ended Year ended December 31, March 31, 2018 2019 2020 2020 2021 (RMB’000) (Unaudited) Operating profit before changes in working capital 32,572 24,815 128,875 4,320 41,090 Changes in working capital 74,309 135,872 138,442 (300) 30,776 Tax paid (9,522) (8,359) (10,024) (520) (5,889)

Net cash generated from operating activities 97,359 152,328 257,293 3,500 65,977 Net cash used in investing activities (4,834) (62,762) (175,897) (32,526) (15,195) Net cash used in financing activities (59,329) (74,820) (66,655) (17,076) (17,323)

Effect of foreign exchange rate changes on cash and cash equivalents 629 140 (442) 116 41 Net increase/(decrease) in cash and cash equivalents 33,825 14,886 14,299 (45,986) 33,500 Cash and cash equivalents at the beginning of the year/period 58,426 92,251 107,137 107,137 121,436

Less: cash and cash equivalents included in assets classified as held for sale – – (4,568) – (5,812)

Cash and cash equivalents at end of the year/period 92,251 107,137 116,868 61,151 149,124

Please see “Financial Information – Liquidity and Capital Resources – Cash Flows” for details of our cash flows.

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Key Financial Ratios The following table sets forth certain of our key financial ratios as of the dates or for the periods indicated: Three months ended Year ended December 31, March 31, 2018 2019 2020 2021 (%) Profitability ratios Gross profit margin 53.7 51.6 53.6 54.1 Net (loss)/profit margin (5.8) (8.2) 4.0 7.3 Return on equity N/A N/A N/A N/A Return on total assets (4.6) (6.9) 3.4 N/A Non-IFRS measure – adjusted EBITDA margin 9.7 6.7 19.8 20.6 Non-IFRS measure – adjusted net (loss)/profit margin (5.8) (8.2) 4.0 8.8 As of As of December 31, March 31, 2018 2019 2020 2021 Liquidity ratios Current ratio 0.51 0.42 0.64 0.67 Quick ratio 0.43 0.37 0.58 0.60 Capital adequacy ratio Gearing ratio N/A N/A N/A N/A Please see “Financial Information – Key Financial Ratios” for descriptions of the calculation of the above ratios.

[REDACTED]

RECENT DEVELOPMENTS Our Directors confirm that, up to the date of this document, (i) there has been no material adverse change in our financial or trading position or prospects since March 31, 2021; and (ii) there has been no material adverse change in our business, the industry in which we operate and/or market or regulatory environment to which we are subject. [REDACTED] STATISTICS [REDACTED]: Initially [REDACTED]% of our enlarged issued share capital [REDACTED]: Up to [REDACTED]% of our initial [REDACTED] [REDACTED] per H HK$[REDACTED] to HK$[REDACTED] per [REDACTED] Share: [REDACTED] Structure: [REDACTED]% [REDACTED] and [REDACTED]% [REDACTED] (subject to reallocation and the [REDACTED]) Based on an Based on an [REDACTED] of [REDACTED] of HK$[REDACTED] HK$[REDACTED] per H Share per H Share [REDACTED] of H Shares(1) HK$[REDACTED] HK$[REDACTED] Unaudited pro forma adjusted net tangible HK$[REDACTED] HK$[REDACTED] assets per H Share(2) (RMB[REDACTED]) (RMB[REDACTED]) Notes: (1) The calculation of market capitalization is based on [REDACTED] expected to be in issue immediately upon completion of the [REDACTED] (assuming the [REDACTED] is not exercised) and [REDACTED]. (2) Please see “Appendix II – Unaudited Pro Forma Financial Information” for further details regarding the assumptions used and the calculations method.

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[REDACTED] EXPENSES Our [REDACTED] expenses mainly include [REDACTED] commissions, professional fees paid to legal advisers, the Reporting Accountants and other professional advisers for their services rendered in relation to the [REDACTED] and the [REDACTED]. The estimated total [REDACTED] expenses (based on the mid-point of our indicative [REDACTED] range for the [REDACTED] and assuming that the [REDACTED] is not exercised) for the [REDACTED] are approximately RMB[REDACTED]. During the Track Record Period, we incurred [REDACTED] expenses of RMB[REDACTED], all of which was charged to the consolidated statements of profit or loss for the three months ended March 31, 2021 as general and administrative expenses. We expect to incur additional [REDACTED] expenses of approximately RMB[REDACTED], of which approximately RMB[REDACTED] is expected to be recognized as general and administrative expenses and approximately RMB[REDACTED] is expected to be recognized as a deduction in equity directly upon the [REDACTED]. DIVIDEND No dividend has been proposed, paid or declared by our Company since its incorporation, or by any of the subsidiaries of our Group during the Track Record Period. We do not currently have a formal dividend policy or a fixed dividend payout ratio. Any declaration of dividends will be at the absolute discretion of our Directors after taking into account our results of operations, financial condition, cash requirements and availability and other factors as it may deem relevant at such time. For details, see “Financial Information – Dividends” in this document. USE OF [REDACTED] We estimate the [REDACTED]ofthe[REDACTED] which we will receive, assuming an [REDACTED] of HK$[REDACTED] per H Share (being the mid-end of the [REDACTED] range stated in this document), will be approximately HK$[REDACTED], after deduction of [REDACTED] fees and commissions and estimated expenses payable by us in connection with the [REDACTED] and assuming the [REDACTED] is not exercised. We intend to use the [REDACTED]ofthe[REDACTED] for the following purposes: Approximately Percentage of HK$ in millions [REDACTED] Future Plans [REDACTED][REDACTED]% Upgrading our existing aesthetic medical institutions, including (i) renovating and/or repairing Qingdao Hospital, Xi’an Hospital and Beijing Aikang Hospital, (ii) expanding Beijing Jianxiang Hospital and Beijing Changdao Hospital, and (iii) relocating Jinan Hospital, Beijing Zizhu Hospital and Tianjin Hospital. Please see “Business – Our Future Expansion – Organic Growth” for more details. [REDACTED][REDACTED]% Establishing new aesthetic medical institutions in Beijing, Xi’an and Sanya. Please see “Business – Our Future Expansion – Organic Growth” for more details. [REDACTED][REDACTED]% Acquiring aesthetic medical institutions, when appropriate opportunities arise, that have demonstrated track records of performance, strong reputations and robust client acquisition channels. Please see “Business – Our Future Expansion – Strategic Acquisitions” for more details. [REDACTED][REDACTED]% Strengthening our information technology infrastructure. Please see “Business – Information Technology Systems” for more details. [REDACTED][REDACTED]% Working capital and other general corporate purposes. Please see “Future Plans and Use of [REDACTED]” for more details.

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

“Anjian Hengyuan” Beijing Anjian Hengyuan Investment Management Co., Ltd. (北京安健恒遠投資管理有限公司), a limited liability company established in the PRC on April 19, 2012 and one of our Controlling Shareholders

“Articles of Association” the articles of association of our Company conditionally adopted on July 12, 2021 with effect from the [REDACTED], as amended from time to time, a summary of which is set out in Appendix V to this document

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

“Audit Committee” the audit committee of the Board

“Baihui Laifo” Beijing Baihui Laifo Hospital Management Consulting Co., Ltd. (北京百匯萊佛醫院管理諮詢有限公司), a limited liability company established in the PRC on January 7, 2015 and a wholly-owned subsidiary of our Company

“Beijing Beifeisi” Beijing Beifeisi Management Consulting Co., Ltd. (北京貝菲斯管理諮詢有限公司), a limited liability company established in the PRC on June 14, 2012, which was deregistered on January 14, 2020

“Beijing Evercare” Beijing Evercare General Hospital Co., Ltd. (北京伊美爾總醫院有限公司), a limited liability company established in the PRC on December 22, 2020 and a wholly-owned subsidiary of our Company

“Beijing Haoguimi” Beijing Haoguimi Consulting Service Co., Ltd. (北京好閨蜜諮詢服務有限公司), a limited liability company established in the PRC on January 28, 2021 and a wholly-owned subsidiary of our Company

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“Beijing Laifo Pediatric” Beijing Laifo Jiangao Pediatric Clinic Co., Ltd. (北京萊佛健高兒科診所有限責任公司), a limited liability company established in the PRC on December 29, 2017 which we disposed of in 2020, as further described in “History and Corporate Structure – Our Corporate Development – Business Reorganization”

“Beijing Seek Beauty” Seek Beauty (Beijing) Network Technology Co., Ltd. (求美(北京)網絡科技有限公司), a limited liability company established in the PRC on May 16, 2016 and a wholly- owned subsidiary of our Company

“Beijing Zhonghengjian” Beijing Zhonghengjian Medical Technology Development Co., Ltd. (北京中恒健醫療科技發展有限責任公司), a limited liability company established in the PRC on May 15, 1997, which was a former shareholder of our Company and deregistered on December 13, 2011

“Board” or “Board of Directors” our board of Directors

“Business Day” or “business a day on which banks in Hong Kong are generally open day” for normal business to the public and which is not a Saturday, Sunday, or public holiday in Hong Kong

“CAGR” compound annual growth rate

“CAPA” Chinese Association of Plastics and Aesthetics (中國整形美容協會)

[REDACTED]

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[REDACTED]

“CDH Giant Healthcare” CDH Giant Healthcare (HK) Limited, a limited liability company incorporated under the laws of Hong Kong and one of our [REDACTED] Investors

“CDH Investments” CDH Jingchun, CDH Jingrun and CDH Giant Healthcare

“CDH Jingchun” Xiamen CDH Jingchun Equity Investment Partnership (Limited Partnership) (廈門鼎暉景淳股權投資合夥企業 (有限合夥)), a limited partnership established in the PRC on December 26, 2018 and one of our [REDACTED] Investors

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“CDH Jingrun” Xiamen CDH Jingrun Equity Investment Partnership (Limited Partnership) (廈門鼎暉景潤股權投資合夥企業 (有限合夥)), a limited partnership established in the PRC on December 26, 2018 and one of our [REDACTED] Investors

“CDH Weisen” Beijing CDH Weisen Venture Capital Center (Limited Partnership) (北京鼎暉維森創業投資中心(有限合夥)), a limited partnership established in the PRC on August 6, 2010 and a former shareholder of our Company

“CDH Weixin” Beijing CDH Weixin Venture Capital Center (Limited Partnership) (北京鼎暉維鑫創業投資中心(有限合夥)), a limited partnership established in the PRC on May 19, 2010 and a former shareholder of our Company

“China” or “PRC” the People’s Republic of China excluding, for the purpose of this document only, Hong Kong, Macau and Taiwan

“Chongqing Aitifeisi” Chongqing Aitifeisi Beauty Technology Co., Ltd. (重慶愛緹菲斯美容科技有限公司), a limited liability company established in the PRC on August 12, 2019, which is in the progress of deregistration

“Chongqing Hospital” Chongqing Aiweimei Aesthetic Medical Out-patient Department Co., Ltd. (重慶艾薇美醫療美容門診部有限公司), a limited liability company established in the PRC on May 29, 2013 and wholly owned by Xinxuan Media

“Chongqing Seek Beauty” New Seek Beauty (Chongqing) Network Technology Co., Ltd. (新求美(重慶)網絡科技有限公司), a limited liability company established in the PRC on April 3, 2020 and wholly owned by Xinxuan Media

“Chongqing Zhonghengjian” Chongqing Zhonghengjian Out-patient Department Co., Ltd. (重慶中恒健診所有限公司), a limited liability company established in the PRC on July 17, 2020, which was deregistered on May 10, 2021

“Citrine HK” Citrine Gem Hong Kong Limited, a limited liability company incorporated under the laws of Hong Kong and an affiliate of Warburg Pincus LLC, one of our [REDACTED] Investors

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

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

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

“Company” or “our Company” Beijing Evercare Medical Technology Group Co., Ltd. (北京伊美爾醫療科技集團股份公司), formerly known as Evercare (Beijing) Investment Management Co., Ltd. (伊美爾(北京)投資管理有限公司), Evercare (Beijing) Aesthetic Enterprise Management Consulting Co., Ltd. (伊美爾(北京)美容企業管理諮詢有限公司), Evercare (Beijing) Holding Group Limited Corporation (伊美爾(北京)控股集團有限公司) or Evercare (Beijing) Holding Group Co., Ltd. (伊美爾(北京)控股集團股份公司), a limited liability company established in the PRC on February 20, 2008 which was converted into a joint stock limited company on April 22, 2016

“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 thereto under the Listing Rules and, unless the context otherwise requires, refers to Mr. Wang, Mr. Wang Muyuan, Anjian Hengyuan and Meirui Shilan

[REDACTED]

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

“COVID-19” a viral respiratory disease caused by the severe acute respiratory syndrome coronavirus 2, believed to have first emerged in late 2019

“CSDC” China Securities Depository and Clearing Corporation Limited (中國證券登記結算有限責任公司)

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“CSDC (Hong Kong)” China Securities Depository and Clearing (Hong Kong) Company Limited

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

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

“Domestic Share(s)” ordinary Share(s) in the share capital of our Company with a nominal value of RMB1.00 each [REDACTED], which are subscribed for and paid up in Renminbi by domestic investors

“Douyiwang” Douyiwang (Beijing) Network Technology Co., Ltd. (豆醫網(北京)網絡科技有限公司), a limited liability company established in the PRC on January 8, 2019 and a non-wholly owned subsidiary of our Company

“EIT” enterprise income tax

“EIT Law” the PRC Enterprise Income Tax Law (中華人民共和國企業所得稅法), as amended, supplemented or otherwise modified from time to time

“Beijing Aikang Hospital” Beijing Evercare Aesthetic Medical Hospital Co., Ltd. (北京伊美爾醫療美容醫院有限公司), a limited liability company established in the PRC on September 2, 2003 and a wholly-owned subsidiary of our Company

“Evercare Anjian” Beijing Yimei Anjian Investment Center (General Partnership) (北京伊美安健投資中心(普通合夥)), a general partnership established in the PRC on August 4, 2015 and non-wholly owned by our Company

“Evercare Beijing EM” Evercare (Beijing) Enterprise Management Co., Ltd. (伊美爾(北京)企業管理有限公司), a limited liability company established in the PRC on March 25, 2008 and a wholly-owned subsidiary of our Company

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“Evercare Chain-Store” Beijing Evercare Aesthetic Plastic Hospital Chain Management Co., Ltd. (北京伊美爾整形美容醫院連鎖管理有限公司), a limited liability company established in the PRC on June 24, 2008 and a wholly-owned subsidiary of our Company

“Beijing Xingfu Hospital” Beijing New Era Evercare Xingfu Aesthetic Medical Hospital Co., Ltd. (北京新時代伊美爾幸福醫學美容專科醫院有限公司), a limited liability company established in the PRC on August 8, 2007 and a wholly-owned subsidiary of our Company, or where the context refers to any time prior to its incorporation, the business which its predecessor was engaged in and which were subsequently assumed by it

“Evercare HK” Evercare Medical Investment Company Limited (伊美爾醫療投資有限公司), a limited liability company established in Hong Kong on October 20, 2014 and a wholly-owned subsidiary of our Company

“Beijing Jianxiang Hospital” Beijing Evercare Jianxiang Hospital Co., Ltd. (北京伊美爾健翔醫院有限公司), a limited liability company established in the PRC on August 21, 2009 and a wholly-owned subsidiary of our Company, or where the context refers to any time prior to its incorporation, the business which its predecessors were or was engaged in and which were subsequently assumed by it

“Beijing Changdao Hospital” Beijing Evercare Changdao Aesthetic Medical Out- patient Department Co., Ltd. (北京伊美爾長島醫療美容門診部有限公司), a limited liability company established in the PRC on December 18, 2006 and a wholly-owned subsidiary of our Company

“Beijing Zizhu Hospital” Beijing Evercare Zizhu Aesthetic Medical Out-patient Department Co., Ltd. (北京伊美爾紫竹醫療美容門診部有限責任公司), a limited liability company established in the PRC on September 3, 2004 and a non-wholly owned subsidiary of our Company

“Extreme Condition(s)” extreme conditions caused by a super typhoon as announced by the government of Hong Kong

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“Frost & Sullivan” Frost & Sullivan (Beijing) Inc., Shanghai Branch Co., an independent market, research and consulting service provider

“Frost & Sullivan Report” the report commissioned by the Company and independently prepared by Frost & Sullivan, a summary of which is set forth in “Industry Overview”

“GDP” gross domestic product

“GFA” gross floor area

[REDACTED]

“Group”, “our Group”, “we”, our Company and its subsidiaries or, where the context so “us” or “our” requires (i) in respect of the periods before our Company became the holding company of our present subsidiaries, such subsidiaries as if they were subsidiaries of our Company at the relevant time and (ii) where the context refers to any time prior to its incorporation, the business which its predecessors or the predecessors of its present subsidiaries, or any one of them as the context may require, were or was engaged in and which were subsequently assumed by it

“H Share(s)” overseas listed foreign share(s) in the share capital of our Company with a nominal value of RMB[REDACTED] each, which is/are to be subscribed for and traded in HK dollars [REDACTED]

[REDACTED]

“Harbin Hospital” Harbin Evercare Aesthetic Medical Hospital Co., Ltd. (哈爾濱伊美爾醫療美容醫院有限公司), a limited liability company established in the PRC on June 15, 2007 and wholly owned by Xinxuan Media

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

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[REDACTED]

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“Huamei Fude” Beijing Huamei Fude Medical Technology Co., Ltd. (北京華美福德醫療科技有限公司), a limited liability company established in the PRC on July 9, 2015 and an affiliate of Citrine HK (one of our [REDACTED] Investors)

“Huatai Ruihe” Beijing Huatai Ruihe Medical Industry Investment Center (Limited Partnership) (北京華泰瑞合醫療產業投資中心(有限合夥)), a limited partnership established in the PRC on June 1, 2015 and one of our [REDACTED] Investors

“IFRS” International Financial Reporting Standards, which as collective term includes all applicable individual International Financial Reporting Standards, International Accounting Standards and Interpretations issued by the International Accounting Standards Board

“Independent Third Party(ies)” an individual or a company which, to the best of our Directors’ knowledge, information, and belief, having made all reasonable enquiries, is not a connected person of our Company within the meaning of the Listing Rules

[REDACTED]

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[REDACTED]

“Jinan Hospital” Jinan Evercare Aesthetic Plastic Hospital Co., Ltd. (濟南伊美爾整形美容醫院有限公司), a limited liability company established in the PRC on August 11, 2009 and a wholly-owned subsidiary of our Company

“Jinan Jiangyi” Jinan Jiangyi Network Technology Co., Ltd. (濟南匠醫網絡科技有限公司), a limited liability company established in the PRC on August 13, 2020 and a wholly-owned subsidiary of our Company

“Jinan Silanduo” Jinan Silanduo Trading Co., Ltd. (濟南絲斕朵商貿有限公司), a limited liability company established in the PRC on February 20, 2012, which was deregistered on December 25, 2020

“Jinghong Huijin” Tibet Jinghong Huijin Investment Management Co., Ltd. (西藏景鴻匯金投資管理有限責任公司), formerly known as Beijing Jinghong Huijin Investment Management Co., Ltd. (北京景鴻匯金投資管理有限責任公司), a limited liability company established in the PRC on May 12, 2008 and a former shareholder of our Company

“Joy Capital” Beijing Joy Capital Investment Management Co., Ltd. (北京愉悅資本投資管理有限公司), a limited liability company established in the PRC on March 4, 2015

“Kangshi Investment” Kangshi Medical Investment Co., Ltd. (康十醫療投資有限公司), formerly known as Kangshi Medical Investment (Beijing) Co., Ltd. (康十醫療投資(北京)有限公司), a limited liability company established in the PRC on June 19, 2013 and a former shareholder of our Company

“Latest Practicable Date” July 26, 2021, being the latest practicable date for the purpose of ascertaining certain information contained in this document prior to its publication

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“Legend Ruizhi” Beijing Legend Ruizhi Venture Capital Center (Limited Partnership) (北京君聯睿智創業投資中心(有限合夥)), a limited partnership established in the PRC on September 18, 2009 and a former shareholder of our Company

[REDACTED]

“Listing Committee” the Listing Committee of the Hong Kong Stock Exchange

[REDACTED]

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

“Macau” the Macau Special Administrative Region of the PRC

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

“Mandatory Provisions” the Mandatory Provisions for Articles of Association of Companies to be Listed Overseas (到境外上市公司章程必備條款), as amended, supplemented or otherwise modified from time to time, for inclusion in the articles of association of companies incorporated in the PRC to be listed overseas (including Hong Kong), which were promulgated by the former Securities Commission of the State Council and the former State Commission for Restructuring the Economic Systems on September 29, 1994

“Medical Mediation Committee” the People’s Mediation Committee for Medical Disputes (醫療糾紛人民調解委員會)

“Meirui Miaolan” Meirui Miaolan (Tianjin) Technology Consulting Service Partnership (Limited Partnership) (美瑞妙斕(天津)技術諮詢服務合夥企業(有限合夥)), a limited partnership established in the PRC on April 15, 2021 and a platform for our employee incentive plan adopted in 2021

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“Meirui Shilan” Beijing Meirui Shilan Management Consulting Co., Ltd. (北京美瑞詩斕管理諮詢有限公司), a limited liability company established in the PRC on December 1, 2010 and one of our Controlling Shareholders

“Mengmei Fude” Beijing Mengmei Fude Medical Technology Co., Ltd. (北京夢美福德醫療科技有限公司), a limited liability company established in the PRC on December 9, 2014 and an affiliate of Citrine HK (one of our [REDACTED] Investors)

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

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

“Mr. Wang” Mr. Wang Yong’an (汪永安), our founder, the chairman of our Board, an executive Director, the chief executive officer of our Company and one of our Controlling Shareholders

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

“NEEQ” the National Equities Exchange and Quotations (全國中小企業股份轉讓系統有限責任公司)

“New Evercare Medical” Beijing Evercare New Yimei Aesthetic Medical Out- patient Department Co., Ltd. (北京伊美爾新伊美醫療美容門診部有限公司), a limited liability company established in the PRC on June 28, 2021 and a wholly- owned subsidiary of our Company

“NHC” National Health Commission of the People’s Republic of China (國家衛生健康委員會)

“NMPA” National Medical Products Administration (國家藥品監督管理局)

“Nomination Committee” the nomination committee of the Board

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“Northern China” the area north of Qinling-Huaihe, south of Daxing’anling-Yinshan-Helan Mountain, and east of Kunlun Mountain-Qilian Mountain, according to Frost & Sullivan

[REDACTED]

“PBOC” the People’s Bank of China (中國人民銀行)

“PRC Company Law” or the Company Law of the PRC (中華人民共和國公司法) “Company Law”

“PRC Legal Advisors” Tian Yuan Law Firm, our legal advisors as to PRC laws

“[REDACTED] Investments” the [REDACTED] investments in our Company undertaken by the [REDACTED] Investors, details of which are set out in “History and Corporate Structure”

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“[REDACTED] Investors” Citrine HK, Zhuhai Yuehe, Huatai Ruihe, Suzhou Yuehan, CDH Giant Healthcare, CDH Jingchun, CDH Jingrun and Ruisheng Shunlian, details of which are further described in “History and Corporate Structure – [REDACTED] Investments”

[REDACTED]

“QIBs” qualified institutional buyers within the meaning of Rule 144A

“Qingdao Hospital” Qingdao Evercare Guobin Plastic Surgery Hospital Co., Ltd. (青島伊美爾國賓整形外科醫院有限公司), a limited liability company established in the PRC on July 16, 2004 and a wholly-owned subsidiary of our Company

“Qingdao Jiangyi” Qingdao Jiangyi Network Technology Co., Ltd. (青島匠醫網絡科技有限公司), a limited liability company established in the PRC on July 6, 2020 and a wholly- owned subsidiary of our Company

“Regulation S” Regulation S under the U.S. Securities Act, as amended from time to time

“Remuneration Committee” The remuneration committee of the Board

“Reporting Accountants” KPMG, the reporting accountants of our Company

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

“Ruilishi Beijing” Ruilishi (Beijing) Enterprise Management Co., Ltd. (瑞麗詩(北京)企業管理有限公司), a limited liability company established in the PRC on March 14, 2011 which we disposed of in 2020, as further described in “History and Corporate Structure – Our Corporate Development – Business Reorganization”

“Ruisheng Shunlian” Ruisheng Shunlian Investment (Shenzhen) Partnership (Limited Partnership) (瑞勝順聯投資(深圳)合夥企業(有限合夥)), a limited partnership established in the PRC on May 7, 2021 and one of our [REDACTED] Investors

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“Ruiyang Technology” Shanghai Ruiyang Technology Development Co., Ltd. (上海瑞陽科技發展有限公司), a limited liability company established in the PRC on January 8, 2002 which we disposed of in 2021, as further described in “History and Corporate Structure – Our Corporate Development – Business Reorganization”

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

“SAFE” the State Administration of Foreign Exchange of the PRC (中國國家外匯管理局)

“SAIC” State Administration for Industry & Commerce of the PRC (中華人民共和國國家工商行政管理總局), currently known as 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” the State Administration of Taxation of the PRC (國家稅務總局)

“SFC” the Securities and Futures Commission of Hong Kong

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

“Shanghai Hospital” Shanghai Evercare Ruiyang Plastic Surgery Out-patient Department Co., Ltd. (上海伊美爾瑞陽整形外科門診部有限公司), a limited liability company established in the PRC on November 8, 2002 and wholly-owned by Ruiyang Technology

“Shanghai Jixi” Shanghai Jixi Investment Partnership (Limited Partnership) (上海吉兮投資合夥企業(有限合夥)), a limited partnership established in the PRC on November 3, 2015 and a former shareholder of our Company

“Shanghai Meiyi” Shanghai Meiyi Network Technology Co., Ltd. (上海美醫網絡科技有限公司), a limited liability company established in the PRC on July 16, 2015 and a non-wholly owned subsidiary of Ruiyang Technology

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“Shanghai Runwofeng” Shanghai Runwofeng Equity Investment Management Co., Ltd. (上海潤沃豐股權投資管理有限公司), a limited liability company established in the PRC on December 29, 2010

“Shanghai Seek Beauty” Shanghai Seek Beauty Network Technology Co., Ltd. (上海求美網絡科技有限公司), a limited liability company established in the PRC on April 14, 2020 and wholly owned by Xinxuan Media

“Share(s)” the ordinary shares in the share capital of our Company, with a nominal value of RMB1.00 each [REDACTED]

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

“Shenyang Consulting” Shenyang Evercare Aesthetic Medical Consulting Co., Ltd. (瀋陽伊美爾醫療美容諮詢有限公司), a limited liability company established in the PRC on December 2, 2015, which was deregistered on September 11, 2019

“Shenyang Hospital” Shenyang Evercare Aesthetic Medical Hospital Co., Ltd. (瀋陽伊美爾醫療美容醫院有限公司), a limited liability company established in the PRC on April 13, 2015 and wholly owned by Xinxuan Media

“Shenyang Jiangyi” Jiangyi (Shenyang) Network Technology Co., Ltd. (匠醫 (瀋陽)網絡科技有限公司), a limited liability company established in the PRC on March 10, 2020 and wholly- owned by Xinxuan Media

“Shenzhen Tiantu” Shenzhen Tiantu Investment Management Co., Ltd. (深圳市天圖投資管理股份有限公司), formerly known as Shenzhen Tiantu Investment Management Limited Corporation (深圳市天圖投資管理有限公司), a limited liability company established in the PRC on January 11, 2010 and a former shareholder of our Company

“Shenzhen Tiantu Fund” Shenzhen Tiantu Equity Investment Fund Management Enterprise (Limited Partnership) (深圳天圖股權投資基金管理企業(有限合夥)), a limited partnership established in the PRC on January 20, 2011 and a former shareholder of our Company

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[REDACTED]

“Sole Sponsor” Haitong International Capital Limited

“Special Regulations” the Special Regulations of the State Council on the Overseas Offering and the Listing of Shares by Joint Stock Limited Companies (國務院關於股份有限公司境外募集股份及上市的特別規定), which was promulgated by the State Council on August 4, 1994, as amended, supplemented or otherwise modified from time to time

“sq.m.” square meters

[REDACTED]

“State Council” the State Council of the PRC (中華人民共和國國務院)

“Stock Exchange” or “Hong The Stock Exchange of Hong Kong Limited Kong Stock Exchange”

“subsidiary(ies)” has the meaning ascribed to it in section 15 of the Companies Ordinance

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

“Supervisor(s)” supervisor(s) of our Company

“Suzhou Yuehan” Suzhou Yuehan Venture Capital Partnership (Limited Partnership) (蘇州悅涵創業投資合夥企業(有限合夥)), a limited partnership established in the PRC on September 29, 2018 and an affiliate of Joy Capital, one of our [REDACTED] Investors

“Takeovers Code” the Code on Takeovers and Mergers, as amended, supplemented or otherwise modified from time to time

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“Tianjin Hospital” Tianjin Evercare Aesthetic Medical Plastic Specialty Hospital Co., Ltd. (天津伊美爾醫療整形美容專科醫院有限公司), a limited liability company established in the PRC on April 29, 2004 and a wholly-owned subsidiary of our Company

“Tianjin Jiangyi” Jiangyi (Tianjin) Network Technology Co., Ltd. (匠醫(天津)網絡科技有限公司), a limited liability company established in the PRC on December 30, 2019 and a wholly-owned subsidiary of our Company

“Tianjin Seek Beauty” Seek Beauty (Tianjin) Network Technology Co., Ltd. (求美(天津)網絡科技有限公司), a limited liability company established in the PRC on March 30, 2020 and a wholly-owned subsidiary of our Company

“Tianjin Sweet Bestie” Sweet Bestie (Tianjin) Network Technology Co., Ltd. (好葩蜜(天津)網絡科技有限公司), a limited liability company established in the PRC on November 19, 2018 and a wholly-owned subsidiary of our Company

“Tianjin Tiantu” Tianjin Tiantu Xingsheng Equity Investment Fund Partnership (Limited Partnership) (天津天圖興盛股權投資基金合夥企業(有限合夥)), a limited partnership established in the PRC on March 25, 2010 and a former shareholder of our Company

“Track Record Period” the three financial years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2021

[REDACTED]

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

“Unlisted Foreign Share(s)” ordinary shares issued by our Company with a nominal value of RMB1.00 each [REDACTED], which are held by foreign investors and are not listed on any stock exchange

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“U.S. Securities Act” the U.S. Securities Act of 1933, as amended, supplemented or otherwise modified from time to time, and the rules and regulations promulgated thereunder

“US$”, “USD” or “US dollars” United States dollars, the lawful currency of the United States

“Xi’an Hospital” Xi’an Aiweimei Aesthetic Medical Hospital Co., Ltd. (西安艾薇美醫療美容醫院有限公司), a limited liability company established in the PRC on January 12, 2018 and a wholly-owned subsidiary of our Company

“Xi’an Seek Beauty” Xi’an New Seek Beauty Network Technology Co., Ltd. (西安新求美網絡科技有限公司), a limited liability company established in the PRC on January 8, 2019 and a wholly-owned subsidiary of our Company

“Xi’an Yanta Hospital” Xi’an Yanta Ruili Shimei Out-patient Department Co., Ltd. (西安雁塔瑞麗詩美門診部有限公司), a limited liability company established in the PRC on August 11, 2009 and a wholly-owned subsidiary of our Company

“Xi’an Zhonghengjian” Xi’an Zhonghengjian Clinic Co., Ltd. (西安中恒健診所有限公司), a limited liability company established in the PRC on January 12, 2018 and a wholly-owned subsidiary of our Company

“Xinxuan Media” Xinxuan (Beijing) Media Culture Co., Ltd. (新選(北京)傳媒文化有限公司), a limited liability company established in the PRC on May 24, 2016, which we disposed of in 2021, as further described in “History and Corporate Structure – Our Corporate Development – Business Reorganization”

“Zhuhai Yuehe” Zhuhai Yuehe Ruixin Equity Investment Partnership (Limited Partnership) (珠海悅和睿信股權投資合夥企業 (有限合夥)), a limited partnership established in the PRC on August 26, 2015 and an affiliate of Joy Capital, one of our [REDACTED] Investors

“%” per cent

For ease of reference, the names of Chinese laws and regulations, governmental authorities, institutions, natural persons or other entities (including our subsidiaries) have been included in this document in both the Chinese and English languages and in the event of any inconsistency, the Chinese names shall prevail.

–30– 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 GLOSSARY OF TECHNICAL TERMS

This glossary contains explanations of certain terms used in this document in connection with the business of our Group. The terms and their meanings may not correspond to standard industry meaning or usage of these terms.

“AI” artificial intelligence

“aesthetic energy-based Aesthetic medical procedures that involve the use of procedures” energy-based devices such as laser, radiofrequency, ultrasound, intense pulsed light and cryolipolysis

“aesthetic injection procedures” aesthetic medical procedures that involve minimally- invasive penetration into body tissue without surgical incisions

“aesthetic plastic procedures” aesthetic medical procedures which are invasive and are performed to alter the appearance of various parts of the face or body, such as eyelids, nose, breast and facial shape

“BOTOX®” a brand of botulinum toxin type A manufactured and marketed by Allergan

“botulinum toxin type A” a natural protein produced by the bacterium clostridium botulinum. Injection of botulinum toxin type A is intended to reduce wrinkles in the face or body, facial or body contouring

“collagen” a natural protein that provides structural support in the body including skin

“contouring” application of aesthetic medical procedures in the attempt to improve the shape of an individual’s face or body

“cryolipolysis” an aesthetic energy-based device that destroys fat cells by controlling cooling

“hyaluronic acid” a stabilized viscous glycosaminoglycan of, which is injected with the intention to achieve certain aesthetic effects such as filling in facial lines and creases, correction of contour defects or depressions, restoration of volume loss from aging and the plumping of lips or cheeks

–31– 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 GLOSSARY OF TECHNICAL TERMS

“intense pulsed light” a technology making use of intense pulses of non- coherent light distributed over a range of wavelengths to improve the appearance and texture of the skin and correct skin blemishes

“laser” Light Amplification by Stimulated Emission of Radiation used to treat various skin problems

“lipoplasty” an aesthetic plastic procedure for removing excess fat tissue from a specific part of the body through liposuction

“mesotherapy” an aesthetic injection procedure of injecting active ingredients, such as hyaluronic acid, vitamins and plant extracts, into the subcutaneous tissue through tiny needle of dedicated machine by using the vacuum negative pressure technology

“O2O” online-to-offline

“OMO” online-merge-offline

“photo rejuvenation” an aesthetic energy-based procedure using broad- spectrum light which can cover a variety of color bases to ease spots on face and stimulate the rejuvenation of collagen with an aim to improve skin texture, shrink pores, increase skin elasticity and whitening skin

“radiofrequency” a technology used in a device, with the oscillation of alternating currents at a frequency of around 300 kHz to 300 GHz

“Thermage” an aesthetic energy-based procedure using a probe to transmit high-energy radiofrequency to deep layer of dermis to denature and constrict the collagen by heat energy, so as to activate the self-repairing process of human body and stimulate the regeneration of collagen with an aim to improve skin texture, shrink pores and increase skin elasticity

“rhinoplasty” an aesthetic plastic procedure for changing the shape or appearance of the noses by adding implants or ear cartilage, septal cartilage or rib cartilage

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“SaaS” software as a service, a cloud-based software licensing and delivery model in which software and associated data are centrally hosted

“TCM” traditional Chinese medicine

“ultrasound” using high intensity focused ultrasound to heat up a target tissue, intended to achieve results such as stimulating collagen production, uplifting sagging skin and tightening loose skin

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This document contains certain statements that are, or may be deemed to be, “forward- looking statements.” These forward-looking statements may be identified by the use of forward-looking terminology, including the terms “believe(s),” “aim(s),” “estimate(s),” “plan(s),” “project(s),” “anticipate(s),” “expect(s),” “intend(s),” “may,” “seek(s),” “can,” “could,” “ought to,” “potential,” “will” or “should” or similar expressions, or, in each case, their negative or other variations, or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. In particular, references to “estimate(s)” only refer to situations where best estimates have been adopted by the management. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this document and include, but are not limited to, statements regarding our intentions, beliefs or current expectations concerning, among other things, our business, results of operations, financial position, liquidity, prospects, growth, strategies and the industries and markets in which we operate or may operate in the future.

By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Forward-looking statements are not guarantee of future performance or the actual results of our operations, financial position and liquidity. The development of the markets and the industries in which we operate may differ materially from the description or implication suggested by the forward-looking statements contained in this document. In addition, even if our results of operations, financial position and liquidity as well as the development of the markets and the industries in which we operate are consistent with the forward-looking statements contained in this document, those results or developments may not be indicative of results or developments in subsequent periods. A number of risks, uncertainties and other factors could cause results and developments to differ materially from those expressed or implied by the forward-looking statements including, without limitation:

• our operations and business prospects;

• our ability to maintain and enhance our market position;

• the effects of competition in the industries or markets we operate and its potential impact on our business;

• developments in, or changes to, laws, regulations, governmental policies, taxation or accounting standards or practices affecting our operations, especially those related to the PRC aesthetic medical service industry;

• general political and global economic conditions, especially those related to the PRC, and macro-economic measures taken by the PRC government to manage economic growth;

• our ability to successfully implement any of our business strategies, plans, objectives and goals;

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• our ability to expand and manage our business operations;

• our ability to obtain or extend the terms of the licenses and leases necessary for the operation of our business;

• changes to our expansion plans and estimated capital expenditures;

• adverse changes or developments in the industries in which we operate;

• fluctuations in inflation, interest rates and exchange rates;

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

• our success in accurately identifying future risks to our business and managing the risks of the aforementioned factors.

Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements in this document reflect our management’s current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions. Investors should specifically consider the factors identified in this document, which could cause actual results to differ, before making any investment decision. Subject to the requirements of the Listing Rules and except as may be required by applicable laws, we undertake no obligation to revise any forward-looking statements that appear in this document to reflect any change in our expectations, or any events or circumstances, that may occur or arise after the date of this document. All forward-looking statements in this document are qualified by reference to this cautionary statement.

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An investment in our H Shares involves various risks. You should carefully consider all the information in this document and in particular the risks and uncertainties described below before making an investment in our H Shares. You should pay particular attention to the fact that we are incorporated in the PRC and that substantially all of our operations are conducted in the PRC and are governed by a legal and regulatory environment that in some respects differs from that prevailing in other countries.

The occurrence of any of the following events could materially and adversely affect our business, financial condition, results of operations or prospects. If any of these events occurs, the trading price of our H Shares could decline and you may lose all or part of your investment. You should seek professional advice from your relevant advisers regarding your prospective investment in the context of your particular circumstances.

RISKS RELATING TO OUR BUSINESS AND INDUSTRY

Our success and continued growth depend significantly on our brand image, reputation and consumer perception. Any failure to maintain and enhance, or any damage to, our brand image, reputation or consumer perception could materially and adversely affect the level of market recognition of, and trust in, our services, and in turn, our business, results of operations, financial condition and prospects.

We consider that our success and continued growth depend to a significant extent on our brand image, reputation and consumer perception as a quality and reliable aesthetic medical service provider in the geographical markets where we conduct our business. If we fail to maintain and enhance, or if there is any damage to, such brand image, reputation or consumer perception in relation to the services provided by us, the demand for our services may be materially and adversely affected.

Many factors, which are important in maintaining and enhancing our brand image, reputation and consumer perception, are beyond our control. Such factors include, among others, our ability to:

• effectively control the quality of the services performed by our physicians and other medical professionals, and monitor the service performance of such personnel as we continue to expand;

• maintain convenient, standardized and reliable client service process as client preferences evolve and as we expand our service offerings; and

• increase brand recognition among existing and potential clients through various means of marketing and promotional activities.

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In addition, our clients may have expectations on the magnitude of improvement of physical appearance resulting from our services. However, we cannot guarantee the results of our services since (i) the aesthetic results vary depending on various factors, such as the medical history and physical condition of our clients, their adherence to our pre-procedure and post-procedure instructions, their respective physical reaction to the procedures, unknown allergies and other factors beyond our control and (ii) our clients’ level of satisfaction is personal and vary subjectively. It is also an inherent risk in the aesthetic medical service industry that the results of our services may lead to undesirable or unexpected outcomes, regardless of merit, such as complications and injuries, or otherwise fail to meet our clients’ expectations. Such undesirable or unexpected outcomes may result in negative sentiments, requests for refunds, or complaints, claims or legal actions against us, which may lead to negative publicity. Any negative publicity may adversely harm our brand image, reputation and consumer perception and could cause a deterioration in the level of market recognition of and trust in our services. As a result, we may experience decreased sales and potential loss of clients and business partners as well as physicians and staff, which could have a material adverse effect on our business, results of operations, financial condition and prospects.

We could become the subject of client complaints, claims or legal proceedings in the course of our operations, which could result in substantial costs and adversely and materially affect our brand image, reputation and results of operations.

We rely on our physicians and other staff at our aesthetic medical institutions to make proper decisions regarding the services provided to our clients. Any inappropriate decisions made by our physicians and other staff, or any failure by us to properly manage our aesthetic medical institutions’ activities may result in undesirable or unexpected outcomes, including complications, injuries and even deaths in extreme cases. We are subject to complaints, claims or legal proceedings initiated by our clients as a result of any negative physical reaction to our services. In addition, given the nature of the aesthetic medical service industry and subjectiveness of the level of satisfaction with services provided, we have been and will continue to be susceptible to other types of complaints associated with our services from time to time. These primarily include (i) dissatisfaction with our staff’s attitude; (ii) long waiting time for reception process or complex appointment procedure; (iii) dispute over pricing; (iv) dissatisfying aesthetic effects of our services; (v) post-procedure discomfort; and (vi) general dissatisfaction with the results of our services. Although rare, incidents have occurred in hospitals and medical institutions in the past in China where dissatisfied patients carried out extreme actions or even violence against hospital staff or other patients. Any such incident, if occurs, would harm our reputation, impair our ability to recruit and retain medical professionals and other staff, and cause us to incur substantial costs.

During the Track Record Period, the total amount of monetary compensation paid by continuing operations to settle client complaints and medical disputes was RMB4.1 million. We cannot guarantee we will not be subject to material client complaints and medical disputes or that we can successfully prevent or address all client complaints and medical disputes in the future. Any complaint, claim or legal proceeding, regardless of merit, if widely disseminated, could affect our brand image and reputation in the industry. In addition, any legal proceeding

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Our business, financial condition, results of operations and prospects may be adversely affected by an unfavorable market perception of the overall aesthetic medical service industry.

Aesthetic medical services have been gaining popularity in recent years. However, we believe that both existing and potential clients of the aesthetic medical service industry are still cautious about the risks inherent in aesthetic medical services and are therefore sensitive to any negative review, comment or allegation against any aesthetic medical service provider or in relation to the industry. Any allegations, complaints, negative news or media reports on any accidents, instances of medical malpractice or professional negligence, unfair selling practices, ineffectiveness of services, health risks or poor service standard relating to any aesthetic medical service provider or the overall aesthetic medical service industry, regardless of merit, may lead to deterioration in client confidence in and market perception of aesthetic medical services and may lead to lesser demand for aesthetic medical services. While such allegations, complaints, negative news or media reports may be unrelated to us, the demand for our services may decline and the entire aesthetic medical service industry and its participants, including us, could consequently be exposed to reputational harm and our business, results of operations, financial condition and prospects may, in turn, be adversely affected.

We conduct our business in a heavily regulated industry and incur on-going compliance costs and face potential penalties for non-compliance.

We conduct our business in a heavily regulated industry. The laws and regulations relate mainly to the requirements for medical facilities and equipment, the licenses and permits of the aesthetic medical institutions, the licensing, qualifications and number of medical professionals, and the medical advertising activities. See “Regulatory Environment” for more details. For example, our aesthetic medical institutions and physicians are subject to periodic licensing renewal requirements and inspections by various government agencies and departments. In addition, any changes in the laws and regulations, or any change of interpretation thereof, could require us to obtain additional licenses, permits, approvals or certificates, or result in the invalidation of our current licenses, permits, approvals or certificates, or result in us being regarded as not in compliance with the relevant laws and regulations, thereby subjecting us to penalties and/or other legal consequences.

Our aesthetic medical institutions have occasionally been subject to administrative penalties for matters such as being engaged in activities beyond the scope permitted under their respective licenses, using non-medical professionals for activities requiring medical licenses and disposing of medical waste and sewage not in accordance with relevant requirements. In

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If we fail to obtain or renew any necessary licenses, permits, approvals and certificates, or if our medical professionals become unlicensed at any time during their practices at our aesthetic medical institutions, or if we are found to be non-compliant with any of these laws, regulations or rules, including the medical advertising laws and regulations, we may face penalties, suspension of operations or even revocation of operating licenses, permits, approvals or certificates, depending on the nature of the findings, any of which could adversely affect our business, financial condition, results of operations and prospects.

We operate in a highly competitive industry, and if we do not compete successfully against new or existing competitors, our business, financial condition and results of operations may be adversely affected.

We compete primarily with private aesthetic medical specialty hospitals, out-patient departments and clinics as well as aesthetic medical departments in public and private general hospitals located in the same geographic areas as our aesthetic medical institutions. We will also compete with future market entrants as the rapid growth of the aesthetic medical service industry in the PRC may attract more domestic or international players to enter. Due to continuous technological upgrades and advancements, the aesthetic medical service industry is characterized by intense competition and rapidly changing market trends. Our clients are constantly looking for innovative and quality aesthetic medical services at reasonable prices. As a result, we are in constant competition with other aesthetic medical service providers in aspects such as quality and scope of services, comprehensiveness and diversity of medical devices as well as pricing. Some of our competitors may be able to foresee the upcoming market trends more accurately or may be more responsive to new technologies or evolving client preferences. They may also have greater financial and other resources than we do, thus allowing them to provide similar services at a lower price. In light of the decreases in industry pricing level, we offered discounts from time to time, which resulted in decreases in the average spending per procedure of certain of our services during the Track Record Period. Please see “Industry Overview – Overview of Aesthetic Medical Service Market in China – Average Patient Spending of Aesthetic Medical Services in China” and “Financial Information – Key Factors Affecting Our Results of Operations – Number of aesthetic medical procedures performed and average spending per procedure.” In addition, we may face competition from numerous non-regulated aesthetic medical service providers in the market, which do not have the necessary licenses and permits to operate, but may provide services similar to ours with lower pricing. We cannot assure you that we will be able to successfully compete against new or existing competitors. If we are unable to compete successfully with our competitors, we may experience a reduction of market share and experience a slowdown in growth or a decline of our operations, and this may in turn adversely affect our business, results of operations, financial condition and prospects.

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We may be adversely affected by a lack of growth in the overall consumer market or a general market downturn.

Our revenue growth is highly dependent on the sustainable growth of consumer spending on aesthetic medical services. However, we cannot assure you that the local economy in the areas where we operate can sustain a stable growth in consumer spending. In addition, any economic slowdown, recession or downturn may result in a decrease in consumer spending on aesthetic medical services and weaken consumer spending willingness, thus reducing the overall demand for our services. Any of the foregoing circumstances may adversely affect our business, results of operations, financial condition and prospects.

Our expansion plans, particularly our plans to expand our business into various new geographic areas in the PRC, are subject to uncertainties and risks, and we may not be able to successfully manage our expanded operations.

We have significantly expanded our business over the past few years. Our organization may become larger and more complex with our intended plans to expand into new geographic areas, through a combination of acquisitions and organic growth. The execution of our expansion plans is expected to require management attention and efforts and incur additional expenditures. Our ability to successfully expand into new markets depends on many factors including, among others, our ability to:

• identify suitable geographic markets for the type of services we offer;

• identify ideal locations of the aesthetic medical institutions premise and negotiate acceptable terms for leasing or acquiring the properties, including desirable tenant allowances;

• identify local consumer preferences;

• address local market competition;

• hire, train and retain a growing workforce of physicians and other personnel;

• successfully integrate new aesthetic medical institutions into our existing control structure and operations, including our information technology systems; and

• secure financing or maintain sufficient capital to invest in new aesthetic medical institutions or making acquisitions of well-established aesthetic medical institutions.

In addition, to manage our growth and expansion, and to attain and maintain profitability, we will continue to place demands on our management, physicians and our administrative, operational and financial personnel and infrastructure. To accommodate our growth, we need to continue managing our relationships with our suppliers and clients. We cannot assure you

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Opening of new aesthetic medical institutions could result in fluctuations in our short-term financial performance.

Our results of operations have been, and in the future may continue to be, influenced by the timing of the opening of new aesthetic medical institutions and the number of new aesthetic medical institutions opened. New aesthetic medical institutions generally have lower income and relatively higher operating costs during the initial stages of their operations. We also incur substantial expenses before opening new aesthetic medical institutions, such as renovation costs, rental expenses and equipment costs. Based on our past experience, it generally takes approximately one to two years for a new aesthetic medical institution to break even and even longer to recover the initial investment. Accordingly, the number and timing of new aesthetic medical institution openings have, and may continue to have, an impact on our profitability. See “Financial Information – Key Factors Affecting Our Results of Operations – Expansion of our aesthetic medical institution network.” As a result, our results of operations may fluctuate from period to period. For details of our expansion plans, see “Business – Our Future Expansion.” Therefore, period-to-period comparisons of our operating results during the Track Record Period may not be meaningful and you should not rely on them to predict the future performance of our operating results or the price of our H Shares.

If we are unable to recruit and retain a sufficient number of qualified physicians, administrators and other medical professionals, our operations could be adversely affected.

Our business is largely dependent on our ability to identify, recruit and retain a sufficient number of qualified physicians, medical institution administrators and other medical professionals, including nurses and medical technicians. The recruitment of qualified physicians is competitive in the PRC due to their shortage as a result of the length of training required, and competition with other aesthetic medical institutions or aesthetic medical departments in public general hospitals. We may not be able to attract or retain the physicians we desire. Our physicians typically are entitled to terminate their employment with our aesthetic medical institutions at any time with a 30 days’ prior written notice. It has also become increasingly costly to recruit and retain other medical professionals in recent years. If we are unable to successfully recruit or retain seasoned and qualified physicians and other medical professionals, our business, financial condition and results of operations may be adversely affected.

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For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2020 and 2021, our total staff costs (including those recorded in cost of sales, selling and marketing expenses and general and administrative expenses) accounted for approximately 41.7%, 46.2%, 41.3%, 50.2% and 42.0% of our total revenue from continuing operations for the same periods, respectively. If such costs increase in the future, it may adversely affect our profitability. See “Financial Information – Key Factors Affecting Our Results of Operations – Ability to control our costs and expenses” for details regarding the sensitivity analysis with respect to our staff costs.

If we fail to properly manage the employment of our physicians and other medical professionals, we may be subject to penalties against our aesthetic medical institutions, which could adversely affect our business.

The practicing activities of physicians and other medical professionals are strictly regulated under the PRC laws and regulations. Physicians, nurses and medical technicians who practice at medical institutions must hold practicing licenses and may only practice within the scope of their licenses and at the specific medical institutions at which their licenses are registered. Please see “Regulatory Environment – Regulations on Medical Practitioners of Medical Institutions.” We cannot assure you that our medical professionals will always strictly follow the requirements and will not practice outside the permitted scope of their respective licenses. In addition, we may also experience difficulty in assisting our foreign physicians to obtain employment visas or other approvals required to enter and work in China. Our failure to properly manage the employment of our physicians and other medical professionals may subject us to administrative penalties against our aesthetic medical institutions, which could adversely affect our business.

If we are unable to keep abreast of the latest technological developments or market trends in the aesthetic medical service industry, we will not be able to compete effectively, which may adversely affect our business, financial condition and results of operations.

In order to keep up with the latest developments and trends in the aesthetic medical service industry and respond to the evolving needs and preferences of our clients, we are required to upgrade our existing service devices, invest in new service devices and introduce new services and products from time to time, which could incur significant expenditures and may be subject to licensing or other regulatory requirements.

If we are unable to anticipate or adapt to the latest technological developments or market trends in the aesthetic medical service industry, we may not be able to meet our clients’ expectations and evolving needs, and the demand for our services may decline. Furthermore, if our competitors are more sensitive to changes in client preferences or more responsive to emerging technology in the industry, our aesthetic medical services may become less competitive. We may lose our existing clients and be unable to attract new clients, which could have an adverse impact on our business. In addition, there is also no assurance that we will be able to recover the expenditures associated with the purchase of new service devices. Moreover, rapid technological improvements could, at times, lead to earlier-than-planned obsolescence or redundancy of equipment and result in impairment charges. Any of these circumstances may adversely affect our results of operations, financial condition and prospects.

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We may not be able to adequately protect our intellectual property rights, which could harm our brand image and our business.

We believe our trademarks and other intellectual property rights are crucial to our success. Our principal intellectual property rights include our trademarks for the “Evercare” brand. We are susceptible to infringement of our intellectual property rights by third parties. We cannot assure you that third parties will not copy or otherwise obtain and use our intellectual property rights without our prior authorization. Our efforts to enforce or defend our intellectual property rights may not be adequate. We may have to initiate legal proceedings to defend the ownership of our intellectual property rights against any infringement by third parties, which may be costly and time-consuming, and we might be required to devote substantial management time and resources in an attempt to achieve a favorable outcome. Furthermore, the outcome of any legal actions to protect our intellectual property rights may be uncertain. If we are unable to adequately protect or safeguard our intellectual property rights, our business, financial condition, results of operations and prospects may be adversely affected.

In addition, as permitted by the PRC laws, other parties may register trademarks which may look similar to our registered trademarks under certain circumstances, which may cause confusion among consumers. We may not be able to prevent third parties from using trademarks that are similar to ours and our clients may confuse our aesthetic medical institutions with others using similar trademarks. In such case, the goodwill and value of our trademarks and the public perception of our brand image may be adversely affected. A negative perception of our brand image could have an adverse effect on our sales, and therefore on our business, financial condition, results of operations and prospects.

We may be subject to intellectual property rights infringement or misappropriation claims by third parties, which may force us to incur legal expenses and, if determined adversely against us, may disrupt our business.

We may be exposed to intellectual property rights infringement or misappropriation claims by third parties during our operations and have from time to time been involved in disputes with third parties over the use of their works or portraits. We may also be subject to litigation involving claims of trademark infringement or violation of other intellectual property rights of third parties. Defense against any potential claims would be both costly and time-consuming, and could divert the efforts and resources of our management and other personnel. An adverse determination in any such litigation or proceedings to which we may become a party could subject us to liabilities to third parties, require us to seek licenses from third parties, pay ongoing royalties, or subject us to injunctions prohibiting the provision and marketing of the relevant brand or services. To the extent that licenses are not available to us on commercially reasonable terms or at all, we may be required to expend considerable time and resources sourcing alternative technologies or rebranding our services, if any, or we may be forced to delay or suspend the relevant services or the promotion of the relevant brand. We may incur expenses and require the attention of management in defending against these third-party infringement claims, regardless of their merit. Protracted litigation could also result in our clients or potential clients deferring, reducing or canceling their purchases of our services due to deteriorated market perception. In addition, we could face disruptions to our business operations as well as damage to our reputation as a result of such claims, and our business, financial condition and results of operations could be adversely affected.

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Newly opened and acquired aesthetic medical institutions may not achieve normal operation as anticipated, which could adversely affect our business, results of operations, financial condition and prospects.

It typically takes newly opened and acquired aesthetic medical institutions a period of time to achieve a utilization rate comparable to our existing aesthetic medical institutions, due to factors such as time needed to build client awareness in the local community and to integrate such aesthetic medical institution’s operations into our existing infrastructure. In addition, the opening and acquisition of new aesthetic medical institutions involve regulatory approvals and reviews by various authorities in China, including healthcare administrative authorities. We may not be able to obtain all the required approvals, permits or licenses for the opening and acquisitions of aesthetic medical institutions in a timely manner or at all. We may not be able to immediately utilize a newly opened or acquired aesthetic medical institution as anticipated due to our inability or material delay in obtaining the required approvals, permits or licenses and any substantial increase in costs to ramp up operations and utilization. In addition, the operating results generated at the newly opened and acquired aesthetic medical institutions may not be comparable to the operating results generated at any of our existing aesthetic medical institutions. The aesthetic medical institutions may even operate at a loss, which could adversely affect our results of operations.

We may need additional capital and may not be able to obtain it in a timely manner or under commercially acceptable terms, or at all.

We may require additional cash resources to finance our continued growth or other future developments, such as any network expansion or other investments we may decide to pursue. The amount and timing of such additional financing needs will vary depending on the timing of our new aesthetic medical institution openings, investments in acquired aesthetic medical institutions and the amount of cash inflow from our operations. If our resources are insufficient to satisfy our cash requirements, we may seek additional financing. To the extent that we raise additional financing by issuance of additional equity securities, our Shareholders may experience dilution. To the extent we engage in debt financing, the incurrence of indebtedness would result in increased debt servicing obligations and could result in operating and financing covenants that may, among other things, restrict our operational flexibility or our ability to pay dividends. Servicing such debt obligations could also be burdensome to our operations. If we fail to service the debt obligations or are unable to comply with such debt covenants, we could be in default under the relevant debt obligations and our liquidity and financial conditions may be adversely affected.

Our ability to obtain additional capital on commercially acceptable terms is subject to a variety of uncertainties, some of which are beyond our control, including general economic and capital market conditions, credit availability of financial institutions, receipt of necessary PRC government approvals, investors’ confidence in us, the performance of the aesthetic medical service industry in general, and our operating and financial performance in particular. We cannot assure you that future financing will be available in sufficient amounts or on terms commercially acceptable to us, if at all. In the event that financing is not available or is not available on terms commercially acceptable to us, our business, results of operations and growth prospects may be adversely affected.

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We may be unable to identify or execute acquisition opportunities, which may adversely affect our business, results of operations, financial condition and prospects.

We may not be able to identify suitable acquisition targets, negotiate commercially acceptable terms for acquisitions, or successfully integrate any acquired assets or businesses in the future. Even if we are able to identify suitable targets, such acquisitions can be difficult, time consuming and costly to execute and integrate, and we may not be able to secure necessary financing for the acquisitions. Unsuccessful acquisition may have an adverse effect on our business and financial condition. Businesses that we acquire may have unknown or contingent liabilities, including liabilities for failure to comply with the relevant laws, regulations and rules. We may also suffer reputational and financial harm for actual or alleged inferior service or harm that occurred at the acquired aesthetic medical institutions prior to our acquisition, and need to respond to claims initially as unsatisfied clients will likely pursue their claims against the aesthetic medical institutions and us. In addition, future acquisitions and subsequent integration of newly acquired assets and businesses into our own would require attention from our management and could result in a diversion of resources from our existing business, which in turn could have an adverse effect on our business operations. Acquired assets or businesses may not generate the financial results we expect.

Our success depends on the continued service of our senior management team and other key employees, and our business, financial condition and results of operations will suffer greatly if we lose their services.

Our success has been, and will continue to be, heavily dependent on the continued services of our senior management team and other key employees, some of whom have been with us since our inception. In particular, we rely on the expertise, experience and leadership of Mr. Wang, our chairman of the Board. We also rely on a number of key members of our senior management team.

We do not maintain key person insurance. Competition for competent candidates in the industry is intense and the pool of competent candidates is limited. If we lose the services of one or more of our key personnel, we may not be able to locate suitable or qualified replacements easily or at all and may incur additional expenses to recruit and train new personnel. Consequently, our business could be severely disrupted, the implementation of our business strategies could be delayed, and our financial condition and results of operations could be materially and adversely affected. In addition, if any member of our senior management team or key employees joins a competitor or forms a competing business, we may lose know-how, trade secrets, clients and key professionals and staff. Each of our key employees has entered into a confidentiality and non-compete agreement with us. We cannot assure you, however, the extent to which any of these agreements will be enforceable under the applicable laws. See “– Risks Relating to Conducting Business in the PRC – The legal protections available to you under the PRC legal system may be limited.”

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Our business is subject to professional and other liabilities for which we may not be insured.

We are exposed to potential liabilities that are inherent to the provision of medical services. In recent years, physicians and medical institutions in China have been subject to an increasing number of claims. Our aesthetic medical institutions were the subject of several such claims during the Track Record Period. During the Track Record Period, the total amount of monetary compensation paid by continuing operations to settle client complaints and medical disputes was RMB4.1 million. We currently do not maintain any form of medical liability insurance for our aesthetic medical institutions or our physicians. Therefore, we may be subject to losses and liabilities for any future claims against us.

In addition, we do not maintain any business interruption insurance, property insurance or product liability insurance, which we believe is consistent with industry practice in China. We may face liabilities that exceed our available insurance coverage or arise from claims outside the scope of our insurance coverage. In addition, as our business expands, the costs for us to maintain an adequate level of insurance may become increasingly high. Any significant uninsured loss could have material and adverse effects on our business, financial condition and results of operations.

Any non-renewal of leases or substantial increase in rents may adversely affect our business and financial performance.

We operate some of our aesthetic medical institutions on leased properties. As of December 31, 2018, 2019 and 2020 and March 31, 2021, our lease liabilities amounted to RMB403.6 million, RMB467.5 million, RMB343.0 million and RMB335.1 million, respectively. We believe that, generally, rental costs for premises that are suitable for our business will continue to increase. Our substantial operating lease obligations expose us to potential risks, including increasing our vulnerability to adverse economic conditions, limiting our ability to obtain additional financing and reducing our cash available for other purposes.

Our lease agreements for our aesthetic medical institutions typically have a term ranging from two to 20 years. If a lease agreement is renewed at a rate substantially higher than the existing rate or if any other existing favorable terms granted by the lessor are not extended, we must evaluate whether renewal on such modified terms is in our business interest. If we are unable to renew our lease agreements upon their expirations, we will have to close or relocate the relevant aesthetic medical institutions. We cannot assure you that we will be able to secure comparable locations with leases based on comparable terms to relocate our business in time, or at all, which could subject us to interruption to our business, construction, renovation and other costs and risks. In addition, the revenue and profit generated after relocation may be less than the revenue and profit previously generated before such relocation. Therefore, any inability to obtain leases for desirable locations or renew existing leases on commercially reasonable terms may adversely affect our business, financial condition and results of operations.

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We have limited or no control over the quality of the implants, injection materials, medical devices, skincare products, pharmaceuticals and other medical consumables. If such quality does not meet the required standards, we could be exposed to liabilities and our reputation, business, results of operations, financial condition and prospects could be adversely affected.

Although we are selective in choosing our suppliers, we cannot guarantee that all of the implants, injection materials, medical devices, skincare products, pharmaceuticals and other medical consumables we use (including our private label offerings) are free of defects or meet the relevant quality standards. We cannot assure you that we will not be subject to litigation or administrative penalty related to defective implants, injection materials, medical devices, skincare products, pharmaceuticals and other medical consumables used by us in the future, or that such incidents, if occurred, will not materially and adversely affect us. If the products provided by our suppliers are defective, of poor quality, or fail to meet our clients’ expectations, we could be subject to liability claims, complaints, related adverse publicity and imposition of penalties by relevant authorities. We may also need to find suitable replacement products, which may lower our profit margins and result in delays in the delivery of services to our clients. Our suppliers are also subject to extensive laws and regulations. If our suppliers violate applicable laws and regulations, our procurement may be adversely affected. In addition, we may be exposed to reputational damage or even liabilities for defective goods provided by our suppliers, or negative publicity associated with our suppliers, and our reputation, business, results of operations, financial condition and prospects could be adversely affected as a result.

We have not entered into any long-term supply agreements with our suppliers. A decrease in supply, or an increase in the cost, of quality supplies may adversely affect our business, financial condition and results of operations.

For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2020 and 2021, our cost of inventories amounted to RMB162.0 million, RMB181.7 million, RMB197.8 million, RMB27.2 million and RMB69.3 million, respectively, representing approximately 52.9%, 50.8%, 52.6%, 44.6% and 55.7% of our total cost of sales from continuing operations for the same periods, respectively. Consistent with industry practice, we have not entered into any long-term supply agreements with our suppliers and we cannot assure you that our suppliers will continue to supply to us on commercially reasonable terms, or at all. If any of our suppliers fail to supply sufficient quantities of supplies, we may have to obtain replacements for such supplies from alternate suppliers. We cannot assure you that we will be able to do so in a timely manner or at commercially reasonable terms. Any such disruption in supply may adversely affect the operations of our aesthetic medical institutions, which may in turn adversely affect our business, results of operations, financial condition and prospects. In addition, should the prices of supplies increase significantly, we cannot assure you that we would be able to pass on any increase in the purchase costs to our clients. Any substantial fluctuation in the market prices of the supplies required in our operations may significantly increase our costs, resulting in us reducing, suspending or ceasing provision of certain types of services, thereby reducing our sales and profit.

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We may not be able to maintain proper inventory levels for our operations.

We consider a number of factors when we manage the inventory levels for our operations, including costs of holding inventory, our service portfolio, the preferences of our clients, and our goal of prompt delivery of services in response to our clients’ requests. The volatile economic environment and fast-evolving demands and preferences of our clients have made accurate projection of inventory levels increasingly challenging. Inventory levels in excess of client demand may result in inventory obsolescence, a decline in inventory values, inventory write-downs, or expiration of products. High inventory levels may also require us to commit substantial capital resources, preventing us from using such capital resources for other important business purposes. Conversely, if we underestimate client demand or if our suppliers fail to provide supplies to us in a timely manner, we may experience inventory shortages. Such inventory shortages might result in unfilled client needs, have a negative impact on client relationships and reduce our sales. We cannot assure you that we will be able to maintain proper inventory levels for our operations and such failure may have an adverse effect on our business, financial condition, results of operations and profitability.

Our sales and marketing strategies may not be effective, which may adversely affect our business, results of operations, financial condition and prospects.

We intend to continue to enhance our brand recognition and reputation among our existing and target clients along with our expansion into new geographic areas. Our sales and marketing strategies are important to enhancing our brand image and reputation. For the years ended 2018, 2019 and 2020 and the three months ended March 31, 2020 and 2021, our selling and marketing expenses from continuing operations were RMB198.9 million, RMB219.2 million, RMB187.5 million, RMB31.0 million and RMB64.2 million, respectively. Our selling and marketing expenses are expected to increase as we expand our business and we intend to continue to spend on a diverse range of promotion and marketing channels. If we do not adequately spend on such channels, or effectively select or utilize the suitable channels, we may not generate the desired result from our selling and marketing expenses. Moreover, it may take a period of time to implement our sales and marketing strategies and the length of such period is hard to predict. The sales and marketing strategies we have adopted or plan to adopt may not achieve their anticipated effect, and we may not recover the relevant expenditures and in turn, our business, results of operations, financial condition and prospects could be adversely affected.

We are subject to risks with respect to clients’ installment payment plans.

We allow our clients to pay for our services through installment payment plans. Under such installment payment plans, our clients make applications to certain third-party financing companies which will review the applicants’ financial condition and determine whether to grant financing to the applicants. Our clients need to submit financing approvals to us before performance of procedures. See “Business – Our Customers – Payment Methods.” For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2021, our continuing operations received payments from third-party financing companies with an

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We recorded net losses and accumulated losses during the Track Record Period and we may not be able to achieve or maintain profitability in the future.

We incurred net losses from continuing operations of RMB38.5 million, RMB60.2 million and RMB15.2 million for the years ended December 31, 2018 and 2019 and the three months ended March 31, 2020, respectively, which was primarily due to (i) the commencement of operations of Xi’an Hospital in May 2019 as a new aesthetic medical institution generally has lower income and relatively higher operating costs during the initial stage of its operations; and (ii) our relatively higher level of selling and marketing expenses in 2018 and 2019 as we made considerable efforts to expand our dedicated team of sales consultants, with a view to decreasing our spending on traditional advertising and marketing channels, which took some time to show effect. Our net loss for the three months ended March 31, 2020 was also attributable to the adverse impact of COVID-19 pandemic. Please see “Financial Information – Period to Period Comparison of Results of Operations from Continuing Operations” for more details. As of December 31, 2018, 2019 and 2020 and March 31, 2021, we had accumulated loss of RMB170.8 million, RMB277.0 million, RMB266.9 million and RMB312.5 million, respectively.

Our ability to achieve and maintain profitability will depend, in part, on our ability to generate adequate revenue growth and manage our costs and expenses. While we recorded net profit from continuing operations of RMB32.2 million and RMB19.9 million for the year ended December 31, 2020 and the three months ended March 31, 2021, respectively, we cannot guarantee that we will be able to generate net profits again, and we cannot assure you that our accumulated losses as of March 31, 2021 will turn into retained profits. If we are not able to continue to improve our financial performance in the future or if we incur further losses in the future, our business, results of operations and prospects may be materially affected. So far as the accumulated losses remain, we may not be able to distribute dividends.

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We recorded net current liabilities and negative equity during the Track Record Period, which expose us to liquidity risk.

We recorded net current liabilities of RMB264.0 million, RMB390.9 million, RMB302.7 million and RMB286.9 million, and total deficits of RMB43.1 million, RMB161.2 million, RMB130.0 million and RMB119.9 million, as of December 31, 2018, 2019 and 2020 and March 31, 2021, respectively. Our net current liability and negative equity positions during the Track Record Period were primarily due to the increases in contract liabilities which represent advanced payments from our clients while the underlying services have not been provided. Please see “Financial Information – Net Current Liabilities” for detailed analysis of our net current liability position.

Our net current liability and negative equity positions expose us to liquidity risk. Our future liquidity, the payment of trade and other payables, our capital expenditure plans and the repayment of our outstanding debt obligations as and when they become due will primarily depend on our ability to maintain adequate cash generated from operations and adequate external financing. We cannot assure you that our net current liability and negative equity will not continue or recur in the future, which may limit our working capital for the purpose of operations or capital for our expansion plans and adversely affect our business, financial condition and results of operations.

We could be exposed to risks related to our dealing with clients’ medical data.

Our aesthetic medical institutions collect and maintain medical data of our clients. PRC laws and regulations generally require medical institutions and their medical professionals to protect the privacy of their clients and prohibit unauthorized disclosure of personal information. Such medical institutions and their medical professionals will be liable for damage caused by divulging the clients’ private or medical records without consent. We have taken measures to maintain the confidentiality of our clients’ medical information, including encrypting such information in our information technology system so that it cannot be viewed without proper authorization and setting internal rules requiring our employees to maintain the confidentiality of our clients’ medical information. However, these measures may not always be effective in protecting our clients’ medical information. Our information technology systems could be breached through hacking activities. Personal information we maintain could be leaked due to any theft or misuse of personal information due to misconduct or negligence. In addition, although we do not make the clients’ medical information available to the public, we use such data on an aggregated basis after redacting personally identifiable information for marketing or research purposes. Although we believe our current usage of clients’ medical information is in compliance with the applicable laws and regulations governing the use of such information, any change in such laws and regulations could impose more stringent data protection requirements and thus affect our ability to use medical data and subject us to liability for the use of such data. Failure to protect clients’ medical information, or any restriction on or liability as a result of our use of medical data, could have an adverse effect on our business and reputation.

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A technical failure, security breach or other disruptions of our computer network infrastructure and centralized information technology systems may interrupt our business.

Our computer network infrastructure and information technology systems, such as the HIS and EAS, are critical for our operation, such as appointment of services, billing, financial and budgeting data, client records and inventory. We regularly maintain, upgrade and enhance the capabilities of our information technology systems to meet operational needs. Any failure associated with our information technology systems, including those caused by power disruption or loss, natural disasters, computer viruses or hackers, network failures or other unauthorized tampering, may cause interruptions in our ability to provide services to our clients, keep accurate records, and maintain proper business operations, which may adversely affect our business, financial condition and results of operations.

Compliance with the PRC advertising laws and regulations may be difficult, and any non-compliance could subject us to government sanctions.

We are obligated to ensure our advertising content complies with the applicable PRC laws, rules and regulations. According to the “Administrative Measures on Medical Advertisement” (《醫療廣告管理辦法》) and “Notice on Further Strengthening the Administrative Measures on Medical Advertisements” (《關於進一步加強醫療廣告管理的通知》), a medical institution must obtain a medical advertisement review certificate (醫療廣告審查證明) prior to publishing medical advertisement. Violation of these regulations may result in penalties against the non-compliant medical institution, including rectification orders, warnings, suspension of operations, revocation of relevant permits to engage in the provision of specific medical services, and the revocation of the medical institution practicing license of such medical institution. In addition, if the content of the published advertisement is tampered from what is approved and documented in the medical advertisement examination certificate, the competent authority may revoke the medical advertisement examination certificate and suspend any application for advertisement examination for one year.

Although we endeavor to comply with the PRC advertising laws and regulations, some of our aesthetic medical institutions published advertisements in violation of, or exceeded the scope of medical advertisement permitted under, these laws and regulations during the Track Record Period. See “Business – Legal Proceedings and Compliance – Compliance.” Any violations of these laws and regulations may subject us to governmental penalties, impair our brand and adversely impact our financial condition and results of operations.

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Failure to comply with the PRC anti-corruption laws, regulations and rules could subject us and/or our physicians, staff and aesthetic medical institution administrators to investigations and administrative or criminal penalties, which may harm our reputation and adversely affect our business, financial condition, results of operations.

We have adopted policies and procedures designed to ensure that our physicians, staff and aesthetic medical institution administrators comply with the PRC anti-corruption laws, rules and regulations. See “Business – Risk Management and Internal Control – Anti-Corruption Risk Management.” However, we operate in the healthcare sector in the PRC, which poses elevated risks of violations of anti-corruption laws, rules and regulations, and the PRC government has recently increased its anti-bribery efforts to reduce improper payments and other benefits received by physicians, staff and hospital administrators in connection with the purchase of pharmaceuticals, medical consumables and medical devices and the provision of healthcare services. Although we have established anti-corruption policies and procedures and have not been subject to any government investigation relating to anti-corruption violations, there is no assurance that these policies and procedures will effectively prevent our non-compliance with the PRC anti-corruption laws, regulations and rules arising from actions taken by the individual physicians, staff and aesthetic medical institution administrators without our knowledge. If this occurs, we and/or our physicians, staff and aesthetic medical institution administrators may be subject to investigations and administrative or criminal penalties, and our reputation could be harmed by any negative publicity stemming from such incidents, which may adversely affect our business, financial condition and results of operations.

Our employees could be incentivized to adopt inappropriate or excessive sales practices in advising clients to purchase unnecessary or unsuitable aesthetic medical procedures.

The remuneration package of our employees generally includes base salary and performance-based bonus. As a result, our employees may be incentivized to adopt inappropriate or excessive sales practices, including advising clients to purchase unnecessary or unsuitable aesthetic medical procedures or over-promising the aesthetic effects of proposed procedures in order to boost their sales and in turn, their income. Any incidents of inappropriate or excessive sales practices may lead to unnecessary or unsuitable aesthetic medical procedures and may result in complaints, claims and legal actions brought by dissatisfied clients. Such dissatisfied clients may request refunds, make complaints on the online platforms or other media or to his/her peers, or take legal actions against us, which may materially and adversely affect our brand image, reputation and consumer perception, thereby causing deterioration in the level of trust in our services and resulting in reduced sales and potential loss of clients. In such cases, substantial time, financial and other resources may be required to recover our brand image, reputation and consumer conception, and our business operations, financial conditions and prospects may be materially and adversely affected. In addition, unscrupulous sales practices are regulated and restricted by PRC laws and regulations, the violations of which would subject us to penalties and/or other legal consequences. We therefore incur on-going compliance costs and face potential penalties for non-compliance. Furthermore, any changes in the existing laws and regulations, or any changes

–52– 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 of interpretation thereof, or any promulgation of new laws and regulations in the PRC in relation to unscrupulous sales practices could require us to incur additional compliance costs, or result in us being regarded as not in compliance with the relevant laws and regulations thereby subjecting us to penalties and/or other legal consequences. We have established a series of internal control measures in order to avoid unscrupulous sales practices, such as the practice guidelines for sales and marketing frontline staff and the prohibition of sales by our physicians and other medical professionals. See “Business – Risk Management and Internal Control – Sales and Marketing.” However, we cannot assure you that such internal control measures are always effective. If we fail to adjust our control measures in a timely manner in response to changes in the existing laws, regulations or rules; or if we are found to be non-compliant with any of these laws, regulations or rules, we may face penalties, which could adversely affect our business, financial condition, results of operations and prospects.

Any future occurrence of force majeure events, natural disasters or outbreaks of contagious diseases in the PRC could prevent us from effectively serving our clients and thus adversely affect our results of operations.

Any occurrence of force majeure events, natural disasters or outbreaks of epidemics, including those caused by avian influenza, swine influenza severe acute respiratory syndrome or SARS, Middle East respiratory syndrome coronavirus or MERS-CoV, or Coronavirus Disease 2019 or COVID-19, may restrict business activities in the areas affected and materially and adversely affect our business and results of operations. Moreover, the PRC has experienced natural disasters like earthquakes, floods and droughts in the past few years. Any future occurrence of natural disasters in the PRC may materially and adversely affect its economy and therefore our business. An outbreak of contagious diseases and other adverse public health developments in China, would have a material adverse effect on our business operations. These could include restrictions on our ability to provide services to our clients, as well as cause temporary closure of our aesthetic medical institutions. These events could adversely affect our clients’ demands for our service as they may not want to go to the aesthetic medical institutions at all. Such closures or service suspensions would severely disrupt our operations and adversely and materially affect our financial condition and results of operations.

In particular, the outbreak of COVID-19 pandemic has endangered the health of many people around the world and significantly disrupted travel and local economy. In light of the epidemic brought by COVID-19, local healthcare administrative authorities imposed controls and restrictions on healthcare services except for those in need for urgent medical attention. In compliance with relevant policies issued by the PRC government to contain the outbreak of COVID-19 pandemic, we temporarily suspended all services of our aesthetic medical institutions since February 2020 and with the permission of relevant governmental authorities, the operation of our aesthetic medical institutions were partially resumed in March 2020. In May 2020, we had resumed to provide all types of aesthetic medical services in all our aesthetic medical institutions.

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Any outbreak of COVID-19 pandemic and the related governmental control measures to contain it, including suspension of work order or restriction of residents’ movements, would restrict travelling of goods and people and thus restricting the flow of clients, supplies and employees to and from our aesthetical medical institutions, which in turn adversely affected our business operations. In addition, if our employees or clients who visited our aesthetic medical institutions are infected with COVID-19, quarantines or temporary closures of aesthetic medical institutions would be required. In such event(s), our business operations would be interrupted and our reputation and clients’ confidence would be materially adversely affected.

Ongoing concerns regarding the outbreak of COVID-19 pandemic, particularly its effect on travel, could also negatively impact the aesthetic medical services industry in the PRC as well as the overall economy of China and worldwide. Our clients’ willingness in visiting our aesthetic medical institutions and the general consumer spending sentiment may be deterred by the outbreak of the COVID-19 pandemic. Any of these circumstances may adversely affect our business, results of operations, financial condition and prospects.

Our Controlling Shareholders have substantial control over our Company and their interests may not be aligned with the interests of the other Shareholders.

Prior to and immediately following the completion of the [REDACTED], our Controlling Shareholders will retain substantial control over our Company. Subject to our Articles of Association and the PRC Company Law, the Controlling Shareholders will be able to exercise significant control and exert significant influence over our business or otherwise on matters of significance to us and other Shareholders by voting at the general meeting of the Shareholders and at Board meetings. The interests of our Controlling Shareholders may differ from the interests of other Shareholders and they are free (other than on any matters that they are required to abstain from voting on) to exercise their votes according to their interests. To the extent that the interests of the Controlling Shareholders conflict with the interests of other Shareholders, the interests of other Shareholders can be disadvantaged and harmed.

RISKS RELATING TO CONDUCTING BUSINESS IN THE PRC

China’s economic, political and social conditions, government policies, as well as the global economy may continue to affect our business.

Substantially all of our businesses, assets, operations and revenues are located in or derived from our operations in the PRC and, as a result, our business, financial condition and results of operations are subject, to a significant degree, to the economic, political, social and regulatory environment in the PRC. The PRC government regulates the economy and the industries by imposing industrial policies and regulating the PRC’s macro economy through fiscal and monetary policies.

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The PRC economy has undergone a transition from a planned economy to a market- oriented economy. The PRC government has, in recent years, taken various actions to introduce market forces for economic reform, to reduce state ownership of productive assets and to promote the establishment of sound corporate governance in business entities. However, a substantial portion of productive assets in the PRC are still owned by the PRC government. In addition, the PRC government continues to play a significant role in regulating the economy and the industries by issuing industrial policies. The PRC government still retains significant control over the PRC’s economic growth through the allocation of resources, the monetary policies and preferential treatments to particular industries or enterprises.

Our performance has been and will continue to be affected by China’s economy, which in turn is influenced by the global economy. The uncertainties relating to the global economy as well as the political environment in various regions of the world will continue to impact China’s economic growth. While China’s economy has experienced significant growth in the past few decades, growth has been uneven across different regions and economic sectors and there is no assurance that such growth can be sustained. The global economic slowdown and the turmoil in the global financial markets that began in the second half of 2008, continued weakness in the U.S. economy and the sovereign debt crisis in Europe have collectively added downward pressure to the economic growth in China. The growth rate of China’s real GDP has decreased from 7.3% in 2014 to 2.3% in 2020.

We are unable to predict all the risks and uncertainties that we face as a result of current economic, political, social, and regulatory developments and many of these risks are beyond our control. All such factors may adversely affect our business and operations as well as our financial performance.

The legal protections available to you under the PRC legal system may be limited.

We are incorporated under the laws of the PRC. The PRC legal system is based on written statutes. Prior court decisions may be adduced for reference but have limited precedential value. Since the late 1970s, the PRC government has promulgated laws and regulations dealing with such economic matters as the issuance and trading of securities, shareholders’ rights, foreign investment, corporate organization and governance, commerce, taxation, and trade, with a view towards developing a comprehensive system of commercial law. However, China has not developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China, or may be unclear or inconsistent. In particular, since the aesthetic medical service industry is in its early developmental stage in the PRC, the laws and regulations relating to this industry are unspecific and may be incomprehensive. As a result, the legal protections available to you under the PRC legal system may be limited.

Our Articles of Association provides that, disputes between holders of H Shares and us, our Directors, Supervisors or senior management personnel or Shareholders of Domestic Shares arising out of our Articles of Association or any rights or obligations conferred or imposed thereupon by the PRC Company Law and related laws and administrative regulations

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You may experience difficulties in effecting service of legal process and enforcing judgments against us and our management.

We are a joint stock company incorporated under the laws of the PRC with limited liability, and all of our assets are located in the PRC. In addition, a majority of our Directors, Supervisors, and all of our senior management personnel reside within the PRC, and substantially all of their assets are located within the PRC. As a result, it may not be possible to effect service of process within the United States or elsewhere outside the PRC upon us or our Directors, Supervisors and senior management personnel, including with respect to matters arising under the U.S. federal securities laws or applicable state securities laws. Furthermore, the PRC does not have treaties providing for the reciprocal enforcement of judgments of courts with the United States, the United Kingdom, Japan, or many other countries. In addition, Hong Kong has no arrangement for the reciprocal enforcement of judgments with the United States. As a result, recognition and enforcement in the PRC or Hong Kong of judgments of a court obtained in the United States and any of the other jurisdictions mentioned above may be difficult or impossible.

On July 14, 2006, the Supreme People’s Court of the PRC and the government of the Hong Kong Special Administrative Region entered into the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region Pursuant to Choice of Court Agreements between Parties Concerned (《最高人民法院關於內地與香港特別行政區法院相互認可和執行當事人協議管轄的民商事案件判決的安排》) (the “Arrangement”), pursuant to which a party with an enforceable final court judgment rendered by any designated PRC court or any designated Hong Kong court requiring payment of money in a civil and commercial case according to a written choice of court agreement, may apply for recognition and enforcement of the judgment in the relevant PRC court or Hong Kong court. A written choice of court agreement is defined as any agreement in writing entered into between parties after the effective date of the Arrangement in which a Hong Kong court or a PRC court is expressly designated as the court having sole jurisdiction for the dispute. Therefore, it may not be possible to enforce a judgment rendered by a Hong Kong court in the PRC if the parties in the dispute did not agree to enter into a choice of court agreement in writing. As a result, it may be difficult or impossible for investors to effect service of process against us, certain of our assets, our Directors and senior management members in the PRC in order to seek recognition and enforcement of foreign judgments in the PRC. On January 18, 2019, Hong Kong and the

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PRC entered into the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region (《關於內地與香港特別行政區法院相互認可和執行民商事案件判決的安排》) (the “New Arrangement”), which seeks to establish a mechanism with greater clarity and certainty for recognition and enforcement of judgments in wider range of civil and commercial matters between Hong Kong and the PRC. The New Arrangement discontinued the requirement for a choice of court agreement for bilateral recognition and enforcement. The New Arrangement will only take effect after the promulgation of a judicial interpretation by the Supreme People’s Court of the PRC and the completion of the relevant legislative procedures in Hong Kong. The New Arrangement will, upon its effectiveness, supersedes the Arrangement. Therefore, before the New Arrangement becomes effective, it may be difficult or impossible to enforce a judgment rendered by a Hong Kong court in the PRC if the parties in the dispute do not agree to enter into a choice of court agreement in writing.

We are subject to PRC laws and regulations on currency conversion, and the fluctuation of the Renminbi exchange rate may adversely affect our business and our ability to pay dividends to holders of H Shares.

All of our revenue is denominated in Renminbi, which is not a fully freely-convertible currency. A portion of our revenues must be converted into other currencies in order to meet our foreign currency obligations. For example, we need to obtain foreign currency to make payments of declared dividends, if any, on our H Shares.

Under China’s existing laws and regulations on foreign exchange, following the completion of the [REDACTED], we will be able to make dividend payments in foreign currencies by complying with certain procedural requirements and without prior approval from SAFE. However, in the future, the PRC government may, at its discretion, take measures to restrict access to foreign currencies for capital account and current account transactions under certain circumstances, which would limit our ability to exchange Renminbi for other currencies. Therefore, we may not be able to pay dividends in foreign currencies to our H Shares holders.

From time to time, the value of the Renminbi against the U.S. dollar and other currencies fluctuates, and is affected by a number of factors, such as changes in China’s and international political and economic conditions and the fiscal and foreign exchange policies prescribed by the PRC government. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the Renminbi to the U.S. dollar where the Renminbi is permitted to fluctuate in a regulated band that is based on reference to a basket of currencies determined by the PBOC. The PRC government further reformed the Renminbi exchange rate regime in 2012 and 2014. On August 11, 2015, PBOC announced to improve the central parity of Renminbi against the U.S. dollar by authorizing market-makers to provide parity to the China Foreign Exchange Trading Center with reference to the interbank foreign exchange market closing rate of the previous day, the supply and demand for foreign exchange as well as changes in major international currency exchange rates. On the same day, the central parity of Renminbi against the U.S. dollar depreciated nearly 2.0% as compared to August 10, and further depreciated

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As all of our revenue and operating expenses are denominated in Renminbi, and the [REDACTED] from the [REDACTED] will be received in Hong Kong dollars, any appreciation of the Renminbi against the U.S. dollar, the Hong Kong dollar or any other currencies may result in the decrease in the value of our foreign currency denominated assets and our [REDACTED] from the [REDACTED]. Conversely, any depreciation of the Renminbi may adversely affect the value of, and any dividends payable on, our H Shares in foreign currency. In addition, there are limited instruments available for us to reduce our foreign exchange currency exposure at reasonable costs. We cannot assure you that we will be able to minimize or reduce our foreign currency risk exposure relating to our foreign currency denominated assets. Furthermore, we are also currently required to obtain the approval from SAFE before converting significant amounts of foreign currencies into Renminbi. All of these factors could adversely affect our financial condition and results of operations.

Holders of H Shares may be subject to PRC taxation on dividends paid by us and gains realized through their disposal of our H Shares.

Under the applicable PRC tax laws, regulations, and statutory documents, non-PRC resident individuals and enterprises are subject to different tax obligations with respect to dividends received from us or gains realized upon the sale or other disposition of our H Shares. Non-PRC domestic resident individuals are generally subject to PRC individual income tax under the Individual Income Tax Law of the PRC (中華人民共和國個人所得稅法) at a rate of 20% unless specifically exempted by the tax authority of the State Council or reduced or eliminated by an applicable tax treaty. We are required to withhold such tax from dividend payments. As of the Latest Practicable Date, there remains uncertainty in the interpretation and application of the relevant current PRC tax laws and regulations as to whether gains realized upon disposal of H Shares by non-PRC domestic resident individuals are subject to PRC individual income tax.

Non-PRC resident enterprises that do not have establishments or premises in the PRC, or have establishments or premises in the PRC but their income is not related to such establishments or premises are subject to PRC enterprise income tax at the rate of 10% on dividends received from PRC companies and gains realized upon disposal of equity interests in PRC companies pursuant to the Enterprise Income Tax Law of the PRC (中華人民共和國企業所得稅法) and its application measures, which can be further reduced under special arrangements or applicable treaties between China and the jurisdiction where the non-resident enterprise resides. As of the Latest Practicable Date, there are no specific rules about how to levy tax on gains realized by non-resident enterprise holders of H Shares through the sale or transfer by other means of H Shares.

–58– 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

There remains uncertainty as to how the PRC tax laws, regulations and statutory documents are interpreted and implemented by the PRC tax authorities. PRC tax laws, regulations and statutory documents may also change. If there are any unfavorable changes to applicable tax laws or interpretations or application with respect to such laws, the value of your investment in our H Shares may be materially affected.

See “Appendix III – Taxation and Foreign Exchange.”

RISKS RELATING TO THE [REDACTED]

No prior public market for our H Shares exists, an active trading market for our H Shares may not develop, and our trading prices may fluctuate significantly.

Prior to the [REDACTED], there was no public market for our H Shares. There can be no assurance that an active trading market for our H Shares will develop and be sustained following the [REDACTED]. In addition, the initial [REDACTED] of our H Shares is expected to be fixed by agreement between the [REDACTED] (on behalf of the [REDACTED]) and us, and may not be indicative of the market price of our H Shares following the completion of the [REDACTED]. Moreover, the trading volume and the price of our H Shares may be affected by various factors including the research reports yet to be released about us prepared by securities and industries analysts or a reduction of their ratings on our H Shares. If an active public market for our H Shares does not develop after the [REDACTED], the market price and liquidity of our H Shares could be materially and adversely affected.

The trading price of our H Shares may be volatile, which could result in substantial losses to you.

The trading price of our H Shares may be volatile and could fluctuate widely in response to factors beyond our control, including general market conditions of the securities markets in Hong Kong, the PRC, the United States and elsewhere in the world. In particular, the performance and fluctuation of the market prices of other companies with business operations located mainly in the PRC that have listed their securities in Hong Kong may affect the volatility in the price of and trading volumes for our H Shares. A number of PRC-based companies have listed their securities, and some are in the process of preparing for listing their securities, in Hong Kong and the United States. Some of these companies have experienced significant volatility, including significant price declines after their initial public offerings. The trading performances of the securities of these companies at the time of or after their offerings may affect the overall investor sentiment towards PRC-based companies listed in Hong Kong and the United States and consequently may impact the trading performance of our H Shares. These broad market and industry factors may significantly affect the market price and volatility of our H Shares, regardless of our actual operating performance.

–59– 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

Future sales or perceived sales of a substantial number of our H Shares in the public markets could adversely affect the prevailing market price of our H Shares and our ability to raise capital in the future.

The market price of our H Shares could decline as a result of future sales of a substantial number of our H Shares or other securities relating to our H Shares in the public market, or the issuance of new shares or other securities, or the perception that such sales or issuances may occur. Future sales, or anticipated sales, of substantial amounts of our securities, including any future offerings, could also materially and adversely affect our ability to raise capital at a time and on terms favorable to us. In addition, our Shareholders may experience dilution in their holdings to the extent we will issue additional securities in future offerings. New equity or equity-linked securities issued by us may also confer rights and privileges that take priority over those conferred by the H Shares.

The conversion of a significant number of our Domestic Shares and Unlisted Foreign Shares into H Shares may seriously harm the prevailing market price of our H Shares.

All of our Domestic Shares and Unlisted Foreign Shares can be converted into H Shares, if the conversion and trading of H Shares so converted shall have been duly completed pursuant to requisite internal approval process and the approval from the relevant PRC regulatory authorities, including the CSRC. In addition, such conversion and trading must, in all aspects, comply with the regulations promulgated by the securities regulatory authority under the State Council and the regulations, requirements and procedures of the Hong Kong Stock Exchange. A vote by the shareholders in separate class meetings is not required for the listing and trading of the converted shares on an overseas stock exchange. However, the PRC Company Law (《中華人民共和國公司法》) provides that in relation to the public offering of a company, the shares of that company which are issued prior to the public offering shall not be transferred within one year from the date of the listing. Therefore, upon obtaining the requisite approval, shares currently held on our Domestic Share register and/or the Unlisted Foreign Share register may be traded, after the conversion, in the form of H Shares on the Stock Exchange after one year of the [REDACTED]. If a significant number of our Domestic Shares or Unlisted Foreign Shares are converted into H Shares, the supply of H Shares may be substantially increased, which could materially and adversely affect the prevailing market price of our H Shares.

As the [REDACTED] of our H Shares is higher than our net tangible asset value per share, you will experience immediate dilution upon such purchase.

The [REDACTED] of our H Shares is higher than the net tangible asset value per share of the outstanding shares of our then-existing Shareholders. Therefore, purchasers of our H Shares in the [REDACTED] will experience an immediate dilution in the pro forma adjusted net tangible asset value of HK$[REDACTED] per H Share as of March 31, 2021, without giving effect to any changes to our net tangible assets subsequent to March 31, 2021, other than the [REDACTED] (assuming an [REDACTED] of HK$[REDACTED] per share for our H Shares, being the high-end of our indicative [REDACTED] ranges of the [REDACTED], and assuming that the [REDACTED] for the [REDACTED] is not exercised and after deduction

–60– 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 of estimated [REDACTED] fees and [REDACTED] expenses in connection with the [REDACTED] payable by us). If the [REDACTED] for the [REDACTED] is exercised, or if we issue additional shares in the future, purchasers of our H Shares could experience further dilution in their shareholding percentage.

There is no assurance if and when we will pay dividends in the future.

We cannot guarantee when, if or in what form and amount dividends will be declared or paid on our H Shares following the [REDACTED]. Distribution of dividends will be at the discretion of our Board and subject to Shareholders’ approval. A decision to declare or pay dividends and the amount of such dividends will depend on various factors, including our financial condition, results of operations, prospects, capital adequacy levels and other factors that our Board may determine to be important. For details of our dividend policy, please see “Financial Information – Dividends.” As a result, there can be no assurances whether, when and in what manner we will pay dividends in the future.

There are uncertainties and risks associated with forward-looking statements.

This document contains certain statements and information that are “forward-looking” and uses forward-looking terminology such as “expect,” “believe,” “plan to,” “intend,” “could,” “anticipate,” “estimate,” “should” and “will.” Those statements include, among other things, the discussion of our growth strategy and expectations concerning our future business, operations, liquidity and capital resources. Purchasers of our H Shares are cautioned that any forward-looking statements are subject to uncertainties and that, although we believe the assumptions on which the forward-looking statements are based are reasonable, any or all of these assumptions could also be incorrect. The uncertainties in this regard include, but are not limited to, those identified in this “Risk Factors” section, many of which are not within our control. In light of these and other uncertainties, the inclusion of forward-looking statements in this document should not be regarded as representations by us that our plans or objectives will be achieved, and investors should not place undue reliance on such forward-looking statements. We do not undertake any obligations to update publicly or release any revisions of any forward-looking statements in this document, whether as a result of new information, future events or otherwise.

Since there may be a gap of several Business Days between [REDACTED] and [REDACTED] of our H Shares, holders of our H Shares are subject to the risk that the price of our H Shares could fall during the period before [REDACTED] of our H Shares begins.

The [REDACTED] of our H Shares is expected to be determined on the [REDACTED]. However, our H Shares will not commence [REDACTED] on the Hong Kong Stock Exchange until they are delivered, which is expected to be several Business Days after the [REDACTED]. As a result, investors may not be able to sell or otherwise deal in our H Shares during that period.

–61– 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

Accordingly, holders of our H Shares are subject to the risk that the price of our H Shares could fall before trading begins as a result of adverse market conditions or other adverse developments that could occur between the time of sale and the time trading begins.

We cannot assure you of the accuracy or comparability of the facts, forecasts and statistics contained in this document.

Facts, forecasts and statistics in this document, in particular those related to the PRC, the PRC economy and the PRC aesthetic medical service industry, are derived from various sources and information published by various government authorities and departments or other public sources, which are generally believed to be reliable. However, we cannot guarantee the quality, comparability, and reliability of such material. In addition, these facts, forecasts and statistics have not been independently verified by us or any other parties involved in the [REDACTED], and may not be consistent with information available from other sources, and may not be complete or up to date. We have taken reasonable care in reproducing or extracting information from such sources. However, because of potentially flawed methodologies, discrepancies in market practice and other reasons, these facts, forecasts and other statistics may be inaccurate or may not be comparable from period to period or to facts, forecasts or statistics offered by other economies. Therefore, you should not unduly rely on such information. You should consider how much weight or importance such facts or statistics carry and should not place undue reliance on them.

You should read the entire document carefully and should only place reliance on information released by us including this document, the [REDACTED] and other formal announcements made with respect to our [REDACTED], and not place any reliance on any information contained in press articles or other media when making your investment decision.

You are strongly advised to read the entire document carefully and are cautioned against placing any reliance on the information in any press article or any other media coverage which contains information not disclosed or not consistent with the information included in this document.

We have not authorized anyone to provide you with information that is not contained in this document and the [REDACTED]. Any financial information, financial projections, valuations, and other information purported about us contained in any press articles or other media have not been authorized by us and we make no representation as to the appropriateness, accuracy, completeness, or reliability of any such information or publication, and accordingly do not accept any responsibility for any such press or media coverage or the inaccuracy or incompleteness of any such information. In making your decision as to whether to purchase our H Shares, you should rely only on the information in this document, the [REDACTED] and other formal announcements made with respect to our [REDACTED].

–62– 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 WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES

In preparation for the [REDACTED], our Company has applied for the following waivers from strict compliance with the relevant provisions of the Listing Rules:

WAIVER IN RELATION TO MANAGEMENT PRESENCE IN HONG KONG

Pursuant to Rules 8.12 and 19A.15 of the Listing Rules, we must have a sufficient management presence in Hong Kong. This normally means that at least two of our executive Directors must be ordinarily resident in Hong Kong. Since substantially all of the business operations of our Group are managed and conducted outside of Hong Kong, and all of our executive Directors ordinarily reside in the PRC, we do not have, and for the foreseeable future will not have, sufficient management presence in Hong Kong for the purpose of satisfying the requirement under Rules 8.12 and 19A.15 of the Listing Rules. Accordingly, we have applied for, and the Hong Kong Stock Exchange [has granted], a waiver from strict compliance with the requirements under Rules 8.12 and 19A.15 of the Listing Rules subject to the following conditions to maintain regular and effective communication between the Hong Kong Stock Exchange and us:

(a) we have appointed Mr. Wang and Ms. Wang Zheng, as our authorized representatives (the “Authorized Representatives”) and Ms. Ko Mei Ying, who is ordinarily resident in Hong Kong, as the alternate to the Authorized Representatives for the purposes of Rule 3.05 of the Listing Rules to serve as our principal channel of communication with the Hong Kong Stock Exchange. We have provided the Hong Kong Stock Exchange with their contact details, and they can be readily contactable in Hong Kong to deal promptly with enquiries from the Hong Kong Stock Exchange, and will also be available to meet with the Hong Kong Stock Exchange within a reasonable period of time upon the request of the Hong Kong Stock Exchange and will be readily contactable by telephone, facsimile and email;

(b) as and when the Hong Kong Stock Exchange wishes to contact our Directors on any matters, each of our Authorized Representatives and their alternate will have means to contact all of our Directors (including our independent non-executive Directors) promptly at all times. We will implement measures such that (i) each Director must provide his or her mobile phone number, office phone number, facsimile number and email address to our Authorized Representatives and their alternate and the Hong Kong Stock Exchange; and (ii) in the event that a Director expects to travel or otherwise be out of office, he or she will provide the phone number of the place of his or her accommodation to our Authorized Representatives and their alternate. We have provided the Hong Kong Stock Exchange with the contact details of each Director to facilitate communication with the Hong Kong Stock Exchange;

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

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(d) we have appointed a compliance adviser, Haitong International Capital Limited, pursuant to Rules 3A.19 and 19A.05 of the Listing Rules, which will act as our additional and alternative channel of communication with the Hong Kong Stock Exchange during the period from the [REDACTED] to 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 immediately after the [REDACTED], and its representative(s) will be fully available to answer enquiries from the Hong Kong Stock Exchange. The compliance adviser will have access at all times to our Authorized Representatives and their alternate, our Directors and the other senior management of our Company to ensure that it is in a position to provide prompt responses to any queries or requests from the Hong Kong Stock Exchange in respect of our Company; and

(e) any meeting between the Hong Kong Stock Exchange and our Directors will be arranged through our Authorized Representatives, their alternate, the compliance adviser or directly with our Directors within a reasonable time frame. We will inform the Hong Kong Stock Exchange promptly in respect of any changes in our Authorized Representatives, their alternate and compliance adviser.

WAIVER IN RELATION TO JOINT COMPANY SECRETARIES

Pursuant to Rules 3.28 and 8.17 of the Listing Rules, our company secretary must be an individual who by virtue of his or her academic or professional qualifications or relevant experience is, in the opinion of the Hong Kong Stock Exchange, capable of discharging the functions of company secretary. Note (1) to Rule 3.28 of the Listing Rules further provides that the Hong Kong Stock Exchange considers the following academic or professional qualifications to be acceptable.

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

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

(c) 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 Hong Kong Stock Exchange will consider the individual’s:

(a) length of employment with the listing applicant and other issuers and the roles he or she played;

(b) familiarity with the Listing Rules and other relevant law and regulations including but not limited to the SFO, the Companies Ordinance, Companies (Winding Up and Miscellaneous Provisions) Ordinance, and the Takeovers Code;

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

(d) professional qualifications in other jurisdictions.

In addition, Guidance Letter HKEX-GL108-20 provides that the waiver from strict compliance with Rule 3.28 of the Listing Rules, if granted, will be for a fixed period of time (the “Waiver Period”) and on the following conditions: (i) the proposed company secretary must be assisted by a person who possesses the qualifications or experience as required under Rule 3.28 of the Listing Rules and is appointed as a joint company secretary throughout the Waiver Period; and (ii) the waiver can be revoked if there are material breaches of the Listing Rules by the Company.

We have appointed Ms. Wang Zheng as one of the joint company secretaries. Ms. Wang Zheng has extensive knowledge about our business operations and corporate culture and has extensive experience in matters concerning the Board and our corporate governance. However, Ms. Wang Zheng does not possess the specified qualifications required by Rule 3.28 of the Listing Rules. As a result, we have appointed Ms. Ko Mei Ying, who meets the requirements under Rule 3.28 of the Listing Rules, to act as the other joint company secretary and to provide assistance to Ms. Wang Zheng in the compliance matters for the [REDACTED] as well as other Hong Kong regulatory requirement for an initial period of three years from the [REDACTED]. Over such period, we will implement the following measures to assist Ms. Wang Zheng to satisfy the requisite qualifications as prescribed in Rules 3.28 and 8.17 of the Listing Rules:

(a) Ms. Ko Mei Ying will assist Ms. Wang Zheng so as to enable her to discharge her duties and responsibilities as a joint company secretary of our Company. Given Ms. Ko Mei Ying’s relevant experiences, she will be able to advise both Ms. Wang Zheng and us on the relevant requirements of the Listing Rules as well as other applicable laws and regulations of Hong Kong;

(b) Ms. Wang Zheng will be assisted by Ms. Ko Mei Ying for an initial period of three years from the [REDACTED], which should be sufficient for her to acquire the requisite knowledge and experience under Rule 3.28 of the Listing Rules;

(c) we will ensure that Ms. Wang Zheng has access to the relevant trainings and support to enable her to familiarize herself with the Listing Rules and the duties required of a company secretary of a Hong Kong listed company, and Ms. Wang Zheng has undertaken to attend such trainings;

(d) Ms. Ko Mei Ying will communicate with Ms. Wang Zheng on a regular basis regarding matters in relation to corporate governance, the Listing Rules as well as other applicable laws and regulations of Hong Kong which are relevant to our operations and affairs. Ms. Ko Mei Ying will work closely with, and provide

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assistance to Ms. Wang Zheng with a view to discharging her duties and responsibilities as a company secretary, including but not limited to organizing the Board meetings and Shareholders’ meetings; and

(e) pursuant to Rule 3.29 of the Listing Rules, Ms. Wang Zheng and Ms. Ko Mei Ying will also attend in each financial year no less than 15 hours of relevant professional training courses to familiarize themselves with the requirements of the Listing Rules and other legal and regulatory requirements of Hong Kong. Both Ms. Wang Zheng and Ms. Ko Mei Ying will be advised by our legal advisers as to Hong Kong law and our compliance adviser as and when appropriate and required.

Accordingly, we have applied for, and the Hong Kong Stock Exchange [has granted], a waiver from strict compliance with the requirements of Rules 3.28 and 8.17 of the Listing Rules, for an initial period of three years from the [REDACTED], on the conditions that (i) Ms. Ko Mei Ying is engaged as a joint company secretary and provides assistance to Ms. Wang Zheng during this period, and (ii) there are no material breaches of the Listing Rules by the Company. Prior to the expiry of the initial three-year period, we will conduct a further evaluation of the qualification and experience of Ms. Wang Zheng to determine whether the requirements as stipulated in Rules 3.28 and 8.17 of the Listing Rules can be satisfied, and we will liaise with the Hong Kong Stock Exchange to assess whether Ms. Wang Zheng, having had the benefit of Ms. Ko Mei Ying’s assistance for three years, would have acquired the relevant experience within the meaning of Note 2 to Rule 3.28 of the Listing Rules and there is no need to further apply for a waiver.

See “Directors, Supervisors and Senior Management” for further details of Ms. Wang Zheng’s and Ms. Ko Mei Ying’s biographies.

–66– 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 INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]

[REDACTED]

–67– 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 INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]

[REDACTED]

–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 INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]

[REDACTED]

–69– 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 INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]

[REDACTED]

–70– 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 INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]

[REDACTED]

–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 INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]

[REDACTED]

–72– 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 DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE [REDACTED]

DIRECTORS

Name Address Nationality

Executive Directors Mr. WANG Yong’an (汪永安) 5005, Lijia Garden Chinese No. 6 Liyuan Street Tianzhu Town Shunyi District, Beijing China

Ms. WANG Zheng (王崢) No. 5, Unit 4, Building 16 Chinese Liulinguan South Lane Haidian District, Beijing China

Non-executive Directors Mr. FANG Min (方敏) Room 1801, No. 14 Chinese Lane 625, Taixing Road Jing’an District, Shanghai China

Mr. ZHANG Quanyuan North No. 301 Chinese (張泉源) No. 13 Xila Hutong Dongcheng District, Beijing China

Ms. LI Quan (李泉) No. 8 Chinese Chaoyangmen North Street Dongcheng District, Beijing China

–73– 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 DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE [REDACTED]

Name Address Nationality

Independent non-executive Directors Mr. WU Jun (武軍) No. 88-1 Chinese Yanlan Shan Longhu Shunyi District, Beijing China

Mr. ZHAO Zhenmin (趙振民) No. 501, Unit 2 Chinese Building 5 Badachu Road West Plastic Surgery Hospital Shijingshan District, Beijing China

Mr. ZHOU Tao David (周韜) Flat 21G, Hoi Wan Mans Chinese Riviera Gardens Tsuen Wan, New Territories Hong Kong

SUPERVISORS

Name Address Nationality

Ms. LU Zhan (路展) No. 901, Unit 2, Building 64 Chinese Deshengmen West Street Xicheng District, Beijing China

Ms. YOU Weiwei (尤薇薇) Room 101, Unit 1, Building 5 Chinese Advantage Community No. 2 Yaojiadian Road Changying Hui Area Chaoyang District, Beijing China

Ms. LIU Qingrong (劉慶榮) Room 501, Unit 2 Chinese Building 3, No.1 Yard Yangfang Garden Fengtai District, Beijing China

See “Directors, Supervisors and Senior Management” for more details.

–74– 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 DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE [REDACTED]

PARTIES INVOLVED IN THE [REDACTED]

Sole Sponsor Haitong International Capital Limited Suites 3001-3006 and 3015-3016 One International Finance Centre No. 1 Harbour View Street Central, Hong Kong

[REDACTED]

Legal Advisors to our Company As to Hong Kong Laws William Ji & Co. LLP in Association with Tian Yuan Law Firm Hong Kong Office Suites 3304-3309, 33/F Jardine House One Connaught Place Central, Hong Kong

As to PRC laws Tian Yuan Law Firm 10/F, CPIC Plaza B No. 28, Fengsheng Lane Xicheng District Beijing, PRC

–75– 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 DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE [REDACTED]

Legal Advisors to the Sole Sponsor As to Hong Kong and United States Laws and [REDACTED] Sidley Austin 39/F, Two International Finance Centre 8 Finance Street Central Hong Kong

As to PRC laws Commerce & Finance Law Offices 12-14th Floor, China World Office 2, No.1 Jianguomenwai Avenue Beijing, PRC

Auditor and Reporting Accountants KPMG Certified Public Accountants 8th Floor Prince’s Building 10 Chater Road Central, Hong Kong

Compliance Adviser Haitong International Capital Limited Suites 3001-3006 and 3015-3016 One International Finance Centre No. 1 Harbour View Street Central, Hong Kong

Industry Consultant Frost & Sullivan (Beijing) Inc., Shanghai Branch Co. Suite 2504 Wheelock Square 1717 Nanjing West Road Shanghai 200040, China

[REDACTED]

–76– 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 CORPORATE INFORMATION

Registered Office Room 808, 8th Floor Block A No. 3 Dongsanhuan North Road Chaoyang District Beijing, the PRC

Headquarters in the PRC Block C, Xueyuan Pai No. 15 Xueyuan South Road Haidian District Beijing, the PRC

Principal Place of Business in Hong Kong 40/F, Dah Sing Financial Centre No. 248 Queen’s Road East Wanchai Hong Kong

Company’s Website www.evercarecn.com (the information contained on the website does not form part of this document)

Joint Company Secretaries Ms. Wang Zheng (王崢) 6/F, Block C, Xueyuan Pai No. 15 Xueyuan South Road Haidian District Beijing, the PRC

Ms. Ko Mei Ying (高美英) (An associate member of The Chartered Governance Institute and The Hong Kong Chartered Governance Institute) 40/F, Dah Sing Financial Centre No. 248 Queen’s Road East Wanchai Hong Kong

Authorized Representatives Mr. Wang Yong’an (汪永安) 6/F, Block C, Xueyuan Pai No. 15 Xueyuan South Road Haidian District Beijing, the PRC

–77– 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 CORPORATE INFORMATION

Ms. Wang Zheng (王崢) 6/F, Block C, Xueyuan Pai No. 15 Xueyuan South Road Haidian District Beijing, the PRC

Alternate to the authorized representatives Ms. Ko Mei Ying (高美英) 40/F, Dah Sing Financial Centre No. 248 Queen’ Road East Wanchai Hong Kong

Audit Committee Mr. Wu Jun (武軍) (Chairman) Mr. Fang Min (方敏) Mr. Zhou Tao David (周韜)

Remuneration Committee Mr. Zhao Zhenmin (趙振民) (Chairman) Mr. Wang Yong’an (汪永安) Mr. Wu Jun (武軍)

Nomination Committee Mr. Zhou Tao David (周韜) (Chairman) Mr. Wang Yong’an (汪永安) Mr. Zhao Zhenmin (趙振民)

[REDACTED]

Principal Bankers Bank of China Limited Beijing Anding Road Sub-branch 1st Floor, No. 10 Anding Road Chaoyang District Beijing, the PRC

China Merchants Bank Beisanhuan Sub-branch 1st Floor, Block D, Global Trade Center No. 36 Beisanhuan East Road Dongcheng District Beijing, the PRC

China Merchants Bank Beijing Dongzhimen Branch 1st Floor Tianheng Building Commercial District No. 46 Dongzhimenwai Street Dongcheng District Beijing, the PRC

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Certain information and statistics set out in this section and elsewhere in the document have been derived from various government publications, market data providers and other independent third-party sources. In addition, certain information and statistics set forth in this section and elsewhere in this document have been derived from an industry report commissioned by us and independently prepared by Frost & Sullivan in connection with the [REDACTED], or the Frost & Sullivan Report. We believe that the sources of such information and statistics are appropriate and have taken reasonable care in extracting and reproducing such information. We have no reason to believe that such information and statistics are false or misleading or that any fact has been omitted that would render such information or statistics false or misleading. None of our Company, the [REDACTED], the Sole Sponsor, the [REDACTED], the [REDACTED], the [REDACTED], or any other party involved in the [REDACTED] (except for Frost & Sullivan) or their respective directors, advisers and affiliates have independently verified such information and statistics. Accordingly, none of our Company, the [REDACTED], the Sole Sponsor, the [REDACTED], the [REDACTED], the [REDACTED], or any other party involved in the [REDACTED] (except for Frost & Sullivan) or their respective directors, advisers and affiliates makes any representation as to the correctness or accuracy of such information and the statistics contained in this document. For the above reasons, information contained in this section should not be unduly relied upon. All references to market rankings in this section are based on revenue from continuing operations only.

SOURCE AND RELIABILITY OF INFORMATION We engaged Frost & Sullivan, an independent market research consultant, to conduct an analysis of, and to prepare a report on, the aesthetic medical service market for use in this document. Founded in 1961, Frost & Sullivan provides market research on a variety of industries, among other services. In addition, we have commissioned Frost & Sullivan to conduct a client satisfaction survey with 217 respondents of different age groups, household income levels and education levels in 20 cities in China. We have agreed to pay a total of RMB700,000 in fees to Frost & Sullivan for the preparation of the Frost & Sullivan Report and the Frost & Sullivan Survey. We are of the view that the payment of such fees does not impair the fairness of the conclusions drawn in the Frost & Sullivan Report or the Frost & Sullivan Survey. The information from Frost & Sullivan disclosed in the document is extracted from the Frost & Sullivan Report and is disclosed with the consent of Frost & Sullivan. In compiling and preparing the Frost & Sullivan Report, Frost & Sullivan used the following key methodologies to collect multiple sources, validate the data and information collected, and cross-check each respondent’s information and views against those of others: (i) secondary research, which involved reviewing published sources including national statistics, annual reports of listed companies, industry reports and data based on Frost & Sullivan’s own research database; and (ii) primary research, which involved in-depth interviews with the industry participants. Frost & Sullivan also adopted the following primary assumptions while making projections on the macroeconomic environment, the overall aesthetic medical service market and various segment markets in China: • China’s economy is expected to grow at a steady rate supported by favorable government policies as well as global economic recovery, among other factors; • China’s total population continues to show an upward trend and the proportion of elderly population will grow rapidly; • No material changes in government policies in regard to the aesthetic medical service market in China; • No major technological breakthrough in the relevant industry will occur from 2021 to 2025; • In addition to macroeconomic factors, certain industry drivers, including but not limited to the increasing disposable income and increasing awareness of appearance, are likely to drive demand in the forecast period; and • As the COVID-19 brought about negative impact to the market, the demand of consumers to aesthetic medical services has decreased. Chinese government took effective reaction and strict regulations to reduce the impact of COVID-19. Therefore, the economy is assumed to recover in 2020 and continue to grow in the future.

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Frost & Sullivan’s projections are made based on various market determinants and their assigned coefficients which indicate their relative importance. The market determinants represent both subjective assumptions and objective factors; therefore, the projected data may not be consistent with the real data. Except as otherwise noted, all of the data and forecasts contained in this section are derived from the Frost & Sullivan Report. Our Directors confirm that after making reasonable due diligence, there is no material adverse change in the overall market information since the date of the Frost & Sullivan Report that would materially qualify, contradict or have an impact on such information. OVERVIEW OF AESTHETIC MEDICAL SERVICES Aesthetic medical services are medical procedures that are primarily intended to improve personal appearance. Such procedures are generally elective and performed on various parts of the face and body. Aesthetic medical services may be categorized as aesthetic non-surgical procedures and aesthetic surgical procedures. Aesthetic non-surgical procedures include minimally invasive procedures, aesthetic energy-based procedures and other aesthetic non-surgical procedures. Minimally invasive procedures primarily comprise aesthetic injection procedures which involve minimal penetration into the body tissue and are characterized by less pain and quicker recovery. Major procedures of this segment include injections of neurotoxin, such as botulinum toxin type A, and dermal fillers, such as hyaluronic acid. Aesthetic energy-based procedures are performed with equipment that utilize various forms of energy such as laser, radiofrequency, intense pulsed light and ultrasound, and are used primarily for skin care and body contouring, such as acne and pigmentary treatments, rejuvenation applications and skin tightening. Other aesthetic non-surgical procedures mainly include chemical peels, wart removal and comedone extraction. Aesthetic surgical procedures are designed to improve the appearance of any part of the body by surgeries. Aesthetic surgical procedures are invasive and performed by certified aesthetic medical physicians. Typical aesthetic surgical procedures include: (i) breast enhancement which includes breast augmentation, lift and reduction; (ii) face and head contouring which includes rhinoplasty, double eyelid, chin and cheek enhancement; and (iii) body contouring which includes tummy tuck and liposuction. OVERVIEW OF GLOBAL AESTHETIC MEDICAL SERVICE MARKET Owing to the innovation of aesthetic medical technologies and the rising awareness of aesthetic medical services among consumers, the total service volume of global aesthetic medical procedures increased from 78.0 million in 2016 to 91.5 million in 2020, representing a CAGR of 4.1%, and is expected to grow further from 98.3 million in 2021 to 125.9 million in 2025, representing a CAGR of 6.4%. Global Service Volume of Aesthetic Medical Service Market by Aesthetic Surgical and Non-surgical Procedures, 2016-2025E

Period Surgical Non-Surgical Total 2016-2020 1.9% 5.7% 4.1% 2021E-2025E 3.7% 8.1% 6.4%

Surgical Non-Surgical 125.9 118.5 111.4 Million 104.8 97.6 98.3 91.1 91.5 45.0 43.5 84.4 42.0 78.0 40.6 40.3 39.0 38.5 37.1 36.6 34.4

74.9 80.9 64.2 69.4 52.5 57.3 54.4 59.3 43.6 47.8

2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E Source: Frost & Sullivan analysis Note: (1) All references to global aesthetic medical service market and China’s aesthetic medical service market hereinafter in the section headed “Industry Overview” only cover the regulated aesthetic medical service market. Total revenue of global aesthetic medical service market increased with a CAGR of 4.6% from US$114.9 billion in 2016 to US$137.5 billion in 2020, and is forecasted to grow further at a CAGR of 6.6% from 2021 to 2025, reaching US$191.6 billion in 2025.

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Global Market Size of Aesthetic Medical Service Market by Aesthetic Surgical and Non-surgical Procedures, 2016-2025E

Period Surgical Non-Surgical Total 2016-2020 3.7% 9.1% 4.6% 2021E-2025E 5.3% 11.4% 6.6% 191.6 179.9 Surgical Non-Surgical 168.9 158.5 USD Billion 146.7 148.2 136.2 137.5 125.8 114.9 146.4 139.3 125.7 132.4 119.9 118.8 112.4 111.4 104.8 96.4

45.2 32.8 36.5 40.6 18.5 21.0 23.8 26.9 26.1 29.4 2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E Source: Frost & Sullivan analysis Due to the COVID-19 pandemic, the total service volume of global aesthetic medical procedures dropped from 97.6 million in 2019 to 91.5 million in 2020, and the total revenue dropped from US$146.7 billion in 2019 to US$137.5 billion in 2020, yet the total service volume and total revenue are expected to grow back to the level similar to the period before the pandemic outbreak on the basis that the economy will recover from the adverse impact of the pandemic outbreak, and that the increasing number of COVID-19 vaccinations as well as the adoption of protective measures will enhance consumer confidence. OVERVIEW OF AESTHETIC MEDICAL SERVICE MARKET IN CHINA Market Size As one of the fastest-growing aesthetic medical service markets in the world, China’s aesthetic medical service market (i) ranked second in terms of total revenue of aesthetic medical services in 2019, accounting for approximately 14.7% of global market share of aesthetic medical service market; and (ii) ranked second in terms of total service volume of aesthetic medical procedures in 2019. Driven by (i) the aging population and the desire to improve or maintain personal appearance as well as growing social acceptance of aesthetic medical services, (ii) increasing disposable income and consumption upgrade, (iii) developments in aesthetic medical technologies, and (iv) increasing capital investment in the aesthetic medical service industry, total revenue of aesthetic medical service market in China is forecasted to grow at a CAGR of 26.0% from 2019 to 2023, being the fastest-growing market among the top 10 markets globally.

Total revenue of Revenue of aesthetic Revenue of aesthetic 2019-2023E CAGR of Ranking of total aesthetic medical surgical procedures non-surgical total revenue of Country revenue of aesthetic service market in market in 2019 procedures market in aesthetic medical medical service 2019 (USD Million) (USD Million) 2019 (USD Million) service market United States 1 28,488.89 22,958.75 5,530.14 7.2% China 2 21,529.89 12,525.74 9,003.64 26.0% Brazil 3 15,251.18 12,992.82 2,258.36 5.6% South Korea 4 8,459.09 6,645.05 2,309.27 5.5% Russia 5 5,127.41 4,680.81 446.70 9.4% Italy 6 4,547.09 3,289.43 1,257.66 1.5% Japan 7 4,051.75 2,491.01 1,560.74 3.2% Turkey 8 3,429.31 2,686.28 743.03 8.9% Mexico 9 3,417.26 2,770.55 646.71 -0.2% India 10 2,312.94 2,042.76 270.17 17.6% Sources: Frost & Sullivan analysis Note: (1) Calculated based on an exchange rate of RMB6.619897 to US$1. Aesthetic non-surgical procedure segment contributes to a larger proportion of the total service volume of aesthetic medical procedures in China mainly due to its relatively low level of risk, high affordability as well as quicker recovery time. Aesthetic non-surgical procedure segment accounted for approximately 74.1% of total service volume of aesthetic medical procedures in 2020. Total service volume of aesthetic non-surgical procedures increased with a CAGR of 14.5% from 8.8 million in 2016 to 15.2 million in 2020, and is expected to grow further at a CAGR of 25.3% from 18.5 million in 2021 to 45.5 million in 2025, accounting for approximately 87.5% of total service volume of aesthetic medical procedures in 2025.

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China Service Volume of Aesthetic Medical Service Market by Aesthetic Surgical and Non-surgical Procedures, 2016-2025E

Period Surgical Non-surgical Total 2016-2020 9.4% 14.5% 13.1% 2021E-2025E 4.3% 25.3% 21.3%

Surgical Non-Surgical 52.0 6.6 Million 43.3 35.9 6.6 29.5 6.3 24.2 24.0 5.9 20.2 20.5 6.8 5.6 45.5 16.3 5.3 12.6 5.8 36.7 4.8 29.5 3.7 23.6 14.5 17.5 15.2 18.5 8.8 11.5 2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E Source: Frost & Sullivan analysis Aesthetic non-surgical procedure segment accounted for approximately 44.0% of total aesthetic medical service market in terms of total revenue in 2020. Total revenue of aesthetic non-surgical procedure segment increased with a CAGR of 13.9% from RMB30.8 billion in 2016 to RMB51.8 billion in 2020, and is expected to grow further at a CAGR of 21.7% from RMB61.1 billion in 2021 to RMB133.9 billion in 2025, accounting for approximately 48.1% of the aesthetic medical service market in terms of total revenue. China Market Size of Aesthetic Medical Service Market by Aesthetic Surgical and Non-surgical Procedures, 2016-2025E

Period Surgical Non-surgical Total 2016-2020 8.9% 13.9% 11.0% 2021E-2025E 18.1% 21.7% 19.7%

278.1 Surgical Non-surgical 234.4 RMB Billion 196.8 144.1 163.8 123.3 143.5 135.3 121.7 117.6 105.0 99.3 88.6 83.5 74.2 77.6 71.7 65.8 59.2 133.9 46.8 91.8 111.1 60.0 61.1 75.2 30.8 40.1 50.0 51.8 2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E Source: Frost & Sullivan analysis The COVID-19 pandemic has caused a more severe impact on the aesthetic medical service market in China than the global aesthetic medical service market. The total service volume of aesthetic medical procedures in China dropped from 24.2 million in 2019 to 20.5 million in 2020, and the total revenue dropped from RMB143.5 billion in 2019 to RMB117.6 billion in 2020. However, the total service volume and total revenue are expected to grow back to the level similar to the period before the COVID-19 pandemic on the basis that (i) the economy will recover from the adverse impact of the pandemic outbreak; (ii) the increasing number of COVID-19 vaccinations as well as the adoption of protective measures will enhance consumer confidence; and (iii) overseas travelling restriction due to COVID-19 pandemic has redirected certain people who would have travelled to foreign countries for aesthetic medical procedures to aesthetic medical service providers in China. Penetration of Aesthetic Medical Services in China Penetration rate is calculated by dividing total service volume of aesthetic medical services by the size of target population in China aged between 15 to 64. With the growing demand for aesthetic medical services, penetration rate of aesthetic medical service market in China grew significantly with a CAGR of 13.6% from 1.3% in 2016 to 2.1% in 2020, and is expected to grow further at a CAGR of 22.9% from 2.4% in 2021 to 5.3% in 2025.

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Aesthetic Medical Services Market Penetration Rate in China, 2016-2025E

Period Surgical Non-surgical Total 2016-2020 12.7% 5.7% 13.6% 2021E-2025E 21.9% 18.9% 22.9%

5.3%

4.4% 1.2% 3.6% 1.0% 3.0% 0.9% 2.5% 2.4% 0.7% 2.0% 2.1% 1.6% 0.7% 0.6% 4.1% 1.3% 0.6% 0.5% 3.4% 0.5% 2.8% 0.4% 2.3% 1.5% 1.8% 1.5% 1.8% 0.9% 1.2% 2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E

Surgical Non-surgical Sources: Frost & Sullivan analysis However, the penetration rate of aesthetic medical services in China is still very low compared with other developed countries, which was only 2.5% in 2019 compared to 12.7% in Korea and 6.5% in the United States, indicating huge growth potential. Penetration Rate of Aesthetic Medical Service in Selected Countries, 2019

Surgical Non-Surgical 12.7%

3.5%

6.5% 6.0% 2.2% 4.8% 9.3% 3.3% 0.9% 2.5% 4.3% 3.9% 0.7% 0.8% 2.7% 1.8% 0.2% 0.6% Korea United Brazil Japan China United States Kingdom Sources: Frost & Sullivan analysis Per Capita Expenditure on Aesthetic Medical Services in China Per capita expenditure on aesthetic medical services is calculated as total revenue of aesthetic medical service market divided by total population in China. With the growing demand for aesthetic medical services and rising purchasing power, per capita expenditure on aesthetic medical services in China grew with a CAGR of 10.6% from RMB56.1 in 2016 to RMB84.0 in 2020, and is expected to grow further at a CAGR of 19.7% from RMB96.6 in 2021 to RMB198.6 in 2025. Per Capita Expenditures on Aesthetic Medical Services in China, 2016-2025E

Period CAGR 2016-2020 10.6% 2021E-2025E 19.7% RMB

198.6 167.4 140.6 117.0 102.5 87.2 96.6 71.4 84.0 56.1

2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E Source: Frost & Sullivan analysis Average Patient Spending of Aesthetic Medical Services in China Average patient spending of aesthetic medical services in China is calculated by the total revenue divided by the total service volume of aesthetic medical procedures. The average patient spending of aesthetic non-surgical procedures decreased from RMB3,494 in 2016 to

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RMB3,418 in 2020, and is expected to continue to decrease from RMB3,397 in 2021 to RMB3,268 in 2025, due to intense market competition. The average patient spending of aesthetic surgical procedures decreased from RMB12,513 in 2016 to RMB12,300 in 2020, due to the same reason. The average patient spending of aesthetic surgical procedures is expected to increase from RMB12,554 in 2021 to RMB12,945 in 2022, primarily due to the rapid recovery of national economy from the adverse impact of the COVID-19 pandemic which resulted in a surge of client demand for aesthetic medical services, and is expected to decrease to RMB12,287 in 2025 due to intense market competition and industry consolidation trend. Average Patient Fee of Aesthetic Medical Service in China, breakdown by Aesthetic Surgical and Non-surgical Procedures

Surgical Non-surgical RMB

14,000 12,945 12,856 12,513 12,462 12,424 12,554 12,662 12,000 12,362 12,300 12,287

10,000

8,000

6,000

4,000 3,494 3,474 3,456 3,435 3,418 3,397 3,373 3,344 3,309 3,268

2,000

0 2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E PRIVATE AESTHETIC MEDICAL SERVICE MARKET IN CHINA Market Size Aesthetic medical service providers in China comprise public institutions and private institutions with private institutions dominating the market. In 2020, private institutions accounted for approximately 82.0% of the total aesthetic medical service market in China in terms of revenue. Revenue generated from private aesthetic medical service providers increased from RMB61.1 billion in 2016 to RMB96.4 billion in 2020, representing a CAGR of 12.1%, and is projected to grow further at a CAGR of 21.1% from RMB113.6 billion in 2021 to RMB244.7 billion in 2025; while revenue generated from public aesthetic medical service providers increased from RMB16.5 billion in 2016 to RMB21.2 billion in 2020, representing a CAGR of 6.5%, and is projected to grow further at a CAGR of 11.4% from RMB21.6 billion in 2021 to RMB33.4 billion in 2025. China Market Size of Aesthetic Medical Service Market by Public and Private Segments, 2016-2025E

Period Public Private Total 2016-2020 6.5% 12.1% 11.0% 2021E-2025E 11.4% 21.1% 19.7% 278.1 Public Private RMB Billion 234.4 33.4 196.8 30.5 163.8 27.6 143.6 135.3 121.7 24.6 24.3 117.6 99.3 21.6 22.5 244.7 77.6 21.2 203.9 19.7 169.2 16.5 139.2 119.3 99.2 96.4 113.6 61.1 79.6

2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E Aesthetic non-surgical procedure segment contributes to a larger proportion of the total service volume of aesthetic medical procedures provided by private institutions in China, accounting for approximately 75.5% of the private aesthetic medical service market in China in terms of total service volume in 2020. Total service volume of aesthetic non-surgical procedures provided by private institutions in China increased with a CAGR of 18.0% from 5.9 million in 2016 to 11.4 million in 2020, and is expected to grow further at a CAGR of 27.0% from 14.1 million in 2021 to 36.6 million in 2025, accounting for approximately 88.0% of the total private aesthetic medical service market in China in terms of total service volume in 2025.

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China Service Volume of Private Aesthetic Medical Service Market by Aesthetic Surgical and Non-surgical Procedures, 2016-2025E

Period Surgical Non-surgical Total 2016-2020 11.2% 18.0% 16.1% 2021E-2025E 5.6% 27.0% 23.2% Surgical Non-surgical 41.6 Million 5.0 34.1 27.8 4.9 22.5 4.7 17.9 18.0 4.4 14.6 15.1 36.6 4.0 11.0 4.6 3.8 3.7 29.1 8.3 23.1 3.2 18.1 2.4 14.1 10.8 13.3 11.4 5.9 7.8 2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E Source: Frost & Sullivan analysis Aesthetic non-surgical procedure segment accounted for approximately 48.5% of China’s private aesthetic medical service market in terms of total revenue in 2020. Total revenue of aesthetic non-surgical procedures provided by private institutions in China increased with a CAGR of 15.1% from RMB26.7 billion in 2016 to RMB46.8 billion in 2020, and is expected to grow further at a CAGR of 31.7% from RMB59.5 billion in 2021 to RMB179.2 billion in 2025, accounting for approximately 73.2% of total aesthetic medical service market in terms of total revenue in 2025. Aesthetic non-surgical procedure segment is anticipated to outgrow surgical procedure segment in terms of total revenue since 2021. Aesthetic non-surgical procedure segment is expected to become the focus of development for most private aesthetic medical service providers in the future. China Market Size of Private Aesthetic Medical Service Market by Aesthetic Surgical and Non-surgical Procedures, 2016-2025E

Period Surgical Non-surgical Total 2016-2020 9.6% 15.1% 12.1% 2021E-2025E 4.9% 31.7% 21.1% 244.7 Surgical Non-surgical

RMB Billion 203.9 65.5 169.2 65.7 139.2 64.0 119.3 113.6 99.2 96.4 59.8 79.6 64.4 54.1 179.2 61.1 54.3 49.7 138.3 44.2 105.3 34.4 79.5 44.8 54.9 46.8 59.5 26.7 35.3 2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E Source: Frost & Sullivan analysis Private Aesthetic Medical Service Market in Northern China Aesthetic non-surgical procedure segment contributes to a larger proportion of the total service volume of aesthetic medical procedures provided by private institutions in Northern China, accounting for approximately 86.5% of the private aesthetic medical service market in Northern China in terms of total service volume in 2020. Total service volume of aesthetic non-surgical procedures provided by private institutions in Northern China increased with a CAGR of 18.8% from 2.2 million in 2016 to 4.5 million in 2020, and is expected to grow further at a CAGR of 26.0% from 5.5 million in 2021 to 13.8 million in 2025, accounting for approximately 94.5% of the total private aesthetic medical service market in Northern China in terms of total service volume in 2025.

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Service Volume of Private Aesthetic Medical Service Market in Northern China by Aesthetic Surgical and Non-surgical Procedures, 2016-2025E

Period Surgical Non-surgical Total 2016-2020 9.4% 18.8% 17.2% 2021E-2025E 5.4% 26.0% 24.1% 14.6 Surgical Non-surgical 0.9 Million 11.7 0.8 9.4 7.6 0.7 6.0 6.2 0.7 5.2 13.8 0.7 4.5 0.9 10.9 3.6 0.8 0.8 8.7 2.8 0.7 6.9 0.5 5.1 5.5 3.7 4.5 2.2 3.0

2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E Source: Frost & Sullivan analysis Aesthetic non-surgical procedure segment accounted for approximately 48.5% of the private aesthetic medical service market in Northern China in terms of total revenue in 2020. Total revenue of aesthetic non-surgical procedures provided by private institutions in Northern China increased with a CAGR of 16.1% from RMB10.7 billion in 2016 to RMB19.5 billion in 2020, and is expected to grow further at a CAGR of 32.3% from RMB25.1 billion in 2021 to RMB76.7 billion in 2025, accounting for approximately 73.2% of total aesthetic medical service market in terms of total revenue in 2025. Aesthetic non-surgical procedure segment is anticipated to outgrow surgical procedure segment in terms of total revenue since 2021. Market Size of Private Aesthetic Medical Service Market in Northern China by Aesthetic Surgical and Non-surgical Procedures, 2016-2025E

Period Surgical Non-surgical Total 2016-2020 10.6% 16.1% 13.1% 2021E-2025E 5.3% 32.3% 21.6%

Surgical Non-surgical 104.8 RMB Billion 86.8 28.1 71.6 28.0 58.6 47.4 47.9 27.1 39.1 40.2 25.2 31.7 76.7 24.6 25.2 22.8 21.4 20.7 58.9 17.6 44.6 13.8 33.5 22.1 19.5 25.1 10.7 14.1 17.7 2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E Source: Frost & Sullivan analysis Key Growth Drivers of Private Aesthetic Medical Service Market in China The expected growth in the private aesthetic medical service market in China is determined by several key drivers as set out below: • Increasing disposable income: According to the National Bureau of Statistics of the PRC (國家統計局), per capita disposable income in China has increased at a CAGR of 6.5% from RMB23.8 thousand in 2016 to RMB30.7 thousand in 2019. The increasing disposable income has raised the purchasing power of Chinese residents, which makes it easier than before for them to afford aesthetic medical services, especially expensive and high-quality services for better treatment effects. The increase in disposable income will continue to boost the consumption of private aesthetic medical services. • Rising demand for aesthetic medical services: Along with the change of urban lifestyle, health and beauty issues, such as wrinkles, patchy skins and overweight, have arisen more frequently, resulting in a growing demand for aesthetic medical services, such as injection of BOTOX®, laser speckle removal and liposuction. The aging trend of population and the increasing acceptance towards aesthetic medical services among male population also create more demand for aesthetic medical services, such as skin tightening. Meanwhile, with rapid development of society and fashion culture, people are paying more attention to their appearance, which is

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propitious to social communication, job hunting and romantic relationship. The enlarging consumer group and growing aesthetic consciousness will release ample demand for aesthetic medical services in the near future. • Development and maturity in aesthetic medical technologies: With the technical development, novel aesthetic medical technologies and products could provide more feasible therapies for customers and reduce adverse effects. In addition, an increasing number of aesthetic medical products and devices were registered in China. For example, the application of autologous fat transplantation technique and endoscopic breast augmentation technique can improve the quality of plastic surgeries and better ensure the safety of treatment. The introduction of Thermage and Fotona4D can improve skin texture and elasticity with radiofrequency and achieve better tightening effect, which has gained great popularity in recent years. • Policy support: The State Council, in collaboration with NHC and other ministries, has issued several policies to encourage the development of non-public healthcare institutions, such as the “Opinions on Promoting the Sustainable and Healthy Development of Medical Institutions Invested by Private Capital” (《關於促進社會辦醫持續健康規範發展的意見》) jointly issued by the NHC and nine other regulatory authorities in June 2019. Entry Barriers of Private Aesthetic Medical Service Market New entrants of the private aesthetic medical service market in China face the following entry barriers: • Strict standards of industry regulation: In China, the aesthetic medical service industry is highly regulated. According to the National Health and Family Planning Commission (the “NHFPC”), aesthetic medical service providers are required to apply for license under Measures for the Administration of Aesthetic Medical Services (《醫療美容服務管理辦法》). Moreover, aesthetic medical physicians should have the practicing qualifications and working experience in the relevant field. Therefore, aesthetic medical service providers must take efforts to achieve compliance with applicable laws, regulations and supervisory guidance. • Strong emphasis on capabilities to provide safe and professional services: Most customers prefer to go to aesthetic medical institutions with safe and professional service capabilities, which are heavily influenced by the professional levels of physicians and medical professionals. Seasoned aesthetic medical physicians are scarce resources in China, and it usually takes a long time to cultivate a qualified one. Therefore, new entrants will be confronted with difficulties in recruiting and retaining excellent aesthetic medical talents, which in return will affect the service capability. • Abundant capital needs: To enter aesthetic medical service market in China, new entrants usually need a large sum of initial capital to purchase essential medical devices and products. In addition, aesthetic medical institutions need to rent or purchase proper workplace to provide medical services for customers, which may be costly. Furthermore, it takes both manpower and financial resources to employ eligible medical professionals to provide quality aesthetic medical services for customers and to lay a foundation for sustainable development of the market players. Therefore, new entrants have to prepare abundant capital to support the operation of aesthetic medical business in the early stage. • Difficult to establish brand reputation: As the aesthetic medical industry becomes more mature and transparent, customers are becoming more rational and usually choose well-reputed aesthetic medical institutions to seek for reliable services. Any dissatisfactory services may have a negative effect on the brand reputation of aesthetic medical service providers. For new entrants, it could be difficult to establish a good brand reputation in a short period of time. • High requirement for hospital management capability: Rich hospital management experience is essential to improving the operational efficiency and service quality of hospitals. The management of hospitals shall be conducted by qualified management talents who specialize in both medical practices and enterprise operation, in order to be appropriately involved and engaged in the initial operation process of non-public hospitals, as well as to improve the performance of the hospitals. However, such qualified management teams, especially senior-level talents, are hard to find.

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Development Trends of Private Aesthetic Medical Service Market in China The private aesthetic medical service market in the PRC is expected to be influenced by the following trends: • Strict governmental regulation: As the aesthetic medical service market continues to grow and attract new investment and market participants, the PRC government is expected to tighten the regulatory framework to protect consumers (for example, from illegal operations or unqualified practitioners) and ensure the industry develops in a sustainable manner, evidenced by the “Notice on Printing and Distributing the Special Rectification Work Plan for Cracking Down on Illegal Medical Beauty Services” (《關於印發打擊非法醫療美容服務專項整治工作方案的通知》) jointly issued by the NHC and seven other regulatory authorities in June 2021. With the development of more transparent and enforced industry standards, consumers are expected to shift from non-regulated to regulated aesthetic medical institutions for aesthetic medical services. Furthermore, increasingly restrictive regulations and rules are expected to continue to lead to sub-scale, unsophisticated market participants exiting the market. • Improved customer service and technical skills: Due to the consumption nature of aesthetic medical services, which are not covered by public medical insurance programs, consumers are inclined to choose aesthetic medical service providers with better customer service, stricter customer privacy policy and more comfortable environment. Moreover, the consumption nature of aesthetic medical service will also push market players to improve their technical skills. In the near future, aesthetic medical institutions equipped with skillful physicians who are able to perform higher quality aesthetic plastic procedures are capable of attracting more consumers, which will promote the business growth of aesthetic injection procedures and aesthetic energy-based procedures at the same time. • Customer acquisition channel upgrade: Among online customer acquisition channels, aesthetic medical service providers usually incur the highest customer acquisition costs on search engines. The higher cost of customer acquisition pushes the aesthetic medical industry to focus precisely on target customers and build their own private domain traffic. Mobile internet platforms in China represent increasingly popular channels for aesthetic medical service providers’ marketing and customer interaction. Customer feedback from these mobile internet platforms allows aesthetic medical service providers to efficiently identify customers’ needs and constantly adjust their targeted marketing strategies to maintain and attract customers. • Consolidation of the industry. The aesthetic medical service market in China is highly competitive and fragmented with a large number of market participants, leading to relatively low market concentration in recent years. Leading aesthetic medical institution groups with technological superiority and brand reputation strength have started and will continue to expand their business through acquisitions, brand licensing, and providing consulting services for smaller-sized aesthetic medical institutions. Therefore, it is expected that the industry consolidation trend will continue in the coming years. Competitive Landscape of Private Aesthetic Medical Service Market in China The private aesthetic medical service market in China remains segmented and highly fragmented with a large number of market participants. However, it is expected that the market will undergo a series of consolidations in the coming years, which could lead to a more concentrated market in the future. In China, there are currently two major types of players in the private aesthetic medical service market in China, namely, large chained medical groups and small-to-middle-sized medical clinics. We are one of the key players in the private aesthetic medical service market in China. Among all the competitors, we ranked fourth in aesthetic medical service market in China in terms of total revenue from aesthetic medical services in 2020, and we ranked first in aesthetical medical service market in Northern China in terms of the same metric. We have been strategically focusing on aesthetic non-surgical procedures. We ranked third among all the private aesthetic medical institution groups in China in terms of revenue from aesthetic non-surgical services in 2020. Among the top five private aesthetic medical institution groups in China in terms of revenue from aesthetic medical services in 2020, we ranked first in terms of proportion of revenue from aesthetic non-surgical services.

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Top Five Players in Aesthetic Medical Service Market in China by Total Revenue from Aesthetic Medical Services in 2020 Rank Company Name Revenue, RMB million, 2020 1 Company A 4,236 2 Company B 1,952 3 Company C 849 4 Our Group 784 5 Company D 725

Source: Frost & Sullivan analysis Top Five Players in Aesthetic Medical Service Market in China by Total Aesthetic Non-Surgical Service Revenue in 2020 Rank Company Name Revenue, RMB million, 2020 1 Company A 2,589 2 Company B 996 3 Our Group 600 4 Company E 384 5 Company C 274

Source: Frost & Sullivan analysis Top Five Players in Aesthetic Medical Service Market in Northern China by Revenue from Aesthetic Medical Services in 2020 Rank Company Name Revenue, RMB million, 2020 1 Our Group 784 2 Company A 752 3 Company D 580 4 Company B 490 5 Company C 180

Source: Frost & Sullivan analysis Note: (1) Northern China refers to the area north of Qinling-Huaihe, south of Daxinganling-Yinshan-Helan Mountain, and east of Kunlun Mountain-Qilian Mountain.

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OVERVIEW

Our business in the PRC is subject to extensive supervision and regulatory control by the PRC government. This section sets out a summary of the major relevant laws, regulations, rules and policies which may have material impact on our business, particularly in relation to: (1) reforms of medical institutions that may affect our capabilities to implement our existing business strategies for the expansion of our hospital network; (2) the management of medical institutions, the regulations on the aesthetic medical services, supervision of medical devices and pharmaceuticals in medical institutions, price of healthcare services and medicine, medical professionals, environmental protection and labor protection, and the governance of our day-to-day operations which may affect our costs of compliance; (3) medical incidents which may affect our indebtedness arising from our day-to-day operations; (4) foreign investors investing in the PRC and our Company’s capabilities to conduct business in the PRC as a foreign-invested company; and (5) taxation and foreign exchange matters which may affect our operating results and business.

REGULATIONS ON THE REFORM OF MEDICAL INSTITUTIONS

Opinions of the Central Committee of the Communist Party and the State Council on Promoting Further Reform of the Healthcare System (《中共中央、國務院關於深化醫藥衛生體制改革的意見》)

The Opinions of the Central Committee of the Communist Party and the State Council on Promoting Further Reform of the Healthcare System (《中共中央、國務院關於深化醫藥衛生體制改革的意見》) (the “Opinions”), which were promulgated by the State Council on March 17, 2009, advocate a range of measures to reform medical institutions in China and to establish a basic healthcare system covering urban and rural residents. The Opinions encourage private capital to invest in medical institutions (including investments by foreign investors), the development of private medical institutions and the reform of public medical institutions (including those established by state-owned enterprises) through private capital investment.

Opinions on Further Encouraging and Guiding the Establishment of Medical Institutions by Social Capital (《關於進一步鼓勵和引導社會資本舉辦醫療機構意見》)

On November 26, 2010, the General Office of the State Council promulgated the Notice of the General Office of the State Council on Forwarding the Opinions of the NDRC, the MOH and Other Ministries on Further Encouraging and Guiding the Establishment of Medical Institutions by Social Capital (《關於進一步鼓勵和引導社會資本舉辦醫療機構意見》) (the “Notice”). The Notice set out the following measures with respect to expanding the scope for social capital to set up medical institutions, including: social capital is permitted and encouraged to set up various medical facilities, social capital may apply for establishing and operating either for-profit medical institutions (the “PMIs”) or not-for-profit medical institutions (the “NMIs”) according to its purposes; priority shall be given to social capital when adjusting or increasing medical and health resources; to reasonably determine the scope of practice for NMIs; overseas medical institutions, enterprises and other economic

–90– 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 ENVIRONMENT organizations are permitted to establish medical institutions together with domestic medical institutions, enterprises or other economic organizations in the form of equity or cooperation joint venture. The restrictions on maximum equity that can be owned by overseas capital in domestic medical institutions will be lifted step by step. Simplify and standardize the approval procedures for medical institutions by overseas capital. The establishment of Sino-foreign equity joint venture and Sino-foreign cooperative joint venture medical institutions can be approved by provincial level health authority and commerce authority. In addition, for encouraging and guiding social capital in setup of medical facilities, the Notice also proposes on tax and price polices for the NMIs, entry policy for service providers under medical insurance plans, employment conditions and purchase of large medical equipment.

Opinions on Accelerating the Development of Setup Medical Institutions by Social Capitals (《關於加快發展社會辦醫的若干意見》)

Opinions on Accelerating the Development of Setup Medical Institutions by Social Capitals (《關於加快發展社會辦醫的若干意見》), which were promulgated by the NHFPC and the State Administration of Traditional Chinese Medicine (the “SATCM”) on December 30, 2013, stipulate the policies to support the development of private-invested healthcare institutions, including but not limited to the (i) gradual relaxation of investment in healthcare institutions by foreign capital; (ii) relaxation of requirements for service sectors, allowing social capital’s investment in the areas which are not explicitly prohibited; and (iii) acceleration of the approval procedures regarding the establishment and operation of private hospitals.

Several Policies and Measures Regarding Promoting Private Investment in Medical Institutions and Accelerating Development (《關於促進社會辦醫加快發展的若干政策措施》)

Several Policies and Measures Regarding Promoting Private Investment in Medical Institutions and Accelerating Development (《關於促進社會辦醫加快發展的若干政策措施》), which were promulgated by the General Office of the State Council and effective on June 11, 2015, provide for (i) elimination and cancellation of administrative authorities’ unreasonable requirements for pre-examination and pre-approval regarding the establishment of medical institutions, and the reduction in the time required for making such examination and approval, (ii) reasonable control of the number and scale of public medical institutions and the exploration of the space for development of the medical institutions through private capital investments, (iii) support for the listing and financing of eligible and qualified for-profit medical institutions funded by private capital investments, and (iv) encouragement for private investors with managerial experience in medical institutions to participate in the management of public medical institutions in various forms such as through hospital management groups and subject to a clear distribution of power and responsibilities.

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Opinions on Encouraging Social Forces to Provide Multi-layered and Diverse Healthcare Services (《關於支持社會力量提供多層次多樣化醫療服務的意見》)

Opinions on Encouraging Social Forces to Provide Multi-layered and Diverse Healthcare Services (《關於支持社會力量提供多層次多樣化醫療服務的意見》), which were promulgated by the General Office of the State Council on May 16, 2017, stipulate the policies to actively support social forces to go deep into the niche service market, such as specialized medical services, expand the effective supply of services, and foster professionalized advantages. A number of competitive branded service agencies will be formed at a rapid pace for such specialties including but not limited to aesthetic medical services.

REGULATIONS ON THE CLASSIFICATION OF MEDICAL INSTITUTIONS

Opinions on Implementing Classification Administration of Urban Medical Institutions (《關於城鎮醫療機構分類管理的實施意見》)

The Opinions on Implementing Classification Administration of Urban Medical Institutions (《關於城鎮醫療機構分類管理的實施意見》), jointly promulgated by the MOH, SATCM, MOF and NDRC on July 18, 2000 and came into effect on September 1, 2000, provides that medical institutions in the PRC are mainly identified as PMIs and NMIs, and NMIs is further divided into public NMIs and private NMIs. NMIs and PMIs shall be classified based on their business objectives, service purposes and implementation of various financial, taxation, pricing and accounting policies. Also, governments shall not operate for-profit medical institutions. On the other hand, NMIs must comply with the pricing guidance for medical service stipulated by governments from time to time, and the rules and policies issued by the NHC and the MOF including Hospital Finance System and Hospital Accounting System. PMIs may distribute their profit to their investors as economic returns. Based on its marketing needs, PMIs have the discretion to set the fees and prices for their medical and healthcare services. In establishing internal control system, they may apply the finance and accounting system and other policies suitable for corporate enterprise. Medical institutions shall file with relevant authorities of health written statements of their not-for-profit/for-profit status when they go through the application, registration and re-examination procedures in accordance with the relevant laws, and the handling authority of health shall, jointly with other relevant authorities, decide the not-for-profit/for-profit status for such medical institution based on the source of its investment and the nature of its business.

REGULATIONS ON THE MANAGEMENT OF MEDICAL INSTITUTIONS

The Administrative Measures on Medical Institutions and its Implementation Measures (《醫療機構管理條例》及其實施細則)

The Administrative Measures on Medical Institutions (《醫療機構管理條例》), which were promulgated on February 26, 1994 by the State Council, came into effect on September 1, 1994 and amended on February 6, 2016, and the Implementation Measures of the Administrative Measures on Healthcare Institutions (《醫療機構管理條例實施細則》, which

–92– 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 ENVIRONMENT were promulgated by the MOH on August 29, 1994 and amended on November 1, 2006, June 24, 2008 and February 21, 2017, respectively, stipulate that the establishment of a medical institution by any entity or individual must be reviewed and approved by health administrative departments of local people’s governments at or above the county level and obtain the Medical Institution Practicing License (醫療機構執業許可證). The Medical Institution Practicing License shall not be forged, altered, sold, transferred or lent. Where the practicing is without authorization or obtaining the Medical Institution Practicing License, the health administrative department of the people’s government at or above the county level must cease its practicing activities and confiscate the illegal incomes, medicines and medical devices in accordance with the law, and it can be imposed fines less than RMB10,000 in light of the circumstances. Medical institutions must conduct medical diagnosis and treatment activities in accordance with registered and approved subjects and shall not employ non-medical technical personnel in medical and health technical work.

The Administrative Measures for Verification of Medical Institutions (For Trial Implementation) (《醫療機構校驗管理辦法(試行)》)

The Administrative Measures for Verification of Medical Institutions (For Trial Implementation) (《醫療機構校驗管理辦法(試行)》), which were promulgated by the MOH and came into effect on June 15, 2009, stipulate that the Medical Institution Practicing License is subject to periodic examinations and verifications by registration authorities. Verification period shall be 3 years for general hospitals, hospitals of traditional Chinese medicine, hospitals of western medicine and traditional Chinese medicine, hospitals of ethnic minority medicine and specialized hospitals, as well as sanitariums, rehabilitation hospitals, maternity and children’s health care centers, emergency centers, clinical laboratories and specialized disease prevention institutions equipped with more than 100 beds, while the verification period shall be one year for other medical institutions. In the event that a medical institution fails to apply for verification as required and post re-verification procedures or unsuccessful in its re-verification application, the registration authorities may cancel its Medical Institution Practicing License.

Administrative Measures on the Radiotherapy (《放射診療管理規定》)

According to Administrative Measures on the Radiotherapy (《放射診療管理規定》), which were promulgated by the MOH on January 24, 2006 and amended on January 19, 2016 by NHFPC, medical institutions engaged in the radio diagnosis and radiotherapy shall have conditions corresponding to the radiological diagnosis and treatment services. Prior to carrying out radiodiagnosis and radiotherapy, medical institutions shall submit relevant materials, including but not limited to the Medical Institution Practicing License or the Approval Certificate for Establishment of a Medical Institution, the list of radiodiagnosis and radiotherapy equipment and apply for the License for Radiotherapy (放射診療許可證) issued by the competent public health administrative authorities. Medical institutions shall be respectively equipped with the corresponding equipment in carrying out different kinds of radiodiagnosis and radiotherapy. After obtaining the License for Radiotherapy, medical institutions shall undertake registration of the relevant diagnosis and treatment items with

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Regulations on the Safety and Protection of Radioisotopes and Radiation-emitting Devices (《放射性同位素與射線裝置安全和防護條例》) and Measures for Administration of the Safety Licensing of Radioactive Isotopes and Radioactive Equipment (《放射性同位素與射線裝置安全許可管理辦法》)

According to Regulations on the Safety and Protection of Radioisotopes and Radiation- emitting Devices (《放射性同位素與射線裝置安全和防護條例》), which were promulgated by the State Council on September 14, 2005 and amended on July 29, 2014 and March 2, 2019, and Measures for Administration of the Safety Licensing of Radioactive Isotopes and Radioactive Equipment (《放射性同位素與射線裝置安全許可管理辦法》), which were promulgated by the State Environment Protection Administration on January 18, 2006, amended on December 6, 2008, December 20, 2017, August 22, 2019 and January 4, 2021 by the Ministry of Environmental Protection and Ministry of Ecology and Environment respectively, any entity conducts activities of production, sale, and use of radioactive isotopes and radial equipment within the territory of PRC shall obtain the Radiation Safety Licenses (輻射安全許可證).

REGULATIONS ON THE AESTHETIC MEDICAL SERVICES

Administrative Measures for Aesthetic Medical Services (《醫療美容服務管理辦法》)

The Administrative Measures for Aesthetic Medical Services (《醫療美容服務管理辦法》) promulgated by the NHFPC on January 22, 2002 and last amended on January 19, 2016, stipulate that aesthetic medical service as a first-level subject could be divided into four second-level subjects, including aesthetic surgery, aesthetic dentistry, aesthetic dermatology and TCM cosmetology. Application for establishment of an aesthetic medical institution shall meet the following conditions: (i) having the capability to bear civil liabilities; (ii) setting a clear scope of the aesthetic medical services to be provided; (iii) compliance with basic standard of medical institution; (iv) other conditions stipulated by health authorities at or above provincial level. In an aesthetic medical institution, the aesthetic medical services shall be responsible for by a surgeon or physician in charge (主診醫師). Aesthetic medical programs shall be carried out by the surgeon or physician in charge himself or by other licensed surgeons or physicians under his supervision. The aforementioned surgeon or physician in charge shall have, among others, (i) the Practice Certificate for Medical Practitioners and registration with relevant authority, (ii) working experience in relevant clinical specialties and (iii) obtained training or further study in aesthetic medical area, or not less than one-year clinical working experience in aesthetic medical services.

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Classification Catalog of Aesthetic Medical Item (《醫療美容項目分級管理目錄》)

The Classification Catalog of Aesthetic Medical Item (《醫療美容項目分級管理目錄》), which was promulgated by the MOH on December 11, 2009 and came into effect on the same date, classifies aesthetic medical services into four categories: (i) aesthetic surgery items; (ii) aesthetic dentistry items; (iii) aesthetic dermatological items and (iv) aesthetic Chinese medicine items. Provincial-level counterparts of the NHFPC may adjust the catalog based on local circumstances. In accordance with the difficulty and complexity of the surgery, the possibility of medical malpractice and the level of surgery risk, the aesthetic surgical items are divided into four grades. Surgeries which involve uncomplicated operation process, less technical difficulty and risk shall be classified as grade 1. Surgeries which involve general complexity of operation process, certain technical difficulty and risk, as well as requiring the use of epidural space block anesthesia and intravenous anesthesia, shall be classified as grade 2. Surgeries involving relatively high complexity of operation process, relatively huge technical difficulties and risk, as well as requiring the preoperative blood preparation and tracheal intubation for general anesthesia, shall be classified as grade 3. If highly complicated operation process needed and huge technical difficulty and high risk involved, the surgeries shall be classified as grade 4.

Basic Standard for Aesthetic Medical Institution and Aesthetic Medical Department (For Trial Implementation) (《美容醫療機構、醫療美容科(室)基本標準(試行)》)

The Basic Standard for Aesthetic Medical Institution and Aesthetic Medical Department (For Trial Implementation) (《美容醫療機構、醫療美容科(室)基本標準(試行)》), which was promulgated by the MOH on April 16, 2002 and came into effect on the same date, specifies basic standards that aesthetic medical hospitals, aesthetic medical out-patient departments, aesthetic medical clinics and aesthetic medical departments should meet, such as the number of beds, clinical departments and medical personnel. Certain basic standards for each type of aesthetic medical institutions and aesthetic medical specialty department are set forth below:

(i) For an aesthetic medical hospital, it should be equipped with, among others, (a) more than 20 hospital beds, more than 12 aesthetic treatment beds and more than four dentistry complex therapy chairs; (b) clinical departments including aesthetic treatment consultation room, aesthetic surgery, aesthetic dentistry, aesthetic dermatology, aesthetic traditional Chinese medicine, aesthetic treatment room and anesthesiology at least and (c) at least 1.03 relevant health technicians for each bed (chair), 0.4 nurse for each bed (chair), six doctors of associate-chief level and above with relevant specialties, two nurses with nurse-in-charge title and above and one attending doctor with specialty for each department.

(ii) For an aesthetic medical out-patient department, it should be equipped with, among others, (a) at least four aesthetic treatment beds, two operation tables, two dentistry complex therapy chairs and two observation beds; (b) clinical departments including aesthetic treatment consultation room, aesthetic surgery, aesthetic dentistry and aesthetic dermatology at least (and it is allowed to have aesthetic traditional Chinese

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medicine department and aesthetic treatment rooms) and (c) at least 2.4 relevant health technicians for each operation table, 1.03 relevant health technicians and 0.4 nurse for each observation bed and dentistry complex therapy chair, five registered doctors including at least one doctor of associate-chief level and above with relevant specialties and one registered nurse, and one attending doctor with specialty for each department.

(iii) For an aesthetic medical clinic, it should be equipped with, among others, (a) at least two aesthetic treatment beds, or one operation table and one observation bed or one dentistry complex therapy chair; (b) no more than two clinical departments among departments of aesthetic surgery, aesthetic dermatology, aesthetic dentistry and aesthetic traditional Chinese medicine and (c) at least one attending doctor with specialty and one nurse for each department.

(iv) For an aesthetic medical department, it should be equipped with, among others, (a) at least four aesthetic treatment beds, one operation table, one dentistry complex therapy chair and one observation bed; (b) clinical departments including aesthetic treatment consultation room and aesthetic treatment room, and at least two clinical departments among departments of aesthetic surgery, aesthetic dermatology, aesthetic dentistry and aesthetic traditional Chinese medicine and (c) at least 2.4 relevant health technicians for each operation table, 1.03 relevant health technicians and 0.4 nurse for each observation bed and dentistry complex therapy chair, one attending doctor with specialty and one registered nurse for each department.

REGULATIONS ON PHARMACEUTICALS IN MEDICAL INSTITUTIONS AND MEDICAL DEVICES

Drug Administration Law of PRC and its Implementing Rules and Measures for Supervision and Administration of Drugs of Medical Institutions (For Trial Implementation) 《中華人民共和國藥品管理法》及其實施條例、《醫療機構藥品監督管理辦法(試行)》

According to the Drug Administration Law of PRC (《中華人民共和國藥品管理法》), which was promulgated by the SCNPC on September 20, 1984 and amended on February 28, 2001, December 28, 2013, April 24, 2015 and August 26, 2019, and took effective on December 1, 2019, the Regulations for the Implementation of the Drug Administration Law (《中華人民共和國藥品管理法實施條例》), which were promulgated by State Council on August 4, 2002 and amended on February 6, 2016, March 2, 2019 and the Measures for Supervision and Administration of Drugs of Medical Institutions (For Trial Implementation) (《醫療機構藥品監督管理辦法(試行)》), which were promulgated by the State Food and Drug Administration (the “CFDA”) and came into effect on October 11, 2011, medical institutions must purchase drugs from enterprises qualified to produce and deal in drugs. Drugs used by medical institutions must be purchased uniformly by special departments in accordance with the provisions, and other departments and medical staff members of medical institutions are forbidden to purchase drugs on their own.

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Regulations on the Control of Narcotic Drugs and Psychotropic Drugs (《麻醉藥品和精神藥品管理條例》)

According to the Regulations on the Control of Narcotic Drugs and Psychotropic Drugs (《麻醉藥品和精神藥品管理條例》), which were promulgated by the State Council on August 3, 2005, amended on December 7, 2013 and February 6, 2016, any medical institution which needs to use narcotic drugs and the psychotropic drugs of category I shall be subject to the approval of the relevant authority, and obtain the seal card for purchasing narcotic drugs and the psychotropic drugs of category I (麻醉藥品、第一類精神藥品購用印鑒卡).

Administrative Measures of Prescriptions (《處方管理辦法》)

According to the Administrative Measures of Prescriptions (《處方管理辦法》), which were promulgated by the MOH on February 14, 2007 and came into effect on May 1, 2007, a physician is entitled to issue prescriptions at his registered practice location. A prescription issued by an assistant medical practitioner in a medical institution is valid only if such prescription is signed by or affixed with the personal chop of a physician at such practice location. A prescription issued by a probation practitioner in a medical institution is valid only if such prescription is reviewed and signed by or affixed with the personal chop of a physician entitled to issue prescriptions in such medical institution. Personnel without qualification of issuing prescriptions are not allowed to issue prescriptions, in particular, medical institutions shall provide training and examination in relation to the usage of narcotic pharmaceuticals and psychotropic substance to its qualified physicians, who shall pass such examination before being granted prescription issue right by medical institution.

The Measures for the Classification and Administration of Prescription Pharmaceuticals and Non-prescription Pharmaceuticals (For Trial Implementation) (《處方藥與非處方藥分類管理辦法(試行)》), which were promulgated by NMPA on June 18, 1999 and came into effect on January 1, 2000, set forth different systems for the control over prescription and non-prescription drugs. Prescription pharmaceuticals can only be dispensed, purchased and used after acquiring prescriptions dispensed by licensed physicians or licensed associate physicians. Non-prescription pharmaceuticals can be purchased and used at discretion without acquiring prescriptions dispensed by licensed physicians or licensed associate physicians. Medical institutions can decide or recommend the use of non-prescription pharmaceuticals with regard to medical necessary.

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Regulations on Supervision and Administration of Medical Devices (《醫療器械監督管理條例》) and The Measures on the Supervision and Administration of the Business Operations of Medical Devices (《醫療器械經營監督管理辦法》)

In the PRC, medical devices are classified into three different categories, Class I, Class II and Class III, based on the invasiveness of and risks associated with each medical device. According to the Regulations on Supervision and Administration of Medical Devices (《醫療器械監督管理條例》) promulgated by the State Council on January 4, 2000 and last amended on February 9, 2021, Class II and Class III medical devices shall be registered with the CFDA or its local branches, while Class I medical devices shall be filed with the competent local FDA. In the event that the business operator distribute Class III medical devices without a medical device operating license or the business operator distribute Class II or Class III medical devices that are not registered with the CFDA or its local branches, the FDA of the local people’s governments at or above the county level may confiscate illegal proceeds, illegally produced or operated medical devices, and tools, equipment, raw materials and other articles that are used for the illegal production or operation and impose fine, and, in serious circumstances, the application for a medical device permit filed by the relevant liable person or the business operator will not be accepted within five years.

The Measures on the Supervision and Administration of the Business Operations of Medical Devices (《醫療器械經營監督管理辦法》) (the “Measures on Medical Devices”), which were promulgated by CFDA on July 30, 2014 and amended on November 17, 2017, apply to any business activities of medical devices conducted within the territory of the PRC as well as the supervision and administration thereof. Pursuant to the Measures on Medical Devices, NMPA shall be responsible for the supervision and administration of nationwide business operations concerning medical devices. Medical devices are divided into three classes depending on the degree of risks of medical devices. Entities engaged in distribution of Class III medical devices shall obtain a medical device operating license and entities engaged in distribution of Class II medical devices shall complete filings with the competent local MPA, while entities engaged in distribution of medical devices of Class I are not required to conduct any filing or obtain any license.

Administrative Measures for Medical Consumables for Medical Institutions (for Trial Implementation) (《醫療機構醫用耗材管理辦法(試行)》)

Administrative Measures for Medical Consumables for Medical Institutions (for Trial Implementation) (《醫療機構醫用耗材管理辦法(試行)》) (the “Medical Consumables Measures”) were jointly promulgated by the NHC and the National Administration of Traditional Chinese Medicine on June 6, 2019 and came into effect on September 1, 2019. Medical Consumables Measures provide for the definition and classification of medical consumables, and state that whole-process administration will be imposed on work related to medical consumables, including selection, procurement, receiving inspections, storage, distribution, clinical use, monitoring, and evaluation. Medical Consumables Measures state that medical consumables will be subject to unified procurement, adding that clinical use of medical consumables is administered at three different levels, and for this purpose, medical

–98– 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 ENVIRONMENT consumables are divided into three classes, i.e. Class I, Class II and Class III. Class I medical consumables are utilized by medical technicians, while Class II medical consumables are used by qualified medical technicians after they have received the necessary training, and Class III medical consumables, as stipulated by relevant administrative provisions on medical technologies, are used by those medical technicians who obtain the qualification to make relevant technical operations. Furthermore, Medical Consumables Measures require that medical consumables usable by medical institutions shall fall in a limited range of varieties, to limited specifications and in a limited quantity, and the number of enterprises supplying the medical consumables with the same or similar functions should be controlled as well.

REGULATIONS ON THE PRICE OF HEALTHCARE SERVICES

Notice of Issues Related to the Implementation of Market Price Adjustment by Non-Public Medical Institutions (《關於非公立醫療機構醫療服務實行市場調節價有關問題的通知》)

According to the Notice of Issues Related to the Implementation of Market Price Adjustment by Non-Public Medical Institutions (《關於非公立醫療機構醫療服務實行市場調節價有關問題的通知》) promulgated and implemented on March 25, 2014 by NDRC, the NHFPC and the Ministry of Human Resources and Social Security (the “MHRSS”), the price of healthcare services provided by non-public medical institutions is to be set with reference to the market level. Non-public medical institutions which are for-profit in nature may set the price list for their healthcare services at their own discretion, but the reasonable prices shall be formulated under the principles of fairness, lawfulness and faithfulness and maintained the relatively stable price level within a specific period. The prices of medical services shall be displayed to the patients publicly through various means. Healthcare institutions shall take the initiative to accept social supervision.

REGULATIONS ON MEDICAL PRACTITIONERS OF MEDICAL INSTITUTIONS

The Law on Practicing Physicians of the People’s Republic of China (《中華人民共和國執業醫師法》)

Pursuant to the Law on Practicing Physicians of the People’s Republic of China (《中華人民共和國執業醫師法》) promulgated by the Standing Committee of the National People’s Congress (the “SCNPC”) on June 26, 1998, became effective on May 1, 1999 and amended on August 27, 2009, medical physicians in the PRC must obtain licenses of medical professional qualifications. Qualified physicians and assistant physicians must register with the relevant health administrative authorities at or above county level. After registration, physicians may practice in medical institutions of their registered location under the type of registered specialty to provide the relevant medical, preventive or healthcare services.

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Notice on Certain Opinions on Promoting and Standardizing Multi-site Practice of Physicians (《關於印發<推進和規範醫師多點執業的若干意見>的通知》)

The Notice on Certain Opinions on Promoting and Standardizing Multi-site Practice of Physicians (《關於印發<推進和規範醫師多點執業的若干意見>的通知》) jointly promulgated by five departments, on November 5, 2014, and became effective on the same date, puts forward to simplify the registration procedure of the multiple place practice and proposes the feasibility of exploring the “record management.” It stipulates clinical physicians, dentists and Chinese medicine physicians are permitted for practicing at multiple sites. Physicians practicing in multiple sites shall have intermediary or above technical skills and has been in the same profession for more than five years. Practicing physicians practicing outside of their first practice site shall practice the same registered specialty as at their first practice site.

Administrative Measures for the Registration of Medical Practitioners (《醫師執業註冊管理辦法》)

Pursuant to the Administrative Measures for the Registration of Medical Practitioners (《醫師執業註冊管理辦法》) promulgated by the NHFPC on February 28, 2017 and becoming effective on April 1, 2017, medical practitioners must register and obtain the Practice Certificate for Medical Practitioners (醫師執業證書) before they commence practice and, those who are not registered or have not obtained the Practice Certificate for Medical Practitioners are not allowed to engage in medical, preventive and healthcare services. The registration details of medical practitioner include place of practice, type of registered specialty and scope of practice. A medical practitioner who practices for multiple institutions at the same place of practice shall determine one institution as the main practicing institution where he or she practices, and apply for registration to the administrative department of health and family planning approving the practice of such institution; and, for other institutions where the medical practitioner is to practice, respectively apply for recordation to the administrative health and family planning authority approving the practice of such institution, and indicate the names of the institutions where he or she is to practice. If a medical practitioner practices in an additional institution not at the registered place of practice, he or she shall apply for registering such addition to the administrative health and family planning authority approving the practice of such institution.

Regulations on Nurses (《護士條例》)

The Regulations on Nurses (《護士條例》) which was promulgated by the State Council on January 31, 2008, came into effect on May 12, 2008 and amended on March 27, 2020, provide that for nursing practice, a nurse must obtain the Nurse Practicing Certificate (護士執業證書), which is valid for five years. The number of nurses deployed to a medical institution shall not be less than the standard number as prescribed by the competent health administration authority.

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REGULATIONS ON MEDICAL INCIDENTS

The Civil Code of the PRC (《中華人民共和國民法典》)

On May 28, 2020, the Civil Code of the PRC (《中華人民共和國民法典》) (the “Civil Code”) was adopted by the third session of the 13th National People’s Congress, which became effective on January 1, 2021. The Civil Code provides that if a medical institution or its medical personnel is at fault for damage inflicted on a patient during the course of diagnosis and treatment, the medical institution will be liable for compensation, The medical institution is responsible for the damage caused to the patient due to the failure of the medical personnel to fulfill their statutory obligations in the course of diagnosis and treatment. Medical institutions and their medical personnel must protect the privacy of their patients and will be liable for damage caused by divulging the patients’ private or medical records without consent.

The Regulations on Handling Medical Incidents (《醫療事故處理條例》)

The Regulations on Handling Medical Incidents (《醫療事故處理條例》), which were promulgated by the State Council on April 4, 2002 and came into effect on September 1, 2002, provide a legal framework and specific regulations regarding the prevention, identification, compensation and penalties of or relating to cases involving personal injury to patients caused by medical institutions or medical personnel due to malpractice. “Medical incident” means an accident caused by a medical institution or its medical personnel resulting in personal injuries to a patient due to faults in medical activities as a result of violation of the laws, administrative regulations or departmental rules on medical and health administration, or of standards or procedures for diagnosis, cure and nursing. Medical institution and the patient may, through negotiation, settle the disputes on civil liability such as the compensation for medical incidents; if they are unwilling or fail to reach settlement, the parties concerned may apply for mediation to the health administration department, or may directly bring a civil lawsuit in the people’s court. The following factors shall be taken into account for determining the actual amount of compensation for medical incidents: the grade of the medical incidents; the extent of responsibility of the medical fault for the injury in the medical incidents; and the relationship between the injury in the medical incidents and the illness of the patient. Where a medical accident occurs in a medical institution, health administration department may penalise the medical institution according to the grade of the medical accident and circumstances.

REGULATIONS ON MEDICAL ADVERTISEMENT

Advertising Law of the PRC (《中華人民共和國廣告法》)

Pursuant to the Advertising Law of the PRC (《中華人民共和國廣告法》) (the “Advertising Law”) promulgated by the SCNPC on October 27, 1994, amended on April 24, 2015, October 26, 2018 and April 29, 2021, advertisements shall not contain false statements that are deceitful or misleading to consumers. Advertisements legally required to receive censorship, including those relating to medical treatment, pharmaceuticals and medical devices, shall be reviewed by the relevant authorities in accordance with relevant rules before

– 101 – 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 ENVIRONMENT being distributed by broadcasting, movies, television, newspapers, journals or otherwise. No such advertisement shall be published without being reviewed. If the advisers published such advertisements without being reviewed in violation of the provisions, the market regulation departments shall order the cessation of the publishing of advertisements, order the advertisers concerned to eliminate the ill-effects within the corresponding scope, and impose a fine equivalent to the amount to three times the amount of the advertising fees; where the advertising fees cannot be calculated or are significantly low, a fine of not less than RMB100,000 and not more than RMB200,000 shall be imposed; where the circumstance is serious, a fine of not less than three times and not more than five times the advertising fees shall be imposed; in case that the advertising fees cannot be calculated or are significantly low, a fine of not less than RMB200,000 and not more than RMB1 million shall be imposed; and the business licenses may be revoked, and the advertisement review authorities shall revoke the approval documents for advertisement review and shall not accept the relevant party’s application for advertisement review for one year. In addition, any advertisement for medical treatment, pharmaceuticals or medical devices shall not contain: (i) any assertion or guarantee for efficacy and safety; (ii) any statement on cure rate or effective rate; (iii) any comparison with the efficacy and safety of other pharmaceuticals or medical devices or with other healthcare institutions; (iv) any use of endorsements or testimonials; or (v) other items as prohibited by laws and administrative regulations.

In accordance with the Administrative Measures for Aesthetic Medical Services, distributing medical advertisement shall comply with the relevant laws and regulations of the advertisement supervision.

Administrative Measures on Medical Advertisement (《醫療廣告管理辦法》)

Pursuant to the Administrative Measures on Medical Advertisement (《醫療廣告管理辦法》), which were jointly promulgated by the MOH and the State Administration of Industry and Commerce (the “SAIC”) on September 27, 1993 and amended on September 28, 2005 and November 10, 2006 and came into effect on January 1, 2007, any medical institution that intends to publish any medical advertisement shall apply for medical advertisement examination and obtain Medical Advertisement Examination Certificate (醫療廣告審查證明). The Medical Advertisement Examination Certificate shall be valid for one year.

Circular of the Ministry of Health on Strengthening the Medical Advertisement Administration (《衛生部關於進一步加強醫療廣告管理的通知》)

According to the Circular of the Ministry of Health on Strengthening the Medical Advertisement Administration (《衛生部關於進一步加強醫療廣告管理的通知》), which was promulgated by the MOH on July 17, 2008 and became effective on the same date, the Medical Advertisement Examination Certificate shall be examined strictly, the medical advertisement monitoring system shall be gradually established and improved and the penalty for illegal medical advertisement shall be increased.

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Provisional Measures for the Administration of Internet Advertisement (《互聯網廣告管理暫行辦法》)

Pursuant to the Provisional Measures for the Administration of Internet Advertisement (《互聯網廣告管理暫行辦法》) promulgated by the SAIC on July 4, 2016 and became effective on September 1, 2016, no advertisement of any medical treatment, medicines, foods for special medical purpose, medical apparatuses, pesticides, veterinary medicines, dietary supplement or other special commodities or services which are subject to examination by an advertising examination authority as stipulated by laws and regulations shall be published unless it has passed such examination. Internet advertisers are responsible for the authenticity of the advertisements content. 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.

REGULATIONS ON PROTECTION OF CUSTOMER RIGHT

According to the Law of PRC on the Protection of Consumer Rights and Interests (《中華人民共和國消費者權益保護法》), which was issued by SCPNC on October 31, 1993 and last amended on October 25, 2013, if business operator cannot provide goods or services as agreed under prepaid arrangement, they shall perform as requested by the customer or refund the prepaid payment and bear the interest of prepaid payment and other necessary reasonable costs paid by the customer.

Measures for Penalties against Infringement upon Consumers’ Rights (2020 Revision) (《侵害消費者權益行為處罰辦法(2020修訂)》) promulgated by SAIC (currently known as State Administration for Market Regulation) on January 5, 2015 and amended on October 23, 2020, provides that, business operator shall covenant with customer regarding the quantity, quality, price, term, after-sale service, liability, etc. under prepaid arrangement. In the event of failure to provide goods or services as agreed, business operator shall perform as requested by the customer or refund the prepaid payment and bear the interest of prepaid payment and other necessary and reasonable costs paid by the customer.

REGULATIONS ON INTELLECTUAL PROPERTY RIGHTS

Trademark Law of the PRC and its Implementing Rules (《中華人民共和國商標法》及其實施條例)

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 subsequently amended on February 22, 1993, October 27, 2001, August 30, 2013, April 23, 2019 and took effect on November 1, 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》) adopted by the State Council on August 3, 2002 and revised on April 29, 2014. In the PRC, registered trademarks include commodity trademarks, service trademarks, collective marks and certification marks. The Trademark Office of National Intellectual

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Property Administration handles trademark registrations and grants a term of 10 years to registered trademarks, renewable every 10 years where a registered trademark needs to be used after the expiration of its validity term.

Patent Law of the PRC and its Implementing Rules (《中華人民共和國專利法》及其實施細則)

According to the Patent Law of the PRC (《中華人民共和國專利法》), promulgated by the SCNPC on March 12, 1984 and further amended on September 4, 1992, August 25, 2000, December 27, 2008, December 17, 2020 and came into effect on June 1, 2021 and the Implementing Rules of the Patent Law of the PRC (《中華人民共和國專利法實施細則》), promulgated by the China Patent Bureau Council on January 19, 1985, and further amended of December 21, 1992, June 15, 2001, December 28, 2002, January 9, 2010 and came into effect on February 1, 2010, the term “invention-creations” refers to inventions, utility models and designs. A patent is valid for a twenty-year term for an invention, a fifteen-year term for a design, and a ten-year term for a utility model, all commencing from the application date. In the event that a dispute arises due to a patent being exploited without the prior authorization of the patentee, that is to say an infringement upon the patent right of the patentee.

Administrative Measures for Internet Domain Names (《互聯網域名管理辦法》)

The Administrative Measures for Internet Domain Names (《互聯網域名管理辦法》), which was promulgated by the Ministry of Industry and Information Technology (the “MIIT”) on August 24, 2017 and became effective on November 1, 2017, regulates the “.CN” and the “.zhongguo (in Chinese character)” shall be China’s national top level domains. Any party that engages in internet information services shall use its domain name in compliance with laws and regulations and in line with relevant provisions of the telecommunications authority, but shall not use its domain name to commit any violation. The registration of domain names is generally on a “first- apply-first-registration” basis and a domain name applicant will become the domain name holder upon the completion of the application procedure.

Copyright Law of the PRC (《中華人民共和國著作權法》) and Measures for the Registration of Computer Software Copyright (《計算機軟件著作權登記辦法》)

The Copyright Law of the PRC (《中華人民共和國著作權法》), which was promulgated by the SCNPC on September 7, 1990, came into effect on June 1, 1991 and was amended on October 27, 2001, February 26, 2010, November 11, 2020 and came into effect on June 1, 2021, specifies that works of Chinese citizens, legal persons or other organizations, including literature, art, natural sciences, social sciences, engineering technologies and computer software created in writing or oral or other forms, whether published or not, shall enjoy the copyright. Copyright holder can enjoy multiple rights, including the right of publication, the right of authorship and the right of reproduction.

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The Measures for the Registration of Computer Software Copyright (《計算機軟件著作權登記辦法》), which were promulgated by the National Copyright Administration on February 20, 2002, and came into effect on the same day, regulate the registration of software copyright, the exclusive licensing contract and assignment contracts of software copyright. The National Copyright Administration is mainly responsible for the registration and management of national software copyright and designates the China Copyright Protection Center as the agency for software registration. The China Copyright Protection Center will grant certificates of registration to computer software copyright applicants.

REGULATIONS ON ENVIRONMENTAL PROTECTION RELATED TO MEDICAL INSTITUTIONS

Environmental Protection Law of PRC (《中華人民共和國環境保護法》) and Environmental Impact Assessment Law of the People’s Republic of China (《中華人民共和國環境影響評價法》)

Pursuant to the Environmental Protection Law of the People’s Republic of China (《中華人民共和國環境保護法》) promulgated by the SCNPC on December 26, 1989 and became effective on the same day, amended on April 24, 2014 and became effective on January 1, 2015, the waste discharge licensing system has been implemented in the PRC and entities that discharge medical sewage to water bodies directly or indirectly shall obtain a waste discharge license. Furthermore, installations for the prevention and control of pollution at a construction project must be designed, built and commissioned together with the principal part of the project.

Pursuant to the Environmental Impact Assessment Law of the People’s Republic of China (《中華人民共和國環境影響評價法》) promulgated by the SCNPC on October 28, 2002, became effective on September 1, 2003 and amended on July 2, 2016 and December 29, 2018, the State has established system of Evaluation of Environmental Effects of Construction Projects. On the basis of the extent of the effects exerted on the environment by construction projects, the State exercises, in a classified manner, control over the evaluation of the effects of construction projects on the environment. Specifically, where considerable effects may be exerted on the environment, a written report on environmental effects in which a comprehensive evaluation of the effects on the environment shall be made; where mild effects may be exerted on the environment, a statement on the effects in which an analysis or special evaluation of the effects shall be made; or where the effects on the environment are very little and therefore it is not necessary to make an evaluation of them, a registration form of environmental effects should be filled out. The document for evaluation of the environmental effects of a construction project shall, in accordance with the regulations of the State Council, be submitted by the construction unit for examination and approval to the competent administrative department for environment protection.

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Regulation on the Management of Waste Discharge (《排污許可管理條例》)

Pursuant to the Regulation on the Management of Waste Discharge (《排污許可管理條例》), which was promulgated by the State Council on January 24, 2021 and came into effect on March 1, 2021, entities that produce and discharge little amount of waste with very little effects on the environment shall fill in the waste discharge registration form (排污登記表) and are no longer required to obtain a waste discharge license (排污許可證). Entity that is required to fill in the waste discharge registration form shall report the basic information, waste discharge destination, waste discharge standards implemented, waste prevention and control measures adopted and other information to the national waste discharge license information platform. If the information reported is changed, it shall be changed in the platform within 20 days as of the date when such change occurs.

Regulations on the Management of Medical Waste (《醫療廢物管理條例》), and the Implementation Measures of the Management of Medical Waste (《醫療衛生機構醫療廢物管理辦法》)

According to the Regulations on the Management of Medical Waste (《醫療廢物管理條例》), which was promulgated by the State Council on June 16, 2003 and amended on January 8, 2011, and the Implementation Measures of the Management of Medical Waste (《醫療衛生機構醫療廢物管理辦法》), which was promulgated by the MOH on October 15, 2003 and came into effect on the same day, medical or health institution shall register medical wastes, manage medical wastes under classification and undertake management of duplicate forms for transfer of hazardous waste in accordance with the Catalog of Classified Medical Wastes (《醫療廢物分類目錄》), and deliver medical wastes to an entity for centralized disposal of medical wastes and licensed by a relevant environment protection administrative department for dispose. Sewage generated by any health institution and excretion of its patients or suspected patients of infectious diseases shall be sterilized in strict accordance with the relevant provisions, and shall not be discharged into sewage disposal systems until the discharging standards are met.

The Administrative Measures on Licensing of Urban Drainage (《城鎮污水排入排水管網許可管理辦法》)

The Administrative Measures on Licensing of Urban Drainage (《城鎮污水排入排水管網許可管理辦法》), which were promulgated by the Ministry of Housing and Urban-rural Development on January 22, 2015 and came into effect on March 1, 2015, provide that enterprises, institutions and individual industrial and commercial households engaging in industry, construction, catering industry, medical industry and discharging sewage into the urban drainage network must apply for and obtain a License for Urban Drainage (排水許可證).

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REGULATIONS ON FOREIGN INVESTMENT IN CHINA

Company Law of the People’s Republic of China (《中華人民共和國公司法》)

The Company Law of the People’s Republic of China (《中華人民共和國公司法》), which was promulgated by the SCNPC on December 29, 1993 and came into effective on July 1, 1994, amended on December 25, 1999 and came into effective on the same day, amended on August 28, 2004 and came into effective on the same day, amended on October 27, 2005 and came into effective on January 1, 2006, amended on December 28, 2013 and came into effective on March 1, 2014, amended on October 26, 2018 and came into effective on the same day, provides that companies established in China may take the form of limited liability company or joint stock company with limited liability. Each company has the status of a legal person and owns the assets itself. The Company Law applies to foreign-invested companies unless relevant laws provide otherwise.

Foreign Investment Law of the People’s Republic of China (《中華人民共和國外商投資法》)

On March 15, 2019, the 2nd meeting of the 13th SCNPC approved the Foreign Investment Law of the People’s Republic of China (《中華人民共和國外商投資法》) (the “FIL”), which became effective on January 1, 2020. According to the FIL, the “foreign investment” refers to investment activities carried out directly or indirectly by foreign natural persons, enterprises or other organizations (the “Foreign Investors”), including the following: (1) Foreign Investors establishing foreign-invested enterprises in China alone or collectively with other investors; (2) Foreign Investors acquiring shares, equities, properties or other similar rights of Chinese domestic enterprises; (3) Foreign Investors investing in new projects in China alone or collectively with other investors; and (4) Foreign Investors investing through other ways prescribed by laws and regulations or the State Council. The State adopts the management system of pre-establishment national treatment and negative list for foreign investment. The pre-establishment national treatment refers to granting to foreign investors and their investments, in the stage of investment access, the treatment no less favorable than that granted to domestic investors and their investments; the negative list refers to special administrative measures for access of foreign investment in specific fields as stipulated by the State. The State will give national treatment to foreign investments outside the negative list. The negative list will be released by or upon approval by the State Council.

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The Special Management Measures (Negative List) for the Access of Foreign Investment (2020 Version) (《外商投資准入特別管理措施(負面清單)(2020年版)》)

The Special Management Measures (Negative List) for the Access of Foreign Investment (2020 Version) (《外商投資准入特別管理措施(負面清單)(2020年版)》) (the “2020 Negative List”), which was promulgated by the NDRC and MOFCOM on June 23, 2020 and came into effect on July 23, 2020 stipulates that other than the more preferential measures for the qualified investors pursuant to the Mainland and Hong Kong Closer Economic Partnership Arrangement (《內地與香港關於建立更緊密經貿關係的安排》) and its supplements, foreign investment in medical institutions shall be restricted to the form of sino-foreign joint venture.

Measures for the Reporting of Foreign Investment Information (《外商投資信息報告辦法》)

Along with the implementation of FIL and its Implementation Rules, the MOFCOM and State Administration for Market Regulation jointly promulgated the Measures for the Reporting of Foreign Investment Information (《外商投資信息報告辦法》) (the “Foreign Investment Reporting Measures”) on December 30, 2019. The Foreign Investment Reporting Measures came into effect on January 1, 2020 and replaced the Interim Administrative Measures for the Record-filing of the Establishment and Modification of Foreign-investment Enterprise. Under the Foreign Investment Reporting Measures, the requirement of record-filing with or approval from the MOFCOM or its local branches is replaced with a reporting requirement, regardless of whether such foreign investment is subject to PRC government’s special entry administration measures. Pursuant to the Foreign Investment Reporting Measures, foreign investors or foreign-invested enterprises shall report relevant information to the MOFCOM or its local branches through the online enterprise registration system when the foreign investment takes place or the reported information changes.

Interim Administrative Measures on Sino-Foreign Equity Medical Institutions and Sino-Foreign Cooperative Medical Institutions (《中外合資、合作醫療機構管理暫行辦法》) and its Supplementary Provisions

The Interim Administrative Measures on Sino-Foreign Equity Medical Institutions and Sino-Foreign Cooperative Medical Institutions (《中外合資、合作醫療機構管理暫行辦法》), which was jointly promulgated by the MOH and the Ministry of Foreign Trade and Economic Cooperation on May 15, 2000 and came into effect on July 1, 2000, and its Supplementary Provisions allow foreign investors to partner with Chinese medical entities to establish a medical institution in China by means of equity joint venture or cooperative joint venture. Establishment of equity joint venture or cooperative joint venture shall meet certain requirements, including the total investment sum shall not be less than RMB20 million and the equity percentage of the Chinese partner in the joint venture shall not be less than 30%. Establishment of equity joint venture or cooperative medical institutions shall be subject to approval by relevant authorities.

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Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors (《關於外國投資者併購境內企業的規定》)

Under the Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors (《關於外國投資者併購境內企業的規定》) (the “M&A Rules”), which was jointly promulgated by the MOFCOM and five other departments and commissions on August 8, 2006, came into effect on September 8, 2006 and subsequently amended by the MOFCOM on June 22, 2009, a foreign investor is required to obtain necessary approvals when (i) a foreign investor acquires equity in a domestic non-foreign-invested enterprise thereby converting it into a foreign-invested enterprise, or subscribes for new equity in a such domestic enterprise via an increase of registered capital thereby converting it into a foreign-invested enterprise; or (ii) a foreign investor establishes a foreign-invested enterprise which subsequently purchases and operates the assets of a domestic enterprise, or purchases the assets of a domestic enterprise and uses those assets to establish a foreign-invested enterprise. According to Article 11 of the M&A Rules, where a domestic company or enterprise, or a domestic natural person, through an overseas company established or controlled by it/him/her, acquires a domestic non-foreign-invested company which is related to or connected with it/him/her, approval from the MOFCOM is required.

REGULATIONS ON EMPLOYMENT AND SOCIAL SECURITY

Labor Law of PRC (《中華人民共和國勞動法》)

The Labor Law of PRC (《中華人民共和國勞動法》), which was promulgated by the SCNPC on July 5, 1994, came into effect on January 1, 1995, and was amended on August 27, 2009 and December 29, 2018, provides that an employer shall develop and improve its rules and regulations to safeguard the rights of its workers. Labor safety and health facilities must comply with relevant national standards. Workers engaged in special operations shall have received specialized training and obtained the pertinent qualifications.

Labor Contract Law of PRC and its Implementation Regulations (《中華人民共和國勞動合同法》及其實施條例)

The Labor Contract Law of PRC (《中華人民共和國勞動合同法》), which was promulgated by the SCNPC on June 29, 2007, came into effect on January 1, 2008, and was amended on December 28, 2012, and came into effect on July 1, 2013, and the Implementation Regulations on Labor Contract Law (《中華人民共和國勞動合同法實施條例》) which was promulgated and came into effect on September 18, 2008 by the State Council, regulate the relations of employer and the employee, and contain specific provisions involving the terms of the labor contract.

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REGULATIONS ON SUPERVISION OVER THE SOCIAL SECURITY AND HOUSING PROVIDENT FUND

The Law on Social Insurance (《中華人民共和國社會保險法》), which was promulgated by the SCNPC on October 28, 2010 and came into effect on July 1, 2011, and was amended on December 29, 2018 regulates that enterprises in the PRC shall provide benefit plans for their employees, which include basic pension insurance, unemployment insurance, maternity insurance, work injury insurance and medical insurance. An enterprise must provide social insurance by processing social insurance registration with local social insurance agencies, and shall pay or withhold relevant social insurance premiums for or on behalf of employees.

The Regulations on the Administration of Housing Provident Fund (《住房公積金管理條例》), which were promulgated on April 3, 1999 and came into effective on the same date, and were amended on March 24, 2002 and March 24, 2019, stipulate that employers are required to contribute to housing provident funds for the benefit of their employees.

REGULATIONS ON TAXATION

Enterprise Income Tax

According to the Enterprise Income Tax Law of the People’s Republic of China (《中華人民共和國企業所得稅法》) (the “EIT Law”), which was promulgated by the National People’s Congress on March 16, 2007, came into effect on January 1, 2008 and amended by the SCNPC on February 24, 2017 and December 29, 2018, and the Implementation Regulations on the EIT Law (《中華人民共和國企業所得稅法實施條例》), which were promulgated by the State Council on December 6, 2007 and came into effect on January 1, 2008, and amended by the State Council on April 23, 2019 and came into effect on the same date, a uniform income tax rate of 25% will be applied to domestic enterprises, foreign-invested enterprises and foreign enterprises that have established production and operation facilities in China. These enterprises are classified as either resident enterprises or non-resident enterprises. Resident enterprises refer to enterprises that are established 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 the PRC. Non-resident enterprises refer to enterprises that are set up in accordance with the laws of foreign countries and whose actual administration is conducted outside the PRC, but who (whether or not through the establishment of institutions in the PRC) derive income from the PRC. Under the EIT Law and relevant implementing regulations, a uniform corporate income tax rate of 25% is applicable. However, if non-resident enterprises have not established institutions or places in the PRC, or if they have established institutions or places in the PRC but there is no actual relationship between the relevant income derived in the PRC and the institutions or places set up by them, enterprise income tax is set at the rate of 10%.

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Value-added Tax

According to the Temporary Regulations on Value-added Tax (《增值稅暫行條例》) which was promulgated by the State Council on December 13, 1993 and amended from time to time, and the Detailed Implementing Rules of the Temporary Regulations on Value-added Tax (《增值稅暫行條例實施細則》), which was promulgated by the MOF on December 25, 1993 and amended from time to time, all taxpayers selling goods, providing processing, repair or replacement services, selling services, intangible properties or immovable properties within the PRC or importing goods to the PRC shall pay value-added tax.

Previously, sale of services, intangible properties or immovable properties were subject to business tax. According to the Trial Scheme for the Conversion of Business Tax to Value-added Tax (《營業稅改徵增值稅試點方案》), which was promulgated by the MOF and SAT on November 16, 2011, the State began to launch taxation reforms in a gradual manner. According to the Circular on Comprehensively Promoting the Pilot Programme of the Collection of Value-added Tax in Lieu of Business Tax (《關於全面推開營業稅改徵增值稅試點的通知》) (the “Circular 36”), which was promulgated on 23 March 2016 and became effective from 1 May 2016, medical services provided by medical institutions shall be exempted from VAT. Under the Circular 36, the medical services exempt from VAT are those listed on the National Standard for Price Items of Medical Service (《全國醫療服務價格項目規範》) provide by medical institutions at rate not higher than the medical service guiding price set by the pricing authority jointly with the health authority and other relevant authorities.

REGULATIONS RELATING TO THE H SHARE FULL CIRCULATION

“Full circulation” means listing and circulating on the Stock Exchange of the domestic unlisted shares of an H-share listed company (“H-share listed company”), including unlisted domestic shares held by domestic shareholders prior to overseas listing, unlisted domestic shares additionally issued after overseas listing, and unlisted shares held by foreign shareholders. On November 14, 2019, CSRC announced the Guidelines for the “Full Circulation” Program for Domestic Unlisted Shares of H-share Listed Companies (Announcement of the CSRC [2019] No. 22) (《H股公司境內未上市股份申請“全流通”業務指引》(中國證券監督管理委員會公告[2019]22號)) (“Guidelines for the ‘Full Circulation’”).

According to the Guidelines for the “Full Circulation”, shareholders of domestic unlisted shares may determine by themselves through consultation the amount and proportion of shares, for which an application will be filed for circulation, provided that the requirements laid down in the relevant laws and regulations and set out in the policies for state-owned asset administration, foreign investment and industry regulation are met, and the corresponding H-share listed company may be entrusted to file the said application for “full circulation.” To file an application for “full circulation”, an H-share listed company shall file the application with the CSRC according to the administrative licensing procedures necessary for the “examination and approval of public issuance and listing (including additional issuance) of shares overseas by a joint stock company.” After the application for “full circulation” has been

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On December 31, 2019, CSDC and Shenzhen Stock Exchange (“SZSE”) jointly announced the Measures for Implementation of H-share “Full Circulation” Business (《H股“全流通”業務實施細則》)(“Measures for Implementation”). The businesses of cross-border transfer registration, maintenance of deposit and holding details, transaction entrustment and instruction transmission, settlement, management of settlement participants, services of nominal holders, etc. in relation to the H-share “full circulation business”, are subject to the Measures for Implementation.

In order to fully promote the reform of H-shares “full circulation” and clarify the business arrangement and procedures for the relevant shares’ registration, custody, settlement and delivery, CSDC has promulgated the Circular on Issuing the Guide to the Program for Full Circulation of H-shares (《關於發佈的通知》) in February 2020, which specified the business preparation, account arrangement, cross-border share transfer registration and overseas centralized custody, etc. In February 2020, CSDC (Hong Kong) also promulgated the Guide to the Program for Full Circulation of H-shares (《中國證券登記結算 (香港)有限公司H 股“全流通”業務指南》) to specify the relevant escrow, custody, agent service of CSDC (Hong Kong), arrangement for settlement and delivery and other relevant matters.

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OVERVIEW

Our history can be traced back to 1997 when our founder, Mr. Wang, entered into the aesthetic medical service market through his controlled company, Beijing Zhonghengjian, a supplier of laser medical equipment. After over a decade’s business exploration, in 2008, Mr. Wang and Beijing Zhonghengjian established our Company under the name of Evercare (Beijing) Investment Management Co., Ltd. (伊美爾(北京)投資管理有限公司). On April 22, 2016, our Company was converted into a joint stock limited company under the PRC Company Law and renamed as Evercare (Beijing) Holding Group Co., Ltd. (伊美爾(北京)控股集團股份公司) which was further renamed as Beijing Evercare Medical Technology Group Co., Ltd. (北京伊美爾醫療科技集團股份公司) in September 2018. We are now a leading private aesthetic medical institution group in China. As of the Latest Practicable Date, we owned and operated nine aesthetic medical institutions in Northern China.

For details of the biography of our founder, Mr. Wang, see “Directors, Supervisors and Senior Management,” and for further details on our history, see “– Our Corporate Development” below.

OUR MILESTONES

The following sets forth the business milestones of our Group:

Year Milestone

1997 We entered into the aesthetic medical service market through Beijing Zhonghengjian.

1999 We established our first hospital, Beijing Jianxiang Hospital, in Beijing.

2001 We introduced the first intense pulsed light laser, the photon rejuvenation device (光子嫩膚儀), in the PRC.

2002 Beijing Xingfu Hospital was established in Beijing.

2004 We established Beijing Zizhu Hospital in Beijing and expanded our business to Tianjin and Shandong Province by establishing Tianjin Hospital and Qingdao Hospital.

2006 Beijing Changdao Hospital was established in Beijing.

2008 Our Company was established in Beijing under the name of Evercare (Beijing) Investment Management Co., Ltd. (伊美爾(北京)投資管理有限公司).

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Year Milestone

2009 “Evercare (伊美爾)” was recognized as one of the “CCTV Sixty Brands in Sixty Years (CCTV60年60品牌),” being the only brand in the medical field. Jinan Hospital was established in Shandong Province.

2010 We acquired Beijing Aikang Hospital in Beijing.

2014 Our “Evercare (伊美爾)” brand was recognized by SAIC as the “Chinese Well-Known Trademark (中國馳名商標).”

Warburg Pincus invested in our Company.

2015 Joy Capital and Huatai Ruihe invested in our Company.

2016 Our Company was converted into a joint stock limited company under the PRC Company Law and was renamed as Evercare (Beijing) Holding Group Co., Ltd. (伊美爾(北京)控股集團股份公司).

2018 We established Xi’an Hospital in Shaanxi Province and our Company was renamed as Beijing Evercare Medical Technology Group Co., Ltd. (北京伊美爾醫療科技集團股份公司).

2019 We were recognized as a member at vice president level by the China Medical Information and Big Data Association (中國衛生信息與健康醫療大數據學會).

2020 We shared the anti-epidemic experiences with over 30 countries around the world at the invitation of a global pharmaceutical company.

2021 CDH Investments and Ruisheng Shunlian invested in our Company and Joy Capital made further investment.

OUR CORPORATE DEVELOPMENT

Establishment of Our Company

On February 20, 2008, our Company was established with a registered capital of RMB30,000,000 in Beijing, the PRC, and was held by Beijing Zhonghengjian and Mr. Wang as to 96% and 4%, respectively. Beijing Zhonghengjian was held by Mr. Wang and Mr. Li Bin (李斌), an Independent Third Party, as to 55% and 45%, respectively, at that time.

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Major Shareholding Changes in Our Company Prior to 2016

After a series of internal shareholding restructurings and early investments and as of September 9, 2013, our Company had a registered capital of RMB128,627,250 and was held by its shareholders as follows:

Registered capital Approximate % Shareholder subscribed of shareholding

Mr. Wang RMB40,224,229 31.27% Kangshi Investment(1) RMB30,991,234 24.09% Legend Ruizhi(2) RMB14,893,103 11.58% Tianjin Tiantu(3) RMB13,403,793 10.42% Meirui Shilan(4) RMB12,300,000 9.56% Jinghong Huijin(5) RMB7,435,350 5.78% Anjian Hengyuan(6) RMB4,105,125 3.19% CDH Weixin(7) RMB2,721,375 2.12% CDH Weisen(7) RMB1,891,125 1.47% Shenzhen Tiantu(3) RMB661,916 0.52%

Total RMB128,627,250 100%

Notes:

(1) Kangshi Investment is a former shareholder of our Company and an Independent Third Party which sold its equity interest in our Company on December 22, 2014. For details, see “– Major Shareholding Changes in Our Company Prior to 2016.”

(2) Legend Ruizhi is a former shareholder of our Company and an Independent Third Party which sold its equity interest in our Company on July 16, 2015. For details, see “– Major Shareholding Changes in Our Company Prior to 2016.”

(3) Tianjin Tiantu is an affiliate of Shenzhen Tiantu and both Tianjian Tiantu and Shenzhen Tiantu are former shareholders of our Company and Independent Third Parties. Shenzhen Tiantu transferred its equity interest in our Company to Shenzhen Tiantu Fund, a limited partnership controlled by Shenzhen Tiantu, on May 25, 2015. Tianjin Tiantu and Shenzhen Tiantu Fund sold their equity interests in our Company on July 16, 2015. For details, see “– Major Shareholding Changes in Our Company Prior to 2016.”

(4) Meirui Shilan is an employee shareholding platform of our Company which was held by Mr. Wang as to 85.76% and by 10 individuals who are either employees or former employees of our Group as to an aggregate of 14.24%.

(5) Jinghong Huijin is a former shareholder of our Company and an Independent Third Party which sold its equity interest in our Company on August 31, 2015. For details, see “– Major Shareholding Changes in Our Company Prior to 2016.”

(6) Anjian Hengyuan is held as to 92.22% and 7.78% by Mr. Wang and Mr. Wang Muyuan (son of Mr. Wang), respectively, and is one of our Controlling Shareholders.

(7) CDH Weixin and CDH Weisen, each an affiliate to the other, are former shareholders of our Company and Independent Third Parties which sold their equity interests in our Company on July 16, 2015. For details, see “– Major Shareholding Changes in Our Company Prior to 2016.”

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On December 22, 2014, Mengmei Fude and Kangshi Investment entered into an equity transfer agreement, pursuant to which Kangshi Investment agreed to transfer its 24.09% equity interest in our Company to Mengmei Fude for a consideration of RMB289,125,600. For further details, see “– [REDACTED] Investments” below.

On July 16, 2015, Mr. Wang Muyuan, Tianjin Tiantu and Shenzhen Tiantu Fund entered into an equity transfer agreement, pursuant to which Tianjin Tiantu and Shenzhen Tiantu Fund agreed to transfer their aggregate 10.94% equity interest in our Company to Mr. Wang Muyuan for a consideration of RMB136,340,970. The consideration was determined based on arm’s length negotiations and was settled on January 6, 2016. On the same date, Huamei Fude entered into an equity transfer agreement with (i) Legend Ruizhi, and (ii) CDH Weixin and CDH Weisen, respectively, pursuant to which (i) Legend Ruizhi agreed to transfer its 11.58% equity interest in our Company to Huamei Fude for a consideration of RMB180,624,562, and (ii) CDH Weixin and CDH Weisen agreed to transfer their 3.59% equity interests in our Company in aggregate to Huamei Fude for a consideration of RMB55,940,712. For further details, see “– [REDACTED] Investments” below.

On August 31, 2015, Huamei Fude acquired 3.42% equity interest in our Company from Jinghong Huijin for a consideration of RMB53,417,454. On the same date, Zhuhai Yuehe entered into an equity transfer agreement with Jinghong Huijin and Mr. Wang Muyuan, respectively, pursuant to which (i) Jinghong Huijin agreed to transfer its 2.36% equity interest in our Company to Zhuhai Yuehe for a consideration of RMB36,758,974, and (ii) Mr. Wang Muyuan agreed to transfer his 4.64% equity interest in our Company to Zhuhai Yuehe for a consideration of RMB72,441,033. For further details of the abovementioned share transfers, see “– [REDACTED] Investments” below.

On September 15, 2015, Mengmei Fude transferred its 19.32% equity interest in our Company to Anjian Hengyuan for a consideration of RMB53,417,454, which was determined based on arm’s length negotiations with reference to the net asset value of our Company as of August 31, 2015 and was settled on December 25, 2015. For further details, see “– [REDACTED] Investments” below.

On October 15, 2015, Shanghai Jixi and Mr. Wang Muyuan entered into an equity transfer agreement, pursuant to which Mr. Wang Muyuan agreed to transfer his 0.89% equity interest in our Company to Shanghai Jixi for a consideration of RMB20 million. The consideration was determined based on arm’s length negotiations and was settled on December 22, 2015. Shanghai Jixi subsequently transferred its 0.89% equity interest in our Company to its sole limited partner, Shanghai Runwofeng, on April 8, 2016.

On November 9, 2015, Huatai Ruihe and Mr. Wang Muyuan entered into an equity transfer agreement, pursuant to which Mr. Wang Muyuan agreed to transfer his 4.00% equity interest in our Company to Huatai Ruihe for a consideration of RMB100 million. For further details, see “– [REDACTED] Investments” below.

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Following the abovementioned shareholding changes and immediately prior to our conversion into a joint stock limited company in 2016, the shareholding structure of our Company was as follows:

Registered capital Approximate % Shareholder subscribed of shareholding

Mr. Wang RMB40,224,229 31.27% Anjian Hengyuan(1) RMB28,953,868 22.51% Huamei Fude(2)(4) RMB23,910,052 18.59% Meirui Shilan(3) RMB12,300,000 9.56% Zhuhai Yuehe(4) RMB9,003,908 7.00% Mengmei Fude(2)(4) RMB6,142,491 4.78% Huatai Ruihe(4) RMB5,145,090 4.00% Mr. Wang Muyuan RMB1,804,259 1.40% Shanghai Runwofeng(5) RMB1,143,353 0.89%

Total RMB128,627,250 100%

Notes:

(1) Anjian Hengyuan is held as to 92.22% and 7.78% by Mr. Wang and Mr. Wang Muyuan (son of Mr. Wang), respectively, and is one of our Controlling Shareholders.

(2) Huamei Fude and Mengmei Fude are both indirectly wholly-owned by Citrine Gem Investment Holdings Limited. Huamei Fude transferred its equity interest to Mengmei Fude and Mengmei Fude transferred its then equity interest in our Company to Citrine HK, another wholly-owned subsidiary of Citrine Gem Investment Holdings Limited, on May 10, 2021. For details, see “– [REDACTED] Investments” below.

(3) Meirui Shilan is an employee shareholding platform of our Company which was held by Mr. Wang as to 85.76% and by 10 individuals who are either employees or former employees of our Group as to an aggregate of 14.24%.

(4) These shareholders are our [REDACTED] Investors. For details, see “– [REDACTED] Investments” below.

(5) Shanghai Runwofeng is a former shareholder of our Company and an Independent Third Party, which transferred its equity interest in our Company to Suzhou Yuehan for a consideration of RMB24,800,000 pursuant to a share transfer agreement dated May 21, 2021. For details, see “– Our Corporate Development – [REDACTED] Investments in 2021” and “– [REDACTED] Investments” below.

Conversion into Joint Stock Limited Company, Prior Listing on the NEEQ and [REDACTED] on the Stock Exchange

In preparation for the listing on the NEEQ, our Company was converted into a joint stock company with limited liabilities in accordance with the PRC laws on April 22, 2016. Upon the conversion, our Company had a registered capital of RMB128,627,250 comprising 128,627,250 Shares with a nominal value of RMB1.00 each, which were subscribed by all then Shareholders in proportion to their respective equity interest in our Company prior to such conversion. We became quoted on the NEEQ on October 11, 2016 (Stock Code: 839070).

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In order to allow our Group to better adjust our strategy, and considering the generally low trading liquidity and limited financing resources on the NEEQ, on March 7, 2017, our Company voluntarily ceased to be quoted on the NEEQ.

Our Directors confirm that we had been in compliance with all applicable laws and regulations as well as rules and regulations of the NEEQ in all material respects, and had not been subject to any disciplinary action by the relevant regulators or any material litigation in this respect, during the period when our Company was quoted on the NEEQ and up to our de-listing therefrom or in connection with the de-listing.

Our Company is seeking to [REDACTED] our H Shares on the Stock Exchange in order to utilize the overseas financing platform to enhance our competitive strengths, raise capital for our business development, and further optimize our capital structure. Our Directors are also of the view that the [REDACTED] will further enhance our business profile and thus our ability to attract new customers, business partners and strategic investors as well as to recruit, motivate and retain talents for our Group’s business. For further details, see “Business – Our Strategies” and “Future Plans and Use of [REDACTED].”

Acquisitions of Beijing Aikang Hospital and Xi’an Yanta Hospital

Most of our aesthetic medical institutions were established and built by ourselves, while Beijing Aikang Hospital and Xi’an Yanta Hospital were acquired from Independent Third Parties.

To further enhance our aesthetic medical services capabilities in Beijing, in December 2010, we acquired 70%, 20% and 10% equity interests of Beijing Aikang Hospital from International Exchange and Cooperation Center of the Ministry of Health (衛生部國際交流與合作中心), Fuzhou Fujian Shuxin Co., Ltd. (福州福建數信有限公司) and SK Life Science Co., Ltd. (SK生命科學有限公司), all of which are Independent Third Parties, at a total consideration of approximately RMB6,548,000. Such consideration was determined after arm’s length negotiation between the parties with reference to the historical investment costs of the vendors and was settled on July 4, 2012. Upon completion of such equity transfer, Beijing Aikang Hospital became a wholly-owned subsidiary of our Company.

To further expand our footprints in the aesthetic medical service market in Northern China, in June 2014, we acquired 60% equity interest in Xi’an Yanta Hospital by (i) purchasing 40% equity interest from Shaanxi New Changan Investment Co., Ltd. (陝西新長安投資有限責任公司), an Independent Third Party, at a consideration of RMB1,400,000 which was determined after arm’s length negotiation with reference to the net asset value and value of the Medical Institution Practicing License of Xi’an Yanta Hospital, and (ii) making an additional capital contribution of RMB4,000,000. The consideration was fully settled on July 9, 2014. Upon completion of such equity transfer and capital contribution, Xi’an Yanta Hospital became our first aesthetic medical institution in Xi’an, Shaanxi Province. In December 2015, we acquired the remaining 40% equity interest in Xi’an Yanta Hospital from Xi’an New Changan Medical Investment Co., Ltd. (西安新長安醫療投資有限公司), an Independent Third Party, at a consideration of RMB4,200,000, which was determined after arm’s length negotiation with reference to the net asset value, operation and customer resources and value of the Medical Institution Practicing License of Xi’an Yanta Hospital and was settled on December 18, 2015. Upon completion of the equity transfer, Xi’an Yanta Hospital became a wholly-owned subsidiary of our Company.

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In 2018, as we decided to further expand our business in Xi’an, we established Xi’an Hospital which has larger operational floor space and transferred our operations from Xi’an Yanta Hospital to Xi’an Hospital to continue to offer aesthetic medical services to our customers in Xi’an.

Business Reorganization

During the Track Record Period and up to the Latest Practicable Date, we have undergone several business reorganization steps to focus our core business on aesthetic medical services and optimize our resources and corporate structure in line with our business positioning and development strategies.

Disposal of Beijing Laifo Pediatric

On January 10, 2020, Baihui Laifo, a wholly-owned subsidiary of our Company, transferred its entire equity interest in Beijing Laifo Pediatric to Shanghai Hetong Medical Technology Co., Ltd. (上海禾桐醫療科技有限公司) (currently known as Jiangao Medical Technology (Shanghai) Co., Ltd. (健高醫療技術(上海)有限公司)), an Independent Third Party, at a consideration of RMB2,000,000 which was determined after arm’s length negotiation among the parties with reference to our historical investment costs and was settled on May 15, 2020. Beijing Laifo Pediatric generated an insignificant amount of revenue and we disposed of Beijing Laifo Pediatric because it engages in pediatric business, which is not in line with our business focus.

Disposal of hair transplantation business

Prior to June 1, 2020, Ruilishi Beijing was held by Evercare Beijing EM, a wholly-owned subsidiary of our Company, as to 60% and Xi’an Bihu Medical Investment Co., Ltd. (西安壁虎醫療投資有限公司)(“Xi’an Bihu”), an Independent Third Party, as to 40%. Ruilishi Beiijng was the holding company of Beijing Changdao Hospital and the other 15 subsidiaries primarily engaging in the hair transplantation business. We decided to (i) dispose of Ruilishi Beijing and its 15 subsidiaries as the hair transplantation business is not in line with our business focus, and (ii) retain Beijing Changdao Hospital to terminate its hair transplantation business and further develop the aesthetic medical business as Beijing Changdao Hospital holds the Medical Institution Practicing License which is the required license for providing aesthetic medical services.

On June 1, 2020, (i) Evercare Beijing EM transferred its 60% equity interest in Ruilishi Beijing to Xi’an Bihu at a consideration of RMB150,000 which was determined after arm’s length negotiation among the parties with reference to the net liabilities position of Ruilishi Beijing and its 15 subsidiaries and was settled on August 26, 2020, and (ii) Ruilishi Beijing transferred its entire equity interest in Beijing Changdao Hospital to Evercare Chain-Store (a wholly-owned subsidiary of our Company) at a consideration of RMB3,000,000 which was determined after arm’s length negotiation among the parties with reference to the estimated costs for application of a new Medical Institution Practicing License and was settled on July 20, 2021.

Upon completion of the aforementioned transactions, we disposed of Ruilishi Beijing and its 15 subsidiaries and retained Beijing Changdao Hospital as a wholly-owned subsidiary of our Company.

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Disposals of companies that are not in line with our development strategies

Our business originated from Beijing and we have historically based our primary business in Beijing as it is a major medical center of China, and has ample medical resources which we believe enables us to remain competitive in recruitment and retention of qualified physicians and keep ourselves abreast of the latest industry and market trends as well as technological developments. We have expanded to, and will continue to expand our footprints in, the aesthetic medical service market in Northern China, particularly in cities with sound economic potential and strong customer base. As a result, in order to optimize our management and other resources to our core business focus and further streamline our business for future developments, in October 2020, we decided to dispose of four aesthetic medical institutions and their ancillary companies which are not in line with our business positioning and development strategies.

On July 9, 2021, our Company entered into a share transfer agreement (the “Share Transfer Agreement”) with Mr. Wang Jie (王傑) and Mr. Yuan Yuesheng (袁躍勝), both of whom are Independent Third Parties, pursuant to which our Company disposed of the entire equity interest in Xinxuan Media and Ruiyang Technology to Mr. Wang Jie and Mr. Yuan Yuesheng at a consideration of RMB14,000,000. The consideration was determined after arm’s length negotiation among the parties with reference to a valuation report prepared by an independent valuer. According to the Share Transfer Agreement, the share transfer has been completed upon settlement of 30% of the consideration on July 17, 2021 and the remaining 70% will be paid within 60 days after the share transfer is registered with the competent company registration authorities. Upon completion of the share transfer, Xinxuan Media and Ruiyang Technology were held by Mr. Wang Jie and Mr. Yuan Yuesheng as to 99% and 1%, respectively. Xinxuan Media and Ruiyang Technology are the holding companies of four aesthetic medical institutions and their four ancillary companies, details of which are set out below:

Equity interest held by our Name of the Group before company disposed the disposal Principal business Reasons for the disposal

Chongqing 100% Providing aesthetic Chongqing Hospital is located in Southwest Hospital medical services in China and maintaining operations in Chongqing Chongqing would be inconsistent with the Group’s business positioning and development plans. It was disposed of so that our Group can optimize our resources to focus on providing aesthetic medical services in Beijing and other cities in Northern China.

Chongqing Seek 100% Marketing and Chongqing Seek Beauty engaged in marketing Beauty business and business development operations ancillary development to Chongqing Hospital, and therefore, it was operations ancillary disposed of along with Chongqing Hospital. to Chongqing Hospital

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Equity interest held by our Name of the Group before company disposed the disposal Principal business Reasons for the disposal

Harbin Hospital 100% Providing aesthetic Harbin Hospital is located in the Northeastern medical services in China where the per capita consumption level Harbin, is relatively low and the population growth in Heilongjiang recent years is negative, therefore maintaining Province operations in Harbin would be inconsistent with the Group’s business positioning and development plans. It was disposed of so that our Group can optimize our resources to focus on providing aesthetic medical services in Beijing and other cities in Northern China with stronger discretionary spending power and sizable population.

Shenyang Hospital 100% Providing aesthetic Shenyang Hospital is located in the Northeastern medical services in China where the per capita consumption level Shenyang, Liaoning is relatively low and the population growth in Province recent years is negative, therefore the maintaining operations in Shenyang would be inconsistent with the Group’s business positioning and development plans. It was disposed of so that our Group can optimize our resources to focus on providing aesthetic medical services in Beijing and other cities in Northern China with stronger discretionary spending power and sizable population.

Shenyang Jiangyi 100% Marketing and Shenyang Jiangyi engaged in marketing and business business development operations ancillary to development Shenyang Hospital, and therefore, it was operations ancillary disposed of along with Shenyang Hospital. to Shenyang Hospital

Shanghai Hospital 100% Providing aesthetic Shanghai Hospital is located in Eastern China medical services in and maintaining operations in Shanghai would Shanghai be inconsistent with the Group’s business positioning and development plans. It was disposed of so that our Group can optimize our resources to focus on providing aesthetic medical services in Beijing and other cities in Northern China.

Shanghai Seek 100% Marketing and Shanghai Seek Beauty engaged in marketing and Beauty business business development operations ancillary to development Shanghai Hospital, it was disposed of along operations ancillary with Shanghai Hospital. to Shanghai Hospital

Shanghai Meiyi 90% N/A Shanghai Meiyi has not commenced any business operation and the Group has no development plan for Shanghai Meiyi. It was disposed of as a subsidiary of Ruiyang Technology.

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Upon completion of the aforementioned disposals, Xinxuan Media, Ruiyang Technology and the four aesthetic medical institutions and four ancillary companies operated by them ceased to be our subsidiaries.

Deregistration of certain subsidiaries

We de-registered the following subsidiaries because they had no mateiral business operations and our Group has no development plan for them:

Equity interest held by Date of Completion of Name of the subsidiary our Group establishment de-registration

Shenyang Consulting 100% December 2, 2015 September 11, 2019

Beijing Beifeisi 70% June 14, 2012 January 14, 2020

Jinan Silanduo 100% February 20, December 25, 2012 2020

Chongqing Zhonghengjian 100% July 17, 2020 May 10, 2021

Chongqing Aitifeisi 100% August 12, 2019 In the progress of deregistration(1)

Note:

(1) As advised by our PRC Legal Advisors, there is no material legal impediment in relation to the completion of the deregistration.

Accounting implications

For the accounting implications regarding the abovementioned disposals, please refer to Note 24 of the Accountants’ Report in Appendix I to this document for further information.

Implementation of Employee Incentive Plan

In recognition of the contributions of our employees and to incentivize them to further promote our development, on April 16, 2021, our Shareholders passed a resolution approving the adoption of an employee incentive plan. To implement the employee incentive plan, Meirui Miaolan was established as a limited partnership on April 15, 2021. Pursuant to a share transfer agreement entered into between Anjian Hengyuan and Meirui Miaolan on April 16, 2021, Anjian Hengyuan transferred 3,215,681 Shares in total, representing approximately 2.5% of the then share capital of our Company, to Meirui Miaolan at a total consideration of approximately RMB6,000,000. The consideration was determined with reference to the net asset value of our Company as of March 31, 2021 and was settled on July 19, 2021.

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The general partner of Meirui Miaolan is Ms. Lu Zhan (2.49%), a Supervisor. The limited partners of Meirui Miaolan include (i) Ms. Wang Zheng (32.83%), a Director, (ii) Mr. Liu Jianru (12.44%), a senior management member, and (iii) other seven employees of our Company.

[REDACTED] Investments in 2021

On May 21, 2021, Suzhou Yuehan and Shanghai Runwofeng entered into an equity transfer agreement, pursuant to which Shanghai Runwofeng agreed to transfer its 0.89% equity interest in our Company to Suzhou Yuehan for a consideration of RMB24,800,000. For details, see “– [REDACTED] Investments” below.

On June 13, 2021, CDH Investments, Ruisheng Shunlian, Anjian Hengyuan, Meirui Shilan, Mr. Wang and our Company entered into a capital increase and equity transfer agreement, pursuant to which (i) CDH Investments subscribed for 6,222,441 Shares at a total consideration of US$25,000,000, and (ii) Mr. Wang transferred his 0.95% equity interest in our Company to Ruisheng Shunlian for a total consideration of RMB30,000,000. For details, see “– [REDACTED] Investments” below.

Upon completion of the above transactions, the shareholding structure of our Company was as follows:

Number of Approximate % Shareholder Shares Held of Shareholding

Mr. Wang 38,937,956 28.88% Citrine HK 30,052,543 22.29% Anjian Hengyuan 25,738,187 19.09% Meirui Shilan 12,300,000 9.12% Zhuhai Yuehe 9,003,908 6.68% Huatai Ruihe 5,145,090 3.82% CDH Giant Healthcare 3,609,626 2.68% Meirui Miaolan 3,215,681 2.38% CDH Jingchun 2,362,389 1.75% Mr. Wang Muyuan 1,804,259 1.34% Ruisheng Shunlian 1,286,273 0.95% Suzhou Yuehan 1,143,353 0.85% CDH Jingrun 250,426 0.19%

Total 134,849,691 100%

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Compliance

Our Directors confirm that none of the abovementioned disposed companies had any non-compliance incidents which would materially and adversely affect our business, financial condition or results of operation, during the Track Record Period and before it was respectively disposed of.

As advised by our PRC Legal Advisors, each of the abovementioned changes in the shareholding structure of our Company, the acquisitions and disposals by our Group, including but not limited to our establishment, the transfer of equity interest, and the conversion of our Company into a joint stock limited company, was legally and properly completed and complied with all applicable laws and regulations of the PRC in all material respects, and we have obtained all necessary approvals, permits, licenses, authorizations and consents from the relevant PRC governmental authorities with respect to such changes, acquisitions and disposals, and such approvals, permits, licenses, authorizations and consents are valid, current and subsisting.

[REDACTED]

Concert Party Agreement

On July 20, 2021, Mr. Wang and Mr. Wang Muyuan entered into a concert party agreement, pursuant to which Mr. Wang and Mr. Wang Muyuan confirmed that since they held equity interest in our Group, they had acted in concert and will continue to, for so long as they remain interested, directly or indirectly, in the Shares of our Company, act in concert by aligning their votes at the shareholders’ meetings of our Company. They also confirmed that Mr. Wang had and will continue to take the lead, and Mr. Wang Muyuan had supported and will continue to support Mr. Wang in this regard by following Mr. Wang’s decisions in relation to the exercise of their voting rights at the meetings of the shareholders of our Company.

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OUR PRINCIPAL SUBSIDIARIES

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

Date of Principal Date of commencement Registered business Name of company establishment of business capital activities

Beijing Aikang September 2, December 31, RMB28,270,000 Aesthetic medical Hospital 2003 2010(1) services

Tianjin Hospital April 29, 2004 April 29, 2004 RMB20,000,000 Aesthetic medical services

Qingdao Hospital July 16, 2004 August 30, 2005 RMB15,000,000 Aesthetic medical services

Beijing Zizhu September 3, September 3, RMB2,000,000 Aesthetic medical Hospital 2004 2004 services

Beijing Changdao December 18, December 18, RMB6,000,000 Aesthetic medical Hospital 2006 2006 services

Beijing Xingfu August 8, 2007(2) August 8, 2007 RMB7,800,000 Aesthetic medical Hospital services

Jinan Hospital August 11, 2009 August 11, 2009 RMB10,000,000 Aesthetic medical services

Beijing Jianxiang August 21, August 21, 2009 RMB4,000,000 Aesthetic medical Hospital 2009(3) services

Xi’an Yanta Hospital August 11, 2009 July 10, 2014(1) RMB40,000,000 Aesthetic medical services

Xi’an Hospital January 12, 2018 May 5, 2019 RMB30,000,000 Aesthetic medical services

Tianjin Sweet Bestie November 19, November 19, RMB5,000,000 Promotion 2018 2018 services

Tianjin Jiangyi December 30, December 30, RMB1,000,000 Promotion 2019 2019 services

Notes:

(1) The hospitals were in operation prior to our acquisition, and the date of commencement of business refers to the date of our acquisition. (2) The hospital has been in existence since 2002 and was operated by its predecessor which transferred the operations to Beijing Xingfu Hospital after its establishment in 2007. (3) The hospital has been in existence since 1999 and was operated by its predecessors which transferred the operations to Beijing Jianxiang Hospital after its establishment in 2009.

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[REDACTED] INVESTMENTS

In order to further develop our Group’s business and benefit from the institutional investors’ industry knowledge and experience, we introduced several [REDACTED] Investors to become Shareholders of our Company.

The consideration for each of the [REDACTED] Investments was determined based on arm’s length negotiations among the parties after taking into account, among others, the timing of the investments, the illiquidity of the shares as a private company when the [REDACTED] Investments were entered into, our business performance, market conditions and our market position.

Principal Terms of the [REDACTED] Investments

The principal terms of the [REDACTED] Investments are set forth below:

CDH Ruisheng Citrine HK(1) Zhuhai Yuehe Huatai Ruihe Suzhou Yuehan Investments Shunlian

Date of the December 22, August 31, 2015 November 9, May 21, 2021 June 13, 2021 June 13, 2021 agreement 2014, July 16, 2015 2015, August 31, 2015, September 15, 2015

Consideration paid RMB525,690,874 RMB109,200,007 RMB100,000,000 RMB24,800,000 US$25,000,000 RMB30,000,000

Date on which the December 28, 2015 December 24, December 30, May 27, 2021 July 2, 2021 June 25, 2021 consideration was 2015 2015 fully settled

Cost per Share paid RMB[REDACTED] RMB[REDACTED] RMB[REDACTED] RMB[REDACTED] US$[REDACTED] RMB[REDACTED] (equivalent to RMB[REDACTED])

Discount to the [REDACTED]% [REDACTED]%(3) [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED] (%)(2)

Use of proceeds We will utilize the proceeds from the [REDACTED] Investments made by CDH Investments for the development and from the operation of our Group as well as for general working capital purposes. As of the Latest Practicable Date, the [REDACTED] net proceeds received by us from such [REDACTED] Investments had not yet been utilized. Investments(4)

Strategic benefits At the time of the [REDACTED] Investments, our Directors were of the view that our Company would benefit from the [REDACTED] the industry knowledge and experience of [REDACTED] Investors and their investments demonstrate their Investors brought confidence in the operation of our Company and serve as an endorsement of our Company’s performance, to our Company strengths and prospects.

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Notes:

(1) The Unlisted Foreign Shares held by Citrine HK were initially purchased by its affiliates, Huamei Fude and Mengmei Fude, and Citrine HK became our direct shareholder after an internal shareholding transfer on May 10, 2021. For details, see “– Our Corporate Development – Major Shareholding Changes in Our Company Prior to 2016.”

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

(3) A greater discount to the [REDACTED] for the [REDACTED] Investment made by Zhuhai Yuehe compared to other [REDACTED] Investments in 2015 was primarily the result of the arm’s length negotiations between Mr. Wang Muyuan (as the transferor) and Zhuhai Yuehe (as the transferee), taking into account the fact that the equity interest acquired by Zhuhai Yuehe did not come with any special right, such as the right of first refusal, preemption right, anti-dilution right, tag-along right and divestment right that were granted to the other [REDACTED] Investors.

(4) As Mengmei Fude, Huamei Fude, Zhuhai Yuehe, Huatai Ruihe, Suzhou Yuehan and Ruisheng Shunlian purchased the equity interests in our Company from our then existing shareholders, our Company did not receive any proceeds from the investment of the aforementioned [REDACTED] Investors. For details, see “– Our Corporate Development – Major Shareholding Changes in Our Company Prior to 2016.”

Special Rights

Pursuant to a shareholders’ agreement dated June 13, 2021, Huatai Ruihe, Citrine HK, Suzhou Yuehan, CDH Giant Healthcare, CDH Jingchun, CDH Jingrun and Ruisheng Shunlian have been granted certain special rights, including, among others, the rights of first refusal, pre-emption rights, anti-dilution rights, tag-along rights and divestment rights. Pursuant to a termination agreement in relation to the shareholders’ rights dated July 5, 2021, all the special rights granted to the above-mentioned [REDACTED] Investors were automatically terminated upon the filing of the application for the [REDACTED] with the CSRC on July 21, 2021.

Information about the [REDACTED] Investors

Citrine HK

Citrine HK is a limited liability company incorporated under the laws of Hong Kong and an affiliate of Warburg Pincus LLC.

Joy Capital (including Zhuhai Yuehe and Suzhou Yuehan)

Zhuhai Yuehe is a limited partnership established in the PRC on August 26, 2015 and primarily engages in equity investment. Suzhou Yuehan is a limited partnership established in the PRC on September 29, 2018 and was primarily engaged in equity investment. Zhuhai Yuexin Investment Management Enterprise (Limited Partnership) (珠海悅昕投資管理企業(有限合夥))(“Zhuhai Yuexin”), a limited partnership established in the PRC, acts as the sole general partner of Zhuhai Yuehe and Suzhou Yuehan. Beijing Yuehe Jiasheng Enterprise Management Consulting Co., Ltd. (北京悅和嘉盛企業管理諮詢有限公司), a limited liability company established in the PRC, acts as the sole general partner of Zhuhai Yuexin and is

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Huatai Ruihe

Huatai Ruihe is a limited partnership established in the PRC on June 1, 2015, and primarily engages in equity investment. The general partners of Huatai Ruihe are Beijing Huatai Ruihe Investment Fund Management Partnership (Limited Partnership) (北京華泰瑞合投資基金管理合夥企業(有限合夥)) and Huatai Zijin Investment Co., Ltd. (華泰紫金投資有限責任公司). The ultimate beneficial owner of Huatai Ruihe is Huatai Securities Co., Ltd. (華泰證券股份有限公司) (Stock Code: 6886.HK, 601688.SH).

CDH Investments (including CDH Giant Healthcare, CDH Jingchun and CDH Jingrun)

CDH Giant Healthcare is a limited liability company incorporated under the laws of Hong Kong and wholly-owned by CDH Giant Health III Limited. CDH Giant Health III Limited is wholly-owned by CDH Fund VI, L.P., the general partner of which is CDH VI Holdings Company Limited, owned as to 85% by CDH Griffin Holdings Company Limited. CDH Griffin Holdings Company Limited is ultimately controlled by Mr. Wu Shangzhi (吳尚志) and Mr. Jiao Shuge (焦樹閣), both of whom are Independent Third Parties.

CDH Jingchun and CHD Jingrun are limited partnerships established in the PRC on December 26, 2018 and primarily engage in equity investment. CDH Equity Investment Management (Tianjin) Co., Ltd. (鼎暉股權投資管理(天津)有限公司), a limited liability company established in the PRC, acts as the executive partner of CDH Jingchun and CDH Jingrun. CDH Equity Investment Management (Tianjin) Co., Ltd. is owned directly as to 85.4% by Tianjin Taiding Investment Co., Ltd. (天津泰鼎投資有限公司) and 14.6% by China National Investment and Guaranty Corporation (中國投融資擔保股份有限公司), an Independent Third Party, primarily engaged in guarantee businesses and listed on NEEQ (stock code: 834777). Tianjin Taiding Investment Co., Ltd. is indirectly owned as to 85% by CDH Griffin Holdings Company Limited which is ultimately controlled by Mr. Wu Shangzhi and Mr. Jiao Shuge.

Ruisheng Shunlian

Ruisheng Shunlian is a limited partnership established in the PRC on May 7, 2021 and primarily engages in equity investment. Shanghai Ruisheng Investment Management Co., Ltd. (上海瑞勝投資管理有限公司), a limited company established in the PRC, acts as the sole general partner of Ruisheng Shunlian. Shanghai Ruisheng Investment Management Co., Ltd. is wholly-owned by Mr. Liao Lining (繆立寧) and Mr. Guo Meng (郭猛), both of whom are Independent Third Parties, as to 72.0007% and 27.9993%, respectively.

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Lock-up Period

The terms of the [REDACTED] Investment did not impose any lock-up obligations over the Shares held by any of the [REDACTED] Investors upon [REDACTED]. However, pursuant to the PRC Company Law, the [REDACTED] Investors will not be able to transfer the Shares held by them within one year from the [REDACTED].

[REDACTED]

The Shares held by the [REDACTED] Investors are Domestic Shares and Unlisted Foreign Shares and will be [REDACTED] upon the completion of the [REDACTED] and [REDACTED].

Immediately following the [REDACTED] (assuming the [REDACTED]isnot exercised) and [REDACTED], Citrine HK will be interested in approximately [REDACTED]% of the registered share capital of the Company and will be a substantial shareholder upon the [REDACTED]. Therefore, Citrine HK will be a core connected person of the Company and the Shares held by Citrine HK will not be counted towards the [REDACTED] for the purpose of Rule 8.08 of the Listing Rules upon the [REDACTED].

Other than Citrine HK, Zhuhai Yuehe and Suzhou Yuehan, all the other [REDACTED] Investors are Independent Third Parties. Except for Citrine HK, none of the other [REDACTED] Investors (i) is a core connected person of the Group; (ii) has been financed directly or indirectly by a core connected person of the Group for the subscription of Shares; or (iii) is accustomed to take instructions from a core connected person of the Group in relation to the acquisition, disposal, voting or other disposition of the Shares registered in his/its name or otherwise held by him/it, and therefore, [REDACTED] Shares held by these [REDACTED] Investors, representing approximately [REDACTED]% of our registered share capital immediately following the [REDACTED] (assuming the [REDACTED] is not exercised) and the [REDACTED], will be counted towards the [REDACTED] for the purpose of Rule 8.08 of the Listing Rules upon the [REDACTED].

Compliance with Interim Guidance and Guidance Letter

The Sole Sponsor has confirmed that, based on the documents provided by the Company relating to the [REDACTED] Investments, the [REDACTED] Investments are in compliance with the [REDACTED] issued on January 2012 and as updated in March 2017 and the [REDACTED] issued by the Stock Exchange in October 2012 and as updated in July 2013 and March 2017.

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Corporate Structure immediately before the [REDACTED]

The following chart sets forth the shareholding structure of our Group immediately before completion of the [REDACTED]: ITR N OPRT STRUCTURE CORPORATE AND HISTORY

Mr. Wang Muyuan Mr. Wang

7.78% 92.22%

85.76% CDH Ruisheng Anjian Hengyuan (1) (2) (3) (3) (3) (3) (3) (3) Meirui Shilan Meirui Miaolan Citrine HK Zhuhai Yuehe Huatai Ruihe Suzhou Yuehan Giant Healthcare(3) CDH Jingchun CDH Jingrun Shunlian(3)

1.34% 19.09% 28.88% 9.12% 2.38% 22.29% 6.68% 3.82% 0.85% 2.68% 1.75% 0.19% 0.95% 3 – 130 –

Our Company

100% 100% 100% 100%90% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 50%

Beijing Beijing Beijing Beijing Xi’an Evercare Tianjin Beijing Evercare Tianjin Qingdao Jinan Xi’an Baihui Tianjin Beijing New Evercare Xingfu Aikang Jianxiang Zizhu Yanta Beijing Sweet (5) Evercare Chain-Store Hospital Hospital Hospital Hospital Laifo Jiangyi Haoguimi Medical Douyiwang Hospital Hospital Hospital Hospital(4) Hospital EM Bestie

100% 51% 100%100% 100% 100% 100% 100% 100%

Beijing Beijing Tianjin Xi’an Evercare Xi'an Evercare Qingdao Jinan Changdao Seek Seek Seek Anjian(6) Zhonghengjian HK Jiangyi Jiangyi Hospital Beauty Beauty Beauty Notes: 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

(1) Meirui Shilan is an employee shareholding platform of our Company which was held by Mr. Wang as to 85.76% and by 10 individuals who are either employees or former employees of our Group as to an aggregate of 14.24%.

(2) Meirui Miaolan is an employee shareholding platform of our Company. Ms. Lu Zhan, a Supervisor, is the general partner (2.49%) and the remaining limited partners include (i) Ms. Wang Zheng (32.83%), a Director, (ii) Mr. Liu Jianru (12.44%), a senior management member, and (iii) other seven employees of our Company. For details, see “– Our

Corporate Development – Implementation of Employee Incentive Plan.” STRUCTURE CORPORATE AND HISTORY

(3) Citrine HK, Zhuhai Yuehe, Huatai Ruihe, Suzhou Yuehan, CDH Giant Healthcare, CDH Jingchun, CDH Jingrun and Ruisheng Shunlian are our [REDACTED] Investors. For details, see “– [REDACTED] Investments – Information about the [REDACTED] Investors.”

(4) The remaining 10% equity interest in Beijing Zizhu Hospital was held by Mr. Ouyang Zishi (歐陽子石), an Independent Third Party.

(5) The remaining 50% equity interest in Douyiwang was held by Dental Bean Co., Ltd (牙豆株式會社) as to 40% and PARK JUNG HYUK (樸正赫) as to 10%, both Independent Third Parties.

(6) The remaining 49% equity interest in Evercare Anjian was held by Ms. Wang Xiuzhi (王秀芝), an Independent Third Party. 3 – 131 – 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

The following chart sets forth the shareholding structure of our Group immediately following the completion of the [REDACTED] (assuming the [REDACTED] is not exercised):

Mr. Wang Muyuan Mr. Wang(7)

STRUCTURE CORPORATE AND HISTORY

7.78% 92.22%

85.76% CDH Giant Ruisheng Anjian Hengyuan (1) (2)(7) (3)(7) (3)(7) (3)(7) (3)(7) (3)(7) (3)(7) Public Shareholders Meirui Shilan Meirui Miaolan Citrine HK Zhuhai Yuehe Huatai Ruihe Suzhou Yuehan Healthcare(3)(7) CDH Jingchun CDH Jingrun Shunlian(3)(7)

REDACTED REDACTED REDACTED REDACTED REDACTED [ ]% [ ]% [ ]% [REDACTED]% [REDACTED]% [ ]% [REDACTED]% [ ]% [REDACTED]% [REDACTED]%[REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]%

Our Company 3 – 132 –

100% 100% 100% 100%90% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 50%

Beijing Beijing Beijing Beijing Xi’an Evercare Tianjin Beijing Evercare Tianjin Qingdao Jinan Xi’an Baihui Tianjin Beijing New Evercare Xingfu Aikang Jianxiang Zizhu Yanta Beijing Sweet Douyiwang(5) Evercare Chain-Store Hospital Hospital Hospital Hospital Laifo Jiangyi Haoguimi Medical Hospital Hospital Hospital Hospital(4) Hospital EM Bestie

100% 51% 100%100% 100% 100% 100% 100% 100%

Beijing Tianjin Xi’an Beijing Evercare Xi'an Evercare Qingdao Jinan (6) Seek Seek Seek Changdao Anjian Zhonghengjian HK Jiangyi Jiangyi Hospital Beauty Beauty Beauty

Notes:

(1)-(6): Please refer to corresponding notes on the preceding page. (7) [REDACTED] 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 MISSION

Centering around our clients and sticking to the essence of medicine, we aspire to provide high-quality and one-stop aesthetic medical services with proven, safe and advanced technologies.

OUR CORE VALUE

We are dedicated to providing scientific, safe and proper aesthetic medical services that fit the needs of our clients.

OVERVIEW

We are a leading private aesthetic medical institution group in China. According to Frost & Sullivan, (i) we ranked first among all the private aesthetic medical institution groups1 in Northern China in terms of revenue from aesthetic medical services in 2020; and (ii) we ranked fourth among all the private aesthetic medical institution groups in China in terms of the same metric. Over our 22 years of operations, we endeavor to “make people beautiful in their own way (成人之美)” through continuously providing one-stop aesthetic medical services to beauty seekers (求美者) with a strategic focus on aesthetic non-surgical procedures.

China is a large and fast growing market for aesthetic medical services. According to Frost & Sullivan, the total revenue of the aesthetic medical service market in China grew at a CAGR of 11.0% from RMB77.6 billion in 2016 to RMB117.6 billion in 2020, and is expected to grow at a CAGR of 19.7% from RMB135.3 billion in 2021 to RMB278.1 billion in 2025. China was the second largest aesthetic medical service market in terms of total revenue in 2019, while the penetration rate of aesthetic medical services in China was significantly lower than developed countries, according to Frost & Sullivan. Leveraging our leading market position, we believe we are well positioned to benefit from the fast growing aesthetic medical service market in China.

We provide a broad range of (i) aesthetic non-surgical services, primarily comprising aesthetic injection procedures and aesthetic energy-based procedures; and (ii) aesthetic surgical services, primarily comprising aesthetic plastic procedures. We have been strategically focusing on aesthetic non-surgical procedures, which contributed the majority of our revenue during the Track Record Period. Compared to aesthetic surgical procedures, aesthetic non-surgical procedures generally have lower level of risk, higher affordability and shorter recovery time, and typically require repeated sessions over time, resulting in higher client stickiness. Therefore, their market acceptance and penetration have been increasing rapidly. In addition to their growing popularity, aesthetic non-surgical procedures can be relatively easier to standardize and implement centralized safety and quality control as well as client management, and therefore, are relatively more scalable and replicable. According to Frost &

1 All references to market rankings in this document are based on revenue from continuing operations only.

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Sullivan, among the top five private aesthetic medical institution groups in China in terms of revenue from aesthetic medical services in 2020, we ranked first in terms of proportion of revenue from aesthetic non-surgical services.

Beijing has been the focus of our business since our inception. We have also strategically expanded to, and will continue to expand our footprints in, the aesthetic medical service market in Northern China. As of the Latest Practicable Date, we owned and operated nine aesthetic medical institutions in five cities in Northern China, including five in Beijing, one in Tianjin, one in Qingdao, one in Jinan and one in Xi’an.

One of our core competitive strengths that underpins our market leadership is our proprietary information technology infrastructure, which was developed in-house and has enabled us to digitalize, streamline and standardize substantially all aspects of our internal client and operational management and external aesthetic medical service offerings.

We have adopted a unique OMO client outreach and acquisition strategy centered on our online marketing platform and our dedicated team of sales consultants. We believe our robust in-house sales and marketing capabilities differentiate us from other market players and allow us to gradually reduce our reliance on third-party client acquisition channels.

Our active clients from continuing operations, defined as those who have purchased at least one aesthetic medical procedure in the relevant period, increased from 70,467 in 2018 to 86,629 in 2020, and from 22,097 for the three months ended March 31, 2020 to 45,694 for the three months ended March 31, 2021. In particular, our new clients from continuing operations, defined as those who have purchased at least one aesthetic medical procedure in the relevant period for the first time, increased from 38,928 in 2018 to 44,386 in 2020, and from 5,241 for the three months ended March 31, 2020 to 14,050 for the three months ended March 31, 2021; while our repeat clients from continuing operations, defined as who (i) are active clients; and (ii) have purchased at least one aesthetic medical procedure in the previous period, increased from 31,539 in 2018 to 42,243 in 2020, and from 16,856 for the three months ended March 31, 2020 to 31,644 for the three months ended March 31, 2021.

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Despite under the adverse impact of COVID-19 pandemic, our revenue from continuing operations increased from RMB661.1 million in 2018 to RMB811.2 million in 2020, representing a CAGR of 10.8%, showing a significantly faster growth than the private aesthetic medical service market in Northern China during the same period, according to Frost & Sullivan. Our revenue from continuing operations increased by 119.4% from RMB123.5 million for the three months ended March 31, 2020 to RMB271.0 million for the three months ended March 31, 2021. We recorded net loss from continuing operations of RMB38.5 million, RMB60.2 million and RMB15.2 million, respectively, for the years ended December 31, 2018 and 2019 and the three months ended March 31, 2020, while we recorded net profit from continuing operations of RMB32.2 million and RMB19.9 million, respectively, for the year ended December 31, 2020 and the three months ended March 31, 2021.

OUR COMPETITIVE STRENGTHS

We believe that the following competitive strengths are critical to our current success and crucial to our future growth:

Leading private aesthetic medical institution brand in China, well-positioned to benefit from the fast growing aesthetic medical service market in China

• We are a leading private aesthetic medical institution group in China

According to Frost & Sullivan, (i) we ranked first among all the private aesthetic medical institution groups in Northern China in terms of revenue from aesthetic medical services in 2020; and (ii) we ranked fourth among all the private aesthetic medical institution groups in China in terms of the same metric. Over our 22 years of operations, we endeavor to “make people beautiful in their own way (成人之美)” through continuously providing one-stop aesthetic medical services to beauty seekers (求美者) with a strategic focus on aesthetic non-surgical procedures. As of the Latest Practicable Date, we owned and operated nine aesthetic medical institutions in five cities in Northern China, including five in Beijing, one in Tianjin, one in Qingdao, one in Jinan and one in Xi’an.

• We operate in the fast growing private aesthetic medical service market in China

According to Frost & Sullivan, the rapid growth of the aesthetic medical service market in China has been driven by (i) the aging population and the desire to improve or maintain personal appearance as well as growing social acceptance of aesthetic medical services, (ii) increasing disposable income and consumption upgrade, (iii) developments in aesthetic medical technology, and (iv) increasing capital investment in the aesthetic medical service industry. According to Frost & Sullivan, the total revenue of the aesthetic medical service market in China grew at a CAGR of 11.0% from RMB77.6 billion in 2016 to RMB117.6 billion in 2020. China was the second largest aesthetic medical service market in terms of total revenue in 2019 following the United States, while compared to the United States, South Korea, Brazil and Japan, aesthetic medical service market

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penetration rate in China is significantly lower. According to Frost & Sullivan, in 2019, the penetration rate of aesthetic medical services (calculated by dividing total service volume of aesthetic medical services by the size of target population aged between 15 to 64) in China was only 2.5%, compared to 12.7% in South Korea, 6.5% in the United States, 6.0% in Brazil and 4.8% in Japan. According to Frost & Sullivan, the total revenue of the aesthetic medical service market in China is expected to grow at a CAGR of 19.7% from RMB135.3 billion in 2021 to RMB278.1 billion in 2025, with market penetration rate increasing from 2.4% in 2021 to 5.3% in 2025.

The private aesthetic medical service market in which we operate has outpaced the overall aesthetic medical service market in China. According to Frost & Sullivan, the total revenue of private aesthetic medical service market in China grew at a CAGR of 12.1% from RMB61.1 billion in 2016 to RMB96.4 billion in 2020, with market share in the overall aesthetic medical service market in China increasing from 78.7% in 2016 to 82.0% in 2020 and expected to further increase to 88.0% in 2025. With the tightening of regulatory framework and the development of more transparent industry standards, the private aesthetic medical service market has become more concentrated with the leading participants dominating an increasingly larger share of the market. According to Frost & Sullivan, the top five players in the private aesthetic medical service market in China in terms of total revenue increased from 7.2% in 2017 to 8.9% in 2020. On June 10, 2021, the NHC and seven other regulatory authorities jointly issued a work plan to clean up non-regulated aesthetic medical service providers. Therefore, it is expected that the industry consolidation trend will continue in the coming years.

• We have been strategically focusing on aesthetic non-surgical procedures

Compared to aesthetic surgical procedures, aesthetic non-surgical procedures generally have lower level of risk, higher affordability and shorter recovery time, and typically require repeated sessions over time, resulting in higher client stickiness. Therefore, their market acceptance and penetration have been increasing rapidly. The private aesthetic non-surgical procedure segment in China has grown and is expected to continue to grow at a higher speed than the private aesthetic surgical procedure segment in China, according to Frost & Sullivan. In particular, the total revenue of private aesthetic non-surgical procedure segment in China grew at a CAGR of 15.1% from 2016 to 2020, and is expected to grow at a CAGR of 31.7% from 2021 to 2025. By comparison, the private aesthetic surgical procedure segment in China grew at a CAGR of 9.6% from 2016 to 2020, and is expected to grow at a CAGR of 4.9% from 2021 to 2025.

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In addition to their growing popularity, aesthetic non-surgical procedures can be relatively easier to standardize and implement centralized safety and quality control as well as client management, and therefore, are relatively more scalable and replicable. We have been strategically focusing on aesthetic non-surgical procedures, which contributed the majority of our revenue during the Track Record Period. For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2020 and 2021, revenue generated from aesthetic non-surgical services amounted to RMB451.0 million, RMB516.6 million, RMB599.9 million, RMB82.6 million and RMB207.8 million, respectively, representing 68.2%, 69.9%, 73.9%, 66.9% and 76.7% of our revenue from continuing operations for the same periods, respectively. According to Frost & Sullivan, (i) we ranked third among all the private aesthetic medical institution groups in China in terms of revenue from aesthetic non-surgical services in 2020; and (ii) among the top five private aesthetic medical institution groups in China in terms of revenue from aesthetic medical services in 2020, we ranked first in terms of proportion of revenue from aesthetic non-surgical services.

• Deep root in the Northern China market which has significant growth potential

Beijing has been the focus of our business since our inception. Beijing, as a major medical center of China, has ample medical resources which enable us to remain competitive in recruitment and retention of qualified physicians and keep ourselves abreast of the latest industry and market trends as well as technological developments. We have also strategically expanded to, and will continue to expand our footprints in, the aesthetic medical service market in Northern China. According to Frost & Sullivan, we were the largest aesthetic medical service institution group in Northern China in terms of revenue from aesthetic medical services in each of the years ended December 31, 2018, 2019 and 2020. According to Frost & Sullivan, the total revenue of private aesthetic medical service market in Northern China grew at a CAGR of 13.1% from RMB24.6 billion in 2016 to RMB40.2 billion in 2020, and is expected to grow at a CAGR of 21.6% from RMB47.9 billion in 2021 to RMB104.8 billion in 2025.

We believe that our market leadership has positioned us to capitalize on industry opportunities and capture future growth potential in the fast growing aesthetic medical service market in China.

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Superior client satisfaction underpinned by our high-quality, safe and tailor-made aesthetic medical solutions

• High-caliber team of medical professionals

We have built up a high-caliber team of medical professionals, which we believe, at the forefront of the aesthetic medical industry in China. As of March 31, 2021, we had 157 physicians who practiced at our aesthetic medical institutions comprising continuing operations, including six chief physicians, 19 associate-chief physicians and 63 attending physicians. As of March 31, 2021, our chief physicians and associate-chief physicians had an average of approximately 14 years of industry experience, our attending physicians had an average of approximately nine years of industry experience. Our physicians also enjoy the full support of our skillful nurses and medical technicians. As of March 31, 2021, we had 209 nurses, 26 pharmacists, six radiographers and 18 laboratory technicians who practiced at our aesthetic medical institutions comprising continuing operations. We believe our high-caliber team of medical professionals is crucial to providing consistently high-quality services to our clients.

• Diversified and innovative service offerings

We provide a broad range of (i) aesthetic non-surgical services, primarily comprising aesthetic injection procedures which mainly include the injection of botulinum toxin type A and fillers as well as mesotherapy, and aesthetic energy-based procedures which are performed with various energy-based devices such as laser, radiofrequency, intense pulsed light and cryolipolysis; and (ii) aesthetic surgical services, primarily comprising aesthetic plastic procedures such as eye surgery, rhinoplasty, breast surgery and lipoplasty. Please see “– Our Services and Products” for more details. We started to sell private label skincare products in October 2019. Leveraging our in-depth understanding of clients’ needs, we have further expanded our portfolio of private label products. In particular, we have partnered with Bloomage BioTechnology to offer customized hyaluronic acid filler to our clients. For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2021, total purchases of private label products by the continuing operations from our contract manufacturers amounted to approximately nil, RMB0.7 million, RMB6.4 million and RMB3.1 million, respectively. We believe our diversified offerings promote client loyalty and facilitate effective cross-selling, thereby driving repeat business from our clients.

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We believe we are a frontrunner of innovation and technological advances in the market and we have been introducing new aesthetic medical procedures to the market as soon as advanced devices with cutting-edge technologies emerge. As a testament to our service quality, we have become a partner of choice for well-known medical device and consumable suppliers seeking to unlock the value of their assets in the rapidly growing PRC market. For example, we have entered into strategic cooperation agreements with a number of suppliers, such as Galderma, pursuant to which we are (i) able to procure medical devices and consumables at favorable prices; (ii) granted priority in terms of supply; and (iii) given marketing and training supports.

• Great emphasis on client experience, providing clients with tailor-made solutions

We are committed to providing high-quality aesthetic medical services and offering exceptional client experience. We provide our clients with tailor-made, closed-loop aesthetic medical solutions that cover the entire client journey from registration and reception, consultation with client service personnel, performance of procedures by qualified medical professionals, post-procedure follow-up to long-term aesthetic medical management, in a one-stop manner. We recommend suitable and personalized service plans to meet each client’s specific needs and desired aesthetic results, which in turn enhances client stickiness.

We place great emphasis on client experience at our aesthetic medical institutions and strive to maintain a high level of client satisfaction by offering friendly and comfortable client care and services. Our aesthetic medical institutions are strategically located in or adjacent to prime commercial districts, which are easily accessible and well-designed and decorated to provide high-end client experience. We have established stringent standards for the service quality of our client service personnel and meticulously collected feedback from our clients.

• Rigorous quality and safety controls

The quality and safety of our aesthetic medical institutions remain our top priority. We generally follow JCI standards at our aesthetic medical institutions. JCI, or the Joint Commission International, is an international arm of The Joint Commission, which is a United States-based independent, not-for-profit organization which accredits and certifies healthcare organizations and programs. JCI standards are recognized worldwide as one of the highest benchmarks for quality and safe medical services.

We have implemented a stringent control system comprising, among others, (i) our medical expert committee (醫學專家委員會) at the headquarters level responsible for overseeing the implementation of standardized clinical quality control procedures across each of our aesthetic medical institutions; (ii) centralized procurement management at the headquarters level to better control the quality of the medical supplies we procure and stringent evaluation and approval process to assess the risks involved before introducing any new aesthetic medical device or product; and (iii) the adoption of standardized operational procedures, which lay out step-by-step instructions and protocols for client services and for handling client complaints and other feedback. Please see “– Risk Management and Internal Control – Quality Control” for more details.

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Our stringent quality and safety controls have translated into our lower number of medical disputes. During the Track Record Period, excluding those from our discontinued operations, we handled 23 medical disputes, representing less than 0.01% of the total number of aesthetic medical procedures performed during the same period, compared to the industry level between 1% to 3%, according to Frost & Sullivan. Among these medical disputes, 10 resulted in monetary compensation, the aggregate amount of which amounted to approximately RMB2.1 million, representing less than 0.1% of our total revenue from continuing operations during the same period, compared to the industry level between 0.8% to 1.2%, according to Frost & Sullivan.

In recognition of our high-quality and safety services, our Beijing Jianxiang Hospital and Beijing Aikang Hospital were accredited as “5A Aesthetic Medical Institution (5A級醫療美容醫院)” by the CAPA in 2018. CAPA, a national-level civil society group approved by the National Health Commission and registered with the Ministry of Civil Affairs of the PRC, reviews the participating aesthetic medical institutions annually and categorizes the aesthetic medical institutions by using grading system with “5A” being the highest. Given the extensive scope of review by the CAPA, “5A” rating signifies the front-end status of a private aesthetic medical institution in China in terms of standard of management, security, clinical technology and service quality.

Our high-quality and safety services have also helped us achieve a high level of client satisfaction, which is evidenced by a satisfaction rate of 99% among certain clients of continuing operations, according to the Frost & Sullivan Survey. Please see “Industry Overview – Source and Reliability of Information” for more details.

Unique OMO client outreach and acquisition strategy centered on robust in-house capabilities

Client acquisition costs represent a significant component of operating costs and expenses of an aesthetic medical institution in China. According to Frost & Sullivan, selling and marketing expenses normally accounts for approximately 25% to 35% of the total revenue of an aesthetic medical institution. With a view to further expanding our client base while controlling our client acquisition costs, we have taken initiatives to adopt a unique OMO client outreach and acquisition strategy centered on our online marketing platform and our dedicated team of sales consultants.

We have launched an interactive online marketing platform, enabling us to enhance our exposure to existing and potential clients in a cost-efficient manner. Our clients may purchase services, check the availability of, and make appointments with, our physicians, and submit their feedback about our services through our official WeChat accounts and mini programs.

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In addition, as word-of-mouth referral has become one of our primary approaches to attract and acquire new clients, we have established a “Members Get Members” system, which is backed by user-engagement mini programs that encourage our existing clients to share their purchase experience and interact with, and recommend our services to, their acquaintances. Such “Members Get Members” system was firstly introduced in Beijing Jianxiang Hospital in April 2020. New clients of Beijing Jianxiang Hospital increased from 76 in May 2020 to 442 in November 2020, while payments received from new clients in Beijing Jianxiang Hospital increased from RMB1.3 million in May 2020 to RMB3.5 million in November 2020. With its success in Beijing Jianxiang Hospital, we have gradually implemented the “Members Get Members” system across our aesthetic medical institution network.

From the offline side, we have built up a dedicated team of sales consultants with relatively high level of industry knowledge and expertise. As of March 31, 2021, our continuing operations had 736 full-time sales consultants, covering all the cities in which we operate. We incentivize our sales consultants with competitive base salaries and performance- based bonuses and provide them with client-centered systematic trainings, which enables them to accurately and effectively convey the benefits and strengths of our services when communicating with existing and potential clients.

We believe that our robust in-house sales and marketing capabilities differentiate us from other market players and allow us to gradually reduce our reliance on third-party client acquisition channels. As a testament to our effective client outreach and acquisition strategy, we achieved significant growth in our client base during the Track Record Period. Our active clients from continuing operations increased at a CAGR of 10.9% from 70,467 in 2018 to 86,629 in 2020, and from 22,097 for the three months ended March 31, 2020 to 45,694 for the three months ended March 31, 2021; while our new clients from continuing operations increased at a CAGR of 6.8% from 38,928 in 2018 to 44,386 in 2020, and from 5,241 for the three months ended March 31, 2020 to 14,050 for the three months ended March 31, 2021. We also enjoy a high level of client loyalty. Our repeat clients from continuing operations increased at a CAGR of 15.4% from 31,539 in 2018 to 42,243 in 2020, and from 16,856 for the three months ended March 31, 2020 to 31,644 for the three months ended March 31, 2021.

Our successful client outreach and acquisition strategy was also reflected in our high efficiency of our sales and marketing. For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2020 and 2021, our selling and marketing expenses as a percentage of our total revenue from continuing operations was 30.1%, 29.7%, 23.1%, 25.1% and 23.7%, respectively.

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Highly scalable business model empowered by our centralized, standardized and digitalized management system

• Centralized management structure and standardized operating procedures

We have adopted a two-tier centralized management structure with central decision- making authority at the headquarters level and delegated management and operational power at the aesthetic medical institution level. Our central management at the headquarters formulates our overall strategies and business plans, makes key management decisions and oversees and coordinates the implementation of our overall strategies and business plans, as well as Group-wide policies and procedures, across our aesthetic medical institutions. Specifically, our central management has responsibility for:

• the formulation of our overall strategies and business plans;

• the key management decisions such as appointment of key management personnel at both headquarters level and institution level and the adoption of standardized recruitment and performance review standards;

• the formulation of standardized branding, marketing and pricing strategies, as well as financial management policies;

• the implementation of standardized clinical quality control procedures and the adoption of standardized operational procedures;

• the development and implementation of standardized information technology infrastructure;

• the adoption of a systematic training program for our physicians and other employees; and

• the implementation of centralized procurement at the headquarters level.

Our two-tier centralized management structure ensures that our Group-level strategies and business plans are well-coordinated and effectively supervised by our headquarters and reduces operational risks, while preserving management and operational flexibility at the individual institution level for better adaptability to local conditions and context. For example, our aesthetic medical institutions are granted appropriate autonomy in various aspects of their operations, such as launch of marketing campaigns, introducing certain insignificant consumables and handling client complaints and medical disputes. However, the level of discounts offered to clients in a marketing campaign, introduction of any new medical device or product, and any client request for monetary compensation need to be approved by our headquarters. Through the centralization of our core

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management functions at our headquarters, we believe we are able to streamline and further enhance the efficiency of our business operations, thereby continuing to benefit from economies of scales as we expand.

• Digitalization of our operations

Our centralized management structure is supported by a proprietary information technology infrastructure, which was developed in-house and designed as analogous to a SaaS platform. Our proprietary information technology infrastructure has enabled us to digitalize, streamline and standardize substantially all aspects of our internal client and operational management and external aesthetic medical service offerings. According to Frost & Sullivan, we are a first mover in the aesthetic medical service industry that has developed and applied an integrated information technology system to digitalize the entire process of operations.

• Front office: Our client relationship management system (CRM), which we use to manage our interactions with existing and potential clients, comprises front-office modules including (i) our official WeChat accounts and mini programs accessible by our clients as well as (ii) mobile apps we designed for and used by our sales consultants and client service personnel. Our CRM streamlines and standardizes the entire process of client management, from client outreach and acquisition, client services and to long-term aesthetic medical management;

• Back office: We collect and store personal and medical data derived from our daily operations, allowing us to understand the diverse needs and preferences of our clients and provide personalized services to clients and optimize our service offerings on a continuing basis.

Our integrated information technology system has been implemented across our headquarters and aesthetic medical institutions, while the information technology system network at our headquarters and each of our aesthetic medical institutions is inter- connected, allowing real-time data sharing and facilitating informed decision making by our central management. We have obtained the Certification of National Information Security Level Protection (Level 3) (國家信息安全等級保護三級認證), which has demonstrated the quality of our information security management.

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• Proven track record of establishing and ramping up new hospitals

We believe that the high degree of standardization and digitalization has enabled us to quickly and successfully expand our operations and replicate our success. As of the Latest Practicable Date, we owned and operated three aesthetic medical specialty hospitals and two aesthetic medical specialty out-patient departments in Beijing. In addition, we have successfully expanded our business operations outside Beijing within a short timeframe and launched or acquired aesthetic medical institutions in Tianjin in 2004, Qingdao in 2005, Jinan in 2009 and Xi’an in 2014. Furthermore, we opened a new aesthetic medical specialty hospital in Xi’an, which, despite under the adverse impact of COVID-19 pandemic, ramped up quickly after commencement of operations in May 2019 and realized significant growth in monthly revenue from RMB1.4 million in May 2019 to RMB5.9 million in December 2020.

Systematic physician cultivation scheme enabling us to incubate and retain a team of high-caliber physicians

We employ a strict recruitment process when selecting junior physicians to join us. We assess, among others, their academic and professional qualifications, years of relevant experience, as well as their character and integrity. We regularly review the performance of our physicians with reference to a variety of indicators and the results of such reviews will later be used in salary determinations, bonus awards and promotion appraisals.

We have implemented a mentoring program, namely, expert studios (專家工作室), which allow junior physicians to learn techniques and know-how from, and perform procedures under the supervision of, partners of the expert studios. As of March 31, 2021, we had 11 expert studios, with presence in all of our nine aesthetic medical institutions, which were led by acclaimed specialists with extensive experience in their respective fields. A physician may be promoted to a partner of an expert studio when (i) he/she has at least five years of clinical experience and (ii) accumulated revenue generated from aesthetic medical procedures performed by him/her exceeds RMB30 million. Once becoming partner of an expert studio, the physician will be entitled to a share of revenue derived from such studio and he/she will enjoy full support from our designated team of client service and sales personnel.

We also provide our physicians with comprehensive trainings by our internal experts comprising academic and technical training sessions as well as clinical experience sharing and exchanges of information. In addition, we had a number of visits by physicians from various overseas medical institutions over the Track Record Period for consultation sessions at our

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Our systematic physician cultivation scheme has enabled us to incubate a team of high-caliber physicians. Among the 157 physicians who practiced at our aesthetic medical institutions comprising continuing operations as of March 31, 2021, over 65% were cultivated on our own, namely, they were resident physicians when we recruited them from third-party hospitals. In 2020, our average revenue per physician of our continuing operations, calculated as our total revenue divided by the number of physicians who practiced at our aesthetic medical institutions as of December 31, 2020, exceeded RMB5.0 million, compared to the industry average of RMB1.2 million, according to Frost & Sullivan.

A majority of our physicians who left us during the Track Record Period joined other leading aesthetic medical institutions in China, which we believe has demonstrated the high quality of our training programs. Nevertheless, we have been able to keep the turnover rate of our physicians at a low level during the Track Record Period. The turnover rate of physicians of our continuing operations, which is calculated by dividing the average monthly number of physicians resigned by the average monthly number of physicians of the relevant period, was 4.0%, 3.0%, 4.0% and 1.0% for the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2021, respectively, which was significantly lower than the typical physician turnover rate at similar private aesthetic medical institutions in China, according to Frost & Sullivan.

Experienced senior management team with demonstrated execution capabilities and social responsibilities as well as strong support from our Shareholders

We are led by a dedicated management team with an average industry experience of more than 20 years. Mr. Wang, our founder, chairman of the Board and our chief executive officer, has over 20 years of experience in the aesthetic medical industry and is committed to achieving scalable operations and efficient management of our Group. Ms. Wang Zheng, our executive Director and our chief financial officer, has decades of experience in financial investment and management. Mr. Fang Min, our non-executive Director, has deep industry knowledge and insightful observations in the fast-growing healthcare market in China with more than 16 years of experience in private equity investment and financial management. In particular, Mr. Fang Min is a non-executive director of Jinxin Fertility Group Limited (Stock Code: 1951.HK) and a non-executive director Hygeia Healthcare Holdings Co., Limited (Stock Code: 6078.HK). Mr. Liu Jianru, our executive deputy general manager, has more than 20 years of clinical and management experience working in aesthetic medical institutions. See “Directors, Supervisors and Senior Management” for their biographies.

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Our senior management team is supported by a team of experienced professionals with strong execution capabilities, collectively covering a full spectrum of skillsets from sales and marketing to operational and financial management. In addition, our high-caliber physicians and medical professionals also take an active role in devising and overseeing the safety and quality of our services.

Our senior management highly values social responsibility and actively participates in public welfare activities. For example, as of the Latest Practicable Date, we partnered with a well-known charitable foundation to provide free corrective surgical procedures for nearly 4,000 children born with cleft lip and cleft palate. In 2020, we also provided free medical assistance to disabled children with cerebral palsy in Shepherd’s Field Children’s Village (天津牧羊兒童村) in Tianjin. We believe our culture will serve as a foundation for our future development.

Our Shareholders include prominent investors such as Warburg Pincus, CDH Investments, Huatai Ruihe, and Joy Capital. In addition to financial support, we draw on their extensive experience in the healthcare industry to help formulate and govern our acquisition and growth strategies.

OUR STRATEGIES

We plan to implement the following strategies:

Expand our aesthetic medical institution network and further extend our leading market position

Leveraging our proven track record and highly scalable business model, we intend to continuously expand our aesthetic medical institution network through a combination of organic growth and strategic acquisitions.

• Upgrading existing aesthetic medical institutions: We intend to (i) renovate and/or repair certain areas of Qingdao Hospital, Xi’an Hospital and Beijing Aikang Hospital to improve their physical environment and enhance client experience and operational efficiency; and (ii) expand Beijing Jianxiang Hospital and Beijing Changdao Hospital as well as relocate Jinan Hospital, Beijing Zizhu Hospital and Tianjin Hospital to increase their service capacity. Please see “– Our Future Expansion – Organic Growth” for more details about our expansion plan for upgrading existing aesthetic medical institutions.

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• New establishments in existing markets: Our initial focus will be Beijing where we have existing presence and established brand influence. We plan to establish a new aesthetic medical specialty hospital and two new aesthetic medical specialty out-patient departments in Beijing. We also plan to explore opportunities to establish new aesthetic medical institutions in other cities in Northern China, which have relatively high level of demand for, and strong discretionary spending power on aesthetic medical services, to further increase our market share and extend our leading market position in the region. For example, we plan to establish a new aesthetic medical specialty out-patient department in Xi’an. Please see “– Our Future Expansion – Organic Growth” for more details about our expansion plan for establishing new aesthetic medical institutions.

• Penetration of new markets: We proactively seek opportunities to penetrate other major markets in China with sizable population and relatively high level of demand for, and strong discretionary spending power on, aesthetic medical services, such as Hainan. In particular, we plan to establish a new aesthetic medical specialty hospital in Sanya. Please see “– Our Future Expansion – Organic Growth” for more details about our expansion plan for establishing new hospital in Sanya.

• Strategic acquisitions: When appropriate opportunities arise, we will also consider acquiring aesthetic medical institutions that have demonstrated track record of performance. Please see “– Our Future Expansion – Strategic Acquisitions” for other factors we consider in evaluating potential targets. We systematically review and screen potential aesthetic medical institution targets. We believe our management is active in relevant aesthetic medical industry associations and keeps in close touch with market participants and thus is well informed on potential suitable targets. We plan to invest in and re-brand acquired aesthetic medical institutions to bring them in line with our existing standards. As of the Latest Practicable Date, we had not entered into any letters of intent or agreements with respect to acquisitions and had not identified any definite acquisition targets.

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Continue to introduce new technologies and broaden our service offerings

We operate in an industry which is highly driven by rapid technological advancements. In order to remain competitive, we plan to continue to invest in new aesthetic medical service devices and consumables. In particular, we plan to selectively introduce advanced aesthetic medical service devices with established brand awareness to widen the spectrum of our aesthetic non-surgical services, such as Clear + Brilliant and Fraxel, laser resurfacing devices clinically proven to reverse signs of skin aging, and Broad Band Light, an intense-pulsed-light photo rejuvenation device. We also plan to introduce an extended indication of Hearty, a hyaluronic acid filler which has gained significant market acceptance in treatment of neck lines, in eye wrinkles. In addition, we intend to introduce Sculptra (童顏針), a poly-L-lactic acid injectable filler, and Ellansé (少女針), a Poly-␧-caprolactone-based injectable dermal filler. Furthermore, we plan to further widen our private label portfolio, which will become one of the primary sources of products we offer.

Continue to enhance our client outreach and acquisition capabilities

We plan to further increase client acquisition efficiency and enhance our client outreach and acquisition capabilities through:

• implementing an integrated and multi-tiered membership loyalty program across all our aesthetic medical institutions, with each tier increasing in qualification requirements and benefits while higher-tiered members entitled to exclusive privileges and dedicated teams of client service personnel. We believe such program will further enhance client loyalty and help us explore and develop high-quality and high-net-worth client groups, thereby further expanding our client base;

• deepening our sales consultants’ interaction with clients to improve our understanding of their needs and to better cross-sell our broad range of services. In particular, we plan to introduce “annual aesthetic medical service plan (年度醫美計劃),” comprising a customized package of aesthetic non-surgical procedures that is designed to cater to the specific needs of any individual client and can be used throughout the year, which we believe will further improve our client stickiness;

• strengthening our targeted client retention and acquisition efforts through continuing to utilize big data to analyze client behavior and preferences; and

• increasing marketing expenditures through, and the greater use of, new media channels, including O2O, social media and video streaming platforms. For example, we will proactively explore collaboration opportunities with leading third-party online aesthetic medical platforms, especially those owned and operated by Internet giants in the PRC, so as to further enhance our brand awareness and generate client traffic. In addition, we intend to host an increasing number of video streaming marketing campaigns to stimulate online client acquisition and online-to-offline conversion of such clients.

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Further upgrade our information technology infrastructure

We will continue to invest in our information technology infrastructure to support our growth and expansion, which we believe will help us maintain an edge over our competitors in operational efficiency, scalability and client experience.

In particular, we plan to (i) upgrade our HIS and other business middle-office systems to enhance the efficiency of our operations; (ii) establish a centralized cloud-based data management and analytic platform, aiming to better understand our clients’ needs and enhance our client acquisition efficiency; (iii) establish a cloud computing infrastructure and utilize advanced technologies such as AI to further improve the digitalization and intelligentization of our operations; and (iv) upgrade our CRM to facilitate remote consultation, which we believe will increase the convenience and responsiveness of our services.

Continue to recruit, cultivate and retain a high-quality talent pool and strengthen our human resources management system

We believe a high-quality talent pool and a well-established human resources management team are critical to our success. We will continue to place great emphasis on the training of our medical professionals. We also plan to continue to source and attract qualified medical professionals and enhance our performance review system to reward and promote service excellence, aiming to unlock the potential of junior physicians.

In addition to our high-caliber medical professionals, we will recruit additional sales consultants to support our business growth. We will continue to provide our team of sales consultants with systematic professional trainings to enhance their industry knowledge and their understanding of our aesthetic medical services, and to promote our corporate culture, mission and core value.

As an aesthetic medical institution group that highly prizes social responsibility, we intend to establish an ethics committee comprising ethicists, psychologists as well as seasoned physicians, social workers and attorneys, which will serve as a gate-keeper for any new procedure we may introduce in the future.

In order to better retain and incentivize our key employees, we will continue to enhance our performance-based review and compensation system to reward and promote excellence. We align our interest with those of certain key employees by offering them participation in the Employee Incentive Plan. Please see “History and Corporate Structure – Our Corporate Development – Implementation of Employee Incentive Plan” for more details.

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OUR BUSINESS MODEL

We generate revenue primarily from the provision of (i) aesthetic non-surgical services, primarily comprising aesthetic injection procedures and aesthetic energy-based procedures; and (ii) aesthetic surgical services, primarily comprising aesthetic plastic procedures.

The following table sets forth our revenue from continuing operations by service offerings for the periods indicated:

Year ended December 31, Three months ended March 31, 2018 2019 2020 2020 2021 %of %of %of %of %of RMB’000 revenue RMB’000 revenue RMB’000 revenue RMB’000 revenue RMB’000 revenue (unaudited)

Aesthetic non-surgical services Aesthetic injection procedures 329,783 49.9 362,997 49.1 353,632 43.6 55,076 44.6 127,500 47.0 Aesthetic energy-based procedures 103,408 15.6 137,003 18.5 232,036 28.6 25,399 20.6 75,515 27.9 Other aesthetic non-surgical services(1) 17,839 2.7 16,573 2.3 14,194 1.7 2,103 1.7 4,794 1.8

Sub-total 451,030 68.2 516,573 69.9 599,862 73.9 82,578 66.9 207,809 76.7 Aesthetic surgical services Aesthetic plastic procedures 166,770 25.2 174,553 23.6 173,285 21.4 35,894 29.0 50,915 18.8 Other aesthetic surgical services(2) 11,851 1.8 13,067 1.8 11,012 1.4 2,534 2.1 2,885 1.1

Sub-total 178,621 27.0 187,620 25.4 184,297 22.8 38,428 31.1 53,800 19.9 Others(3) 31,442 4.8 34,622 4.7 27,080 3.3 2,523 2.0 9,389 3.4 Total 661,093 100.0 738,815 100.0 811,239 100.0 123,529 100.0 270,998 100.0

Notes:

(1) Other aesthetic non-surgical services primarily consist of aesthetic TCM services and other aesthetic dermatology services.

(2) Other aesthetic surgical services primarily consist of (i) ancillary services in connection with our aesthetic plastic procedures, such as anesthesiology services, nursing services and examination services, and (ii) sales of pharmaceuticals used in connection with our aesthetic plastic procedures.

(3) Others primarily comprise cosmetic dentistry services and sales of skincare products.

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OUR SERVICES AND PRODUCTS

We offer a wide range of aesthetic non-surgical services and aesthetic surgical services to our clients to cater to their different aesthetic and anti-aging objectives, aiming to improve their wellbeing and physical appearance. The following table sets forth the number of aesthetic medical procedures performed by the continuing operations and the average spending per procedure during the Track Record Period:

Three months ended Year ended December 31, March 31, 2018 2019 2020 2020 2021

Aesthetic non-surgical services Aesthetic injection procedures Number of procedures performed 110,434 149,373 163,858 23,130 63,542 Average spending per procedure (RMB) 2,986 2,430 2,158 2,381 2,007 Aesthetic energy-based procedures Number of procedures performed 99,465 125,532 121,941 16,904 41,022 Average spending per procedure (RMB) 1,040 1,091 1,903 1,503 1,841 Aesthetic surgical services Number of procedures performed(1) 23,474 23,293 24,074 4,911 6,914 Average spending per procedure (RMB) 7,104 7,494 7,198 7,309 7,364 Total Number of procedures performed 233,373 298,198 309,873 44,945 111,478 Average spending per procedure (RMB) 2,571 2,262 2,449 2,589 2,278

Note:

(1) For each aesthetic plastic procedure, our services generally comprise various components, including pre-procedure medical examination, application of anesthetics, performance of the procedure and post-procedure care, such as observing wounds, changing medication and removing stitches (if necessary), which are all highly relevant and are counted as one procedure.

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Aesthetic Non-surgical Services

Our aesthetic non-surgical services primarily include the provision of aesthetic injection procedures and aesthetic energy-based procedures.

Aesthetic Injection Procedures

Aesthetic injection procedures help an individual improve his/her appearance with minimally-invasive penetration into body tissue and without surgical incisions. According to Frost & Sullivan, aesthetic injection procedures are gaining popularity both globally and in the PRC due to their relatively low level of risk and higher affordability compared to aesthetic plastic procedures, and relatively quicker and more visible effects compared to traditional beauty services.

We provide a wide range of aesthetic injection procedures for facial and body contouring, sculpting, shaping and wrinkle removal. Depending on the physicians involved and the injection materials used for the procedures, our aesthetic injection procedures vary significantly in price. The following table sets forth our main aesthetic injection procedures performed during the Track Record Period:

Price Range Per Procedure (Excluding Trial or Retouch) Typically Intended as of the Latest Procedure Description Aesthetic Effects Practicable Date (RMB)

Injection of Injecting the Reducing wrinkles in 1,000 to 10,000 botulinum toxin medication the face or body, type A botulinum toxin facial or body type A, such as contouring BOTOX®, into the skin and/or muscle of the face or body

Injection of fillers Injecting hyaluronic Filling in wrinkles in 1,000 to 15,000 acid, such as the face or body, YVOIRE®, restoring natural Restylane®, Hearty volume that is lost (嗨體), Elravie, and lifting sagging ® Juvéderm and skin Matrifill®, into the skin of the face or body and/or periosteum

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Price Range Per Procedure (Excluding Trial or Retouch) Typically Intended as of the Latest Procedure Description Aesthetic Effects Practicable Date (RMB)

Mesotherapy Injecting active Moisturizing and 1,000 to 5,000 ingredients, such as hydrating skin, hyaluronic acid, shrinking pores, vitamins and plant improving skin extracts, into tone and lightening subcutaneous tissue fine wrinkles through tiny needle of dedicated machine by using the vacuum negative pressure technology

In accordance with the relevant PRC laws and regulations, all of our aesthetic injection procedures are required to be performed by our qualified physicians with at least three years of relevant experience. To ensure the consistency of quality and safety in our aesthetic injection procedures, we developed a series of standardized processes as follows:

Apply local Design and mark Disinfect Inject with sterile Clean the Apply ice to the anesthetics on treatment area treatment area syringe treatment area treatment area

Our aesthetic injection procedures are typically performed within 20 to 60 minutes. Recovery time varies depending upon the type of procedure and the clients’ physical conditions, which is generally between three days and two weeks. The aesthetic effect of aesthetic injection procedures only lasts for a limited period of time, which varies depending on the injection materials and the clients’ physical conditions. We fully inform our clients of the expected duration of effectiveness of our aesthetic injection procedures, and many return for repeated procedures subsequently when the effects of their respective previous procedures require upkeeping.

For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2020 and 2021, revenue generated from aesthetic injection procedures amounted to RMB329.8 million, RMB363.0 million, RMB353.6 million, RMB55.1 million and RMB127.5 million, respectively, representing approximately 49.9%, 49.1%, 43.6%, 44.6% and 47.0% of our total revenue from continuing operations for the same periods, respectively.

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Aesthetic Energy-based Procedures

Our aesthetic energy-based procedures involve the use of various energy-based devices such as laser, radiofrequency, intense pulsed light and cryolipolysis. All of our energy-based devices are approved by the NMPA for their safety and effectiveness. In addition, we have implemented a number of safety protocols in relation to the use of the such devices, including evaluation and assessment by our designated teams at our headquarters before deployment, distribution of operating manual to our medical professionals and regular maintenance by our suppliers. Depending on the physicians involved and the medical devices and medical consumables used for the procedures, our aesthetic energy-based procedures vary significantly in price. The following table sets forth our main aesthetic energy-based procedures performed during the Track Record Period:

Price Range Per Procedure (Excluding Trial or Retouch) Technology/ as of the Latest Procedure Device type Description Practicable Date (RMB)

Thermage Radiofrequency Using a probe to 9,000 to 30,000 transmit high-energy radiofrequency to deep layer of dermis to denature and constrict the collagen by heat energy, so as to activate the self-repairing process of human body and stimulate the regeneration of collagen with an aim to improve skin texture, shrink pores and increase skin elasticity.

Picosecond Laser Using laser of picosecond 2,000 to 10,000 laser duration with high energy which can accurately blast pigment tissue or tattoo to reduce pigmentation, rejuvenate skin, minimize pores and brighten skin tone.

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Price Range Per Procedure (Excluding Trial or Retouch) Technology/ as of the Latest Procedure Device type Description Practicable Date (RMB)

Q-Switched Laser Using laser of nanosecond 1,000 to 3,000 laser duration which can accurately blast pigment tissue or tattoo with selective photothermolysis to reduce pigmentation and brighten skin tone.

Laser hair Laser Using the selective 500 to 3,500 removal photothermal effect of laser to damage hair follicle and the surrounding hair stem cells to achieve hair removal in various parts of the body without irritation to skin.

Photo Intense pulsed Using broad-spectrum light 1,000 to 3,500 rejuvenation light which can cover a variety of color bases to ease spots on face and stimulate the rejuvenation of collagen with an aim to improve skin texture, shrink pores, increase skin elasticity and whitening skin.

CoolSculpting Cryolipolysis Using controlled cooling to 2,700 to 3,500 target and eliminate fat cells underneath the skin.

Depending on the type of device, local anesthetics may be applied. In accordance with the relevant PRC laws and regulations, all our aesthetic energy-based procedures are required to be performed by our qualified physicians with at least three years of relevant experience.

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To ensure the consistency of quality and safety in our aesthetic energy-based procedures, we developed a series of standardized processes as follows:

Disinfect and apply local anesthethics to face or body area Perform energy-based to be treated Perform pre-procedure test procedures and adjust level (if applicable) of intensity accordingly

Our aesthetic energy-based procedures typically take 20 to 60 minutes. Depending on the type of the procedures and the client’s reaction to the procedure, most of our aesthetic energy-based procedures require repeated sessions in order to achieve or maintain the desired optimal results.

For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2020 and 2021, revenue generated from aesthetic energy-based procedures amounted to RMB103.4 million, RMB137.0 million, RMB232.0 million, RMB25.4 million and RMB75.5 million, respectively, representing approximately 15.6%, 18.5%, 28.6%, 20.6% and 27.9% of our total revenue from continuing operations for the same periods, respectively.

Other Aesthetic Non-surgical Services

We also provide other aesthetic non-surgical services, comprising primarily TCM treatment services and other aesthetic dermatology services. Our TCM treatment services aim at helping our clients achieve and maintain health and wellness, including acupuncture and thread embedding. Our TCM treatment services are performed by qualified TCM practitioners. We also provide other aesthetic dermatology services such as chemical peels, wart removal and comedown extraction.

For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2020 and 2021, revenue generated from other aesthetic non-surgical services amounted to RMB17.8 million, RMB16.6 million, RMB14.2 million, RMB2.1 million and RMB4.8 million, respectively, representing approximately 2.7%, 2.3%, 1.7%, 1.7% and 1.8% of our total revenue from continuing operations for the same periods, respectively.

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Aesthetic Surgical Services

Our aesthetic surgical services primarily involve the provision of aesthetic plastic procedures.

Aesthetic plastic procedures are surgical procedures which are invasive and are performed to alter the appearance of various parts of the face or body, such as eyelids, nose, breast and facial shape. Depending on the complexity of the procedures, the physicians involved and the implants, other medical consumables and medical devices used for the procedures, our aesthetic plastic procedures vary significantly in price. The following table sets forth our main aesthetic plastic procedures performed during the Track Record Period:

Price Range Per Procedure (Excluding Trial or Retouch) as of the Latest Procedure Description and Intended Aesthetic Effects Practicable Date (RMB)

Eye surgery Improving the shape or appearance of the eyes 5,000 to 20,000 or eyelids, such as double eyelid surgery, canthi correction, eye bag removal and ptosis correction

Rhinoplasty Changing the shape or appearance of the noses 6,000 to 50,000 by adding implants or ear cartilage, septal cartilage or rib cartilage

Breast surgery Enlarging breasts by adding implants, lifting 20,000 to 100,000 sagging breasts or changing the shape of the breasts

Lipoplasty Removing excess fat tissue from a specific part 10,000 to 40,000 of the face or body through liposuction

As a result of the surgical nature of the aesthetic plastic procedures, the aesthetic effect of most of our aesthetic plastic procedures performed may last for a longer period of time. Aesthetic plastic procedures typically involve local anesthesia or, to a much lesser extent, full anesthesia. All of our anesthesia procedures are required to be performed by qualified anesthesiologists with necessary clinical working experience in accordance with the relevant PRC laws and regulations.

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Due to the complexity of aesthetic plastic procedures, we require all our aesthetic plastic procedures to be performed by our qualified physicians with at least six years of relevant experience, which is in compliance with PRC laws and regulations. To ensure the consistency of quality and safety in our aesthetic plastic procedures, we developed a series of standardized processes as follows:

Observe wounds Periodic follow up (may be required Change Perform plastic to stay overnight visit(s) and Apply anesthetics Check-out medication and monitor healing procedures or for a longer remove stitches period of time as of treatment area necessary)

Our aesthetic plastic procedures are typically performed within half an hour to two hours. Recovery time varies depending upon the type of procedures and the clients’ physical conditions, which is generally between two weeks to three months. We fully inform our clients of the medical risks and possible side effects before performance of our procedures.

For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2020 and 2021, revenue generated from aesthetic surgical services amounted to RMB178.6 million, RMB187.6 million, RMB184.3 million, RMB38.4 million and RMB53.8 million, respectively, representing 27.0%, 25.4%, 22.8%, 31.1% and 19.9% of our revenue from continuing operations for the same periods, respectively.

Others

We provide cosmetic dentistry services which aim at improving the appearance of our clients’ teeth, including orthodontics, dental implant and dental whitening. Our cosmetic dentistry services are performed by qualified dentists.

To a much lesser extent, we also derive revenue from sales of skincare products. We began to sell our private label skincare products in October 2019. As part of our aesthetic medical services, our medical professionals apply our private label skincare products, mainly moisture masks, on our clients’ faces to facilitate post-procedure recovery or hydrate, nourish and restore the skin. Our clients can also make standalone purchases of our private label skincare products. Sale of our private label skincare products is consistent with our concept of providing one-stop aesthetic medical services, as we believe our skincare products will help our clients with skin repair after receiving our procedures as well as their daily skin care.

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OUR AESTHETIC MEDICAL SERVICE PROCESS

Leveraging years of industry experience and accumulated know-how, we have developed, improved and implemented standardized operational procedures across our aesthetic medical institutions. The following diagram illustrates our typical aesthetic medical service process:

Reception and Registration

• Client completes registration at the reception or through our official WeChat accounts or mini programs • Client is assigned to designated personnel for consultation

Consultation

• We propose suitable procedures to client after review of client’s registration form and face-to-face consultation with client • Physician reviews and confirms the procedures and explains the procedures to client

Appointment of Services and Payment • Client pays in full before the procedures • We make appointment for client/Client (with unutilized balance of prepaid package) can make appointment himself/herself through our official WeChat accounts or mini programs

Pre-procedure Physical Examination

• Client goes through pre-procedure physical examination • Physician reviews the test results

Performance of Procedures

• Physician explains the proposed procedures again • Client signs consent forms

Post-procedure Follow-up

• Medical professional examines client’s conditions and provides post-procedure care tips • Recovery observation • We book subsequent sessions for client

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Reception and Registration

When a client visits us for the first time, we ask the client to fill out a registration form that inquires about, among other things, the client’s aesthetic goals and medical history. Client can also register for consultation through our official WeChat accounts or mini programs. The client will then be assigned to the designated personnel for consultation.

Face-to-face Consultation

Our employees are well-trained to have thorough knowledge of a full range of our aesthetic medical services and are familiar with each type of treatment which is suitable for a particular aesthetic problem or concern. We will first review the registration form from, and have face-to face consultation with, the new client so as to better understand the concerns and needs of the new client. Depending on the specific aesthetic goal of the client, we will then design and recommend the most suitable procedure to the client to achieve desired aesthetic results, which may be a one-off service session, multiple service sessions of a single procedure or multiple types of procedures. We will also explain the prices of the recommended procedures as well as any promotion that is applicable to such recommendations.

The client will then receive face-to-face consultation from our physicians, who will review and confirm the proposed procedures and explain the proposed procedures in details, including the objective, process, medical risks, the estimated recovery time, possible side effects and service fees, and answer any queries the client may have.

Appointment of Services and Payment

After consultation with the physician, if the client remains interested in receiving our services, we will make appointment for the relevant procedure. Our client will then be asked to settle the service fees in full before the procedures. Clients who have purchased our services through our WeChat shops and other online shops on e-commerce platforms will be asked to show their payment receipts through the respective e-commerce platforms to verify their purchases. If the final procedure the client decides to do is not the same as his/her previous online purchase, the client needs to cancel such online purchase through the respective e-commerce platform by himself/herself and settle the service fees for the final procedure on site. Client with unutilized balance of prepaid package can also make appointment through our official WeChat accounts or mini programs.

Pre-procedure Physical Examination

The responsible physician will review the medical history of the client and may require relevant physical examinations, such as blood test, skin test or computed tomography, to be conducted to ensure the medical condition of the client is suitable for the relevant procedure. In particular, for any aesthetic plastic procedure requiring full anesthesia or any procedure to be performed on intimate parts of the body, the client needs to go through a physical

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Performance of Procedure

Immediately prior to the performance of any procedure, the responsible physician confirms the identity of the client and again explains the proposed procedure to the client, including objectives and processes, medical risks, possible side effects, normal recovery period and information regarding post-procedure care, and answers any questions the client may have. Each client is asked to review and sign a consent form, which, among others, requires the client to acknowledge that (i) he/she understands any potential side effects of the procedure and (ii) he/she is voluntarily undergoing the procedure to be performed. Immediately after completion of the procedure, the client needs to sign a payment collection slip to confirm the relevant procedure performed and the amount of payment made.

Post-procedure Follow-up

Subsequent to completion of the procedure, our medical professionals will examine the client’s conditions to ensure that they are suitable to be discharged and provide post-procedure treatment care tips to the client. Based on the responsible physician’s advice, clients may be prescribed with medication for more speedy recovery. For certain aesthetic plastic procedures, the client may be required to stay hospitalized overnight or for a longer period of time for recovery observation and post-surgery evaluation. If applicable, we generally assist the client to book the next appointment.

OUR MEDICAL PROFESSIONALS

The qualification and expertise of our physicians and other medical professionals are vital to the quality of our services and our competitiveness. All of our physicians are our employees and practice at one or more of our aesthetic medical institutions.

We enter into employment contracts with our physicians in accordance with the relevant labor laws and regulations in the PRC. Some of our physicians are acclaimed experts in their fields. We are responsible for making social insurance and housing provident fund contributions for and on behalf of our physicians to the extent required by the applicable PRC laws and regulations. The remuneration of our physicians comprises base salary and performance-based bonus. As of March 31, 2021, we had 157 physicians who practiced at our aesthetic medical institutions comprising continuing operations, including 155 PRC physicians and two Korean physicians.

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In the PRC, licensed physicians are subject to periodic assessment of their professional skills, achievements and professional ethics by institutions or organizations authorized by the public health department in the PRC. There are three qualifications and three professional ranks for physicians in the PRC: (i) junior qualification (初級職稱) for resident physicians who must have a medical degree, and typically undertake entry-level tasks such as patients’ medical record preparation and practice under the supervision of attending physicians or other superiors; (ii) mid-end qualification (中級職稱) for attending physicians who may supervise resident physicians and typically undertake routine medical procedures, teaching and research; and (iii) senior qualification (高級職稱) for (a) associate-chief physicians who may supervise attending and resident physicians, direct research work of a specific field, and typically undertake complex medical procedures and (b) chief physicians who typically command the highest level of medical capability in a specific field and are generally the head of a clinical department. As of March 31, 2021, our physicians who practiced at our aesthetic medical institutions comprising continuing operations included six chief physicians, 19 associate chief physicians, 63 attending physicians and 69 resident physicians. As of March 31, 2021, these chief physicians and associate-chief physicians had an average of approximately 14 years of industry experience, these attending physicians had an average of approximately nine years of industry experience and these resident physicians had an average of approximately four years of industry experience. The human resources department at our headquarters regularly reviews the profile of our physicians and reminds them to apply for their next professional rank when eligible.

As of March 31, 2021, we had 259 other medical professionals who practiced at our aesthetic medical institutions comprising continuing operations, including 209 nurses, 26 pharmacists, six radiographers and 18 laboratory technicians.

As of the Latest Practicable Date, each of our physicians had obtained the physician qualification certificate in the PRC. As of the Latest Practicable Date, each of our other medical professionals had obtained the necessary qualification certificate for his/her medical practice in the PRC. We closely monitor the qualification registration and licensing records on a continuing basis to ensure that all our medical professionals comply with all applicable requirements under the PRC laws and regulations, in particular, each medical professional’s practice is within the scope of his or her qualification and license. During the Track Record Period and up to the Latest Practicable Date, we were not aware of any material complaints or penalties in relation to our medical professionals practicing beyond the scope of their respective licenses.

Recruitment, Training and Retention of Our Medical Professionals

We regard our physicians as backbone assets of our business. We have meticulously designed a multi-layered physician cultivation scheme which provides our physicians with a clear career track from young physician (青年醫生) to academic leader (學科帶頭人), which we believe, combined with our comprehensive training programs, visible promotion opportunities and attractive performance incentives, encourage our physicians to take a long-term view of career development and align their long-term interests with ours.

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We employ a strict recruitment process when selecting junior medical professionals to join us. We assess, among others, their academic and professional qualifications, years of relevant experience, as well as their character and integrity.

We have implemented a physician mentoring program, namely, expert studios (專家工作室), to support the organic growth of our own physician team. Under such program, junior physicians will, upon joining us, first rotate across different clinical departments for at least one year to receive trainings for a wide range of skillsets. After the rotation, a junior physician will be allocated to one of our expert studios for at least two years so that he/she can learn techniques and know-how from, and perform procedures under the supervision of, partners of the expert studio. As of March 31, 2021, we had 11 expert studios, with presence in all of our nine aesthetic medical institutions. Partners of expert studios are generally chief physicians or associate-chief physicians who are acclaimed specialists with extensive experience in their respective fields. A physician may be promoted to a partner of an expert studio when (i) he/she has at least five years of clinical experience and (ii) accumulated revenue generated from aesthetic medical procedures performed by him/her exceeds RMB30 million. Once becoming partner of an expert studio, the physician will be entitled to (i) a certain percentage of the revenue we generate from procedures performed by physicians under his/her supervision and (ii) bonuses when revenue derived from such expert studio and he/she will enjoy full support from our designated team of client service and sales personnel.

Our physicians and other medical professionals also frequently receive training on the operation of medical devices, service processes and latest technologies or developments in their relevant fields. In particular, we have active dialogues and interactions with well- respected aesthetic medical institutions, industry associations and aesthetic medical device and consumable providers in developed overseas markets, such as the United States, France, Israel, Japan and South Korea, to learn about the latest developments in the aesthetic medical industry. In addition, we had a number of visits by physicians from various overseas medical institutions over the Track Record Period for consultation sessions at our aesthetic medical institutions, and such visits provided continuous learning and collaboration opportunities for our physicians. For newly recruited physicians, we offer orientation program to help them better understand and identify with our core values.

We review the performance of our medical professionals annually with reference to a variety of indicators and set performance targets for them based on their positions and their respective clinical departments. The results of such reviews will later be used in salary determinations, bonus awards and promotion appraisals.

Our systematic physician cultivation scheme, competitive compensation packages and a friendly, professional working environment have allowed us to better retain our physicians, resulting in a low level of turnover rate of our physicians during the Track Record Period. The turnover rate of physicians of our continuing operations, which is calculated by dividing the average monthly number of physicians resigned by the average monthly number of physicians of the relevant period, was 4.0%, 3.0%, 4.0% and 1.0% for the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2021, respectively.

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OUR AESTHETIC MEDICAL INSTITUTIONS

As of the Latest Practicable Date, we owned and operated nine aesthetic medical institutions in the PRC. Set out below is an illustration of the locations of our aesthetic medical institutions as of the Latest Practicable Date:

Beijing Jianxiang Hospital Beijing Xingfu Hospital Beijing Zizhu Hospital Beijing Aikang Hospital Beijing Changdao Hospital

Tianjin Hospital

Jinan Hospital Qingdao Hospital Xi’an Hospital

The following table sets forth certain operational data of our nine aesthetic medical institutions comprising continuing operations as of March 31, 2021. Save for certain examinations and laboratory tests at our aesthetic medical specialty out-patient departments, none of our aesthetic medical institutions have outsourced any of their services to third parties during the Track Record Period and up to the Latest Practicable Date.

Number of: Date of Non- commencement Number of surgical Aesthetic medical Established/ of operations/ Number of other medical Operating Service service institution GFA Acquired acquisition physicians professionals(1) Classification(2) rooms rooms(3) beds (sq.m.)

1. Beijing Aikang 4,094.24 Acquired December 2010 31 33 I 6 52 28 Hospital 2. Beijing Xingfu 5,159.59 Established August 2007(4) 27 37 I 7 52 35 Hospital 3. Beijing Jianxiang 4,522.06 Established August 2009(5) 25 30 I 5 50 22 Hospital 4. Beijing Zizhu 1,133.21 Established September 2004 7 10 II 1 12 5 Hospital 5. Beijing Changdao 2,341.22 Established December 2006 5 15 II 2 27 11 Hospital 6. Tianjin Hospital 4,417.62 Established April 2004 20 52 I 7 44 35

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7. Qingdao Hospital 6,695.19 Established August 2005 16 25 I 6 54 26 8. Jinan Hospital 2,305.00 Established August 2009 7 16 I 3 19 12 9. Xi’an Hospital 7,460.00 Established May 2019 19 41 I 8 45 27

Notes:

(1) Includes nurses, pharmacists, radiographers, and laboratory technicians. (2) As of the Latest Practicable Date, among our nine aesthetic medical institutions, seven were aesthetic medical specialty hospitals and two were aesthetic medical specialty out-patient departments. I denotes an aesthetic medical specialty hospital and II denotes an aesthetic medical specialty outpatient department, while aesthetic medical specialty hospitals are allowed to perform more complex aesthetic plastic procedures than aesthetic medical specialty outpatient departments. See “Regulatory Environment – Regulations on the Aesthetic Medical Services – Classification Catalog of Aesthetic Medical Item.”

(3) Service rooms include examination rooms (檢驗室), consultation rooms (諮詢室), non-surgical treatment rooms (非手術治療室), radiation rooms (放射室), cosmetic dental service rooms (口腔美容室) and other service rooms.

(4) The hospital has been in existence since 2002 and was operated by its predecessor which transferred the operations to Beijing Xingfu Hospital after its establishment in 2007.

(5) The hospital has been in existence since 1999 and was operated by its predecessors which transferred the operations to Beijing Jianxiang Hospital after its establishment in 2009.

The following table sets forth the contribution of each aesthetic medical institution to our revenue from continuing operations for the periods indicated:

Year ended December 31, Three months ended March 31, 2018 2019 2020 2020 2021 %of %of %of %of %of RMB’000 revenue RMB’000 revenue RMB’000 revenue RMB’000 revenue RMB’000 revenue (unaudited)

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Year ended December 31, Three months ended March 31, 2018 2019 2020 2020 2021 %of %of %of %of %of RMB’000 revenue RMB’000 revenue RMB’000 revenue RMB’000 revenue RMB’000 revenue (unaudited)

Beijing Changdao Hospital –(1) –(1) –(1) –(1) 4,348(1) 0.5(1) –(1) –(1) 5,640 2.1 Tianjin Hospital 188,696 28.5 188,414 25.6 173,148 21.4 29,323 23.7 51,846 19.1 Qingdao Hospital 106,478 16.1 104,915 14.2 106,657 13.1 18,555 15.0 33,107 12.2 Xi’an Yanta Hospital/Xi’ an Hospital(2) 18,342 2.8 25,462 3.4 46,841 5.8 5,556 4.5 19,925 7.4 Jinan Hospital 24,479 3.7 27,503 3.7 28,648 3.5 5,021 4.1 10,545 3.9 Total 661,093 100.0 738,815 100.0 811,239 100.0 123,529 100.0 270,998 100.0

Notes:

(1) Prior to June 1, 2020 when we disposed of Ruilishi Beijing, Beijing Changdao Hospital was wholly owned by Ruilishi Beijing. Therefore, revenue generated from Beijing Changdao Hospital before June 1, 2020 was included in revenue from discontinued operations, while revenue generated from Beijing Changdao Hospital since June 1, 2020 was included in revenue from continuing operations. Please see “History and Corporate Structure – Our Corporate Development – Business Reorganization – Disposal of hair transplantation business” and “Financial Information – Description of Key Statement of Profit or Loss Items – Discontinued Operation.”

(2) Xi’an Yanta Hospital ceased operations in May 2019 and Xi’ an Hospital commenced operations in the same month.

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Information of Our Selected Aesthetic Medical Institutions

Beijing Aikang Hospital

We acquired Beijing Aikang Hospital in December 2010. As of March 31, 2021, Beijing Aikang Hospital had a GFA of 4,094.24 sq.m. with six operating rooms, 52 service rooms and 28 non-surgical service beds. It is equipped with advanced medical devices, such as Thermage CPT, Thermage FLX, Fotona4D, PicoWay and PicoSure. Beijing Aikang Hospital has three major clinical departments, namely, aesthetic surgery department, aesthetic dermatology department and cosmetic dentistry department.

For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2020 and 2021, Beijing Aikang Hospital had 7,621, 11,542, 12,596, 3,319 and 7,109 active clients, respectively. As of March 31, 2021, Beijing Aikang Hospital had 31 physicians and 33 other medical professionals.

Beijing Xingfu Hospital

Beijing Xingfu Hospital commenced operations in August 2007. As of March 31, 2021, Beijing Xingfu Hospital had a GFA of 5,159.59 sq.m. with seven operating rooms, 52 service rooms and 35 non-surgical service beds. It is equipped with advanced medical devices, such as Thermage CPT, Thermage FLX, Fotona4D, PicoWay and PicoSure. Beijing Xingfu Hospital has three major clinical departments, namely, aesthetic surgery department, aesthetic dermatology department and cosmetic dentistry department.

For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2020 and 2021, Beijing Xingfu Hospital had 6,528, 9,091, 10,683, 2,708 and 5,866 active clients, respectively. As of March 31, 2021, Beijing Xingfu Hospital had 27 physicians and 37 other medical professionals.

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Beijing Jianxiang Hospital

Beijing Jianxiang Hospital commenced operations in August 2009. As of March 31, 2021, Beijing Jianxiang Hospital had a GFA of 4,522.06 sq.m. with five operating rooms, 50 service rooms and 22 non-surgical service beds. It is equipped with advanced medical devices, such as Thermage CPT, Thermage FLX, Fotona4D and PicoWay. Beijing Jianxiang Hospital has three major clinical departments, namely, aesthetic surgery department, aesthetic dermatology department and cosmetic dentistry department.

For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2020 and 2021, Beijing Jianxiang Hospital had 7,052, 9,353, 10,040, 2,627 and 5,208 active clients, respectively. As of March 31, 2021, Beijing Jianxiang Hospital had 25 physicians and 30 other medical professionals.

Tianjin Hospital

Tianjin Hospital commenced operations in April 2004. As of March 31, 2021, Tianjin Hospital had a GFA of 4,417.62 sq.m. with seven operating rooms, 44 service rooms and 35 non-surgical service beds. It is equipped with advanced medical devices, such as Thermage CPT, Thermage FLX, Fotona4D, PicoWay and PicoSure. Tianjin Hospital has three major clinical departments, namely, aesthetic surgery department, aesthetic dermatology department and cosmetic dentistry department.

For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2020 and 2021, Tianjin Hospital had 24,124, 26,120, 23,200, 6,105 and 11,264 active clients, respectively. As of March 31, 2021, Tianjin Hospital had 20 physicians and 52 other medical professionals.

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Qingdao Hospital

Qingdao Hospital commenced operations in August 2005. As of March 31, 2021, Qingdao Hospital had a GFA of 6,695.19 sq.m. with six operating rooms, 54 service rooms and 26 non-surgical service beds. It is equipped with advanced medical devices, such as Thermage CPT, Thermage FLX, Fotona4D, PicoWay and PicoSure. Qingdao Hospital has three major clinical departments, namely, aesthetic surgery department, aesthetic dermatology department and cosmetic dentistry department.

For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2020 and 2021, Qingdao Hospital had 15,297, 16,892, 14,189, 4,116 and 6,697 active clients, respectively. As of March 31, 2021, Qingdao Hospital had 16 physicians and 25 other medical professionals.

Xi’an Yanta Hospital/Xi’an Hospital

Xi’an Yanta Hospital commenced operations in August 2009 and ceased operations in May 2019, while Xi’an Hospital commenced operations in May 2019. As of March 31, 2021, Xi’an Hospital had a GFA of 7,460.00 sq.m. with eight operating rooms, 45 service rooms and 27 non-surgical service beds. It is equipped with advanced medical devices, such as Thermage CPT, Thermage FLX, Fotona4D and PicoSure. Xi’an Hospital has three major clinical departments, namely, aesthetic surgery department, aesthetic dermatology department and cosmetic dentistry department.

For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2020 and 2021, Xi’an Yanta Hospital and Xi’an Hospital had an aggregate of 3,671, 6,211, 9,914, 1,621 and 5,766 active clients, respectively. As of March 31, 2021, Xi’an Hospital had 19 physicians and 41 other medical professionals.

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The table below sets out details of the utilization of the aesthetic medical institutions comprising our continuing operations for the periods indicated:

Year ended December 31, Three months ended March 31, 2018 2019 2020 2020 2021

Aesthetic medical Service Actual Actual Actual Actual Actual institution capacity services services services services services UtilizationService UtilizationService UtilizationService UtilizationService Utilization offered offered offered offered offered (1) (2) rate(3)capacity(1) (2) rate(3)capacity(1) (2) rate(3)capacity(1) (2) rate(3)capacity(1) (2) rate(3)

Beijing Aikang Hospital 63,360 30,554 48.2% 74,880 57,878 77.3% 97,920 62,223 63.5% 24,480 8,862 36.2% 24,480 23,514 96.1% Beijing Xingfu Hospital 83,520 29,290 35.1% 83,520 41,041 49.1% 112,320 53,150 47.3% 23,760 6,996 29.4% 28,080 19,258 68.6% Beijing Jianxiang Hospital 51,840 30,992 59.8% 51,840 45,843 88.4% 77,760 46,188 59.4% 12,960 7,000 54.0% 19,440 15,767 81.1% Beijing Zizhu Hospital 17,280 11,669 67.5% 17,280 13,418 77.6% 17,280 10,263 59.4% 4,320 1,792 41.5% 4,320 2,997 69.4% Beijing Changdao Hospital – BUSINESS (4) (4) (4) (4) (4) (4) (4) (4) (4) (4) (4) (4)

7 – 170 – – – – – – 37,440 970 2.6% – – – 9,360 2,438 26.0% Tianjin Hospital 115,200 103,840 90.1% 115,200 105,247 91.4% 118,080 91,753 77.7% 29,520 14,101 47.8% 30,240 26,169 86.5% Qingdao Hospital 86,400 49,900 57.8% 92,160 58,276 63.2% 92,160 48,221 52.3% 23,040 8,796 38.2% 23,040 15,749 68.4% Xi’an Yanta Hospital/Xi’an Hospital

(5) 40,320 12,246 30.4% 54,720 21,738 39.7% 100,800 34,594 34.3% 19,440 3,498 18.0% 25,200 14,977 59.4% Jinan Hospital 34,560 11,038 31.9% 34,560 10,763 31.1% 34,560 12,381 35.8% 8,640 2,120 24.5% 8,640 4,590 53.1% Total 492,480 279,526 56.8% 524,160 354,201 67.6% 688,320 359,741 52.3% 146,160 53,163 36.4% 172,800 125,458 72.6% Notes: 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

(1) Service capacity refers to the maximum number of service hours we can provide in our aesthetic medical institution, which is calculated based on the product of: (i) the average number of operation rooms for aesthetic plastic procedures and the average number of hospital beds for aesthetic injection procedures and energy-based procedures of the relevant aesthetic medical institution at the beginning and ending of the relevant period; (ii) the maximum number of servicing hours per day (being 8 hours for operation room and 8 hours for non-surgical service beds); and (iii) the number of days the relevant aesthetic medical institution is open during the period (namely, 360 working days for each of the three years ended December 31, 2018, 2019 and 2020, and 90 days for the three months ended March 31, 2020 and 2021, except when the relevant aesthetic medical institution commenced operations during the period).

(2) Actual service offered refers to the actual number of hours of service that we offer, which is calculated based on the product of (i) the estimated service time spent for each specific type of procedures (including set-up time) in the relevant aesthetic medical institution based on sampling of medical records; and (ii) the number of each type of procedures performed in the relevant aesthetic medical institution during the period.

(3) Utilization rate is calculated by dividing the actual number of hours of services offered by service capacity in the relevant period.

(4) Prior to June 1, 2020 when we disposed of Ruilishi Beijing, Beijing Changdao Hospital was wholly owned by Ruilishi Beijing. Therefore, service capacity, actual service and

utilization rate of Beijing Changdao Hospital before June 1, 2020 were included in those from discontinued operations, while service capacity, actual service and utilization BUSINESS rate of Beijing Changdao Hospital since June 1, 2020 were included in those from continuing operations. Please see “History and Corporate Structure – Our Corporate 7 – 171 – Development – Business Reorganization – Disposal of hair transplantation business.”

(5) Xi’an Yanta Hospital ceased operations in May 2019 and Xi’ an Hospital commenced operations in the same month. 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 increasing trend of the utilization rate of our aesthetic medical institutions for the year ended December 31, 2019 was mainly due to the increase in aesthetic medical procedures performed driven by the organic growth of our aesthetic medical institutions.

Our aesthetic medical institutions recorded lower utilization rates during the Track Record Period, primarily due to lower number of aesthetic medical procedures performed in the relevant periods, which was principally attributable to (i) the temporary suspension of operations due to the outbreak of COVID-19 pandemic from February 2020 to the date of the respective partial resumption of operations of our aesthetic medical institutions in March 2020; (ii) the subsequent partial resumption of operations of our aesthetic medical institutions in March 2020 until the full resumption in May 2020; and (iii) the outbreak of COVID-19 pandemic which severely and adversely affected our clients’ willingness in visiting our aesthetic medical institutions and the general consumer spending sentiment in aesthetic medical services.

Due to the recovery of our business from the impact of the outbreak of COVID-19 pandemic with an increased number of procedures performed, the overall utilization rate of our aesthetic medical institutions for the three months ended March 31, 2021 improved and reached approximately 72.6%.

Breakeven and Investment Period

Significant costs will be incurred in the course of opening a new aesthetic medical institution. The establishment of our aesthetic medical institutions was mainly funded by our internal resources.

We consider that a new aesthetic medical institution achieves breakeven when its monthly revenue first sufficiently covers its monthly operating expenses. We consider that a new aesthetic medical institution achieves investment payback when its accumulated net operating cash inflow is able to cover the total initial investment amount. For example, the breakeven period for Xi’an Hospital is 14 months. As of the Latest Practicable Date, two out of our nine aesthetic medical institutions had not achieved investment payback, namely, Xi’an Hospital and Beijing Changdao Hospital.

Medical Device

Our key medical devices are mainly used for aesthetic plastic procedures and aesthetic energy-based procedures. All aesthetic medical devices deployed by us has been critically evaluated and assessed by physicians, based on their clinical knowledge and experience to ensure that our medical devices are safe and capable of producing the desired results for our clients.

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Set forth below is a table summarizing the estimated average useful lives of certain of our key medical devices:

Approximate Approximate Estimated Net book Estimated Remaining value as of Number of Average Age Useful March 31, Type of Device Devices of Devices Lives(1) 2021 (Years) (Years) (RMB’000)

Surgery-related(2) 188 5 3 2,169 Anesthesia 33 5 2 1,036 Laser 95 5 2 17,069 Radiofrequency 72 5 3 8,557 Intense pulsed light 23 5 3 1,622 Cryolipolysis 12 5 4 2,986

Total 423 33,440

Notes:

(1) The actual length that we will use these devices may be different from the estimates due to reasons such as periodic maintenance.

(2) Surgery related aesthetic medical devices include semiconductor laser therapeutic devices, liposuction machine, endoscope and other devices in relation to our aesthetic surgical services.

According to our accounting policies, depreciation of our aesthetic medical devices is calculated using the straight line method to allocate their cost to their residual values over its estimated useful lives of five years. We do not have a specific replacement cycle for our devices and we will only replace them when necessary. Replacement decisions are made on a case-by-case basis having regard to the factors such as the operating conditions and cost effectiveness. Our Directors consider that our major aesthetic medical devices were in good conditions as of the Latest Practicable Date.

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We perform regular maintenance on our medical devices in accordance with the relevant suggestions by the respective manufacturers. Our suppliers also provide regular inspection and maintenance services to our medical devices within their warranty period at no costs and throughout their remaining useful lives at a fixed-annual fee.

For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2021, we incurred RMB15.4 million, RMB22.5 million, RMB25.5 million and RMB7.8 million on the acquisition of aesthetic medical devices which was generally funded by our internal resources. None of our aesthetic medical devices is leased from third parties. In view of the growing business opportunities in the industry, we will continue to acquire new aesthetic medical devices in the future to enhance our capacity and quality of service.

OUR FUTURE EXPANSION

We plan to expand our aesthetic medical institution network in Northern China and penetrate other major markets in China with sizable population and relatively high level of demand for, and strong discretionary spending power on, aesthetic medical services, by both organic growth and strategic acquisitions.

Organic Growth

Leveraging our successful track record, we intend to continuously upgrade our existing aesthetic medical institutions and establish new aesthetic medical institutions.

Upgrading Existing Aesthetic Medical Institutions

We intend to renovate and/or repair certain areas of Qingdao Hospital, Xi’an Hospital and Beijing Aikang Hospital to improve their physical environment and enhance client experience and operational efficiency. In addition, we plan to expand Beijing Jianxiang Hospital and Beijing Changdao Hospital as well as relocate Jinan Hospital, Beijing Zizhu Hospital and Tianjin Hospital to increase their service capacity.

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The following table sets forth the estimated details of our intended plan for upgrading Qingdao Hospital, Xi’an Hospital and Beijing Aikang Hospital and expanding Beijing Jianxiang Hospital and Beijing Changdao Hospital:

Disturbance to the operations of the Estimated increase Expected time Estimated capital Hospital Hospital Current status in scale of completion commitments

Qingdao Hospital Minimal disturbance To be commenced – 46 non-surgical 2023 Approximately to the operations in 2023 service beds; RMB[REDACTED] – 27 service rooms

Xi’an Hospital Minimal disturbance To be commenced – 48 non-surgical 2024 Approximately to the operations in 2024 service beds; RMB[REDACTED] – 34 service rooms

Beijing Aikang Minimal disturbance To be commenced – 25 non-surgical 2023 Approximately Hospital to the operations in 2023 service beds; RMB[REDACTED] – 11 service rooms

Beijing Jianxiang Minimal disturbance To be commenced – GFA: 1,500 2023 Approximately Hospital to the operations in 2022 sq.m.; RMB[REDACTED] – 52 non-surgical service beds; – 34 service rooms

Beijing Changdao Minimal disturbance To be commenced – GFA: 1,000 2024 Approximately Hospital to the operations in 2023 sq.m.; RMB[REDACTED] – 34 non-surgical service beds; – two operating rooms and 17 service rooms

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The following table sets forth the estimated details of our intended plan for relocating Jinan Hospital, Beijing Zizhu Hospital and Tianjin Hospital:

Expected time Estimated capital Hospital Current status Estimated scale of completion commitments

Jinan Hospital Location selecting – GFA: 2,000 sq.m.; 2023 Approximately – 52 non-surgical RMB[REDACTED] service beds; – three operating rooms and 47 service rooms Beijin Zizhu Hospital Location selecting – GFA: 1,900 sq.m.; 2024 Approximately – 40 non-surgical RMB[REDACTED] service beds; – three operating rooms and 39 service rooms Tianjin Hospital Location selecting – GFA: 8,000 sq.m.; 2024 Approximately – 85 non-surgical RMB[REDACTED] service beds; – four operating rooms and 78 service rooms

We expect to incur total investment of approximately RMB[REDACTED] for the above, substantially all of which will be funded by [REDACTED] from the [REDACTED]. Please see “Future Plans and Use of [REDACTED].”

Establishing New Aesthetic Medical Institutions

Our initial focus will be Beijing where we have existing presence and established brand influence. We plan to establish (i) a new aesthetic medical specialty hospital in Beijing, which will be our flagship hospital offering academic and technical training support to other aesthetic medical institutions in our network; (ii) a new aesthetic medical specialty out-patient department in Beijing CBD area; and (iii) a new aesthetic medical specialty out-patient department around West Fourth Ring Road in Beijing. We also plan to explore opportunities to establish new aesthetic medical institutions in other cities in Northern China, which have relatively high level of demand for, and strong discretionary spending power on aesthetic medical services, to further increase our market share and extend our leading market position in the region. For example, we plan to establish a new aesthetic medical specialty out-patient department in Xi’an.

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In addition, we proactively seek opportunities to penetrate other major markets in China with sizable population and relatively high level of demand for, and strong discretionary spending power on, aesthetic medical services, such as Hainan. With the establishment of Hainan Free Trade Port Boao Lecheng International Medical & Tourism Pilot Zone (海南自由貿易港博鰲樂城國際醫療旅遊先行區), Hainan has become a major medical tourism destination. In addition, the PRC government has issued various favorable policies to encourage the development of healthcare service industry in Hainan. Furthermore, a considerable number of our clients chose to migrate to Hainan to escape from winter in Northern China. With the aspiration to better serve these clients and considering the significant growth potential of the aesthetic medical service market in Hainan, we plan to establish a new aesthetic medical specialty hospital in Sanya.

The following table sets forth the estimated details of our intended expansion plan for establishing new aesthetic medical institutions:

Estimated capital Expected time commitments and Location Current status Estimated scale of opening source of funding

Beijing Location selecting – GFA: approximately 2024 Approximately 20,000 sq.m.; RMB[REDACTED], – 120 non-surgical [REDACTED]% from service beds; [REDACTED] from – 10 operating rooms the [REDACTED] and 122 service rooms

Beijing Location selection – GFA: 7,900 sq.m.; 2022 Approximately completed – 105 non-surgical RMB[REDACTED], service beds; RMB[REDACTED] – four operating rooms from [REDACTED] and 105 service rooms from the [REDACTED]

Beijing Location selecting – GFA: approximately 2023 Approximately 3,000 sq.m.; RMB[REDACTED], – 45 non-surgical [REDACTED]% from service beds; [REDACTED] from – four operating rooms the [REDACTED] and 51 service rooms

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Estimated capital Expected time commitments and Location Current status Estimated scale of opening source of funding Xi’an Location selecting – GFA: approximately 2024 Approximately 3,000 sq.m.; RMB[REDACTED], – 45 non-surgical [REDACTED]% from service beds; [REDACTED] from – three operating rooms the [REDACTED] and 51 service rooms Sanya Location selecting – GFA: approximately 2024 Approximately 6,000 sq.m.; RMB[REDACTED], – 75 non-surgical [REDACTED]% from service beds; [REDACTED] from – five operating rooms the [REDACTED] and 80 service rooms

The establishment of a new aesthetic medical institution generally involves a number of steps, including strategic planning, market research, site selection, feasibility study, regulatory approval process, construction and decoration of premises, recruitment of necessary personnel, acquisition of medical devices and supplies, and trial operations. According to our past experience, we believe such process generally takes one and a half year to complete. In particular, before we make a strategic planning for the new markets to expand into, we evaluate these new markets’ population density, people’s discretionary spending power, GDP and size of the local aesthetic medical services market.

Due to the nature of our business, a new aesthetic medical institution generally has lower income and relatively higher operating costs during the initial stage of its operation. Based on our previous operating experience, we estimate that the breakeven period for our new aesthetic medical institutions to be approximately one to two years and the investment payback period to be approximately four years from commencement of operations. These estimated breakeven periods and investment payback periods may be further affected by the specific characteristics of an aesthetic medical institution, such as its scale and location, initial investment, the range of its services and the competitive landscape.

Strategic Acquisitions

When appropriate opportunities arise, we will also consider acquiring aesthetic medical institutions that have demonstrated track records of performance, strong reputations and robust client acquisition channels, which we believe will enable us to rapidly replicate our success in the new markets. We believe our previous operating experience will aid us in identifying potential acquisition opportunities and successfully integrating newly acquired aesthetic medical institutions’ operations into our existing infrastructure.

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We plan to finance the above intended acquisitions primarily by the [REDACTED] from the [REDACTED], and, if necessary or desirable, with our internal resources and/or bank borrowing. As of the Latest Practicable Date, we had not entered into any letters of intent or agreements with respect to acquisitions and had not identified any definite acquisition targets.

When expanding by acquisition, we will primarily target aesthetic medical institutions (i) that have been fully operational for at least eight years with annual revenue of at least RMB8.0 million and (ii) with at least eight quality physicians and eight quality administrators. We also systematically review and screen potential aesthetic medical institution targets. We believe our management is active in the relevant aesthetic medical industry associations and keeps in close touch with the market participants and thus is well informed on potential suitable targets. We will evaluate potential aesthetic medical institution targets based on a number of selection criteria, including:

• location of the target and its proximity to prime commercial districts;

• the current operations and capacity of the target, taking into consideration its medical professionals and clinical departments;

• experience and track record of medical professionals of the target;

• estimated initial investment amount required to improve the target’s infrastructure;

• ongoing operating expenses and capital requirements;

• potential returns and estimated future value;

• the historical medical performance and industry reputation of the target, taking into consideration the quality and safety of the services provided by the target;

• the local resources and sales channel of the target;

• required licenses and permits for operation; and

• the target’s compatibility with our corporate culture and the existing aesthetic medical institutions.

We plan to invest in and re-brand acquired aesthetic medical institutions to bring them in line with our existing standards. In respect of our expansion through acquisition, we intend to target aesthetic medical institutions that have reached or are close to reaching the breakeven point, and on that basis, the estimated investment payback period is approximately four years from acquisition.

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We may face a number of challenges in implementing our expansion plans, such as recruiting experienced physicians and other medical professionals, obtaining the requisite licenses and permits, and maintaining our competitive advantages. To this end, we intend to continue to attract and retain seasoned medical professionals to join us by offering competitive benefits and promising career opportunities. In addition, we will, in accordance with all applicable PRC laws, regulations and rules, apply for the necessary approvals, permits and licenses for our expansion plans, primarily relating to the opening of our new aesthetic medical institutions. Our expansion plans are inevitably subject to our operations and the market conditions from time to time and we may make adjustments accordingly in our best interests.

OUR CUSTOMERS

During the Track Record Period, all of our customers were individual retail clients, other than one corporate customer who was also one of our major suppliers. See “– Suppliers and Procurement – Top Suppliers.” The following table sets out the number of active clients, repeat clients and new clients from continuing operations during the periods indicated:

Three months ended Year ended December 31, March 31, 2018 2019 2020 2020 2021

New clients(1) 38,928 47,791 44,386 5,241 14,050 Repeat clients(2) 31,539 37,674 42,243 16,856 31,644 Active clients(3) 70,467 85,465 86,629 22,097 45,694

Notes:

(1) Refer to clients who have purchased at least one aesthetic medical procedure in the relevant period for the first time.

(2) Refer to clients who (i) are active clients; and (ii) have purchased at least one aesthetic medical procedure in the previous period.

(3) Refer to clients who have purchased at least one aesthetic medical procedure in the relevant period.

For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2020 and 2021, repeat clients contributed to approximately 56.7%, 57.6%, 58.9%, 71.4% and 70.9% of our total revenue from continuing operations, respectively, while new clients contributed to approximately 43.3%, 42.4%, 41.1%, 28.6% and 29.1% of our total revenue from continuing operations for the same periods, respectively.

The majority of our clients were females. We served clients of different age groups, and were not reliant on clients from any particular age group during the Track Record Period.

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Payment Methods

Our clients are required to pay our service fees in full before receiving our services. Depending on the needs of our clients and type of services, one-off service session, multiple service sessions of a single procedure or multiple types of procedures may be recommended to our clients to achieve desired results. Our clients may choose to pay before each service session or purchase prepaid package in respect of multiple service sessions and multiple types of procedures.

The major characteristics of prepaid packages include:

• generally a discount is offered;

• the number and type of procedures in each prepaid package is designed based on recommendations from our physician;

• the prepaid packages do not have expiration dates; and

• in the event that our physician determines that the client is unsuitable for the relevant procedures, such as allergic skin conditions, we allow refund of the unutilized balance of the prepaid package. Otherwise, the client is only eligible to refund of the unutilized balance after deduction of the discount applied to the utilized portion of the package, if any, as if the performed procedures were in their original prices.

Payments received for prepaid packages are recorded as contract liabilities in our consolidated statements of financial position at the time of payment and are subsequently recognized as revenue in our consolidated statements of profit or loss at the time when the procedure is performed. Please see “Financial Information – Certain Balance Sheet Items – Contract Liabilities” for more details. We have implemented certain internal control measures on prepaid packages. In particular, we require our clients to sign a written confirmation to acknowledge his/her understanding of the terms and conditions of the prepaid packages. Payments received for prepaid packages may not be used to purchase wealth management products that have relatively long terms and high risks. The finance department at our headquarters monitors our balance of contract liabilities to ensure we have sufficient cash and cash equivalents to satisfy clients’ requests for refunds of the unutilized balance of the prepaid packages.

During the Track Record Period, our clients settled our aesthetic medical services fees by (i) on-site purchases through POS machine, including credit card, debit card, Alipay and WeChat, during clients’ visits to our aesthetic medical institutions; (ii) online purchases through our WeChat shops and other online shops on third-party e-commerce platforms; (iii) cash and bank transfer; and (iv) installment payment plans from third-party financing companies.

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During the Track Record Period, we accepted client payments through installment payment plans from certain third-party financing companies. We accept client payments through installment payment plans when and only when our clients request to settle service fees in such manner. Our chief financial officer and our marketing management department at the headquarters are responsible for approving cooperation with financing companies after reviewing their qualifications, such as industry reputation, scale of business operation, background of shareholders and merchant partners. Our aesthetic medical institutions are not allowed to enter into cooperation agreement with any financing company without prior approval by our chief financial officer and our marketing management department at the headquarters. When a client informs us his/her need for financing, we will provide a list of financing companies with which we have entered into cooperation agreements and such client may choose one at his/her own discretion. As of March 31, 2021, such list included three financing companies. When a client decides to pay for our services through installment payment plan from the financing company he/she chooses, our cooperation agreements with these financing companies provide that the client shall make application to such financing company for the installment payment and the financing company will review the applicant’s financial condition and then determine whether to grant financing. If the financing company determines to grant financing, it will enter into an installment payment agreement with the client, to which we are not a party. We will not provide our services until we receive notice of financing approval from the financing company. Generally the financing company will make full payments for the service fees to us on the next business day after the financing approval and the client then needs to repay the principal amounts and the interests based on the terms of his/her agreement with the financing company. We are not liable for any misrepresentation made by the client in his/her applications to the financing company and we do not provide any collateral to guarantee repayment by the client, while we are obliged to ensure that payments to us from the financing company will be used to purchase our services as stated in the client’s applications. Moreover, when the client defaults, generally we are not responsible for any repayments unless a court verdict adjudicates that we were at fault. However, from time to time, we may agree to bear the interests of our clients as part of our special promotion events, the aggregate amount of which borne by the continuing operations was RMB5.0 million, RMB4.2 million, RMB2.5 million and RMB0.7 million, respectively, for the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2021. According to Frost & Sullivan, the terms of our arrangements with the financing companies as described above are in line with industry norm. For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2021, payments our continuing operations received from third-party financing companies amounted to RMB87.4 million, RMB69.5 million, RMB43.3 million and RMB11.5 million, respectively. To the best knowledge of our Directors, each of the financing companies which we entered into cooperation agreements with during the Track Record Period and up to the Latest Practicable Date (including their shareholders and directors) does not have any past or present relationship (shareholding, business or otherwise), agreement, arrangement or understanding with us, the shareholders, directors and senior management of our Company and our subsidiaries or any of their respective associates, other than being engaged to finance the instalment payment plans of our clients.

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Top Customers

During the Track Record Period, all of our five largest customers are individuals and Independent Third Parties. None of our five largest clients was also our supplier during the Track Record Period. The revenue contributed by our five largest customers collectively accounted for less than 2.0% of our total revenue from continuing operations in 2018, 2019 and 2020 and the three months ended March 31, 2021, respectively.

CLIENT FEEDBACK AND CLIENT COMPLAINT MANAGEMENT

We place value on our clients’ feedback and complaints. We have a robust client feedback system and a four-tier client complaint management system in place for our clients to give their feedback and report their complaints regarding our service or personnel in a timely manner.

Client Feedback

As a measure to enhance client loyalty and establish long-term relationships with our clients, we have implemented a robust client feedback system as part of our after-sales services to ascertain clients’ expectations and collect clients’ comments. This system enables us to improve our services to increase clients’ satisfaction level and allows us to actively manage clients’ feedback. Our clients’ satisfaction level towards our services is paramount to our business, brand image and market reputation. However, with the unique nature of the aesthetic medical services industry, the level of clients’ satisfaction with our services is personal and varies subjectively.

Our client service team proactively solicits client feedbacks and ascertains their level of satisfaction in relation to our services through various channels, including client service hotlines, encouraging clients to fill out comment collection surveys on our official WeChat accounts and mini programs, setting up suggestion boxes in each aesthetic medical institution, and proactively assisting clients during face-to-face communication with frontline staff at our aesthetic medical institutions. In particular, it is part of our internal procedures that after the completion of each aesthetic medical procedure, our client service personnel will actively contact our clients to solicit their feedbacks, check their recovery progress and remind them of return visits and post-procedure care. Our client service team also closely monitors the feedbacks on online platforms in relation to our services and provides timely explanation and responses to our clients.

Clients’ positive reviews and feedbacks in relation to their experience with us would enable us to attract clients without incurring extra advertising efforts. The high quality of our client experience is evidenced by the high ratings and reviews on several leading third-party online platforms. For example, as of the Latest Practicable Date, on certain online platforms, our aesthetic medical institutions received an average review rating of 4 stars or above out of 5 stars. On the other hand, we may inevitably encounter clients who are not fully satisfied with our services. In this information age, any negative reviews in relation to our services given by our clients online may spread quickly in the market, and may, regardless of merit, damage our

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Client Complaint

Sometimes, dissatisfied clients may actively make complaint to us directly on-site through our frontline staff at our aesthetical medical institutions or our client service hotlines; or actively make complaints to local governmental authorities, including local health bureau or local market regulation bureau, and such complaints are referred to us by the relevant local governmental authorities. We have a four-tier client complaint management system to deal with our clients’ complaints of different dissatisfaction levels. Some complaints are regarding (i) our staff attitude being dissatisfying or below our clients’ expectation and (ii) the reception process being dissatisfying, such as the long waiting time and the complex appointment procedure. These trivial complaints are handled by our responsible physician or operation managers. Other complaints generally involve relatively more material dissatisfaction or discomfort of clients or of more complex nature compared with the trivial complaint cases, and are handled by our medical affairs department of the respective aesthetic medical institutions or the medical affairs administration center at our headquarters.

As part of our risk management and internal control procedures, we fully inform our clients of the inherent risks and possible side effects in relation to the aesthetic medical procedures and obtain their consents before performance of the relevant procedures. However, due to the nature of, and subjectiveness of the level of satisfaction with, the aesthetic medical services, we inevitably receive client complaints in relation to our performance of aesthetic medical procedures from time to time. According to Frost & Sullivan, it is common in the aesthetic medical industry to receive client complaints in relation to the performance of aesthetic medical procedures.

Our clients’ complaints can generally be categorized by the following nature:

• Staff attitude: clients may find the service attitude of a staff member dissatisfying or below their expectations.

• Reception process: clients may find the waiting time for reception process longer than expected or the appointment procedure more complex than expected.

• Dispute over pricing: this typically occurs when a client discovers that the service he/she purchased at our aesthetic medical institution is offered by our competitor for a lower price or that we offer a similar service for a lower price at a later time.

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• Results of the procedures: clients may believe that the aesthetic results of our services have not fully met their expectations or feel that our staff has oversold the effects of our services.

• Post-procedure discomfort: when potential side effects, allergic reactions, infections or complications that may accompany any of our services occur; or clients may find the recovery time longer than expected, even if we have emphasized to clients prior to the performance of any procedure that the recovery time provided is only an estimate and each person’s recovery time varies among individuals.

In order to manage client complaints properly and enhance our brand image, we have adopted a set of standardized four-tier complaint management measures and procedures.

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The following diagram illustrates our key procedures of client complaint management:

Complaint received on-site at Client complaint made to local our aesthetic medical government authorities and institutions or through our or referred to us by the local client service hotlines government authorities

Non-medical-related complaint Medical-related complaint

2. Operation manager at each aesthetic medical institution 1. Client service manager offers retrieves the relevant medical record detailed explanation to understand the complaint and take appropriate rectification measures if necessary

3. If the client is not satisfied with the proposed resolution, the medical affairs department of each aesthetic medical institution will review and investigate the complaint and propose resolution

4. If the complaint involves the determination of medical incident, the medical affairs administration center at the headquarters will engage medical expert committee and organize group medical consultation to investigate the complaint and propose resolutions

If no settlement reached, the Client agrees to the resolution and complaint may be referred to the signs settlement agreement local M edical M ediation Committee or court

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Our client service manager will preliminarily handle the non-medical-related complaints, such as staff attitude or dissatisfying reception process, and resolve such trivial complaints by offering detailed explanation or sometimes providing complimentary low-value skincare products or procedures to appease our clients.

If a complaint is medical-related, such as client’s dissatisfaction with the aesthetic results, our operation manager at the respective aesthetic medical institution will retrieve the relevant medical record, understand the nature of the complaint, and try to resolve and address client’s concern (consulting with the responsible physician if necessary) by providing explanation promptly to the largest extent possible. Our operation manager may also in their discretion provide the dissatisfied clients with complimentary gifts or procedures on a case-by-case basis. In rare circumstances where the client is not satisfactory with the resolutions, our operation manager will file an official complaint for the client by completing the complaint registration form which includes particulars, such as name and contact of the complainant, the date of the procedure performed, the name of the relevant responsible physician, and the nature of the complaint, and submit such form to the medical affairs department of our respective aesthetic medical institution for further handling.

Our medical affairs department at each of our aesthetic medical institutions is responsible for handling client complaints diverted from our operation managers and complaints referred by local governmental authorities. Our medical affairs department will review and investigate the complaint by studying the relevant medical record and interviewing the responsible physician and the relevant medical professionals to understand the legality and procedure of the services. After considering a number of factors, including, the nature and complexity of the complaint, the monetary value of the complaint involved, the involvement by governmental authorities, the potential reputation impact on us, the medical affairs department will make a preliminary judgement on the complaint. If the medical affairs department is of the view that we do not hold any liability for the complaint, we will try to offer detailed explanation of the dissatisfying aesthetic results or post-procedure discomfort to ease the client or provide complimentary gifts or procedures on a case-by-case basis; otherwise, we will provide complimentary procedures or monetary compensation, refund part or all of the service fees, or to a lesser extent, redo the procedures.

Where a medical compliant involves the determination of medical incident, our medical affairs administration center at the headquarters will take over and deal with such complaint. Our medical affairs administration center will engage medical expert committee, comprising experts of more than 15 years’ relevant experience on average in the aesthetic medical service industry, in the investigation and group medical consultation of such medical complaint. The medical affairs administration center may propose potential resolution, including complimentary gifts or procedures, refunds, and/or monetary compensation, to the complainant. If the complainant agrees to the resolution, we will enter into a settlement agreement with the complainant who needs to acknowledge his/her agreement to the settlement proposal and to waive all his/her rights in further pursuing the complaint in any manner, including through media, industry association, government authority, mediation and litigation.

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To prevent recurring complaints of a similar nature, we hold internal meetings periodically to review clients’ feedbacks and complaints and implement appropriate measures for rectification.

For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2021, the total amount of monetary compensation paid by continuing operations to settle client complaints was RMB0.9 million, RMB0.4 million, RMB0.5 million and RMB0.3 million, respectively.

A medical-related client complaint becomes a medical dispute when initial negotiation to reach a settlement fails and the client requests to resolve the complaint through the local Medical Mediation Committee for mediation or through court litigation. See “– Legal Proceedings and Compliance – Legal Proceedings – Medical Disputes.”

SALES AND MARKETING

While we formulate the overall sales and marketing strategies at the headquarters level, we conduct sales and marketing mainly through the sales and marketing team at each of our aesthetic medical institutions, which is responsible for the collection of market data and organization of marketing events. We design our sales and marketing strategies and events based on market research, client feedback system, response from online platforms and internal discussion among our sales and marketing team, financial and other relevant departments. Our sales channels primarily comprise (i) our dedicated direct sales force, (ii) our official WeChat accounts and mini programs and other third-party online platforms, and (iii) traditional advertising.

Our dedicated direct sales force (comprising full time and part-time sales consultants), which possesses relatively high level of industry knowledge and expertise, is responsible for (i) attracting new clients to expand our client base and (ii) retaining existing clients and enhancing client loyalty. As of March 31, 2021, our continuing operations had 736 full-time sales consultants, covering all the cities in which we operate. We incentivize our sales consultants with competitive base salaries and performance-based bonuses and provide them with client-centered systematic trainings, which enables them to accurately and effectively convey the benefits and strengths of our services when communicating with existing and potential clients. For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2020 and 2021, payments to our part-time consultants amounted to RMB6.9 million, RMB17.2 million, RMB23.9 million, RMB2.4 million and RMB7.9 million, respectively, representing 3.4%, 7.9%, 12.7%, 7.6% and 12.3%, respectively, of our selling and marketing expenses of continuing operations for the same periods.

We have been increasingly using our official WeChat accounts and mini programs to engage with our clients and the public. Our clients may purchase services, check the availability of, and make appointments with, our physicians, and submit their feedback about our services through our official WeChat accounts and mini programs. In addition, as word-of-mouth referral has become one of our primary approaches to attract and acquire new clients, we have established a “Members Get Members” system, which is backed by user-engagement mini programs that encourage our existing clients to share their purchase

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We also promote our brand and services through traditional advertising, such as billboards. For example, we place billboard advertisements in commercial centers of the cities where our aesthetic medical institutions are located as well as highly visible and busy areas of these cities, such as train stations and body of motor vehicles.

Medical advertising is strictly regulated in the PRC. Under applicable PRC laws and regulations, certain medical advertisements must be reviewed by relevant governmental authorities and a “medical advertisement review certificate” (醫療廣告審查證明) must be obtained before the publication of any medical advertisement. The certificate generally has an effective term of one year, subject to renewal. See “Regulatory Environment – Regulations on Medical Advertisement” for more details related to the regulation of medical advertising. As advised by our PRC Legal Advisors, except as disclosed in “– Legal Proceedings and Compliance – Compliance,” we were in compliance with all the applicable laws and regulations in all material respects in relation to medical advertising during the Track Record Period and up to the Latest Practicable Date.

To govern the sales and marketing activities of our frontline staff and avoid illegal marketing practices, we have implemented a set of internal control measures. See “– Risk Management and Internal Control.”

PRICING

Pursuant to the applicable PRC laws and regulations, a private for-profit medical institution is generally entitled to set the prices of its service offerings at its sole discretion. We price our aesthetic medical services based on certain factors, including positioning of our aesthetic medical institutions (namely, mid- to high-end), complexity of the procedure, the medical devices, implants, injection materials or other consumables used for the procedure, if any, the seniority of the physician involved, local market conditions and competitors’ pricing of similar services.

We display the prices of our aesthetic medical services (i) at our WeChat shops and other online shops on e-commerce platforms and (ii) at or around the reception area of each of our aesthetic medical institutions using electronic devices which are accessible to all the clients

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None of our aesthetic medical institutions is a “medical insurance designated medical institution” (醫保定點醫療機構) and therefore our service fees are not subject to the pricing guidelines for reimbursement set by the relevant local healthcare insurance authorities in the PRC.

SUPPLIERS AND PROCUREMENT

Suppliers

The medical supplies required in our operations primarily include implants, injection materials, pharmaceuticals, skincare products and other medical consumables. For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2021, our cost of inventories amounted to RMB162.0 million, RMB181.7 million, RMB197.8 million and RMB69.3 million, respectively, representing 52.9%, 50.8%, 52.6% and 55.7% of our total cost of sales for the same periods, respectively.

Procurement

We utilized a centralized procurement management system at the headquarters level and our centralized procurement management team is responsible for formulating procurement budget, approving supply channels, and negotiating the contract terms for our medical devices and medical supplies. We have implemented internal guidelines for our procurement process. Our aesthetic medical institutions submit their procurement needs on a monthly basis to our centralized procurement management team, which then aggregates all procurement needs, selects quality suppliers and places purchase orders with the suppliers. We believe centralized procurement allows us to obtain favorable terms, achieve economies of scale and to better control the quality of the supplies we procure. Our headquarters place purchase orders and make payments for substantially all of our medical devices and medical supplies, while each of our aesthetic medical institutions has discretion to purchase certain daily consumables.

We select our suppliers based on stringent criteria and applicable laws and regulations to ensure the quality of our supplies. When selecting suppliers, we consider, among other things, their product offerings, pricing, reputation, service or product quality, delivery schedule, and after-sales services. Our suppliers are required to possess all licenses and permits necessary to conduct their operations. Only those suppliers which fulfill all our selection criteria are selected. Our centralized procurement management team maintains an approved list of suppliers and we only source from these suppliers. We routinely review and assess our suppliers’ performance and check their qualifications to ensure the legality and quality of our supplies, and update the approved shortlist of suppliers regularly. Those suppliers who fail to meet our standards or requirements are removed from our approved shortlist of suppliers.

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Depending on the different types of supplies and our relationships with the suppliers, the terms of the supply agreements with our suppliers vary from supplier to supplier. We generally do not have long-term agreements with our suppliers. We are normally required by our medical device suppliers to make prepayment of 30% to 100% of the total purchases before delivery. In the case of medical supplies, we are generally given credit terms of 30 days. We normally pay our suppliers via wire transfer. Our suppliers are generally responsible for arranging the delivery of supplies to our respective aesthetic medical institutions at their own costs. We are entitled to return any supplies that do not meet our standards upon preliminary inspection after delivery. During the Track Record Period, we had not experienced any significant return of supplies that did not meet our standards, and had not suffered any significant loss or damage caused by quality problems with the supplies. For large-sized medical devices, the suppliers usually provide warranty periods of one year and regular maintenance and technical support services within the warranty period. Upon the expiry of the warranty period, we purchase maintenance and repair services on an annual basis from our suppliers throughout the remaining useful lives of such devices.

Our medical devices primarily originate from Israel, the United States and Germany, and our implants, injection materials primarily originate from the United States, the United Kingdom, Sweden and France. Our skincare products, pharmaceuticals and other medical consumables are primarily sourced within the PRC. Despite that some of our supplies originate from abroad, all of our suppliers are located in China. We procure supplies that are manufactured by foreign manufacturers through their licensed distributors in the PRC to ensure the quality and legality of the source of supply. We settle all such transactions in RMB.

For most of our medical supplies, we can choose from a number of suppliers. During the Track Record Period and up to the Latest Practicable Date, we did not experience any significant shortage of or delay in the delivery of supplies. We maintained stable business relationships with our suppliers during the Track Record Period.

During the Track Record Period, we had not experienced any significant fluctuation in the prices of our supplies. For the sensitivity analysis and breakeven analysis of the cost of inventories, see “Financial Information – Key Factors Affecting Our Results of Operations – Ability to control our costs and expenses.”

We started to sell private label skincare products in October 2019 and we have further expanded our private label portfolio by offering private label hyaluronic acid filler to our clients. For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2021, total purchases of private label products by the continuing operations from our contract manufacturers amounted to approximately nil, RMB0.7 million, RMB6.4 million and RMB3.1 million, respectively.

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Top Suppliers

The tables below set forth certain details of our five largest suppliers for the periods indicated:

For the three months ended March 31, 2021

As a Length percentage of business Major products Settlement Amount of of our total relationship Supplier purchased by us Credit terms information purchases purchases with us (RMB’000)

Supplier A Pharmaceuticals and 30 days Wire 22,589 18.2% Since 2013 injection materials transfer Supplier B Other medial Payment upon Wire 17,728 14.2% Since 2015 consumables delivery and transfer acceptance Supplier C Pharmaceuticals and Payment upon Wire 4,422 3.6% Since 2017 injection materials delivery and transfer acceptance Supplier D Injection materials 30 days Wire 3,439 2.8% Since 2017 transfer Supplier E Injection materials 30 days Wire 3,274 2.6% Since 2020 transfer

51,452 41.4%

For the year Ended December 31, 2020

As a Length percentage of business Major products Settlement Amount of of our total relationship Supplier purchased by us Credit terms information purchases purchases with us (RMB’000)

Supplier A Pharmaceuticals and 30 days Wire 76,729 20.4% Since 2013 injection materials transfer Supplier B Other medical Payment upon Wire 52,516 14.0% Since 2015 consumables delivery and transfer acceptance Supplier C Pharmaceuticals and Payment upon Wire 20,598 5.5% Since 2017 injection materials delivery and transfer acceptance Supplier E Injection materials 30 days Wire 7,168 1.9% Since 2020 transfer Supplier D Injection materials 30 days Wire 4,254 1.1% Since 2017 transfer

161,265 42.9%

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For the year Ended December 31, 2019

As a Length percentage of business Major products Settlement Amount of of our total relationship Supplier purchased by us Credit terms information purchases purchases with us (RMB’000)

Supplier A Pharmaceuticals and 30 days Wire 77,747 21.7% Since 2013 injection materials transfer Supplier B Other medical Payment upon Wire 15,847 4.4% Since 2015 consumables delivery and transfer acceptance Supplier F Injection materials 30 days Wire 11,019 3.1% Since 2014 transfer Supplier G Other medical 30 days Wire 5,872 1.6% Since 2018 consumables transfer Supplier H Injection materials 60 days Wire 4,314 1.2% Since 2014 transfer

114,799 32.0%

For the year Ended December 31, 2018

As a Length percentage of business Major products Settlement Amount of of our total relationship Supplier purchased by us Credit terms information purchases purchases with us (RMB’000)

Supplier A Pharmaceuticals and 30 days Wire 54,794 17.9% Since 2013 injection materials transfer Supplier F Injection materials 30 days Wire 17,692 5.8% Since 2014 transfer Supplier I Other medical Payment upon Wire 16,200 5.3% Since 2017 consumables and delivery and transfer injection materials acceptance Supplier C Pharmaceuticals and Payment upon Wire 8,644 2.8% Since 2017 injection materials delivery and transfer acceptance Supplier H Injection materials 60 days Wire 10,239 3.3% Since 2014 transfer

107,568 35.1%

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All of our five largest suppliers during the Track Record Period are Independent Third Parties, except Supplier I which is held as to 40% by an individual who served as a director of one of our principal subsidiaries during the past 12 months. To the best of the knowledge of our Directors, none of our Directors, their respective associates or any shareholder who owns more than 5% of our issued share capital had any interest in any of our five largest suppliers during the Track Record Period.

During the Track Record Period, we organized training sessions for one of our major suppliers for injection materials at our hospital premises from time to time. Total purchases from such overlapping supplier and customer amounted to RMB17.7 million, RMB11.0 million, nil and nil, respectively, in 2018, 2019 and 2020 and the three months ended March 31, 2021, representing 5.8%, 3.1%, nil and nil, respectively, of total cost of sales of continuing operations for the same periods; while we generated revenue of nil, nil, RMB0.7 million and nil, respectively, from such overlapping supplier and customer in 2018, 2019 and 2020 and the three months ended March 31, 2021, representing nil, nil, 0.1% and nil, respectively, of total revenue from continuing operations for the same periods. The gross profit generated from such overlapping supplier and customer was nil, nil, RMB0.7 million and nil, respectively, in 2018, 2019 and 2020 and the three months ended March 31, 2021, accounting for nil, nil, 0.2% and nil, respectively, of total gross profit from continuing operations for the same periods.

RISK MANAGEMENT AND INTERNAL CONTROL

We adopt a two-tier centralized management system within our Group with central decision-making authority at the headquarters level and delegated management and operational power at the aesthetic medical institution level. Our headquarters is responsible for the recruitment, training and retaining of our medical professionals, the quality control of our services, the procurement plan of our supplies, the formulation of our sales and marketing strategies, our financial planning and budgeting, and the implementation of the risk management and internal control policies. The audit department at our headquarters is generally responsible for approving all the risk management procedures and internal control systems. Our audit department at the headquarters oversees the implementation of such procedures and systems by our aesthetic medical institutions, while the respective local departments at each aesthetic medical institution are responsible for daily affairs in respect of implementation of such procedures and systems. Our employees receive mandatory training on the relevant policies, standards, protocols and procedures from time to time and are required to strictly comply with them in daily operations.

At each aesthetic medical institution, the management and operations are generally headed by a chief administrator who is experienced in management of medical institutions. Each aesthetic medical institution also has a deputy chief administrator who is in charge of medical and quality control related matters, makes independent judgment on these matters and reports to both the chief administrator of the respective aesthetic medical institution and the medical and clinical safety committee (醫務和安全委員會) at our headquarters. The chief administrator of each aesthetic medical institution report to the management team at our headquarters.

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Quality Control

We generally follow JCI standards at our aesthetic medical institutions. JCI, or the Joint Commission International, is an international arm of The Joint Commission, which is a United States-based independent, not-for-profit organization which accredits and certifies healthcare organizations and programs. JCI standards are recognized worldwide as one of the highest benchmarks for quality and safe medical services.

To ensure the safety and quality of our aesthetic medical services, we have established a comprehensive quality control system in our aesthetic medical institutions, comprising primarily:

• the implementation of standardized clinical quality control procedures across all of our aesthetic medical institutions, comprising primarily guidelines relating to the performance of our aesthetic medical procedures. In particular, our quality control procedures include the 18 core procedures promulgated by the NHFPC to ensure healthcare quality, which include proper procedures for initial diagnosis, ward inspection, consultation, discussions of incidents that involve injuries to our clients, medical record keeping, pre-operation discussions and shift relief system;

• the adoption of standardized operational procedures across all of our aesthetic medical institutions, which lay out step-by-step instructions and protocols for client services and for handling client complaints and other feedback. In particular, prior to the performance of any aesthetic medical procedure, we fully inform the client of the inherent risks and possible side effects in relation to the procedure and obtain his/her consent. We proactively follow up with the client after completion of the procedure in order to obtain the client’s feedback and provide necessary assistance for further needs the client may have. In addition, in order to ensure prompt and proper handling of client complaints and medical disputes, we have adopted a set of standardized four-tier complaint management measures and procedures. See “– Our Aesthetic Medical Service Process” and “– Client Feedback and Client Complaint Management”;

• the implementation of centralized procurement at the headquarters level. In addition, the approval of our centralized procurement management team needs to be obtained before we introduce any new medical device or product. See “– Suppliers and Procurement.” We will not adopt a new device or product if we determine that it presents too great of a risk. We strictly control the source of our supplies and prohibit the use of any medical device or medical supplies furnished by any individual client or individual physician at our aesthetic medical institutions; and

• recruitment and retaining of qualified medical professionals. Our physicians are properly trained and licensed in the performance of the relevant procedures, and are also knowledgeable in advising our clients as to the necessary combination of procedures to achieve the desired aesthetic results. We closely monitor the

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qualification registration and licensing records on a continuing basis to ensure that all our physicians comply with all applicable requirements under PRC laws and regulations. See “– Our Medical Professionals.”

Our medical expert committee at the headquarters level, consisting of internal and external experts in aesthetic surgical procedures, aesthetic non-surgical procedures, anesthesia as well as management and operation of medical institutions. Our medical expert committee is primarily responsible for overseeing the implementation of standardized clinical quality control procedures, which consist primarily of guidelines relating to the performance of our aesthetic medical procedures, across each of our aesthetic medical institutions. Our medical expert committee also monitors our physician recruitment process, provides training sessions and clinical experience sharing, and when necessary, offer consultation on difficult or complex cases and involve in the handling of major medical disputes.

We also have quality control procedures in place for our private label products. In particular, we conduct regular and random inspections on the manufacturing process and inventory management of our contract manufacturers to ensure they comply with our quality standards. Our private label products are stored under appropriate temperature and storage conditions. We monitor the inventory level of our private label products to ensure they have not expired and are safe for consumption.

Client and Staff Safety

The safety of our clients and staff is of utmost importance to our operations. We have an outsourced security team responsible for the personal safety of our clients and staff while they are in our aesthetic medical institution premises. We also have designated personnel responsible for responding to emergency such as power outage or water leakage at our aesthetic medical institutions. We have backup ring circuits at each of our aesthetic medical institutions in case of emergency power failure to ensure the proper functions of our operations. In addition, our operating rooms are equipped with uninterruptible power supply system. In addition, we have adopted a set of stringent security protocols and fire and explosive protection procedures in case of emergency.

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We have installed electronic security systems at our aesthetic medical institutions to record emergency events and incidents, which may provide crucial evidence in case of disputes or investigations.

Client Information Security

Our client information security management mainly ensures the safe storage and usage of client information, including personal information and medical records. We use our information technology system to manage our clients’ information, and access to such system is subject to security level control and authorization. We also have designated personnel responsible for the safekeeping of the medical records of our clients. In addition, we established a library of photos of clients for which we have obtained written consent to use in our promotional materials. Our aesthetic medical institutions can only use the photos in such library to promote our services and products. During the Track Record Period, we did not experience any breach of client confidential information or any other client information related incidents which could cause a material adverse effect on our reputation, business, financial condition or results of operations. We have obtained the Certification of National Information Security Level Protection (Level 3) (國家信息安全等級保護三級認證), which has demonstrated the quality of our information security management.

Sales and Marketing

We have implemented the following internal control measures to govern the sales and marketing activities of our frontline staff:

• Services and products offered to our clients should come from our service and product catalogues approved by our headquarters to ensure they are legal and registered with the relevant PRC authorities;

• Descriptions and/or pictures of our services, products, devices, physicians and honors to be used in any marketing activities should be based on contents from a database maintained by our headquarters, and must not be misleading;

• Prices of our services should be based on the price list approved by the marketing support department (營銷支持部) at our headquarters. Discounts offered to clients should only be approved by the chief administrator of the relevant aesthetic medical institution. The head of finance department of each aesthetic medical institution conducts monthly inspections on sales transactions to ensure the price list and discount policy have been complied with; and

• Clients’ payment process should be handled by cashier, instead of the frontline staff, to ensure segregation of duties.

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Settlement and Cash Management

Cash receipts at our aesthetic medical institutions generally arise from income from provision of our services. Our clients settled our aesthetic medical services fees through POS system, online shops, cash and bank transfer during the Track Record Period, and to a lesser extent, through installment payment plans from third-party financing companies. See “– Our Customers – Payment Methods.”

We have implemented a check and balance system to ensure that our sales receipts are accurately received and recorded. Our finance staff is expected to check our daily sales records in our information technology systems against all record slips generated from POS machines and actual cash receipts and bank transfers, and rectify any discrepancies noted, on a daily basis. Generally actual cash receipts will be arranged to be deposited to the bank on the next business day. Upon receiving bank statements, we conduct daily bank reconciliation against the sales report generated from our information technology systems to ensure the accuracy of the proceeds received. Any reconciliation reports will be reviewed and approved by the finance department at our headquarters.

Anti-Corruption Risk Management

The PRC government has recently enhanced its anti-bribery efforts to prevent improper payments and other benefits received by physicians, staff and hospital administrators in connection with the procurement of pharmaceuticals, medical consumables and medical devices and the provision of healthcare services. We have implemented the following policies and procedures to address potential bribery and corruption incidents:

• The audit department at our headquarters is responsible for the design and implementation of our anti-bribery and corruption policies and procedures. Related policies are set forth in our employee handbook and code of conduct. We provide trainings to our senior management and employees and give periodic updates on recent anti-corruption issues as such issues arise.

• We have a zero-tolerance policy towards acceptance of any bribes by our physicians and other medical professionals. We have established a whistle blower program, including a dedicated hotline and an email address, to receive reports of corruption charges, with the option of anonymity. We have also established stringent investigation protocols. Any employee found in breach of our anti-bribery and corruption policies and procedures will be dismissed.

• With respect to procurement, we have centralized the procurement of medical supplies at the headquarters level, thereby minimizing the risk of corruption or abuse. See “– Suppliers and Procurement.”

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INVENTORY MANAGEMENT

Our inventories primarily comprise implants, injection materials, skincare products, pharmaceuticals and other medical consumables. Upon inspection after delivery, the medical supplies are then put into storage areas with controlled temperature and humidity. During the Track Record Period, we had been in compliance with the applicable PRC laws and regulations in relation to the storage of medical supplies in all material aspects, in particular with regard to narcotic pharmaceuticals. For details of the applicable laws and regulations with regard to the storage and usage of medical supplies, see “Regulatory Environment – Regulations on Pharmaceuticals in Medical Institutions and Medical Devices.”

We generally maintain 30 days of inventory to meet the needs of our aesthetic medical institutions. We review our inventories on hand on a monthly basis. We carry out regular physical inventory counts to verify the accuracy of our inventory records and we closely monitor inventory expiry dates to ensure no expired items will be used. Most of our implant and injection material suppliers allow us to return and/or exchange supplies within a certain period of time, normally three to six months, before the expiry dates. Once the supplies are expired, or the medical devices have reached the end of their service lives, we will safely dispose them in accordance with applicable PRC laws and regulations, and such supplies will be written off accordingly. During the Track Record Period, we did not experience any significant write-offs of our inventories.

COMPETITION

The aesthetic medical service industry in China has experienced rapid growth and is expected to continue to grow tremendously during the next five years.

According to Frost &Sullivan, the aesthetic medical service industry in China is highly competitive and fragmented with a large number of market participants. Market participants comprise public and private aesthetic medical institutions, including general hospitals with aesthetic medical departments, aesthetic medical specialty hospitals, out-patient departments and clinics. According to Frost & Sullivan, in 2020, private institutions accounted for approximately 82.0% of the total aesthetic medical service market in China in terms of revenue. The size of private aesthetic medical market in China increased from RMB61.1 billion in 2016 to RMB96.4 billion in 2020, representing a CAGR of 12.1%, and is projected to grow further at a CAGR of 21.1% from RMB113.6 billion in 2021 to RMB244.7 billion in 2025, according to Frost & Sullivan.

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We believe the key competitive factors in the aesthetic medical service market in China are brand image, nationwide medical institution network as well as availability of quality medical professionals and advanced medical devices. According to Frost & Sullivan, it is expected that the aesthetic medical service industry in China will undergo a significant amount of consolidations in the coming years. We believe we are well positioned to capitalize on these industry trends. We intend to leverage our leading position, reputation and extensive market knowledge to capture this huge growth opportunity through strategic acquisition of other aesthetic medical institutions in China. See “Industry Overview” for a more detailed discussion regarding the markets in which we operate.

INTELLECTUAL PROPERTY

As of the Latest Practicable Date, we have (i) six registered trademarks, four pending trademark applications in the PRC and two pending trademark applications in Hong Kong, (ii) two registered patents in the PRC, (iii) two registered copyrights, and (iv) two registered domain names, which were material to our business. Details of our material intellectual property rights are set forth under the section headed “Appendix VI – Statutory and General Information – B. Further Information about Our Business – 2. Intellectual Property Rights of Our Group” in this document.

We do not engage in any proprietary aesthetic medical research and development. We recognize the importance of our intellectual property rights and will protect and enforce our intellectual property rights when we become aware of any potential infringement. During the Track Record Period and as of the Latest Practicable Date, we were not engaged in or threatened with any claim for any material infringement of any intellectual property rights, whether as a claimant or as a defendant.

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AWARDS AND RECOGNITIONS

The following table sets forth our recent major awards and achievements:

Year Awards and Recognitions Award Issuing Authority

2018 5A Aesthetic Medical Institution of Chinese Association of Plastics and Chinese Association of Plastics Aesthetics (中國整形美容協會) and Aesthetics (中國整形美容協會5A醫美機構) 2014 China Well-Known Trademark China National Intellectual Property (中國馳名商標) Administration, State Administration for Industry and Commerce (國家知識產權局、國家工商行政管理局) 2011 Beijing Famous Trademark (北京著 Beijing Administration for Industry 名商標) and Commerce (北京市工商行政管理局) 2009 Charity Star of Smile Angel China Red Cross Foundation Foundation (嫣然天使基金慈善之 (中國紅十字基金會) 星) 2009 CCTV 60 Brands in 60 Years China Central Television (CCTV) (CCTV 60年60品牌) 2008 Top 10 Aesthetic Medical All-China Federation of Industry Institutions in China Beauty and Commerce Beauty and Industry (中華美業十大醫療美容 Cosmetics Chamber of Commerce 機構) (中華全國工商業聯合會美容化妝品業商會) 2008 Charity Model of China Women’s China Women’s Development Public Welfare (中國婦女公益事 Foundation (中國婦女發展基金會) 業慈善楷模) 2008 Designated Hospital of China China Women’s Development Women’s Development Foundation (中國婦女發展基金會) Foundation Rose Foundation (中國婦女發展基金會玫瑰基金指定醫院) 2007 The Most Popular Plastic Surgery 39 Health Net (39健康網) Hospital of China Health Annual General Appraisal (中國健康年度總評榜最受歡迎整形美容醫院) 2006 Designated Hospital of Smile Angel China Red Cross Foundation Foundation of Beijing Red Cross (中國紅十字基金會) Foundation (北京紅十字基金嫣然天使基金指定醫院) 2005 Top 10 Private Medical Beauty Chinese Medical Doctor Association Institutions in China (中國民營醫 Cosmetology and Plastic Surgery 療美容十強機構) Branch (中國醫師協會美容與整形醫師分會)

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INFORMATION TECHNOLOGY SYSTEMS

Our proprietary information technology infrastructure, which was developed in-house, was designed as analogous to a SaaS platform and has enabled us to digitalize, streamline and standardize substantially all aspects of our internal client and operational management and external aesthetic medical service offerings. According to Frost & Sullivan, we are a first mover in the aesthetic medical service industry that has developed and applied an integrated information technology system to digitalize the entire process of operations.

• Front office: Our client relationship management system (CRM), which we use to manage our interactions with existing and potential clients, comprises front-office modules including (i) our official WeChat accounts and mini programs accessible by our clients as well as (ii) mobile apps we designed for and used by our sales consultants and client service personnel. Our CRM streamlines and standardizes the entire process of client management, from client reach and acquisition, client services and to long-term aesthetic medical management;

• Middle office: We have implemented a variety of business middle-office systems to cater to specific needs of our business operations, including a hospital information system (HIS), an electronic medical records system (EMRS), a pharmacy information system (PIS), an enterprise application suite (EAS) and an office automation system (OA). HIS supports the daily operations of our aesthetic medical institutions, including the management of client records and billing history and the staffing of physicians and other medical professionals. EMRS electronically catalogs clients’ medical records. PIS supports the distribution and management of implants, injection materials, pharmaceuticals, skincare products and other medical consumables. EAS is used for financial management and OA covers file-sending and file-receiving and delivery of notices within the Group. The business middle-office systems implemented in each of our aesthetic medical institutions are inter- connected; and

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We plan to continue to upgrade and improve our information technology infrastructure to support the growth and expansion of our business and operations. In particular, we plan to (i) upgrade our HIS and other business middle-office systems to enhance the efficiency of our operations; (ii) establish a centralized cloud-based data management and analytic platform, aiming to better understand our clients’ needs and enhance our client acquisition efficiency; (iii) establish a cloud computing infrastructure and utilize advanced technologies such as AI to further improve the digitalization and intelligentization of our operations; and (iv) upgrade our CRM to facilitate remote consultation, which we believe will increase the convenience and responsiveness of our services.

PROPERTIES

We occupy certain properties in China in connection with our business operations. These properties are used for non-property activities as defined under Rule 5.01(2) of the Listing Rules. They mainly include premises for our aesthetic medical institutions and offices.

According to Chapter 5 of the Listing Rules and Section 6(2) of the Companies (Exemption of Companies and Prospectuses from Compliance with Provisions) Notice (Chapter 32L of the Laws of Hong Kong), this document is exempted from compliance with the requirements of section 342(1)(b) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance in relation to paragraph 34(2) of the Third Schedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance, which requires a valuation report with respect to all of our interests in land and buildings, because as of March 31, 2021, we had no single property interest with a carrying amount of 15% or more of our total assets.

Owned Properties

As of the Latest Practicable Date, we owned two buildings with a total GFA of 3,438.49 sq.m. We have obtained the relevant real property ownership certificates for all our owned properties. The following table sets forth a summary of our owned properties as of the Latest Practicable Date:

Real Property Total Ownership Owner Location Purpose GFA Certificate (sq.m.)

Jinan Hospital Jinan, Shangdong Aesthetic medical 2,305.28 Yes institution and office premises Beijing Zizhu Beijing Aesthetic medical 1,133.21 Yes Hospital institution and office premises

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Leased Properties

As of the Latest Practicable Date, we leased or occupied properties with an aggregate GFA of approximately 51,021.76 sq.m. under 21 lease agreements. Our lease agreements for our aesthetic medical institutions typically have a term ranging from two to 20 years. The following table sets forth a summary of our leased properties as of the Latest Practicable Date which are considered material:

Range of Expiry Dates Occupier Purpose Total GFA (YYYY/MM/DD) (sq.m.)

Our Company Office premises 215.00 2023/02/21 Our Company Aesthetic medical 7,940.13 2029/06/30 institution and office premises(1) Beijing Aikang Hospital Aesthetic medical 4,094.24 2029/03/28 institution and office premises Beijing Jianxiang Aesthetic medical 4,522.06 2030/12/17 Hospital institution premises Beijing Jianxiang Office premises 1,794.03 2030/12/17 Hospital Beijing Jianxiang Office premises 1,329.62 2030/12/17 Hospital Beijing Zizhu Hospital Office premises 254.38 2023/05/18 Beijing Zizhu Hospital Office premises 249.53 2021/11/05 Beijing Xingfu Hospital Aesthetic medical 5,159.59 2021/09/30 institution and office premises Beijing Changdao Aesthetic medical 2,341.22 2021/12/31 Hospital institution and office premises Tianjin Hospital Aesthetic medical 4,417.62 2030/12/14 institution and office premises Tianjin Hospital Aesthetic medical 485.70 2023/07/31 institution and office premises Qingdao Hospital Aesthetic medical 6,695.19 2035/06/15 institution and office premises

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Range of Expiry Dates Occupier Purpose Total GFA (YYYY/MM/DD) (sq.m.)

Xi’an Hospital Aesthetic medical 7,460.00 2038/07/31 institution and office premises Tianjin Seek Beauty Office premises 511.22 2022/05/07 Xi’an Seek Beauty Office premises 1,800.00 2038/06/30

Note:

(1) The property was leased for the purpose of establishing a new aesthetic medical specialty out-patient department in Beijing CBD area. Please see “– Our Future Expansion – Organic Growth” for more details.

As of the Latest Practicable Date, 20 of our lease agreements with an aggregate GFA of 46,927.52 sq.m. had not been registered with the relevant PRC authorities by the landlords, primarily due to the difficulties in procuring our lessors’ cooperation. As advised by our PRC Legal Advisors, the failure to register an executed lease agreement will not affect its legality, validity or enforceability. However, we may be subject to a fine of no less than RMB1,000 and not exceeding RMB10,000 for each unregistered lease agreement if the relevant PRC government authorities require us to rectify and we fail to do so within the prescribed time period. We estimate that the maximum penalty we may be subject to for these unregistered lease agreements will be approximately RMB200,000, which we believe is immaterial. Therefore, we believe that the failure to register these lease agreements will not have any material adverse effects on our business, results of operations, financial condition and prospects. We will actively liaise with the respective lessors to complete the registration of all such lease agreements, if possible.

INSURANCE

As advised by our PRC Legal Advisors, we are not required by any applicable laws or regulations of the PRC to maintain medical liability insurance. We do not maintain (i) professional malpractice liability insurance for our physicians or other medical professionals working in our aesthetic medical institutions, or (ii) medical institution liability insurance for our aesthetic medical institutions. We satisfied the medical liability claims against us using our financial resources. In addition, we do not maintain product liability insurance or business interruption insurance. According to Frost & Sullivan, it is common for market players in the aesthetic medical service industry not to maintain medical institution liability insurance for themselves or professional malpractice liability insurance for their medical professionals since there are no suitable insurance products readily available in the market in the PRC for corporate aesthetic medical service providers and their medical professionals. However, we have been actively looking for suitable medical liability insurance policies in the market and will purchase those once suitable policies are available in the market.

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During the Track Record Period and up to the Latest Practicable Date, we did not submit any material insurance claims, nor did we experience any material difficulties in renewing our insurance policies.

We contribute to social security insurance for our employees in accordance with applicable PRC laws, rules and regulations.

Our Directors believe that the insurance coverage for our operations was adequate and in line with industry practice as of the Latest Practicable Date. However, the risks related to our business and operations may not be fully covered by insurance. See “Risk Factors – Risks Relating to Our Business and Industry – Our business is subject to professional and other liabilities for which we may not be insured.”

ENVIRONMENTAL, SOCIAL AND CORPORATE GOVERNANCE

We give high regard for environmental protection, and are committed to promoting corporate social responsibility and sustainable development. Therefore, we seek to and have integrated these core values into our business operation by adopting and implementing various policies in relation to environmental, social and corporate governance responsibilities (the “ESG policy”) throughout our operations. Our ESG policy sets forth our corporate social responsibility objectives and provides guidance on practicing corporate social responsibility in our daily operations in accordance with all applicable law and regulations, including the Listing Rules. Our Directors believe that the ESG policy adopted by us was adequate and effective in addressing our ESG-related risks as of the Latest Practicable Date.

Environmental Protection

We are subject to various PRC laws, regulations and rules with respect to environmental matters, including aesthetic medical institution sanitation, disease control, disposal of medical waste, and discharge of waste water, pollutants and radioactive substances. See “Regulatory Environment – Regulations on Environmental Protection related to Medical Institutions.” We have implemented internal policies and procedures in this regard and engaged qualified service providers to dispose of medical waste and radioactive substances. As advised by our PRC Legal Advisors, during the Track Record Period and up to the Latest Practicable Date, our business was in compliance with all applicable laws, regulations and rules with regard to environmental protection in all material aspects.

For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2021, our annual cost of compliance with environmental protection rules and regulations was approximately RMB0.3 million, RMB0.3 million, RMB0.3 million and RMB0.1 million, respectively. We do not expect there to be substantial changes to our costs for compliance with the applicable environmental protection rules and regulations in the near future.

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Occupational Safety

We value the importance of maintaining a safe, healthy and efficient work environment for all of our employees. Our employees are required to abide by occupational health and safety regulations in the PRC as well as safety guidelines in our employee handbooks. In order to provide a healthy working environment, we also set out a series of measures in our staff manual to prevent our staff from being contaminated by medical waste.

Social Responsibility

We care about our social responsibility and our relationship with different stakeholders in the community. We have internal social responsibility policy and staff handbook in place to ensure that we and our employees have a positive impact on the society.

We highly value social responsibility and actively participate in public welfare activities. For example, as of the Latest Practicable Date, we partnered with a well-known charitable foundation to provide free corrective surgical procedures for nearly 4,000 children born with cleft lip and cleft palate. In 2020, we also provided free medical assistance to disabled children with cerebral palsy in Shepherd’s Field Children’s Village (天津牧羊兒童村) in Tianjin.

In order to avoid unscrupulous sales practices that excessively encourage young and immature females to undertake aesthetic plastic procedures, we have established a series of control measures including: (i) we provide aesthetic surgical services only to adults over 18 years old, save for limited aesthetic plastic procedures on a need basis, such as orthodontics and cosmetic dentistry services, during which we require the teenagers below 18 years old be accompanied by their guardians; (ii) a registration form is required to be filled and signed by all of our clients to state their personal information as well as the reasons for requesting our aesthetic medical services; (iii) immediately prior to the performance of any procedure, the responsible physician will confirm the identity of the client and explain again the proposed procedures to the client. See “– Our Aesthetic Medical Service Process – Performance of procedure”; (iv) though we allow our clients to pay for our services via installment payment plans arranged by certain third-party financing companies, we do not provide sales on credit or any kind of loans to our clients in respect of the service fees in order to avoid excessive and unnecessary sales to clients; (v) we provide trainings to our sales and marketing team from time to time in relation to appropriate sales practices; and (vi) we have systematic and efficient client feedback and client complaint management system to handle any clients’ feedback and complaints in relation to our sales practices. See “– Client Feedback and Client Complaint Management.”

Our Board is committed to promoting a compliance culture to enhance our ESG policy. Our Board has the collective responsibility for establishing, adopting and reviewing the vision, policies and target of our ESG policy, and evaluating and determining our ESG-related risks regularly. Our Board may assess or engage external consultants to evaluate our risks in these regards and will take necessary improvement measures to mitigate identified risks.

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EMPLOYEES

As of March 31, 2021, our continuing operations had 2,138 full-time employees in the PRC, including two Korean physicians. These employees are located in Beijing, Tianjin, Jinan, Qingdao and Xi’an. The following table shows a breakdown of the full-time employees of our continuing operations by function as of the same date:

Number of %of Functions Employees Employees

Management and Administrative Staff(1) 430 20.1% Physicians 157 7.3% Other Medical Staff 486 22.7% Sales and Marketing Staff 932 43.6% Client Service Staff 133 6.2%

Total 2,138 100.0%

Note:

(1) Comprising management, finance and legal staff, human resources staff, technical staff and other administrative staff.

We believe we have maintained good relationships with our employees. Our employees are not represented by a labor union. As of the Latest Practicable Date, we did not experience any strikes or any labor disputes with our employees which have had or are likely to have a material effect on our business.

Our employees typically enter into standard employment contracts incorporating a confidentiality clause with us. Each aesthetic medical institution independently recruits and enters into employment contracts with its own employees.

We provide both in-house and external trainings for our employees to improve their skills and knowledge. We place high value on recruiting, training and retaining our employees. We maintain high recruitment standards and provide competitive compensation packages. Remuneration packages for our employees mainly comprise base salary and performance-based bonus, and to a lesser extent, commissions generated from the procedures they perform. See “– Our Medical Professionals – Recruitment, Training and Retention of Our Medical Professionals.”

We contribute to social security insurance and housing provident funds for our employees in accordance with applicable PRC laws, rules and regulations.

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LICENSES, PERMITS AND CERTIFICATES

As advised by our PRC Legal Advisors, we had obtained all material licenses, permits and approvals required for our operations and such licenses, permits and approvals were valid and remain in effect as of the Latest Practicable Date. The following table sets forth the Medical Institution Practicing License (醫療機構執業許可證) of our aesthetic medical institutions:

Effective Date Expiration Date Aesthetic Medical Institution (YYYY/MM/DD) (YYYY/MM/DD)

Beijing Xingfu Hospital 2019/12/16 2024/12/31 Beijing Aikang Hospital 2019/12/09 2024/12/31 Beijing Jianxiang Hospital 2017/01/01 2021/12/31 Beijing Zizhu Hospital 2017/01/01 2021/12/31 Qingdao Hospital 2016/08/01 2031/07/31 Jinan Hospital 2010/01/06 2025/01/05 Xi’an Hospital 2020/11/26 2025/11/26 Tianjin Hospital 2017/07/01 2022/06/30 Beijing Changdao Hospital 2017/01/01 2021/12/31

Our aesthetic medical institutions have also obtained other necessary licenses and permits such as License for Radiotherapy (放射診療許可證), License for Safe Radiation (輻射安全許可證) and Medical Seal Card for the Purchase and Use of Narcotic Pharmaceuticals and Class I Psychotropic Substances (麻醉藥品、第一類精神藥品購用印鑒卡).

We monitor the validity status of our licenses, permits and certificates, and make timely applications for the renewal of relevant licenses, permits and certificates prior to the expiration date. We had not experienced any material difficulty in obtaining or renewing the required licenses, permits and certificates for our business operations during the Track Record Period and up to the Latest Practicable Date. However, we cannot assure you that we will be able to obtain or renew such licenses, permits or certificates in the future. See “Risk Factors – Risks Relating to Our Business and Industry – We conduct our business in a heavily regulated industry and incur on-going compliance costs and face potential penalties for non-compliance.”

LEGAL PROCEEDINGS AND COMPLIANCE

Compliance

We are subject to a wide variety of laws, rules and regulations in the ordinary course of our business operations. See “Regulatory Environment.”

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During the Track Record Period, there were eight incidents (four, two and two in 2018, 2019 and 2020, respectively) where our continuing operations received administrative penalties for (i) publishing medical advertisements without obtaining a medical advertisement review certificate (醫療廣告審查證明); or (ii) publishing medical advertisements whose content or form violated applicable laws and regulations.

The incidents were primarily caused by the lack of understanding by our sales and marketing staff at the relevant aesthetic medical institutions in respect of the relevant laws and regulations who failed to obtain medical advertisement review certificates in time or conducted aggressive marketing campaigns in violation of content or form requirements for medical advertisements.

As a result of these incidents, we received one administrative warning and paid penalties of RMB430,000.0 in total. In addition, we received an order to suspend a license in connection with the provision of aesthetic surgical services of Tianjin Hospital from November 4, 2020 to December 10, 2020. According to the PRC Legal Advisor, Tianjin Hospital held another license which allowed it to continue to provide aesthetic surgical services, and therefore, the operations of Tianjin Hospital were not interrupted during the same period. Our Directors believe that the administrative penalties we received for such non-compliant medical advertisements did not cause any material adverse effects on our business, results of operations, financial condition and prospects during the Track Record Period and up to the Latest Practicable Date.

We terminated or rectified the relevant non-compliance medical advertisements immediately after we were notified by the relevant government authorities of such non- compliant medical advertisements and we have established enhanced internal control measures to ensure compliance in the future. Please see “– Enhanced Internal Control Measures.”

Except as disclosed in this document, as advised by our PRC Legal Advisors, we complied with all the applicable PRC laws and regulations in all material aspects during the Track Record Period and up to the Latest Practicable Date.

Enhanced Internal Control Measures

In accordance with the applicable PRC and Hong Kong laws and regulations, we have implemented measures with a view to establishing and maintaining our internal control system, and established risk management policies and compiled with applicable laws and regulations. In particular:

(i) our Directors have attended trainings conducted by our Hong Kong legal advisor on the ongoing obligations, duties and responsibilities of directors of publicly listed companies under the Companies Ordinance, the SFO and the Listing Rules and the Directors are fully aware of their duties and responsibilities as directors of a listed company in Hong Kong;

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(ii) we have instituted procedures for lines of communication and provided a process by which our employees can identify and report potential non-compliance exposures;

(iii) we have appointed Haitong International Capital Limited as our compliance advisor pursuant to Rule 3A.19 of the Listing Rules to ensure that, among other things, we are properly guided and advised as to compliance with the Listing Rules and all other applicable laws, rules, codes and guidelines; and

(iv) we have established an audit committee which comprises two independent non- executive Directors and one non-executive Director. The audit committee has also adopted its terms of reference which set out clearly its duties and obligations for ensuring compliance with the relevant regulatory requirements. In particular, the audit committee is empowered under its terms of reference to review any arrangement which may raise concerns about possible improprieties in financial reporting, internal control or other matters.

In addition, we have implemented the following internal control measures to prevent recurrence of our historical non-compliance incidents:

Medical Advertisement Related Internal Control Measures

• We have designated the president’s office (總裁辦公室) and the branding department (品牌部) at our headquarters to review each medical advertisement in detail to ensure a medical advertisement review certificate has been obtained and its content and form are in compliance with applicable laws and regulations.

• Approvals by the president’s office and the branding department at our headquarters need to be obtained before publishing.

• All of these application forms will be kept on file.

• The branding department at our headquarters also regularly monitors all published medical advertisements and alerts the relevant aesthetic medical institution of any medical advertisement review certificate to be expired shortly.

Legal Proceedings

As an aesthetic medical service provider in the PRC, we are subject to legal proceedings, disputes and claims that arise in the ordinary course of business, which primarily included medical disputes with our clients. See “– Medical Disputes” below.

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As of the Latest Practicable Date, we were not a party to any ongoing material litigation, arbitration or administrative proceedings, and we are not aware of any claims or proceedings contemplated by government authorities or third parties which would materially and adversely affect our business. Our Directors are not involved in any actual or threatened material claims or litigation.

Medical Disputes

Our medical disputes are primarily related to complications and physical injuries that our clients suffered during or after receiving aesthetic medical procedures at our aesthetic medical institutions or otherwise complaints we receive from our clients regarding our aesthetic medical services. Most of the physical injuries incurred were not material and could not have been completely avoided due to the inherent risks involved or unforeseeable conditions that may result in complications or physical injuries of the clients. As part of our risk management and internal control procedures, we have fully informed our clients of these inherent risks and obtained their consents before performance of the relevant procedures.

Resolved and Settled Medical Disputes

Most of our client complaints were resolved through our complaint handling, see “– Client Feedback and Client Complaint Management.” However, they may choose to seek claims against us if initial negotiation to reach a settlement fails. A medical-related client complaint becomes a medical dispute when the client requests to resolve the complaint through the local Medical Mediation Committee for mediation or through court litigation. During the Track Record Period and up to the Latest Practicable Date, we did not experience any medical disputes that could cause a material adverse effect on our business, financial condition or results of operations. During the Track Record Period, our continuing operations had 23 medical disputes and the total amount of monetary compensation paid by continuing operations to settle these medical disputes was RMB2.1 million. In each of these medical disputes, we believe that our medical professionals have followed appropriate treatment procedures and protocols. None of the medical disputes settled by us during the Track Record Period and up to the Latest Practicable Date involved any determination of medical incident (醫療事故)by the healthcare administrative authorities or their relevant medical associations in charge of the technical appraisal of medical incident. During the Track Record Period and up to the Latest Practicable Date, none of our physicians and other medical professionals were involved in any disciplinary proceedings in connection with, or otherwise determined to be liable for, medical incident.

Unresolved Medical Disputes

As of the Latest Practicable Date, we did not have any unresolved material medical disputes.

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OUR CONTROLLING SHAREHOLDERS

Our Controlling Shareholders are Mr. Wang, Mr. Wang Muyuan, Anjian Hengyuan and Meirui Shilan.

Immediately after completion of the [REDACTED] (assuming the [REDACTED]isnot exercised), (i) Mr. Wang and Mr. Wang Muyuan (son of Mr. Wang) will together be interested in approximately [REDACTED]% equity interest of our enlarged total share capital through their interests in Anjian Hengyuan (which is in turn held by Mr. Wang and Mr. Wang Muyuan as to approximately 92.22% and 7.78%, respectively); (ii) Mr. Wang will directly hold approximately [REDACTED]% equity interest of our enlarged total share capital; (iii) Mr. Wang will be interested in approximately [REDACTED]% of our enlarged total share capital through his interest in Meirui Shilan (which is in turn held by Mr. Wang as to approximately 85.76%); and (iv) Mr. Wang Muyuan will directly hold approximately [REDACTED]% equity interest of our enlarged total share capital. Pursuant to the concert party agreement dated July 20, 2021, Mr. Wang and Mr. Wang Muyuan have confirmed that they are acting in concert in respect of their equity interests in our Company and Mr. Wang Muyuan will follow Mr. Wang’s decisions in relation to the exercise of their voting rights at the meetings of the shareholders of our Company. See “History and Corporate Structure – Our Corporate Development – Concert Party Agreement” for details. Therefore, Mr. Wang and Mr. Wang Muyuan will together be entitled to exercise the voting rights attaching to approximately [REDACTED]% of our enlarged total share capital, and Mr. Wang, Mr. Wang Muyuan, Anjian Hengyuan and Meirui Shilan will be considered as a group of Controlling Shareholders for the purpose of the Listing Rules after the [REDACTED].

Neither our Controlling Shareholders nor any of our Directors, including their respective close associates, was, as of the Latest Practicable Date, interested in any business, other than our Group, which, competes or is likely to compete, either directly or indirectly, with our Group’s business and which requires disclosure pursuant to Rule 8.10 of the Listing Rules.

INDEPENDENCE FROM OUR CONTROLLING SHAREHOLDERS

Having considered the following factors, our Directors are satisfied that we are capable of carrying out our business independently of our Controlling Shareholders and their respective close associates after [REDACTED].

Operational Independence

Our Company makes business decisions independently. We have established our own organizational structure with independent departments, and each department is assigned to specific areas of responsibilities. We maintain a set of comprehensive internal control procedures to facilitate the effective operation of our business. We have independent access to suppliers and customers and are not dependent on our Controlling Shareholders or their respective close associates with respect to supplies and customers for our business operations. We are also in possession of all relevant licenses necessary to carry out and operate our business and we have sufficient operational capacity in terms of capital and employees to operate independently.

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Accordingly, our Directors are satisfied that we will be able to function and operate independently from our Controlling Shareholders and their respective close associates.

Management Independence

Our Board comprises two executive Directors, three non-executive Directors and three independent non-executive Directors. Although Mr. Wang is an executive Director and also a Controlling Shareholder, our management and operation decisions are made by all our executive Directors and senior management, most of whom have served our Group for a long time and all of whom have substantial experience in the industry in which we are engaged and/or in their respective fields of expertise. The balance of power and authority is ensured by the operation of the senior management and our Board. See “Directors, Supervisors and Senior Management” for more details of our Directors.

Our Directors are satisfied that the Board as a whole, together with our senior management team, is able to perform the managerial role in our Group independently on the following grounds:

(i) we have appointed three independent non-executive Directors, including Mr. Wu Jun, Mr. Zhao Zhenmin, and Mr. Zhou Tao David, which represents more than one-third of the members of the Board. Accordingly, there will be a sufficiently robust and independent voice within our Board to counter-balance any situation involving a conflict of interest and they will be able to protect the interests of our Company and the Shareholders as a whole. In addition, our board of Supervisors is governed by terms of reference formulated in accordance with PRC Company Law, other relevant laws and regulations and the Articles of Association, so as to enhance a regulated and effective corporate governance structure;

(ii) save for Mr. Wang, our Board is supported by an experienced full time senior management team, all of whom are independent from the Controlling Shareholders and their respective close associates. All of our senior management team have worked with us during the Track Record Period and up to the Latest Practicable Date. Our senior management team are principally responsible for the daily management of our business operation;

(iii) each Director is aware of his or her fiduciary duties as a Director, which require, among other things, that he or she acts for the benefit and in the best interests of our Company and does not allow any conflict between his or her duties as a Director and his or her personal interests;

(iv) in the event that there is a potential conflict of interest arising out of any transaction to be entered into between our Company and our Directors or their respective close associates, the interested Director(s) shall abstain from voting at the relevant Board meetings in respect of such transactions and shall not be counted in the quorum; and

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(v) our Company has also established internal control mechanism to identify related party transactions to ensure that our Shareholders or Directors with conflicting interests in a proposed transaction will abstain from voting on the relevant resolutions.

Financial Independence

Our Group has established an independent financial department with a team of independent financial staff, as well as a sound and independent financial system and makes financial decisions according to our Group’s own business needs. Our Group has adequate capital to operate our business independently, and has sufficient internal resources to support our daily operations.

As of the Latest Practicable Date, there were no loans, advances and balances due to and from our Controlling Shareholders or their close associate nor any pledges and guarantees provided by our Controlling Shareholders or their close associate on our Group’s borrowing which have not been fully released or discharged.

CORPORATE GOVERNANCE

Our Directors recognize the importance of good corporate governance to protect the interest of our Shareholders. We would adopt the following corporate governance measures to manage potential conflict of interests between our Group and the Controlling Shareholders:

(i) where a Shareholders’ meeting is held for considering proposed transaction in which any of the Controlling Shareholders has a material interest, the Controlling Shareholder(s) shall abstain from voting on the resolutions and shall not be counted in the quorum for the voting;

(ii) where a Board meeting is held for the matters in which a Director has a material interest, such Director shall abstain from voting on the resolutions and shall not be counted in the quorum for the voting;

(iii) we are committed that our Board should include a balanced composition of executive and non-executive Directors (including independent non-executive Directors). We have appointed three independent non-executive Directors and we believe our independent non-executive Directors possess sufficient experience and they are free of any business and/or other relationship which could interfere in any material manner with the exercise of their independent judgment and will be able to provide an impartial and external opinion to protect the interests of our public Shareholders. For more details of the biographies of our independent non-executive Directors, please see “Directors, Supervisors and Senior Management”;

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(iv) any transaction between (or proposed to be made between) our Group and the connected persons will be subject to the requirements under Chapter 14A of the Listing Rules, including, where applicable, the announcement, reporting, annual review, circular (including independent financial advice) and independent Shareholders’ approval requirements and with those conditions imposed by the Stock Exchange for the granting of waiver from strict compliance with relevant requirements under the Listing Rules;

(v) in the event that our independent non-executive Directors are requested to review any conflict of interests between our Group and the Controlling Shareholders, the Controlling Shareholders shall provide the independent non-executive Directors with all necessary information and our Company shall disclose the decisions of the independent non-executive Directors either in its annual report or by way of announcements to the public;

(vi) our Company has appointed Haitong International Capital Limited as our compliance adviser, which will provide advice and guidance to our Group in respect of compliance with the applicable laws and Listing Rules including various requirements relating to Directors’ duties and corporate governance.

Based on the above, our Directors are satisfied that sufficient corporate governance measures have been put in place to manage conflicts of interest between our Group and our Controlling Shareholders and/or Directors to protect the minority Shareholders’ rights after [REDACTED].

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OVERVIEW

The following table sets forth certain information regarding our Directors, Supervisors and members of our senior management:

Time of joining our Date of Name Age Position Group appointment Roles and responsibilities

Directors Mr. Wang Yong’an 57 – Chairman of May 1997 – February 20, 2008 Formulating overall (汪永安) the Board development strategies – Executive – February 20, 2008 and overseeing the daily Director operation and – Chief executive – February 20, 2008 management of our officer Group

Ms. Wang Zheng 53 – Executive August 2017 – April 9, 2021 Overseeing the financial (王崢) Director operation and risk – Chief financial – August 1, 2017 management of our officer Group

Mr. Fang Min 42 – Non-executive December – December 14, Providing strategic (方敏) Director 2015 2015 advice and making recommendations on financial management and business development to our Board

Mr. Zhang Quanyuan 44 – Non-executive November – November 9, 2015 Providing strategic (張泉源) Director 2015 advice and making recommendations on medical management and business development to our Board

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Time of joining our Date of Name Age Position Group appointment Roles and responsibilities

Ms. Li Quan 41 – Non-executive June 2021 – June 13, 2021 Providing strategic (李泉) Director advice and making recommendations on financial management and business development to our Board

Mr. Wu Jun 52 – Independent July 2021 – July 12, 2021 Providing independent (武軍) non-executive opinion and judgement Director to our Board

Mr. Zhao Zhenmin 59 – Independent July 2021 – July 12, 2021 Providing independent (趙振民) non-executive opinion and judgement Director to our Board

Mr. Zhou Tao David 50 – Independent July 2021 – July 12, 2021 Providing independent (周韜) non-executive opinion and judgement Director to our Board

Supervisors Ms. Lu Zhan 43 – Chairman of May 2014 – July 9, 2018 Supervising the (路展) the Board of performance of duties by Supervisors our Directors and senior – Supervisor – July 9, 2018 management

Ms. You Weiwei 43 – Supervisor May 2018 – April 9, 2021 Supervising the (尤薇薇) performance of duties by our Directors and senior management

Ms. Liu Qingrong 52 – Supervisor November – July 9, 2018 Supervising the (劉慶榮) 2000 performance of duties by our Directors and senior management

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Time of joining our Date of Name Age Position Group appointment Roles and responsibilities

Senior Management Mr. Wang Yong’an 57 – Chairman of May 1997 – February 20, 2008 Formulating overall (汪永安) the Board development strategies – Executive – February 20, 2008 and overseeing the daily Director operation and – Chief executive – February 20, 2008 management of our officer Group

Mr. Liu Jianru 48 – Executive deputy December – June 16, 2020 Assisting in overall (劉劍如) general manager 2004 management, strategic planning and managing our aesthetic medical institutions in Tianjin, Qingdao and Jinan

Ms. Wang Zheng 53 – Executive August 2017 – April 9, 2021 Overseeing the financial (王崢) Director operation and risk management of our Group – Chief financial August 2017 – August 1, 2017 Overseeing the financial officer operation and risk management of our Group

DIRECTORS

Our Board is responsible for, and has general powers over, the management and operation of our business. It currently consists of eight Directors, comprising two executive Directors, three non-executive Director and three independent non-executive Directors.

The following sets forth the biographies of our Directors.

Executive Directors

Mr. Wang Yong’an (汪永安), aged 57, is our founder and has been the chairman of the Board, an executive Director and the chief executive officer of our Company since its establishment in February 2008, primarily responsible for formulating overall development strategies and overseeing the daily operation and management of our Group.

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With over 20 years of experience in aesthetic medical industry, Mr. Wang has gained an in-depth understanding of the aesthetic medical services market and acquired rich management experience by managing and developing our business. Prior to the establishment of our Company, Mr. Wang established Beijing Zhonghengjian in May 1997, where he served as the chairman of the board till June 2008 and was responsible for the strategic planning of Beijing Zhonghengjian and continuously provided leadership and inspiration for the our Group’s early exploration in the aesthetic medical business.

Mr. Wang was the vice president of the Chinese Association of Plastics and Aesthetics (中國整形美容協會) from March 2011 to May 2021.

Mr. Wang obtained a bachelor’s degree in journalism from Chinese People’s Police University (中國人民警官大學), currently known as People’s Public Security University of China (中國人民公安大學), in July 1986. He completed the postgraduate courses held by Liaoning University (遼寧大學) majoring in finance in June 1997.

Ms. Wang Zheng (王崢), aged 53, was appointed as our chief financial officer in August 2017 and our executive Director in April 2021, primarily responsible for overseeing the financial operation and risk management of our Group.

Ms. Wang has decades of experience in financial investment and management. From December 2003 to January 2011, she was a director of merger & acquisition and investment department in AsiaInfo Linkage Technologies (China), Inc. (亞信聯創科技(中國)有限公司), a subsidiary of AsiaInfo Holdings, LLC, which was formerly listed on Nasdaq and currently known as AsiaInfo Technologies Limited (亞信科技控股有限公司) (Stock Code: 1675.HK) (“AsiaInfo”). She served as a chief financial officer in Shanghai Sihua Technology Co. Ltd. (上海思華科技股份有限公司) from February 2011 to October 2015. She subsequently worked as a senior vice president in Beijing AsiaInfo Smart Big Data Co., Ltd. (北京亞信智慧數據科技有限公司), a subsidiary of AsiaInfo, from November 2015 to July 2017. She joined our Group in August 2017 and has been our chief financial officer since then.

Ms. Wang graduated from Beijing Technology and Business University (北京工商大學), formerly known as Beijing Light Industry School (北京輕工業學院), with a bachelor’s degree of engineering in industrial management engineering in July 1990 and received a master’s degree of economics majoring in international finance by way of on-the-job study from Renmin University of China (中國人民大學) in June 1998. She also obtained a master’s degree of accounting in international accounting and financial management from University of Glasgow in December 2002.

Non-executive Directors

Mr. Fang Min (方敏), aged 42, was appointed as our non-executive Director in December 2014, and is responsible for providing strategic advice and making recommendations on financial management and business development to our Board.

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Mr. Fang has deep industry knowledge and insightful observations in the fast-growing healthcare market in China with more than 16 years of experience in private equity investment and financial management. He worked at Boston Consulting (Shanghai) Company Ltd. (波士頓諮詢上海有限公司) as a consultant between September 2001 and July 2005. In July 2011, he joined Beijing Warburg Pincus Investment Consulting Company Limited Shanghai Branch (北京華平投資諮詢有限公司上海分公司) as an investment manager and received appointment for his current position as a managing director in January 2016, primarily responsible for investment and management consulting. From March 2015 to August 2016, he also served as a director of China Biologic Products Holdings Inc (Stock Code: CBPO. NASDAQ). Since December 2018, he became a non-executive director of Jinxin Fertility Group Limited (Stock Code: 1951.HK). He has also served as chairman of the board of HTDK (Shanghai) Co., Ltd. (華瑭大昌商業(上海)有限公司) since January 2019. Since June 2019, he has been a director, re-designated as a non-executive director in September 2019, of Hygeia Healthcare Holdings Co., Limited (海吉亞醫療控股有限公司) (Stock Code: 6078.HK), where he also served as the chairman of the board from January 2020 to July 2021.

Mr. Fang obtained a bachelor’s degree in economics majoring in international finance from Fudan University (復旦大學) in July 2001 and a master’s degree in business administration from Stanford University in June 2007.

Mr. Zhang Quanyuan (張泉源), aged 44, was appointed as our non-executive Director in November 2015, and is responsible for providing strategic advice and making recommendations on medical management and business development to our Board.

With over 13 years of investment and management experience, Mr. Zhang has a deep understanding in the healthcare industry and accumulated rich management and industry experience. From December 2006 to July 2010, he served as a general manager of investment management department in Phoenix United Hospital Management Beijing Co Ltd (北京鳳凰聯合醫院管理股份有限公司), currently known as Beijing Phoenix United Hospital Management Consulting Co., Ltd. (華潤醫院管理諮詢有限公司), a wholly-owned subsidiary of China Resources Medical Holdings Company Limited (華潤醫療控股有限公司) (Stock Code: 1515.HK). He subsequently served as a vice president of investment in CITIC Industrial Investment Fund Management Co., Ltd. (中信產業投資基金管理有限公司) from July 2011 to December 2014. He was a founding managing partner and the general manager in Beijing Huatai Ruihe Investment Fund Management Partnership (Limited Partnership) (北京華泰瑞合投資基金管理合夥企業(有限合夥)), a company principally engaged in healthcare industry investment, from August 2015 to July 2018. Since August 2018, he has also been a fund manager of Huatai Zijin Investment Co. Ltd. (華泰紫金投資有限責任公司), in charge of big health investment.

Mr. Zhang graduated from Rush University, Chicago, with a master’s degree of science in June 2006 and University of Illinois at Urbana-Champaign with a master’s degree of science in biology in May 2007. He received a bachelor’s degree in clinical medicine from Capital Medical University (首都醫科大學) in July 2001.

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Ms. Li Quan (李泉), aged 41, was appointed as our non-executive Director in June 2021, and is responsible for providing strategic advice and making recommendations on financial management and business development to our Board.

Ms. Li has over ten years of experience in investment management. Ms. Li served as an executive director of CDH Investments Management (Hong Kong) Limited from December 2010 to May 2017 and has served as a managing director in private equity department since June 2017, responsible for the management of CDH Fund V.

Ms. Li has been a non-executive director of SciClone Pharmaceuticals (Holdings) Limited (Stock Code: 6600.HK) since June 2020.

Ms. Li obtained two bachelor’s degrees in cell biology and genetics, and economy from Peking University in July 2002 and her master’s degree in school of computing in bioinformatics from National University of Singapore in July 2004.

Independent Non-executive Directors

Mr. Wu Jun (武軍), aged 52, was appointed as our independent non-executive Director in July 2021, and is primarily responsible for providing independent opinion and judgement to our Board.

Mr. Wu has over 25 years of experience in internal audit, internal control and financial management. At the beginning of his career, Mr. Wu held certain financial management positions, including the management accountant, sales routine supervisor and logistics assistant manager, at Wall’s (China) Co., Ltd from January 1991 to April 1995. From August 1995 to November 1996, he was an accountant at the Beijing Representative Office of SAP AG and subsequently at SAP (Beijing) Software System Co., Ltd (SAP(北京)軟件系統有限公司). From April 1997 to March 1999 and from July 2002 to June 2005, he worked at Lucent Technologies China (朗訊科技中國有限公司), a subsidiary of Lucent Technologies Inc., a company formerly listed on the New York Stock Exchange, with his last position as the chief financial officer of the greater China region. From May 2006 to March 2007, he served as the vice president of the financial management department of Huawei Technologies Co., Ltd. (華為技術有限公司), a telecommunications solutions provider in China, where he was primarily responsible for the financial management. From February 2008 to August 2010, he served as the chief financial officer and led the initial public offering of iSoftStone Information Technology (Group) Co., Ltd. (軟通動力信息技術(集團)股份有限公司), a subsidiary of iSoftStone Holdings Limited, which is a China-based IT outsourcing company and was formerly listed on the New York Stock Exchange. From August 2010 to May 2017, he served at AsiaInfo Holdings, LLC, which was formerly listed on Nasdaq and currently known as AsiaInfo Technologies Limited (亞信科技控股有限公司) (Stock Code: 1675.HK) (“AsiaInfo”). He was the chief financial officer of AsiaInfo and was primarily responsible for the financial management, preparing the financial statements, and communicating with the external auditors till March 2015. He subsequently served as the chief executive officer of AsiaInfo and was primarily responsible for the overall operations and strategic decisions of AsiaInfo. He founded Beijing Radium Scene Technology Co., Ltd. (北京鐳場景科技有限公司) in February 2018, where he served as the chief executive officer.

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Since March 2017, Mr. Wu served as the strategic advisor and has been re-designated as the executive director of Beijing Wanzhisheng Technology Co., Ltd. (北京市萬智生科技有限公司) in March 2020, where he has been responsible for internal audit, internal control and investor relationship management. He has also been the chief strategic advisor of Oriental Group Incorporation (東方集團股份有限公司) (Stock Code: 600811.SH) since September 2019 and Senyint International Digital Medical System (Dalian) Co., Ltd. (心醫國際數位醫療系統 (大連)有限公司) since June 2020.

Mr. Wu graduated from the University of International Business and Economics (對外經濟貿易大學) with a diploma majoring in international accounting in January 1993. He received a master’s degree in business administration from the City University, Seattle, Washington in June 1999.

Mr. Zhao Zhenmin (趙振民), aged 59, was appointed as our independent non-executive Director in July 2021, and is primarily responsible for providing independent opinion and judgement to our Board.

Mr. Zhao has more than 30 years of experience in plastic surgery industry. From August 1998 to November 2016, he worked in the Plastic Surgery Hospital at Chinese Academy of Medical Sciences and Peking Union Medical College (中國醫學科學院北京協和醫學院整形外科醫院), where he successively served as various positions, including professor, chief physician and vice hospital administrator. From November 2016 to March 2019, he was a chief physician, professor and a doctoral supervisor of the dental department at Beijing Children’s Hospital of Capital Medical University (首都醫科大學附屬北京兒童醫院). Since March 2019, he has served as a chief physician, professor, the director of the department of plastic and cosmetic surgery and the director of development center of plastic and cosmetic surgery at Peking University Third Hospital (北京大學第三醫院).

Mr. Zhao has been the secretary-general of the Chinese Association of Plastics and Aesthetics (中國整形美容協會) since August 2014 and the chairman of the plastic surgery professional committee of the Chinese Medical Information and Big Data Association (中國衛生信息與健康醫療大數據學會) since January 2018.

Mr. Zhao graduated from Changzhi Medical College (長治醫學院), formerly known as Jindongnan Medical College (晉東南醫學專科學校), with a diploma majoring in medical in August 1982. He obtained his master’s degree and doctoral degree in plastic surgery from Chinese Academy of Medical Sciences and Peking Union Medical College (中國醫學科學院北京協和醫學院) in July 1993 and July 1998, respectively.

Mr. Zhou Tao David (周韜), aged 50, was appointed as our independent non-executive Director in July 2021, and is primarily responsible for providing independent opinion and judgement to our Board.

Mr. Zhou has more than 15 years of experience in legal and compliance. From September 2004 to December 2010, he was an assistant to the general manager in the legal department of China Everbright Holdings Company Limited (中國光大集團有限公司). From January 2011 to April 2011, he worked at Haitong International Holdings Limited (海通國際控股有限公司), the

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Since September 2017, Mr. Zhou has been an external supervisor at Henan Jinma Energy Company Limited (河南金馬能源股份有限公司) (Stock Code: 6885.HK), where he is primarily responsible for supervising the operations and financial activities. Since September 2019, he has been a chief strategic consultant of Orient Group Co., Ltd. (東方集團有限公司), a modern agricultural enterprise holding interests in several listed companies, including Orient Group Incorporation (東方集團股份有限公司) (Stock Code: 600811.SH).

Mr. Zhou obtained a bachelor’s degree in laws from Xiamen University (廈門大學)in July 1992. He also received a bachelor’s degree in laws from Manchester Metropolitan University, England in July 2007 through a long-distance learning program. Mr. Zhou is a solicitor in Hong Kong and holds the lawyer qualification in the PRC.

SUPERVISORS

The Board of Supervisors consists of three Supervisors, comprising one employees representative and two shareholders’ representatives. Among the three Supervisors, the employees representative is elected by our employees while the shareholders representatives are elected by our Shareholders, all for a term of three years and renewable upon re-election and re-appointment.

The following sets forth the biographies of our Supervisors.

Ms. Lu Zhan (路展), aged 43, was appointed as the Chairman of the Board of Supervisors and our Supervisor in July 2018 and is primarily responsible for supervising the performance of duties by our Directors and senior management.

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Ms. Lu has over 20 years of experience in public relationship and administrative management. She worked in BenQ Corporation (明基電通股份有限公司), currently known as Qisda Corporation (佳世達科技股份有限公司) (Stock Code: 2352.TW), a company principally engaged in manufacture and marketing of electronic products, from July 2000 to December 2002. She worked in Beijing Wanwang Zhicheng Technology Co., Ltd. (北京萬網志成科技有限公司) from January 2003 to December 2005 and subsequently in Alibaba Cloud Computing (Beijing) Co., Ltd. (阿里巴巴雲計算(北京)有限公司) from February 2006 to January 2014. She joined our Group in May 2014 and currently serves as the director of the president office.

Ms. Lu received a college graduation certificate in business administration by way of distance learning from China University of Petroleum (中國石油大學) in January 2007.

Ms. You Weiwei (尤薇薇), aged 43, was appointed as our Supervisor in April 2021 and is primarily responsible for supervising the performance of duties by our Directors and senior management.

Ms. You has over 15 years of experience in administration and human resources. From February 2003 to May 2004, she worked at Sira (Tianjin) Radiator Co., Ltd. (意樂(天津)散熱器有限公司). From July 2005 to February 2013, she was an office manager at the Beijing Representative Office of Trützschler Textile Machinery Co., Ltd. (特呂茨施勒紡織機械有限公司), a global leading textile machinery manufacturing group where she was primarily responsible for its administrative and business affairs. From July 2013 to May 2018, she successively served a manager and a director of human resources and administration department at Beijing Panther Healthcare Medical Equipment Co., Ltd. (北京派爾特醫療科技股份有限公司), a company developing, manufacturing and distributing surgical stapling and minimally invasive endo surgery products. In May 2018, she joined our Group and became a director of human resources management center.

Ms. You obtained a qualification certificate of Enterprise Human Resources Manager (Level 1) and a qualification certificate of Psychological Counselor (Level 2), awarded by the Vocational Skills Appraisal Center of Ministry of Human Resources and Social Security (人力資源和社會保障部職業技能鑒定中心), in April 2017.

Ms. You graduated from the University of International Business and Economics (對外經濟貿易大學) with a diploma majoring in international accounting in June 1999 and graduated from Renmin University of China (中國人民大學) with a master’s degree in business administration in June 2014.

Ms. Liu Qingrong (劉慶榮), aged 52, was appointed as our Supervisor in July 2018 and is primarily responsible for supervising the performance of duties by our Directors and senior management.

With over 20 years of experience in the aesthetic medical industry, Ms. Liu has accumulated rich work experience in the operation and management of aesthetic medical services. In November 2000, she joined Beijing Zhonghengjian and served as a consulting sales

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Ms. Liu obtained a college graduation certificate in human resource management by way of distance learning from Beijing International Youth Training College (北京國際青年研修學院) in July 2006.

SENIOR MANAGEMENT

Our senior management is responsible for the day-to-day management and operation of our business. The following sets forth the biographies of the members of our senior management.

Mr. Wang Yong’an (汪永安), see “– Directors – Executive Directors” in this section.

Mr. Liu Jianru (劉劍如), aged 48, was appointed as the executive deputy general manager of our Group in June 2020. He has served in our Group since December 2004 and is primarily responsible for assisting in overall management, strategic planning and managing our aesthetic medical institutions in Tianjin, Qingdao and Jinan.

Mr. Liu has more than 20 years of experience in aesthetic medical operational management. In November 1998, he joined Beijing Zhonghengjian and served as a project manager till December 1999. Mr. Liu joined our Group in December 2004 and served as the chief hospital administrator of Tianjin Hospital till December 2013, and has been responsible for managing our aesthetic medical institutions in Tianjin, Qingdao and Jinan since December 2013.

Mr. Liu has been the standing director of the Aesthetic and Regenerative Medicine Branch of Chinese Association of Plastics and Aesthetics (中國整形美容協會美容與再生醫學分會) since August 2015 and has been the vice chairman of the Aesthetic Medical Physician Branch of Tianjin Medical Doctor Association (天津市醫師協會醫療美容科醫師分會) since September 2019.

Mr. Liu graduated from Tianjin College of Traditional Chinese Medicine (天津中醫學院), currently known as Tianjin University of Traditional Chinese Medicine (天津中醫藥大學), with a bachelor’s degree majoring in integrated Traditional Chinese and western medicine in July 1996.

Ms. Wang Zheng (王崢), see “– Directors – Executive Directors” in this section.

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Save as disclosed herein, to the best of the knowledge, information and belief of our Directors, having made all reasonable enquiries, there are no other matters relating to the appointment of our Directors, Supervisors and senior management members that need to be brought to the attention of our Shareholders and none of our Directors, Supervisors and senior management members held any directorship in any public companies the securities of which are listed on any securities market in Hong Kong or overseas in the last three years immediately preceding the date of this document.

JOINT COMPANY SECRETARIES

Ms. Wang Zheng (王崢), see “– Directors – Executive Directors” in this section.

Ms. Ko Mei Ying (高美英), was appointed as one of our joint company secretaries in July 2021 with effect from the [REDACTED].

Ms. Ko is a manager of corporate secretarial department of SWCS Corporate Services Group (Hong Kong) Limited, a professional services provider specializing in corporate services, and has over ten years of experience in accounting, auditing and corporate services field.

Ms. Ko obtained a bachelor’s degree of commerce in accounting from Macquarie University, Australia in September 2004, and a master’s degree of science in professional accounting and corporate governance from City University of Hong Kong in February 2015. Ms. Ko is an associate member of The Chartered Governance Institute (formerly known as The Institute of Chartered Secretaries and Administrators) and The Hong Kong Chartered Governance Institute (formerly known as The Hong Kong Institute of Chartered Secretaries).

MANAGEMENT PRESENCE IN HONG KONG

Rules 8.12 and 19A.15 of the Listing Rules require that a listing applicant applying for a primary listing on the Stock Exchange must have a sufficient management presence in Hong Kong. This normally means that at least two of its executive directors must be ordinarily resident in Hong Kong. Our headquarters and our principal business operations are located, managed and conducted in the PRC, and both of our executive Directors currently reside in the PRC. As a result, our Company does not, and will not, in the foreseeable future, have sufficient management presence in Hong Kong as required under Rules 8.12 and 19A.15 of the Listing Rules. Furthermore, it would be impractical and commercially unnecessary for our Group to appoint additional executive Directors who are ordinarily resident in Hong Kong or to relocate our existing PRC based executive Directors to Hong Kong.

Our Company has applied to the Stock Exchange for a waiver from strict compliance with the requirements under Rules 8.12 and 19A.15 of the Listing Rules. See “Waivers from Strict Compliance with the Listing Rules – Waiver in Relation to Management Presence in Hong Kong” for more details.

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BOARD COMMITTEES

Audit Committee

Our Company has established an audit committee with written terms of reference in compliance with the requirements under the Listing Rules. The audit committee consists of three members, being Mr. Wu Jun, Mr. Fang Min and Mr. Zhou Tao David. The chairperson of the audit committee is Mr. Wu Jun, who is the independent non-executive Director with the appropriate accounting and related financial management expertise. The primary duties of the audit committee include, among others:

• reviewing our compliance, accounting policies and financial reporting procedures;

• supervising the implementation of our internal audit system;

• advising on the appointment or replacement of external auditors;

• liaising between our internal audit department and external auditors;

• other responsibilities as authorized by our Board.

Remuneration Committee

Our Company has established a remuneration committee with written terms of reference in compliance with the requirements under the Listing Rules. The remuneration committee consists of three members, being Mr. Zhao Zhenmin, Mr. Wang Yong’an and Mr. Wu Jun. The chairperson of the remuneration committee is Mr. Zhao Zhenmin. The primary duties of the remuneration committee include, among others:

• making recommendations to the Board on our policy and structure concerning remuneration of our Directors and members of the senior management;

• making recommendations to the Board on the specific remuneration package of each Director and members of the senior management;

• reviewing and approving compensations payable to executive Directors and members of senior management for any loss or termination of office or appointment to ensure that it is consistent with contractual terms and is otherwise fair and not excessive;

• reviewing and approving compensation arrangements relating to dismissal or removal of any Director for his or her misconduct to ensure that such arrangements are consistent with contractual terms and are otherwise reasonable and appropriate; and

• other responsibilities as authorized by our Board.

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Nomination Committee

Our Company has established a nomination committee with written terms of reference in compliance with the requirements under the Listing Rules. The nomination committee consists of three members, being Mr. Zhou Tao David, Mr. Wang Yong’an and Mr. Zhao Zhenmin. The chairperson of the nomination committee is Mr. Zhou Tao David. The primary duties of the nomination committee include, among others:

• reviewing the structure, size and composition of the Board annually, and advising on any changes of the Board proposed in accordance with the strategies of our Company;

• identifying, selecting or making recommendations to our Board on the selection of individuals nominated for directorships;

• making recommendations to the Board on relevant matters relating to the appointment and re-appointment of our Directors;

• assessing the independence of independent non-executive Directors; and

• other responsibilities as authorized by our Board.

CORPORATE GOVERNANCE

Pursuant to code provision A.2.1 in the Corporate Governance Code as set out in Appendix 14 to the Listing Rules, the roles of chairman and chief executive should be separate and should not be performed by the same individual.

Mr. Wang is currently serving as the chairman of the Board as well as the chief executive officer of our Company. As Mr. Wang is the founder of our Group and has been managing our Group’s business and overall strategic planning since its inception, our Directors consider that vesting the roles of chairman and chief executive officer in Mr. Wang is beneficial to the business prospects and management of our Group by ensuring consistent leadership within our Group. Taking into account all the corporate governance measures that we are going to implement upon [REDACTED], our Board considers that the balance of power and authority for the present arrangement will not be impaired and this structure will enable our Company to make and implement decisions promptly and effectively. Accordingly, our Company had not segregated the roles of its chairman and chief executive officer. Our Board will continue to review and consider splitting the roles of chairman of our Board and the chief executive officer of our Company at an appropriate time if necessary, taking into account the circumstances of our Group as a whole.

Saved as disclosed above, as of the Latest Practicable date and to the best of the knowledge, information and belief of our Directors, having made all reasonable enquiries, the Directors are not aware of any deviation from provisions in the Corporate Governance Code as set out in Appendix 14 to the Listing Rules.

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BOARD DIVERSITY

We [have adopted] a board diversity policy which sets out the approach to achieve and maintain an appropriate balance of diversity perspectives of our Board that are relevant to our business growth. Selection of candidates will be based on a range of diversity perspectives, including but not limited to gender, age, cultural and educational background, ethnicity, professional experience, skills, knowledge and length of service. The ultimate decision will be based on merits and contribution that the selected candidates will bring to the Board.

Our nomination committee is responsible for ensuring the diversity of our Board. After the [REDACTED], our nomination committee will review the board diversity policy from time to time to ensure its continued effectiveness and we will disclose in our corporate governance report about the implementation of the board diversity policy on annual basis.

COMPENSATION OF DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

Our Directors, Supervisors and senior management members receive compensation from our Company in the form of salaries, allowances and benefits in kind, discretionary bonuses and retirement scheme contributions.

The aggregate amounts of remuneration (including fees, salaries, allowances and benefits in kind, discretionary bonuses, and retirement scheme contributions) paid to our Directors and Supervisors for the three years ended December 31, 2018, 2019 and 2020 and three months ended March 31, 2021 were approximately RMB2.5 million, RMB1.9 million, RMB1.5 million and RMB0.4 million, respectively.

For the three years ended December 31, 2018, 2019 and 2020 and three months ended March 31, 2021, the aggregate amount of remuneration (including salaries and other emoluments, and retirement scheme contributions) for the five highest paid individuals who are not Directors of our Group were approximately RMB7.3 million, RMB7.6 million, RMB7.6 million and RMB1.9 million, respectively.

It is estimated that remuneration equivalent to approximately RMB3.97 million in aggregate will be paid to the Directors and Supervisors (inclusive of benefits in kind but exclusive of any discretionary bonuses) by our Company for the year ending December 31, 2021 based on the arrangements currently in force.

No remuneration was paid by our Company to the Directors or Supervisors or the five highest paid individuals as inducement to join or upon joining our Company or as a compensation for loss of office during the Track Record Period. Furthermore, none of our Directors or Supervisors had waived or agreed to waive any remuneration during the Track Record Period.

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COMPLIANCE ADVISER

We have appointed Haitong International Capital Limited as the compliance adviser pursuant to Rule 3A.19 and 19A.05 of the Listing Rules, and the compliance adviser will advise our Company in the following circumstances:

• before the publication of any regulatory announcement, circular or financial report;

• where a transaction, which might be a notifiable or connected transaction under the Listing Rules, is contemplated, including share issues and share repurchases;

• where our Company proposes to use the [REDACTED]ofthe[REDACTED]ina manner that is different from that detailed in this document or where our business activities, developments or results deviate from any forecasts, estimates or other information in this document; and

• where the Stock Exchange makes an inquiry of our Company regarding unusual movements in the price or trading volume of the Shares or any other matters under Rule 13.10 of the Listing Rules a false market in the Shares.

The terms of the appointment of the compliance adviser will commence on the [REDACTED] and is expected to end on the date when our Company distributes the annual report of its financial results for the first full financial year commencing after the [REDACTED].

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To the best knowledge of our Directors, the following persons will, immediately after the completion of the [REDACTED] (assuming the [REDACTED] is not exercised), have an interest or short position in the Shares or underlying Shares which are required to be disclosed to our Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, directly or indirectly, be interested in 10% or more of the nominal value of any class of share capital carrying the rights to vote in all circumstances at the general meetings of our Company:

Approximate percentage of Approximate shareholding in percentage of the relevant class shareholding in Number of Shares of Shares our Company held immediately immediately immediately following the following the following the Class of completion of the completion of the completion of the Name of Shareholder Nature of interest Shares [REDACTED] [REDACTED](1) [REDACTED](1)

Mr. Wang(2)(3) Beneficial interest/Interest in [REDACTED][REDACTED][REDACTED]% [REDACTED]% controlled corporations/ Interest of concert parties Beneficial interest [REDACTED][REDACTED][REDACTED]% [REDACTED]% Mr. Wang Muyuan(2)(3) Beneficial interest/Interest of [REDACTED][REDACTED][REDACTED]% [REDACTED]% concert parties Interest of concert parties [REDACTED][REDACTED][REDACTED]% [REDACTED]% Anjian Hengyuan(2) Beneficial interest [REDACTED][REDACTED][REDACTED]% [REDACTED]% Meirui Shilan(2) Beneficial interest [REDACTED][REDACTED][REDACTED]% [REDACTED]% Citrine HK(4) Beneficial interest [REDACTED][REDACTED][REDACTED]% [REDACTED]% Zhuhai Yuehe(5) Beneficial interest [REDACTED][REDACTED][REDACTED]% [REDACTED]% Suzhou Yuehan(5) Beneficial interest [REDACTED][REDACTED][REDACTED]% [REDACTED]% CDH Giant Healthcare(6) Beneficial interest [REDACTED][REDACTED][REDACTED]% [REDACTED]% CDH Jingchun(6) Beneficial interest [REDACTED][REDACTED][REDACTED]% [REDACTED]% CDH Jingrun(6) Beneficial interest [REDACTED][REDACTED][REDACTED]% [REDACTED]%

Notes:

(1) The calculation is based on the total number of [REDACTED] Domestic Shares and [REDACTED] H Shares in issue immediately following the completion of the [REDACTED] (assuming the [REDACTED]isnot exercised) and the [REDACTED].

(2) Anjian Hengyuan and Meirui Shilan are held by Mr. Wang as to approximately 92.22% and 85.76%, respectively. Therefore, Mr. Wang is deemed to be interested in the Shares directly held by Anjian Hengyuan and Meirui Shilan.

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(3) Pursuant to the concert party agreement, Mr. Wang and Mr. Wang Muyuan have confirmed that they are acting in concert in respect of their equity interests in our Company. See “History and Corporate Structure – Our Corporate Development – Concert Party Agreement” for details. As such, Mr. Wang and Mr. Wang Muyuan are deemed to be interested in the Shares interested by each other.

(4) Citrine HK is wholly-owned by Citrine Gem Investment Holdings Limited. Citrine Gem Investment Holdings Limited is wholly-owned by Sunnybeach Investment Ltd which is held by Warburg Pincus Private Equity XI, L.P. as to approximately 60.49%. The general partner of Warburg Pincus Private Equity XI, L.P. is Warburg Pincus XI, L.P., the general partner of which is WP Global LLC. The managing member of WP Global LLC is Warburg Pincus Partners II, L.P., the general partner of which is Warburg Pincus Partners GP LLC. Warburg Pincus & Co is the managing member of Warburg Pincus Partners GP LLC.

(5) The general partner of Zhuhai Yuehe and Suzhou Yuehan is Zhuhai Yuexin Investment Management Enterprise (Limited Partnership) (珠海悅昕投資管理企業(有限合夥)). The general partner of Zhuhai Yuexin Investment Management Enterprise (Limited Partnership) is Beijing Yuehe Jiasheng Enterprise Management Consulting Co., Ltd. (北京悅和嘉盛企業管理諮詢有限公司) which is wholly-owned by Joy Capital. Joy Capital is held by Mr. Liu Erhai (劉二海) and Ms. Lin Lin (林琳) as to 99.9967% and 0.0033%, respectively.

(6) CDH Giant Healthcare is wholly-owned by CDH Giant Health III Limited which is in turn wholly-owned by CDH Fund VI, L.P. The general partner of CDH Fund VI, L.P. is CDH VI Holdings Company Limited which is owned as to 85% by CDH Griffin Holdings Company Limited (“CDH Griffin”). CDH Equity Investment Management (Tianjin) Co., Ltd. (鼎暉股權投資管理(天津)有限公司) acts as the executive partner of both CDH Jingchun and CHD Jingrun, and is owned as to 85.4% by Tianjin Taiding Investment Co., Ltd. (天津泰鼎投資有限公司) and 14.6% by China National Investment and Guaranty Corporation (中國投融資擔保股份有限公司). Tianjin Taiding Investment Co., Ltd. is owned as to 45% and 55% by Tianjin Weiyuan Investment Management Co., Ltd. (天津維遠投資管理有限公司)(“Tianjin Weiyuan”) and Tianjin Haoyong Investment Management Co., Ltd. (天津浩永投資管理有限公司)(“Tianjin Haoyong”), respectively. Tianjin Weiyuan is wholly-owned by Ningbo Economic and Technological Development Zone Penghui Investment Consulting Co., Ltd. (寧波經濟技術開發區鵬暉投資諮詢有限公司)(“Ningbo Penghui”). Ningbo Penghui is wholly owned by Ningbo Economic and Technological Development Zone Xubo Investment Consulting Co., Ltd. (寧波經濟技術開發區旭博投資諮詢有限公司)(“Ningbo Xubo”). Ningbo Xubo is wholly owned by Ningbo Economic and Technological Development Zone Weijun Investment Consulting Co., Ltd. (寧波經濟技術開發區維均投資諮詢有限公司)(“Ningbo Weijun”). Ningbo Weijun is wholly-owned by Access Star Company Limited (“Access Star”). Tianjin Haoyong is wholly-owned by Ningbo Economic and Technological Development Zone Runyong Investment Consulting Co., Ltd. (寧波經濟技術開發區潤永投資諮詢有限公司) (“Ningbo Runyong”). Ningbo Runyong is wholly-owned by Ningbo Economic and Technological Development Zone Chunyong Investment Consulting Co., Ltd. (寧波經濟技術開發區淳永投資諮詢有限公司) (“Ningbo Chunyong”). Ningbo Chunyong is wholly-owned by Ningbo Economic and Technological Development Zone Huiyong Investment Consulting Co., Ltd. (寧波經濟技術開發區匯永投資諮詢有限公司) (“Ningbo Huiyong”), which is wholly-owned by East Oak Company Limited (“East Oak”). Each of Access Star and East Oak is wholly-owned by CDH Investment (BVI) Company Limited, which is wholly-owned by CDH Investment Management Company Limited. CDH Investment Management Company Limited is owned as to 85% by CDH Griffin. Therefore, CDH Griffin is deemed under the SFO to be interested in the [REDACTED] H Shares held by CDH Giant Healthcare, CDH Jingchun and CDH Jingrun upon the [REDACTED].

Save as disclosed above, the Directors are not aware of any person who will, immediately following the completion of the [REDACTED] (assuming the [REDACTED] is not exercised) and [REDACTED], have an interest or short position in the Shares or underlying Shares which will be required to be disclosed to our Company and the Stock Exchange under the provisions of Division 2 and 3 of Part XV of the SFO or will be, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of our Company.

We are not aware of any arrangement which may result in any change of control in our Company at any subsequent date.

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As of the Latest Practicable Date, the registered capital of our Company was RMB134,849,691, comprising 101,187,522 Domestic Shares and 33,662,169 Unlisted Foreign Shares with a nominal value of RMB1.00 each.

[REDACTED]

Immediately following completion of the [REDACTED] and [REDACTED], assuming the [REDACTED] is not exercised, the share capital of our Company will be as follows:

Approximate % of the enlarged issued share capital after the Description of Shares Number of Shares [REDACTED]

Domestic Shares [REDACTED][REDACTED]% [REDACTED][REDACTED][REDACTED]% [REDACTED][REDACTED][REDACTED]% H Shares to be issued pursuant to the [REDACTED][REDACTED][REDACTED]%

Total [REDACTED][REDACTED]%

Notes:

(1) [REDACTED].

(2) See “History and Corporate Structure – Corporate Structure – Corporate Structure immediately following the [REDACTED]” for details of the identities of the shareholders whose Shares will be [REDACTED].

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Immediately following completion of the [REDACTED] and [REDACTED], assuming the [REDACTED] is fully exercised, the share capital of our Company will be as follows:

Approximate % of the enlarged issued share capital after the Description of Shares Number of Shares [REDACTED]

Domestic Shares [REDACTED][REDACTED]% [REDACTED][REDACTED][REDACTED]% [REDACTED][REDACTED][REDACTED]% H Shares to be issued pursuant to the [REDACTED][REDACTED][REDACTED]%

Total [REDACTED][REDACTED]%

Notes:

(1) [REDACTED].

CLASS OF SHARES

Upon the completion of the [REDACTED] and [REDACTED], the Shares will consist of Domestic Shares and H Shares. Domestic Shares and H Shares are all ordinary Shares in the share capital of the Company.

Apart from certain qualified domestic institutional investors in the PRC, the qualified PRC investors under the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect and other persons who are entitled to hold our H Shares pursuant to relevant PRC laws and regulations or upon approvals of any competent authorities [REDACTED], H Shares generally cannot be subscribed for by or traded between legal or natural PRC persons.

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Domestic Shares and H Shares are regarded as different classes of Shares. The differences between the two classes of Shares, provisions on class rights, dispatch of notices and financial reports to Shareholders, dispute resolution, registration of Shares on different registers of Shareholders, the procedure of transfer of Shares and appointment of dividend receiving agents as contained in the Articles of Association are summarized in “Appendix V – Summary of Articles of Association.”

Furthermore, any change or abrogation of the rights of class Shareholders shall be approved by way of a special resolution of the general meeting of Shareholders and by a separate class shareholders meeting of class Shareholders convened by the affected class of Shareholders. The circumstances under which a general meeting and/or a class meeting is required are summarized in “Appendix V – Summary of Articles of Association.” However, the special approval process of separate classes of Shareholders is not required under the following circumstances:

(i) issue of Domestic Shares or H Shares of not more than 20% of existing Domestic Shares or H Shares, respectively, either separately or concurrently in a period of 12 months, pursuant to an approval by a special resolution of the general meeting;

(ii) proposal to issue of Domestic Shares and H Shares of the Company upon its establishment pursuant to approval of the securities regulatory authority under the State Council, provided that such proposal is carried out within 15 months after such approval; or

(iii) transfer of Domestic Shares by domestic shareholder to foreign investors, or [REDACTED] of Domestic Shares by domestic shareholder to foreign Shares in part or in full, and such transferred or converted Shares are listed on overseas stock exchange as approved by the securities regulatory authority under the State Council and with the consent of the Hong Kong Stock Exchange.

Save as disclosed above, Domestic Shares and H Shares shall rank pari passu with each other in all other respects and, in particular, will rank equally for dividends or distributions declared, paid or made. All dividends for H Shares will be denominated and declared in Renminbi, and paid in Hong Kong dollars or Renminbi, whereas all dividends for Domestic Shares will be paid in Renminbi. Other than cash, dividends could also be paid in the form of shares.

CONVERSION OF DOMESTIC SHARES AND UNLISTED FOREIGN SHARES INTO H SHARES

If any of the Domestic Shares and Unlisted Foreign Shares are to be converted, [REDACTED] and traded as H Shares on the Hong Kong Stock Exchange, such conversion, [REDACTED] and [REDACTED] will need the approval of the relevant PRC regulatory authorities, including the CSRC, and the approval of the Hong Kong Stock Exchange.

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[REDACTED] Review and Approval by the CSRC

[REDACTED]

[REDACTED] Approval by the Hong Kong Stock Exchange

We have applied to the [REDACTED] of the Hong Kong Stock Exchange for the granting of [REDACTED] of, and permission to deal in, our H Shares to be issued pursuant to the [REDACTED] (including any H Shares which may be issued pursuant to the exercise of the [REDACTED]) and the H Shares to be [REDACTED] on the Hong Kong Stock Exchange, which is subject to the approval by the Hong Kong Stock Exchange.

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[REDACTED]

TRANSFER OF SHARES ISSUED PRIOR TO THE [REDACTED]

According to the Company Law, the Shares issued by the Company prior to the [REDACTED] are restricted from trading within one year from the [REDACTED].

[REDACTED]

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REGISTRATION OF SHARES NOT LISTED ON AN OVERSEAS STOCK EXCHANGE

According to the Notice of Centralized Registration and Deposit of Non-overseas Listed Shares of Companies Listed on an Overseas Stock Exchange (《關於境外上市公司非境外上市股份集中登記存管有關事宜的通知》) issued by the CSRC, the Company is required to register the Shares with the China Clearing within 15 business days upon the [REDACTED] and provide a written report to the CSRC regarding the results of centralized registration and deposit of the Domestic Shares as well as the [REDACTED] and [REDACTED]ofthe [REDACTED].

SHAREHOLDERS’ APPROVAL FOR THE [REDACTED]

Approval from holders of the Shares is required for the Company to issue [REDACTED] and seek the [REDACTED]of[REDACTED] on the Hong Kong Stock Exchange. The Company has obtained such approval at the Shareholders’ general meeting held on July 12, 2021.

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You should read the following discussion and analysis in conjunction with our audited consolidated financial information as of and for the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2021 included in the Accountants’ Report set out in Appendix I to this document, together with the accompanying notes. Our consolidated financial information has been prepared in accordance with IFRSs.

The following discussion and analysis contain forward-looking statements that reflect our current views with respect to future events and financial performance that involve risks and uncertainties. These statements are based on assumptions and analysis made by us in light of our experience and perception of historical events, current conditions and expected future developments, as well as other factors we believe are appropriate under the circumstances. In evaluating our business, you should carefully consider the information provided in the section headed “Risk Factors” in this document.

OVERVIEW

During the Track Record Period, we generated revenue primarily from the provision of (i) aesthetic non-surgical services, primarily comprising aesthetic injection procedures and aesthetic energy-based procedures, and (ii) aesthetic surgical services involving aesthetic plastic procedures.

Our revenue from continuing operations increased from RMB661.1 million in 2018 to RMB811.2 million in 2020, representing a CAGR of 10.8%. Our revenue from continuing operations increased by 119.4% from RMB123.5 million for the three months ended March 31, 2020 to RMB271.0 million for the three months ended March 31, 2021. We recorded net loss from continuing operations of RMB38.5 million, RMB60.2 million and RMB15.2 million for the years ended December 31, 2018 and 2019 and the three months ended March 31, 2020, while we recorded net profit from continuing operations of RMB32.2 million and RMB19.9 million for the year ended December 31, 2020 and the three months ended March 31, 2021.

BASIS OF PRESENTATION

Our Company was incorporated in the PRC with limited liabilities on February 20, 2008 under the PRC laws. The Company is ultimately controlled by Mr. Wang. The Company entered into a share transfer agreement on February 1, 2021 to acquire the entire equity interest in Tianjin Jiangyi and Tianjin Sweet Bestie from Anjian Hengyuan, which is controlled by

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Mr. Wang (the “Acquisition”). As the Company, Tianjin Jiangyi and Tianjin Sweet Bestie were controlled by Mr. Wang before and after the Acquisition and that control was not transitory, there was a continuation of the risks and benefits to Mr. Wang and therefore the Acquisition is considered as a business combination under common control. Accordingly, the accompanying consolidated financial information has been prepared using the principles of merger accounting as if the current group structure had always been in existence.

Our consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows of the companies now comprising the Group as if the existing relationship between the Company and its subsidiaries had been in existence throughout the Track Record Period or since their respective dates of incorporation/establishment or acquisition, whichever is the shorter period. Our consolidated statements of financial position have been prepared to present the financial position of the companies now comprising the Group as of the end of each period of the Track Record Period, or where the companies now comprising the Group was incorporated/acquired at a date after January 1, 2018, as if the consolidation had occurred from the date when those companies first came under the control of Mr. Wang.

For companies we disposed to third parties during the Track Record Period, they are excluded from the financial statements of the Group from the respective date of the disposal. Inter-company transactions, balances and unrealized gains or losses on transactions between group companies are eliminated on consolidation.

Our consolidated financial statements have been prepared in accordance with the IFRSs, International Accounting Standards (“IASs”) and Interpretations issued by the International Accounting Standards Board (the “IASB”) on the basis set out in Note 1 to the Accountants’ Report contained in Appendix I to this document.

KEY FACTORS AFFECTING OUR RESULTS OF OPERATIONS

Our financial condition and results of operations have been, and are expected to continue to be, affected by a number of factors, which primarily include the following:

The growth of aesthetic medical service market in China and increasing market acceptance of aesthetic medical services in China

The growth and success of our business are significantly affected by the trend of growth in consumer spending on aesthetic medical services. According to Frost & Sullivan, the total revenue of the aesthetic medical service market in China grew at a CAGR of 11.0% from RMB77.6 billion in 2016 to RMB117.6 billion in 2020 and such momentum is expected to continue from 2021 to 2025 at a CAGR of 19.7%. Please see “Industry Overview – Overview of Aesthetic Medical Service Market in China – Market Size.” As a leading private aesthetic medical institution group in China, we are well positioned to capture future growth opportunities in the fast-growing aesthetic medical service market in China. Conversely, a slowdown of the aesthetic medical service market in China may adversely affect our results of operations.

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The growth of the aesthetic medical service market in China has depended and will continue to depend, in part, on the market acceptance of aesthetic medical services by the general public in China. Despite the limited knowledge among the general public in China regarding the spectrum and the process of aesthetic medical services, we believe aesthetic medical services have gained popularity in recent years due to increased safety and effectiveness, reduced recovery time and generally greater publicity of the industry in the media. On the other hand, many consumers may be concerned with the risks inherent in aesthetic medical procedures. Therefore, any shift caused by media influences, peer perceptions, research indicating adverse health effects of aesthetic medical procedures, any medical incidents in the industry or otherwise could lead to deterioration in market perception towards and less demand for aesthetic medical services.

Number of aesthetic medical procedures performed and average spending per procedure

The revenue generated from our aesthetic medical services (comprising aesthetic non-surgical services and aesthetic surgical services), which accounted for substantially all of our revenue during the Track Record Period, was a function of the number of procedures performed and average spending per procedure. The number of aesthetic medical procedures is generally affected by:

• growth of client base as a result of our in-house sales and marketing efforts;

• our brand reputation;

• market demand for existing and newly introduced procedures;

• the opening and acquisition of new aesthetic medical institutions; and

• our ability to cross sell.

For aesthetic non-surgical services, the number of procedures is also affected by:

• recurring nature of these procedures;

• timing and number of newly introduced injection materials and energy-based devices as a result of developments and technological advances; and

• redirected demand formerly satisfied through aesthetic surgical services.

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Average spending per aesthetic medical procedure is generally affected by:

• market prices of the relevant procedures;

• our brand influence and perceived medical expertise;

• complexity of, the medical devices, implants, injection materials or other medical consumables used in, and the physicians involved in, the procedures performed; and

• geographically differentiated discretionary spending power and aesthetic preference.

For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2020 and 2021, revenue generated from aesthetic injection procedures represented 49.9%, 49.1%, 43.6%, 44.6% and 47.0%, respectively, of our total revenue from continuing operations. In the same periods, the total number of aesthetic injection procedures performed by continuing operations was 110,434, 149,373, 163,858, 23,130 and 63,542, respectively, and the average spending per aesthetic injection procedure was RMB2,986, RMB2,430, RMB2,158, RMB2,381 and RMB2,007, respectively. For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2020 and 2021, revenue generated from aesthetic energy-based procedures represented 15.6%, 18.5%, 28.6%, 20.6% and 27.9%, respectively, of our total revenue from continuing operations. In the same periods, the total number of aesthetic energy-based procedures performed by continuing operations was 99,465, 125,532, 121,941, 16,904 and 41,022, respectively, and the average spending per aesthetic energy-based procedure was RMB1,040, RMB1,091, RMB1,903, RMB1,503 and RMB1,841, respectively. The increases in the number of aesthetic injection procedures and aesthetic energy-based procedures performed during the Track Record Period were primarily due to (i) organic growth of our existing aesthetic medical institutions; (ii) our in-house sales and marketing efforts; (iii) the recovery from the adverse impact of COVID-19 pandemic in the first quarter of 2020; and (iv) newly established aesthetic medical institution whose operations ramped up. The decreases in average spending per aesthetic injection procedure were primarily due to greater discounts we offered in light of the decreases in industry pricing level. The increases in average spending per aesthetic energy-based procedure were primarily due to a change in the mix of services. For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2020 and 2021, revenue generated from aesthetic surgical services represented 27.0%, 25.4%, 22.8%, 31.1% and 19.9%, respectively, of our total revenue from continuing operations. In the same periods, the total number of aesthetic plastic procedures performed by continuing operations was 23,474, 23,293, 24,074, 4,911 and 6,914, respectively, and the average spending per aesthetic plastic procedure was RMB7,104, RMB7,494, RMB7,198, RMB7,309 and RMB7,364, respectively. The increase in the number of aesthetic plastic procedures performed from the three months ended March 31, 2020 to the three months ended March 31, 2021 was primarily due to the recovery from the adverse impact of COVID-19 pandemic in the first quarter of 2020. The higher average spending per aesthetic plastic procedure in 2019 was primarily due to a change in the mix of services. Please see “– Period to Period Comparison of Results of Operations from Continuing Operations” for more details.

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As we are a private for-profit aesthetic medical institution group and none of our medical institutions is a “medical insurance designated medical institution” (醫保定點醫療機構), our service fees are not subject to government regulation, and we are generally entitled to set the prices of our services at our discretion, subject to market conditions. Please see “Business – Pricing.”

Expansion of our aesthetic medical institution network

As of the Latest Practicable Date, we owned and operated three aesthetic medical specialty hospitals and two aesthetic medical specialty out-patient departments in Beijing. In addition, we have successfully expanded our business operations outside Beijing within a short timeframe and launched or acquired aesthetic medical institutions in Tianjin in 2004, Qingdao in 2005, Jinan in 2009 and Xi’an in 2014. The pace of the opening of new aesthetic medical institutions directly affects our results of operations because a new aesthetic medical institution generally has lower income and relatively higher operating costs during the initial stages of its operation. We also incur substantial expenses before the opening of new aesthetic medical institutions, such as renovation costs, rental expenses and equipment costs. We consider that a new aesthetic medical institution achieves breakeven when its monthly revenue first sufficiently covers its monthly operating expenses. We consider that a new aesthetic medical institution achieves investment payback when its accumulated net operating cash inflow is able to cover the total initial investment amount. However, the breakeven periods and the investment payback periods may be further affected by the specific characteristics of an aesthetic medical institution, such as its size, initial investment, the coverage of its services and the competitive landscape. As of the Latest Practicable Date, one out of our nine aesthetic medical institutions had not achieved breakeven, namely, Xi’an Hospital, and two out of our nine aesthetic medical institutions had not achieved investment payback, namely, Xi’an Hospital and Beijing Changdao Hospital. Our progress in opening new aesthetic medical institutions from period to period may also occur at an uneven rate. As a result, our profitability may fluctuate from period to period. Please see “Business – Our Aesthetic Medical Institutions.”

In the future, we plan to continue to expand our business by both organic growth and strategic acquisitions. Please see “Business – Our Future Expansion.” Our expansion requires us to make upfront investments, which could adversely impact our liquidity and profitability. Our ability to open or acquire and manage these additional aesthetic medical institutions in a cost-efficient manner determines whether and how quickly we can recover our investment, and may materially affect our revenue and profitability.

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Revenue mix

Our overall gross profit margin is affected by our revenue mix, due to considerable differences among the gross profit margins of our service offerings. During the Track Record Period, we experienced variation in the gross profit margins of our key service offerings, as well as in the different proportionate contributions of each key service offering to our total revenue. The gross profit margin of our aesthetic energy-based procedures is generally the highest among our key service offerings, while the gross profit margin of our aesthetic injection procedures is generally the lowest among our key service offerings. Please see “– Description of Key Statement of Profit or Loss Items – Continuing Operations – Gross Profit.” As our revenue mix changes, our overall gross margin will be negatively affected if we derive more of our revenue from relatively lower gross margin services. We expect our future gross profit margin to continue to be influenced by the revenue mix and the respective gross profit margin of our key service offerings.

Ability to control our costs and expenses

During the Track Record Period, cost of inventories, which mainly consists of implants, injection materials, skincare products, pharmaceuticals and other medical consumables, represented the largest component of our cost of sales, accounting for 24.5%, 24.6%, 24.4% and 25.6%, respectively, of our revenue for the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2021. The use of these supplies forms a key aspect of many of our aesthetic medical procedures. The following table sets forth a sensitivity analysis illustrating the impact of hypothetical fluctuations in cost of inventories on our net loss/profit for the periods indicated:

Three months Year ended December 31, ended March 31, 2018 2019 2020 2021 Change % change Change % change Change % change Change % change in net in net in net in net in net in net in net in net loss loss loss loss profit profit profit profit (RMB’000, except percentages)

+15% -24,301 -63.1% -27,258 -45.2% -29,677 -92.2% -10,390 -52.3% +10% -16,200 -42.0% -18,172 -30.2% -19,785 -61.5% -6,927 -34.8% +5% -8,100 -21.0% -9,086 -15.1% -9,892 -30.7% -3,463 -17.4% -5% 8,100 21.0% 9,086 15.1% 9,892 30.7% 3,463 17.4% -10% 16,200 42.0% 18,172 30.2% 19,785 61.5% 6,927 34.8% -15% 24,301 63.1% 27,258 45.2% 29,677 92.2% 10,390 52.3%

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Meanwhile, staff costs constituted the second largest component of our cost of sales, the largest component of our selling and marketing expenses and the largest component of our general and administrative expenses. For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2021, our total staff costs (including those recorded in cost of sales, selling and marketing expenses and general and administrative expenses) amounted to RMB275.7 million, RMB341.2 million, RMB335.0 million and RMB113.8 million, respectively, accounted for 41.7%, 46.2%, 41.3%, and 42.0% of our total revenue for the same periods, respectively. The following table sets forth a sensitivity analysis illustrating the impact of hypothetical fluctuations in staff costs on our net loss/profit for the periods indicated:

+15% -41,349 -107.3% -51,178 -84.9% -50,249 -156.1% -17,075 -85.9% +10% -27,566 -71.5% -34,118 -56.6% -33,500 -104.1% -11,384 -57.3% +5% -13,783 -35.8% -17,059 -28.3% -16,750 -52.0% -5,692 -28.6% -5% 13,783 35.8% 17,059 28.3% 16,750 52.0% 5,692 28.6% -10% 27,566 71.5% 34,118 56.6% 33,500 104.1% 11,384 57.3% -15% 41,349 107.3% 51,178 84.9% 50,249 156.1% 17,075 85.9%

As a result, we expect that cost of inventories as well as staff costs to continue to be our most significant costs and expenses going forward, particularly in light of the continued expansion and ramping up of our aesthetic medical institutions. Our ability to control such costs and expenses may significantly affect our profitability.

Our brand awareness

We are committed to providing high-quality and safe aesthetic medical services and offering a superior client experience. Our high-quality and safety services have also helped us achieve a high level of client satisfaction, which is evidenced by a satisfaction rate of 99% among certain clients of continuing operations, according to the Frost & Sullivan Survey.

In order to enhance public recognition of our brand and services in both existing and new markets and to attract new clients and retain our existing clients, we have implemented effective client acquisition and management strategies, which have enabled us to build a broad and loyal client base. Our active clients from continuing operations, defined as those who have received at least one procedure in the relevant period, increased from 70,467 in 2018 to 86,629 in 2020, and from 22,097 for the three months ended March 31, 2020 to 45,694 for the three months ended March 31, 2021. In particular, our new clients from continuing operations, defined as those who have purchased at least one aesthetic medical procedure in the relevant period for the first time, increased from 38,928 in 2018 to 44,386 in 2020, and from 5,241 for

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Advances in aesthetic medical technology

During the Track Record Period, aesthetic medical technology advanced quickly and is expected to continue to evolve as new procedures and devices emerge. Our ability to retain and attract clients and, in turn, our ability to generate revenue have been, and are expected to continue to be, affected by our ability to make available new aesthetic medical services and enhance our existing services derived from developments in technology. Moreover, advances in technology may further reduce potential risks associated with aesthetic medical services, thereby increasing the popularity of aesthetic medical services among consumers. We have active dialogues and exchanges of information with well-respected medical institutions and industry associations in China and developed overseas markets, such as the United States, France, Israel, Japan and South Korea, to learn about the latest developments in the aesthetic medical industry. Our ability to continuously adopt the latest technologies and quickly and cost-efficiently respond to our clients’ ever changing preferences has a positive effect on our financial condition and results of operations.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We prepare our consolidated financial information in accordance with IFRSs, which requires us to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities on the date of the consolidated financial information and the reported amounts of revenue and expenses during the financial reporting period. We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Because the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. We will continuously assess our assumptions and estimates going forward. We consider the policies discussed below to be critical to an understanding of our consolidated financial information as their application places significant demands on our management’s judgment.

For details of our significant accounting policies, see Note 2 to the Accountants’ Report set out in Appendix I to this document.

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Revenue Recognition

Our revenue during the Track Record Period mainly represents proceeds from aesthetic medical services and sales of skincare products. Revenue is recognized at the amount of promised consideration to which we are expected to be entitled, excluding those amounts collected on behalf of third parties. Revenue excludes value added tax or other sales taxes and is after deduction of any trade discounts. Any refunds to settle client complaints will be deducted from our revenue.

Aesthetic Medical Services

Revenue from provision of aesthetic medical services, comprising primarily aesthetic non-surgical services and aesthetic surgical services, is recognized when the services have been rendered to our clients.

Most of our services are sold on a prepaid basis, comprising various components, with the deferred revenue of each component being an appropriate proportion of the total transaction price under the contract and allocated between all the goods and services promised under the contract on a relative stand-alone selling price basis.

Our clients may not utilize all of their contracted rights within the service period. Such unutilized services are referred to as breakage. An expected breakage amount is determined by historical experience and is recognized as revenue in proportion to the pattern of services utilized by the clients.

Any residual deferred revenue at the end of the service period, after the effect of previously recognized expected breakage amount, is fully recognized in profit or loss.

Services which are not sold on a prepaid basis is recognized in full when the services have been rendered to clients.

Sales of Skincare Products

Revenue of sales of skincare products is recognized when our client takes possession of and accepts the products. If the products are a partial fulfilment of a contract covering other goods and/or services, the amount of revenue recognized is an appropriate proportion of the total transaction price under the contract, allocated between all the goods and services promised under the contract on a relative stand-alone selling price basis.

Deferred Tax Assets

Deferred tax assets are recognized for unused tax losses and temporary differences to the extent that it is probable that taxable profit will be available in the foreseeable future against which the losses and temporary differences can be utilized. Significant management judgement is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable profits together with future tax planning strategies.

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Fair Value of Financial Assets

During the Track Record Period, we had investments in wealth management products and investments in equity securities of private companies, which were categorized within level 3 of the fair value hierarchy. The main level 3 inputs used by us for wealth management products are the expected rates of return. The fair value of wealth management products is determined based on the discounted cash flow method. The fair value of unlisted equity securities is determined using the price to book ratio of comparable listed companies adjusted for lack of marketability discount. The fair value measurement is negatively correlated to the discount for lack of marketability.

Details of the fair value measurement of the level 3 financial assets, particularly the fair value hierarchy, the valuation techniques and significant unobservable inputs, the relationship of unobservable inputs to fair value and reconciliation of level 3 measurements are disclosed in Note 25(e) to the historical financial information of our Group for the Track Record Period.

Adoption of IFRS 16

We have adopted a full retrospective application of IFRS 16, which we have applied on a consistent basis throughout the Track Record Period. IFRS 16 “Leases” provides new provisions for the accounting treatment of leases and requires lessees to recognize certain leases on the statements of financial position. Specifically, for any lease with a term of more than 12 months, unless the underlying asset is of low value, we recognize a right-of-use asset representing our right to use the underlying leased asset in our consolidated statements of financial position and depreciation of the right-of-use asset is recognized over the lease term on a straight-line basis in our consolidated statements of comprehensive income. In addition, we record a lease liability representing our obligation to make lease payments based on present value, calculated by using the effective interest method, in our consolidated statements of financial position and finance costs on the lease liability is recognized in our consolidated statements of comprehensive income. As of December 31, 2018, 2019 and 2020 and March 31, 2021, we recorded right-of-use assets of RMB497.1 million, RMB581.0 million, RMB445.6 million and RMB442.6 million, respectively, and lease liabilities of RMB403.6 million, RMB467.5 million, RMB343.0 million and RMB335.1 million, respectively, in our consolidated statements of financial position. For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2021, we recorded depreciation of right-of-use assets of RMB49.6 million, RMB59.3 million, RMB57.8 million and RMB10.4 million, respectively, and finance costs on lease liabilities of RMB15.8 million, RMB16.8 million, RMB16.9 million and RMB4.1 million, respectively, in our consolidated statements of comprehensive income.

Save as disclosed above, the adoption of IFRS 16 did not have any significant impact on our financial position as of December 31, 2018, 2019 and 2020 and March 31, 2021 or our results of operations during the Track Record Period.

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DESCRIPTION OF KEY STATEMENT OF PROFIT OR LOSS ITEMS

The following table sets forth selected consolidated statement of profit or loss items for the periods indicated:

Three months ended Year ended December 31, March 31, 2018 2019 2020 2020 2021 (RMB in thousands) (Unaudited)

CONTINUING OPERATIONS Revenue 661,093 738,815 811,239 123,529 270,998 Cost of sales (305,975) (357,917) (376,390) (61,124) (124,455)

Gross profit 355,118 380,898 434,849 62,405 146,543 Other income and other gains/(losses) 1,669 6,789 3,327 152 1,836 General and administrative expenses (166,780) (202,008) (183,601) (39,432) (54,529) Selling and marketing expenses (198,913) (219,203) (187,520) (31,025) (64,221)

(Loss)/profit from operations (8,906) (33,524) 67,055 (7,900) 29,629 Finance costs (15,801) (16,781) (16,936) (4,185) (4,085) Share of net (losses)/profits of associates (520) (166) 3,017 235 368

(Loss)/profit before taxation (25,227) (50,471) 53,136 (11,850) 25,912 Income tax (13,303) (9,776) (20,952) (3,394) (6,030) (Loss)/profit from continuing operations for the year/period (38,530) (60,247) 32,184 (15,244) 19,882

DISCONTINUED OPERATION Loss from discontinued operation, net of tax (61,881) (58,137) (23,898) (21,740) (9,829)

(Loss)/profit for the year/period (100,411) (118,384) 8,286 (36,984) 10,053

Non-IFRS Measures – Continuing Operations Adjusted EBITDA 64,033 49,709 160,410 15,889 55,717 Adjusted net (loss)/profit (38,530) (60,247) 32,184 (15,244) 23,810

Continuing Operations

Revenue

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Revenue by Service Offerings

The following table sets forth our revenue by service offerings for the periods indicated:

Year ended December 31, Three months ended March 31, 2018 2019 2020 2020 2021 %of %of %of %of %of RMB’000 revenue RMB’000 revenue RMB’000 revenue RMB’000 revenue RMB’000 revenue (Unaudited)

Sub-total 451,030 68.2 516,573 69.9 599,862 73.9 82,578 66.9 207,809 76.7

Aesthetic surgical services Aesthetic plastic procedures 166,770 25.2 174,553 23.6 173,285 21.4 35,894 29.0 50,915 18.8 Other aesthetic surgical services(2) 11,851 1.8 13,067 1.8 11,012 1.4 2,534 2.1 2,885 1.1

Sub-total 178,621 27.0 187,620 25.4 184,297 22.8 38,428 31.1 53,800 19.9 Others(3) 31,442 4.8 34,622 4.7 27,080 3.3 2,523 2.0 9,389 3.4

Total 661,093 100.0 738,815 100.0 811,239 100.0 123,529 100.0 270,998 100.0

Notes:

(1) Other aesthetic non-surgical services primarily consist of aesthetic TCM services and other aesthetic dermatology services.

(3) Others primarily comprise cosmetic dentistry services and sales of skincare products.

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Our revenue generated from our aesthetic medical services is a function of the number of procedures performed and average spending per procedure in the relevant periods. The following table sets forth the number of aesthetic medical procedures we performed in connection with our aesthetic non-surgical services and aesthetic surgical services and the average spending per procedure for the periods indicated:

Three months ended Year ended December 31, March 31, 2018 2019 2020 2020 2021

Note:

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Revenue by Aesthetic Medical Institutions

The following table sets forth the revenue from each of our aesthetic medical institutions for the periods indicated:

Year ended December 31, Three months ended March 31, 2018 2019 2020 2020 2021 %of %of %of %of %of RMB’000 revenue RMB’000 revenue RMB’000 revenue RMB’000 revenue RMB’000 revenue (Unaudited)

Beijing Aikang Hospital 109,437 16.6 146,660 19.9 169,221 20.9 26,386 21.4 58,531 21.6 Beijing Xingfu Hospital 106,329 16.1 114,029 15.4 149,265 18.4 20,339 16.5 48,957 18.1 Beijing Jianxiang Hospital 79,962 12.1 102,916 13.9 106,461 13.1 13,772 11.1 35,576 13.1 Beijing Zizhu Hospital 27,370 4.1 28,916 3.9 26,650 3.3 4,577 3.7 6,871 2.5 Beijing Changdao Hospital –(1) –(1) –(1) –(1) 4,348(1) 0.5(1) –(1) –(1) 5,640 2.1 Tianjin Hospital 188,696 28.5 188,414 25.6 173,148 21.4 29,323 23.7 51,846 19.1 Qingdao Hospital 106,478 16.1 104,915 14.2 106,657 13.1 18,555 15.0 33,107 12.2 Xi’an Yanta Hospital/ Xi’an Hospital(2) 18,342 2.8 25,462 3.4 46,841 5.8 5,556 4.5 19,925 7.4 Jinan Hospital 24,479 3.7 27,503 3.7 28,648 3.5 5,021 4.1 10,545 3.9

Total 661,093 100.0 738,815 100.0 811,239 100.0 123,529 100.0 270,998 100.0

Notes:

(2) Xi’an Yanta Hospital ceased operations in May 2019 and Xi’ an Hospital commenced operations in the same month.

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Cost of Sales

Our cost of sales primarily consists of cost of inventories, staff costs, rental expenses, as well as depreciation and amortization. The following table sets forth a breakdown of our cost of sales for the periods indicated:

Year ended December 31, Three months ended March 31, 2018 2019 2020 2020 2021 RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 % (Unaudited)

Cost of inventories 162,004 52.9% 181,717 50.8% 197,848 52.6% 27,245 44.6% 69,269 55.7% Staff costs 100,577 32.9% 125,042 34.9% 122,936 32.7% 23,035 37.7% 39,614 31.8% Depreciation and amortization 39,038 12.8% 44,314 12.4% 47,183 12.5% 9,265 15.1% 11,937 9.6% Others(1) 4,356 1.4% 6,844 1.9% 8,423 2.2% 1,579 2.6% 3,635 2.9%

Total 305,975 100.0 357,917 100.0 376,390 100.0 61,124 100.0 124,455 100.0

Note:

(1) Others primarily consist of travelling, entertainment, vehicle, office expenses and short-term rental expenses.

Cost of inventories represents primarily the cost of procuring implants, injection materials, skincare products, pharmaceuticals and other medical consumables.

Staff costs mainly consist of the salaries, bonuses, pension and other social security and welfare of our physicians and other medical professionals.

Depreciation and amortization primarily comprise depreciation of medical devices and right-of-use assets as well as amortization of leasehold improvements.

Gross Profit

Our gross profit consists of our revenue less cost of sales. For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2020 and 2021, our gross profit was RMB355.1 million, RMB380.9 million, RMB434.8 million, RMB62.4 million and RMB146.5 million, respectively. Gross profit margin represents gross profit divided by total revenue, expressed as a percentage. For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2021, our gross profit margin was 53.7%, 51.6%, 53.6%, 50.5% and 54.1%, respectively.

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Gross Profit and Gross Profit Margin by Service Offerings

The following table sets forth a breakdown of our gross profit and gross profit margin by service offerings for the periods indicated:

Year ended December 31, Three months ended March 31, 2018 2019 2020 2020 2021 Gross Gross Gross Gross Gross Gross Profit Gross Profit Gross Profit Gross Profit Gross Profit Profit Margin Profit Margin Profit Margin Profit Margin Profit Margin (RMB in thousands, except percentages) (Unaudited)

Aesthetic non-surgical services Aesthetic injection procedures 159,492 48.4% 170,748 47.0% 169,862 48.0% 25,017 45.4% 59,907 47.0% Aesthetic energy-based procedures 72,775 70.4% 93,720 68.4% 149,096 64.3% 15,997 63.0% 50,798 67.3% Other aesthetic non-surgical services(1) 12,432 69.7% 12,531 75.6% 11,563 81.5% 1,561 74.2% 4,018 83.8%

Total 355,118 53.7% 380,898 51.6% 434,849 53.6% 62,405 50.5% 146,543 54.1%

Notes:

(1) Other aesthetic non-surgical services primarily consist of aesthetic TCM services and other aesthetic dermatology services.

(2) Others primarily comprise cosmetic dentistry services and sales of skincare products.

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Gross Profit and Gross Profit Margin by Our Aesthetic Medical Institutions

The following table sets forth the gross profit and gross profit margin by each of our aesthetic medical institutions for the periods indicated:

Beijing Aikang Hospital 63,491 58.0% 81,927 55.9% 99,187 58.6% 14,880 56.4% 34,739 59.4% Beijing Xingfu Hospital 50,836 47.8% 47,695 41.8% 73,826 49.5% 8,277 40.7% 23,975 49.0% Beijing Jianxiang Hospital 39,260 49.1% 46,169 44.9% 49,309 46.3% 5,179 37.6% 18,050 50.7% Beijing Zizhu Hospital 12,952 47.3% 12,516 43.3% 13,915 52.2% 1,950 42.6% 3,431 49.9% Beijing Changdao Hospital –(1) –(1) –(1) –(1) 1,181(1) 27.2%(1) –(1) –(1) 2,734 48.5% Tianjin Hospital 113,623 60.2% 110,398 58.6% 96,966 56.0% 16,403 55.9% 27,786 53.6% Qingdao Hospital 57,818 54.3% 61,991 59.1% 66,442 62.3% 11,552 62.3% 19,624 59.3% Xi’an Yanta Hospital/ Xi’an Hospital(2) 9,137 49.8% 8,640 33.9%(3) 20,180 43.1% 1,688 30.4% 10,606 53.2% Jinan Hospital 8,001 32.7% 11,562 42.0% 13,843 48.3% 2,476 49.3% 5,598 53.1%

Total 355,118 53.7% 380,898 51.6% 434,849 53.6% 62,405 50.5% 146,543 54.1%

Notes:

(1) Prior to June 1, 2020 when we disposed of Ruilishi Beijing, Beijing Changdao Hospital was wholly owned by Ruilishi Beijing. Therefore, gross profit generated from Beijing Changdao Hospital before June 1, 2020 was included in gross profit from discontinued operations, while gross profit generated from Beijing Changdao Hospital since June 1, 2020 was included in gross profit from continuing operations. Please see “History and Corporate Structure – Our Corporate Development – Business Reorganization– Disposal of hair transplantation business” and “– Discontinued Operation.”

(2) Xi’an Yanta Hospital ceased operations in May 2019 and Xi’an Hospital commenced operations in the same month.

(3) The decrease in 2019 was primarily because Xi’an Yanta Hospital ceased operations in May 2019 and Xi’an Hospital commenced operations in the same month, while a new aesthetic medical institution generally has lower income and relatively higher operating costs during the initial stage of its operations.

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Other Income and Other Gains/(Losses)

The following table sets forth a breakdown of our other income and other gains or losses for the periods indicated:

Three months ended Year ended December 31, March 31, 2018 2019 2020 2020 2021 (RMB’000) (Unaudited)

Government grants 2 1,196 3,342 56 177 Net realized and unrealized gains from investment in wealth management products 3,438 2,355 5,613 2,911 1,381 Gain on disposal of an associate – 4,034––– Loss on disposal of subsidiaries – – (87) (87) – Interest income 312 457 428 80 146 Foreign exchange gain/(loss) 23 (35) (82) (21) 14 Impairment loss on other receivables (1,705) (339) (3,690) (2,726) – Others (401) (879) (2,197) (61) 118

Total 1,669 6,789 3,327 152 1,836

Government grants primarily comprise financial subsidies received from the local government in accordance with its policies, which were non-recurring in nature.

Net realized and unrealized gains from investment in wealth management products represent the interest income of and the changes in fair value of our investments in wealth management products. Please see “– Certain Balance Sheet Items – Financial Assets at Fair Value through Profit or Loss” for more details about these investments.

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General and Administrative Expenses

Our administrative expenses primarily consist of staff costs for our management, finance and accounting, human resources and other administrative staff, rental expenses and utilities and office expenses for our administrative staff, depreciation and amortization of property, equipment and intangible assets for office and other administrative functions as well as service charges in connection with the development and maintenance of certain of our information technology systems. The following table sets forth a breakdown of our general and administrative expenses for the periods indicated:

Three months ended Year ended December 31, March 31, 2018 2019 2020 2020 2021 (RMB’000) (Unaudited)

Staff costs 85,391 97,390 83,414 18,729 27,078 Rental expenses 7,556 6,145 6,484 323 1,405 Utilities and office expenses 30,423 39,565 30,278 7,448 9,268 Depreciation and amortization 34,641 43,016 47,147 10,789 13,363 IT service charges 3,637 8,971 9,112 577 443 Others(1) 5,132 6,921 7,166 1,566 2,972

Total 166,780 202,008 183,601 39,432 54,529

Note:

(1) Others primarily consist of bank charges.

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Selling and Marketing Expenses

Our selling and marketing expenses primarily consist of staff costs for our sales and marketing staff and client service staff, promotion and marketing expenses, bank charges, utilities and office expenses for our sales and marketing staff and depreciation and amortization. The following table sets forth a breakdown of our selling and marketing expenses for the periods indicated:

Three months ended Year ended December 31, March 31, 2018 2019 2020 2020 2021 (RMB’000) (Unaudited)

Staff costs 89,690 118,752 128,646 20,307 47,144 Promotion and marketing expenses 94,159 83,056 42,326 7,973 14,178 Bank charges 5,266 4,501 2,977 416 917 Utilities and office expenses 3,651 4,423 6,852 1,146 326 Depreciation and amortization 4,830 7,004 5,093 567 1,118 Others 1,317 1,467 1,626 616 538

Total 198,913 219,203 187,520 31,025 64,221

Finance Costs

Our finance costs represent interest expense on lease liabilities. For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2020 and 2021, our finance costs amounted to RMB15.8 million, RMB16.8 million, RMB16.9 million, RMB4.2 million and RMB4.1 million, respectively.

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Income Tax

Our income tax primarily consists of current income tax and deferred income tax. The following table sets forth a breakdown of our income tax for the periods indicated:

Three months ended Year ended December 31, March 31, 2018 2019 2020 2020 2021 (RMB’000) (Unaudited) Current tax – PRC EIT 9,967 5,762 18,649 4,157 6,601 Deferred tax 3,336 4,014 2,303 (763) (571)

Income tax 13,303 9,776 20,952 3,394 6,030

Current tax represents PRC EIT payable by our PRC subsidiaries. Our PRC subsidiaries are subject to the statutory EIT rate of 25%, except Beijing Zizhu Hospital. Pursuant to Notice on the Implementation of Inclusive Tax Concessions for Small and Micro Enterprises (《關於實施小微企業普惠性稅收減免政策的通知》) jointly issued by MOF and SAT on January 17, 2019 (“the Notice”), since January 1, 2019, Beijing Zizhu Hospital has been recognized as a small and micro enterprise and thus, for its first RMB3 million of taxable profit, Beijing Zizhu Hospital was entitled to a preferential EIT rate of 20% and a 25% or 50% reduced rate of taxable profit. Pursuant to the Notice, such preferential tax treatment will expire on December 31, 2021.

Our effective income tax rate, calculated as income tax divided by loss or profit before taxation, was (52.7)%, (19.4)%, 39.4%, (28.6)% and 23.3% for the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2020 and 2021, respectively. For the years ended December 31, 2018 and 2019 and the three months ended March 31, 2020, we recorded income tax expenses that were incurred by our subsidiaries with taxable profit, while we recorded loss before taxation for the same periods. Our effective income tax rate for the year ended December 31, 2020 was higher than our statutory EIT rate, primarily due to losses incurred by certain of our subsidiaries in 2020 for which we did not recognize deferred tax assets, mainly because we did not expect taxable profits of such subsidiaries to be available in the foreseeable future against which deferred tax assets can be utilized. See Note 7 to the Accountants’ Report included in Appendix I of this document for a reconciliation of our income tax applicable to profit before taxation.

During the Track Record Period and up to the Latest Practicable Date, we paid all relevant taxes that were due and applicable to us and had no disputes or unresolved tax issues with relevant tax authorities.

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Discontinued Operation

On June 1, 2020, we disposed of our 60% equity interest in Ruilishi Beijing at a consideration of RMB150,000. Ruilishi Beiijng was the holding company of Beijing Changdao Hospital and the other 15 subsidiaries primarily engaging in the hair transplantation business. We disposed of Ruilishi Beijing and its 15 subsidiaries as the hair transplantation business is not in line with our business focus, while retaining Beijing Changdao Hospital to terminate its hair transplantation business. We reported gain on disposal of RMB28.5 million in 2020 for the disposal of Ruilishi Beijing and its 15 subsidiaries. We did not determine to dispose of the hair transplantation business segment until 2020, thus it was not previously classified as held-for-sale or as a discontinued operation as of December 31, 2019. For the purpose of our consolidated financial statements, the financial information of profit or loss and other comprehensive income has been re-represented to show the discontinued operation separately from continuing operation.

The following table sets forth the results of discontinued operation of Ruilishi Beijing and its subsidiaries (including Beijing Changdao Hospital and the 15 subsidiaries we disposed of) for the periods indicated:

From January 1, 2020 up to Year ended its disposal December 31, in 2020 2018 2019 2020 (RMB in thousands)

Revenue 141,365 94,374 15,771 Cost of sales (35,765) (25,896) (8,395) Other income and other gains/(losses) (361) (988) (143) General and administrative expenses (57,404) (45,784) (9,550) Selling and marketing expenses (76,310) (49,835) (1,290) Finance costs (3,793) (3,165) (88)

Loss before taxation of Ruilishi Beijing and its subsidiaries (32,268) (31,294) (3,695) Income tax (485) (3,562) (345)

Loss for the year/period of Ruilishi Beijing and its subsidiaries (32,753) (34,856) (4,040) Gain on disposal – – 28,450

(Loss)/profit from discontinued operation of Ruilishi Beijing and its subsidiaries for the year/period (32,753) (34,856) 24,410

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On July 9, 2021, we disposed of our entire equity interest in Xinxuan Media and Ruiyang Technology at a consideration of RMB14,000,000. Xinxuan Media and Ruiyang Technology are the holding companies of four aesthetic medical institutions and their four ancillary companies (the “Disposal Targets”). We have decided to dispose of these Disposal Targets as we have strategically expanded to, and will continue to expand our footprints in, the aesthetic medical service market in Northern China, particularly in cities with sound economic potential and strong customer base. We classified the assets and liabilities attributable to the Disposal Targets as a disposal group held for sale, and they are presented separately in our consolidated financial statements as of March 31, 2021. As of March 31, 2021, we recorded assets held for sale of RMB108.1 million and liabilities directly associated with the assets held for sale of RMB110.5 million. For the purpose of our consolidated financial statements, the financial information of profit or loss and other comprehensive income has been re-represented to show the discontinued operations separately from continuing operations.

The following table sets forth the results of discontinued operation of the Disposal Targets for the periods indicated:

Three months ended Year ended December 31, March 31, 2018 2019 2020 2020 2021 (RMB in thousands) (Unaudited)

Revenue 81,958 62,270 36,233 4,280 14,733 Cost of sales (56,267) (41,976) (36,550) (6,206) (11,681) Expenses (54,819) (43,575) (47,991) (16,365) (12,881)

Loss before taxation of the Disposal Targets for the year/period (29,128) (23,281) (48,308) (18,291) (9,829) Income tax –––––

Loss from discontinued operation of the Disposal Targets for the year/period (29,128) (23,281) (48,308) (18,291) (9,829)

See “History and Corporate Structure – Business Reorganization – Disposal of hair transplantation business and Disposals of companies that are not in line with our development strategies” and Note 24 to the Accountants’ Report included in Appendix I to this document for more information on our discontinued operations and our disposals.

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NON-IFRS MEASURES

To supplement our consolidated statements of profit and loss which are presented in accordance with IFRS, we also use EBITDA, adjusted EBITDA and adjusted net profit as non-IFRS measures, which are not required by, or presented in accordance with, IFRS. We believe that these non-IFRS measures facilitate comparison of operating performance from year to year by eliminating potential impacts of items that we do not consider to be indicative of our operating performance.

We believe that these measures provide useful information to investors and others in understanding and evaluating our consolidated statements of comprehensive income in the same manner as they help our management. However, our presentation of EBITDA, adjusted EBITDA and adjusted net profit may not be comparable to similarly titled measures presented by other companies. The use of these non-IFRS measures has limitations as an analytical tool, as such, they should not be considered in isolation from, or as substitute for analysis of, our consolidated statements of comprehensive income or financial condition as reported under IFRS.

There are two components to the adjusted EBITDA metric: (i) EBITDA, which we define as (loss)/profit before taxation plus finance costs, depreciation of property, plant and equipment, and amortization of intangible assets; and (ii) adjustments to EBITDA, which includes items which are non-recurring or extraordinary, namely, [REDACTED] expenses.

We define adjusted net profit as (loss)/profit from continuing operations for the period adjusted for items which are non-recurring or extraordinary, namely, [REDACTED] expenses.

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The following table shows our EBITDA, adjusted EBITDA and adjusted net (loss)/profit for the periods indicated:

Three months ended Year ended December 31, March 31, 2018 2019 2020 2020 2021 (RMB in thousands) (Unaudited)

(Loss)/profit before taxation (25,227) (50,471) 53,136 (11,850) 25,912 Adjustments: Finance costs 15,801 16,781 16,936 4,185 4,085 Depreciation of property, plant and equipment, and amortization of intangible assets 73,459 83,399 90,338 23,554 21,792

EBITDA 64,033 49,709 160,410 15,889 51,789 Adjustments: [REDACTED] expenses [REDACTED][REDACTED][REDACTED][REDACTED][REDACTED]

Non-IFRS measure – adjusted EBITDA [REDACTED][REDACTED][REDACTED][REDACTED][REDACTED]

(Loss)/profit from continuing operations for the year/period (38,530) (60,247) 32,184 (15,244) 19,882 Adjustments: [REDACTED] expenses [REDACTED][REDACTED][REDACTED][REDACTED][REDACTED]

Non-IFRS measure – adjusted net (loss)/profit [REDACTED][REDACTED][REDACTED][REDACTED][REDACTED]

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PERIOD TO PERIOD COMPARISON OF RESULTS OF OPERATIONS FROM CONTINUING OPERATIONS

Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020

Revenue

Our revenue increased by 119.4% to RMB271.0 million for the three months ended March 31, 2021 from RMB123.5 million for the three months ended March 31, 2020, primarily attributable to an increase in revenue from aesthetic non-surgical services of RMB125.2 million.

Aesthetic non-surgical services

Revenue from aesthetic non-surgical services increased by 151.7% from RMB82.6 million for the three months ended March 31, 2020 to RMB207.8 million for the three months ended March 31, 2021, primarily attributable to an increase in revenue from aesthetic injection procedures of RMB72.4 million and an increase in revenue from aesthetic energy-based procedures of RMB50.1 million.

The following table sets forth the number of aesthetic injection procedures and aesthetic energy-based procedures performed and average spending per procedure for the three months indicated:

Three months ended March 31, 2020 2021

Aesthetic injection procedures Number of procedures performed 23,130 63,542 Average spending per procedure (RMB) 2,381 2,007 Aesthetic energy-based procedures Number of procedures performed 16,904 41,022 Average spending per procedure (RMB) 1,503 1,841

Revenue from aesthetic injection procedures increased by 131.5% from RMB55.1 million for the three months ended March 31, 2020 to RMB127.5 million for the three months ended March 31, 2021, which was due to a significant increase in number of procedures performed and offset by a decrease in average spending per procedure. The number of aesthetic injection procedures increased by 174.7% to 63,542 for the three months ended March 31, 2021 from 23,130 for the three months ended March 31, 2020, primarily due to the recovery from the adverse impact of COVID-19 pandemic in the first quarter of 2020. The average spending per aesthetic injection procedure decreased by 15.7% to RMB2,007 for the three months ended March 31, 2021 from RMB2,381 for the three months ended March 31, 2020, primarily due to greater discounts we offered in light of the decrease in industry pricing level.

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Revenue from aesthetic energy-based procedures increased by 197.3% to RMB75.5 million for the three months ended March 31, 2021 from RMB25.4 million for the three months ended March 31, 2020, which was due to the increases in number of procedures performed and average spending per procedure. The number of aesthetic energy-based procedures increased by 142.7% to 41,022 for the three months ended March 31, 2021 from 16,904 for the three months ended March 31, 2020 primarily due to the recovery from the adverse impact of COVID-19 pandemic in the first quarter of 2020. The average spending per aesthetic energy-based procedure increased by 22.5% to RMB1,841 for the three months ended March 31, 2021 from RMB1,503 for the three months ended March 31, 2020, primarily due to a change in the mix of services, for example, an increase in the number of procedures performed using high-end energy-based devices, such as Thermage, which has become increasingly popular in recent years due to celebrity effect.

Aesthetic surgical services

Revenue from aesthetic surgical services increased by 40.0% to RMB53.8 million for the three months ended March 31, 2021 from RMB38.4 million for the three months ended March 31, 2020, primarily attributable to an increase in revenue from aesthetic plastic procedures of RMB15.0 million, which in turn was primarily due to an increase in the number of procedures performed.

The following table sets forth the number of aesthetic plastic procedures performed and average spending per procedure for the periods indicated:

Three months ended March 31, 2020 2021

Aesthetic plastic procedures Number of procedures performed 4,911 6,914 Average spending per procedure (RMB) 7,309 7,364

The number of aesthetic plastic procedures increase by 40.8% to 6,914 for the three months ended March 31, 2021 from 4,911 for the three months ended March 31, 2020, primarily due to the recovery from the adverse impact of COVID-19 pandemic in the first quarter of 2020. The average spending per aesthetic plastic procedure remained relatively stable at RMB7,309 for the three months ended March 31, 2020 and RMB7,364 the three months ended March 31, 2021.

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Others

Revenue from others increased by 272.1% to RMB9.4 million for the three months ended March 31, 2021 from RMB2.5 million for the three months ended March 31, 2020, primarily attributable to the recovery from the adverse impact of COVID-19 pandemic in the first quarter of 2020.

Cost of Sales

Our cost of sales increased by 103.6% to RMB124.5 million for the three months ended March 31, 2021 from RMB61.1 million for the three months ended March 31, 2020, primarily attributable to (i) an increase in cost of inventories of RMB42.0 million which was generally in line with the growth of our business; and (ii) an increase in staff costs of RMB16.6 million, mainly due to (i) an increase in social security contributions as we enjoyed a reduction or exemption of social security contributions pursuant to the “Notice on the Temporary Reduction and Exemption of Social Insurance Premiums Payable by Enterprises” (《關於階段性減免企業社會保險費的通知》) and “Notice on Extending the Implementation Period of the Temporary Reduction and Exemption of Social Insurance Premiums Payable by Enterprises and Other Issues” (《關於延長階段性減免企業社會保險費政策實施期限等問題的通知》) issued by the PRC government during the outbreak of the COVID-19 pandemic in 2020, while such rules and regulations lapsed in 2021; and (ii) an increase in performance-based compensation which was generally in line with the growth of our business.

Gross Profit and Gross Profit Margin

As a result of foregoing, our gross profit increased by 134.8% to RMB146.5 million for the three months ended March 31, 2021 from RMB62.4 million for the three months ended March 31, 2020. Our gross profit margin increased to 54.1% for the three months ended March 31, 2021 from 50.5% for the three months ended March 31, 2020. Such increase was primarily attributable to an increase in the gross profit margin of our aesthetic non-surgical services.

The gross profit margin of our aesthetic non-surgical services increased from 51.6% for the three months ended March 31, 2020 to 55.2% for the three months ended March 31, 2021, primarily due to an increase in the gross profit margin of our aesthetic energy-based procedures. The gross profit margin of our aesthetic energy-based procedures increased from 63.0% for the three months ended March 31, 2020 to 67.3% for the three months ended March 31, 2021, primarily due to the greater economies of scale we enjoyed due to increased number of procedures performed, mainly attributable to recovery from the adverse impact of COVID-19 pandemic. The gross profit margin of aesthetic injection procedures increased from 45.4% for the three months ended March 31, 2020 to 47.0% for the three months ended March 31, 2021, primarily due to the greater economies of scale we enjoyed due to increased number of procedures performed, mainly attributable to recovery from the adverse impact of COVID-19 pandemic.

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The gross profit margin of our aesthetic surgical services increased from 52.1% for the three months ended March 31, 2020 to 53.3% for the three months ended March 31, 2021, primarily due to the greater economies of scale we enjoyed due to increased number of procedures performed, mainly attributable to recovery from the adverse impact of COVID-19 pandemic.

Other Income and Other Gains/(Losses)

Our other income and other gains or losses increased significantly from RMB152,000 for the three months ended March 31, 2020 to RMB1.8 million for the three months ended March 31, 2021, primarily because we recorded impairment loss on other receivables of RMB2.7 million for the three months ended March 31, 2020, while we did not record any impairment loss on other receivables for the three months ended March 31, 2021.

General and Administrative Expenses

Our general and administrative expenses increased by 38.3% to RMB54.5 million for the three months ended March 31, 2021 from RMB39.4 million for the three months ended March 31, 2020, primarily attributable to the increase in staff costs of RMB8.3 million, which was mainly due to an increase in social security contributions as we enjoyed a reduction or exemption of social security contributions pursuant to the abovementioned rules and regulations in 2020, while such rules and regulations lapsed in 2021.

Selling and Marketing Expenses

Our selling and marketing expenses increased by 107.0% to RMB64.2 million for the three months ended March 31, 2021 from RMB31.0 million for the three months ended March 31, 2020, primarily attributable to (i) the increase in staff costs of RMB26.8 million, which was mainly due to (a) an increase in social security contributions as we enjoyed a reduction or exemption of social security contributions pursuant to the abovementioned rules and regulations in 2020, while such rules and regulations lapsed in 2021, and (b) an increase in performance-based compensation which was generally in line with the growth of our business; and (ii) the increase in promotion and marketing expenses of RMB6.2 million, mainly due to the reduced spending during the first quarter of 2020 as a result of the outbreak of the COVID-19 pandemic.

Finance Costs

Our finance costs remained relatively stable at RMB4.2 million for the three months ended March 31, 2020 and RMB4.1 million for the three months ended March 31, 2021.

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Share of Net Profits of Associates

Our share of net profits of associates increased by 56.6% from RMB235,000 for the three months ended March 31, 2020 to RMB368,000 for the three months ended March 31, 2021, primarily due to increased profits generated from an associate.

Income Tax

Our income tax increased by 77.7% from RMB3.4 million for the three months ended March 31, 2020 to RMB6.0 million for the three months ended March 31, 2021, primarily because we recognized loss before taxation of RMB11.9 million for the three months ended March 31, 2020 and we recognized profit before taxation of RMB25.9 million for the three months ended March 31, 2021. As such, our effective income tax rate was (28.6)% and 23.3% for the three months ended March 31, 2020 and 2021, respectively.

Profit/Loss for the Period

As a result of the foregoing, we recorded net profit of RMB19.9 million for the three months ended March 31, 2021, compared to net loss of RMB15.2 million for the three months ended March 31, 2020. We recorded net profit margin of 7.3% for the three months ended March 31, 2021, compared to net loss margin of 12.3% for the three months ended March 31, 2020.

Year Ended December 31, 2020 Compared to Year Ended December 31, 2019

Revenue

Our revenue increased by 9.8% to RMB811.2 million for the year ended December 31, 2020 from RMB738.8 million for the year ended December 31, 2019, primarily attributable to an increase in revenue from aesthetic non-surgical services of RMB83.3 million.

Aesthetic non-surgical services

Revenue from aesthetic non-surgical services increased by 16.1% from RMB516.6 million for the year ended December 31, 2019 to RMB599.9 million for the year ended December 31, 2020, primarily attributable to an increase in revenue from aesthetic energy- based procedures of RMB95.0 million.

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The following table sets forth the number of aesthetic injection procedures and aesthetic energy-based procedures performed and average spending per procedure for the years indicated:

Year ended December 31, 2019 2020

Aesthetic injection procedures Number of procedures performed 149,373 163,858 Average spending per procedure (RMB) 2,430 2,158 Aesthetic energy-based procedures Number of procedures performed 125,532 121,941 Average spending per procedure (RMB) 1,091 1,903

Revenue from aesthetic injection procedures decreased by 2.6% from RMB363.0 million for the year ended December 31, 2019 to RMB353.6 million for the year ended December 31, 2020, which was due to a decrease in average spending per procedure and offset by an increase in number of procedures performed. The average spending per aesthetic injection procedure decreased by 11.2% to RMB2,158 for the year ended December 31, 2020 from RMB2,430 for the year ended December 31, 2019, primarily due to greater discounts we offered in light of the decrease in industry pricing level. The number of aesthetic injection procedures increased by 9.7% to 163,858 for the year ended December 31, 2020 from 149,373 for the year ended December 31, 2019, primarily due to (i) organic growth of our aesthetic medical institutions; (ii) Xi’an Hospital which commenced operations in May 2019 and whose operations quickly ramped up in 2020; and (iii) our in-house sales and marketing efforts.

Revenue from aesthetic energy-based procedures increased by 69.4% to RMB232.0 million for the year ended December 31, 2020 from RMB137.0 million for the year ended December 31, 2019, which was due to an increase in the average spending per procedure. The average spending per aesthetic energy-based procedure increased by 74.4% to RMB1,903 for the year ended December 31, 2020 from RMB1,091 for the year ended December 31, 2019, primarily due to a change in the mix of services, for example, an increase in the number of procedures performed using high-end energy-based devices, such as Thermage, which has become increasingly popular in recent years due to celebrity effect. The number of aesthetic energy-based procedures remained relatively stable at 121,941 for the year ended December 31, 2020 and 125,532 for the year ended December 31, 2019.

Aesthetic surgical services

Revenue from aesthetic surgical services remained relatively stable at RMB187.6 million for the year ended December 31, 2019 and RMB184.3 million for the year ended December 31, 2020.

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The following table sets forth the number of aesthetic plastic procedures performed and average spending per procedure for the years indicated:

Year ended December 31, 2019 2020

Aesthetic plastic procedures Number of procedures performed 23,293 24,074 Average spending per procedure (RMB) 7,494 7,198

The number of aesthetic plastic procedures remained relatively stable at 23,293 for the year ended December 31, 2019 and 24,074 for the year ended December 31, 2020, while the average spending per aesthetic plastic procedure remained relatively stable at RMB7,494 for the year ended December 31, 2019 and RMB7,198 for the year ended December 31, 2020.

Others

Revenue from others decreased by 21.8% to RMB27.1 million for the year ended December 31, 2020 from RMB34.6 million for the year ended December 31, 2019, primarily attributable to a decrease in revenue from cosmetic dentistry services which was adversely affected by the COVID-19 pandemic in the first quarter of 2020.

Cost of Sales

Our cost of sales remained increased by 5.2% from RMB357.9 million for the year ended December 31, 2019 to RMB376.4 million for the year ended December 31, 2020, primarily due to an increase in cost of inventories of RMB16.1 million which was generally in line with our business growth.

Gross Profit and Gross Profit Margin

As a result of foregoing, our gross profit increased by 14.2% to RMB434.8 million for the year ended December 31, 2020 from RMB380.9 million for the year ended December 31, 2019. Our gross profit margin increased to 53.6% for the year ended December 31, 2020 from 51.6% for the year ended December 31, 2019. Such increase was primarily attributable to an increase in the gross profit margin of aesthetic surgical services.

The gross profit margin of our aesthetic non-surgical services remained relatively stable at 53.6% for the year ended December 31, 2019 and 55.1% for the year ended December 31, 2020. The gross profit margin of aesthetic injection procedures remained relatively stable at 47.0% for the year ended December 31, 2019 and 48.0% for the year ended December 31, 2020. The gross profit margin of our aesthetic energy-based procedures decreased from 68.4% for the year ended December 31, 2019 to 64.3% for the year ended December 31, 2020, primarily due to a change in the mix of services, for example, an increase in the number of

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The gross profit margin of our aesthetic surgical services increased from 50.6% for the year ended December 31, 2019 to 53.2% for the year ended December 31, 2020, primarily due to (i) a change in the mix of services, for example, a decrease in the revenue generated from breast surgeries, which have lower gross profit margins than other aesthetic plastic procedures mainly as a result of their higher cost of implants; and (ii) a decrease in staff costs, which contributed a higher proportion of cost of sales of aesthetic surgical services than that of other service offerings, mainly attributable to a decrease in social security contributions pursuant to the “Notice on the Temporary Reduction and Exemption of Social Insurance Premiums Payable by Enterprises” (《關於階段性減免企業社會保險費的通知》) and “Notice on Extending the Implementation Period of the Temporary Reduction and Exemption of Social Insurance Premiums Payable by Enterprises and Other Issues” (《關於延長階段性減免企業社會保險費政策實施期限等問題的通知》) issued by the PRC government.

Other Income and Other Gains/(Losses)

Our other income and other gains or losses decreased by 51.0% from RMB6.8 million for the year ended December 31, 2019 to RMB3.3 million for the year ended December 31, 2020, primarily due to an increase in impairment loss on other receivables of RMB3.4 million, which was partially offset by an increase in net realized and unrealized gains from investment in wealth management products of RMB3.3 million mainly attributable to an increase in scale of investment in wealth management products.

General and Administrative Expenses

Our general and administrative expenses decreased by 9.1% to RMB183.6 million for the year ended December 31, 2020 from RMB202.0 million for the year ended December 31, 2019, primarily attributable to (i) a decrease in staff costs for administrative staff of RMB14.0 million mainly due to a decrease in social security contributions pursuant to the abovementioned rules and regulations in connection with the temporary reduction and exemption of social security contributions in 2020; and (ii) a decrease in utilities and office expenses of RMB9.3 million mainly due to the temporary suspension of operations of our aesthetic medical institutions during the outbreak of the COVID-19 pandemic in 2020.

Selling and Marketing Expenses

Our selling and marketing expenses decreased by 14.5% to RMB187.5 million for the year ended December 31, 2020 from RMB219.2 million for the year ended December 31, 2019, primarily attributable to a decrease in promotion and marketing expenses of RMB40.7 million. Such decrease in promotion and marketing expenses was primarily due to our increased efforts to acquire new clients and promote our brand and services through our dedicated team of sales

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Finance Costs

Our finance costs remained relatively stable at RMB16.9 million for the year ended December 31, 2020 and RMB16.8 million for the year ended December 31, 2019.

Share of Net (Losses)/Profits of Associates

We recorded share of net losses of associates of RMB166,000 for the year ended December 31, 2019, while we recorded net share of net profits of associates of RMB3.0 million for the year ended December 31, 2020, primarily due to increased profits generated from an associate.

Income Tax

Our income tax increased from RMB9.8 million for the year ended December 31, 2019 to RMB21.0 million for the year ended December 31, 2020, primarily because we recognized loss before taxation of RMB50.5 million for the year ended December 31, 2019 and we recognized profit before taxation of RMB53.1 million the year ended December 31, 2020. As such, our effective income tax rate was (19.4)% and 39.4% for the year ended December 31, 2019 and 2020, respectively.

Profit/Loss for the Year

As a result of the foregoing, we recorded net profit of RMB32.2 million for the year ended December 31, 2020, compared to net loss of RMB60.2 million for the year ended December 31, 2019. We recorded net profit margin of 4.0% for the year ended December 31, 2020, compared to net loss margin of 8.2% for the year ended December 31, 2019.

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

Revenue

Our revenue increased by 11.8% to RMB738.8 million for the year ended December 31, 2019 from RMB661.1 million for the year ended December 31, 2018, primarily attributable to (i) an increase in revenue from aesthetic non-surgical services of RMB65.5 million, and (ii) an increase in revenue from aesthetic surgical services of RMB9.0 million.

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Aesthetic non-surgical services

Revenue from aesthetic non-surgical services increased by 14.5% from RMB451.0 million for the year ended December 31, 2018 to RMB516.6 million for the year ended December 31, 2019, primarily attributable to (i) an increase in revenue from aesthetic injection procedures of RMB33.2 million; and (ii) an increase in revenue from aesthetic energy-based procedures of RMB33.6 million.

The following table sets forth the number of aesthetic injection procedures and aesthetic energy-based procedures performed and average spending per procedure for the years indicated:

Year ended December 31, 2018 2019

Aesthetic injection procedures Number of procedures performed 110,434 149,373 Average spending per procedure (RMB) 2,986 2,430 Aesthetic energy-based procedures Number of procedures performed 99,465 125,532 Average spending per procedure (RMB) 1,040 1,091

Revenue from aesthetic injection procedures increased by 10.1% from RMB329.8 million for the year ended December 31, 2018 to RMB363.0 million for the year ended December 31, 2019, which was due to an increase in number of procedures performed and offset by a decrease in average spending per procedure. The number of aesthetic injection procedures increased by 35.3% to 149,373 for the year ended December 31, 2019 from 110,434 for the year ended December 31, 2018, primarily due to (i) organic growth of our aesthetic medical institutions; and (ii) our in-house sales and marketing efforts. The average spending per aesthetic injection procedure decreased by 18.6% to RMB2,430 for the year ended December 31, 2019 from RMB2,986 for the year ended December 31, 2018, primarily due to greater discounts we offered in light of the decrease in industry pricing level.

Revenue from aesthetic energy-based procedures increased by 32.5% to RMB137.0 million for the year ended December 31, 2019 from RMB103.4 million for the year ended December 31, 2018, which was primarily due to an increase in number of procedures performed. The number of aesthetic energy-based procedures increased by 26.2% to 125,532 for the year ended December 31, 2019 from 99,465 for the year ended December 31, 2018, primarily due to (i) organic growth of our aesthetic medical institutions; and (ii) our in-house sales and marketing efforts. The average spending per aesthetic energy-based procedure remained relatively stable at RMB1,091 for the year ended December 31, 2019 and RMB1,040 for the year ended December 31, 2018.

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Aesthetic surgical services

Revenue from aesthetic surgical services increased by 5.0% to RMB187.6 million for the year ended December 31, 2019 from RMB178.6 million for the year ended December 31, 2018, primarily due to an increase in average spending per procedure.

The following table sets forth the number of aesthetic plastic procedures performed and average spending per procedure for the years indicated:

Year ended December 31, 2018 2019

Aesthetic plastic procedures Number of procedures performed 23,474 23,293 Average spending per procedure (RMB) 7,104 7,494

The average spending per aesthetic plastic procedure increased by 5.5% to RMB7,494 for the year ended December 31, 2019 from RMB7,104 for the year ended December 31, 2018, primarily due to a change in the mix of services, for example, an increase in the number of lipoplasty procedures performed, which have relatively higher average spending per procedure. The number of aesthetic plastic procedures remained relatively stable at 23,474 for the year ended December 31, 2018 and 23,293 for the year ended December 31, 2019.

Others

Revenue from other services increased by 10.1% from RMB31.4 million for the year ended December 31, 2018 to RMB34.6 million for the year ended December 31, 2019, primarily attributable to an increase in revenue from cosmetic dentistry services.

Cost of sales

Our cost of sales increased by 17.0% to RMB357.9 million for the year ended December 31, 2019 from RMB306.0 million for the year ended December 31, 2018. The increase was primarily attributable to (i) an increase in staff costs of RMB24.5 million, mainly due to increased headcount and compensation level; and (ii) an increase in cost of inventories of RMB19.7 million which was generally in line with our business growth.

Gross Profit and Gross Profit Margin

As a result of foregoing, our gross profit increased by 7.3% to RMB380.9 million for the year ended December 31, 2019 from RMB355.1 million for the year ended December 31, 2018. Our gross profit margin decreased to 51.6% for the year ended December 31, 2019 from 53.7% for the year ended December 31, 2018. Such decrease was primarily attributable to a decrease in the gross profit margin of aesthetic surgical services.

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The gross profit margin of our aesthetic non-surgical services remained relatively stable at 54.3% for the year ended December 31, 2018 and 53.6% for the year ended December 31, 2019. The gross profit margin of aesthetic injection procedures decreased from 48.4% for the year ended December 31, 2018 to 47.0% for the year ended December 31, 2019, primarily due to (i) a decrease in average spending per procedure, while cost of injection materials, a major component of the cost of sales of aesthetic injection procedures, remained relatively stable; and (ii) an increase in staff costs mainly attributable to (a) the commencement of operations of Xi’an Hospital in May 2019; and (b) increased headcount in anticipation of the future development of our other aesthetic medical institutions. The gross profit margin of aesthetic energy-based procedures decreased from 70.4% for the year ended December 31, 2018 to 68.4% for the year ended December 31, 2019, primarily due to an increase in staff costs mainly attributable to (i) the commencement of operations of Xi’an Hospital in May 2019; and (ii) increased headcount in anticipation of the future development of our other aesthetic medical institutions.

The gross profit margin of our aesthetic surgical services decreased from 56.2% for the year ended December 31, 2018 to 50.6% for the year ended December 31, 2019, primarily due to an increase in staff costs mainly attributable to (i) the commencement of operations of Xi’an Hospital in May 2019; and (ii) increased headcount in anticipation of the future development of our other aesthetic medical institutions.

Other Income and Other Gains/(Losses)

Our other income and other gains or losses increased significantly from RMB1.7 million for the year ended December 31, 2018 to RMB6.8 million for the year ended December 31, 2019, primarily because we recorded gain from a decrease in our shareholding in an associate of RMB4.0 million in 2019.

General and Administrative Expenses

Our general and administrative expenses increased by 21.1% to RMB202.0 million for the year ended December 31, 2019 from RMB166.8 million for the year ended December 31, 2018, primarily attributable to (i) an increase in staff costs for administrative staff of RMB12.0 million mainly due to the increased headcount; and (ii) an increase in utilities and office expenses of RMB9.1 million, which was mainly attributable to the increased headcount and the commencement of operations of Xi’an Hospital in May 2019.

Selling and Marketing Expenses

Our selling and marketing expenses increased by 10.2% to RMB219.2 million for the year ended December 31, 2019 from RMB198.9 million for the year ended December 31, 2018, primarily attributable to an increase in staff costs of RMB29.1 million mainly due to the increased headcount of our sales consultants. Such increase was partially offset by a decrease in promotion and marketing expenses of RMB11.1 million, primarily due to our increased efforts to acquire new clients and promote our brand and services through our dedicated team of sales consultants, while decreasing our spending on traditional advertising and marketing channels.

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Finance Costs

Our finance costs increased by 6.2% from RMB15.8 million for the year ended December 31, 2018 to RMB16.8 million for the year ended December 31, 2019, primarily due to new lease agreements we entered into in the second half of 2018.

Share of Net Losses of Associates

Our share of net losses of associates decreased by 68.1% from RMB520,000 for the year ended December 31, 2018 to RMB166,000 for the year ended December 31, 2019, primarily due to a decrease in our shareholding in an associate in 2019.

Income Tax

Our income tax decreased from RMB13.3 million for the year ended December 31, 2018 to RMB9.8 million for the year ended December 31, 2019, primarily due to (i) the preferential tax treatment enjoyed by Beijing Zizhu Hospital as a small and micro enterprise since 2019; and (ii) a decrease in taxable profits of certain of our subsidiaries. As such, our effective income tax rate was (52.7)% and (19.4)% for the year ended December 31, 2018 and 2019, respectively.

Loss for the Year

As a result of the foregoing, our net loss increased by 56.4% from RMB38.5 million for the year ended December 31, 2018 to RMB60.2 million for the year ended December 31, 2019. Our net loss margin increased from 5.8% for the year ended December 31, 2018 to 8.2% for the year ended December 31, 2019.

LIQUIDITY AND CAPITAL RESOURCES

Our business operations and expansion plans require a significant amount of capital, including upgrading our existing aesthetic medical institutions, establishing and acquiring new aesthetic medical institutions and other working capital requirements. Historically, we financed our capital expenditure and working capital requirements mainly through cash generated from operations and capital contributions from Shareholders. As of December 31, 2018, 2019 and 2020 and March 31, 2021, we had cash and cash equivalents of RMB92.3 million, RMB107.1 million, RMB116.9 million and RMB149.1 million, respectively, consisting of cash at bank and in hand.

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Cash Flows

The following table sets forth a summary of our cash flows during the Track Record Period:

Three months ended Year ended December 31, March 31, 2018 2019 2020 2020 2021 (RMB’000) (Unaudited)

Operating profit before changes in working capital 32,572 24,815 128,875 4,320 41,090 Changes in working capital 74,309 135,872 138,442 (300) 30,776 Tax paid (9,522) (8,359) (10,024) (520) (5,889)

Cash and cash equivalents at end of the year/period 92,251 107,137 116,868 61,151 149,124

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Operating Activities

We derive our cash inflow from operating activities primarily through provision of aesthetic medical services. Cash outflow from operating activities primarily comprises payments for procuring implants, injection materials, skincare products, pharmaceuticals and other medical consumables as well as medical devices, staff costs, rental expenses, utilities and office expenses, promotion and advertising expenses and other operating expenses. Our cash from operating activities reflects our profit before taxation, adjusted for non-cash items, such as depreciation and amortization, and the changes in working capital, including increases or decreases in inventories, trade and other receivables, trade payables, other payables and accruals and contract liabilities.

Our net cash generated from operating activities was RMB66.0 million for the three months ended March 31, 2021. This net cash inflow was attributable to (i) profit before taxation of RMB16.1 million, as adjusted to reflect non-cash items, which principally included depreciation of property, plant and equipment of RMB21.6 million; and (ii) an increase in contract liabilities of RMB24.0 million, which was in line with the growth of our business.

Our net cash generated from operating activities was RMB3.5 million for the three months ended March 31, 2020. This net cash inflow was attributable to (i) loss before taxation of RMB33.5 million, as adjusted to reflect non-cash items, which principally included depreciation of property, plant and equipment of RMB33.9 million; and (ii) a decrease in trade and other receivables of RMB22.2 million mainly due to a decrease in prepaid rental expenses because our lessors agreed to reduced rental rates or rental deferral during the outbreak of the COVID-19 pandemic. This net cash inflow was partially offset by a decrease in other payables and accruals of RMB17.1 million mainly due to decreased payables for staff related cost primarily attributable to the temporary reduction or exemption of social security contributions we enjoyed in 2020.

Our net cash generated from operating activities was RMB257.3 million for the year ended December 31, 2020. This net cash inflow was attributable to (i) profit before taxation of RMB29.6 million, as adjusted to reflect non-cash items, which principally included depreciation of property, plant and equipment of RMB112.4 million, gain on disposal of subsidiaries of RMB28.4 million and finance cost of RMB20.6 million; (ii) an increase in contract liabilities of RMB131.8 million, which was in line with the growth of our business; and (iii) an increase in other payables and accruals of RMB43.8 million mainly attributable to increased payables for staff related cost primarily due to increased headcount. This net cash inflow was partially offset by (i) an increase in trade and other receivables of RMB23.4 million; and (ii) an increase in inventories of RMB19.0 million, which was mainly due to our increased procurement in line with our business growth.

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Our net cash generated from operating activities was RMB152.3 million for the year ended December 31, 2019. This net cash inflow was primarily attributable to (i) loss before taxation of RMB105.0 million, as adjusted to reflect non-cash items, which principally included depreciation of property, plant and equipment of RMB111.4 million and finance cost of RMB23.0 million; (ii) an increase in contract liabilities of RMB92.5 million, which was in line with the growth of our business; and (iii) an increase in other payables and accruals of RMB25.6 million, mainly attributable to an increase in payables for staff related cost, primarily due to increased headcount, which was in line with our business growth.

Our net cash generated from operating activities was RMB97.4 million for the year ended December 31, 2018. This net cash inflow was primarily attributable to (i) loss before taxation of RMB86.6 million, as adjusted to reflect non-cash items, which principally included depreciation of property, plant and equipment of RMB98.5 million and finance cost of RMB20.7 million; and (ii) an increase in contract liabilities of RMB79.7 million, which was in line with the growth of our business.

Investing Activities

Our cash used in investing activities mainly reflects our cash used in payments for purchases of property, plant and equipment and purchase of financial assets at fair value through profit or loss. Our cash generated from investing activities mainly comprises proceeds from disposal of financial assets at fair value through profit or loss.

Our net cash used in investing activities was RMB15.2 million for the three months ended March 31, 2021. This net cash outflow was primarily due to purchase of financial assets at fair value through profit or loss of RMB226.0 million. This net cash outflow was partially offset by proceeds from disposal of financial assets at fair value through profit or loss of RMB223.7 million.

Our net cash used in investing activities was RMB32.5 million for the three months ended March 31, 2020. This net cash outflow was primarily due to purchase of financial assets at fair value through profit or loss of RMB137.5 million. This net cash outflow was partially offset by proceeds from disposal of financial assets at fair value through profit or loss of RMB117.8 million.

Our net cash used in investing activities was RMB175.9 million for the year ended December 31, 2020. This net cash outflow was primarily due to (i) purchase of financial assets at fair value through profit or loss of RMB392.3 million; (ii) payment for the purchase of property, plant and equipment of RMB53.5 million; and (iii) lending to a Shareholder of RMB24.8 million. Our purchases of property, plant and equipment in 2020 were primarily in connection with the expenditures on leasehold improvement and purchase of medical devices. This net cash outflow was partially offset by proceeds from disposal of financial assets at fair value through profit or loss of RMB296.1 million.

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Our net cash used in investing activities was RMB62.8 million for the year ended December 31, 2019. This net cash outflow was primarily due to (i) purchase of financial assets at fair value through profit or loss of RMB64.0 million; and (ii) payment for the purchase of property, plant and equipment of RMB50.2 million. Our purchases of property, plant and equipment in 2019 were primarily in connection with the expenditures on construction in progress and purchase of medical devices. This net cash outflow was partially offset by proceeds from disposal of financial assets at fair value through profit or loss of RMB52.9 million.

Our net cash used in investing activities was RMB4.8 million for the year ended December 31, 2018. This net cash outflow was primarily due to (i) payment for the purchase of property, plant and equipment of RMB53.7 million; (ii) purchase of financial assets at fair value through profit or loss of RMB35.0 million. Our purchases of property, plant and equipment in 2018 were primarily in connection with the expenditures on construction in progress and purchase of medical devices. This net cash outflow was partially offset by proceeds from disposal of financial assets at fair value through profit or loss of RMB84.4 million.

Financing Activities

Cash outflow from financing activities primarily comprises capital and interest element of lease rentals paid.

Our net cash used in financing activities was RMB17.3 million for the three months ended March 31, 2021. This net cash outflow was primarily due to capital element of lease rentals paid of RMB12.3 million.

Our net cash used in financing activities was RMB17.1 million for the three months ended March 31, 2020. This net cash outflow was primarily due to capital element of lease rentals paid of RMB13.1 million.

Our net cash used in financing activities was RMB66.7 million for the year ended December 31, 2020. This net cash outflow was due to (i) capital element of lease rentals paid of RMB48.5 million; and (ii) interest element of lease rentals paid of RMB20.6 million.

Our net cash used in financing activities was RMB74.8 million for the year ended December 31, 2019. This net cash outflow was due to (i) capital element of lease rentals paid of RMB51.8 million; and (ii) interest element of lease rentals paid of RMB23.0 million.

Our net cash used in financing activities was RMB59.3 million for the year ended December 31, 2018. This net cash outflow was due to (i) capital element of lease rentals paid of RMB38.7 million; and (ii) interest element of lease rentals paid of RMB20.7 million.

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CAPITAL EXPENDITURES

Our capital expenditures during the Track Record Period primarily consisted of expenditures on (i) property, plant and equipment, mainly comprising right-of-use assets, medical devices, construction in progress and leasehold improvements; and (ii) intangible assets. The following table sets forth our capital expenditures for the periods indicated:

Three months ended Year ended December 31, March 31, 2018 2019 2020 2021 (RMB’000)

Property, plant and equipment 53,683 50,210 53,520 12,920 Intangible assets 543 998 158 –

Total 54,226 51,208 53,678 12,920

We expect to incur approximately RMB61.5 million in the year ending December 31, 2021, primarily related to expenditures on purchases of medical devices as well as leasehold improvements. We intend to fund our planned capital expenditures through a combination of the [REDACTED] from the [REDACTED] as well as cash generated from operations.

Our actual capital expenditures may differ from the amounts set forth above due to various factors, including our future cash flows, results of operations and financial condition, economic conditions in the PRC, the availability of financing on terms acceptable to us and changes in the regulatory environment in the PRC. In addition, we may incur additional capital expenditures from time to time as we pursue new opportunities to expand our business.

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NET CURRENT LIABILITIES

The table below sets forth, as of the dates indicated, our current assets, current liabilities and net current liabilities:

As of As of As of December 31, March 31, June 30, 2018 2019 2020 2021 2021 (RMB’000) (Unaudited)

Current assets: Inventories 41,305 37,927 52,186 57,860 58,616 Trade and other receivables 67,266 57,993 73,414 73,512 74,594 Financial assets at fair value through profit or loss 71,046 84,546 186,397 190,053 347,758 Cash and cash equivalents 92,251 107,137 116,868 149,124 60,816 Assets held for sale – – 111,130 108,120 109,664

Total current assets 271,868 287,603 539,995 578,669 651,448

Current liabilities: Trade payables (19,048) (23,192) (21,691) (27,457) (36,520) Other payables and accruals (91,426) (117,135) (97,977) (95,705) (95,231) Lease liabilities (56,319) (74,322) (48,020) (45,268) (40,882) Income tax payable (4,450) (6,716) (10,142) (10,854) (10,854) Contract liabilities (364,656) (457,155) (554,238) (575,818) (627,474) Liabilities directly associated with the assets held for sale – – (110,612) (110,488) (132,870)

Total current liabilities (535,899) (678,520) (842,680) (865,590) (943,831)

Net current liabilities (264,031) (390,917) (302,685) (286,921) (292,383)

We had net current liabilities of RMB292.4 million as of June 30, 2021, consisting of current assets of RMB651.5 million and current liabilities of RMB943.8 million, which remained relatively stable compared with our net current liabilities of RMB286.9 million as of March 31, 2021.

We had net current liabilities of RMB286.9 million as of March 31, 2021, consisting of current assets of RMB578.7 million and current liabilities of RMB865.6 million, which represented a decrease of RMB15.8 million from our net current liabilities of RMB302.7 million as of December 31, 2020. This decrease was primarily attributable to an increase in cash and cash equivalents of RMB32.3 million. This decrease was partially offset by an increase in contract liabilities of RMB21.6 million, which was in line with our business growth.

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We had net current liabilities of RMB302.7 million as of December 31, 2020, consisting of current assets of RMB540.0 million and current liabilities of RMB842.7 million, which represented a decrease of RMB88.2 million from our net current liabilities of RMB390.9 million as of December 31, 2019. This decrease was primarily attributable to an increase in financial assets at fair value through profit or loss of RMB101.9 million. This increase was partially offset by an increase in contract liabilities of RMB97.1 million, which was in line with our business growth. We recorded liabilities directly associated with the assets held for sale of RMB110.6 million and assets held for sale of RMB111.1 million as of December 31, 2020, which were in connection with our disposal of the Disposal Targets.

We had net current liabilities of RMB390.9 million as of December 31, 2019, consisting of current assets of RMB287.6 million and current liabilities of RMB678.5 million, which represented an increase of RMB126.9 million from our net current liabilities of RMB264.0 million as of December 31, 2018. This increase was primarily attributable to an increase in contract liabilities of RMB92.5 million, which was in line with our business growth.

As of December 31, 2018, we had net current liabilities of RMB264.0 million, consisting of current assets of RMB271.9 million and current liabilities of RMB535.9 million.

Working Capital Sufficiency

During the Track Record Period, we met our working capital requirements mainly from cash generated from operations. We recorded net current liabilities of RMB264.0 million, RMB390.9 million, RMB302.7 million and RMB286.9 million, and total deficits of RMB43.1 million, RMB161.2 million, RMB130.0 million and RMB119.9 million, as of December 31, 2018, 2019 and 2020 and March 31, 2021, respectively.

Our net current liability and negative equity positions during the Track Record Period were primarily due to the increases in contract liabilities which represent advanced payments from our clients while the underlying services have not been provided. Please see “Risk Factors – Risks Relating to Our Business and Industry – We recorded net current liabilities and negative equity during the Track Record Period, which expose us to liquidity risk.”

On July 2, 2021, we received payment for consideration of [REDACTED] Investments of US$25,000,000 from CDH Investments, which significantly improved our working capital. We plan to further improve our working capital through (i) cash generated from our business operations, and (ii) [REDACTED] from the [REDACTED]. We also plan to implement the following measures to manage our liquidity, including (i) preparation of cash flow forecasts on a regular basis; (ii) assessment of our liquidity position to ensure that we have sufficient funding to meet our working capital and future capital expenditure requirements and pay other liabilities and commitments as they become due; and (iii) seeking additional sources financing, such as bank loans, when necessary.

Taking into account the financial resources available to us, including cash flow from operating activities 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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CERTAIN BALANCE SHEET ITEMS

Inventories

The following table sets forth our inventories as of the dates indicated:

As of As of December 31, March 31, 2018 2019 2020 2021 (RMB’000)

Skincare products 2,395 1,099 1,879 1,826 Medication 3,907 5,300 11,367 8,225 Raw material, consumables and others(1) 35,003 31,528 38,940 47,809

Total 41,305 37,927 52,186 57,860

Note:

(1) Raw material, consumables and others primarily comprise implants, injection materials and other medical consumables.

Our inventories increased by 10.9% to RMB57.9 million as of March 31, 2021 from RMB52.2 million as of December 31, 2020, primarily attributable to an increase in raw material, consumables and others of RMB8.9 million, which was mainly due to our increased procurement in line with our business growth.

Our inventories increased by 37.6% to RMB52.2 million as of December 31, 2020 from RMB37.9 million as of December 31, 2019, primarily attributable to an increase in raw material, consumables and others of RMB7.4 million and an increase in medication of RMB6.1 million, which were mainly due to our increased procurement in line with our business growth.

Our inventories decreased by 8.2% to RMB37.9 million as of December 31, 2019 from RMB41.3 million as of December 31, 2018, primarily due to a decrease in raw material, consumables and others of RMB3.5 million, mainly attributable to increased patient visits in December 2019 in anticipation of the earlier 2020 Chinese New Year which fell in January, resulting in our increased use of raw material and medical consumables towards the end of 2019.

For the year ended December 31, 2018, 2019 and 2020, and the three months ended March 31, 2021, our inventory turnover days were 37.8 days, 34.1 days, 39.3 days and 36.5 days, respectively. We calculate the inventory turnover days using the average of the opening and ending inventory balances for the period, divided by cost of sales of both continuing operations and discontinued operations for the relevant period, multiplied by 365 days for 2018 and 2019

– 285 – 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 FINANCIAL INFORMATION and 366 days for 2020 and 90 days for the three months ended March 31, 2021. Inventory turnover days decreased from 37.8 days in 2018 to 34.1 days in 2019, primarily as a result of our decreased level of inventories as a result of increased patient visits in December 2019 due to the same reason mentioned above. Inventory turnover days increased from 34.1 days in 2019 to 39.3 days in 2020, primarily due to our increased procurement of the disposable probes for Thermage towards the end of 2020 in consideration of the increasing popularity of Thermage. Inventory turnover days decreased from 39.3 days in 2020 to 36.5 days for the three months ended March 31, 2021, primarily due to the temporary suspension of operations during the first half of 2020 due to the outbreak of COVID-19 pandemic.

As of June 30, 2021, approximately 73.5% of our inventories as of March 31, 2021 had been utilized or sold.

Trade and Other Receivables

The following table sets forth our trade and other receivables as of the dates indicated:

As of As of December 31, March 31, 2018 2019 2020 2021 (RMB’000)

Trade receivables – – 216 216 Amounts due from a Shareholder – – 24,800 24,800 Deposits with service providers 21,811 22,657 16,648 17,454 Balance with online payment platforms 17,862 5,097 3,981 4,612 Prepayments for inventories 9,465 8,602 10,291 8,885 Prepaid service charge 9,047 9,751 8,971 8,904 Loans to third parties 3,000 5,200 3,000 3,000 Value-added tax receivable 1,716 3,314 2,371 2,942 Income tax recoverable – 1,301 – – Others 4,941 2,662 3,157 2,720

67,842 58,584 73,435 73,533 Less: loss allowance 576 591 21 21

Total 67,266 57,993 73,414 73,512

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Our trade receivables mainly represent the balances due from an Independent Third Party for organizing training sessions at our hospitals from time to time. As of June 30, 2021, all of our trade receivables as of March 31, 2021 had been subsequently settled.

Amounts due from a Shareholder represents a loan to Shanghai Runwofeng, a former shareholder of our Company, amounting to RMB24.8 million in 2020. Such loan was unsecured, interest free and had no fixed term of repayment. As of the Latest Practicable Date, amounts due from a Shareholder had been fully settled.

Deposits with service providers primarily comprise deposits to our advertising suppliers and rental deposits.

Balance with online payment platforms represent (i) our receivables from third-party e-commerce platforms which represented payments received by our WeChat shops and other online shops. For clients who have purchased our services through our online shops, they will be asked to verify their online purchases prior to receiving treatment at our aesthetic medical institutions; and (ii) our receivables from third-party online payment channels through which our clients settled our services fees. Generally, we are able to retrieve our collections from such e-commerce platforms and online payment channels to our bank accounts within one month.

Loans to third parties were unsecured and subject to interest rates ranging from 3% to 3.5% per annum. As of the Latest Practicable Date, loans to third parties had been fully settled.

Pursuant to the “Provisions of the Supreme People’s Court on the Application of Laws to the Hearing of Private Lending Cases” (《最高人民法院關於審理民間借貸案件適用法律若干問題的規定》) (the “Provisions”), which was passed on June 23, 2015 and last amended on December 23, 2020, when a private lending contract is necessary for the purposes of production and business operations between legal persons, unless circumstances under Articles 146, 153 and 154 of the Civil Code of the PRC (《中華人民共和國民法典》) and Article 13 of the Provisions exist, if the party claims that the private lending contract is valid, the People’s Court shall uphold such claim. As our loans to third parties were necessary for production and business operation purposes and did not contravene Articles 146, 153 and 154 of the Civil Code of the PRC or Article 13 of the Provisions, our PRC Legal Advisors have advised us that the private lending contracts in connection with such loans are valid.

Our trade and other receivables decreased by 13.8% from RMB67.3 million as of December 31, 2018 to RMB58.0 million as of December 31, 2019, primarily attributable to a decrease in balance with online payment platforms of RMB12.8 million, primarily because one of the online e-commerce platforms on which we operated online shops in 2018 had longer settlement period, while we ceased to operate online shop on such platform in 2019. Our trade and other receivables increased by 26.6% from RMB58.0 million as of December 31, 2019 to RMB73.4 million as of December 31, 2020, primarily due to an increase in amounts due from a Shareholder of RMB24.8 million attributable to loan to Shanghai Runwofeng in 2020. Our trade and other receivables remained relatively stable at RMB73.4 million as of December 31, 2020 and RMB73.5 million as of March 31, 2021.

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Financial Assets at Fair Value Through Profit or Loss

Our financial assets at fair value through profit or loss comprise investments in short-term wealth management products issued by reputable commercial banks, with expected rates of return ranging from 2.0% to 5.0%, 2.0% to 4.4%, 1.7% to 3.5% and 1.5% to 3.5% per annum for the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2021, respectively.

The following table sets forth our financial assets at fair value through profit or loss as of the dates indicated:

As of As of December 31, March 31, 2018 2019 2020 2021 (RMB’000)

RMB wealth management products 71,046 84,546 186,397 190,053

Total 71,046 84,546 186,397 190,053

As part of our treasury management, we invested in these financial assets as a supplemental means to improve utilization of our cash on hand on a short-term basis. During the Track Record Period, we preserved all our investment capital and did not encounter any default by the issuing financial institutions. We have established internal policies to monitor and control the risks relating to our investment activities. In particular:

• in order to optimize our cash management, we may only make such investments in situations where we have surplus cash;

• in principle, only investments that are of low risk and reasonable returns and liquidity are allowed and investments should be non-speculative in nature. We typically invest in financial assets which do not have a stated maturity and are redeemable at will;

• we only invest in financial assets issued by well recognized commercial banks and other qualified financial institutions, and in any given period, we make investments in assets of multiple issuers to mitigate concentration risks;

• any proposed investment is subject to a feasibility study which shall be submitted to our chief executive officer and chief financial officer for review and approval; and

• the finance department at our headquarters is responsible for monitoring the performance of the invested assets and any significant or adverse fluctuation in our investments shall be reported to our chief executive officer and chief financial officer in a timely manner.

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We may adjust our investment policies from time to time based on our development, conditions of the financial market and the macroeconomic environment in China. We understand that upon [REDACTED], the investments in such financial assets may constitute notifiable transactions under Chapter 14 of the Listing Rules and our Directors confirm that any such investment would only be made after compliance with the Listing Rules as well as other relevant laws and regulations, if applicable.

Trade Payables

Trade payables primarily represent outstanding amounts due to our suppliers of pharmaceuticals and medical consumables. As of December 31, 2018, 2019 and 2020 and March 31, 2021, we had trade payables of RMB19.0 million, RMB23.2 million, RMB21.7 million and RMB27.5 million, respectively.

Our trade payables increased by 21.8% from RMB19.0 million as of December 31, 2018 to RMB23.2 million as of December 31, 2019, primarily due to increased procurement of the disposable probes for Thermage in consideration of the increasing popularity of Thermage. Our trade payables remained relatively stable at RMB23.2 million as of December 31, 2019 and RMB21.7 million as of December 31, 2020. Our trade payables increased by 26.6% from RMB21.7 million as of December 31, 2020 to RMB27.5 million as of March 31, 2021, primarily due to our increased procurement in line with the growth of our business.

The following table sets forth an aging analysis of our trade payables, based on invoice date, as of the dates indicated:

As of As of December 31, March 31, 2018 2019 2020 2021 (RMB’000)

Within one year 14,143 16,583 17,465 23,139 One to two years 2,532 1,798 907 936 Two to three years 1,212 2,459 487 459 Over three years 1,161 2,352 2,832 2,923

Total 19,048 23,192 21,691 27,457

For the year ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2021, our trade payable turnover days were 23.5 days, 18.2 days, 19.6 days and 16.3 days, respectively. We calculate the trade payable turnover days using the average of the opening and closing trade payable balances for the period, divided by cost of sales of both continuing operations and discontinued operations for the relevant period, multiplied by 365 days for 2018 and 2019 and 366 days for 2020 and 90 days for March 31, 2021. Trade payable turnover days decreased from 23.5 days in 2018 to 18.2 days in 2019, primarily due to increased procurement

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As of June 30, 2021, all of our trade payables as of March 31, 2021 had been subsequently settled.

Other Payables and Accruals

The following table sets forth our other payables and accruals as of the dates indicated:

As of As of December 31, March 31, 2018 2019 2020 2021 (RMB’000)

Payables for staff related cost 45,973 65,997 63,968 62,411 Payables for other taxes 3,740 1,632 2,006 698 Payables to promotion and marketing related suppliers 17,261 24,542 9,348 10,423 Provision for medical risk 9,700 9,238 9,093 9,343 Rental payables 4,883 3,393 3,358 4,823 Payables for renovation cost 3,589 6,509 3,477 1,011 Others 6,280 5,824 6,727 6,996

Total 91,426 117,135 97,977 95,705

Payables for staff related cost mainly represent salary and bonus payables. Payables to promotion and marketing related suppliers mainly represent advertising expenses payables. Provision for medical risk represents provision we made for potential medical disputes based on a certain proportion of revenue of the relevant periods, which is determined based on the management’s estimate and past experience with patients.

Our other payables and accruals increased by 28.1% to RMB117.1 million as of December 31, 2019 from RMB91.4 million as of December 31, 2018, mainly attributable to an increase in payables for staff related cost of RMB20.0 million, primarily due to increased headcount, which was in line with our business growth.

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Our other payables and accruals decreased by 16.4% to RMB98.0 million as of December 31, 2020 from RMB117.1 million as of December 31, 2019, mainly attributable to a decrease in payables to promotion and marketing related suppliers of RMB15.2 million, primarily due to our increased efforts to acquire new clients and promote our brand and services through our dedicated team of sales consultants, while decreasing our spending on traditional advertising and marketing channels.

Our other payables and accruals remained relatively stable at RMB98.0 million as of December 31, 2020 and RMB95.7 million as of March 31, 2021.

Our Directors confirm that we had no material defaults in our trade payables or other payables during the Track Record Period and up to the Latest Practicable Date.

Lease Liabilities

We are the lessee in respect of certain properties held under operating leases for our aesthetic medical institution, office and warehouse premises during the Track Record Period. For any lease with a term of more than 12 months, unless the underlying asset is of low value, we recognize a right-of-use asset representing our right to use the underlying leased asset and a lease liability representing our obligation to make lease payments. Please see “– Critical Accounting Policies and Estimates – Adoption of IFRS 16” for more details.

The table below sets forth a breakdown of our lease liabilities by remaining maturity as of the dates as indicated:

As of As of December 31, March 31, 2018 2019 2020 2021 (RMB’000)

Within one year 56,319 74,322 48,020 45,268 After one but within two years 44,063 54,357 34,519 35,169 After two but within five years 109,474 131,337 89,561 94,266 After five years 193,780 207,528 170,871 160,379

Total 403,636 467,544 342,971 335,082

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Contract Liabilities

Our contract liabilities represent payments received for prepaid packages while the underlying services have not been provided, which are subsequently recognized as revenue upon rendering of the relevant procedures. For the years ended December 31, 2018, 2019 and 2020, and the three months ended March 31, 2021, we recognized contract liabilities of RMB364.7 million, RMB457.2 million, RMB554.2 million and RMB575.8 million, respectively, from our aesthetic medical services. The increases in our contract liabilities during the Track Record Period were primarily due to the growth of our business. We recognized revenue of RMB284.9 million, RMB350.1 million, RMB457.2 million and RMB268.9 million, respectively, for the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2021, in relation to carried-forward contract liabilities as of January 1, 2018, 2019, 2020 and 2021.

INDEBTEDNESS AND CONTINGENT LIABILITIES

Indebtedness

During the Track Record Period and up to the Latest Practicable Date, we did not have any bank loans or other borrowings. During the Track Record Period, our indebtedness consisted of lease liabilities. The following table sets forth a breakdown of our indebtedness as of the dates indicated:

As of As of As of December 31, March 31, June 30, 2018 2019 2020 2021 2021 (RMB’000) (Unaudited)

Included in current liabilities Current portion of lease liabilities 56,319 74,322 48,020 45,268 40,882

Included in non-current liabilities Non-current portion of lease liabilities 347,317 393,222 294,951 289,814 285,697

Total 403,636 467,544 342,971 335,082 326,579

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Our Directors confirm that there has been no material change in our indebtedness position since June 30, 2021, the latest date for liquidity disclosure, up to the date of this document.

Contingent Liabilities

Except as disclosed above, we did not have, as of June 30, 2021, any outstanding debt securities, mortgage, charges, debentures or other loan capital (issued or agreed to be issued), bank overdrafts, loans, liabilities under acceptance or acceptance credits, or other similar indebtedness, leasing and financial leasing commitments, hire purchase commitments, guarantees or other material contingent liabilities.

OFF-BALANCE SHEET ARRANGEMENTS

We have not entered into, nor do we expect to enter into, any off-balance sheet arrangements. We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of third parties. In addition, we have not entered into any derivative contracts that are indexed to our equity interest and classified as owners’ equity, or that are not reflected in our consolidated financial statements. Furthermore, 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. We do not have variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing or hedging or research and development services with us.

COMMITMENTS

The following table sets forth our capital commitments as of the date indicated:

As of As of December 31, March 31, 2018 2019 2020 2021 (RMB’000)

Contracted but not provided for: – Property, plant and equipment 3,073 2,473 5,433 1,863

Total 3,073 2,473 5,433 1,863

Capital commitments that were contracted but not provided represent commitments arising out of a contractual relationship where the relevant property, plant and equipment were not provided as of the relevant dates. Our capital commitments during the Track Record Period were primarily related to leasehold improvements and purchase of medical devices.

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RELATED PARTY TRANSACTIONS

The following tables set forth our material related party transactions and a breakdown of our amounts due to related parties as of the dates indicated:

Three Months ended Year ended December 31, March 31, 2018 2019 2020 2020 2021 (RMB’000) (Unaudited)

Purchase of goods from an associate Ningxia Mioron Biotechnology Co., Ltd.(1) – 125 1,701 93 601

As of As of December 31, March 31, 2018 2019 2020 2021 (RMB’000)

Trade and other receivables(2) – 100 113 113 Trade payables(3) – 125 13 46

Notes:

(1) Represented purchases of skincare products and injection materials from such associate.

(2) Represented prepayments paid to such associate for purchases of skincare products and injection materials.

(3) Represented payables due to such associate for purchases of skincare products and injection materials.

It is the view of our Directors that each of the related party transactions set out in Note 27 of the Accountants’ Report in Appendix I to this document (i) was conducted on normal commercial terms and/or on terms not less favorable than terms available from Independent Third Parties, which are considered fair, reasonable and in the interest of our Shareholders as a whole; and (ii) do not distort our Track Record Period results or make our historical results not reflective of future performance.

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KEY FINANCIAL RATIOS

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

Three months ended Year ended December 31, March 31, 2018 2019 2020 2021 (%)

Profitability ratios Gross profit margin(1) 53.7 51.6 53.6 54.1 Net (loss)/profit margin(2) (5.8) (8.2) 4.0 7.3 Return on equity(3) N/A N/A N/A N/A Return on total assets(4) (4.6) (6.9) 3.4 N/A Non-IFRS measure – adjusted EBITDA margin(5) 9.7 6.7 19.8 20.6 Non-IFRS measure – adjusted net (loss)/profit margin(6) (5.8) (8.2) 4.0 8.8

As of As of December 31, March 31, 2018 2019 2020 2021

Liquidity ratios Current ratio(7) 0.51 0.42 0.64 0.67 Quick ratio(8) 0.43 0.37 0.58 0.60

Capital adequacy ratio Gearing ratio(9) N/A N/A N/A N/A

Notes:

(1) Gross profit margin is calculated based on gross profit from continuing operations divided by revenue from continuing operations and multiplied by 100%.

(2) Net (loss)/profit margin is calculated based on loss/profit from continuing operations for the period divided by revenue from continuing operations and multiplied by 100%.

(3) Return on equity is calculated based on loss/profit from continuing operations for the period divided by the arithmetic mean of the opening and closing balances of total equity and multiplied by 100%. Return on equity is not applicable to us during the Track Record Period because we were in negative equity position.

(4) Return on total assets is calculated based on loss/profit from continuing operations for the period divided by the arithmetic mean of the opening and closing balances of total assets and multiplied by 100%.

(5) Adjusted EBITDA margin, a non-IFRS measure, is calculated based on adjusted EBITDA divided by revenue from continuing operations and multiplied by 100%. Please see “– Non-IFRS Measures” for the reconciliation from (loss)/profit before taxation to EBITDA and adjusted EBITDA.

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(6) Adjusted net (loss)/profit margin, a non-IFRS measure, is calculated based on adjusted net (loss)/profit divided by revenue from continuing operations and multiplied by 100%. Please see “– Non-IFRS Measures” for the reconciliation from (loss)/profit from continuing operations for the period to adjusted net (loss)/profit.

(7) Current ratio is calculated based on total current assets divided by total current liabilities.

(8) Quick ratio is calculated based on total current assets less inventories divided by total current liabilities.

(9) Gearing ratio is calculated based on total borrowings divided by total equity multiplied by 100%. Gearing ratio is not applicable to us during the Track Record Period because we have nil borrowings.

See “– Period to Period Comparison of Results of Operations from Continuing Operations” for a discussion of the factors affecting our gross profit margin and net profit margin during the respective periods.

Return on Total Assets

Our return on total assets decreased from (4.6)% in 2018 to (6.9)% in 2019, primarily due to increase in loss from continuing operations.

Our return on total assets increased from (6.9)% in 2019 to 3.4% in 2020, primarily because we recorded net profit in 2020, compared to net loss we recorded in 2019.

Current Ratio

Our current ratio decreased from 0.51 as of December 31, 2018 to 0.42 as of December 31, 2019, primarily because the increase in our current liabilities outpaced the increase in our current assets. The increase in our current liabilities was primarily due to (i) an increase in contract liabilities of RMB92.5 million; and (ii) an increase in other payables and accruals of RMB25.7 million.

Our current ratio increased from 0.42 as of December 31, 2019 to 0.64 as of December 31, 2020, primarily because the increase in our current assets outpaced the increase in our current liabilities. The increase in our current assets was primarily due to an increase in assets held for sale of RMB111.1 million.

Our current ratio increased from 0.64 as of December 31, 2020 to 0.67 as of March 31, 2021, primarily because the increase in our current assets outpaced the increase in our current liabilities. The increase in our current assets was primarily due to the increase in cash and cash equivalents of RMB32.3 million.

Quick Ratio

Consistent with the changes in our current ratio, our quick ratio decreased from 0.43 as of December 31, 2018 to 0.37 as of December 31, 2019, increased to 0.58 as of December 31, 2020 and increased to 0.60 as of March 31, 2021.

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FINANCIAL RISKS

We are exposed to a variety of financial risks, including credit risk, liquidity risk, interest rate risk and currency risk, as set out below. We manage and monitor these exposures to ensure appropriate measures are implemented on a timely and effective manner. As of the Latest Practicable Date, we did not hedge or consider necessary to hedge any of these risks. For further details, including relevant sensitivity analysis, see Note 25 in the Accountants’ Report set out in Appendix I to this document.

Credit Risk

Our credit risk is primarily attributable to trade and other receivables. Our exposure to credit risk arising from cash and cash equivalents is limited because the counterparties are banks and financial institutions with a minimum credit rating assigned by our management, for which we consider to have low credit risk.

As of December 31, 2018, 2019, 2020 and March 31, 2021, our trade receivables amounted to nil, nil, RMB216,000 and RMB216,000, respectively. We monitor trade receivable balances on an ongoing basis and our exposure to bad debts is not significant.

We measure loss allowances for trade receivables at an amount equal to lifetime ECLs, which is calculated using a provision matrix. As our historical credit loss experiences do not indicate significantly different loss patterns for different businesses, the loss allowance based on past due status is not further distinguished between our different customer bases.

For other receivables and amounts due from related parties, our management makes periodic collective assessments as well as individual assessment on the recoverability based on historical settlement records and past experience. Our Directors believe that there is no material credit risk inherent in our outstanding balance of other receivables and amounts due from related parties as we closely monitor their repayment.

Liquidity Risk

We monitor and maintain a sufficient level of cash and cash equivalents deemed adequate by our management to finance our operations and mitigate the effects of fluctuation in cash flows. Our management reviews and monitors our working capital requirements regularly.

Interest Rate Risk

Our interest rate risk arises primarily from lease liabilities. Lease liabilities expose us to fair value interest rate risk. We currently do not use any interest rate swap contracts or other financial instruments to hedge against interest rate exposure.

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Currency Risk

We mainly operate in the PRC and are exposed to currency risk primarily through sales which give rise to cash, receivables and payables balances that are denominated in a foreign currency. The currency gives rise to this risk is primarily United States dollars.

For the years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2021, had there been a 5% increase or decrease in the exchange rate of United States dollars against Renminbi, our profit after tax would have increased or decreased by approximately RMB548.0 thousand, RMB252.0 thousand, RMB239.0 thousand and RMB240.0 thousand, respectively.

For further details, please see Note 25 to the Accountants’ Report included in Appendix I to this document.

DIVIDENDS

No dividend has been proposed, paid or declared by our Company since its incorporation, or by any of the subsidiaries of our Group during the Track Record Period.

After completion of the [REDACTED], we may distribute dividends in the form of cash or by other means permitted by our Articles of Association. Any proposed distribution of dividends shall be formulated by our Board and will be subject to approval of our Shareholders. A decision to declare or to pay any dividends in the future, and the amount of any dividend, will depend upon a number of factors, including our earnings and financial condition, operating requirements, capital requirements, business prospects, statutory, regulatory and contractual restrictions on our declaration and payment of dividends, and any other factors that our Directors may consider important.

There is no assurance that dividends of any amount will be declared or be distributed in any year. Currently, we do not intend to adopt a formal dividend policy or a fixed dividend distribution ratio following the [REDACTED].

PRC laws require that dividends be paid only out of the profit for the year calculated according to PRC accounting principles, which differ in many aspects from the generally accepted accounting principles in other jurisdiction, including the IFRSs. According to the applicable PRC laws and our Articles of Association, we will pay dividends out of our profit after tax only after we have made the following allocations:

• recovery of the losses incurred in the previous year;

• allocations to the statutory reserve equivalent to 10% of our profit after tax; and

• allocation to a discretionary common reserve of not less than 10% of our profit after tax that are approved by a shareholders’ meeting.

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DISTRIBUTABLE RESERVES

As of March 31, 2021, we had no distributable reserves available for distribution to our Shareholders.

[REDACTED] EXPENSES

Our [REDACTED] expenses mainly include [REDACTED], professional fees paid to legal advisers, the Reporting Accountants and other professional advisers for their services rendered in relation to the [REDACTED] and the [REDACTED]. The estimated total [REDACTED] expenses (based on the mid-point of our indicative [REDACTED] range for the [REDACTED] and assuming that the [REDACTED] is not exercised) for the [REDACTED] are approximately RMB[REDACTED]. During the Track Record Period, we incurred [REDACTED] expenses of RMB[REDACTED], all of which was charged to the consolidated statements of profit or loss for the three months ended March 31, 2021 as general and administrative expenses. We expect to incur additional [REDACTED] expenses of approximately RMB[REDACTED], of which approximately RMB[REDACTED] is expected to be recognized as general and administrative expenses and approximately RMB[REDACTED] is expected to be recognized as a deduction in equity directly upon the [REDACTED].

UNAUDITED PRO FORMA ADJUSTED NET TANGIBLE ASSETS

The following unaudited pro forma statement of adjusted net tangible assets prepared in accordance with Rule 4.29 of the Listing Rules is set out to show the effect of the [REDACTED] on our net tangible assets as of March 31, 2021, as if the [REDACTED] had taken place on that date. The unaudited pro forma statement of adjusted net tangible assets has been prepared for illustrative purpose 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 March 31, 2021 or at any future date. The unaudited pro forma statement of adjusted net tangible assets is based on the unaudited consolidated total net tangible assets of the Group attributable to the owners of the Company as of March 31, 2021 derived from the Accountants’ Report in set out in Appendix I to this document, and adjusted as follows:

Consolidated net deficits of our Group Unaudited attributable to pro forma the owners of Estimated adjusted the Company [REDACTED] consolidated Unaudited pro forma as of March 31, from the net tangible adjusted net tangible assets 2021 [REDACTED] assets per H Share RMB’000 RMB’000 RMB’000 RMB HK$ equivalent (Note 1) (Note 2) (Note 3) (Note 4)

Based on an [REDACTED] of HK$[REDACTED] per H Share (125,500) [REDACTED][REDACTED][REDACTED][REDACTED]

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Notes:

(1) The consolidated net tangible assets attributable to equity shareholders of the Company as of March 31, 2021 is arrived after deducting intangible assets of RMB1,004,000, from the consolidated total deficits attributable to the equity shareholders of the Company as of March 31, 2021 of RMB124,496,000, which is extracted from the Accountants’ Report set out in Appendix I to this document.

(2) The estimated [REDACTED] from the [REDACTED] are based on [REDACTED] H Shares to be issued pursuant to the [REDACTED] and the indicative [REDACTED] of HK$[REDACTED] per [REDACTED] and HK$[REDACTED] per [REDACTED], being the low end and high end of [REDACTED] range, after deduction of the estimated [REDACTED] and other related expenses payable by us (excluding the [REDACTED] expense of RMB[REDACTED] that have been charged to profit or loss during the Track Record Period) and does not take into account any Shares which may be issued upon the exercise of the [REDACTED]. The estimated [REDACTED]ofthe[REDACTED] have been converted to Renminbi at the exchange rate of HK$1 to RMB0.83343 prevailing on July 26, 2021. No representation is made that the Hong Kong dollar amounts have been, could have been or could be converted into RMB, or vice versa, at that rate or at any other rates.

(3) The unaudited pro forma adjusted consolidated net tangible assets attributable to equity shareholders of the Company per Share is arrived at after the adjustment referred to in the preceding paragraph and on the basis that [REDACTED] Shares were in issue (excluding the 6,222,441 ordinary shares that were issued in June 2021 and the proposed ordinary [REDACTED]onan[REDACTED] basis as described in note 5 below) assuming that the [REDACTED] had been completed on March 31, 2021, but does not take into account any shares which may be issued upon the exercise of the [REDACTED], or any Shares which may be allotted, issued or repurchased by the Company.

(4) The unaudited pro forma adjusted consolidated net tangible assets attributable to equity shareholders of the Company per Share amounts in RMB are converted to Hong Kong dollar with the exchange rate of RMB1 to HK$1.1999 prevailing on July 26, 2021. No representation is made that the Hong Kong dollar amounts have been, could have been or could be converted into RMB, or vice versa, at that rate or at any other rates.

(5) No adjustment has been made to the unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to equity shareholders of the Company as of March 31, 2021 to reflect any trading results or other transactions of the Group entered into subsequent to March 31, 2021, including but not limited to the share subscription agreement with certain investors in June 2021 pursuant to which these investors agreed to purchase an aggregate of 6,222,441 newly issued shares for RMB160,913,000 received subsequently in July 2021 and the proposed ordinary [REDACTED]onan[REDACTED] basis.

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NO MATERIAL ADVERSE CHANGE

After performing sufficient due diligence work which our Directors consider appropriate and after due and careful consideration, our Directors confirm that, up to the date of this document, there has been no material adverse change in our financial or trading position or prospects since March 31, 2021, being the date of the latest audited consolidated financial position of our Group as set out in the Accountants’ Report in Appendix I to this document.

DISCLOSURE REQUIRED UNDER THE LISTING RULES

We confirm that, as of the Latest Practicable Date, there were no circumstances that would give rise to a disclosure requirement under Rules 13.13 to 13.19 in Chapter 13 of the Listing Rules upon the [REDACTED] of the Shares on the Stock Exchange.

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FUTURE PLANS

See the section headed “Business – Our Strategies” for a detailed description of our future plans.

USE OF [REDACTED]

We estimate the [REDACTED]ofthe[REDACTED] which we will receive, assuming an [REDACTED] of HK$[REDACTED] per [REDACTED] (being the mid-end of the [REDACTED] range stated in this document), will be approximately HK$[REDACTED], after deduction of [REDACTED] and commissions and estimated expenses payable by us in connection with the [REDACTED] and assuming the [REDACTED] is not exercised.

We intend to use the [REDACTED]ofthe[REDACTED] for the following purposes:

• approximately [REDACTED]% (or HK$[REDACTED]) for upgrading our existing aesthetic medical institutions, including (i) renovating and/or repairing Qingdao Hospital, Xi’an Hospital and Beijing Aikang Hospital, (ii) expanding Beijing Jianxiang Hospital and Beijing Changdao Hospital, (iii) relocating Jinan Hospital, Beijing Zizhu Hospital and Tianjin Hospital. We plan to use approximately [REDACTED]% (or HK$[REDACTED]), [REDACTED]% (or HK$[REDACTED]) and [REDACTED]% (or HK$[REDACTED]), respectively, in 2022, 2023 and 2024. Please see “Business – Our Future Expansion – Organic Growth” for more details;

• approximately [REDACTED]% (or HK$[REDACTED]) for establishing new aesthetic medical institutions in Beijing, Xi’an and Sanya. We plan to use approximately [REDACTED]% (or HK$[REDACTED]), [REDACTED]% (or HK$[REDACTED]) and [REDACTED]% (or HK$[REDACTED]), respectively, in 2022, 2023 and 2024. Please see “Business – Our Future Expansion – Organic Growth” for more details;

• approximately [REDACTED]% (or HK$[REDACTED]) for acquiring aesthetic medical institutions, when appropriate opportunities arise, that have demonstrated track records of performance, strong reputations and robust client acquisition channels. As of the Latest Practicable Date, we had not entered into any letters of intent or agreements with respect to acquisitions and had not identified any definite acquisition targets. Please see “Business – Our Future Expansion – Strategic Acquisitions” for more details;

• approximately [REDACTED]% (or HK$[REDACTED]) for strengthening our information technology infrastructure. In particular, we plan to use approximately [REDACTED]% (or HK$[REDACTED]) for establishing a cloud computing infrastructure and utilizing advanced technologies such as AI, approximately [REDACTED]% (or HK$[REDACTED]) for establishing a centralized cloud- based data management and analytic platform, approximately [REDACTED]% (or HK$[REDACTED]) for upgrading our HIS and other business middle-office systems, and approximately [REDACTED]% (or HK$[REDACTED]) for upgrading our client relationship management system (CRM). Please see “Business – Information Technology Systems” for more details; and

• approximately [REDACTED]% (or HK$[REDACTED]) for working capital and other general corporate purposes.

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If the [REDACTED] is fixed at HK$[REDACTED] per [REDACTED] (being the high-end of the [REDACTED] range stated in this document) and assuming the [REDACTED] is not exercised, we will receive additional [REDACTED] of approximately HK$[REDACTED]. If the [REDACTED] is fixed at HK$[REDACTED] per H Share (being the low-end of the [REDACTED] range stated in this document) and assuming the [REDACTED] is not exercised, the [REDACTED] we receive will be reduced by approximately HK$[REDACTED]. The above allocation of the [REDACTED] will be adjusted on a pro rata basis in the event that the [REDACTED] is fixed at a higher or lower level compared to the mid-end of the estimated [REDACTED] range.

The additional [REDACTED] that we would receive if the [REDACTED] were exercised in full would be (i) HK$[REDACTED] (assuming an [REDACTED]of HK$[REDACTED] per H Share, being the high-end of the [REDACTED] range stated in this document), (ii) HK$[REDACTED] (assuming an [REDACTED] of HK$[REDACTED] per [REDACTED], being the mid-end of the [REDACTED] range stated in this document) and (iii) HK$[REDACTED] (assuming an [REDACTED] of HK$[REDACTED] per [REDACTED], being the low-end of the [REDACTED] range stated in this document). Additional [REDACTED] received due to the exercise of any [REDACTED] will be used for the above purposes accordingly on a pro rata basis in the event that the [REDACTED]is exercised.

To the extent that the [REDACTED] are not immediately applied to the above purposes and to the extent permitted by applicable law and regulations, we intend to allocate part or all of the [REDACTED] to short-term interest-bearing deposits and/or money market instruments with authorized financial institutions and/or licensed banks in Hong Kong and/or the PRC.

In the event of any material change in our use of [REDACTED]ofthe[REDACTED] from the purposes described above or in our allocation of the [REDACTED] among the purposes described above, a formal announcement will be made.

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[REDACTED]

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 we will not, at any time within six months from the [REDACTED], issue any Shares or other securities convertible into our equity securities (whether or not of a class already listed) or enter into any agreement or arrangement to such an issue (whether or not such issue of Shares or such other securities will be completed within six months from the [REDACTED]), except (a) pursuant to the [REDACTED], the [REDACTED], the [REDACTED] or (b) under any of the circumstances provided under Rule 10.08 of the Listing Rules.

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The following is the text of a report set out on pages I-[●]toI-[●], received from the Company’s reporting accountants, KPMG, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this document.

ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE DIRECTORS OF BEIJING EVERCARE MEDICAL TECHNOLOGY GROUP CO., LTD. 北京伊美爾醫療科技集團股份公司 AND HAITONG INTERNATIONAL CAPITAL LIMITED

Introduction

We report on the historical financial information of Beijing Evercare Medical Technology Group Co., Ltd. 北京伊美爾醫療科技集團股份公司 (the “Company”) and its subsidiaries (together, the “Group”) set out on pages I-5 to I-73, which comprises the consolidated statements of financial position of the Group and the statements of financial position of the Company as at 31 December 2018, 2019 and 2020 and 31 March 2021, and the consolidated statements of profit or loss and other comprehensive income, the consolidated statements of changes in equity and the consolidated cash flow statements, for each of the years ended 31 December 2018, 2019 and 2020 and the three months ended 31 March 2021 (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 I-5 to I-73 forms an integral part of this report, which has been prepared for inclusion in the document of the Company dated [REDACTED] (the “Document”) in connection with the [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 the Historical Financial Information that gives a true and fair view in accordance with the basis of preparation and presentation set out in Note 1 to the Historical Financial Information, and for such internal control as the directors of the Company determine is necessary to enable the preparation of the Historical Financial Information that is free from material misstatement, whether due to fraud or error.

Reporting accountants’ responsibility

Our responsibility is to express an opinion on the Historical Financial Information and to report our opinion to you. We conducted our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 200 “Accountants’ Reports on Historical Financial Information in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”). This standard requires that we comply with ethical standards and plan and perform our work to obtain reasonable assurance about whether the Historical Financial Information is free from material misstatement.

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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 accountants’ judgement, including the assessment of risks of material misstatement of the Historical Financial Information, whether due to fraud or error. In making those risk assessments, the reporting accountants consider internal control relevant to the entity’s preparation of the Historical Financial Information that gives a true and fair view in accordance with the basis of preparation and presentation set out in Note 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 purpose of the accountants’ report, a true and fair view of the Company’s and the Group’s financial position as at 31 December 2018, 2019 and 2020 and 31 March 2021, and of the Group’s financial performance and cash flows for the Relevant Periods in accordance with the basis of preparation and presentation set out in Note 1 to the Historical Financial Information.

Review of stub period corresponding financial information

We have reviewed the stub period corresponding financial information of the Group which comprises the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated cash flow statement for the three months ended 31 March 2020 and other explanatory information (the “Stub Period Corresponding Financial Information”). The directors of the Company are responsible for the preparation and presentation of the Stub Period Corresponding Financial Information in accordance with the basis of preparation and presentation set out in Note 1 to the Historical Financial Information. Our responsibility is to express a conclusion on the Stub Period Corresponding Financial Information based on our review. We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the HKICPA. A review consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Based on our review, nothing has come to our attention that causes us to believe that the Stub Period Corresponding Financial Information, for the purpose of the accountants’ report, is not prepared, in all material respects, in accordance with the basis of preparation and presentation set out in Note 1 to the Historical Financial Information.

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Report on matters under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and the Companies (Winding Up and Miscellaneous Provisions) Ordinance

Adjustments

In preparing the Historical Financial Information, no adjustments to the Underlying Financial Statements as defined on page I-4 have been made.

Dividends

We refer to Note 23(d) to the Historical Financial Information which states that no dividends have been declared or paid to the equity shareholder of the Company during the Relevant Periods.

[●]

Certified Public Accountants 8th Floor, Prince’s Building 10 Chater Road Central, Hong Kong

[Date]

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HISTORICAL FINANCIAL INFORMATION

Set out below is the Historical Financial Information which forms an integral part of this accountants’ report.

The consolidated financial statements of the Group for the Relevant Periods, on which the Historical Financial Information is based, were audited by KPMG Huazhen LLP in accordance with Hong Kong Standards on Auditing issued by the HKICPA (the “Underlying Financial Statements”).

The Historical Financial Information is presented in Renminbi (“RMB”) and all values are rounded to the nearest thousand (RMB’000) except when otherwise indicated.

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CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME (Expressed in Renminbi (“RMB”)

For the year ended Three months ended 31 December 31 March Note 2018 2019 2020 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Continuing operations Revenue 4 661,093 738,815 811,239 123,529 270,998 Cost of sales (305,975) (357,917) (376,390) (61,124) (124,455)

Gross profit 355,118 380,898 434,849 62,405 146,543

Other income and other gains/(losses) 5 1,669 6,789 3,327 152 1,836 General and administrative expenses (166,780) (202,008) (183,601) (39,432) (54,529) Selling and marketing expenses (198,913) (219,203) (187,520) (31,025) (64,221)

(Loss)/profit from operations (8,906) (33,524) 67,055 (7,900) 29,629

Finance costs 6(a) (15,801) (16,781) (16,936) (4,185) (4,085) Share of net (losses)/profits of associates (520) (166) 3,017 235 368

(Loss)/profit before taxation (25,227) (50,471) 53,136 (11,850) 25,912

Income tax 7 (13,303) (9,776) (20,952) (3,394) (6,030)

(Loss)/profit from continuing operations for the year/period (38,530) (60,247) 32,184 (15,244) 19,882 ------

Discontinued operations Loss from discontinued operations, net of tax 24 (61,881) (58,137) (23,898) (21,740) (9,829) ------

(Loss)/profit for the year/period (100,411) (118,384) 8,286 (36,984) 10,053

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For the year ended Three months ended 31 December 31 March 2018 2019 2020 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Other comprehensive income for the year/period (after tax and reclassification adjustments)

Items that will not be reclassified subsequently to profit or loss Exchange differences on translation of financial statements of foreign operations 592 285 (435) 260 28

Total comprehensive income for the year/period (99,819) (118,099) 7,851 (36,724) 10,081

(Loss)/profit for the year/period attributable to: – Continuing operations (38,431) (61,225) 32,216 (15,169) 19,515 – Discontinued operations (53,439) (44,966) (22,183) (20,349) (9,821) Equity shareholders of the Company (91,870) (106,191) 10,033 (35,518) 9,694 Non-controlling interests (8,541) (12,193) (1,747) (1,466) 359

(Loss)/profit for the year/period (100,411) (118,384) 8,286 (36,984) 10,053

Total comprehensive income for the year/period attributable to: – Continuing operations (37,839) (60,940) 31,781 (14,909) 19,543 – Discontinued operations (53,439) (44,966) (22,183) (20,349) (9,821) Equity shareholders of the Company (91,278) (105,906) 9,598 (35,258) 9,722 Non-controlling interests (8,541) (12,193) (1,747) (1,466) 359

Total comprehensive income for the year/period (99,819) (118,099) 7,851 (36,724) 10,081

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For the year ended Three months ended 31 December 31 March Note 2018 2019 2020 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

(Loss)/earnings per share Basic and diluted (RMB) 10 (0.72) (0.83) 0.08 (0.28) 0.07

(Loss)/earnings per share – continuing operations Basic and diluted (RMB) 10 (0.30) (0.48) 0.25 (0.12) 0.15

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CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Expressed in RMB)

As at As at 31 December 31 March Note 2018 2019 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000

Non-current assets Property, plant and equipment 11 530,100 587,455 430,829 422,343 Intangible assets 12 2,691 2,394 1,231 1,004 Interests in associates 14 9,318 11,395 19,712 20,080 Other non-current assets 10,181 9,752 6,267 3,221 Deferred tax assets 22 15,932 11,918 9,615 10,186

568,222 622,914 467,654 456,834 ------

Current assets Inventories 15 41,305 37,927 52,186 57,860 Trade and other receivables 16 67,266 57,993 73,414 73,512 Financial assets at FVTPL 17 71,046 84,546 186,397 190,053 Cash and cash equivalents 18 92,251 107,137 116,868 149,124 Assets held for sale 24 – – 111,130 108,120

271,868 287,603 539,995 578,669 ------

Current liabilities Trade payables 19 19,048 23,192 21,691 27,457 Other payables and accruals 20 91,426 117,135 97,977 95,705 Lease liabilities 21 56,319 74,322 48,020 45,268 Income tax payable 22 4,450 6,716 10,142 10,854 Contract liabilities 4(c) 364,656 457,155 554,238 575,818 Liabilities directly associated with the assets held for sale 24 – – 110,612 110,488

535,899 678,520 842,680 865,590 ------

Net current liabilities (264,031) (390,917) (302,685) (286,921) ------

Total assets less current liabilities 304,191 231,997 164,969 169,913 ------

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As at As at 31 December 31 March Note 2018 2019 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000

Non-current liabilities Lease liabilities 21 347,317 393,222 294,951 289,814 ------

Net liabilities (43,126) (161,225) (129,982) (119,901)

CAPITAL AND RESERVES 23 Share capital 128,627 128,627 128,627 128,627 Reserves (152,508) (258,414) (262,845) (253,123)

Total deficits attributable to equity shareholders of the Company (23,881) (129,787) (134,218) (124,496) Non-controlling interests (19,245) (31,438) 4,236 4,595

TOTAL DEFICITS (43,126) (161,225) (129,982) (119,901)

– I-9 – 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 APPENDIX I ACCOUNTANTS’ REPORT

STATEMENTS OF FINANCIAL POSITION OF THE COMPANY (Expressed in RMB)

As at As at 31 December 31 March Note 2018 2019 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000

Non-current assets Property, plant and equipment 34,809 30,135 4,743 9,036 Intangible assets 2,246 2,059 1,132 910 Investments in subsidiaries 13 98,806 153,806 153,306 154,306 Other non-current assets 1,439 1,675 5,351 1,411

137,300 187,675 164,532 165,663 ------

Current assets Inventories 9,843 6,369 4,999 12,647 Trade and other receivables 16 261,537 247,841 290,813 298,914 Financial assets at FVTPL 17 71,046 84,546 186,397 178,053 Cash and cash equivalents 18 40,902 39,752 62,318 80,084

383,328 378,508 544,527 569,698 ------

Current liabilities Trade payables 2,117 2,792 4,088 8,250 Other payables and accruals 20 254,231 332,927 492,717 509,308 Lease liabilities 3,919 6,023 293 770

260,267 341,742 497,098 518,328 ------

Net current assets 123,061 36,766 47,429 51,370 ------

Total assets less current liabilities 260,361 224,441 211,961 217,033 ------

Non-current liabilities Lease liabilities 5,098 1,476 – 419 ------

NET ASSETS 255,263 222,965 211,961 216,614

CAPITAL AND RESERVES 23 Share capital 128,627 128,627 128,627 128,627 Reserves 126,636 94,338 83,334 87,987

TOTAL EQUITY 255,263 222,965 211,961 216,614

– I-10 – CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY REPORT ACCOUNTANTS’ DOCUMENT THIS OF I COVER MUST THE INFORMATION APPENDIX ON THE “WARNING” THAT HEADED AND CHANGE SECTION TO THE SUBJECT WITH AND CONJUNCTION INCOMPLETE IN FORM, READ DRAFT BE IN IS DOCUMENT THIS (Expressed in RMB)

Attributable to equity shareholders of the Group Non- Total Share Capital Exchange Statutory Accumulated controlling equity/ capital reserve reserve reserve loss Total interests (deficits) RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Balance at 1 January 2018 128,627 (830) 706 17,783 (78,889) 67,397 (10,704) 56,693 ------

Changes in equity for 2018: Loss for the year ––––(91,870) (91,870) (8,541) (100,411) Other comprehensive income – – 592 – – 592 – 592 -1– I-11 – Total comprehensive income – – 592 – (91,870) (91,278) (8,541) (99,819) ------

Balance at 31 December 2018 and 1 January 2019 128,627 (830) 1,298 17,783 (170,759) (23,881) (19,245) (43,126) ------

Changes in equity for 2019: Loss for the year ––––(106,191) (106,191) (12,193) (118,384) Other comprehensive income – – 285 – – 285 – 285

Total comprehensive income – – 285 – (106,191) (105,906) (12,193) (118,099) ------

Balance at 31 December 2019 128,627 (830) 1,583 17,783 (276,950) (129,787) (31,438) (161,225) Attributable to equity shareholders of the Group REPORT ACCOUNTANTS’ DOCUMENT THIS OF I COVER MUST THE INFORMATION APPENDIX ON THE “WARNING” THAT HEADED AND CHANGE SECTION TO THE SUBJECT WITH AND CONJUNCTION INCOMPLETE IN FORM, READ DRAFT BE IN IS DOCUMENT THIS Non- Total Share Capital Exchange Statutory Accumulated controlling equity/ capital reserve reserve reserve loss Total interests (deficits) Note RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Balance at 1 January 2020 128,627 (830) 1,583 17,783 (276,950) (129,787) (31,438) (161,225) ------

Changes in equity for 2020: Profit for the year ––––10,033 10,033 (1,747) 8,286 Other comprehensive income – – (435) – – (435) – (435)

-2– I-12 – Total comprehensive income – – (435) – 10,033 9,598 (1,747) 7,851 ------

Capital contributions from a subsidiary’s non- controlling shareholders and others –––– ––2,365 2,365 Acquisition of non- controlling interests of a subsidiary 13 – (14,029) – – – (14,029) 14,029 – Disposal of subsidiaries 13 –––– ––21,027 21,027 ------

Balance at 31 December 2020 128,627 (14,859) 1,148 17,783 (266,917) (134,218) 4,236 (129,982) (Unaudited) REPORT ACCOUNTANTS’ DOCUMENT THIS OF I COVER MUST THE INFORMATION APPENDIX ON THE “WARNING” THAT HEADED AND CHANGE SECTION TO THE SUBJECT WITH AND CONJUNCTION INCOMPLETE IN FORM, READ DRAFT BE IN IS DOCUMENT THIS

Attributable to equity shareholders of the Group Non- Share Capital Exchange Statutory Accumulated controlling Total capital reserve reserve reserve loss Total interests deficits RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Balance at 1 January 2020 128,627 (830) 1,583 17,783 (276,950) (129,787) (31,438) (161,225) ------

Changes in equity for three months ended 31 March 2020: Loss for the period ––––(35,518) (35,518) (1,466) (36,984) Other comprehensive income – – 260 – – 260 – 260 -3– I-13 –

Total comprehensive income – – 260 – (35,518) (35,258) (1,466) (36,724) ------

Capital contribution from a subsidiary’s non-controlling shareholder –––– ––1,196 1,196 Disposal of a subsidiary –––– ––2,161 2,161 ------

Balance at 31 March 2020 128,627 (830) 1,843 17,783 (312,468) (165,045) (29,547) (194,592) Attributable to equity shareholders of the Group REPORT ACCOUNTANTS’ DOCUMENT THIS OF I COVER MUST THE INFORMATION APPENDIX ON THE “WARNING” THAT HEADED AND CHANGE SECTION TO THE SUBJECT WITH AND CONJUNCTION INCOMPLETE IN FORM, READ DRAFT BE IN IS DOCUMENT THIS Non- Share Capital Exchange Statutory Accumulated controlling Total capital reserve reserve reserve loss Total interests deficits RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Balance at 1 January 2021 128,627 (14,859) 1,148 17,783 (266,917) (134,218) 4,236 (129,982) ------

Changes in equity for three months ended 31 March 2021: Profit for the period ––––9,694 9,694 359 10,053 Other comprehensive income – – 28 – – 28 – 28

Total comprehensive income – – 28 – 9,694 9,722 359 10,081

-4– I-14 – ------

Balance at 31 March 2021 128,627 (14,859) 1,176 17,783 (257,223) (124,496) 4,595 (119,901) 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 APPENDIX I ACCOUNTANTS’ REPORT

CONSOLIDATED CASH FLOW STATEMENTS (Expressed in RMB)

Three months ended 31 Year ended 31 December March Note 2018 2019 2020 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Operating activities (Loss)/profit before taxation (86,623) (105,046) 29,583 (33,454) 16,083 – from continuing operation (25,227) (50,471) 53,136 (11,850) 25,912 – from discontinued operations (61,396) (54,575) (23,553) (21,604) (9,829)

Adjustments for: Amortization of intangible assets 12 1,273 1,295 1,144 305 227 Depreciation of property, plant and equipment 11 98,489 111,389 112,350 33,854 21,565 Impairment loss on other receivables 6(c) 1,705 339 3,690 2,726 – Net realized and unrealized gains from investment in wealth management products 5 (3,438) (2,355) (5,613) (2,911) (1,381) Share of net (losses)/profits of associates 520 166 (3,017) (235) (368) Gain on disposal of an associate 5 – (4,034) – – – (Gains)/losses on disposal of subsidiaries – – (28,363) 87 – COVID-19-related rent concessions from lessors 6(c) – – (1,615) (1,206) – Net foreign exchange (gain)/loss 5 (23) 35 82 21 (14) Finance costs 20,669 23,026 20,634 5,133 4,978

– I-15 – 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 APPENDIX I ACCOUNTANTS’ REPORT

Three months ended 31 Year ended 31 December March Note 2018 2019 2020 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Changes in working capital: (Increase)/decrease in inventories (2,635) 3,378 (18,995) (1,768) (5,634) Decrease/(increase) in trade and other receivables 3,422 10,235 (23,418) 22,180 (245) Increase in trade payables 5,936 4,144 5,257 2,663 7,041 (Decrease)/increase in other payables and accruals (12,134) 25,616 43,809 (17,075) 5,567 Increase/(decrease) in contract liabilities 79,720 92,499 131,789 (6,300) 24,047

Cash generated from operations 106,881 160,687 267,317 4,020 71,866

Tax paid 22(a) (9,522) (8,359) (10,024) (520) (5,889) Net cash generated from operating activities 97,359 152,328 257,293 3,500 65,977 ------

Investing activities Payment for investment in associates – (6,069) (5,300) – – Proceeds from disposal of interests in an associate – 7,860 – – – Payment for financial assets at FVTPL (35,000) (64,000) (392,320) (137,500) (226,000) Proceeds from disposal of financial assets at FVTPL 84,392 52,855 296,082 117,810 223,725 Proceeds from disposal of investment in a subsidiary – – 2,000 2,000 – Payments for purchase of property, plant and equipment (53,683) (50,210) (53,520) (2,436) (12,920) Payments for intangible assets (543) (998) (158) – – Proceeds of discontinued operation, net of cash disposed of 24(a) – – (81) – – Loan to a shareholder – – (24,800) (12,400) – Loan to a third party – (2,200) – – – Repayment from a third party – – 2,200 – –

Net cash used in investing activities (4,834) (62,762) (175,897) (32,526) (15,195) ------

– I-16 – 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 APPENDIX I ACCOUNTANTS’ REPORT

Three months ended 31 Year ended 31 December March Note 2018 2019 2020 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Financing activities Capital element of lease rentals paid (38,660) (51,794) (48,525) (13,139) (12,345) Interest element of lease rentals paid (20,669) (23,026) (20,634) (5,133) (4,978) Proceeds from capital contribution of a subsidiary’s non-controlling shareholders – – 2,504 1,196 –

Net cash used in financing activities (59,329) (74,820) (66,655) (17,076) (17,323) ------

Effect of foreign exchange rate changes on cash and cash equivalents 629 140 (442) 116 41 ------

Net increase/(decrease) in cash and cash equivalents 33,825 14,886 14,299 (45,986) 33,500

Cash and cash equivalents at 1 January 18 58,426 92,251 107,137 107,137 121,436

Less: cash and cash equivalents included in assets classified as held for sale 24(b)(i) – – (4,568) – (5,812)

Cash and cash equivalents at 31 December/31 March 18 92,251 107,137 116,868 61,151 149,124

– I-17 – 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 APPENDIX I ACCOUNTANTS’ REPORT

NOTES TO THE HISTORICAL FINANCIAL INFORMATION

1 BASIS OF PREPARATION AND PRESENTATION OF HISTORICAL FINANCIAL INFORMATION

(a) Basis of preparation and presentation of the historical financial information

Beijing Evercare Medical Technology Group Co., Ltd. (北京伊美爾醫療科技集團股份公司, the “Company”) is a joint stock company incorporated in the People’s Republic of China with limited liabilities in 2008. The Company is ultimately controlled by Mr. Wang Yong’an (the “Ultimate Controlling Shareholder”).

The Company and its subsidiaries (together, “the Group”) are principally engaged in the provision of aesthetic medical services.

In preparation for the [REDACTED] of the Company’s shares on the Main Board of the Stock Exchange of Hong Kong Limited, the Company entered into a share transfer agreement on 1 February 2021 to acquire 100% equity interest in Jiangyi (Tianjin) Network Technology Co., Ltd. (“Tianjin Jiangyi”) and Sweet Bestie (Tianjin) Network Technology Co., Ltd. (“Tianjin Sweet Bestie”) from Beijing Anjian Hengyuan Investment Management Co., Ltd. which is controlled by Ultimate Controlling Shareholder (the “Acquisition”).

As the Company, Tianjin Jiangyi and Tianjin Sweet Bestie were controlled by the Ultimate Controlling Shareholder before and after the Acquisition and that control was not transitory, there was a continuation of the risks and benefits to the Ultimate Controlling Shareholders and therefore the Acquisition is considered as a business combination under common control. Accordingly, the accompanying consolidated financial information has been prepared using the principles of merger accounting as if the current group structure had always been in existence. The consolidated statements of profit or loss and other comprehensive income, the consolidated statements of changes in equity and the consolidated cash flow statements of the Group for each of the years ended 31 December 2018, 2019 and 2020 and three months ended 31 March 2021 have been prepared to present the financial performance and cash flows of the companies now comprising the Group as if the current group structure had been in existence on 1 January 2018 (or where the companies now comprising the Group were incorporated/acquired at a date after 1 January 2018, for the period from the date of incorporation/acquisition to 31 March 2021). The consolidated statements of financial position of the Group as at 31 December 2018, 2019 and 2020 and 31 March 2021 have been prepared to present the financial position of the companies now comprising the Group as at those dates (or where the companies now comprising the Group was incorporated/acquired at a date after 1 January 2018, as if the consolidation had occurred from the date when those companies first came under the control of the Ultimate Controlling Shareholder).

Intra-group balances and transactions are eliminated in full in preparing the Historical Financial Information.

The Company’s principal subsidiaries are set out in Note 13.

The Historical Financial Information has been prepared in accordance with all applicable International Financial Reporting Standards (“IFRSs”) which collective term includes all applicable individual International Financial Reporting Standards, International Accounting Standards (“IASs”) and Interpretations issued by the International Accounting Standards Board (the “IASB”). Further details of the significant accounting policies adopted are set out in Note 2.

The IASB has issued a number of new and revised IFRSs. For the purpose of preparing this Historical Financial Information, the Group has consistently adopted all applicable new and revised IFRSs throughout the Relevant Periods. The Group has not adopted any new standards or interpretations that are not yet effective for the accounting period beginning on 1 January 2021. The new and revised accounting standards and interpretations issued but not yet effective and adopted by the Group for the accounting period beginning on 1 January 2021 are set out in Note 28.

The Historical Financial Information also complies with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

The accounting policies set out below have been applied consistently to all periods presented in the Historical Financial Information.

The Stub Period Corresponding Financial Information has been prepared in accordance with the same basis of preparation and presentation adopted in respect of the Historical Financial Information.

The functional currency of the Company is Renminbi (“RMB”), which is the same as the presentation currency of the Historical Financial Information.

– I-18 – 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 APPENDIX I ACCOUNTANTS’ REPORT

(b) Going concern

The Historical Financial Information has been prepared on a going concern basis, notwithstanding the net current liabilities and net liabilities of the Group as at 31 December 2018, 2019 and 2020 and 31 March 2021.

The management has prepared a cash flow projection covering the years ending 31 December 2021 and 31 December 2022. Based on the projections, taking into account the Group’s future operational performance and financial resources available, the directors are of the opinion that the Group will have sufficient financial resources to support its operations and to meet its financial obligations as and when they fall due for the next twelve months from 31 March 2021.

2 SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of measurement

The measurement basis used in the preparation of the Historical Financial Information is the historical cost basis except that the investment in debt and equity securities are stated at their fair value (see Note 2(g)) and disposal groups held for sale are stated at the lower of carrying amount and fair value less costs to sell (see Note 2(v)).

(b) Use of estimates and judgements

The preparation of the Historical Financial Information in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Judgements made by management in the application of IFRSs that have significant effect on the Historical Financial Information and major sources of estimation uncertainty are discussed in Note 3.

Business combination arising from transfer of interests in entities that are under the control is accounted for as if the acquisition had occurred at the beginning of the Track Record Period or, if later, at the date that common control was established. The assets acquired and liabilities assumed are recognized at the carrying amounts recognized previously in the controlling shareholder’s perspective. The components of equity of the acquired entities are added to the same components within the Group’s equity and any difference between the net assets acquired and the consideration paid is recognized directly in equity.

Except for business combination under common control, the Group accounts for business combinations using the acquisition method when control is transferred to the Group (see Note 2(d)). The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment (see Note 2(k)(ii)). Any gain on a bargain purchase is recognized in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognized in profit or loss.

Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, other contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognized in profit or loss.

– I-19 – 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 APPENDIX I ACCOUNTANTS’ REPORT

If share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree’s employees (acquiree’s awards), then all or portion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on the market-based measure of the replacement awards compared with the market-based measure of the acquiree’s awards and the extent to which the replacement awards relate to pre-combination service.

The components of equity of the acquired entities are added to the same components within the Group’s equity and any difference between the net assets acquired and the consideration paid is recognized directly in equity.

Business combination arising from transfer of interest in entities that are under common control is accounted for as if the acquisition had occurred at the beginning of the Relevant Periods of, if later, at the date that common control was established. The assets acquired and liabilities assumed are recognized at the carrying amounts recognized previously from the controlling shareholders’ perspective.

(d) Subsidiaries and non-controlling interests

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. When assessing whether the Group has power, only substantive rights (held by the Group and other parties) are considered.

An investment in a subsidiary is consolidated into the Historical Financial Information from the date that control commences until the date that control ceases. Intra-group balances, transactions and cash flows and any unrealized profits arising from intra-group transactions are eliminated in full in preparing the Historical Financial Information. Unrealized losses resulting from intra-group transactions are eliminated in the same way as unrealized gains but only to the extent that there is no evidence of impairment.

Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly to the Company, and in respect of which the Group has not agreed any additional terms with the holders of those interests which would result in the Group as a whole having a contractual obligation in respect of those interests that meets the definition of a financial liability. For each business combination, the Group can elect to measure any non-controlling interests either at fair value or at the non-controlling interests’ proportionate share of the subsidiary’s net identifiable assets.

Non-controlling interests are presented in the consolidated statement of financial position within equity, separately from equity attributable to the equity shareholders of the Company. Non-controlling interests in the results of the Group are presented on the face of the consolidated statements of profit or loss and other comprehensive income as an allocation of the total profit or loss and total comprehensive income for the period between non-controlling interests and the equity shareholders of the Company. Loans from holders of non-controlling interests and other contractual obligations towards these holders are presented as financial liabilities in the consolidated statement of financial position depending on the nature of the liability.

Changes in the Group’s interests in a subsidiary that do not result in a loss of control are accounted for as equity transactions, whereby adjustments are made to the amounts of controlling and non-controlling interests within consolidated equity to reflect the change in relative interests, but no adjustments are made to goodwill and no gain or loss is recognized.

When the Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that subsidiary, with a resulting gain or loss being recognized in profit or loss. Any interest retained in that former subsidiary at the date when control is lost is recognized at fair value and this amount is regarded as the fair value on initial recognition of a financial asset (see Note 2(f)) or, when appropriate, the cost on initial recognition of an investment in an associate or joint venture.

In the Company’s statement of financial position, an investment in a subsidiary is stated at cost less impairment losses (see Note 2(k)), unless the investment is classified as held for sale (or included in a disposal group that is classified as held for sale).

(e) Associates and joint ventures

An associate is an entity in which the Group has significant influence, but not control or joint control, over its management, including participation in the financial and operating policy decisions.

– I-20 – 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 APPENDIX I ACCOUNTANTS’ REPORT

A joint venture is an arrangement whereby the Group and other parties contractually agree to share control of the arrangement, and have rights to the net assets of the arrangement.

An investment in an associate or a joint venture is accounted for in the consolidated financial statements under the equity method, unless it is classified as held for sale (or included in a disposal group that is classified as held for sale). Under the equity method, the investment is initially recognized at cost, adjusted for any excess of the Group’s share of the acquisition-date fair value of the investee’s identifiable net assets over the cost of the investment (if any). The cost of the investment includes purchase price, other costs directly attributable to the acquisition of the investment, and any direct investment into the associate or joint venture that forms part of the Group’s equity investment. Thereafter, the investment is adjusted for the post acquisition change in the Group’s share of the investee’s net assets and any impairment loss relating to the investment. The Group’s share of the post-acquisition post-tax results of the investees and any impairment losses for the year are recognized in the consolidated statement of profit or loss, whereas the Group’s share of the post-acquisition post-tax items of the investees’ other comprehensive income is recognized as other comprehensive income in the consolidated statement of comprehensive income.

When the Group’s share of losses exceeds its interest in the associate or the joint venture, the Group’s interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the investee. For this purpose, the Group’s interest is the carrying amount of the investment under the equity method together with the Group’s long-term interests that in substance form part of the Group’s net investment in the associate or the joint venture (after applying the ECL model to such other long-term interests where applicable (see Note 2(k)(i)).

Unrealized profits and losses resulting from transactions between the Group and its associates and joint venture are eliminated to the extent of the Group’s interest in the investee, except where unrealized losses provide evidence of an impairment of the asset transferred, in which case they are recognized immediately in profit or loss.

If an investment in an associate becomes an investment in a joint venture or vice versa, retained interest is not remeasured. Instead, the investment continues to be accounted for under the equity method.

In all other cases, when the Group ceases to have significant influence over an associate or joint control over a joint venture, it is accounted for as a disposal of the entire interest in that investee, with a resulting gain or loss being recognized in profit or loss. Any interest retained in that former investee at the date when significant influence or joint control is lost is recognized at fair value and this amount is regarded as the fair value on initial recognition of a financial asset.

(f) Goodwill

Goodwill represents the excess of

(i) the aggregate of the fair value of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the Group’s previously held equity interest in the acquiree; over

(ii) the net fair value of the acquiree’s identifiable assets and liabilities measured as at the acquisition date.

When (ii) is greater than (i), then this excess is recognized immediately in profit or loss as a gain on a bargain purchase.

Goodwill is stated at cost less accumulated impairment losses. Goodwill arising on a business combination is allocated to each cash-generating unit, or groups of cash generating units, that is expected to benefit from the synergies of the combination and is tested annually for impairment (see Note 2(k)).

On disposal of a cash generating unit during the period, any attributable amount of purchased goodwill is included in the calculation of the profit or loss on disposal.

(g) Other investments in debt and equity securities

The Group’s policies for investments in debt and equity securities, other than investments in subsidiaries, associates and joint ventures, are set out below.

– I-21 – 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 APPENDIX I ACCOUNTANTS’ REPORT

Investments in debt and equity securities are recognized/derecognized on the date the Group commits to purchase/sell the investment. The investments are initially stated at fair value plus directly attributable transaction costs, except for those investments measured at fair value through profit or loss (FVTPL) for which transaction costs are recognized directly in profit or loss. For an explanation of how the Group determines fair value of financial instruments, see Note 25(e). These investments are subsequently accounted for as follows, depending on their classification.

(i) Investments other than equity investments

Non-equity investments held by the Group are classified into one of the following measurement categories:

– amortized cost, if the investment is held for the collection of contractual cash flows which represent solely payments of principal and interest. Interest income from the investment is calculated using the effective interest method (see Note 2(t)(iv)).

– fair value through other comprehensive income (FVOCI) – recycling, if the contractual cash flows of the investment comprise solely payments of principal and interest and the investment is held within a business model whose objective is achieved by both the collection of contractual cash flows and sale. Changes in fair value are recognized in other comprehensive income, except for the recognition in profit or loss of expected credit losses, interest income (calculated using the effective interest method) and foreign exchange gains and losses. When the investment is derecognized, the amount accumulated in other comprehensive income is recycled from equity to profit or loss.

– fair value at profit or loss (FVTPL) if the investment does not meet the criteria for being measured at amortized cost or FVOCI (recycling). Changes in the fair value of the investment (including interest) are recognized in profit or loss.

(ii) Equity investments

An investment in equity securities is classified as FVTPL unless the equity investment is not held for trading purposes and on initial recognition of the investment the Group makes an irrevocable election to designate the investment at FVOCI (non-recycling) such that subsequent changes in fair value are recognized in other comprehensive income. Such elections are made on an instrument-by-instrument basis, but may only be made if the investment meets the definition of equity from the issuer’s perspective. Where such an election is made, the amount accumulated in other comprehensive income remains in the fair value reserve (non-recycling) until the investment is disposed of. At the time of disposal, the amount accumulated in the fair value reserve (non-recycling) is transferred to retained earnings. It is not recycled through profit or loss. Dividends from an investment in equity securities, irrespective of whether classified as at FVTPL or FVOCI, are recognized in profit or loss as other income.

(h) Property, plant and equipment

The following items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses (see Note 2(k)):

– right-of-use assets arising from leases over leasehold properties where the Group is not the registered owner of the property interest; and

– items of plant and equipment, including right-of-use assets arising from leases of underlying plant and equipment.

The cost of self-constructed items of property, plant and equipment includes the cost of materials, direct labor, the initial estimate, where relevant, of the costs of dismantling and removing the items and restoring the site on which they are located, and an appropriate proportion of production overheads and borrowing costs.

Gains or losses arising from the retirement or disposal of an item of property, plant and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognized in profit or loss on the date of retirement or disposal.

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Depreciation is calculated to write off the cost of property, plant and equipment, less their estimated residual value, if any, using the straight-line method over their estimated useful lives as follows:

Estimated useful lives

Building 40 years Medical equipment 5 years Other equipment 3 – 5 years Right-of-use assets Over the term of lease Leasehold improvement 2-5 years, or over the remaining term of lease, whichever is shorter

Construction in progress represents property, plant and equipment under construction and equipment pending installation and is stated at cost less impairment losses.

Capitalization of construction in progress costs ceases and the construction in progress is transferred to property, plant and equipment when substantially all of the activities necessary to prepare the asset for its intended use is completed. No depreciation is provided in respect of construction in progress until it is ready for its intended use.

(i) Intangible assets (other than goodwill)

Intangible assets represent software and similar licenses with finite useful life that are acquired by the Group. These intangible assets are stated at cost less accumulated amortization (where the estimated useful life is finite) and impairment losses. Expenditure on internally generated goodwill and brands is recognized as an expense in the period in which it is incurred.

Amortization is charged to profit or loss on a straight-line basis over the assets’ estimated useful lives. The useful lives of intangible assets are determined based on factors such as the attrition rate, technological obsolescence, and expiry of related legal rights. The following intangible assets with finite useful lives are amortized from the date they are available for use and their estimated useful lives are as follows:

Estimated useful lives

Trademarks 10 years Software 3-10 years

(j) Lease

At inception of a contract, the Group assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Control is conveyed where the customer has both the right to direct the use of the identified asset and to obtain substantially all of the economic benefits from that use.

As a lessee

Where the contract contains lease component(s) and non-lease component(s), the Group has elected not to separate non-lease components and accounts for each lease component and any associated non-lease components as a single lease component for all leases.

At the lease commencement date, the Group recognizes a right-of-use asset and a lease liability, except for short-term leases that have a lease term of 12 months or less and leases of low-value assets. When the Group enters into a lease in respect of a low-value asset, the Group decides whether to capitalize the lease on a lease-by-lease basis. The lease payments associated with those leases which are not capitalized are recognized as an expense on a systematic basis over the lease term.

Where the lease is capitalized, the lease liability is initially recognized at the present value of the lease payments payable over the lease term, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, using a relevant incremental borrowing rate. After initial recognition, the lease liability is measured at amortized cost and interest expense is calculated using the effective interest method. Variable lease payments that do not depend on an index or rate are not included in the measurement of the lease liability and hence are charged to profit or loss in the accounting period in which they are incurred.

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The right-of-use asset recognized when a lease is capitalized is initially measured at cost, which comprises the initial amount of the lease liability plus any lease payments made at or before the commencement date, and any initial direct costs incurred. Where applicable, the cost of the right-of-use assets also includes an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, discounted to their present value, less any lease incentives received. The right-of-use asset is subsequently stated at cost less accumulated depreciation and impairment losses (see Note 2(k)(ii)).

The lease liability is remeasured when there is a change in future lease payments arising from a change in an index or rate, or there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, or there is a change arising from the reassessment of whether the Group will be reasonably certain to exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The lease liability is also remeasured when there is a change in the scope of a lease or the consideration for a lease that is not originally provided for in the lease contract (“lease modification”) that is not accounted for as a separate lease. In this case the lease liability is remeasured based on the revised lease payments and lease term using a revised discount rate at the effective date of the modification. The only exceptions are any rent concessions which arose as a direct consequence of the COVID-19 pandemic and which satisfied the conditions set out in paragraph 46B of IFRS 16 Leases. In such cases, the Group has taken advantage of the practical expedient not to assess whether the rent concessions are lease modifications, and recognized the change in consideration as negative variable lease payments in profit or loss in the period in which the event or condition that triggers the rent concessions occurred.

In the consolidated statement of financial position, the current portion of long-term lease liabilities is determined as the present value of contractual payments that are due to be settled within twelve months after the reporting period.

As a lessor

When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operation lease. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to the ownership of an underlying assets to the lease. If this is not the case, the lease is classified as an operating lease.

When a contract contains lease and non-lease components, the Group allocates the consideration in the contract to each component on a relative stand-alone selling price basis. The rental income from operating leases is recognized in profit or loss.

(k) Credit losses and impairment of assets

(i) Credit losses from financial instruments

The Group recognizes a loss allowance for expected credit losses (ECLs) on financial assets measured at amortized cost (including cash and cash equivalents, trade receivables, and other receivables).

Other financial assets measured at fair value, including equity and debt securities measured at FVTPL, equity investments designated at FVOCI (non-recycling), are not subject to the ECL assessment.

Measurement of ECLs

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all expected cash shortfalls (i.e. the difference between the cash flows due to the Group in accordance with the contract and the cash flows that the Group expects to receive).

The expected cash shortfalls of fixed-rate financial assets and trade and other receivables are discounted using the effective interest rate determined at initial recognition or an approximation thereof where the effect of discounting is material.

The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk.

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In measuring ECLs, the Group takes into account reasonable and supportable information that is available without undue cost or effort. This includes information about past events, current conditions and forecasts of future economic conditions.

ECLs are measured on either of the following bases:

– 12-month ECLs: these are losses that are expected to result from possible default events within the 12 months after the reporting date; and

– lifetime ECLs: these are losses that are expected to result from all possible default events over the expected lives of the items to which the ECL model applies.

Loss allowances for trade receivables are always measured at an amount equal to lifetime ECLs. ECLs on these financial assets are estimated using a provision matrix based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors and an assessment of both the current and forecast general economic conditions at the reporting date.

For all other financial instruments, the Group recognizes a loss allowance equal to 12-month ECLs unless there has been a significant increase in credit risk of the financial instrument since initial recognition, in which case the loss allowance is measured at an amount equal to lifetime ECLs.

Significant increases in credit risk

In assessing whether the credit risk of a financial instrument has increased significantly since initial recognition, the Group compares the risk of default occurring on the financial instrument assessed at the reporting date with that assessed at the date of initial recognition. In making this reassessment, the Group considers that a default event occurs when the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as realizing security (if any is held). The Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort.

In particular, the following information is taken into account when assessing whether credit risk has increased significantly since initial recognition:

– failure to make payments of principal or interest on their contractually due dates;

– an actual or expected significant deterioration in a financial instrument’s external or internal credit rating (if available);

– an actual or expected significant deterioration in the operating results of the debtor; and

– existing or forecast changes in the technological, market, economic or legal environment that have a significant adverse effect on the debtor’s ability to meet its obligation to the Group.

Depending on the nature of the financial instruments, the assessment of a significant increase in credit risk is performed on either an individual basis or a collective basis. When the assessment is performed on a collective basis, the financial instruments are grouped based on shared credit risk characteristics, such as past due status and credit risk ratings.

ECLs are remeasured at each reporting date to reflect changes in the financial instrument’s credit risk since initial recognition. Any change in the ECL amount is recognized as an impairment gain or loss in profit or loss. The Group recognizes an impairment gain or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account.

Basis of calculation of interest income

Interest income recognized in accordance with Note 2(t)(iv) is calculated based on the gross carrying amount of the financial asset unless the financial asset is credit-impaired, in which case interest income is calculated based on the amortized cost (i.e. the gross carrying amount less loss allowance) of the financial asset.

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At each reporting date, the Group assesses whether a financial asset is credit-impaired. A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

Evidence that a financial asset is credit-impaired includes the following observable events:

– significant financial difficulties of the debtor;

– a breach of contract, such as a default or past due event;

– it becoming probable that the borrower will enter into bankruptcy or other financial reorganization;

– significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor; or

– the disappearance of an active market for a security because of financial difficulties of the issuer.

Write-off policy

The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off.

Subsequent recoveries of an asset that was previously written off are recognized as a reversal of impairment in profit or loss in the period in which the recovery occurs.

(ii) Impairment of other non-current assets

Internal and external sources of information are reviewed at the end of each reporting period to identify indications that the following assets may be impaired or, except in the case of goodwill, an impairment loss previously recognized no longer exists or may have decreased:

– property, plant and equipment, including right-of-use assets;

– intangible assets;

– Investments in associates; and

– investments in subsidiaries in the Company’s statement of financial position.

If any such indication exists, the asset’s recoverable amount is estimated. In addition, for goodwill, the recoverable amount is estimated annually whether or not there is any indication of impairment.

– Calculation of recoverable amount

The recoverable amount of an asset is the greater of its fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit).

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– Recognition of impairment losses

An impairment loss is recognized in profit or loss if the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or group of units) and then, to reduce the carrying amount of the other assets in the unit (or group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs of disposal (if measurable) or value in use (if determinable).

– Reversals of impairment losses

In respect of assets other than goodwill, an impairment loss is reversed if there has been a favorable change in the estimates used to determine the recoverable amount. An impairment loss in respect of goodwill is not reversed.

A reversal of an impairment loss is limited to the asset’s carrying amount that would have been determined had no impairment loss been recognized in prior periods. Reversals of impairment losses are credited to profit or loss in the period in which the reversals are recognized.

(l) Inventories

Inventories comprise consumables used in the ordinary course of business, medication, skincare, healthcare and beauty products.

Inventories are stated at the lower of cost and net realizable value. Cost of Inventories, representing the purchase cost, is calculated on the weighted average basis. Net realizable value of merchandise is the estimated selling price in the ordinary course of business, less the estimated cost necessary to make the sale.

When inventories are sold or consumed in the ordinary course of business, the carrying amount of those inventories is recognized as an expense in the period in which the related revenue is recognized.

The amount of any write-down of inventories to net realisable value and all losses of inventories are recognized as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories is recognized as a reduction in the amount of inventories recognized as an expense in the period in which the reversal occurs.

(m) Contract liabilities

A contract liability is recognized when the customer pays the consideration before the Group recognizes the related revenue (see Note 2(t)). A contract liability would also be recognized if the Group has an unconditional right to receive the consideration before the Group recognizes the related revenue. In such cases, a corresponding receivable would also be recognized (see Note 2(n)).

Contract liability is recognized as revenue when the related goods or services are delivered.

(n) Trade and other receivables

A receivable is recognized when the Group has an unconditional right to receive consideration. A right to receive consideration is unconditional if only the passage of time is required before payment of that consideration is due.

Receivables are stated at amortized cost using the effective interest method less allowance for credit losses (see Note 2(k)(i)).

(o) Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are also included as a component of cash and cash equivalents for the purpose of the consolidated cash flow statement. Cash and cash equivalents are assessed for expected credit losses (ECL) in accordance with the policy set out in Note 2(k)(i).

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(p) Trade and other payables

Trade and other payables are initially recognized at fair value and are subsequently stated at amortized cost unless the effect of discounting would be immaterial, in which case they are stated at cost.

(q) Employee benefits

(i) Short-term employee benefits and contributions to defined contribution retirement plans

Salaries, annual bonuses, paid annual leave, contributions to defined contribution retirement plans and the cost of non-monetary benefits are accrued in the period in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values.

(ii) Termination benefits

Termination benefits are recognized at the earlier of when the Group can no longer withdraw the offer of those benefits and when it recognizes restructuring costs involving the payment of termination benefits.

(r) Income tax

Income tax for the period comprises current tax and movements in deferred tax assets and liabilities. Current tax and movements in deferred tax assets and liabilities are recognized in profit or loss except to the extent that they relate to items recognized in other comprehensive income or directly in equity, in which case the relevant amounts of tax are recognized in other comprehensive income or directly in equity, respectively.

Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at the end of the reporting period, and any adjustment to tax payable in respect of previous periods.

Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits.

Apart from certain limited exceptions, all deferred tax liabilities, and all deferred tax assets to the extent that it is probable that future taxable profits will be available against which the asset can be utilized, are recognized. Future taxable profits that may support the recognition of deferred tax assets arising from deductible temporary differences include those that will arise from the reversal of existing taxable temporary differences, provided those differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the same period as the expected reversal of the deductible temporary difference or in periods into which a tax loss arising from the deferred tax asset can be carried back or forward. The same criteria are adopted when determining whether existing taxable temporary differences support the recognition of deferred tax assets arising from unused tax losses and credits, that is, those differences are taken into account if they relate to the same taxation authority and the same taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilized.

The limited exceptions to recognition of deferred tax assets and liabilities are those temporary differences arising from goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit (provided they are not part of a business combination), and temporary differences relating to investments in subsidiaries to the extent that, in the case of taxable differences, the Group controls the timing of the reversal and it is probable that the differences will not reverse in the foreseeable future, or in the case of deductible differences, unless it is probable that they will reverse in the future.

The amount of deferred tax recognized is measured based on the expected manner of realization or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the end of the reporting period. Deferred tax assets and liabilities are not discounted.

The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the related tax benefit to be utilized. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profits will be available.

Additional income taxes that arise from the distribution of dividends are recognized when the liability to pay the related dividends is recognized.

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Current tax balances and deferred tax balances, and movements therein, are presented separately from each other and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against deferred tax liabilities, if the Company or the Group has the legally enforceable right to set off current tax assets against current tax liabilities and the following additional conditions are met:

(i) In the case of current tax assets and liabilities, the Company or the Group intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously; or

(ii) In the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority on either:

– the same taxable entity; or

– different taxable entities, which, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered, intend to realize the current tax assets and settle the current tax liabilities on a net basis or realize and settle simultaneously.

(s) Provisions and contingent liabilities

Provisions are recognized when the Group has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditure expected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

(t) Revenue and other income

Income is classified by the Group as revenue when it arises from the sale of goods or the provision of services in the ordinary course of the Group’s business.

Revenue is recognized when control over a product or service is transferred to the customer, at the amount of promised consideration to which the Group is expected to be entitled, excluding those amounts collected on behalf of third parties. Revenue excludes value added tax or other sales taxes and is after deduction of any trade discounts.

Further details of the Group’s revenue and other income recognition policies are as follows:

(i) Revenue from aesthetic medical services

Revenue from provision of aesthetic medical services, including aesthetic non-surgical services, primarily comprising aesthetic injection procedures and aesthetic energy-based procedures; and aesthetic surgical services, primarily comprising aesthetic plastic procedures, is recognized when the services have been rendered to customers.

The Group provides certain aesthetic medical services in package which is accounted for as multiple elements as each service represents a distinct performance obligation. The total transaction price of the package is allocated to each service by using their relative stand-alone selling prices. Revenue of each service is recognized when the related services are rendered. Customers usually pay in advance when they purchase the package. The packages do not have an expiry date and the Group offers refund to customers for any remaining undelivered services in the packages upon customer requests. Historically the refund rate is insignificant. A majority of the customers receive all the services in the packages within one year.

(ii) Sale of healthcare and beauty products

Revenue is recognized when the customer takes possession of and accepts the products. If the products are a partial fulfilment of a contract covering other goods and/or services, then the amount of revenue recognized is an appropriate proportion of the total transaction price under the contract, allocated between all the goods and services promised under the contract on a relative stand-alone selling price basis.

(iii) Dividends

Dividend income is recognized when the shareholder’s right to receive payment is established.

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(iv) Interest income

Interest income is recognized as it accrues under the effective interest method using the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying amount of the financial asset. For credit-impaired financial assets, the effective interest rate is applied to the amortized cost (i.e. gross carrying amount net of loss allowance) of the asset (see Note 2(k)).

(v) Government grants

Government grants are recognized when the Group fulfils the conditions attached to them and they are probable to be received. When government grants are received in the form of monetary assets, they are measured at the amount received or receivable. When the grant is in the form of non-monetary assets, it is measured at fair value. When fair value cannot be measured reliably, a nominal amount is assigned.

Government grants that compensate the Group for the cost of an asset is initially recognized as deferred income and is amortized on a straight-line basis in profit or loss over the useful lives of related assets.

Income-related government grant that is used to compensate subsequent related expenses or losses of the Group is recognized as deferred income and recorded in profit or loss when the related expenses or losses are incurred. When the grant is used to compensate expenses or losses that were already incurred, they are directly recognized in the current period of profit or loss.

(u) Translation of foreign currencies

Foreign currency transactions during the period are translated at the foreign exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rates ruling at the end of the reporting period. Exchange gains and losses are recognized in profit or loss.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the foreign exchange rates ruling at the transaction dates. The transaction date is the date on which the Group initially recognizes such non-monetary assets or liabilities.

The results of foreign operations are translated into RMB at the exchange rates approximating the foreign exchange rates ruling at the dates of the transactions. Statement of financial position items, including goodwill arising on consolidation of foreign operations are translated into RMB at the closing foreign exchange rates at the end of the reporting period. The resulting exchange differences are recognized in other comprehensive income and accumulated separately in equity in the exchange reserve.

On disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation is reclassified from equity to profit or loss when the profit or loss on disposal is recognized.

(v) Non-current assets held for sale and discontinued operations

(i) Non-current assets held for sale

A non-current asset (or disposal group) is classified as held for sale if it is highly probable that its carrying amount will be recovered through a sale transaction rather than through continuing use and the asset (or disposal group) is available for sale in its present condition. A disposal group is a group of assets to be disposed of together as a group in a single transaction, and liabilities directly associated with those assets that will be transferred in the transaction.

When the Group is committed to a sale plan involving loss of control of a subsidiary, all the assets and liabilities of that subsidiary are classified as held for sale when the above criteria for classification as held for sale are met, regardless of whether the Group or the Company will retain a non-controlling interest in the subsidiary after the sale.

Immediately before classification as held for sale, the measurement of the non-current assets (and all individual assets and liabilities in a disposal group) is brought up-to-date in accordance with the accounting policies before the classification. Then, on initial classification as held for sale and until disposal, the non-current assets (except for certain assets as explained below), or disposal groups, are recognized at the lower of their carrying amount and fair value less costs to sell. The principal exceptions to this measurement policy so far as the financial statements of the Group and the Company are concerned are deferred tax assets, assets arising from employee benefits, financial assets (other than investments in subsidiaries and associates). These assets, even if held for sale, would continue to be measured in accordance with the policies set out elsewhere in Note 2.

Impairment losses on initial classification as held for sale, and on subsequent remeasurement while held for sale, are recognized in profit or loss. As long as a non-current asset is classified as held for sale, or is included in a disposal group that is classified as held for sale, the non-current asset is not depreciated or amortized.

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(ii) Discontinued operations

A discontinued operation is a component of the Group’s business, the operations and cash flows of which can be clearly distinguished from the rest of the Group and which represents a separate major line of business or geographical area of operations, or is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations, or is a subsidiary acquired exclusively with a view to resale.

Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale (see Note 2(v)(i) above), if earlier. It also occurs if the operation is abandoned.

Where an operation is classified as discontinued, a single amount is presented on the face of the consolidated statement of profit or loss and other comprehensive income, which comprises:

(i) the post-tax profit or loss of the discontinued operation; and

(ii) the post-tax gain or loss recognized on the disposal, of the assets or disposal group(s) constituting the discontinued operation.

(w) Related parties

(a) A person, or a close member of that person’s family, is related to the Group if that person:

(i) has control or joint control over the Group;

(ii) has significant influence over the Group; or

(iii) is a member of the key management personnel of the Group or the Group’s parent.

(b) An entity is related to the Group if any of the following conditions applies:

(i) The entity and the Group are members of the same group.

(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

(iii) Both entities are joint ventures of the same third party.

(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

(v) The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group.

(vi) The entity is controlled or jointly controlled by a person identified in (a).

(vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

(viii) The entity, or any member of a group of which it is a part, provides key management personnel services to the Group or to the Group’s parent.

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.

(x) Segment reporting

Operating segments, and the amounts of each segment item reported in the financial statements, are identified from the financial information provided regularly to the Group’s most senior executive management for the purposes of allocating resources to, and assessing the performance of, the Group’s various lines of business and geographical locations.

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Individually material operating segments are not aggregated for financial reporting purposes unless the segments have similar economic characteristics and are similar in respect of the nature of products and services, the nature of production processes, the type or class of customers, the methods used to distribute the products or provide the services, and the nature of the regulatory environment. Operating segments which are not individually material may be aggregated if they share a majority of these criteria.

3 ACCOUNTING JUDGEMENT AND ESTIMATES

Estimates and judgments 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.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates may not be equal to 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 are discussed below.

(a) Deferred tax assets

Deferred tax assets are recognized for unused tax losses and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which the deferred tax assets can be utilized. In determining the amount of deferred tax assets to be recognized, significant judgement is required relating to the timing and level of future taxable profits, after taking into account future tax planning strategies. The amount of deferred tax assets recognized at future dates are adjusted if there are significant changes from these estimates.

4 REVENUE AND SEGMENT REPORTING

(a) Revenue

The Group is principally engaged in providing aesthetic non-surgical services, primarily comprising aesthetic injection procedures and aesthetic energy-based procedures; and aesthetic surgical services, primarily comprising aesthetic plastic procedures.

Further details regarding the Group’s principal activities are disclosed in Note 4(b).

(i) Disaggregation of revenue from contracts with customers by major service lines within the reportable segment “Aesthetic medical services – Core” (Note 4(b)) is as follows:

Three months Year ended 31 December ended 31 March 2018 2019 2020 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Revenue from contracts with customers within the scope of IFRS 15 Aesthetic medical service Non-surgical services 451,030 516,573 599,862 82,578 207,809 Surgical and related services 178,621 187,620 184,297 38,428 53,800 Other services 12,305 17,806 14,504 940 3,690 Sales of products 19,137 16,816 12,576 1,583 5,699

Total 661,093 738,815 811,239 123,529 270,998

During the years ended 31 December 2018, 2019 and 2020 and 31 March 2021, the Group recognized its revenue from contract with customers in accordance with the accounting policies as at set forth in Note 2(t). Given the period of fulfilment of each aesthetic medical service is generally very short (typically completed within one day), the Group recognizes revenue from provision of the aesthetic medical services at a point in time when the service is completed. All revenue from sales of products is recognized at point in time.

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The Group’s customer base is diversified and therefore no single external customer contributes 10 percent or more of the Group’s revenue during the Relevant Periods.

(ii) Geographic information

All of the non-current assets of the Group are physically located in the PRC. The geographical location of customers is based on the location at which the service is provided to customers and all of the revenue of the Group is derived from operations in the PRC during the Relevant Periods.

(b) Segment reporting

The directors of the Company have been identified as the Group’s chief operating decision maker (“CODM”). Operating segments are determined based on how the CODM manages the Group’s businesses and examines the performance from both service offerings and geographical perspective.

For the aesthetic medical service reportable segment, the CODM reviews the financial information of the aesthetic medical institutions in each city, hence the aesthetic medical institutions in each city constitutes a separate operating segment. However, the aesthetic medical institutions in Beijing, Tianjin, Qingdao, Jinan and Xi’an possess similar economic characteristics in terms of trends in sales growth and operating cashflows, and are with similar development and selling activities. Therefore, all aesthetic medical institutions in these five cities are aggregated into one reportable segment for segment reporting purposes. Similarly, the aesthetic medical institutions in Shanghai, Harbin, Shenyang and Chongqing which possess similar economic characteristics and are with similar development and selling activities, are aggregated into one reportable segment for segment reporting purposes.

For the Hair transplant service reportable segment, the CODM reviews the financial information of the hair transplant institutions in aggregate, hence all of the hair transplant institutions constitute a whole operating segment.

In a manner consistent with the way in which information is reported internally to the CODM for the purposes of resource allocation and performance assessment, the Group aggregates the operating segments which possess similar economic characteristics into three reportable segments.

Reportable segments Principal activities

Aesthetic medical services – Core Principally engaged in the provision of aesthetic surgery services and aesthetic non-surgical services in Beijing, Tianjin, Qingdao, Jinan and Xi’an. Aesthetic medical services – Non-core Principally engaged in the provision of aesthetic (Discontinued) surgery services and aesthetic non-surgical services in Shanghai, Harbin, Shenyang and Chongqing. Hair transplant services (Discontinued) Principally engaged in the provision of hair transplant service in mainland China.

The CODM considers revenue and gross profit as the performance indicators to measure segment performance and makes decisions regarding allocation of resources.

Gross profit is calculated by excluding cost of sales from revenue. Cost of sales mainly include cost of inventories, staff cost directly related to provision of services, depreciation and amortization and others.

No analysis of segment assets and liabilities is presented as management does not regularly review such information. Therefore, only segment revenue and gross profit are presented.

Sales between segments are carried out on terms agreed between the counterparties.

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(i) Segment results

Financial information of the Group’s reportable segments for the Relevant Periods is set out below.

For the year ended 31 December 2018

Aesthetic Aesthetic medical medical services Hair transplant services – – Non-core service Core (Discontinued)* (Discontinued)* Total RMB’000 RMB’000 RMB’000 RMB’000

Revenue from external customer 661,093 81,958 141,365 884,416 Inter-segment revenue 7,143 – – 7,143

Reportable segment revenue 668,236 81,958 141,365 891,559

Reportable segment gross profit 359,063 25,691 105,600 490,354

Depreciation and amortisation for the year/period 73,459 12,427 13,876 99,762

For the year ended 31 December 2019

Aesthetic Aesthetic medical medical services Hair transplant services – – Non-core service Core (Discontinued)* (Discontinued)* Total RMB’000 RMB’000 RMB’000 RMB’000

Revenue from external customer 738,815 62,270 94,374 895,459 Inter-segment revenue 5,342 – – 5,342

Reportable segment revenue 744,157 62,270 94,374 900,801

Reportable segment gross profit 383,157 20,294 68,478 471,929

Depreciation and amortisation for the year/period 83,399 16,534 12,751 112,684

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For the year ended 31 December 2020

Aesthetic Aesthetic medical medical services Hair transplant services – – Non-Core service Core (Discontinued)* (Discontinued)* Total RMB’000 RMB’000 RMB’000 RMB’000

Revenue from external customer 811,239 36,233 15,771 863,243 Inter-segment revenue 6,131 – – 6,131

Reportable segment revenue 817,370 36,233 15,771 869,374

Reportable segment gross profit 437,578 (317) 7,376 444,637

Depreciation and amortisation for the year/period 90,338 21,712 1,444 113,494

For three months ended 31 March 2020 (Unaudited)

Aesthetic Aesthetic medical medical services Hair transplant services – – Non-core service Core (Discontinued)* (Discontinued)* Total RMB’000 RMB’000 RMB’000 RMB’000

Revenue from external customer 123,529 4,280 8,005 135,814 Inter-segment revenue 630 – – 630

Reportable segment revenue 124,159 4,280 8,005 136,444

Reportable segment gross profit 63,044 (1,926) 3,141 64,259

Depreciation and amortisation for the period 23,554 5,719 4,886 34,159

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For three months ended 31 March 2021

Aesthetic Aesthetic medical services medical – Non-core services – Core (Discontinued)* Total RMB’000 RMB’000 RMB’000

Revenue from external customer 270,998 14,733 285,731 Inter-segment revenue 1,976 – 1,976

Reportable segment revenue 272,974 14,733 287,707

Reportable segment gross profit 146,966 3,052 150,018

Depreciation and amortisation for the period 21,792 – 21,792

* See Note 24.

(ii) Reconciliations of reportable segment revenue

Reportable segment revenue

Three months ended Year ended 31 December 31 March 2018 2019 2020 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Reportable segment revenue 891,559 900,801 869,374 136,444 287,707 Elimination of inter-segment revenue (7,143) (5,342) (6,131) (630) (1,976) Elimination of discontinued operation (Note 24) (223,323) (156,644) (52,004) (12,285) (14,733)

Consolidated revenue from continuing operations (Note 4(a)(i)) 661,093 738,815 811,239 123,529 270,998

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Reportable segment gross profit

Three months ended Year ended 31 December 31 March 2018 2019 2020 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Reportable segment gross profit 490,354 471,929 444,637 64,259 150,018 Elimination of inter-segment gross profit (3,945) (2,259) (2,729) (639) (423) Elimination of discontinued operation (Note 24) (131,291) (88,772) (7,059) (1,215) (3,052)

Consolidated gross profit from continuing operations 355,118 380,898 434,849 62,405 146,543

Unallocated other income and other gains/(losses) 1,669 6,789 3,327 152 1,836 Unallocated general and administrative expenses (166,780) (202,008) (183,601) (39,432) (54,529) Unallocated selling and marketing expenses (198,913) (219,203) (187,520) (31,025) (64,221) Unallocated finance costs (15,801) (16,781) (16,936) (4,185) (4,085) Unallocated share of net (losses)/profits of associates (520) (166) 3,017 235 368

(Loss)/profit before taxation (25,227) (50,471) 53,136 (11,850) 25,912

The following table provides information about contract liabilities from contracts with customers.

As at As at 31 December 31 March 2018 2019 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000

Contract liabilities 364,656 457,155 554,238 575,818

Normally the Group receives advanced payments before the provision of aesthetic surgery and related services to customers. Contract liabilities represent the Group’s obligations to provide services to customers for which the Group has received advanced payments from such customers.

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Aesthetic surgery and related services are generally rendered within one year after the contracts with the customers are entered into.

The amount of revenue recognized for the year ended 31 December 2018, 2019, 2020 and three months ended 31 March 2021 that was included in contract liabilities as at 1 January 2018, 2019 and 2020 and 2021 was RMB284,936,000, RMB350,114,000, RMB457,155,000 and RMB268,922,000 respectively.

5 OTHER INCOME AND OTHER GAINS/(LOSSES)

Three months ended Year ended 31 December 31 March 2018 2019 2020 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Continuing operations Government grants 2 1,196 3,342 56 177 Net realized and unrealized gains from investment in wealth management products 3,438 2,355 5,613 2,911 1,381 Gain on disposal of an associate – 4,034––– Loss on disposal of subsidiaries – – (87) (87) – Interest income 312 457 428 80 146 Foreign exchange gain/(loss) 23 (35) (82) (21) 14 Impairment loss on other receivables (1,705) (339) (3,690) (2,726) – Others (401) (879) (2,197) (61) 118

1,669 6,789 3,327 152 1,836

6 PROFIT BEFORE TAXATION

Profit before taxation is arrived at after charging:

(a) Finance costs

Three months ended Year ended 31 December 31 March 2018 2019 2020 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Continuing operations Interest on lease liabilities 15,801 16,781 16,936 4,185 4,085

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(b) Staff costs

Three months ended Year ended 31 December 31 March 2018 2019 2020 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Continuing operations Salaries, wages and other benefits 258,109 321,441 332,979 60,054 105,972 Contributions to defined contribution retirement scheme 17,549 19,743 2,017 2,017 7,864

275,658 341,184 334,996 62,071 113,836

Employees of the Group’s PRC subsidiaries are required to participate in a defined contribution retirement scheme administrated and operated by the local municipal governments where the subsidiaries are registered. The Group’s PRC subsidiaries contribute funds which are calculated based on certain percentages of the average employee salary as agreed by the respective local municipal governments to the scheme to fund the retirement benefits of the employees. According to the Notice on Periodic Reduction and Exemption of Corporate Social Insurance (Ren She Bu Fa [2020] No.11) issued by Ministry of Human Resources and Social Security of PRC, Ministry of Finance of PRC and State Taxation Administration of PRC, some subsidiaries of the Group enjoyed a reduction of social insurance payment ranged from 50% to 100% for the period from 1 February 2020 to 31 December 2020.

The Group has no further obligation for payment of other retirement benefits beyond the above contributions.

Three months ended Year ended 31 December 31 March 2018 2019 2020 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Continuing operations Cost of inventories 162,004 181,717 197,848 27,245 69,269

Depreciation of property, plant and equipment 72,261 82,179 89,232 23,274 21,565 Expenses of short-term leases not included in the measurement of lease liabilities 7,821 8,056 9,018 2,405 2,108 COVID-19-related rent concessions from lessors – – (1,615) (1,206) – Impairment loss on other receivables 1,705 339 3,690 2,726 – Promotion and marketing related expenses 94,159 83,056 42,326 7,973 14,178

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7 INCOME TAX

(a) Taxation in the consolidated statements of profit or loss and other comprehensive income represents:

Three months ended Year ended 31 December 31 March 2018 2019 2020 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Continuing operations Current tax Provision for the year/period 9,967 5,762 18,649 4,157 6,601 Deferred tax Origination and reversal of temporary differences (Note 22(b)) 3,336 4,014 2,303 (763) (571)

13,303 9,776 20,952 3,394 6,030

(b) Reconciliation between tax expense and accounting (loss)/profit at applicable tax rates:

Three months ended Year ended 31 December 31 March 2018 2019 2020 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Continuing operations (Loss)/profit before taxation (25,227) (50,471) 53,136 (11,850) 25,912 Tax calculated at PRC statutory tax rate of 25% (i) (6,307) (12,618) 13,284 (2,963) 6,478 Different tax rates of subsidiaries operating in other tax jurisdictions or entitled to statutory tax concessions (ii) (2) (228) (500) – (669) Share of net (losses)/profits of associates 130 42 (754) (59) (92) Non-deductible expenses 4,109 3,877 4,534 405 313 Net tax losses and temporary differences not recognised as deferred tax assets 15,373 18,703 4,388 6,011 –

13,303 9,776 20,952 3,394 6,030

(i) The Company and the subsidiaries of the Group established in the PRC (excluding Hong Kong) are subject to the PRC Corporate Income Tax rate of 25% during the Relevant Periods.

(ii) A subsidiary of the Group incorporated in Hong Kong is subject to Hong Kong Profits Tax rate of 16.5%. The subsidiary of the Group incorporated in Hong Kong is eligible for 8.25% tax band under the two-tiered tax regime introduced by the Hong Kong SAR Government.

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Pursuant to the relevant regulations in respect of the Notice on the Implementation of Inclusive Tax Concessions for Small and Micro Enterprises (Cai Shui [2019] No. 13) jointly issued by the Ministry of Finance and the State Administration of Taxation in the PRC, a subsidiary of the Group, Beijing Evercare Zizhu Aesthetic Medical Clinic Co., Ltd. (北京伊美爾紫竹醫療美容門診部有限責任公司), enjoyed this preferential income tax rate during the Relevant Periods.

8 DIRECTORS’ EMOLUMENTS

Details of the emoluments of the directors of the Company during the Relevant Periods are as follows:

Year ended 31 December 2018 Salaries, allowances Retirement Directors’ and benefits Discretionary scheme fee in kind bonuses contributions Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Executive director Mr. Wang Yong’an – 547 – 55 602 Non-executive directors Mr. Liu Erhai (note i) ––––– Mr. Fang Min ––––– Mr. Zhang Quanyuan ––––– Mr. Liu Hao (note ii) –––––

Supervisors Ms. Lu Zhan – 389 – 55 444 Ms. Liu Qingrong – 641 – 55 696 Ms. Yu Kun (note v) – 248 – 32 280 Ms. Wang Linqi (note v) – 394 – 55 449 Mr. Li Lei (note v) –24–630

– 2,243 – 258 2,501

Year ended 31 December 2019 Salaries, allowances Retirement Directors’ and benefits Discretionary scheme fee in kind bonuses contributions Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Executive director Mr. Wang Yong’an – 537 – 49 586 Non-executive directors Mr. Liu Erhai (note i) ––––– Mr. Fang Min ––––– Mr. Zhang Quanyuan ––––– Mr. Liu Hao (note ii) –––––

Supervisors Ms. Lu Zhan – 421 – 49 470 Ms. Liu Qingrong – 734 – 30 764 Ms. Wang Linqi (note v) –73–982

– 1,765 – 137 1,902

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Year ended 31 December 2020 Salaries, allowances Retirement Directors’s and benefits Discretionary scheme fee in kind bonuses contributions Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Executive director Mr. Wang Yong’an – 483 – 6 489 Non-executive directors Mr. Liu Erhai (note i) ––––– Mr. Fang Min ––––– Mr. Zhang Quanyuan ––––– Mr. Liu Hao (note ii) –––––

Supervisors Ms. Lu Zhan – 418 – 4 422 Ms. Liu Qingrong – 638 – – 638

– 1,539 – 10 1,549

Three months ended 31 March 2020 (Unaudited) Salaries, allowances Retirement Directors’s and benefits Discretionary scheme fee in kind bonuses contributions Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Executive director Mr. Wang Yong’an – 73 – 6 79 Non-executive directors Mr. Liu Erhai (note i) ––––– Mr. Fang Min ––––– Mr. Zhang Quanyuan ––––– Mr Liu Hao (note ii) –––––

Supervisors Ms. Lu Zhan – 77 – 4 81 Ms. Liu Qingrong – 154 – – 154

– 304 – 10 314

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Three months ended 31 March 2021 Salaries, allowances Retirement Directors’s and benefits Discretionary scheme fee in kind bonuses contributions Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Executive director Mr. Wang Yong’an – 147 – 16 163 Non-executive directors Mr. Liu Erhai (note i) ––––– Mr. Fang Min ––––– Mr. Zhang Quanyuan ––––– Mr Liu Hao (note ii) –––––

Supervisors Ms. Lu Zhan – 115 – 13 128 Ms. Liu Qingrong – 137 – – 137

– 399 – 29 428

Notes:

i. Mr Liu Erhai resigned as non-executive director of the Company in June 2021.

ii. Mr Liu Hao resigned as non-executive director of the Company in April 2021.

iii. During the Relevant Periods, there are no directors that have waived or agreed to waive any emoluments.

iv. During the Relevant Periods, no emoluments were paid by the Group to the directors as an inducement to join or upon joining the Group or as compensation for loss of office.

v. Mr. Li Lei has resigned in January 2018;

Ms. Yu Kun has resigned in July 2018;

Ms. Wang Linqi has resigned in March 2019;

vi. Ms. Wang Zheng was appointed as executive director of the Company in April 2021;

Ms. Li Quan was appointed as non-executive director of the Company in June 2021;

Mr. Wu Jun, Mr. Zhao Zhenmin and Mr. Zhou Tao were appointed as independent non-executive director of the Company in July 2021;

Ms. You Weiwei was appointed as supervisor of the Company in April 2021;

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9. INDIVIDUALS WITH HIGHEST EMOLUMENTS

During the Relevant Periods, none of the directors and supervisors are among the five highest paid individuals. The aggregate of the emoluments in respect of the five highest paid individuals during the Relevant Periods are as follows:

Three months ended Year ended 31 December 31 March 2018 2019 2020 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Salaries and other emoluments 7,174 7,485 7,554 1,791 1,857 Retirement scheme contributions 156 144 11 13 51

7,330 7,629 7,565 1,804 1,908

The emoluments of the five highest paid individuals of the Group for each of the years ended 31 December 2018, 2019 and 2020 and the three months ended 31 March 2020 and 2021 are within the following bands:

Three months ended Year ended 31 December 31 March 2018 2019 2020 2020 2021 Number of Number of Number of Number of Number of individuals individuals individuals individuals individuals (unaudited)

Nil to HK$1,000,000 –––55 HK$1,000,001 to HK$1,500,000 322–– HK$1,500,001 to HK$2,000,000 122–– HK$2,500,001 to HK$3,000,000 111––

55555

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10 (LOSS)/EARNINGS PER SHARE

Basic (loss)/earnings per share

Basic (loss)/earnings per share during the Relevant Periods were calculated by dividing the (loss)/profit attributable to equity shareholders of the Company by the weighted average number of ordinary shares outstanding during the Relevant Periods. There were no dilutive potential ordinary shares during the Relevant Periods.

The calculations of basic and diluted (loss)/earnings per share are based on:

Three months ended Year ended 31 December 31 March 2018 2019 2020 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) (Loss)/profit attributable to equity shareholders of the Company for the year/period (in RMB’000) – Continuing operations (38,431) (61,225) 32,216 (15,169) 19,515 – Discontinued operations (53,439) (44,966) (22,183) (20,349) (9,821)

(91,870) (106,191) 10,033 (35,518) 9,694

Weighted average number of ordinary shares (in ’000) 128,627 128,627 128,627 128,627 128,627

Basic and diluted earnings per share (in RMB) – Continuing operations (0.30) (0.48) 0.25 (0.12) 0.15 – Discontinued operations (0.42) (0.35) (0.17) (0.16) (0.08)

(0.72) (0.83) 0.08 (0.28) 0.07

11 PROPERTY, PLANT AND EQUIPMENT

(a) Reconciliation of carrying amount

The Group

Right- of-use Medical Other Leasehold Construction assets equipment equipment Building improvement in progress Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Cost: At 1 January 2018 403,845 122,665 39,487 40,322 103,193 4,619 714,131 Additions 100,720 15,389 2,971 – 2,050 27,508 148,638 Transfer – – 1,167 – 10,523 (11,690) – Disposals (7,507) (3,269) (2,062) – – – (12,838)

At 31 December 2018 497,058 134,785 41,563 40,322 115,766 20,437 849,931 Additions 115,955 22,492 9,580 – 3,861 18,124 170,012 Transfer ––––35,691 (35,691) – Disposals (32,028) (6,802) (7,787) – – – (46,617)

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Right- of-use Medical Other Leasehold Construction assets equipment equipment Building improvement in progress Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

At 31 December 2019 580,985 150,475 43,356 40,322 155,318 2,870 973,326 Additions 44,235 25,521 7,598 – – 20,594 97,948 Transfer ––––17,919 (17,919) – Disposals (20,114) (34,213) (8,119) – – (2,637) (65,083) Disposal of subsidiaries (56,151) (2,960) (933) – (26,319) (166) (86,529) Reclassification to assets held for sale (Note 24) (103,356) (46,954) (10,047) – (31,499) (577) (192,433)

At 31 December 2020 445,599 91,869 31,855 40,322 115,419 2,165 727,229 Additions 1,080 7,812 543 – 2,450 1,197 13,082 Transfer ––––2,059 (2,059) – Disposals (4,066) (4,227) (250) – – – (8,543)

At 31 March 2021 442,613 95,454 32,148 40,322 119,928 1,303 731,768 ------

Accumulated depreciation: At 1 January 2018 (93,619) (82,681) (29,210) (9,124) (19,316) – (233,950) Charge for the year (49,646) (15,657) (4,844) (1,137) (27,205) – (98,489) Written back on disposals 7,507 3,189 1,912 – – – 12,608

At 31 December 2018 (135,758) (95,149) (32,142) (10,261) (46,521) – (319,831) Charge for the year (59,280) (17,287) (5,521) (1,138) (28,163) – (111,389) Written back on disposals 31,785 6,572 6,992 – – – 45,349

At 31 December 2019 (163,253) (105,864) (30,671) (11,399) (74,684) – (385,871) Charge for the year (57,791) (16,992) (5,669) (1,138) (30,760) – (112,350) Written back on disposals 17,588 31,580 7,696 – – – 56,864 Disposal of subsidiaries 21,685 2,452 688 – 20,104 – 44,929 Reclassification to assets held for sale (Note 24) 31,396 41,243 4,681 – 22,708 – 100,028

At 31 December 2020 (150,375) (47,581) (23,275) (12,537) (62,632) – (296,400) Charge for the period (10,400) (3,688) (1,175) (284) (6,018) – (21,565) Written back on disposals 4,066 4,227 247 – – – 8,540

At 31 March 2021 (156,709) (47,042) (24,203) (12,821) (68,650) – (309,425) ------

Net book value: At 31 December 2018 361,300 39,636 9,421 30,061 69,245 20,437 530,100

At 31 December 2019 417,732 44,611 12,685 28,923 80,634 2,870 587,455

At 31 December 2020 295,224 44,288 8,580 27,785 52,787 2,165 430,829

At 31 March 2021 285,904 48,412 7,945 27,501 51,278 1,303 422,343

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(b) Right-of-use assets

The Group leases properties for hospital sites, offices and staff dormitories. The leases typically run for a period of 2 to 20 years for hospital sites, 2 to 20 years for offices and 2 to 5 years for staff dormitories.

Lease terms are negotiated on an individual basis and contain 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.

Extension and termination options are included in certain property leases across the Group. These are used to maximize operational flexibility in terms of managing the assets used in the Group’s operations. In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).

None of the leases includes an option to purchase the leased assets at the end of the lease term.

Information about leases for which the Group is a lessee is presented as below:

(i) The analyses of the carrying amounts of the Group’s right-of-use assets by class of underlying assets are as follows:

As at As at 31 December 31 March 2018 2019 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000

Included in “Right-of-use assets”: – Properties 361,300 417,732 295,224 285,904

Right-of-use assets related to lease properties that do not meet the definition of investment property are presented as property, plant and equipment (See Note 11).

(ii) The analyses of expense items in relation to leases recognized in profit or loss are as follows:

Continuing operation:

Three months ended Years ended 31 December 31 March 2018 2019 2020 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Depreciation charges of right-of-use assets by class of underlying assets: – Properties 37,643 42,269 44,499 10,992 10,400 Interest expenses on lease liabilities (Note 6(a)) 15,801 16,781 16,936 4,185 4,085 Short-term leases not included in the measurement of lease liabilities (Note 6 (c)) 7,821 8,056 9,018 2,405 2,108

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Three months ended Years ended 31 December 31 March 2018 2019 2020 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) COVID-19-related rent concessions from lessors (Note 6(c)) – – (1,615) (1,206) –

(iii) The analysis of cashflow and maturity analysis of lease liabilities in relation to leases are set out in Notes 18(c) and 21, respectively.

12 INTANGIBLE ASSETS

The Group

As at As at 31 December 31 March 2018 2019 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000

Cost: At 1 January 7,094 7,637 8,635 8,318 Additions 543 998 158 – Disposals – – (99) – Disposal of a subsidiary – – (376) –

At the end of the year/period 7,637 8,635 8,318 8,318 ------

Accumulated amortisation: At 1 January (3,673) (4,946) (6,241) (7,087) Charge for the year/period (1,273) (1,295) (1,144) (227) Disposals – – 92 – Disposal of a subsidiary – – 206 –

At the end of the year/period (4,946) (6,241) (7,087) (7,314) ------

Net book value: At the end of the year/period 2,691 2,394 1,231 1,004

The amortization of intangible assets is allocated to general and administrative expenses and selling and marketing expenses in the consolidated statements of profit and loss and comprehensive income.

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13 INVESTMENTS IN SUBSIDIARIES

Particulars of the Company’s principal subsidiaries are as follows:

Place and date of incorporation Group’s effective interest and operations, Particulars of As of kind of legal issued/paid-in At 31 December 31 March date of Principal Name of company entity capital 2018 2019 2020 2021 report activities

Beijing Evercare Aesthetic The PRC, RMB28,270,000 100% 100% 100% 100% 100% Aesthetic Medical Hospital Co., Ltd. 02/09/2003 medical 北京伊美爾醫療美容醫院 limited liability service 有限公司 company Beijing New Era Evercare The PRC, RMB7,800,000 100% 100% 100% 100% 100% Aesthetic Xingfu Aesthetic Medical 08/08/2007 medical Hospital Co., Ltd. 北京新 limited liability service 時代伊美爾幸福醫學美容 company 專科醫院有限公司 Beijing Evercare Jianxiang The PRC, RMB4,000,000 100% 100% 100% 100% 100% Aesthetic Hospital Co., Ltd. 北京伊 21/08/2009 medical 美爾健翔醫院有限公司 limited liability service company Beijing Evercare Zizhu The PRC, RMB2,000,000 90% 90% 90% 90% 90% Aesthetic Aesthetic Medical Out- 03/09/2004 medical patient Department Co., limited liability service Ltd. 北京伊美爾紫竹醫療 company 美容門診部有限責任公司 Beijing Evercare Changdao The PRC, RMB6,000,000 60% 60% 100% 100% 100% Aesthetic Aesthetic Medical Out- 18/12/2006 medical patient Department Co., limited liability service Ltd. 北京伊美爾長島醫療 company 美容門診部有限公司 (note v) Tianjin Evercare Aesthetic The PRC, RMB20,000,000 100% 100% 100% 100% 100% Aesthetic Medical Plastic Specialty 29/04/2004 medical Hospital Co., Ltd. 天津伊 limited liability service 美爾醫療整形美容專科醫 company 院有限公司 Qingdao Evercare Guobin The PRC, RMB15,000,000 100% 100% 100% 100% 100% Aesthetic Plastic Surgery Hospital 16/07/2004 medical Co., Ltd. 青島伊美爾國賓 limited liability service 整形外科醫院有限公司 company Jinan Evercare Aesthetic The PRC, RMB10,000,000 100% 100% 100% 100% 100% Aesthetic Plastic Hospital Co., Ltd. 11/08/2009 medical 濟南伊美爾整形美容醫院 limited liability service 有限公司 company Xi’an Aiweimei Aesthetic The PRC, RMB30,000,000 100% 100% 100% 100% 100% Aesthetic Medical Hospital Co., Ltd. 12/01/2018 medical 西安艾薇美醫療美容醫院 limited liability service 有限公司 company Xi’an Yanta Ruili Shimei The PRC, RMB40,000,000 100% 100% 100% 100% 100% Aesthetic Out-patient Department 11/08/2009 medical Co., Ltd. 西安雁塔瑞麗詩 limited liability service 美門診部有限公司 company Jiangyi (Tianjin) Network The PRC, RMB700,000 – 100% 100% 100% 100% Promotion Technology Co., Ltd. 30/12/2019 service 匠醫(天津)網絡科技有限公 limited liability 司 company Sweet Bestie (Tianjin) The PRC, RMB300,000 100% 100% 100% 100% 100% Promotion Network Technology 19/11/2018 service Co., Ltd. 好葩蜜(天津)網 limited liability 絡科技有限公司 company

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Notes:

(i) The above table lists the principal subsidiaries of the Company which, in the opinion of the directors, principally affected the results during the Relevant Periods or formed a substantial portion of the net assets of the Group.

(ii) The official names of these entities are in Chinese. The English translation is included for identification purpose only.

(iii) All companies comprising the Group have adopted 31 December as their financial year end date.

(iv) No statutory financial statements have been prepared for these companies for the Relevant Periods.

(v) In June 2020, Ruilishi (Beijing) Enterprise Management Co., Ltd. (“Ruilishi Beijing”), a 60% owned subsidiary of the Group, transferred its entire equity interest in Beijing Evercare Changdao Aesthetic Medical Out-patient Department Co., Ltd. (“Beijing Changdao Hospital”) to a wholly-owned subsidiary of the Company at a consideration of RMB3,000,000 which was determined after arm’s length negotiation among the parties with reference to the estimated costs for application of a new Medical Institution Practicing License. Upon the completion of the transaction, the Company’s effective interest in Beijing Changdao Hospital increased from 60% to 100%.

The carrying amount of Beijing Changdao Hospital’s net deficits in the Group’s consolidated financial statements on the date of the acquisition was RMB35,072,000. As a result of the transaction, the equity attributable to equity shareholders of the Company decreased by RMB14,029,000.

(vi) In 2020, the Group disposed its entire equity interest in Ruilishi (Beijing) (Note 24(a)) and two immaterial subsidiaries, Beijing Laifo Jiangao Pediatric Clinic Co., Ltd. and Beijing Beifeisi Management Consulting Co., Ltd., and recorded a gain of RMB28,450,000 and a loss of RMB87,000 respectively.

14 INTERESTS IN ASSOCIATES

As at As at 31 December 31 March 2018 2019 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000

Share of net assets 9,318 11,395 19,712 20,080

As of date of report, particulars of the Company’s principal associate are as follows:

Proportion of ownership interest Place of Group’s Held incorporation effective by the Held by a Name of associate and business interest Company subsidiary Principal activity

Shanghai Jinbeigao Hospital The PRC 12.75% – 25% Business services Investment Management Co., Ltd.* 上海金蓓高醫院投資管理有限公司

* For identification purpose only.

(i) All of the associates are accounted for using the equity method in the consolidated financial statements.

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(ii) Aggregate information of the associates that are not individually material:

As at As at 31 December 31 March 2018 2019 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000

Aggregate carrying amount of individually immaterial associates in the consolidated statements of financial position 9,318 11,395 19,712 20,080

Aggregate amount of the Group’s share of those associates

(Loss)/profit for the year/period (520) (166) 3,017 368

Total comprehensive income (520) (166) 3,017 368

15 INVENTORIES

(a) Inventories in the consolidated statement of financial position comprise:

The Group

As at As at 31 December 31 March 2018 2019 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000

Skincare products 2,395 1,099 1,879 1,826 Medication 3,907 5,300 11,367 8,225 Consumables and others 35,003 31,528 38,940 47,809

41,305 37,927 52,186 57,860

(b) The analysis of the amount of inventories recognized as expenses in profit or loss are as follows:

Three months ended Year ended 31 December 31 March 2018 2019 2020 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Continuing operations Carrying amounts of inventories sold 162,004 181,717 197,848 27,245 69,269 Write-down of inventories –––––

162,004 181,717 197,848 27,245 69,269

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16 TRADE AND OTHER RECEIVABLES

The Group

As at As at 31 December 31 March 2018 2019 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000

Trade receivables (note i) – – 216 216 Amounts due from a shareholder (note ii) – – 24,800 24,800 Deposits with service providers 21,811 22,657 16,648 17,454 Balance with online payment platforms 17,862 5,097 3,981 4,612 Prepayments for inventories 9,465 8,602 10,291 8,885 Prepaid service charge 9,047 9,751 8,971 8,904 Loan to a third party (note iii) 3,000 5,200 3,000 3,000 Value-added tax recoverable 1,716 3,314 2,371 2,942 Income tax recoverable – 1,301 – – Others 4,941 2,662 3,157 2,720

67,842 58,584 73,435 73,533

Less: Loss allowance 576 591 21 21

67,266 57,993 73,414 73,512

The Company

As at As at 31 December 31 March 2018 2019 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000

Trade receivables 43,643 28,600 52,600 55,792 Amounts due from a shareholder (note ii) – – 24,800 24,800 Amounts due from subsidiaries 210,328 210,748 204,770 208,899 Deposit with service providers 2,601 2,374 2,216 2,313 Prepayments for inventories 37 255 1,966 1,398 Prepaid service charge 3,430 2,518 3,802 4,756 Loan to a third party (note iii) – 2,200 – – Others 1,498 1,146 659 956

261,537 247,841 290,813 298,914

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Notes:

(i) All trade receivables at the end of each reporting period were aged within one year based on the invoice date.

(ii) This represents amount due from a non-controlling shareholder, Shanghai Runwofeng Equity Investment Management Co., Ltd (上海瑞沃豐股權投資管理有限公司), amounting to RMB24,800,000 as at 31 December 2020 and 31 March 2021, respectively. Such amount is unsecured, interest free and has no fixed terms of repayment and has been fully settled as at the date of report.

(iii) The amounts include (i) a loan to a third party amounting to RMB3,000,000, which is interest-bearing at 3.5% per annum, as at 31 December 2018, 2019, 2020 and 31 March 2021 respectively; (ii) a loan to another third party amounting to RMB2,200,000, which is interest-bearing at 3% per annum as at 31 December 2019. Such amounts are unsecured and repayable in one year at the end of each reporting period and have been fully settled as of the date of report.

(iv) All of the prepayments and other receivables are expected to be recovered or recognised as expense within one year.

17 FINANCIAL ASSETS AT FVTPL

Financial assets measured at fair value through profit or loss comprises of wealth management products denominated in RMB and purchased from banks in the PRC.

18 CASH AND CASH EQUIVALENTS AND OTHER CASH FLOW INFORMATION

(a) Cash and cash equivalents comprise:

The Group

As at As at 31 December 31 March 2018 2019 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000

Cash and cash equivalents 92,251 107,137 116,868 149,124

The Company

As at As at 31 December 31 March 2018 2019 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000

Cash and cash equivalents 40,902 39,752 62,318 80,084

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(b) Reconciliation of liabilities arising from financing activities

The tables below detail changes in the Group’s liabilities from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are liabilities for which cash flows were, or future cash flows will be, classified in the Group’s consolidated cash flow statements as cash flows from financing activities.

Lease liabilities RMB’000 (Note 21)

At 1 January 2018 341,576 ------

Changes from financing cash flows: Capital element of lease rentals paid (38,660) Interest element of lease rentals paid (20,669)

Total changes from financing cash flows (59,329) ------

Other changes: Capitalisation of new leases 100,720 Finance costs 20,669

121,389 ------

At 31 December 2018 403,636

Lease liabilities RMB’000 (Note 21)

At 1 January 2019 403,636 ------

Changes from financing cash flows: Capital element of lease rentals paid (51,794) Interest element of lease rentals paid (23,026)

Total changes from financing cash flows (74,820) ------

Other changes: Capitalisation of new leases 115,955 Termination of lease contracts (253) Finance costs 23,026

138,728 ------

At 31 December 2019 467,544

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Lease liabilities RMB’000 (Note 21)

At 1 January 2020 467,544 ------

Changes from financing cash flows: Capital element of lease rentals paid (48,525) Interest element of lease rentals paid (20,634)

Total changes from financing cash flows (69,159) ------

Other changes: Capitalisation of new leases 44,235 Termination of lease contracts (2,914) COVID-19-related rent concessions from lessors (1,615) Disposals of a subsidiary (40,724) Reclassification to liabilities directly associated with the assets held for sale (Note 24) (75,030) Finance costs 20,634 ------

At 31 December 2020 342,971

Lease liabilities RMB’000 (Note 21)

At 1 January 2021 342,971 ------

Changes from financing cash flows: Capital element of lease rentals paid (8,969) Interest element of lease rentals paid (4,085)

Total changes from financing cash flows (13,054) ------

Other changes: Capitalisation of new leases 1,080 Finance costs 4,085 ------

At 31 March 2021 335,082

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Three months ended Year ended 31 December 31 March 2018 2019 2020 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Within operating cash flows 12,122 12,709 9,575 2,789 774 Within financing cash flows 59,329 74,820 69,159 12,291 17,323

Total lease rentals paid 71,451 87,529 78,734 15,080 18,097

19 TRADE PAYABLES

The Group

As at As at 31 December 31 March 2018 2019 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000

Trade payables 19,048 23,192 21,691 27,457

As at 31 December 2018, 2019 and 2020 and 31 March 2021, the aging analysis of trade payables, based on the invoice date, is as follows:

The Group

As at As at 31 December 31 March 2018 2019 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000

Within 1 year 14,143 16,583 17,465 23,139 1-2 years 2,532 1,798 907 936 2-3 years 1,212 2,459 487 459 Over 3 years 1,161 2,352 2,832 2,923

19,048 23,192 21,691 27,457

As at 31 December 2018, 2019 and 2020 and 31 March 2021, all of the trade payables of the Group are expected to be settled within one year or are payable on demand.

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20 OTHER PAYABLES AND ACCRUALS

The Group

As at As at 31 December 31 March 2018 2019 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000

Payables for staff related cost 45,973 65,997 63,968 62,411 Payables for other taxes 3,740 1,632 2,006 698 Payables to promotion and marketing related suppliers 17,261 24,542 9,348 10,423 Provision for medical risk (Note i) 9,700 9,238 9,093 9,343 Rental payables 4,883 3,393 3,358 4,823 Payables for renovation cost 3,589 6,509 3,477 1,011 Others 6,280 5,824 6,727 6,996

91,426 117,135 97,977 95,705

The Company

As at As at 31 December 31 March 2018 2019 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000

Payables to subsidiaries 249,044 326,427 487,791 505,402 Payables for staff related cost 2,777 3,988 3,136 2,998 Others 2,410 2,512 1,790 908

Total 254,231 332,927 492,717 509,308

Notes:

(i) The Group has estimated the provision for medical risk which is based on the Group’s past experience with customers.

(ii) All of the other payables are expected to be settled within one year or are repayable on demand.

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21 LEASE LIABILITIES

The following table shows the maturity analysis of the carrying amount of Group’s lease liabilities at 31 December 2018, 2019, 2020 and 31 March 2021.

The Group

As at As at 31 December 31 March 2018 2019 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000

Within 1 year 56,319 74,322 48,020 45,268 ------

After 1 year but within 2 years 44,063 54,357 34,519 35,169 After 2 years but within 5 years 109,474 131,337 89,561 94,266 After 5 years 193,780 207,528 170,871 160,379

347,317 393,222 294,951 289,814 ------

403,636 467,544 342,971 335,082

22 INCOME TAX IN THE STATEMENT OF FINANCIAL POSITION

(a) Current taxation in the statement of financial position represents:

The Group

Three months ended Year ended 31 December 31 March 2018 2019 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000

As at 1 January (3,545) (4,450) (5,415) (10,142) Provision for the year/period (10,427) (9,324) (19,001) (6,601) Payments during the year/period 9,522 8,359 10,024 5,889 Disposal of a subsidiary (Note 24 (a)(i)) – – 4,250 –

As at 31 December/31 March (4,450) (5,415) (10,142) (10,854)

Representing: – Income tax recoverable (Note 16) – 1,301 – – – Income tax payable (4,450) (6,716) (10,142) (10,854)

(4,450) (5,415) (10,142) (10,854)

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(b) Deferred tax assets and liabilities recognized:

The deferred tax assets/(liabilities) recognized in the statement of financial position and the movements throughout the Relevant Periods are as follows:

The Group

Depreciation charge of Provision Other right-of-use for medical Deductible temporary Deferred tax arising from: assets risk tax loss differences Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

At 1 January 2018 3,636 1,840 3,354 10,438 19,268 Charged/(credited) to profit or loss 712 443 1,463 (5,954) (3,336)

At 31 December 2018 and 1 January 2019 4,348 2,283 4,817 4,484 15,932 Charged/(credited) to profit or loss 475 274 (1,145) (3,618) (4,014)

At 31 December 2019 and 1 January 2020 4,823 2,557 3,672 866 11,918 Charged/(credited) to profit or loss 287 159 (1,883) (866) (2,303)

At 31 December 2020 and 1 January 2021 5,110 2,716 1,789 – 9,615 Charged to profit or loss 26 40 505 – 571

At 31 March 2021 5,136 2,756 2,294 – 10,186

In accordance with the accounting policy set out in Note 2(r), the Group has not recognized deferred tax assets of RMB40,421,000, RMB57,024,000, RMB65,415,000 and RMB60,867,000 in respect of cumulative tax losses as at 31 December 2018, 2019, 2020, and 31 March 2021, respectively, as it is not probable that future taxable profits against which the losses can be utilized will be available in the relevant tax jurisdiction/entity.

As of 31 March 2021, exclude the tax losses of the entities which do not expire, the tax losses of its subsidiaries established in the mainland China can be carried forward up to five years from the year in which the losses originated, and will expire in the following years:

As at 31 March 2021 RMB’000

Year of 2022 33,312 Year of 2023 71,835 Year of 2024 84,656 Year of 2025 41,525 Year of 2026 12,141

243,469

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23 CAPITAL AND RESERVES

(a) Movements in components of equity

The reconciliation between the opening and closing balances of each component of the Group’s consolidated equity is set out in the consolidated statements of changes in equity. Details of the changes in the Company’s individual components of equity during the Relevant Periods are set out below:

Share Capital Statuary Retained capital reserve reserve profits Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Note-(b)) (Note-(c)(i)) (Note-(c)(ii))

At 1 January 2018 128,627 38,983 17,783 75,782 261,175 Change in equity: Total comprehensive income – – – (5,912) (5,912)

At 31 December 2018 and 1 January 2019 128,627 38,983 17,783 69,870 255,263 Change in equity: Total comprehensive income – – – (32,298) (32,298)

At 31 December 2019 and 1 January 2020 128,627 38,983 17,783 37,572 222,965 Change in equity: Total comprehensive income – – – (11,004) (11,004)

At 31 December 2020 and 1 January 2021 128,627 38,983 17,783 26,568 211,961 Change in equity: Total comprehensive income – – – 4,653 4,653

At 31 March 2021 128,627 38,983 17,783 31,221 216,614

(b) Share capital

As at As at 31 December 31 March 2018 2019 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000

128,627,250 ordinary shares registered, issued and fully paid (at par value of RMB1 each) 128,627 128,627 128,627 128,627

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at general meetings of the Company. All ordinary shares rank equally with regard to the Company’s residual assets.

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(i) Capital reserve

Capital reserve represents (i) the net proceeds received in excess of the total amount of the par value of the Company’s shares, (ii) the difference between the consideration and the net assets acquired in business combination under common control, (iii) the difference between consideration and the share of the net assets in subsidiaries acquired/disposed while retaining the control.

(ii) Statutory reserve

Pursuant to the Company’s Articles of Association, the Company is required to transfer 10% of net profit (after offsetting prior year losses) determined in accordance with the accounting rules and regulations of the PRC to the statutory reserve until such reserve reaches 50% of the registered capital of the Company. The statutory reserve can be utilized, upon approval by the relevant authorities, to offset accumulated losses or to increase capital of the Company and is non-distributable other than in liquidation.

(iii) Exchange reserve

The exchange reserve comprises foreign exchange differences arising from the translation of the financial statements of foreign operations into RMB. The reserve is dealt with in accordance with the accounting policy set out in Note 2(u).

(d) Dividends

No dividends were declared or paid to the equity shareholders of the Company during the Relevant Periods.

(e) Capital management

The Group’s main objectives with respect to capital management include maintaining a solid and stable financing structure to support its ongoing business growth so that it can continue to maximize shareholders’ return, and providing an adequate return to the shareholders by pricing products and services commensurate with the level of risk.

The Group regularly reviews and manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Group may adjust the dividend payment to the shareholders, return capital to the shareholders or issue new shares. The Group is not subject to any externally imposed capital requirements. No changes were made to the objectives, policies or processes for managing capital during the Relevant Periods.

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24 DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

Loss from discontinued operations consist of the followings:

Three months ended Year ended 31 December 31 March 2018 2019 2020 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Ruilishi (Beijing) Enterprise Management Ltd. 瑞麗詩(北京)企業管理有限公司 (Note (a)) (32,753) (34,856) 24,410 (3,449) – Non-core aesthetic medical services operations held for sale (Note (b)) (29,128) (23,281) (48,308) (18,291) (9,829)

(61,881) (58,137) (23,898) (21,740) (9,829)

Loss from discontinued operations attributable to: Equity shareholders of the Company (53,439) (44,966) (22,183) (20,349) (9,821) Non-controlling interests (8,442) (13,171) (1,715) (1,391) (8)

Total (61,881) (58,137) (23,898) (21,740) (9,829)

(a) Ruilishi (Beijing) Enterprise Management Ltd.

Ruilishi (Beijing) Enterprise Management Co., Ltd. 瑞麗詩(北京)企業管理有限公司 (“Ruilishi Beijing”) had been a subgroup of the Company during the Relevant Periods, which constituted the hair transplant service reportable segment (see Note 4) of the Group.

In June 2020, the Group disposed its 60% equity interest in Ruilishi Beijing for a cash consideration of RMB150,000. As a result of the disposal, the hair transplant service reportable segment was classified as a discontinued operation and the consolidated results of discontinued operation was presented separately from continuing operations, as a single amount in the consolidated statement of profit or loss and other comprehensive income in the Relevant Periods.

Although intra-group transactions have been fully eliminated in the consolidated financial results, management has elected to attribute the elimination of transactions between the continuing operations and the discontinued operation before the disposal in a way that reflects the continuance of these transactions subsequent to the disposal, because management believes this is useful to the users of the financial statements.

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(i) Effect of disposal of hair transplant service reportable segment on the financial position of the Group:

As at the date of disposal in 2020 RMB’000

Property, plant and equipment 41,600 Trade and other receivables 18,385 Cash and cash equivalents 231 Trade payables (2,566) Other payables and accruals (52,168) Lease liabilities (40,724) Income tax payable (4,250) Contract liabilities (9,524) Others 1,850

Net liabilities (47,166) Less: Non-controlling interests 18,866

Net liabilities attributable to equity shareholders of the Company (28,300)

Add: Gain on disposal 28,450

Cash consideration received 150 Less: cash and cash equivalents disposed (231)

Net cash outflow included in cash flows used in investing activities in the consolidated cash flow statements (81)

(ii) Results of discontinued operation of hair transplant service reportable segment:

From 1 January to Year ended Year ended the date of 31 December 31 December disposal in 2018 2019 2020 RMB’000 RMB’000 RMB’000

Loss before taxation from hair transplant service segment (32,268) (31,294) (3,695) Income tax (485) (3,562) (345)

Loss for the year/period from hair transplant service segment (32,753) (34,856) (4,040) Gain on disposal – – 28,450

(Loss)/profit from discontinued operation of hair transplant service segment for the year/period (32,753) (34,856) 24,410

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From 1 January to Year ended Year ended the date of 31 December 31 December disposal in 2018 2019 2020 RMB’000 RMB’000 RMB’000

Attributable to: Equity shareholders of the Company (24,482) (21,841) 26,058 Non-controlling interests (8,271) (13,015) (1,648)

(Loss)/profit from discontinued operation of hair transplant service segment for the year/period (32,753) (34,856) 24,410

(iii) Net cashflows used in discontinued operation of hair transplant service reportable segment:

From 1 January to the date of 31 December 31 December disposal in 2018 2019 2020 RMB’000 RMB’000 RMB’000

Net cash generated from/(used in) operating activities 9,835 2,073 (211) Net cash used in investing activities (4,712) (1,199) – Net cash used in financing activities (5,524) (1,480) –

Net cash flows for the year/period (401) (606) (211)

(b) Non-core aesthetic medical operations held for sale

As at 31 December 2020, the board of directors had committed to a plan to sell its entire equity interests of its aesthetic medical operations in Shanghai, Harbin, Shenyang and Chongqing (the non-core aesthetic medical services reportable segment), following a strategic decision to focus the Company’s aesthetic medical operations in markets and regions with a better environment and brand influence. As a result, the non-core aesthetic medical services reportable segment has been reclassified as a discontinued operation and the consolidated results of the non-core aesthetic medical services reportable segment were presented separately from the continuing operations as a single amount on the face of the consolidated statements of profit or loss and other comprehensive income for the years ended 31 December 2018, 2019 and 2020 and the three months ended 31 March 2020 (unaudited) and 2021 and all the related assets and liabilities of non-core aesthetic medical operations have been reclassified to assets held for sale and liabilities directly associated with the assets held for sale as at 31 December 2020 and 31 March 2021.

In July 2021, the non-core aesthetic medical operations have been disposed at a consideration of RMB14,000,000.

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(i) Assets and liabilities of non-core aesthetic medical services segments held for sale

As at 31 December 2020 and 31 March 2021, the non-core aesthetic medical services reportable segment was stated at the lower of its carrying amount and fair value less costs to sell and comprised the following assets and liabilities:

As at As at 31 December 31 March 2020 2021 RMB’000 RMB’000

Property, plant and equipment 92,405 88,044 Inventories 4,736 4,696 Trade and other receivables 9,381 9,484 Cash and cash equivalents 4,568 5,812 Other assets 40 84

Assets held for sale 111,130 108,120

Trade payables 4,192 5,467 Other payables and accruals 6,208 5,717 Lease liabilities 75,030 71,655 Contract liabilities 25,182 27,649

Liabilities held for sale 110,612 110,488

(ii) Results of non-core aesthetic medical services reportable segment

Three months ended Year ended 31 December 31 March 2018 2019 2020 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Revenue 81,958 62,270 36,233 4,280 14,733 Cost of sales (56,267) (41,976) (36,550) (6,206) (11,681) Expenses (54,819) (43,575) (47,991) (16,365) (12,881)

Loss before taxation from non-core aesthetic medical services reportable segment (29,128) (23,281) (48,308) (18,291) (9,829) Income tax –––––

Loss from discontinued operation of non-core aesthetic medical services reportable segment for the year/period (29,128) (23,281) (48,308) (18,291) (9,829)

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Three months ended Year ended 31 December 31 March 2018 2019 2020 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Equity shareholders of the Company (28,957) (23,125) (48,241) (18,279) (9,821) Non-controlling interests (171) (156) (67) (12) (8)

Loss from discontinued operation of non-core aesthetic medical services reportable segment for the year/period (29,128) (23,281) (48,308) (18,291) (9,829)

(iii) Cash flows generate from/(used in) the non-core aesthetic medical services reportable segment

Three months ended Year ended 31 December 31 March 2018 2019 2020 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Net cash (used in)/generated from operating activities (5,749) (13,616) 8,587 (662) 5,901 Net cash used in investing activities (1,149) (4,906) (6,271) (2,369) (1,915) Net cash generated from/(used in) financing activities 8,781 18,451 (2,845) (1,107) (2,742)

Net cash flows for the year/period 1,883 (71) (529) (4,138) 1,244

25 FINANCIAL RISK MANAGEMENT AND FAIR VALUES OF FINANCIAL INSTRUMENTS

Exposure to credit, liquidity, interest rate and currency risks arises in the normal course of the Group’s business.

The Group’s exposure to these risks and the financial risk management policies and practices used by the Group to manage these risks are described below.

(a) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Group.

The Group’s credit risk is primarily attributable to other receivables. The Group’s exposure to credit risk arising from cash and cash equivalents is limited because the counterparties are banks and financial institutions with a minimum credit rating assigned by the management of the Group, for which the Group considers to have low credit risks.

The Group was involved in the provision of medical, aesthetic medical, beauty and wellness and performance marketing and related services and the sale of skincare, healthcare and beauty products. Other receivable balances are mainly from financial institutions in respect of credit card receivables and other institutional customers arising from medical and performance marketing and related services. Receivable balances are monitored on an ongoing basis by senior management and the Group’s exposure to bad debts is not significant.

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The Group measures loss allowances for trade receivables at an amount equal to lifetime ECLs. As the Group’s historical credit loss experience does not indicate significantly different loss patterns for different customer segments, the loss allowance based on past due status is not further distinguished between the Group’s different customer bases. The management assessed the risk of default based on historical experience and forward looking element is not significant.

For other receivables and amounts due from related parties, the Group’s management makes periodic collective assessments as well as individual assessment on the recoverability based on historical settlement records and past experience. The directors believe that there is no material credit risk inherent in the Group’s outstanding balance of other receivables and amounts due from related parties as the Group closely monitors their repayment.

The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the consolidated statements of financial position. The Group does not provide any guarantees which would expose the Group to credit risk.

(b) Liquidity risk

The Group’s policy is to regularly monitor its liquidity requirements to ensure that it maintains sufficient reserves of cash to meet its liquidity requirements in the short and longer term.

The following are the contractual maturities of the Group’s financial liabilities as at 31 December 2018, 2019 and 2020 and 31 March 2021, which are based on contractual undiscounted cash flows and the earliest date the Group can be required to pay.

As at 31 December 2018 Contractual undiscounted cash flow More than More than Within 1 year but 2 years but 1 year or less than less than Over Carrying on demand 2 years 5 years 5 years Total amount RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Trade payables 19,048 – – – 19,048 19,048 Other payables and accruals 91,426 – – – 91,426 91,426 Lease liabilities (Note 21) 57,706 47,391 129,532 334,054 568,683 403,636

168,180 47,391 129,532 334,054 679,157 514,110

As at 31 December 2019 Contractual undiscounted cash flow More than More than Within 1 year but 2 years but 1 year or less than less than Over Carrying on demand 2 years 5 years 5 years Total amount RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Trade payables 23,192 – – – 23,192 23,192 Other payables and accruals 117,135 – – – 117,135 117,135 Lease liabilities (Note 21) 76,296 58,597 155,377 328,096 618,366 467,544

216,623 58,597 155,377 328,096 758,693 607,871

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Continuing operations As at 31 December 2020 Contractual undiscounted cash flow More than More than Within 1 year but 2 years but 1 year or less than less than Over Carrying on demand 2 years 5 years 5 years Total amount RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Trade payables 21,691 – – – 21,691 21,691 Other payables and accruals 97,977 – – – 97,977 97,977 Lease liabilities (Note 21) 49,516 37,498 106,995 261,791 455,800 342,971

169,184 37,498 106,995 261,791 575,468 462,639

Continuing operations As at 31 March 2021 Contractual undiscounted cash flow More than More than Within 1 year but 2 years but 1 year or less than less than Over Carrying on demand 2 years 5 years 5 years Total amount RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Trade payables 27,457 – – – 27,457 27,457 Other payables and accruals 95,705 – – – 95,705 95,705 Lease liabilities (Note 21) 46,302 37,739 111,263 245,540 440,844 335,082

169,464 37,739 111,263 245,540 564,006 458,244

The Group’s income and operating cash flows are substantially independent of changes in market interest rates and the Group has no significant interest-bearing assets except for cash and cash equivalents.

Lease liabilities expose the Group to fair value interest rate risk. The Group currently has not used any interest rate swap arrangements.

(d) Currency risk

The Group is exposed to currency risk primarily through sales which give rise to cash, receivables and payables balances that are denominated in a currency other than the functional currency of the operations to which they relate. The currency gives rise to this risk is primarily US$.

As at 31 March As at 31 December 2020 2021 US$ US$ US$ US$ RMB’000 RMB’000 RMB’000 RMB’000

Cash and cash equivalents 10,959 5,041 4,772 4,806

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Sensitivity analysis

The following table indicates the instantaneous change in the Group’s (loss)/profit after tax (and accumulated losses) that would arise if foreign exchange rates to which the Group has significant exposure at the end of the reporting period had changed at that date, assuming all other risk variables remained constant.

Increase/ (decrease) Effect on the results in foreign As at exchange As at 31 December 31 March rates 2018 2019 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000

US$ 5% 548 252 239 240 (5%) (548) (252) (239) (240)

Results of the analysis as presented in the above table represent an aggregation of the instantaneous effects on each of the Group entities’ (loss)/profit after tax and equity measured in the respective functional currencies, translated into RMB at the exchange rate ruling at the end of the reporting period for presentation purposes.

The sensitivity analysis assumes that the change in foreign exchange rates had been applied to re-measure those financial instruments held by the Group which expose the Group to foreign currency risk at the end of the reporting period, including inter-company payables and receivables within the Group which are denominated in a currency other than the functional currencies of the lender or the borrower. The analysis excludes differences that would result from the translation of the financial statements of foreign operations into the Group’s presentation currency, which depends on the foreign currencies the Group is exposed to, may or may not have an effect on the Group’s net assets. The analysis is performed on the same basis throughout the Relevant Periods.

(e) Fair values measurement

Fair value hierarchy

Fair values are categorized into the three-level fair value hierarchy as defined in IFRS 13, Fair value measurement. The level into which a fair value measurement is classified is determined with reference to the observability and significance of the inputs used in the valuation technique as follows:

– Level 1 valuations: Fair value measured using only Level 1 inputs, i.e. unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.

– Level 2 valuations: Fair value measured using Level 2 inputs, i.e. observable inputs which fail to meet Level 1, and not using significant unobservable inputs. Unobservable inputs are inputs for which market data are not available.

– Level 3 valuations: Fair value measured using significant unobservable inputs.

(i) Financial assets measured at fair value

As at As at 31 December 31 March 2018 2019 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000

Level 3 valuations RMB wealth management products (Note 17) 71,046 84,546 186,397 190,053

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During the Relevant Periods, there were no transfers between Level 1 and Level 2, or transfers into or out of Level 3. The Group’s policy is to recognize transfers between levels of fair value hierarchy as at the end of the reporting period in which they occur.

Information about Level 3 fair value measurements

The fair value of RMB wealth management products is determined based on the discounted cash flow method. The significant unobservable inputs used by the Group for the valuation of the RMB wealth management products are the expected rates of return. The directors believe that the estimated fair values resulting from the discounted cash flow method is reasonable, and that they were the most appropriate values at the end of the reporting period.

At 31 December 2018, 2019 and 2020 and 31 March 2021, if the expected rate of return of the investment in RMB wealth management products held by the Group had been 100 basic points higher/lower, the Group’s profit for the year/period and retained profits would have been RMB545,000, RMB626,000, RMB1,294,000 and RMB405,000 higher/lower respectively.

The movements during the year/period in the balance of Level 3 fair value measurements are as follows:

Three months ended Year ended 31 December 31 March 2018 2019 2020 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

RMB wealth management products: At 1 January 117,000 71,046 84,546 84,546 186,397 Additions in investments 35,000 64,000 392,320 137,500 226,000 Net realized and unrealized gains or losses recognized in profit or loss during the year/period 3,438 2,355 5,613 2,911 1,381 Disposal of financial assets (84,392) (52,855) (296,082) (117,810) (223,725)

At 31 December/31 March 71,046 84,546 186,397 107,147 190,053

(ii) Fair values of financial assets and liabilities carried at other than fair value.

The carrying amounts of the Group’s and the Company’s financial instruments carried at cost or amortized cost are not materially different from their fair values as at 31 December 2018, 2019 and 2020 and 31 March 2021.

26 COMMITMENTS

(a) Capital commitments

Capital commitments outstanding at respective reporting period end dates not provided for in the Historical Financial Information were as follows:

As at As at 31 December 31 March 2018 2019 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000

Contracted for purchasing of property, plant and equipment 3,073 2,473 5,433 1,863

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(b) Lease commitments

The Group’s future aggregate minimum lease payments due under short-term leases (which are exampled from recognizing the related right-of-use assets and lease liabilities) are as follows:

As at As at 31 December 31 March 2018 2019 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000

Within 1 year 5,878 5,558 7,382 6,526

27 MATERIAL RELATED PARTY TRANSACTIONS AND BALANCES

(a) Name and relationship of the related parties that had material transactions with the Group during the Relevant Periods:

Name of related parties Relationship

Ningxia Mioron Biotechnology Co., Ltd. Associate

(b) Transactions with related parties during the Relevant Periods

Three months ended Year ended 31 December 31 March 2018 2019 2020 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Purchases from an associate – Ningxia Mioron Biotechnology Co., Ltd. – 125 1,701 93 601

The Group’s balances with related parties as at the end of each reporting period are as follows:

As at As at 31 December 31 March 2018 2019 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000

Trade and other receivables – 100 113 113 Trade payables – 125 13 46

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(d) Key management personnel remuneration

Remuneration for key management personnel of the Group, including amounts paid to the Company’s directors and supervisors as disclosed in Note 8, is as follows:

Total remuneration is included in “staff costs” in Note 6(b).

Three months ended Year ended 31 December 31 March 2018 2019 2020 2020 2021 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Short-term employee benefits 2,243 1,765 1,539 304 399 Retirement scheme contributions 258 137 10 10 29

2,501 1,902 1,549 314 428

28 POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE FOR THE ACCOUNTING PERIOD BEGINNING ON 1 JANUARY 2021

Up to the date of this report, the IASB has issued a number of amendments, new standards and interpretations which are not yet effective for the accounting period beginning on 1 January 2021 and which have not been adopted in the Historical Financial Information as follows:

Effective for accounting periods beginning on or after

Amendments to IFRS 3, Business Combinations, Reference to the 1 January 2022 Conceptual Framework

Amendments to IAS 16, Property, Plant and Equipment: Proceeds 1 January 2022 before Intended Use

Amendments to IAS 37, Onerous Contracts – Cost of Fulfilling a Contract 1 January 2022

Annual Improvements to IFRSs 2018-2020 Cycle 1 January 2022

IFRS 17, Insurance contracts 1 January 2023

Amendments to IAS 1, Presentation of financial statements, 1 January 2023 Classification of liabilities as current or non-current

Amendments to IAS 1 and IFRS Practice Statement 2, Disclosure of Accounting 1 January 2023 Policies

Amendments to IAS 8, Definition of Accounting Estimates 1 January 2023

Amendments to IAS 12, Deferred Tax related to Assets and Liabilities arising from 1 January 2023 a Single Transaction

Amendments to IFRS 4, Extension of the temporary exemption 1 January 2023 from applying IFRS 9

Amendments to IFRS 10 and IAS 28, Sale or contribution of assets To be determined between an investor and its associate or joint venture

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The Group is in the process of making an assessment of what the impact of these amendments, new standards and interpretations is expected to be in the initial application. So far it has concluded that the adoption of them is unlikely to have a significant impact on the consolidated financial statements.

29 SUBSEQUENT EVENTS

(i) On 1 June 2021, 3,215,681 shares were granted to certain senior management and employees of the Group pursuant to the share incentive scheme with an exercise price of RMB1.8659 per share.

(ii) On 13 June 2021, the Company entered into a share subscription agreement with certain investors pursuant to which these investors agreed to purchase an aggregate 6,222,441 newly issued shares. The consideration amounted to RMB160,913,000 are fully settled by the investors on 2 July 2021.

(iii) On [REDACTED], the ordinary shares of the Company were [REDACTED]ona[REDACTED] basis, and the nominal value of the Shares was changed from RMB1.00 each to RMB[REDACTED] each. Immediately after such the [REDACTED], the registered share capital of the Company became RMB[REDACTED] comprising [REDACTED] shares with a nominal value of RMB[REDACTED] each, all of which were fully paid up.

30 IMMEDIATE AND ULTIMATE CONTROLLING PARTY

As of date of this report, the directors consider the immediate and ultimate controlling party of the Group to be Mr. Wang Yong’an.

SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Company or any of its subsidiaries in respect of any period subsequent to 31 March 2021.

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The information set forth below does not form part of the Accountants’ Report from KPMG, Certified Public Accountants, Hong Kong, the Company’s reporting accountants, as set out in Appendix I to this document, and is included herein for illustrative purposes only.

The unaudited pro forma financial information should be read in conjunction with the section headed “Financial Information” in this document and the Accountants’ Report set out in Appendix I to this document.

A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED NET TANGIBLE ASSETS

The following unaudited pro forma statement of adjusted net tangible assets of the Group is prepared in accordance with paragraph 4.29 of the Listing Rules and is set out below to illustrate the effect of the [REDACTED] on the consolidated net tangible liabilities attributable to equity shareholders of the Company as at 31 March 2021 as if the [REDACTED] had taken place on 31 March 2021.

The unaudited pro forma statement of adjusted net tangible assets has been prepared for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of the financial position of the Group had the [REDACTED] been completed as at 31 March 2021 or at any future date.

Unaudited pro Consolidated net forma adjusted tangible liabilities consolidated net of the Group tangible assets Unaudited pro forma attributable to Estimated attributable adjusted consolidated net equity shareholders [REDACTED] to equity tangible assets attributable of the Company as from the shareholders of to equity shareholders of at 31 March 2021(1) [REDACTED](2) the Company the Company per Share RMB’000 RMB’000 RMB’000 RMB(3) HK$(4)

Based on an [REDACTED] of HK$[REDACTED] per H Share (125,500) [REDACTED][REDACTED][REDACTED][REDACTED] Based on an [REDACTED] of HK$[REDACTED] per H Share (125,500) [REDACTED][REDACTED][REDACTED][REDACTED]

Notes:

(1) The consolidated net tangible liabilities of the Group attributable to equity shareholders of the Company as at 31 March 2021 is arrived at after deducting intangible assets of RMB1,004,000 from the consolidated total deficits attributable to equity shareholders of the Company as at 31 March 2021 of RMB124,496,000, which is extracted from the Accountants’ Report set out in Appendix I to this document.

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(2) The estimated [REDACTED] from the [REDACTED] are based on [REDACTED] H Shares to be issued pursuant to the [REDACTED] and the indicative [REDACTED] of HK$[REDACTED] per H Share and HK$[REDACTED] per H Share, being the low end and high end of the [REDACTED] range, after deduction of the estimated [REDACTED] fees and other related expenses payable by the Group (excluding the [REDACTED] expense of RMB[REDACTED] that have been charged to profit or loss during the Relevant Periods) and does not take into account any shares which may be issued upon the exercise of the [REDACTED]. The estimated [REDACTED]ofthe[REDACTED] have been converted to Renminbi at the exchange rate of HK$1 to RMB0.83343 prevailing on 26 July 2021, which is the latest practicable date. No representation is made that the Hong Kong dollar amounts have been, could have been or could be converted into RMB, or vice versa, at that rate or at any other rates.

(3) The unaudited pro forma adjusted consolidated net tangible assets attributable to equity shareholders of the Company per Share is arrived at after the adjustment referred to in the preceding paragraph and on the basis that [REDACTED] Shares were in issue (excluding the 6,222,441 ordinary shares that were issued in June 2021 and the proposed ordinary [REDACTED]onan[REDACTED] basis as described in note 5 below) assuming that the [REDACTED] had been completed on 31 March 2021, but does not take into account any shares which may be issued upon the exercise of the [REDACTED].

(4) The unaudited pro forma adjusted consolidated net tangible assets attributable to equity shareholders of the Company per Share amounts in RMB are converted to Hong Kong dollar with the exchange rate of RMB1 to HK$1.1999 prevailing on 26 July 2021, which is the latest practicable date.. No representation is made that the Hong Kong dollar amounts have been, could have been or could be converted into RMB, or vice versa, at that rate or at any other rates.

(5) No adjustment has been made to the unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to equity shareholders of the Company as at 31 March 2021 to reflect any trading results or other transactions of the Group entered into subsequent to 31 March 2021 including but not limited to the share subscription agreement with certain investors in June 2021 pursuant to which these investors agreed to purchase an aggregate 6,222,441 newly issued shares for RMB160,913,000 received subsequently in July 2021 and the proposed ordinary [REDACTED]onan[REDACTED] basis.

Had both transactions been completed and settled on 31 March 2021, our unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to equity shareholders of the Company as at 31 March 2021 would have increased by approximately RMB[REDACTED], and our unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to equity shareholders of the Company per share would have decreased by RMB[REDACTED] and RMB[REDACTED], respectively, based on the indicative [REDACTED] of HK$[REDACTED] per H Share and HK$[REDACTED] per H Share, being the low end and high end of the [REDACTED] range, respectively.

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[REDACTED]

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[REDACTED]

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[REDACTED]

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The following summary of certain Hong Kong and PRC tax consequences of the purchase, ownership and disposition of the H Shares is based upon the laws, regulations, rules and decisions now in effect, all of which are subject to change (possibly with retroactive effect). The summary does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase, own or dispose of the H Shares and does not purport to apply to all categories of prospective investors, some of whom may be subject to special rules, which does not and shall not be deemed as consisting a legal or taxation suggestion. Prospective investors should consult their own tax advisers concerning the application of Hong Kong and PRC tax laws to their particular situation as well as any consequences of the purchase, ownership and disposition of the shares arising under the laws of any other taxing jurisdiction.

The taxation of the Company and that of the Shareholders is described below. Where Hong Kong and PRC tax laws are discussed, these are merely an outlined implication of such laws. It should not be assumed that the relevant tax authorities or the PRC or Hong Kong courts will accept or agree with the explanations or conclusions that are set out below.

Investors should note that the following statements are based on advice received by the Company regarding taxation laws, regulations and practice in force as at the date of this document, which may be subject to change.

OVERVIEW OF TAX IMPLICATIONS OF PRC

PRC Taxation of Security Holders

Taxation on Dividends

Individual Investors

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

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company. If a Hong Kong resident directly holds 25% or more of the equity interest in a Chinese company, then such tax shall not exceed 5% of the total dividends payable by the Chinese company. The Fifth Protocol of the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and the Prevention of Fiscal Evasion issued by the SAT (《國家稅務總局關於 <內地和香港特別行政區關於對所得避免雙重徵稅和防止偷漏稅的安排>第五議定書》) effective on December 6, 2019 states that such provisions shall not apply to those arrangements or transactions, of which the main purpose includes gaining such tax benefit. The application of the dividend clause of tax agreements shall be subject to the PRC tax laws and regulations, such as the Notice of the SAT on the Issues Concerning the Implementation of the Dividend Clauses of Tax Agreements (《國家稅務總局關於執行稅收協議股息條款有關問題的通知》).

Enterprise Investors

In accordance with the Enterprise Income Tax Law of the PRC (《中華人民共和國企業所得稅法》) (the “EIT Law”), which came into effect as of January 1, 2008 and was last amended on December 29, 2018, and the Implementation provisions for the Enterprise Income Tax Law of the PRC (《中華人民共和國企業所得稅法實施條例》), which came into effect as of January 1, 2008 and was last amended on April 23, 2019, the rate of enterprise income tax shall be 25%. A non-resident enterprise is generally subject to a 10% enterprise income tax on PRC-sourced income (including dividends received from a PRC resident enterprise that issues shares in Hong Kong), if such non-resident enterprise does not have an establishment or place in the PRC or has an establishment or place in the PRC but the PRC-sourced income is not connected to such establishment or place in the PRC. The aforesaid income tax may be reduced pursuant to applicable treaties to avoid double taxation. Such withholding tax for non-resident enterprises are deducted at source, where the payer of the income are required to withhold the income tax from the amount to be paid to the non-resident enterprise when such payment is made or due.

The Circular of the SAT on Issues Relating to the Withholding of Enterprise Income Tax on Dividends Paid by Chinese Resident Enterprises to Overseas Non-PRC Resident Enterprise Shareholders of H Shares (《國家稅務總局關於中國居民企業向境外H股非居民企業股東派發股息代扣代繳企業所得稅有關問題的通知》) (Guo Shui Han [2008] No. 897) which was issued by the SAT on November 6, 2008, further clarified that a PRC-resident enterprise must withhold enterprise income tax at a rate of 10% on dividends paid to overseas non-resident enterprise shareholders of H Shares for 2008 and subsequent years. In addition, the Response to Issues on Levying Enterprise Income Tax on Dividends Derived by Non-resident Enterprise from Holding Stock such as B-shares (《國家稅務總局關於非居民企業取得B股等股票股息徵收企業所得稅問題的批覆》) (Guo Shui Han [2009] No. 394) which was issued by the SAT and came into effect on July 24, 2009, further provides that any PRC-resident enterprise that is listed on overseas stock exchanges must withhold enterprise income tax at a rate of 10% on dividends of 2008 and onwards that it distributes to non-resident enterprises. Such tax rates may be further modified pursuant to the tax treaty or agreement that China has concluded with a relevant jurisdiction, where applicable.

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Pursuant to the Arrangement between the Mainland and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion (《內地和香港特別行政區關於對所得避免雙重徵稅和防止偷漏稅的安排》) signed on August 21, 2006, PRC Government may levy taxes on the dividends paid by a Chinese company to Hong Kong residents (including natural persons and legal entities) in an amount not exceeding 10% of total dividends payable by the Chinese company. If a Hong Kong resident directly holds 25% or more of the equity interest in a Chinese company, then such tax shall not exceed 5% of the total dividends payable by the Chinese company. The Fifth Protocol of the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and the Prevention of Fiscal Evasion issued by the SAT (《國家稅務總局關於 <內地和香港特別行政區關於對所得避免雙重徵稅和防止偷漏稅的安排>第五議定書》) effective on December 6, 2019 states that such provisions shall not apply to those arrangements or transactions, of which the main purpose includes gaining such tax benefit. The application of the dividend clause of tax agreements shall be subject to the PRC tax laws and regulations, such as the Notice of the SAT on the Issues Concerning the Implementation of the Dividend Clauses of Tax Agreements (《國家稅務總局關於執行稅收協議股息條款有關問題的通知》).

Tax Treaties

Non-PRC resident investors residing in countries which have entered into treaties for the avoidance of double taxation with the PRC are entitled to a reduction of the withholding taxes imposed on the dividends received from PRC companies. The PRC currently has entered into Avoidance of Double Taxation Treaties/Arrangements with a number of countries and regions including HK, Macau, Australia, Canada, France, Germany, Japan, Malaysia, the Netherlands, Singapore, the United Kingdom and the United States. Non-PRC resident enterprises entitled to preferential tax rates in accordance with the relevant income tax treaties or arrangements are required to apply to the Chinese tax authorities for a refund of the withholding tax in excess of the agreed tax rate, and the refund payment is subject to approval by the Chinese tax authorities.

Taxation on Share Transfer

Value-Added Tax and Local Surcharges

Pursuant to the Notice on the Full Implementation of Pilot Program for Transition from Business Tax to Value-added Tax (《關於全面推開營業稅改增值稅試點的通知》, Cai Shui [2016] No.36, “Circular 36”), effective from May 1, 2016, entities and individuals engaged in sales of services within the PRC shall be subject to Value-added Tax (the “VAT”) and sales of services within the PRC refers to the situation where either the seller or the buyer of a taxable service is located within the PRC. Circular 36 also provides that transfer of financial products, including transfer of the ownership of marketable securities, shall be subject to VAT at 6% on the taxable income (which is the balance of sales price upon deduction of purchase price), for a general or a foreign VAT taxpayer. However, individuals are exempt from VAT upon transfer of financial products.

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According to these regulations, if the holder is a non-resident individual, the PRC VAT is exempted from the sale or disposal of H shares; if the holder is a non-resident enterprise and the H-share buyer is an individual or entity located outside China, the holder is not necessarily required to pay the PRC VAT, but if the H-share buyer is an individual or entity located in China, the holder may be required to pay the PRC VAT. However, it is still uncertain whether the non-Chinese resident enterprises are required to pay the PRC VAT for the disposal of H shares in practice.

Meanwhile, VAT taxpayers are also subject to urban maintenance and construction tax, education surcharge and local education surcharge (collectively, “local surcharges”), which is usually at 12% of the VAT payable, if any.

Income Tax

(a) Individual Investors

According to the IIT Law and its implementation provisions, gains realized on the sale of equity interests in the PRC resident enterprises are subject to the individual income tax at a rate of 20%. Pursuant to the Circular of the MOF and the SAT on Declaring that Individual Income Tax Continues to be Exempted over Individual Income from Transfer of Shares (《財政部及國家稅務總局關於個人轉讓股票所得繼續暫免徵收個人所得稅的通知》) issued by the MOF and the SAT on March 20, 1998, from January 1, 1997, income of individuals from the transfer of shares of listed enterprises shall continue to be exempted from individual income tax.

On December 31, 2009, the MOF, the SAT and the CSRC jointly issued the Circular on Relevant Issues Concerning the Collection of Individual Income Tax over the Income Received by Individuals from Transfer of Listed Shares Subject to Sales Limitation (《關於個人轉讓上市公司限售股所得徵收個人所得稅有關問題的通知》) which states that individuals’ income from the transfer of listed shares on Shanghai Stock Exchange or Shenzhen Stock Exchange shall continue to be exempted from individual income tax, except for the relevant shares which are subject to sales restriction as defined in the Supplementary Circular on Relevant Issues Concerning the Collection of Individual Income Tax over the Income Received by Individuals from Transfer of Listed Shares Subject to Sales Limitation (關於個人轉讓上市公司限售股所得徵收個人所得稅有關問題的補充通知) jointly issued by the three aforementioned authorities on November 10, 2010.

As of the Latest Practicable Date, the aforesaid provision has not expressly provided that individual income tax shall be collected from non-PRC resident individuals on the sale of shares of PRC resident enterprises listed on overseas stock exchanges.

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(b) Enterprise Investors

In accordance with the EIT Law and its implementation provisions, a non-resident enterprise is generally subject to a 10% enterprise income tax on PRC-sourced income, including gains derived from the disposal of equity interests in a PRC resident enterprise, if it does not have an establishment or place in the PRC or has an establishment or premises in the PRC but the PRC-sourced income does not have actual connection with such establishment or premise. Such income tax for non-resident enterprises are deducted at source, where the payer of the income are required to withhold the income tax from the amount to be paid to the non-resident enterprise when such payment is made or due. The withholding tax may be reduced or exempted pursuant to relevant treaties or agreements on avoidance of double taxation.

Stamp Duty

Pursuant to the Provisional Regulations of the PRC Concerning Stamp Duty (《中華人民共和國印花稅暫行條例》) effective as of October 1, 1988 and amended on January 8, 2011, and the Detailed Rules for Implementation of Provisional Regulations of the PRC Concerning Stamp Duty (《中華人民共和國印花稅暫行條例施行細則》) effective as of October 1, 1988, PRC stamp duty only applies on specific proof executed or received within the PRC and legally binding force in the PRC and protected under the PRC laws, thus the requirements of the stamp duty imposed on the transfer of shares of PRC listed companies shall not apply to the acquisition and disposal of H Shares by non-PRC investors outside of the PRC.

Principal Taxation of The Company in the PRC

Enterprise Income Tax

Pursuant to EIT Law and its implementation provisions, enterprises and other organizations which generate income within the PRC are enterprise income tax payers and shall pay enterprise income tax at a tax rate of 25%. Meanwhile, pursuant to EIT Law, qualified small low-profit enterprises are given the reduced enterprise income tax rate of 20% and the income from agriculture, forestry, animal husbandry and fisheries may be entitled to exemption or reduction of enterprise income tax.

Value-added Tax

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For a VAT general taxpayer, unless certain tax preference treatment applies, the VAT tax rate ranges from 6% to 13%, depending on the goods or services sold. In accordance with the Circular 36, medical services provided by medical institutions shall be exempted from VAT. Under the Circular 36, the medical services exempt from VAT are those listed on the National Standard for Price Items of Medical Service (《全國醫療服務價格項目規範》) provide by medical institutions at rate not higher than the medical service guiding price set by the pricing authority jointly with the health authority and other relevant authorities.

OVERVIEW OF TAX IMPLICATIONS OF HONG KONG

Hong Kong Taxation of the Company

Profits Tax

The Company will be subject to Hong Kong profits tax in respect of profits arising in or derived from Hong Kong at the current rate of 16.5% unless such profits are chargeable under the half-rate of 8.25% that may apply for the first HK$2 million of assessable profits for years of assessment beginning on or after April 1, 2018. Dividend income derived by the Company from its subsidiaries will be excluded from Hong Kong profits tax.

Hong Kong Taxation of Shareholders

Tax on Dividends

No tax is payable in Hong Kong in respect of dividends paid by the Company.

Profits Tax

Hong Kong profits tax will not be payable by any Shareholders (other than Shareholders carrying on a trade, profession or business in Hong Kong and holding the H Shares for trading purposes) on any capital gains made on the sale or other disposal of the Shares. Trading gains from the sale of H Shares by persons carrying on a trade, profession or business in Hong Kong where such gains are derived from or arise in Hong Kong from such trade, profession or business will be chargeable to Hong Kong income tax rates of 16.5% on corporations and 15.0% on individuals, unless such gains are chargeable under the respective half-rates of 8.25%

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Stamp Duty

Hong Kong stamp duty, currently charged at the ad valorem rate of 0.13% on the higher of the consideration for or the market value of the H Shares, will be payable by the purchaser on every purchase and by the seller on every sale of any Hong Kong securities, including H Shares (in other words, a total of 0.26% is currently payable on a typical sale and purchase transaction involving H Shares). In addition, a fixed stamp duty of HK$5.00 is currently payable on any instrument of transfer of H Shares. Where one of the parties is a resident outside Hong Kong and does not pay the ad valorem duty due by it, the duty not paid will be assessed on the instrument of transfer (if any) and will be payable by the transferee. If no stamp duty is paid on or before the due date, a penalty of up to 10 times the duty payable may be imposed.

Estate Duty

Hong Kong estate duty was abolished effective from 11 February 2006. No Hong Kong estate duty is payable by Shareholders in relation to the Shares owned by them upon death.

FOREIGN EXCHANGE CONTROL IN THE PRC

The lawful currency of the PRC is Renminbi, which is currently subject to foreign exchange controls and cannot be freely converted into foreign currency. The SAFE, under the authority of the PBOC, is empowered with the functions of administering all matters relating to foreign exchange, including the enforcement of foreign exchange control regulations.

According to Regulations on Foreign Exchange Administration of the PRC (《中華人民共和國外匯管理條例》) (the “Foreign Exchange Administration Regulations”), which was promulgated by the State Council of on January 29, 1996 and came into effect since April 1, 1996, the Foreign Exchange Administration Regulations classify all international payments and transfers into current items and capital items. Most of the current items are not subject to the approval of foreign exchange administration agencies, while capital items are subject to such approval. The Foreign Exchange Administration Regulations were subsequently amended on January 14, 1997 and August 1, 2008 and came into effect on August 5, 2008. The latest amendment to the Foreign Exchange Administration Regulations clearly states that PRC will not impose any restriction on international current payments and transfers.

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On June 20, 1996, PBOC promulgated the Regulations for the Administration of Settlement, Sale and Payment of Foreign Exchange (《結匯、售匯及付匯管理規定》) (the “Settlement Regulations”), which became effective on July 1, 1996. The Settlement Regulations do not impose any restrictions on convertibility of foreign exchange under current items, while imposes restrictions on foreign exchange transactions under capital items.

According to the relevant laws and regulations in the PRC, PRC enterprises (including foreign investment enterprises) which need foreign exchange for current item transactions may, without the approval of the foreign exchange administrative authorities, effect payment through foreign exchange accounts opened at financial institutions that carries foreign exchange business or operating institutions that carries settlement and sale business, on the strength of valid receipts and proof. Foreign investment enterprises which need foreign exchange for the distribution of profits to their shareholders and PRC enterprises which, in accordance with regulations, are required to pay dividends to their shareholders in foreign exchange may, on the strength of resolutions of the board of directors or the shareholders’ meeting on the distribution of profits, effect payment from foreign exchange accounts opened at financial institutions that carries foreign exchange business or institutions that carries settlement and sale business, or effect exchange and payment at financial institutions that carry foreign exchange business or institutions that carry settlement and sale business.

On December 26, 2014, the SAFE issued the Notice of the SAFE on Issues Concerning the Foreign Exchange Administration of Overseas Listing (《國家外匯管理局關於境外上市外匯管理有關問題的通知》), pursuant to which a domestic company shall, within 15 business days of the date of the end of its overseas listing issuance, register the overseas listing with the SAFE’s local branch at the place of its incorporation; and the proceeds from an overseas listing of a domestic company may be remitted to the domestic account or deposited in an overseas account, but the use of the proceeds shall be consistent with the content of the document and other disclosure documents.

On February 13, 2015, the SAFE issued the Notice of the SAFE on Further Simplifying and Improving Policies for the Foreign Exchange Administration of 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》) (Hui Fa [2015] No. 13), which came into effect on June 1, 2015. The notice has cancelled the confirmation of foreign exchange registration under domestic direct investment and the confirmation of foreign exchange registration under overseas direct investment, instead, banks shall directly examine and handle foreign exchange registration under domestic direct investment and foreign exchange registration under overseas direct investment, and the SAFE and its local offices shall indirectly regulate the foreign exchange registration of direct investment through banks.

According to the Notice of the SAFE of the PRC on Revolutionize and Regulate Capital Account Settlement Management Policies (《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》) (Hui Fa [2016] No. 16) issued by the SAFE on June 9, 2016, foreign currency earnings in capital account that relevant policies of willingness exchange settlement have been clearly implemented on (including the recalling of raised capital by overseas listing) may undertake foreign exchange settlement in the banks according to actual business needs of the

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On January 26, 2017, SAFE promulgated the Circular on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuineness and Compliance Verification (《國家外匯管理局關於進一步推進外匯管理改革完善真實合規性審核的通知》), which stipulates several capital control measures with respect to the outbound remittance of profit from domestic entities to offshore entities, including: (i) banks should check board resolutions regarding profit distribution, the original version of tax filing records, and audited financial statements pursuant to the principle of genuine transactions; and (ii) domestic entities should hold income to account for previous years’ losses before remitting the profits. Moreover, pursuant to this circular, domestic entities should make detailed explanations of the sources of capital and utilization arrangements, and provide board resolutions, contracts, and other proof when completing the registration procedures in connection with an outbound investment.

On October 23, 2019, the SAFE promulgated the Notice for Further Advancing the Facilitation of Cross-border Trade and Investment (《國家外匯管理局關於進一步促進跨境貿易投資便利化的通知》) (the “Circular 28”), which, among other things, allows all FIEs to use Renminbi converted from foreign currency-denominated capital for equity investments in China, as long as the equity investment is genuine, does not violate applicable laws, and complies with the negative list on foreign investment. On December 31, 2020, the People’s Bank of China, SAFE and other government authorities jointly issued the Circular on Further Optimizing Cross-border Renminbi Policies to Support the Stabilization of Foreign Trade and Foreign Investment (《關於進一步優化跨境人民幣政策支持穩外貿穩外資的通知》) (the “Circular 330”), which, among other things, reiterates the above provisions in Circular 28. However, since the Circular 28 and Circular 330 are relevantly new, it is unclear how SAFE and other government authorities as well as competent banks will carry this out in practice.

According to the Circular of SAFE on Optimizing Foreign Exchange Administration to Support the Development of Foreign-related Business (《國家外匯管理局關於優化外匯管理支持涉外業務發展的通知》) (the “Circular 8”) promulgated and effective on April 10, 2020 by the SAFE, the reform of facilitating the payments of incomes under the capital accounts shall be promoted nationwide. Under the prerequisite of ensuring true and compliant use of funds and compliance and complying with the prevailing administrative provisions on use of income from capital projects, enterprises which satisfy the criteria are allowed to use income under the capital account, such as capital funds, foreign debt and overseas listing, etc., for domestic payment, without the need to provide proof materials for veracity to the bank beforehand for each transaction.

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This Appendix sets forth summaries of certain aspects of PRC laws and regulations which are relevant to the Company’s operations and business. Laws and regulations relating to taxation in the PRC are discussed separately in “Appendix III – Taxation and Foreign Exchange.” This Appendix also contains a summary of certain Hong Kong legal and regulatory provisions, including summaries of certain of the material differences between PRC and Hong Kong company law, certain requirements of the Hong Kong Listing Rules and additional provisions required by the Hong Kong Stock Exchange for inclusion in the articles of association of the PRC issuers.

PRC LAWS AND REGULATIONS

This Appendix contains a summary of laws and regulations on companies and securities in the PRC, certain major differences between the PRC Company Law and Companies (Winding Up and Miscellaneous Provisions) Ordinance and the Companies Ordinance as well as the additional regulatory provisions of the Hong Kong Stock Exchange on joint stock limited companies of the PRC. The principal objective of this summary is to provide potential investors with an overview of the principal laws and regulations applicable to us. This summary is with no intention to include all the information which may be important to the potential investors. For discussion of laws and regulations specifically governing the business of the Company, see section headed “Regulatory Environment” in this document.

PRC LEGAL SYSTEM

The PRC legal system is based on the Constitution of the PRC (《中華人民共和國憲法》) (the “Constitution”) and is made up of written laws, administrative regulations, local regulations, autonomous regulations, separate regulations, rules and regulations of departments of the State Council, rules and regulations of local governments, international treaties of which the PRC government is a signatory, and other regulatory documents. Court verdicts may be used as judicial reference and guidance. However, they do not constitute binding precedents.

According to the Constitution and the Legislation Law of the PRC (《中華人民共和國立法法》) (the “Legislation Law”), National People’s Congress (the “NPC”) and the Standing Committee of the NPC (the “SCNPC”) are empowered to exercise the legislative power of the State. The NPC has the power to formulate and amend basic laws governing civil and criminal matters, state organs and other matters. The SCNPC is empowered to formulate and amend laws other than those required to be enacted by the NPC and to supplement and amend any parts of laws enacted by the NPC during the adjournment of the NPC, provided that such supplements and amendments are not in conflict with the basic principles of such laws. The State Council is the highest organ of the PRC administration and has the power to formulate administrative regulations based on the Constitution and laws. The people’s congresses of provinces, autonomous regions and municipalities and their respective standing committees may formulate local regulations based on the specific circumstances and actual requirements of their own respective administrative areas, provided that such local regulations do not contravene any provision of the Constitution, laws or administrative regulations. The people’s

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Congress of the National Autonomous Region has the power to formulate autonomous regulations and separate regulations in accordance with the political, economic and cultural characteristics of the local ethnic groups, and make flexible provisions on the provisions of laws and administrative regulations, but shall not violate the basic principles of laws or administrative regulations, and shall not make flexible provisions on the provisions of the constitution law and the law of regional ethnic autonomy, as well as other relevant laws and administrative regulations on ethnic autonomy.

The ministries and commissions of the State Council, PBOC, the State Audit Administration as well as the other organs endowed with administrative functions directly under the State Council may, in accordance with the laws as well as the administrative regulations, decisions and orders of the State Council and within the limits of their power, formulate rules. The people’s governments of the provinces, autonomous regions, and municipalities directly under the central government, cities divided into districts and autonomous prefectures may enact rules, in accordance with laws, administrative regulations and the local regulations of their respective provinces, autonomous regions or municipalities.

The Constitution has supreme legal authority and no laws, administrative regulations, local regulations, autonomous regulations or separate regulations may contravene the Constitution. The authority of laws is greater than that of administrative regulations, local regulations and rules. The authority of administrative regulations is greater than that of local regulations and rules. The authority of local regulations is greater than that of the rules of the local governments at or below the corresponding level. The authority of the rules enacted by the people’s governments of the provinces or autonomous regions is greater than that of the rules enacted by the people’s governments of the cities divided into districts or autonomous prefectures within the administrative areas of the provinces and the autonomous regions.

The NPC has the power to alter or annul any inappropriate laws enacted by its Standing Committee, and to annul any autonomous regulations or separate regulations which have been approved by its Standing Committee, but which contravene the Constitution or the Legislation Law. The SCNPC has the power to annul any administrative regulations that contravene the Constitution and laws, to annul any local regulations that contravene the Constitution, laws or administrative regulations, and to annul any autonomous regulations or local regulations which have been approved by the standing committees of the people’s congresses of the relevant provinces, autonomous regions or municipalities directly under the central government, but which contravene the Constitution and the Legislation Law. The State Council has the power to alter or annul any inappropriate ministerial rules and rules of local governments. The people’s congresses of provinces, autonomous regions or municipalities directly under the central government have the power to alter or annul any inappropriate local regulations enacted or approved by their respective standing committees. The Standing Committees of local people’s Congresses have the power to annul inappropriate rules enacted by the people’s governments at the corresponding level. The people’s governments of provinces and autonomous regions have the power to alter or annul any inappropriate rules enacted by the people’s governments at a lower level.

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According to the constitution, the power to interpret laws is invested in the SCNPC. According to the Decision of the Standing Committee of the NPC Regarding the Strengthening of Interpretation of Laws (《全國人民代表大會常務委員會關於加強法律解釋工作的決議》), if the scope prescribed by laws or decrees needs to be further defined or supplementary provisions need to be made, the SCNPC shall interpret them or make provisions by means of decrees. Issues involving the specific application of laws and decrees in the trial work of the court shall be interpreted by the Supreme People’s court. Issues involving the specific application of laws and decrees in the procuratorial work of the procuratorate shall be interpreted by the Supreme People’s procuratorate. If there are principled differences in the interpretation of the Supreme People’s court and the Supreme People’s Procuratorate, they shall be submitted to the SCNPC for interpretation or decision. Issues that do not involve the specific application of laws and decrees in judicial and procuratorial work shall be interpreted by the State Council and the competent departments. If the scope of local laws and regulations needs to be further defined or supplemented, the Standing Committee of the people’s Congress of each province, autonomous region and municipality directly under the central government that promulgates such laws and regulations shall interpret or enact regulations. Issues involving the specific application of local laws and regulations shall be interpreted by the competent departments of the people’s governments of all provinces, autonomous regions and municipalities directly under the central government.

PRC JUDICIAL SYSTEM

According to the Constitution and the Organic Law of the People’s Court of the People’s Republic of China (《中華人民共和國人民法院組織法》) (“the Organic Law of the People’s Court”), the people’s court is composed of the Supreme People’s Court, the local people’s courts at all levels and the special people’s courts.

Local people’s courts at all levels are composed of primary people’s courts, intermediate people’s courts and higher people’s courts. The primary people’s courts may set up civil, criminal and economic tribunals. The intermediate people’s court has similar structure with the primary people’s court, and can set up other tribunals, such as intellectual property tribunal when necessary. Special people’s courts include military courts, maritime courts, intellectual property courts, financial courts, etc.

The higher level of people’s court supervises the trial work of the people’s court at a lower level. The people’s Procuratorate also has the right to exercise legal supervision over the proceedings of the people’s court at the same level or at a lower level. The Supreme People’s Court is the highest judicial organ in China and supervises the trial work of local people’s courts at all levels and special people’s courts.

In accordance with the Criminal Procedure Law of the PRC (《中華人民共和國刑事訴訟法》) (“Criminal Procedure Law”) and the Civil Procedure Law of the PRC (《中華人民共和國民事訴訟法》) (“Civil Procedure Law”), the people’s courts apply a two-tier appellate system. Before a judgment or ruling of first instance has legal effect, the parties may appeal

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The Civil Procedure Law contains provisions on the jurisdiction of the people’s court, the procedures to be followed in conducting civil proceedings and the procedures for the enforcement of civil judgments or rulings. All parties to a civil action in China shall abide by the civil procedure law. Generally speaking, civil cases are heard by the local court where the defendant lives. The parties to the contract may also choose the court of jurisdiction to file a civil action by express agreement, but the court of jurisdiction shall be the place where the dispute is actually related, such as the place where the plaintiff or the defendant lives, the place where the contract is signed or performed, or the place where the subject matter of the action is located, etc. However, in any case, the above selection shall not violate the provisions of the Civil Procedure Law on level jurisdiction and exclusive jurisdiction.

A foreign individual, a person without nationality, a foreign enterprise or a foreign organization that institute or respond to proceedings in a people’s court is given the same litigation rights and obligations as a citizen or legal person of the PRC. Should a foreign court limit the litigation rights of PRC citizens and enterprises, the PRC court shall apply the same limitations to the citizens and enterprises of such foreign country.

If any party to a civil action refuses to comply with the effective judgement, ruling, conciliation statement and other legal documents to be executed by the people’s court or an award made by the arbitration tribunal in the PRC, the other party may apply to the people’s court for the enforcement of the same. There are time limits of two years imposed on the right to apply for such enforcement. Suspension or disruption of the time limit for applying for such enforcement shall comply with the provisions of the applicable law concerning the suspension or disruption of the time-barring of actions.

A party seeking to enforce a judgement or ruling of a people’s court against a party who is not personally or whose property is not within the PRC may apply to a foreign court with jurisdiction over the case for recognition and enforcement of the judgement or ruling. A foreign judgement or ruling may also be recognized and enforced by the people’s court according to PRC enforcement procedures if the PRC has entered into or acceded to an international treaty with the relevant foreign country, which provides for such recognition and enforcement, or if the judgement or ruling satisfies the court’s examination according to the principle of

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THE PRC COMPANY LAW, SPECIAL REGULATIONS AND MANDATORY PROVISIONS

The Company Law (《公司法》) was passed by the Standing Committee of the Eighth NPC on December 29, 1993 and came into effect on July 1, 1994. It was successively amended on December 25, 1999, August 28, 2004, October 27, 2005, December 28, 2013 and October 26, 2018. The revised Company Law came into effect on October 26, 2018.

Special Regulations of the State Council Concerning the Floatation and Listing Abroad of Stocks by Limited Stock Companies (《國務院關於股份有限公司境外募集股份及上市的特別規定》) (the “Special Regulations”) were passed at the 22nd Standing Committee Meeting of the State Council on July 4,1994 and were promulgated and implemented on August 4, 1994. The Special Regulations were formulated according to the then applicable Article 85 and Article 155 of the Company Law and should be applicable to the overseas share issue and listing of joint stock limited companies. According to the Official Reply of the State Council on the Proposed Adjustment to the Provisions Concerning Matters Including the Notice Period for Convention of Shareholders’ Meetings by Overseas Listed Companies (Guo Han [2019] No. 97) (《關於調整適用在境外上市公司召開股東大會通知期限等事項規定的批覆》(國函[2019]97 號)) (the “Circular 97”) issued on October 17, 2019, the notice period for a shareholders’ meeting, the shareholder proposal right, and the procedures for convening a shareholders’ meeting, for those joint stock companies established within the territory of China but listed outside the territory of China should be governed by the relevant provisions of the Company Law, and the provisions laid down in Article 20 through Article 22 of the Special Regulations shall no longer apply to the aforesaid matters.

The Mandatory Provisions in Articles of Association of Joint Stock Limited Companies to be Listed Overseas (《到境外上市公司章程必備條款》) (the “Mandatory Provisions”) were promulgated and implemented by the former Securities Commission of the State Council and the former State Economic System Restructuring Commission on August 27, 1994, prescribing provisions which must be incorporated into the articles of association of joint stock limited companies to be listed overseas. Therefore, the Mandatory Provisions have been incorporated into the Articles of Association. Set out below is a summary of the provisions of the PRC Company Law, the Special Regulations, the Mandatory Provisions and the Circular 97 applicable to the Company.

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General Provisions

A joint stock limited company is a corporate legal person incorporated under the Company Law, whose registered capital is divided into shares of equal par value. The liability of its shareholders is limited to the extent of the shares they hold, and the liability of the company is limited to the full amount of all the assets it owns.

A company must conduct its business in accordance with laws as well as public and commercial ethics. A company may invest in other limited liability companies. The liabilities of the company to such invested companies are limited to the amount invested. Unless otherwise provided by laws, a company cannot be the capital contributor who has the joint and several liabilities associated with the debts of the invested enterprises.

Incorporation

A company may be incorporated by promotion or public subscription. A company may be incorporated by two to 200 promoters, but at least half of the promoters must reside in the PRC. A company incorporated by promotion is the one with registered capital entirely subscribed for by the promoters. Where a company is incorporated by public subscription, unless otherwise provided, the promoters are required to subscribe for not less than 35% of the total shares of the company, and the remaining shares can be offered to the public or specific parties.

The Company Law provides that for companies incorporated by way of promotion, the registered capital shall be the total capital subscribed for by all promoters as registered with the relevant administrative bureau for industry and commerce. Shares in the company shall not be offered to others unless the registered capital has been fully paid up.

For companies incorporated by way of public subscription, the registered capital is the amount of total paid-up capital as registered with the relevant administrative bureau for industry and commerce. The promoters shall subscribe in writing for the shares required to be subscribed for by them and pay up their capital contributions under the articles of association. Procedures relating to the transfer of titles to non-monetary assets shall be duly completed in accordance with laws if such assets are to be contributed as capital.

The latest revision of the Company Law no longer imposes restrictions on minimum amount or requirements for payment deadlines of paid-up registered capital. However, if there are laws, administrative regulations and other requirements imposed by the State Council provide for payment deadlines of paid-up registered capital or the minimum registered capital of a limited liability company or a joint stock limited company, such laws, administrative regulations and requirements shall prevail.

The promoters shall convene an extraordinary meeting within 30 days after the issued shares have been completely paid up. The extraordinary meeting may be convened only with the presence of promoters and subscribers holding shares representing more than 50% of the

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Within 30 days after the conclusion of the extraordinary meeting, the board of directors shall apply to the registration authority for registration of the incorporation of the company. A company is formally established and has the qualification of a legal person once the registration has been approved by the relevant administrative bureau for market regulation and a business license has been issued.

The promoters of a company shall individually and jointly be liable for the payment of all expenses and liabilities incurred in the incorporation process if the company cannot be incorporated, the repayment of subscription monies to the subscribers together with interest at bank rates for a deposit of the same term if the company cannot be incorporated, and damages suffered by the company as a result of the default of the promoters in the course of incorporation of the company.

Share Capital

The promoters of a company may make capital contributions in cash, or in kind that can be valued in currency and transferable according to laws such as intellectual property rights or land-use rights based on their appraised value.

There is no limit under the Company Law as to the percentage of shares held by an individual shareholder in a company. If capital contribution is made other than in cash by the promoters of the company, valuation and verification of the properties contributed must be carried out and converted into shares. A company may issue registered or bearer shares. However, shares issued to promoter(s) or legal person(s) shall be in the form of registered shares and shall be registered under the name(s) of such promoter(s) or legal person(s) and shall not be registered under a different name or the name of a representative. The Special Regulations and the Mandatory Provisions provide that shares issued to foreign investors and listed overseas shall be issued in registered form and shall be denominated in RMB and subscribed for in foreign currency.

Pursuant to the Special Regulations and the Mandatory Provisions, shares issued to foreign investors and investors from Hong Kong, Macau and Taiwan and subscribed in foreign currency are defined as foreign shares. Foreign shares listed overseas are defined as overseas listed and foreign invested shares. Shares issued to investors within the PRC other than the aforementioned areas and subscribed in RMB are defined as Domestic Shares. Qualified Foreign Institutional Investors (“QFII”) approved by the China Securities Regulatory Commission (the “CSRC”) may invest in the PRC securities market.

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A company may offer its shares to the public overseas with approval by the securities administration department of the State Council. Detailed measures shall be specified by the State Council based on the Special Regulations. The share price may be equal to or in excess of par value, but shall not be less than par value. The transfer of shares by shareholders shall be conducted in legally established stock exchanges or via other methods as stipulated by the State Council.

Increase of Share Capital

Pursuant to the Company Law, an increase in the capital of a company by means of an issue of new shares must be approved by shareholders in general meeting. Except for above-mentioned conditions of obtaining approval at the general meeting required by the Company Law, the Securities Law of the People’s Republic of China (《中華人民共和國證券法》) (the “Securities Law”) requires the following conditions for a company to issue new shares to the public: the company is a complete and well-operated organization; the company is capable of making profits continuously; no false records or significant irregularities are found in its financial and accounting documents over the last three years; the issuer, its controlling shareholder, and actual controller have not been involved in corruption, bribery, embezzlement, misappropriation of property, or disruption of the socialist market economic order in the past three years; the company is able to fulfill any other requirements as prescribed by the securities regulatory authority of the State Council as approved by the State Council. The approval of the securities regulatory authority of the State Council must be obtained. After payment in full for the new shares issued, a company must modify its registration with the relevant administrative bureau for industry and commerce and issue a public notice accordingly.

Reduction of Share Capital

A company may reduce its registered capital in accordance with the following procedures stipulated by the Company Law:

• the company shall prepare a balance sheet and a list of properties;

• the reduction of registered capital must be approved by shareholders in the general meeting;

• the company shall inform its creditors of the reduction of capital within ten days, and publish an announcement in respect of the reduction in newspapers within thirty (30) days upon passing of the resolution approving the reduction of capital;

• creditors of the company may require the company to settle its debts or provide corresponding guarantees within 30 days after receiving the notice, or within 45 days of the public announcement if no notice has been received; and

• the company must apply to the relevant administration of registration for the registration of the reduction of registered capital.

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Repurchase of Shares

A company shall not purchase its own shares other than for the following purposes:

(1) reducing its registered capital;

(2) merging with other company which holds its shares;

(3) using shares for employees stock ownership plan or equity incentives;

(4) acquiring its own shares at the request of its shareholders who vote in a shareholders’ general meeting against a resolution regarding a merger or division;

(5) using shares for converting convertible corporate bonds issued by the listed company; and

(6) for the purpose of protecting the corporate value and the rights and interests of shareholders of a listed company when necessary.

A company purchasing its own shares under any of the circumstances set forth in items (1) and (2) shall be subject to a resolution of the shareholders’ meeting; and a company purchasing its own shares under any of the circumstances set forth in items (3), (5) and (6) may, pursuant to its articles of association or the authorization of the shareholders’ meeting, be subject to a resolution of a meeting of the board of directors at which more than two-thirds of directors are present.

After purchasing its own shares in accordance with these requirements, a company shall, under the circumstance set forth in item (1), cancel them within 10 days after the purchase; while under the circumstance set forth in either item (2) or (4), transfer or cancel them within six months; and while under the circumstance set forth in item (3), (5) or (6), aggregately hold not more than 10% of the total shares that have been issued by the company, and transfer or cancel them within three years.

A listed company purchasing its own shares shall perform the obligation of information disclosure and under any of the circumstances set forth in items (3), (5) and (6) shall carry out trading in a public and centralized manner.

The Mandatory Provisions stipulate that upon obtaining approvals from relevant supervisory authorities in accordance with the articles of association of the company, a company may, for the aforementioned purposes, repurchase its issued shares by way of a general offer to its shareholders or purchase on a stock exchange or through off-market contract.

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Transfer of Shares

Shares may be transferred in accordance with the relevant laws and regulations. A shareholder shall transfer his/her shares in stock exchanges established pursuant to laws or by other means as stipulated by the State Council. Registered shares may be transferred by endorsement of the shareholders or in any other manner specified in applicable laws and regulations. Bearer shares are transferred by delivering the shares to relevant transferees. Unless otherwise stipulated by laws, no modifications of registration in the share register caused by transfer of shares shall be made within 20 days prior to convening a shareholders’ general meeting or five days prior to any record date for determination of dividend distributions. Shares of a company held by its promoter(s) shall not be transferred within one year from the date of incorporation of such company. Shares in issue prior to the company’s public offering of shares shall not be transferred within one year from the listing date of its shares on the stock exchange.

Directors, supervisors and senior management of a company shall not transfer over 25% of the total shares held by them in the company each year during their term of office, and shall not transfer the shares held by them in the company within one year from the listing date of the shares. Such persons shall also not transfer the shares held by them in the company within half a year after they leave office. The articles of association may set other restrictive requirements on the transfer of the company’s shares held by its directors, supervisors and senior management.

Shareholders

The company’s articles of association set forth the rights and duties of its shareholders, which are binding on all shareholders. Pursuant to the Company Law and the Mandatory Provisions, the rights of shareholders include:

• the right to attend shareholders’ general meetings in person or by proxy and to vote in respect of the number of shares held;

• the right to transfer their shares in accordance with the applicable laws, regulations and the company’s articles of association;

• the right to inspect the company’s articles of association, share register, counterfoil of company debentures, minutes of shareholders’ general meetings, resolutions of board meetings, resolutions of meetings of the board of supervisors and financial statements and to make proposals or enquires on the company’s business operations;

• where a resolution passed by shareholders’ general meetings or the board of directors violates the articles of association or infringe the lawful rights and interests of shareholders, the right to institute an action in a people’s court demanding the cessation of such unlawful infringement;

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• the right to receive dividends based on the number of shares held;

• to participate in distribution of residual properties of the company in proportion to their shareholdings upon the liquidation of the company; and

• any other rights of shareholders specified in the company’s articles of association.

The obligations of a shareholder include: to abide by the company’s articles of association; to pay the subscription monies in respect of the shares subscribed for; to be liable for the company’s debts and liabilities to the extent of the amount of subscription monies agreed to be paid in respect of the shares subscribed for; not to abuse the shareholders’ rights to prejudice the interests of the company or other shareholders thereof; not to abuse the independent status of the company as a legal person and a joint stock limited company to prejudice the interests of the creditor(s) of the company; and other obligations specified in the company’s articles of association.

Shareholders’ General Meetings

The shareholders’ general meeting is the organ of authority of the company, which exercises its powers in accordance with the Company Law. The shareholders’ general meeting exercises the following powers:

• to decide on the company’s operational policies and investment plans;

• to elect or remove the directors and supervisors who are not representatives of the employees;

• to decide on matters relevant to remuneration of directors and supervisors;

• to review and approve reports of the board of directors;

• to review and approve reports of the board of supervisors or supervisors;

• to review and approve annual financial budget and final accounts proposed by the company;

• to review and approve the company’s proposals on profit distribution and recovery of loss;

• to decide on any increase or reduction of the registered capital of the company;

• to decide on the company’s issuance of bonds;

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• to decide on merger, division, dissolution and liquidation of the company and other matters;

• to amend the company’s articles of association; and

• other powers as specified in the articles of association.

Annual general meetings shall be held once a year. An extraordinary general meeting shall be held within two months after the occurrence of any of the following circumstances:

• the number of directors is less than the number stipulated by the Company Law or less than two thirds of the number specified in the articles of association;

• the losses of the company which are not recovered reach one-third of the company’s total paid up share capital;

• as requested by shareholders alone or in aggregate holding 10% or more of the shares of the Company;

• when deemed necessary by the board of directors;

• when proposed by the board of supervisors; or

• other circumstances as specified in the articles of associations.

Shareholders’ general meetings shall be convened by the board of directors and presided over by the chairman of the board of directors.

The notice to convene an annual general meeting and an extraordinary general meeting shall be given 20 days and 15 days, respectively, before the date of such meeting pursuant to the Company Law. For a company that has issued bearer shares, the time and venue of and matters to be considered at a general meeting shall be announced 30 days before the meeting.

There is no specific provisions in the Company Law regarding the number of shareholders constituting a quorum in a general meeting. Shareholders alone or in aggregate holding more than 3% of the shares of the company may put forth interim proposals and submit the same in writing to the board of directors 10 days before a general meeting. The board of directors shall notify other shareholders within two days after receiving such proposals, and submit the interim proposals to the general meeting for review and approval if such proposals are within the scope of its duties and powers. The contents of the interim proposal shall be within the scope of the functions and powers of the general meeting of shareholders, with clear topics and specific matters for resolutions. The general meeting shall not make any resolution on any matter not listed in a notice as stipulated in either of the preceding two notices. Where holders

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Pursuant to the Company Law, shareholders present at a shareholders’ general meeting have one vote for each share they hold, save that shares held by the company are not entitled to any voting rights. An accumulative voting system may be adopted for the election of directors and supervisors at the general meeting pursuant to the provisions of the articles of association or a resolution of the general meeting. Under the accumulative voting system, each share shall be entitled to the number of votes equivalent to the number of directors or supervisors to be elected at the general meeting, and shareholders may consolidate their votes for one or more directors or supervisors when casting a vote.

Pursuant to the Company Law and the Mandatory Provisions, resolutions of the shareholders’ general meeting shall be adopted by more than half of the voting rights held by the shareholders present at the meeting. However, resolutions of the shareholders’ general meeting regarding the following matters shall be adopted by more than two-thirds of the voting rights held by the shareholders present at the meeting: (i) amendments to the articles of association; (ii) the increase or decrease of registered capital; (iii) the issue of any types of shares, warrants or other similar securities; (iv) the issue of debentures; (v) the merger, division, dissolution, liquidation or change in the form of the company; (vi) other matters considered by the shareholders’ general meeting, by way of an ordinary resolution, to be of a nature which may have a material impact on the company and should be adopted by a special resolution.

Under the Company Law, meeting minutes shall be prepared in respect of decisions on matters discussed at the shareholders’ general meeting. The chairman of the meeting and directors attending the meeting shall sign to endorse such minutes. The minutes shall be kept together with the shareholders’ attendance register and the proxy forms.

The Mandatory Provisions require class meetings to be held in the event of a variation or derogation of the class rights of a class. Holders of Domestic Shares and holders of overseas listed and foreign invested shares are deemed to be different classes of shareholders for this purpose.

Directors

A company shall have a board of directors, which shall consist of 5 to 19 members. The term of office of the directors shall be provided for by the articles of association, but each term of office shall not exceed three years. The directors may hold consecutive terms by re-election upon the expiry of term.

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Meetings of the board of directors shall be convened at least twice a year. A notice of meeting shall be given to all directors and supervisors at least ten days before the meeting. As for extraordinary general meetings convened by the board of directors, the way of giving notice and the notice period may be otherwise determined.

Under the Company Law, the board of directors exercises the following functions and powers:

• to convene the general meeting and report on its work to the shareholders;

• to implement the resolution of the general meeting;

• to decide on the company’s business plans and investment plans;

• to formulate the company’s proposed annual financial budget and final accounts;

• to formulate the company’s proposals for profit distribution and for recovery of losses;

• to formulate proposals for the increase or reduction of the company’s registered capital and the issue of corporate bonds;

• to formulate plans for the merger, division, dissolution or change in the form of the company;

• to decide on the company’s internal management structure;

• to appoint or dismiss the company’s general manager, and based on the general manager’s nomination, to appoint or dismiss deputy general managers and financial officers of the company and to decide on their remuneration;

• to formulate the company’s basic management system; and

• other functions and powers as specified in the articles of association.

In addition, the Mandatory Provisions provide that the board of directors is also responsible for formulating the proposals for amendment of the articles of association of a company. Interim board meetings may be convened by shareholders representing more than 10% of the voting rights, more than one-third of the directors or the supervisory board. The chairman shall convene the meeting within ten days of receiving such proposal, and preside over the meeting. Meetings of the board of directors could be held only if more than half of the directors are present. Resolutions of the board of directors require the approval of more

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If a resolution of the board of directors violates the laws, administrative regulations or the company’s articles of association as a result of which the company sustains serious losses, the directors participating in the resolution are liable to compensate the company. However, if it can be proven that a director expressly objected to the resolution when the resolution was voted on, and that such objections were recorded in the minutes of the meeting, such director may be relieved of that liability.

Under the Company Law, the following persons may not act as a director of a company:

• persons without capacity or restricted capacity to undertake civil liabilities;

• persons who have committed the offense of corruption, bribery, taking of property, misappropriation of property or destruction of the order of socialist market economy, and have been sentenced to criminal punishment, where less than five years have elapsed since the date of completion of the sentence; or persons who have been deprived of their political rights due to criminal offense, where less than five years have elapsed since the date of the completion of implementation of this deprivation;

• persons who have been former directors, factory managers or general managers of a company or an enterprise that has been bankrupt and has been liquidated, and those persons are personally liable for the bankruptcy of such company or enterprise, where less than three years have elapsed since the date of the completion of the bankruptcy and liquidation of the company or enterprise;

• persons who were legal representatives of a company or enterprise which had its business license revoked due to violation of the law and who are personally liable, and less than three years have elapsed since the date of the revocation of the business license;

• persons who have a relatively large amount of debt due and outstanding; or

• other circumstances under which a person is disqualified from acting as a director of a company as set out in the Mandatory Provisions (which have been incorporated in the Articles of Association, a summary of which is set out in Appendix V).

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The board of directors shall appoint a chairman, who is elected with approval of more than half of all the directors. The chairman of the board of directors exercises the following functions and powers (including but not limited to):

• to preside over general meetings and convene and preside over meetings of the board of directors; and

• to check on the implementation of the resolutions of the board of directors.

According to the Company Law, the legal representative of a company may be the chairman, any executive director (if the limited liability company does not have a board of directors) or the general manager. However, the Mandatory Provisions require that the legal representative of the company shall be the chairman.

The Special Regulations provide that a company’s directors, supervisors, general managers and other senior management shall bear fiduciary duties and the obligation to act diligently. They are required to faithfully perform their duties, protect the interests of the company and not to use their positions and power for their own benefit. The Mandatory Provisions (which have been incorporated into the Articles of Association, a summary of which is set out in Appendix V) contain further elaborations of such duties.

Supervisors

A company shall have a board of supervisors composed of not less than three members. The term of office of a supervisor shall be three years, and the supervisors may hold consecutive terms by re-election. The board of supervisors is made up of shareholders’ representatives and an appropriate proportion of the company’s staff representatives, which shall be no less than one-third. Directors and senior management shall not act as supervisors.

The board of supervisors of a company shall hold at least one meeting every six months. According to the Company Law, a resolution of the board of supervisors shall be passed by more than half of all the supervisors, while according to the Opinions on Supplementary Amendment to Articles of Associations by Companies to be listed in Hong Kong (《關於到香港上市公司對公司章程作補充修改的意見的函》), a resolution of the board of supervisors shall be passed by more than two-thirds of all the supervisors.

The board of supervisors exercises the following functions and powers:

• check the financial affairs of the company;

• supervise the directors and senior management in the performance of their duties, and to put forward proposals on the removal of any director or senior manager who violates laws, administrative regulations, the articles of association or any resolution of the shareholders’ meeting;

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• require the director or senior management to make corrections if his/her act is detrimental to the interests of the company;

• propose the convening of extraordinary general meetings, and to convene and preside over shareholders’ meetings when the board of directors fails to exercise the function of convening and presiding over shareholders’ meetings;

• put forward proposals at general meetings;

• initiate actions against directors or senior management; and

• other functions and duties as provided for by the articles of association.

The circumstances under which a person is disqualified from being a director described above apply mutatis mutandis to supervisors of a company.

General Manager and Senior Managers

A company shall have a general manager who shall be appointed or removed by the board of directors. The general manager is accountable to the board of directors and may exercise the following powers:

• manage the production, operation and management of the company and arrange for the implementation of resolutions of the board of directors;

• arrange for the implementation of the company’s annual business and investment plans;

• formulate plans for the establishment of the company’s internal management structure;

• formulate the basic administration system of the company;

• formulate the company’s specific rules;

• recommend the appointment and dismissal of deputy general managers and financial officers;

• decide to appoint or dismiss other management personnel (other than those required to be appointed or dismissed by the board of directors);

• attend board meetings as a non-voting attendant; and

• other powers conferred by the board of directors or the company’s articles of association.

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Under the Company Law, the senior management of a company include the general manager, deputy general managers, financial officers, secretary of the board of directors of a listed company and other executives as specified in the articles of association of the company. The circumstances under which a person is disqualified from being a director of a company described above apply mutatis mutandis to general managers and officers of the company. The articles of association of a company shall have binding effect on the shareholders, directors, supervisors, general managers and other senior management of the company. Such persons shall be entitled to exercise their rights, apply for arbitration or initiate legal proceedings according to the articles of association of the company. The provisions of the Mandatory Provisions regarding the senior management of a company have been incorporated in the Articles of Association.

Duties of Directors, Supervisors and Senior Managers

Directors, supervisors, general managers and other senior management of a company are required under the Company Law to comply with the relevant laws, regulations and the company’s articles of association, carry out their duties honestly and protect the interests of the company. Each director, supervisor, general manager and senior officer of a company is also under a duty of confidentiality to the company and is prohibited from divulging secret information of the company unless permitted by the relevant laws and regulations or by the shareholders.

Any director, supervisor, general manager and other senior management who contravenes any laws, regulations or the company’s articles of association in the performance of his duties which results in any loss to the company shall be personally liable to the company.

The Special Regulations and the Mandatory Provisions provide that a director, supervisor, general manager and other senior management of a company owe fiduciary duties to the company and are required to perform their duties faithfully, protect the interests of the company and not to make use of their positions and power in the company for their own benefit.

Finance and Accounting

A company shall establish its financial and accounting systems according to the laws, administrative regulations and the regulations of the MOF of the State Council.

At the end of each financial year, a company shall prepare a financial statements, which shall be audited and verified according to laws.

A company shall make available its financial statements for the inspection by the shareholders at least 20 days before the convening of the annual general meeting. A company established by the public subscription method must publish its financial statements.

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When distributing each year’s after-tax profits, the company shall set aside 10% of its after-tax profits for the company’s statutory common reserve (except where such reserve has reached 50% of the company’s registered capital). After a company has made an allocation to its statutory common reserve from its after-tax profit, subject to a resolution of the shareholders or the general meeting, the company may make an allocation to a discretionary common reserve from the after-tax profits. If the company’s statutory surplus reserve is not enough to make up for the losses of the company for the previous year, the current year’s profits shall first be used for making up the losses before the statutory surplus reserve is set aside according to the provisions of the preceding paragraph.

After the losses have been made up and surplus reserves have been set aside, the remaining profits after-tax shall be distributed to shareholders in proportion to the number of shares held by shareholders as in the case of a joint stock limited company, except as otherwise provided in the articles of association. The capital common reserve of a joint stock limited company is made up of the premium over the nominal value of the shares of the company in issue, and other amounts required by the MOF of the State Council to be allocated to the capital common reserve. The company’s common reserves shall be used for making up losses, expanding the production and business scale or increasing the registered capital of the company, but the capital reserve fund shall not be used for making up the company’s losses. Where the statutory surplus reserve is converted into registered capital, the balance of the statutory reserve shall not be less than 25% of the registered capital after such conversion.

Appointment and Dismissal of Accounting Firms

According to the Special Regulations, a company shall engage an independent PRC qualified accounting firm to audit the company’s annual financial statements and review other financial reports. Pursuant to the Company Law, the appointment or dismissal of accounting firms responsible for the auditing of the company shall be determined by shareholders’ meeting, shareholders’ general meeting or board of directors in accordance with the articles of association. The accounting firm is to be appointed for a term commencing from the conclusion of an annual general meeting and ending at the conclusion of the next annual general meeting. The accounting firm should be allowed to make representations when the shareholders’ general meeting conducts a vote on the dismissal of the accounting firm. The company should provide true and complete accounting evidences, books, financial statements and other accounting data to the accounting firm which it employs without any refusal, withholding and misrepresentation.

Distribution of Profits

The Special Regulations provide that the dividends and other distributions to be paid to holders of overseas listed foreign shares shall be declared and calculated in Renminbi and paid in foreign currency. Under the Mandatory Provisions, the payment of dividends to shareholders shall be made through a receiving agent.

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According to the Guide to the Program for “Full Circulation” of H shares promulgated by CSDC on February 7, 2020, cash dividends to domestic investors of H-share “full circulation” shall be distributed through CSDC. An H-share listed company shall transfer RMB cash dividends to the designated bank account of the Shenzhen subsidiary of CSDC, who shall complete the clearing of cash dividends by distributing the cash dividends to investors through domestic securities companies.

Amendments to the Articles of Association

Any amendments to the company’s articles of association must be made in accordance with the procedures set forth in the company’s articles of association. In relation to matters involving the company’s registration, its changes in registration shall be applied with the company registry.

Dissolution and Liquidation

A company may apply for the declaration of insolvency by reason of its inability to pay debts as they fall due. After the people’s court has made a declaration of the company’s insolvency, the shareholders, the relevant authorities and the relevant professionals shall form a liquidation committee to conduct the liquidation of the company.

Under the Company Law, a company shall be dissolved in any of the following events:

(1) the term of its operations set down in its articles of association has expired or events of dissolution specified in its articles of association have occurred;

(2) the shareholders in shareholders’ general meeting have resolved to dissolve the company;

(3) the company is dissolved by reason of its merger or division;

(4) the company is subject to the revocation of business license, a closure order or elimination in accordance with laws; or

(5) in the event that the company encounters substantial difficulties in its operation and management, and its continuance shall cause a significant loss in the interest of shareholders, and where this cannot be resolved through other means, shareholders who hold more than 10% of the total shareholders’ voting rights of the company may present a petition to the people’s court for the dissolution of the company.

Where the company is dissolved in the circumstances described in (1), (2), (4) and (5) above, a liquidation committee must be formed within 15 days after the date of dissolution. Members of the liquidation committee shall be appointed by shareholders at the shareholders’ general meeting. If a liquidation committee is not established within the stipulated period, the

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The liquidation committee shall exercise the following functions and powers during the liquidation period:

• to take stock of the company’s assets and to prepare a balance sheet and a property list;

• to notify creditors or issue public notices;

• to deal with any outstanding business of the company related to the liquidation;

• to pay any tax overdue together with any tax arising during the liquidation process;

• to settle the company’s financial claims and liabilities;

• to handle the surplus assets of the company after its debts have been paid off; and

• to represent the company in civil lawsuits.

If the company’s assets are sufficient to meet its liabilities, they shall be applied towards the payment of the liquidation expenses, wages owed to the employees and labor insurance expenses, tax overdue and debts of the company. Any surplus assets shall be distributed to the shareholders of the company in proportion to the number of shares held by them. During the liquidation period, a company shall not engage in operating activities unrelated to the liquidation. If the liquidation committee becomes aware that the company does not have sufficient assets to meet its liabilities, it shall immediately apply to the people’s court for a declaration for bankruptcy. Following such declaration, the liquidation committee shall hand over all affairs of the liquidation to the people’s court.

Upon completion of the liquidation, the liquidation committee shall submit a liquidation report to the shareholders’ general meeting or relevant regulatory authorities for confirmation. Thereafter, the report shall be submitted to the company registration authority in order to cancel the company’s registration, and a public notice of its termination shall be issued. Members of the liquidation committee are required to discharge their duties honestly and perform their obligation according to laws. A member of liquidation committee is liable to indemnify the company and its creditors in respect of any loss arising from his willful or material default.

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Overseas Listing

According to the Special Regulations, the shares of a company shall only be listed overseas after obtaining approval from CSRC. A domestic company shall go through formalities of registration with the relevant exchange authority for the overseas listing within 15 business days after the completion of the overseas listing.

Loss of H Shares Certificates

In the event domestic share certificates in registered form are either stolen or lost, shareholder may, in accordance with the relevant provisions set out in the Civil Procedure Law, apply to a people’s court for a declaration that such certificates are no longer valid. Upon such declaration, the shareholder may apply to the company for the issue of replacement certificates. The Mandatory Provisions provide for a separate procedure regarding the loss of H share certificates.

“Full Circulation” of H Shares

Shareholders of domestic unlisted shares may determine by themselves through consultation the amount and proportion of shares, for which an application will be filed for circulation, provided that the requirements laid down in the relevant laws and regulations and set out in the policies for state-owned asset administration, foreign investment and industry regulation are met, and the corresponding H-share listed company may be entrusted to file the said application for “full circulation.” To file an application for “Full Circulation”, an H-share listed company shall file the application with the CSRC according to the administrative licensing procedures necessary for the “examination and approval of public issuance and listing (including additional issuance) of shares overseas by a joint stock company.”

An H-share listed company may apply for “Full Circulation” separately or when applying for refinancing abroad. An unlisted domestic joint stock company may apply for “full circulation” when applying for an overseas initial public offering.

Merger and Division

Companies may merge through merger by absorption or through the establishment of a newly merged entity. If it merges by absorption, the company which is absorbed shall be dissolved.

If it merges by forming a new corporation, both companies will be dissolved. Where there is a division of a company, its assets shall be divided up accordingly and a balance sheet and a property list shall be prepared. The company shall notify its creditors within ten days of the date of the company’s division resolution and shall publish an announcement in a newspaper within 30 days of the date of the company’s division resolution. Debts of the company prior

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SECURITIES LAW AND OTHER RELEVANT REGULATIONS

The PRC has promulgated a series of regulations that relate to the issue and trading of shares and disclosure of information. In October 1992, the State Council established the Securities Committee and the CSRC. The Securities Committee is responsible for coordinating the drafting of securities regulations, formulating securities-related policies, planning the development of securities markets, directing, coordinating and supervising all securities- related institutions in the PRC and administering the CSRC.

The CSRC is the regulatory arm of the Securities Committee and is responsible for the drafting of regulatory provisions of securities markets, supervising securities companies, regulating public offers of securities by PRC companies in the PRC or overseas, regulating the trading of securities, compiling securities related statistics and undertaking relevant research and analysis. In 1998, the State Council consolidated the two departments and the CSRC has since taken over the original functions of the Securities Commission.

The Securities Law came into force on July 1, 1999, and was revised for the first time on August 28, 2004, for the second time on October 27, 2005, for the third time on June 29, 2013, for the fourth time on August 31, 2014 and for the fifth time on December 28, 2019. This law is the first national securities law in China, which is divided into 14 chapters and 226 articles, regulating (including) the issuance and trading of securities, the acquisition of listed companies, stock exchanges, securities companies and the duties and responsibilities of the securities regulatory authority under the State Council. The Securities Law comprehensively regulates the activities of China’s securities market. Article 224 of the Securities Law stipulates that a domestic enterprise shall comply with the relevant provisions of the State Council in issuing securities or listing its securities abroad directly or indirectly. Article 225 of the Securities Law stipulates that the specific measures for subscription and trading of shares of domestic companies in foreign currencies shall be separately formulated by the State Council. At present, the shares (including H shares) issued and traded abroad are still subject to the rules and regulations promulgated by the State Council and the CSRC.

ARBITRATION AND ENFORCEMENT OF ARBITRAL AWARDS

The Arbitration Law of the People’s Republic of China (《中華人民共和國仲裁法》) (the “Arbitration Law”) was passed by the SCNPC on August 31, 1994, became effective on September 1, 1995 and was amended on August 27, 2009 and September 1, 2017. It is applicable to contract disputes and other property disputes between natural person, legal person and other organizations, and the parties have entered into a written agreement to refer the matter to arbitration committee constituted in accordance with the Arbitration Law. Under the Arbitration Law, an arbitration committee may, before the promulgation by the PRC Arbitration

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Association of arbitration regulations, formulate interim arbitration rules in accordance with the Arbitration Law and the PRC Civil Procedure Law. Where the parties have by agreement provided arbitration as the method for dispute resolution, the people’s court will refuse to handle the case.

The Listing Rules and the Mandatory Provisions require an arbitration clause to be included in the articles of association of the company and, in the case of the Listing Rules, shall also be in contracts between the company and each of its directors and supervisors, to the effect that any disputes or claims arising among the following parties will be referred to arbitration including between holders of H shares and the company, between holders of H Shares and the directors, supervisors, manager or other senior management of the company, and between holders of H shares and holders of Domestic Shares, with respect to any disputes or claims in relation to the companies affairs or as a result of rights or obligations arising under its articles of association, the Company Law or other relevant laws and administrative regulations. Where a dispute or claim of rights referred to in the preceding paragraph is referred to arbitration, the entire claim or dispute must be referred to arbitration, and all persons who have a cause of action based on the same facts giving rise to the dispute or claim or whose participation is necessary for the resolution of such dispute or claim, must comply with the arbitration. Disputes in respect of the definition of shareholder and disputes in relation to our register of shareholders need not be resolved by arbitration.

A claimant may elect for arbitration to be carried out at either the China International Economic and Trade Arbitration Commission in accordance with its rules or the Hong Kong International Arbitration Center in accordance with the Securities Arbitration Rules. Once a claimant refers to a dispute or claim to arbitration, the other party shall submit to the arbitral body elected by the claimant. If the claimant elects for arbitration to be carried out at the Hong Kong International Arbitration Center, any party to the dispute or claim may apply for a hearing to take place in Shenzhen in accordance with the Securities Arbitration Rules of the Hong Kong International Arbitration Center.

Under the Arbitration Law and Civil Procedure Law, an arbitral award is final and binding on the parties.

MATERIAL DIFFERENCES BETWEEN CERTAIN ASPECTS OF CORPORATION LAW IN THE PRC AND HONG KONG

Hong Kong company law is primarily set out in the Companies Ordinance and the Companies (Winding Up and Miscellaneous Provisions) Ordinance, supplemented by common law and rules of equity that apply to Hong Kong. As a joint stock limited company incorporated in the PRC that is seeking a [REDACTED] of shares on the Hong Kong Stock Exchange, we are governed by the Company Law and all other rules and regulations promulgated pursuant to the Company Law. Set out below is a summary of certain material differences between Hong Kong company law and the Company Law. This summary is, however, not intended to be an exhaustive comparison.

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Corporate Existence

Under Hong Kong company law, a company with share capital is incorporated by the Registrar of Companies in Hong Kong, which issues a certificate of incorporation to the Company upon its incorporation, and the company will acquire an independent corporate existence henceforth. A company may be incorporated as a public company or a private company. Pursuant to the Companies Ordinance, the articles of association of a private company incorporated in Hong Kong shall contain certain pre-emptive provisions. A public company’s articles of association do not contain such pre-emptive provisions.

Under the Company Law, a joint stock limited company may be incorporated by promotion or public subscription.

Share Capital

Under Hong Kong law, the directors of a Hong Kong company may, with the prior approval of the shareholders if required, issue new shares of the company. The Company Law has no provisions on minimum registered capital of joint stock companies, except that laws, administrative regulations and State Council decisions have separate provisions on paid-in registered capital and the minimum registered capital of joint stock companies, in which case the company should follow such provisions. The Company’s registered capital is the amount of its issued share capital. Any increase in the Company’s registered capital must be approved at the general meeting and shall be approved by/filed with the relevant PRC governmental and regulatory authorities (if applicable).

The Companies Ordinance does not prescribe any minimum capital requirement for companies incorporated in Hong Kong.

Under the Company Law, the shares may be subscribed for in the form of money or non-monetary assets (other than assets not entitled to be used as capital contributions under relevant laws or administrative regulations). For non-monetary assets to be used as capital contributions, appraisals must be carried out to ensure there is no over-valuation or under-valuation of the assets. There is no such restriction on a company incorporated in Hong Kong.

Restrictions on Shareholding and Transfer of Shares

Generally, Domestic Shares, which are denominated and subscribed for in Renminbi, can be subscribed for and traded by PRC investors, qualified overseas institutional investors or qualified overseas strategic investors.

Overseas listed shares, which are denominated in Renminbi and subscribed for in a currency other than Renminbi, may only be subscribed for, and traded by, investors from Hong Kong, Macau and Taiwan or any country and territory outside the PRC, or qualified domestic

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Under the Company Law, a promoter of a joint stock limited company is not allowed to transfer the shares it holds for a period of one year after the date of establishment of the company. Shares in issue prior to a public offering of the company cannot be transferred within one year from the listing date of the shares on a stock exchange. Shares in a joint stock limited liability company held by its directors, supervisors and senior management and transferred each year during their term of office shall not exceed 25% of the total shares they held in a company, and the shares they held in a company cannot be transferred within one year from the listing date of the shares, and also cannot be transferred within half a year after the said personnel has left office. The articles of association may set other restrictive requirements on the transfer of a company’s shares held by its directors, supervisors and senior management. There are no restrictions on shareholdings and transfers of shares under Hong Kong law apart from (i) the restriction on the Company to issue additional Shares within six months, and (ii) 12-month lockup on Controlling Shareholders’ disposal of Shares, after the [REDACTED], as illustrated by the undertakings given by our Company and our Controlling Shareholders to the Stock Exchange.

Financial Assistance for Acquisition of Shares

The Company Law does not prohibit or restrict a joint stock limited company or its subsidiaries from providing financial assistance for the purpose of an acquisition of its own or its holding company’s shares. However, the Mandatory Provisions contain certain restrictions on a company and its subsidiaries on providing such financial assistance similar to those under Hong Kong company law.

Notice of Shareholders’ Meetings

Under the Company Law, notice of a shareholder’s annual general meeting must be given not less than 20 days before the meeting. Whereas notice of an extraordinary general meeting must be given not less than 15 days before the meeting. For a company that has issued bearer shares, notice of a shareholder’s general meeting must be announced at least 30 days prior to the meeting.

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For a company incorporated in Hong Kong with limited liability, the minimum period of notice of a general meeting is 14 days. Further, where a meeting involves consideration of a resolution requiring special notice, the company must also give its shareholders notice of the resolution at least 14 days before the meeting. The notice period for the annual shareholders’ general meeting is 21 days.

Quorum for Shareholders’ Meetings

The Company Law does not specify any quorum requirement for a shareholders’ general meeting.

Under Hong Kong law, the quorum for a shareholders’ meeting is two members, unless the articles of association of a company specifies otherwise or the company has only one member, in which case the quorum is one.

Voting at Shareholders’ Meetings

Under the Company Law, the passing of any resolution requires more than one-half of the voting rights represented by our shareholders present in person or by proxy at a shareholders’ meeting except in cases such as proposed amendments to our Articles of Association, increase or decrease of registered capital, merger, division, dissolution or transformation, which require more than two-thirds of the voting rights represented by shareholders present in person or by proxy at a shareholders’ general meeting.

Under Hong Kong law, an ordinary resolution is passed by a simple majority of affirmative votes cast by shareholders present in person, or by proxy, at a general meeting, and a special resolution is passed by not less than three-fourths of affirmative votes casted by shareholders present in person, or by proxy, at a general meeting.

Variation of Class Rights

The Company Law makes no specific provision relating to variation of class rights. However, the Company Law states that the State Council can promulgate requirements relating to other kinds of shares. The Mandatory Provisions contain detailed provisions relating to the circumstances which are deemed to be variations of class rights and the approval procedures required to be followed in respect thereof. These provisions have been incorporated in the Articles of Association, which are summarized in “Appendix V – Summary of Articles of Association.”

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Under the Companies Ordinance, no rights attached to any class of shares can be varied except (i) with the passing of a special resolution by the shareholders of the relevant class at a separate meeting sanctioning the variation, (ii) with the written consent of shareholders representing at least three-fourths of the total voting rights of shareholders of the relevant class, or (iii) if there are provisions in the articles of association relating to the variation of those rights, then in accordance with those provisions.

As required by the Hong Kong Listing Rules and the Mandatory Provisions, we have adopted in the Articles of Association provisions protecting class rights in a similar manner to those found in Hong Kong law. Holders of overseas listed shares and domestic shares are defined in the Articles of Association as different classes. The special procedures for voting by a class of Shareholders shall not apply in the following circumstances: (i) where we issue, either separately or concurrently in any 12-month period, upon approval by special resolutions passed at a general meeting, domestic shares and H shares not more than 20% of each of the existing domestic shares and H shares, respectively; (ii) where the plan for the issue of domestic shares and H shares upon our establishment is fulfilled within 15 months following the date of approval by the securities regulatory authorities under the State Council; and (iii) with the approval of the securities regulatory authority under the State Council and with the consent of the HKEX, the Company’s domestic shares may be transferred to foreign investors and listed on the overseas stock exchange, and all or part of the domestic shares of the Company may be converted into foreign shares, and the converted shares may be listed and traded on the overseas stock exchange.

Derivative Action by Minority Shareholders

Under Hong Kong company law, a shareholder may, with the leave of the Court, start a derivative action on behalf of a company for any misconduct committed by its directors against the company. For example, leave may be granted where the directors control a majority of votes at a general meeting, and could thereby prevent the company from suing the directors in its own name.

Pursuant to the Company Law, in the event where the directors and senior management of a joint stock limited company violate laws, administrative regulations or its articles of association, resulting in losses to the company, the shareholders individually or jointly holding 1% or more of the shares in the company for more than 180 consecutive days may request in writing the board of supervisors to initiate proceedings in the people’s court. In the event that the board of supervisors violates as such, the above said shareholders may send written request to the board of directors to initiate proceedings in the people’s court. Upon receipt of such written request from the shareholders, if the board of supervisors or the board of directors refuses to initiate such proceedings, or has not initiated proceedings within 30 days upon receipt of the request, or if under urgent situations, failure of initiating immediate proceeding may cause irremediable damages to the company, the above said shareholders shall, for the benefit of the company’s interests, have the right to initiate proceedings directly to the court in their own name.

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In addition, the Mandatory Provisions provide us with certain remedies against the Directors, Supervisors and senior management who breach their duties to the Company. In addition, as a condition to the listing of overseas listed foreign Shares on the Hong Kong Stock Exchange, each director and supervisor of a joint stock limited company is required to give an undertaking to observe the articles of association in favor of the company. This allows minority Shareholders to take action against our Directors and Supervisors in default.

Minority Shareholder Protection

Under the Companies Ordinance, a shareholder who alleges that the affairs of a company are conducted in a manner unfairly prejudicial to his interests may petition to the Court to make an appropriate order to give relief to the unfairly prejudicial conduct. Alternatively, pursuant to the Companies (Winding Up and Miscellaneous Provisions) Ordinance, a shareholder may seek to wind up the company on the just and equitable ground. In addition, on the application of a specified number of members, the Financial Secretary may appoint inspectors who are given extensive statutory powers to investigate the affairs of a company incorporated or registered in Hong Kong. The Company Law provides that any shareholders holding 10% or above of voting rights of all issued shares of a company may request a People’s Court to dissolve the company to the extent that the operation or management of the company experiences any substantial difficulties and its continuous existence would cause serious losses to them, and no other alternatives can resolve such difficulties.

The Company, as required by the Mandatory Provisions, has adopted in its Articles of Association minority Shareholder protection provisions similar to (though not as comprehensive as) those available under the Hong Kong law. These provisions state that a controlling shareholder may not exercise its voting rights in a manner prejudicial to the interests of other shareholders, may not relieve a director or supervisor of his duty to act honestly in our best interests or may not approve the expropriation by a director or supervisor of our assets or the individual rights of other shareholders.

Directors

The Company Law, unlike Hong Kong company law, does not contain any requirements relating to the declaration of directors’ interests in material contracts, restrictions on directors’ authority in making major dispositions, restrictions on companies providing certain benefits to directors and indemnification in respect of directors’ liability and prohibitions against compensation for loss of office without shareholders’ approval. The Mandatory Provisions, however, contain certain requirements and restrictions on major disposals and specify the circumstances under which a director may receive compensation for loss of office.

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Board of Supervisors

Under the Company Law, a joint stock limited company’s directors and senior management are subject to the supervision of a board of supervisors. There is no mandatory requirement for the establishment of a board of supervisors for a company incorporated in Hong Kong.

The Mandatory Provisions provide that each supervisor owes a duty, in the exercise of his powers, to act in good faith and honestly in what he considers to be in the best interests of the Company and to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

Fiduciary Duties

In Hong Kong, directors owe fiduciary duties to the company, including the duty not to act in conflict with the company’s interests. Furthermore, the Companies Ordinance has codified the directors’ statutory duty of care. Under the Company Law, directors, supervisors and senior management should be loyal and diligent. Under the Special Regulations, directors, supervisors, managers and other members of senior management of the company shall honestly and diligently perform their duties for the company.

Financial Disclosure

Under the Company Law, a joint stock limited company is required to make available at the company for inspection by shareholders its financial report 20 days before its annual general meeting. In addition, a joint stock limited company of which the shares are publicly offered must publish its financial report. The Companies Ordinance requires a company incorporated in Hong Kong to send to every shareholder a copy of its financial statements, auditors’ report and directors’ report, which are to be presented before the company in its annual general meeting, not less than 21 days before such meeting. According to the PRC laws, a company shall prepare its financial statements as at the end of each accounting year, and submit the same to accounting firms for auditing as required by law. The Mandatory Provisions require that a company must, in addition to preparing financial statements according to the CAS, have its financial statements prepared and audited in accordance with international or Hong Kong accounting standards and its financial statements must also contain a statement of the financial effect of the material differences (if any) from the financial statements prepared in accordance with the CAS.

The Special Regulations require that there should not be any inconsistency between the information disclosed within and outside the PRC and that, to the extent that there are differences in the information disclosed in accordance with the relevant PRC and overseas laws, regulations and requirements of the relevant stock exchanges, such differences should also be disclosed simultaneously.

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Information on Directors and Shareholders

The Company Law gives shareholders the right to inspect the company’s articles of association, minutes of the general meetings and financial statements. Under the articles of association, shareholders have the right to inspect and copy (at reasonable charges) certain information on shareholders and on directors which is similar to the rights of shareholders of Hong Kong companies under the Companies Ordinance.

Receiving Agent

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

Corporate Reorganization

Corporate reorganization involving a company incorporated in Hong Kong may be effected in a number of ways, such as a transfer of the whole or part of the business or property of the company in the course of voluntary winding up to another company pursuant to Section 237 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance or a compromise or arrangement between the company and its creditors or between the company and its members pursuant to Section 673 and Division 2 of Part 13 of the Companies Ordinance, which requires the sanction of the court. In addition, subject to the shareholders’ approval, an intra-group wholly-owned subsidiary company may also be amalgamated horizontally or vertically under the Companies Ordinance. Under PRC law, merger, division, dissolution or change to the status of a joint stock limited liability company has to be approved by shareholders in general meeting.

Mandatory Deductions

Under the Company Law, a joint stock limited liability company is required to make transfers equivalent to certain prescribed percentages of its after-tax profit to the statutory common reserve fund. There are no corresponding provisions under Hong Kong law.

Arbitration of Disputes

In Hong Kong, disputes between shareholders and a company or its directors, managers and other senior management may be resolved through the courts. The Mandatory Provisions provides that disputes between a holder of H shares and the Company, a holder of H shares and directors, supervisors, managers and other members of senior management of the Company or a holder of H shares and a holder of domestic shares, arising from the Articles of Association,

– IV-31 – 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 APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS the Company Law or other relevant laws and administrative regulations which concerns the affairs of the Company should, with certain exceptions, be referred to arbitration at either the HKIAC or the China International Economic and Trade Arbitration Commission. Such arbitration is final and conclusive.

The Securities Arbitration Rules of the HKIAC contain provisions allowing, upon application by any party, an arbitral tribunal to conduct a hearing in Shenzhen for cases involving the affairs of companies incorporated in the PRC and listed on the Hong Kong Stock Exchange so that PRC parties and witnesses may attend. Where any party applies for a hearing to take place in Shenzhen, the tribunal shall, where satisfied that such application is based on bona fide grounds, order the hearing to take place in Shenzhen conditional upon all parties, including witnesses and arbitrators, being permitted to enter Shenzhen for the purpose of the hearing. Where a party, other than a PRC party or any of its witnesses or any arbitrator, is not permitted to enter Shenzhen, then the tribunal shall order that the hearing be conducted in any practicable manner, including the use of electronic media. For the purpose of the Securities Arbitration Rules of the HKIAC, a PRC party means a party domiciled in the PRC other than the territories of Hong Kong, Macau and Taiwan.

Remedies of a Company

Under the Company Law, if a director, supervisor or manager in carrying out his duties infringes any law, administrative regulation or the articles of association of a company, which results in damage to the company, that director, supervisor or manager should be responsible to the company for such damages. In addition, the Hong Kong Listing Rules require listed companies’ articles to provide for remedies of the company similar to those available under Hong Kong law (including rescission of the relevant contract and recovery of profits from a director, supervisor or senior management).

Dividends

The company has the power in certain circumstances to withhold, and pay to the relevant tax authorities, any tax payable under PRC law on any dividends or other distributions payable to a shareholder. Under Hong Kong law, the limitation period for an action to recover a debt (including the recovery of declared dividends) is six years, whereas under PRC laws, the relevant limitation period is three years. The company must not exercise its powers to forfeit any unclaimed dividend in respect of shares until after the expiry of the applicable limitation period.

Closure of Register of Shareholders

The Companies Ordinance requires that the register of shareholders of a company must not be closed for the registration of transfers of shares for more than 30 days (extendable to 60 days in certain circumstances) in a year, whereas, as required by the Mandatory Provisions, share transfers shall not be registered within 30 days prior to convening a shareholders’ general meeting or within five days before the base date of distribution of dividends.

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This appendix contains the summary of the principal provisions of the Articles of Association adopted by the Company on July 12, 2021 and will become effective on the date when the H Shares are [REDACTED] on the Hong Kong Stock Exchange. The main purpose of this appendix is to provide an overview of the Company’s Articles of Association for potential investors, so it may not contain all the information that is important to potential investors.

SHARES AND REGISTERED CAPITAL

The Company shall issue ordinary shares at all times. With the approval from authorities authorised by the State Council, the Company may issue other classes of shares when needed.

All the shares issued by the Company shall have a nominal value, each share having a nominal value of RMB[REDACTED].

The Company shall issue shares in an open, fair and just manner, and each share of the same class shall have equal rights.

All shares of the same class issued at the same time shall be issued under the same conditions and at the same price; the same price shall be paid for each share subscribed by any entities or individuals.

The domestic shares and overseas listed foreign shares issued by the Company enjoy the same rights to distribution of dividends and distribution in any other form.

INCREASE, DECREASE AND REPURCHASE OF SHARES

Increase of Capital

Pursuant to the requirements of laws, regulations and the listing rules of the stock exchange where the Company’s shares are listed, the Company may, based on its business and development needs, authorize the increase of its capital in accordance with the relevant provisions of the Articles of Association by way of a resolution in general meeting.

The Company may increase its registered capital in the following ways:

(1) by issuing new shares to non-specified investors;

(2) by placing new shares to its existing Shareholders;

(3) by distributing new shares to existing shareholders;

(4) by issuing new shares to certain investors;

(5) by capitalising its capital reserves;

(6) by other ways permitted by the laws, administrative regulations and relevant regulatory authorities.

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The Company’s increase of capital by issuing new shares shall, after being approved in accordance with the provisions of the Articles of Association, be conducted in accordance with the procedures stipulated in the relevant laws, administrative regulations and the listing rules of the stock exchange where the Company’s shares are listed.

Decrease of Capital

The Company may reduce our registered capital according to the Articles of Association and shall be conducted in accordance with the procedures stipulated in the PRC Company Law, other relevant regulations and the Articles of Association.

In the event of reduction of registered capital, the Company shall prepare a balance sheet and a list of assets.

The company shall notify its creditors within 10 days, and make an announcement in a newspaper within 30 days from the date of resolution of reducing its registered capital. Within 30 days from the date of receiving the notice, or within 45 days from the date of announcement if the creditor fails to receive the notice, the creditor shall have the right to require the company to pay off its debts or provide corresponding guarantees.

Repurchase of Shares

The Company may, according to the requirements of the laws, administrative regulations, the listing rules of the stock exchange where the Company’s shares are listed and the Articles of Association and subject to the approval by reporting to the relevant competent authorities of the PRC, repurchase its outstanding shares through legal procedures under the following circumstances:

(1) cancelling shares for reducing the Company’s registered capital;

(2) merging with other companies which hold shares in the Company;

(3) awarding shares for employee stock ownership plan or share incentive plan;

(4) acquiring shares held by Shareholders, who vote against any resolution proposed in any general meeting on the merger or division of the Company, upon their request;

(5) using shares for converting corporate bonds which are convertible into shares that issued by Company;

(6) for the need of protecting Company value and Shareholders’ equity;

(7) other circumstances as permitted by laws, administrative regulations, the listing rules of the stock exchange where the Company’s shares are listed and regulatory authorities.

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The Company shall not purchase or sell its own shares except under the aforesaid circumstances.

Where the laws, administrative regulations, normative documents and relevant requirements of the securities regulatory authorities in the place where the Company’s shares are listed provide otherwise for the aforementioned share buy-back, such provisions shall prevail.

The Company may buy back its shares in one of the following manners with the approval from the relevant competent authority of China:

(1) by making general offer of buy-back on a pro-rata basis to all shareholders;

(2) by repurchasing shares through public trading on a stock exchange;

(3) by repurchasing through an off-market agreement;

(4) by other means as permitted by laws and regulations and relevant regulatory authorities.

Where the Company buys back its shares through an off-market agreement, it shall seek prior approval of the shareholders’ general meeting in accordance with the Articles of Association. The Company may terminate or amend an agreement entered into in the aforementioned manner or waive any of its rights thereunder with prior approval of the shareholders’ general meeting obtained in the same manner.

A contract to repurchase shares referred to in the preceding paragraph shall include but not limited to an agreement to become obliged to repurchase or acquire the right to repurchase shares.

The Company shall not assign an agreement to repurchase its own shares or any of its rights provided thereunder.

With regard to the redeemable shares that the Company has the right to redeem, if they are not bought back on the market or by way of tender, the purchase prices of these shares shall not exceed certain maximum price; if they are bought back by way of tender, the tenders shall be available and proposed to all shareholders in the same manner.

If the Company cancels the portion of Shares upon such repurchase, the cancellation shall be conducted within the period prescribed by laws, administrative regulations and the stock listing rules of the stock exchange where the Company’s shares are listed, and shall apply to the original company registration authority for registration of the change in the registered capital and make relevant announcement.

The amount of the Company’s registered capital shall be reduced by the aggregate nominal value of those cancelled shares.

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Unless the Company is under liquidation, it shall comply with the following provisions in respect of the buy-back of its outstanding shares:

(1) where the Company buys back its shares at nominal value, the amount thereof shall be deducted from the book balance of the distributable profits of the Company and/or from the proceeds of a new issue of shares made for the buy-back of shares;

(2) where the Company buys back its shares at a price higher than nominal value, the portion corresponding to the nominal value shall be deducted from the book balance of the distributable profits of the Company and/or from the proceeds of a new issue of shares made for the buy-back of the old shares. The portion in excess of the nominal value shall be handled as follows:

(a) if the shares bought back were issued at nominal value, payment shall be deducted from the book balance of the distributable profits of the Company;

(b) if the shares bought back were issued at a price higher than their nominal value, payment shall be deducted from the book balance of the distributable profits of the Company and/or from the proceeds of a new issue of shares made for the buy-back of the old shares, provided that the amount deducted from the proceeds of the new issue of shares shall not be more than the aggregate of premiums received by the Company at the time of the issue of the shares bought back nor shall it be more than the amount of the Company’s premium account (or capital common reserve account) at the time of such buy-back (including the premiums on the new issue of shares);

(3) payment by the Company for the following purposes shall be paid out of the Company’s distributable profits:

(a) acquisition of rights to buy-back shares of the Company;

(b) modification of any agreement for repurchasing shares of the Company;

(4) after the aggregate nominal value of the cancelled shares has been deducted from the registered capital of the Company in accordance with the relevant requirements, the amount deducted from the distributable profits for payment for repurchasing shares at their nominal value shall be accounted for in the Company’s premium account (or capital common reserve account).

Where the laws, administrative regulations, departmental rules, normative documents and relevant requirements of the securities regulatory authorities in the place where the Company’s shares are listed provide otherwise for the accounting treatment related to the aforementioned share buy-back, such provisions shall prevail.

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FINANCIAL ASSISTANCE FOR PURCHASE OF THE COMPANY’S SHARES

The Company or any of its subsidiaries shall not, by any means and at any time, provide any financial assistance to purchasers or potential purchasers of the Company’s shares. The aforesaid purchasers of the Company’s shares include persons directly or indirectly undertaking obligations due to purchase of the Company’s shares.

The Company or its subsidiaries shall not, by any means and at any time, provide any financial assistance to the aforesaid obligors for the purpose of reducing or discharging their obligations.

The following acts shall not be prohibited:

(1) the Company provides the relevant financial assistance in the interests of the Company in good faith, and the primary purpose of the said financial assistance is not to purchase the Company’s shares, or the said financial assistance is part of a master plan of the Company;

(2) the Company distributes its assets as dividends in accordance with the laws;

(3) the Company distributes dividends in the form of shares;

(4) the Company reduces its registered capital, repurchases its shares and adjusts the equity structure in accordance with the Articles of Association;

(5) the Company provides a loan for its normal business operations within its business scope (provided that such financial assistance shall not result in a reduction in the net assets of the Company, or in the event of such reduction, such financial assistance is provided out of the distributable profits of the Company);

(6) the Company provides the funding for employee stock ownership plan (provided that such financial assistance shall not result in a reduction in the net assets of the Company, or in the event of such reduction, such financial assistance is provided out of the distributable profits of the Company).

Financial assistance includes (but not limited to) the following ways:

(1) gift;

(2) guarantee (including the undertaking of liability or provisions of property by the guarantor in order to guarantee the performance of the obligation by the obligor), indemnity (excluding, however, indemnity arising from the Company’s own fault) and termination or waiver of rights;

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(3) providing of a loan or signing of a contract under which the obligations of the Company are to be fulfilled prior to the fulfillment of the obligations of the other party to the contract, and a change in the party to such loan or agreement as well as the assignment of rights under such loan or contract;

(4) financial assistance provided in any other form when the Company is insolvent or has no net assets or when such assistance would lead to a significant reduction in the Company’s net assets.

The term undertake obligations shall include the undertaking of an obligation by the obligor by entering into a contract or making an arrangement (whether or not such contract or arrangement is enforceable and whether or not such obligation is assumed by the obligor individually or jointly with any other person), or by changing its financial position in any other way.

TRANSFER OF SHARES

The shares of the Company held by the promoters shall not be transferred within one year after the incorporation of the Company. Shares issued prior to any [REDACTED] of shares shall not be transferred within one year of the date on which the shares of the Company are first [REDACTED] on a stock exchange.

The Directors, Supervisors and senior management of the Company shall report to the Company their shareholdings and changes thereof and shall not transfer more than 25% of the total number of their shares in the Company per annum during their terms of office. The shares held by them shall not be transferred within one year of the date on which the shares are first [REDACTED] on a stock exchange.

The aforesaid persons shall not transfer their shares in the Company within half a year after they terminate service with the Company.

SHARE CERTIFICATES AND REGISTER OF SHAREHOLDERS

Share Certificates

The share certificates of the Company shall be in registered form.

Matters needed to be specified in the Company shares shall pursuant to the PRC Company Law and to the rules of the stock exchange in which Company’s shares are listed.

The share certificates shall be signed by the Chairman of the Board. Where the signatures of other senior management of the Company are required by the stock exchange where the Company’s shares are listed, the share certificates shall also be signed by such other senior management. The share certificates shall become valid after the Company seal is affixed

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In case of paperless issuance and trading of the shares of the Company, provisions otherwise provided by the securities regulatory authorities and the stock exchanges in the place where the Company’s shares are listed shall apply.

The Company shall establish a register of shareholders in accordance with certificates from the share registrar, and shall register therein the following particulars:

(1) the name (title), address (domicile), occupation or nature of each Shareholder;

(2) the class and number of shares held by each Shareholder;

(3) the amount paid or payable for the shares held by each Shareholder;

(4) the serial number of the share certificate held by each Shareholder;

(5) the date on which each shareholder is registered as a Shareholder;

(6) the date on which each shareholder ceases to be a Shareholder.

The shareholders’ register is a sufficient evidence of the Shareholders’ shareholdings in the Company unless there is evidence to the contrary.

The Company may keep overseas the register of shareholders of overseas listed foreign shares and entrust the administration thereof to an overseas agent in accordance with the understanding and agreement reached between the securities regulatory authorities of the State Council and the overseas securities regulatory authorities. The original register of holders of overseas listed foreign shares listed on the Hong Kong Stock Exchange shall be kept in Hong Kong.

The Company shall keep at its domicile a copy of the register of shareholders of overseas listed foreign shares. The entrusted overseas agent shall always ensure that the original and copies of the register of holders of overseas listed foreign shares are consistent.

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Where the original and copies of the register of shareholders of overseas listed foreign shares are inconsistent, the original shall prevail. The Company shall keep a complete shareholders’ register.

The shareholders’ register shall include the following parts:

(1) the register(s) of shareholders kept at the Company’s domicile other than those specified in items (2) and (3);

(2) the original register(s) of shareholders of overseas listed foreign shares kept in the place(s) of the overseas stock exchange(s) where the shares are listed;

(3) the register(s) of shareholders kept in other places as the Board may decide and consider necessary for listing purposes.

The various parts of the register of shareholders shall not overlap with each another. The transfer of shares registered in a certain part of the register of shareholders shall not, during the continuance of the registration of such shares, be registered in any other part of the register of shareholders.

Changes and corrections to each part of the register of shareholders shall be carried out in accordance with the laws of the places where each part is kept.

If the laws, administrative regulations, rules of department, normative documents of the PRC and rules of relevant stock exchanges or regulatory authorities in the place where the company’s shares are listed provide for the period of suspension of share transfer registration before the date of convening a general meeting or before the base date of distribution of dividends, such provisions shall prevail.

When the Company convenes a general meeting, distributes dividends, commences liquidation or participates in other activities requiring the identification of shareholders, the Board shall decide the record date. The shareholders whose names appear on the register of shareholders at the end of the record date shall be entitled to the relevant rights.

Any party which raises objection to a register of shareholders and requests to have its name (or title) recorded in or deleted from the register of shareholders may apply to the court with jurisdiction to amend that register of shareholders.

If any shareholder in the register of shareholders or any person requesting to have his/her name (title) recorded in the register of shareholders loses his/her share certificates (i.e. “the Original Share Certificates”), the said shareholder or person may apply to the Company to issue replacement certificates in respect of the said shares (i.e. “the Relevant Shares”).

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After the Company reissues new shares in accordance with the provisions of the Articles of Association, the name (title) of a bona fide purchaser gaining possession of such new share certificate or the person who is subsequently entered in the register of shareholders as holder of such shares (if he/she is a bona fide purchaser) shall not be removed from the register of shareholders.

The Company shall not be liable for any damages suffered by any person arising from the cancellation of the Original Share Certificates or the issuance of a new replacement share certificate, unless the claimant can prove that the Company has committed a fraudulent act.

RIGHTS AND OBLIGATIONS OF SHAREHOLDERS

Shareholders

A Shareholder is a person who lawfully holds shares of the Company and has his/her name (title) recorded in the register of shareholders.

A Shareholder shall enjoy the relevant rights and assume the relevant obligations in accordance with the class of shares he/she holds. Shareholders holding the same class of shares shall enjoy the same rights and assume the same obligations.

Rights and Obligations of Shareholders

The ordinary Shareholders shall enjoy the following rights:

(1) the right to receive dividends and other profit distributions in proportion to their shareholdings;

(2) the right to request, convene, preside, attend or appoint proxies to attend general meetings lawfully and to exercise the corresponding voting rights;

(3) the right to supervise and manage the business operation of the company, to present proposals or to raise enquires;

(4) the right to transfer, gift or pledge shares held by them in accordance with laws, administrative regulations, the listing rules of the stock exchange where our shares are listed and provisions of the Articles of Association;

(5) the right to obtain relevant information in accordance with the provisions of the Articles of Association, including:

(a) the right to obtain the Articles of Association, subject to payment of reasonable cost;

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(b) the right to inspect and copy, subject to payment of a reasonable charge:

(i) the register of all the Shareholders;

(ii) personal particulars of each of the Company’s Directors, Supervisors and senior management members, including:

A. present and former name and alias;

B. principal address (domicile);

C. nationality;

D. primary and all other part-time occupations and duties;

E. identification documents and the numbers thereof.

(d) reports (breakdown by domestic and foreign shares) showing the aggregate nominal value, quantity, maximum and minimum prices paid in respect of each class of shares repurchased by the Company since the last financial year and the aggregate amount incurred by the Company for this purpose;

(e) counterfoils of corporate bonds, resolutions of the Board of Directors, resolutions of the Board of Supervisors and financial statements;

(f) the latest audited financial statements of the Company and the audit report with respect thereto, and the reports of the Board of Directors, auditors and the Board of Supervisors;

(g) the copy of annual report of last year that has been filed with the PRC Administration for Market Regulation or other competent authorities;

(h) minutes of general meeting of shareholders (for shareholders’ reference only), special resolutions of the Company.

The company shall keep the above documents other than items (b) and (e) at the Company’s address in Hong Kong, according to the requirements of the Hong Kong Listing Rules, for the public and H-share shareholders to inspect free of charge.

The company may refuse to provide the contents consulted and copied that involve the Company’s business secrets and inside information as well as the personal privacy of relevant personnel.

(6) in the event of the termination or liquidation of the Company, to participate in the distribution of remaining assets of the Company in accordance with the shareholdings;

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(7) with respect to shareholders who vote against any resolution adopted at the shareholders’ general meeting on the merger or division of the Company, the right to demand the Company to buy back their shares;

(8) Shareholders, who severally or jointly hold 3% or more of the shares of the Company, may submit ad hoc proposals in writing to the Board ten (10) days before the convening of the general meeting;

(9) other rights under laws, administrative regulations, departmental rules, the listing rules of the stock exchange where the Company’s shares are listed or the Articles of Association.

The Company shall not exercise any rights to freeze or otherwise prejudice any rights attached to the shares held by any person who directly or indirectly has interest in the Company solely for the reason that such person fails to disclose to the Company any such interests.

The ordinary Shareholders of the Company shall have the following obligations:

(1) to abide by laws, administrative regulations, the listing rules of the stock exchange where the Company’s shares are listed and the Articles of Association;

(2) to pay capital contribution for the shares subscribed for in the prescribed method of subscription;

(3) to be liable to the Company to the extent of the shares they subscribed;

(4) not to withdraw their fund contribution after approval and registration by the Company, except as provided in laws and regulations;

(5) not to abuse their shareholders’ rights to jeopardize the interests of the Company or other shareholders; and not to abuse the status of the Company as an independent legal person and the limited liability of shareholders to jeopardize the interests of any creditors of the Company.

Where shareholders of the Company abuse their shareholders’ rights and thereby causing loss to the Company or other shareholders, such shareholders shall be liable for indemnity in accordance with the law.

Where shareholders of the Company abuse the Company’s status as an independent legal person and the limited liability of shareholders for the purposes of evading repayment of debts, thereby materially impairing the interests of the creditors of the Company, such shareholders shall be jointly and severally liable for the debts owed by the Company;

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(6) to fulfill other obligations as stipulated by laws, administrative regulations and the listing rules of the stock exchange where the Company’s shares are listed and the Articles of Association.

Shareholders shall not be liable for further contribution to share capital other than the conditions agreed to as a subscriber of the shares at the time of subscription.

RESTRICTIONS ON THE CONTROLLING SHAREHOLDERS’ RIGHTS

Except for the obligations required by the laws, administrative regulations or the listing rules of the stock exchanges in which the Company’s shares are listed, the Controlling Shareholder shall not exercise its voting rights on the following issues to the detriment of all or part of the Shareholders:

(1) exempting Directors and Supervisors from acting in good faith with the best interests of the Company;

(2) approving Directors and Supervisors (for the benefit of themselves or others) to deprive the Company’s property in any form, including (but not limited to) any opportunity that is beneficial to the Company;

(3) approving Directors and Supervisors (for the benefit of themselves or others) to deprive other Shareholders’ own rights, including (but not limited to) any distribution rights and voting rights, but does not include the reorganisation of the Company approved by the shareholders’ general meeting in accordance with the Articles of Association.

SHAREHOLDERS’ GENERAL MEETING

General Rules for the Shareholders’ General Meeting

The general meeting is the authority of power of the Company, and shall exercise the following duties and powers in accordance with the law:

(1) to decide the Company’s operational policies and investment plans;

(2) to elect and change the Directors and decide on the remunerations of Directors;

(3) to elect and change the Supervisors from the representatives of the shareholders and decide on the remunerations of Supervisors;

(4) to examine and approve reports of the Board of Directors;

(5) to examine and approve reports of the Supervisory Committee;

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(6) to examine and approve the proposed annual financial budgets, final accounts of the Company;

(7) to examine and approve the profit distribution plans and loss recovery plans of the Company;

(8) to make resolutions on the increase or reduction of the registered capital of the Company;

(9) to make resolutions on the issuance of corporate bonds, the issuance of any class of shares, warrants and similar securities;

(10) to make resolutions on the merger, division, dissolution, liquidation or change in the form of the Company;

(11) to determine the Company’s engagement, removal or discontinuance of engagement of accounting firms;

(12) to amend the Articles of Association and the rules of procedure of the general meeting, the Board of Directors and the Board of Supervisors;

(13) to consider and approve matters relating to the purchases, disposals of material assets (including but not limited to land, building, equipment, production line, equity), or aggregate amount of guarantees, which are more than 30% of the latest total assets as per the audited financial statements of the Company, within one year;

(14) to consider and approve external guarantees which are subject to approval at the shareholders’ general meeting;

(15) to review the equity incentive plan;

(16) to consider the proposal of shareholders representing more than 3% of the voting shares of the Company;

(17) to consider and approve matters relating to changes in the use of proceeds;

(18) to consider other matters required to be resolved by the shareholders’ general meeting pursuant to laws, regulations, the listing rules of the stock exchange where our shares are listed and the Articles of Association.

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“Within one year” above refers to “within one financial year.”

Except as otherwise provided in the Articles of Association, provision of guarantees for others by the Company shall be decided by the Board of Directors; however, where the Company provides guarantee for the shareholders or actual controllers of the Company, a resolution shall be made by the shareholders’ general meeting. When the general meeting of shareholders is deliberating the proposal to provide guarantee for the shareholder or the actual controller, the shareholder or the shareholder controlled by the actual controller shall not participate in the voting of the matters specified in the preceding paragraph. The vote shall be adopted by more than half of the voting rights held by other shareholders present at the meeting.

Unless the Company is under exceptional circumstances such as crisis, the Company shall not enter into contracts with a party (other than Director, Supervisor, and senior management members) in relation to handover of the administration of all business or the important business of the Company to that party without the pre-approval of the general meeting.

The general meetings consist of annual general meetings and extraordinary general meetings. The general meetings shall be convened by the Board of Directors. The annual general meeting shall hold once every year within six months from the end of the previous accounting year.

The Company shall convene an extraordinary general meeting within two (2) months upon occurrence of the following events:

(1) when the number of Directors is less than the number stipulated in the Company Law or two-thirds of the number specified in the Articles of Association;

(2) when the unrecovered losses of the Company amount to one-third of the total amount of its paid-up share capital;

(3) when shareholder(s), holding 10% or more of the Company’s outstanding shares carrying voting rights request(s) in writing the convening of an extraordinary general meeting;

(4) when deemed necessary by the Board;

(5) when proposed by the Supervisory Committee;

(6) when proposed by two or more independent non-executive Directors;

(7) any other circumstances stipulated by laws, administrative regulations, departmental regulations, the listing rules of the stock exchange where the Company’s shares are listed or the Articles of Association.

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Notices of the Shareholders’ General Meeting

The convener will notify all shareholders of the time, place and deliberation matters of the annual general meeting 20 clear business days before the meeting is held, and the extraordinary general meeting will notify all shareholders 15 days or 10 clear business days (whichever is longer) before the meeting is held.

The “working days” mentioned in the Articles of Association shall be subject to the statutory working days announced by the PRC and Hong Kong government.

Resolutions with regard to matters other than those specified in the preceding paragraph shall not be adopted at the extraordinary general meetings.

Notice of a general meeting shall satisfy the following requirements:

(1) be in writing;

(2) specific venue, date and time of the meeting;

(3) matters to be considered at the meeting;

(4) any information and explanations necessary to be made available to the Shareholders for such Shareholders to make sound decisions about the matters to be discussed. This principle includes (but not limited to) the provision of the specific terms and contract(s), if any, of the proposed transaction(s) and serious explanations about the reasons and effects when the Company proposes mergers, repurchase of shares, equity restructuring or other restructuring;

(5) in the event that any of the Directors, Supervisors, Manager and other senior management has material interests in matters to be discussed, the nature and extent of the interests shall be disclosed. If the matters to be discussed affect any Director, Supervisor, Manager and other senior management as a Shareholder in a manner different from the manner they affect other Shareholders of the same class, the difference shall be explained;

(6) the full text of any special resolution to be proposed for approval at the meeting;

(7) a prominent statement that all Shareholders are eligible for attending and voting at the general meeting and are entitled to appoint one or more proxies to attend and vote at such meeting on his/her behalf, and that such proxy does not need to be a Shareholders of the Company;

(8) the time and venue for lodging a proxy form for the meeting;

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Except as otherwise stipulated in the Articles of Association, the notice of the general meeting shall be served on the Shareholders (whether or not such Shareholder is entitled to vote at the general meeting) by hand or postage prepaid mail. The address of the recipient shall be the registered address as shown in the register of shareholders. For holders of Domestic Shares, the notice of the general meeting may also be given by way of announcement.

The announcement referred above shall be published in one or more newspapers designated by the Securities Regulatory Authorities of the State Council 15 days or 10 clear business days (whichever is longer) prior to the convening of extraordinary general meetings, 20 clear business days prior to the convening of Shareholders’ annual general meetings. Once such an announcement is made, all holders of the Domestic Shares shall be deemed to have received the relevant notice of the general meeting.

The notice of a shareholders’ general meeting served on the holders of overseas listed foreign shares may be published through the designated website of the Hong Kong Stock Exchange and the website of the Company. Upon the publication of the announcement, all holders of overseas listed foreign shares shall be deemed to have received the notice of the relevant shareholders’ general meeting.

Convening of Shareholders’ General Meeting

Any Shareholder entitled to attend and vote at the general meeting shall have the right to appoint one or more persons (who may not be a Shareholder) to act as his or her proxy(ies) to attend and vote at the meeting on his or her behalf.

The proxy(ies) so appointed by the Shareholder(s) may, pursuant to the instructions of the Shareholder(s), exercise the following rights:

(1) the Shareholder’s right to speak at the general meeting;

(2) the right to demand a poll by himself/herself or jointly with others;

(3) the right to exercise voting rights by a show of hands or by a poll, provided that where more than one proxy is appointed, such proxies may only exercise their voting rights by a poll.

The appointment of a proxy shall be in writing and signed by the appointing Shareholder or his/her attorney duly authorised in writing; where the appointing Shareholder is a legal person, such appointment shall be affixed with its seal or signed by its Director or attorney duly authorised.

The instrument of proxy shall be lodged at the address of the Company or at other places specified in the notice of meeting at least twenty-four (24) hours prior to the relevant meeting at which the proxy is authorized to vote, or within twenty-four (24) hours prior to the specified time of voting. Where the instrument of proxy is signed by a person authorized by the

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Where the appointing shareholder is a legal person, its legal representative or the person authorized by the resolution of its board of directors or other governing bodies may attend the shareholders’ general meetings of the Company as a representative of such appointing shareholder.

Any blank instrument of proxy or proxy form issued to a shareholder by the board of directors of the Company for appointing a proxy shall allow the shareholder to freely instruct the proxy to cast vote for, against or abstain from voting and enable the shareholder to give separate instructions on each matter to be voted at the meeting.

Such instrument of proxy shall contain a statement that in the absence of instructions from the shareholders, his proxy may vote at his discretion.

Where the appointing shareholder has deceased, lost capacity, revocated the appointment or the signed instrument of authorization prior to the voting, or the relevant shares have been transferred prior to the voting, a vote given in accordance with the terms of instrument of proxy shall remain valid as long as the Company did not receive a written notice of such event prior to the commencement of the relevant meeting.

Resolutions of Shareholders’ General Meetings

Resolutions of the general meeting include ordinary resolutions and special resolutions.

Ordinary resolution at a general meeting shall be adopted by more than one half of the voting rights held by Shareholders (including their proxies) attending the general meeting.

Special resolution at a general meeting shall be adopted by more than two-thirds of the voting rights held by Shareholders (including their proxies) attending the general meeting.

Shareholders (including their proxies) who vote at a general meeting shall exercise their voting rights according to the number of voting shares they represent, with one vote for each share. However, the shares held by the company itself do not have voting rights, and such shares are not included in the total number of shares with voting rights attending the general meeting of shareholders.

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The following matters shall be resolved by way of ordinary resolutions at a general meeting:

(1) work reports of the Board and the Supervisory Committee;

(2) profit distribution plan and loss recovery plan formulated by the Board;

(3) elect and replace of Directors and supervisors who are not employee-supervisors, and remuneration and payment methods thereof;

(4) annual financial budget report, final accounts report, balance sheet, income statement and other financial statements of the Company;

(5) annual report of the Company;

(6) resolutions to determine the Company’s appointments, dismissals or discontinuance of appointment of accountancy firms;

(7) other matters which shall be approved by a general meeting other than those requiring approval by special resolutions in accordance with laws, administrative regulations, the listing rules of the stock exchange where the Company’s shares are listed or the Articles of Association;

The following matters shall be resolved by way of special resolutions at a general meeting:

(1) the increase or reduction of the Company’s share capital and the issuance of any class of shares, warrants and other similar securities;

(2) issuance of corporate bonds;

(3) division, merger, dissolution and liquidation of the Company or change in the form of the Company;

(4) amendments to the Articles of Association;

(5) the consideration and approval of matters relating to the Company’s purchases or disposals of material assets (including but not limited to land, building, equipment, production line, equity) or the amount of guarantees within one (1) year, which is more than 30% of the latest total assets as per the audited financial statements of the Company;

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(6) other matters stipulated by laws, administrative regulations, the listing rules of the stock exchange where the Company’s shares are listed or the Company’s Articles of Association, and the general meeting of shareholders adopting ordinary resolutions that are considered to have a significant impact on the Company, requiring approval by special resolutions;

“Within one year” refers to “within one financial year.”

When any shareholders’ general meeting considers matters related to connected transactions, if the applicable laws and regulations or the listing rules of the stock exchange where the Company’s shares are listed require, the related shareholder shall not vote and the number of voting shares that he/she represents shall not be counted as part of the total number of valid votes.

Voting at general meetings shall be conducted by way of poll, only when the chairman of the meeting makes the decision on the principle of good faith, and on purely procedural or administrative matters.

If the chairman of the meeting decides to vote on a show of hands, the general meeting shall vote on a show of hands unless a vote is demanded by the following persons before or after the show of hands:

(1) chairman of the meeting;

(2) at least two voting shareholders or proxies of voting shareholders;

(3) one or more shareholders (including shareholder’s proxies) holding more than 10% (including 10%) of the voting shares at the meeting shall be calculated separately or jointly.

If the chairman of the meeting decides to vote on a show of hands, unless a poll is proposed, the chairman of the meeting shall, on the basis of the result of the show of hands, announce the adoption of the proposal and record it in the minutes of the meeting as the final basis, without proving the number or proportion of votes for or against the resolution passed at the meeting.

The demand for a poll can be withdrawn by the proposer.

If the matter required to be voted by way of a poll relates to election of chairman or adjournment of meeting, a poll shall be conducted immediately; in respect of other matters required to be voted by way of a poll, the chairman may decide the time of a poll, and the meeting may proceed to consider other matters. The voting results shall still be deemed as resolutions passed at the said meeting.

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When voting by a poll, Shareholders (including their proxies) entitled to two or more votes need not to cast all their votes for or against in the same way.

When the number of votes against and in favour are equal, the chairman of the meeting shall be entitled to an additional vote.

Where relevant laws and regulations and the Listing Rules require any shareholder to abstain from voting on any particular resolution or restrict to voting only for or only against any particular resolution, any votes cast by or on behalf of such shareholder in contravention of such requirement or restriction shall not be counted.

SPECIAL PROCEDURES FOR VOTING OF CLASS SHAREHOLDERS

Shareholders holding different classes of shares shall be class Shareholders.

Class Shareholders shall enjoy the rights and assume the obligations in accordance with laws, administrative regulations, the listing rules of the stock exchange where the Company’s shares are listed and the Articles of Association.

The Company shall not proceed to change or abrogate the rights of class Shareholders unless such proposed change or abrogation has been approved by way of a special resolution at a general meeting and by a separate shareholder meeting convened by the class Shareholders so affected in accordance with the Articles of Association.

No approval by a shareholders’ general meeting or a class meeting is required for the variation or abrogation of rights of class Shareholders resulting from any change in domestic and foreign laws and administrative regulations and the listing rules of stock exchange where the Company’s shares are listed, as well as the decisions made by domestic and foreign regulatory institutions.

With the approval of the securities regulatory authority under the State Council and with the consent of the Hong Kong Stock Exchange, the conversion of all or part of the domestic investment shares into overseas listed foreign investment shares for listing and trading on overseas stock exchange(s) by domestic shareholders of the Company shall not be deemed as the Company’s intention to vary or abrogate the rights of class shareholders.

The following circumstances shall be deemed as change or abrogation of the rights of a certain class shareholder:

(1) to increase or decrease the number of shares of such class, or to increase or decrease the number of shares of a class’ voting rights, distribution rights or other privileges equal or superior to those of the shares of such class;

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(2) to change all or part of the shares of such class into shares of another class or to change all or part of the shares of another class into shares of that class or to grant relevant conversion rights;

(3) to cancel or reduce rights to accrued dividends or cumulative dividends attached to shares of the said class;

(4) to reduce or cancel rights attached to the shares of the said class to preferentially receive dividends or to receive distributions of assets in a liquidation of the Company;

(5) to add, cancel or reduce share conversion rights, options, voting rights, transfer rights, pre-emptive placing rights, or rights to acquire securities of the Company attached to the shares of the said class;

(6) to cancel or reduce rights to receive Company payables in a particular currency attached to the shares of the said class;

(7) to create a new class of shares with voting rights, distribution rights or other privileges equal or superior to those of the shares of the said class;

(8) to restrict the transfer or ownership of the shares of the said class or to impose additional restrictions;

(9) to issue rights to subscribe for, or to convert into, shares of the said class or another class;

(10) to increase the rights and privileges of the shares of another class;

(11) to restructure the Company in such a way to cause Shareholders of different classes to undertake liabilities disproportionately during the restructuring;

(12) to amend or cancel provisions in this chapter.

Shareholders of the affected class, whether or not with the rights to vote at general meetings originally, shall have the right to vote at shareholders’ class meetings in respect of matters referred to in the aforementioned items (2) to (8) and (11) to (12) above, except that interested shareholders shall not vote at such shareholders’ class meetings.

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The term interested shareholders in the preceding paragraph shall mean:

(1) in case of a buy-back of shares by the Company by way of a general offer to all Shareholders in equal proportion or by way of open market transactions on a stock exchange where our shares are listed in accordance with the Articles of Association, the controlling shareholders as defined in the Articles of Association shall be the “interested shareholders”;

(2) in case of a buy-back of shares by the Company by an agreement outside the stock exchange where our shares are listed in accordance with Articles of Association, holders of shares in relation to such agreement shall be the “interested shareholders”;

(3) in case of a proposed restructuring of the Company, Shareholders who assume a relatively lower proportion of obligation than the obligations imposed on the other Shareholders of that class or who have an interest in the proposed restructuring that is different from the general interests in such proposed restructuring of the other Shareholders of that class shall be the “interested shareholders.”

Resolution of a shareholders’ class meeting shall be passed only by two-thirds or more of the total voting rights being held by the Shareholders of that class, who are entitled to do so, present and vote at the shareholders’ class meeting in accordance with the Articles of Association.

When the Company is to convene a shareholders’ class meeting, it shall issue a written notice in accordance with the provisions on convening an extraordinary general meeting under the Articles of Association informing all the shareholders who are registered as holders of that class in the register of shareholders of the matters to be considered at the meeting as well as the date and place of the meeting.

In the event that the number of the voting shares represented by the shareholders intending to attend the meeting is more than one half of the total number of voting shares of that class, the Company may convene a shareholders’ class meeting. Otherwise, the Company shall within five (5) days notify the shareholders once again, by way of public announcement, of the matters to be considered at the meeting and the date and place of the meeting. Upon notification by public announcement, the Company may then proceed to convene the shareholders’ class meeting.

If any special provisions otherwise provided by the listing rules of the stock exchange in the place where the Company’s shares are listed, these provisions shall apply.

The notice of a shareholders’ class meeting shall be sent to the Shareholders entitled to vote at such meeting only.

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The procedure of a shareholders’ class meeting shall, to the extent possible, be identical with the procedure of a general meeting. Provisions of the Articles of Association relevant to procedure for the holding of a general meeting shall be applicable to a shareholders’ class meeting, unless otherwise stipulated in the Articles of Association.

Except for other classes of Shareholders, domestic shareholders and foreign shareholders of listed shares are treated as different classes of shareholders.

In the following circumstances, the special procedures for voting by class shareholders shall not apply:

(1) with the approval by a special resolution at the general meeting, the Company issues Domestic Shares or overseas listed foreign shares alone or at the same time at each interval of 12 months and the number of the proposed Domestic Shares and overseas listed foreign shares does not exceed 20% of the respective outstanding shares of such class.

(2) the Company has made the plans to issue Domestic Shares or overseas listed foreign shares at the time of incorporation and the implementation of such plan has been completed within 15 months from the date of approval by the securities regulatory authorities of the State Council.

(3) the shareholders of Domestic shares of the Company transfer their shares to overseas investors or such shareholders are approved to convert all or part of the domestic shares into foreign shares listed overseas under the approval by the securities regulatory authority of the State Council and Hong Kong Stock Exchange, and list and trade the said shares on overseas stock exchanges.

DIRECTORS AND BOARD OF DIRECTORS

Directors

The Company shall set aside a period of time before the relevant meeting is held on the nomination of candidates by shareholders to be Directors. Within such period, shareholders may give written notice to the Company on the nomination of candidates to be Directors, and the candidates may give written notice to the Company on their willingness to accept the nomination. The said period shall be at least seven (7) days, and the starting date shall not be earlier than the first date of the notice of the relevant meeting and the deadline for such period shall be no later than seven (7) days before the date of the relevant meeting.

Directors shall be elected and replaced at the general meeting and serve a term of three (3) years for each session. A director may serve consecutive terms if re-elected upon the expiry of his/her term.

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The term of office of the Directors shall be counted from the date of appointment until the expiration of the term of the current Board of Directors. When the Directors’ term expires and re-election is not held in time, or where the resignation of a director during his term of office causes the number of board members to be less than the quorum, the original Directors shall still perform their duties as Directors in accordance with laws, administrative regulations, departmental rules, the listing rules of the stock exchange where the Company’s shares are listed and the Company’s Articles of Association before the re-elected Directors take office.

Before the expiration of any Director’s term of office, subject to the relevant laws and administrative regulations, the general meeting of shareholders may remove such Director by ordinary resolution. The removal may not affect any claim of the Director for damages that may be made pursuant to any contract.

The Directors need not hold any of our shares.

Board of Directors

The Company shall have a board of directors which shall be accountable and report to the general meeting. The board of directors shall consist of eight directors, including two executive directors, three non-executive directors and three independent non-executive directors. The board of directors shall have a chairman. The chairman of the board shall be elected and removed by more than half of all directors, with a term of office of three years and may be re-elected.

The Board of Directors shall be accountable to the general meeting and exercise the following powers and duties:

(1) to convene a general meeting and submit a work report to such meeting;

(2) to implement the resolutions of a general meeting;

(3) to decide on the operation plan and investment scheme of the Company;

(4) to prepare the draft annual budget and final accounts of the Company;

(5) to prepare the profit distribution plan and loss recovery plan of the Company;

(6) to prepare the plan for the Company to increase or reduce its registered capital, the plan for issuance of shares, issuance of bonds or other securities and listing plans;

(7) to prepare plans for the material asset acquisition or disposal, repurchase of shares of the Company or the merger, divisions, dissolution and changes of the form of the Company;

(8) to decide on the establishment of the internal management organisations of the Company;

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(9) to appoint or dismiss the general manager of the Company, the secretary to the Board and the company secretary; to appoint or dismiss the senior management including the deputy general managers and the chief financial officer of the Company in accordance with the nominations made by general manager, and to decide on their remunerations;

(10) to establish a basic management system of the Company;

(11) to prepare plans to amend the Articles of Association;

(12) to authorize the chairman of the Board of Directors to exercise part of the functions and powers of the Board of Directors;

(13) to formulate the Company’s equity incentive plan;

(14) to propose the amount of Directors’ remuneration and the scheme of payment method, and report to the general meeting for decision;

(15) to manage the information disclosure of the Company;

(16) to make the proposal of engaging or replacing an accounting firm conducting auditing for the Company to the general meeting;

(17) to listen to the work reports of the general manager and other senior management members of the Company and review their work;

(18) to decide on investment, acquisition or sale of assets, financing, connected transactions, etc. as specified in the Listing Rules of the Hong Kong Stock Exchange;

(19) to decide on such major matters and administrative affairs other than those ought to be decided by the general meeting as specified in the laws, administrative regulations, rules and regulations of the competent authorities and these Articles of Association and enter into other important agreements;

(20) to exercise other powers and duties conferred by relevant laws, administrative regulations, departmental regulations, the listing rules of the stock exchange where the shares of the Company are listed, or the Articles of Association.

The board meeting can be held only when there are more than one half of the Directors attending the meeting.

Resolutions relating to the above, with the exception of items (6), (7) and (11) which shall be approved by not less than two-thirds of the Directors, shall be approved by not less than half of the Directors.

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When the number of votes against and in favour are equal, the chairman of the Board of Directors shall be entitled to an additional vote.

Should the foregoing exercise of such functions and powers by the Board, or any transaction or arrangement of the Company be considered and reviewed by a general meeting according to the listing rules of the stock exchange(s) where the Company’s shares are listed, such shall be submitted to the general meeting for consideration and review.

When the Board of Directors disposes of fixed assets, if the sum of the expected value of the fixed assets to be disposed of, and the amount or value received from the fixed assets of the Company disposed of within the four months immediately preceding this suggestion for disposal exceeds 33% of the value of fixed assets of the Company indicated on the latest balance sheet in the audited financial statements submitted at the general meeting, the Board of Directors shall not dispose of or agree to dispose of the fixed assets without any approval from the general meeting. A disposition of fixed assets includes certain acts of transfer of interests in assets but does not include the provision of fixed assets as security.

The validity of the transactions with respect to the disposal of fixed assets of the Company shall not be affected by the violation of the above restrictions contained in the Articles of Association.

SECRETARY TO THE BOARD

The Company has one secretary to the Board, which is appointed or dismissed by the Board of Directors. The secretary to the Board is considered as the senior management of the Company.

Directors or other senior management officers may concurrently act as the secretary to the Board. The accountant of the accounting firm engaged by the Company or the management personnel of controlling shareholders shall not concurrently serve as the secretary to the Board of the Company.

Where the secretary to the Board concurrently acts as a director, for an act which is required to be made by a director and the secretary to the Board separately, the person who concurrently acts as a director and the secretary to the Board may not perform the act in dual capacity.

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GENERAL MANAGER

The Company has one general manager, which is appointed or removed by the Board of Directors. The Company has a number of deputy general managers, who are appointed or dismissed by the Board of Directors.

The general manager of the Company is accountable to the Board of Directors and shall exercise the following powers and duties:

(1) being in charge of managing the Company’s production and operation, organising the implementation of resolutions of the Board of Directors and reporting work to the Board of Directors;

(2) organising the implementation of annual operating plans and investment programmes of the Company;

(3) preparing the annual financial budget and final accounts of the Company and making recommendations to the Board of Directors;

(4) making inner management organisation establishment plan;

(5) making basic management system;

(6) formulating detailed rules of the Company;

(7) recommending to the Board of Directors for appointment or removal of the deputy general managers and chief financial officer;

(8) deciding to appoint or remove officers of the Company other than those to be appointed or removed by the Board of Directors;

(9) drafting employee’s wages, benefits, rewards and punishment and deciding to appoint or remove the employees;

(10) other powers and duties prescribed by the Articles of Association and delegated by the Board of Directors;

SUPERVISORY COMMITTEE

The Company shall establish a Supervisory Committee.

The Supervisory Committee consists of three members. The Supervisory Committee shall have a chairman. The term of office of a Supervisor is three years. Upon expiration of the term of office, the Supervisors can be re-elected and re-appointed.

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The Supervisory Committee’s chairman shall be appointed or dismissed by the votes of two thirds (inclusive) or more of the members of the Supervisory Committee. The Supervisors shall be the representatives of shareholders and employees of the Company.

The ratio of the employee representative Supervisor(s) shall be no less than one-third of the total number of members. The shareholder representative Supervisor(s) of the Supervisory Committee shall be elected and dismissed at the shareholders’ general meeting. The employee representative Supervisor(s) shall be elected by the representative staff and workers congress, the staff and workers congress or other forms of democratic election.

The Supervisory Committee shall be accountable to the general meeting, and exercise the following duties and powers according to the laws:

(1) to review the financial position of the Company;

(2) to supervise the performance of Directors and senior management members in fulfilling their duties to the Company, and propose dismissal of Directors and senior management members that have violated laws, administrative regulations, the listing rules of the stock exchange where the Company’s shares are listed, the Articles of Association or resolutions of the general meeting;

(3) to demand rectification by Directors and senior management members of the Company when the acts of such persons are prejudicial to the Company’s interest;

(4) to review financial information such as financial reports, business reports, and profit distribution plans as proposed by the Board to the general meetings, and to engage certified public accountants and practising auditors to assist with further examination in the name of the Company if there are any queries;

(5) to propose the convening of an extraordinary general meeting, to convene and preside over shareholders’ general meetings when the Board of Directors does not perform its duties to convene and preside over shareholders’ general meetings as required by the Company Law;

(6) to make proposals to the shareholders’ general meeting;

(7) to negotiate with Directors on behalf of the Company or initiate litigations against Directors;

(8) to conduct investigation in case of any abnormality found in the operation of the Company; and if necessary, to retain at the expense of the Company agencies such as certified accounting firm and law firm to assist its work;

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(9) to take proceedings against Directors and senior management in accordance with the provisions of the Company Law;

(10) other duties and powers conferred by laws, administrative regulations and the Articles of Association.

Supervisors may present at meetings of the Board of Directors.

Resolution of the Supervisory Committee shall require approval from more than two-thirds (inclusive) of the Supervisors.

BORROWING POWER

The Company shall not, directly or indirectly, provide loans to or loan guarantees for directors, supervisors and senior managers of the Company or its controlling shareholders, or the related parties thereof.

The preceding paragraph does not apply to the following circumstances:

(1) where the Company provides loans to its subsidiaries or provides loan guarantees for its subsidiaries;

(2) where the Company, in accordance with the contracts of appointment as approved by the general meeting of shareholders, provides loans to, loan guarantees for or other funds for directors, supervisors and senior management, for payments made on behalf of the Company or for payments or expenses incurred in the performance of their duties; and

(3) where the scope of the Company’s normal business operations includes provision of loans and loan guarantees, the Company may provide loans to and loan guarantees for its directors, supervisors and senior management and their related parties; however, such provision of loans or loan guarantees shall be under normal business conditions.

FINANCE AND ACCOUNTING SYSTEM

The Company shall establish its financial and accounting system in accordance with relevant laws and administrative regulations and PRC accounting standards formulated by the state competent financial authorities.

The Company shall prepare financial statements at the end of each financial year, and such financial statements shall be audited in compliance with laws.

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Any financial statements shall be prepared in accordance with the PRC accounting standards and regulations, and also in accordance with either international accounting standards or those of the place outside the PRC where the Company’s shares are listed. If there are significant discrepancies in the above two standards financial statements, the notes shall be added in the financial report. As to the distribution of after-tax profits of the Company in a financial year, the after-tax profits indicated on the two financial statements, whichever is lower shall prevail.

The interim results or financial information published or disclosed by the Company shall be prepared in accordance with the PRC accounting standards and regulations as well as either international accounting standards or those of the place outside the PRC where the Company’s shares are listed.

The financial report of the Company shall be kept at the Company and shall be made available to the Shareholders twenty (20) days before the annual general meeting is held. Each Shareholder shall have the right to obtain the financial report mentioned in this chapter.

Except as otherwise provided in the Articles of Association, the Company shall deliver the report of the Board, together with the balance sheet (including each document required to be attached thereto in accordance with the laws of the PRC or others), profit and loss account or income and expenditure statement, or (under condition of not violating PRC laws) the summary of financial reports approved by the Hong Kong Stock Exchange to each holder of overseas-listed foreign shares at least 21 days before the annual general meeting by postage-paid mail, at the recipient’s address as registered in the shareholders register.

The Company shall also publish the same by a way of announcements (including through posting at the Company website and/or newspapers) permitted by the laws, administrative regulations, departmental rules, normative documents and the listing rules of the stock exchange where the Company’s shares are listed.

The Company shall publish two financial reports in each financial year: the interim financial report shall be published within sixty (60) days after the end of the first six months of a financial year; the annual financial report shall be published within one hundred and twenty (120) days after the end of the financial year.

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PROFIT DISTRIBUTION

The Company may distribute dividends in one of the following forms (or in more than two forms simultaneously):

(1) Cash;

(2) Shares;

(3) other methods permitted by laws, administrative regulations, departmental rules and the regulatory rules of the place(s) of listing.

DISSOLUTION AND LIQUIDATION OF THE COMPANY

The Company shall be dissolved and liquidated according to laws in any of the following circumstances:

(1) the term of business of the Company stipulated in the Articles of Association has expired or any other trigger for dissolution stipulated in the Articles of Association occurred;

(2) the resolution of general meeting has resolved to dissolve the Company;

(3) merger or division of the Company requires a dissolution;

(4) if the Company gets into serious trouble in operations and management and continuation may incur material losses to the interests of the Shareholders, and no solution can be found through any other means, the Shareholders holding 10% or more of the total voting rights of the Company may request the People’s Court to dissolve the Company;

(5) the Company is declared bankrupt because it is unable to pay its debts as they fall due;

(6) the business licence is revoked in accordance with the laws or the Company is ordered to close or cancelled.

Where the Company is dissolved under the circumstances set out in items (1), (2), (4) and (6) above, the Company shall establish a liquidation committee to start liquidation within 15 days from the date when the cause of dissolution occurred. The composition of the liquidation committee shall be determined by the directors or the general meeting. If a liquidation committee fails to be established within the limited time for liquidation, the creditor may apply to the People’s Court for appointing relevant personnel to form a liquidation committee for liquidation.

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In the event that the Company is dissolved in accordance with the provisions set forth in item (5) above, the People’s Court shall organise the shareholders, related authorities and professional to form the liquidation committee for liquidation pursuant to relevant provisions of the law.

Where the Board resolves to liquidate the Company for any reason other than bankruptcy, the Board shall include a statement in its notice convening a general meeting to the effect that, after making full inquiry into the affairs of the Company, the Board is of the opinion that the Company shall be able to pay its debts in full within twelve months from the commencement of the liquidation.

The Board shall lose its powers immediately after the resolution for liquidation is passed at the general meeting.

The liquidation committee shall act in accordance with instructions of the general meeting and make a report at least once every year to the general meeting on the committee’s income and expenses, the business of the Company and the progress of the liquidation; and present a final report to the general meeting upon completion of the liquidation.

The liquidation committee shall notify all creditors within ten (10) days after its establishment and shall publish announcements in newspapers within sixty (60) days. Upon liquidation for the purpose of dissolution, after the liquidation committee has sorted out the assets of the Company and prepared a balance sheet and a property inventory, if it discovers that the Company’s assets are insufficient to repay its debts in full, it shall immediately apply to the People’s Court to declare the Company bankrupt.

Following a ruling by the People’s Court that the Company is declared bankrupt, the liquidation committee shall hand over all matters relating to the liquidation to the People’s Court.

After completion of liquidation of the Company, the liquidation committee shall prepare a liquidation report, a statement of revenue and expenditure and financial account books in respect of the liquidation period and, after verification thereof by an accountant registered in China, submit the same to the general meeting or relevant competent authorities for confirmation. Within thirty (30) days from the date of confirmation of the aforementioned documents by the general meeting or relevant competent authorities, the liquidation committee shall deliver the same to the Company registration authority, apply for cancellation of the Company’s registration and publicly announce the Company’s dissolution.

AMENDMENTS TO THE ARTICLES OF ASSOCIATION

The Company may amend the Articles of Association pursuant to laws, administrative regulations, the listing rules of the stock exchange where the Company’s shares are listed and the Articles of Association. Amendments to the Articles of Association shall not be inconsistent with the provisions of laws, administrative regulations and the relevant regulations of the securities regulatory authorities where the Company’s shares are listed.

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The amendment to the Articles of Association shall be subject to relevant decision- making procedures and go through necessary formalities in accordance with the provisions of relevant laws, administrative regulations and the Articles of Association. If an amendment to these Articles of Association involves a registered particular of the Company, registration of the change shall be carried out in accordance with the law.

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A. FURTHER INFORMATION ABOUT OUR GROUP

1. Incorporation

Our Company was established under the name of Evercare (Beijing) Investment Management Co., Ltd. (伊美爾(北京)投資管理有限公司) in the PRC as a limited liability company on February 20, 2008, was renamed as Evercare (Beijing) Aesthetic Enterprise Management Consulting Co., Ltd. (伊美爾(北京)美容企業管理諮詢有限公司) on October 10, 2008, was further renamed as Evercare (Beijing) Holding Group Limited Corporation (伊美爾 (北京)控股集團有限公司) on January 19, 2010. On April 22, 2016, our Company was converted into a joint stock limited company under the laws of the PRC with a registered share capital of RMB128,627,250 and was renamed as Evercare (Beijing) Holding Group Co., Ltd. (伊美爾(北京)控股集團股份公司). On September 28, 2018, our Company was further renamed as Beijing Evercare Medical Technology Group Co., Ltd. (北京伊美爾醫療科技集團股份公司). Our registered office is situated as Room 808, 8th Floor, Block A, No. 3 Dongsanhuan North Road, Chaoyang District, Beijing, the PRC. Our Company has established a principal place of business in Hong Kong at 40/F, Dah Sing Financial Centre, No. 248 Queen’s Road East, Wanchai, Hong Kong, and has been registered with the Registrar of Companies in Hong Kong as a non-Hong Kong company under Part 16 of the Companies Ordinance on July 19, 2021.

Ms. Ko Mei Ying has been appointed as the authorized representative of our Company for acceptance of service of process and notices required to be served on the Company in Hong Kong. The address for acceptance of service of process and notices is the same as its principal place of business in Hong Kong.

As our Company was established in the PRC, our operations are subject to the relevant laws and regulations of the PRC. A summary of the relevant aspects of PRC laws and principal regulatory provisions is set out in Appendix IV to this document. A summary of the Articles of Association is set out in Appendix V to this document.

2. Changes in the Share Capital of our Company

As of the date of its establishment, the initial registered capital of our Company was RMB30,000,000. As at the even date, our Company was owned by Beijing Zhonghengjian and Mr. Wang as to 96% and 4%, respectively.

On April 22, 2016, our Company was converted into a joint stock limited company under the laws of the RPC with a registered capital of RMB128,627,250, comprising 128,627,250 Domestic Shares with a nominal value of RMB1.00 each, which was subscribed by all the then existing shareholders.

On June 13, 2021, our then shareholders resolved to increase the registered capital of our Company by issuing 6,222,441 new Domestic Shares at a subscription price of US$4.02 per share to three institutional investors at an aggregate consideration of US$25,000,000. Upon completion of the capital increase, our registered capital increased from RMB128,627,250 to

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RMB134,849,691, divided into 101,187,522 Domestic Shares and 33,662,169 Unlisted Foreign Shares with a nominal value of RMB1.00 each. The registration of such increase of registered capital with the local branch of State Administration for Market Regulation was completed on June 16, 2021.

[REDACTED]

Save as disclosed above, there has been no alteration in the share capital of the Company within two years immediately preceding the date of this document.

[REDACTED]

3. Resolutions Passed at our Shareholders’ General Meeting in Relation to the [REDACTED]

At the annual general meeting of the Shareholders held on July 12, 2021, it was resolved that, among others:

(1) the issuance by our Company of the H Shares with a nominal value of RMB[REDACTED] each and such H Shares be [REDACTED] on the Hong Kong Stock Exchange;

(2) the number of H Shares to be issued before the exercise of the [REDACTED] shall be no more than [REDACTED]% of the total issued share capital of our Company as enlarged by the [REDACTED], and the grant of the [REDACTED] of not more than [REDACTED]% of the number of H Shares issued pursuant to the [REDACTED];

(3) subject to the CSRC’s approval, upon completing of the [REDACTED], [REDACTED] and [REDACTED] held by [REDACTED] will be [REDACTED] into H shares on a [REDACTED] basis;

(4) subject to the completion of the [REDACTED], the conditional adoption of the revised Articles of Association, which shall become effective on the [REDACTED];

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(5) approving the Board and its authorized representatives to handle all matters relating to, among other thing, the [REDACTED] and the proposed [REDACTED]ofH Shares on the Main Board of the Stock Exchange; and

(6) the validity period of all relevant resolutions passed at this annual general meeting of our Company in relation to the [REDACTED] and the proposed [REDACTED] of H Shares on the Main Board of the Stock Exchange shall be 24 months from the date of approval and adoption of all such relevant resolutions.

4. Changes in the share capital of our subsidiaries

Details of our principal subsidiaries are set out in Note 13 to the Accountants’ Report in Appendix I to this document.

Save as disclosed in “History and Corporate Structure” and below, there has been no alteration in the share capital or the registered capital (as the case may be) of any of our subsidiaries have taken place within the two years immediately preceding the date of this document.

On July 17, 2020, the registered share capital of Douyiwang was increased from RMB3.0 million to RMB5.0 million with the additional capital contribution of RMB2.0 million made by our Company, Dental Bean (牙豆株式會社) and PARK JUNG HYUK (樸正赫).

5. Restriction of share repurchase

For details of the restrictions on the share repurchase by our Company, please refer to “Summary of Articles of Association” in Appendix V to this document.

B. FURTHER INFORMATION ABOUT OUR BUSINESS

1. Summary of Material Contracts

The following contract (not being contracts entered into in the ordinary course of business) have been entered into by members of our Group within the two years preceding the date of this document and are or may be material:

(1) [REDACTED].

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2. Intellectual Property Rights of our Group

Trademarks

(1) Trademarks for which registration has been granted

As of the Latest Practicable Date, we were the registered owner of and had the right to use the following trademarks which we consider to be or may be material to our business:

Place of Registration Registered Registration No. Trademark Registration Number Owner Class Date Expiry Date

1. PRC 26695977 our Company 44 December 7, December 6, 2018 2028 2. PRC 13593921 our Company 44 March 7, 2015 March 6, 2025

3. PRC 3078098 our Company 3 May 7, 2005 May 6, 2023

4. PRC 4724595 our Company 3 November 14, November 13, 2008 2028 5. PRC 5303838 our Company 10 April 21, 2009 April 20, 2029

6. PRC 47589776 our Company 3 May 28, 2021 May 27, 2031

(2) Trademarks for which registration has been applied

As of the Latest Practicable Date, we have applied for registration of the following material trademarks:

Place of Application Application No. Trademark Application Applicant Class Number Date

1. PRC our Company 44 52018857 December 9, 2020 2. PRC our Company 44 51829022 December 3, 2020 3. PRC our Company 44 56487122 May 31, 2021

4. PRC our Company 3 52794467 January 7, 2021 5. Hong Kong our Company 3, 5, 10, 305583187 April 1, 2021 16, 35, 44 6. Hong Kong our Company 3, 16 305583196 April 1, 2021

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Patents

As of the Latest Practicable Date, we have registered the following material patents:

Registration Registered No. Title of Patent Patent Type Number Owner Filing Date Expiry Date

1. 一種鼻錘拉鈎 Utility model ZL201220170878.6 Jinan April 20, April 20, Evercare 2012 2022 2. 瞼板縫合定位器 Utility model ZL201220338255.5 Jinan July 13, July 13, Evercare 2012 2022

Copyrights

As of the Latest Practicable Date, we have registered the following copyrights which are material to our Group’s business:

Registered Registration Place of Registration No. Copyright Owner Number Registration Date Expiry Date

1. our Company 國作登字-2020-F- PRC November 19, December 31, 011497725 2020 2070 2. our Company 國作登字2021-F- PRC June 10, 2021 December 31, 00129520 2071

Domain names

As of the Latest Practicable Date, we have registered the following domain names which are material to our business:

Date of No. Domain Name Registrant Registration Expiry Date

1. evercare.com.cn our Company January 12, January 12, 2004 2024 2. evercarecn.com our Company March 8, 2015 March 8, 2022

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C. FURTHER INFORMATION ABOUT OUR DIRECTORS, SUPERVISORS AND SUBSTANTIAL SHAREHOLDERS

1. Disclosure of interests

(1) Interests and short positions of the Directors, Supervisors and chief executive of our Company in the Shares, underlying shares or debentures of our Company and its associated corporation

Immediately following the completion of the [REDACTED] and assuming the [REDACTED] is not exercised, the beneficial interests or short positions of our Directors, Supervisors and the chief executive in any shares, underlying shares and debentures of our Company or any of its associated corporations (within the meaning of Part XV of the SFO), which once the H Shares are [REDACTED], will be required (a) to be notified to our Company and the Hong Kong Stock Exchange pursuant to Division 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (b) pursuant to section 352 of Part XV of the SFO, to be entered in the register required to be kept therein once the H Shares are [REDACTED]; or (c) pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules, once the H Shares are [REDACTED] are as follows:

Interests in the Shares of our Company

Approximate Approximate percentage of percentage of interest in the interest in the relevant class of total share capital Number of Shares Shares of our Company held immediately immediately immediately Class of following the following the following the Director/Supervisor Nature of interest Shares [REDACTED] [REDACTED](1) [REDACTED](1)

Mr. Wang(2)(3) Beneficial interest [REDACTED][REDACTED][REDACTED]% [REDACTED]% Interest in controlled corporations Interest of concert parties Beneficial interest [REDACTED][REDACTED][REDACTED]% [REDACTED]%

Ms. Wang Zheng(4) Beneficial interest [REDACTED][REDACTED][REDACTED]% [REDACTED]%

Ms. Lu Zhan(5) Interest in a controlled [REDACTED][REDACTED][REDACTED]% [REDACTED]% corporation

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Notes:

(1) The calculation is based on the total number of [REDACTED] and [REDACTED] in issue immediately following the completion of the [REDACTED] (assuming the [REDACTED] is not exercised) and the [REDACTED].

(3) Pursuant to the concert party agreement, Mr. Wang and Mr. Wang Muyuan have confirmed that they are acting in concert in respect of their equity interests in our Company. Therefore, Mr. Wang was deemed to be interested in the Shares held by Mr. Wang Muyuan. For details, see “History and Corporate Structure – Our Corporate Development – Concert Party Agreement.”

(4) Ms. Wang Zheng is a limited partner of Meirui Miaolan holding 32.83% partnership interest, and is deemed to be interested in [REDACTED] Shares held by Meirui Miaolan.

(5) Ms. Lu Zhan is the general partner of Meirui Miaolan and therefore, Ms. Lu Zhan is deemed to be interested in the Shares held by Meirui Miaolan.

(2) Interests and short positions of substantial shareholders

Save as disclosed in “Substantial Shareholders” of this document, our Directors are not aware of any other person who will, immediately following the [REDACTED], have an interest or short position in the Shares or underlying shares which are required to be disclosed to our Company and the Hong Kong Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, directly or indirectly, be interested in 10% or more of the nominal value of any class of share capital carrying the rights to vote in all circumstances at the general meetings of our Company.

Interests of substantial shareholders in members of our Group (excluding our Company)

Approximate percentage of Registered Parties with 10% or more shareholding in Our subsidiary capital equity interest our subsidiary

Beijing Zizhu RMB2,000,000 Mr. Ouyang Zishi (歐陽子石) 10% Hospital Douyiwang RMB5,000,000 Dental Bean Co., Ltd 40% (牙豆株式會社) PARK JUNG HYUK (樸正赫) 10% Evercare Anjian RMB33,000,000 Ms. Wang Xiuzhi (王秀芝) 49%

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2. Particulars of service contracts

Each of our Directors [has entered] into a service contract with our Company. The principal particulars of these service contracts are (a) for a term of three years commencing from the date on which the relevant Shareholders’ approvals for the appointment were obtained and (b) are subject to termination in accordance with their respective terms. The service contracts may be renewed in accordance with our Articles of Association and the applicable laws, rules and regulations.

Each of the Supervisors [has entered] into a service contract with our Company, in respect of, among others, compliance with relevant laws and regulations, observations of the Articles of Association and provision on arbitration.

Save as disclosed above, none of our Directors or Supervisors has or is proposed to have a service contract with any member of the Group (other than contracts/letters expiring or determinable by the employer within one year without the payment of compensation (other than statutory compensation)).

3. Compensation of Directors and Supervisors

Save as disclosed in the sections headed “Directors, Supervisors and Senior Management” and Note 8 to the Accountants’ Report as set out in Appendix I to this document, no Director or Supervisor received other remuneration or benefits in kind from our Company in respect of each of the three financial years ended December 31, 2018, 2019 and 2020 and the three months ended March 31, 2021.

4. Disclaimers

Save as disclosed in this document:

(1) none of our Directors, Supervisors or the chief executive of our Company has any interest or short position in the Shares, underlying shares or debentures of our Company or any of its associated corporation (within the meaning of the Part XV of the SFO) which will have to be notified to our Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO or which will be required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or which will be required to be notified to our Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies once the H Shares are [REDACTED] on the Stock Exchange;

(2) none of our Directors, Supervisors or experts referred to under “– D. Other Information – 9. Qualification of Experts” in this appendix has any direct or indirect interest in the promotion of our Company, or in any assets which have within the two

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years immediately preceding the date of this document been acquired or disposed of by or leased to any member of our Group, or are proposed to be acquired or disposed of by or leased to any member of our Group;

(3) none of our Directors or Supervisors is materially interested in any contract or arrangement subsisting at the date of this document which is significant in relation to the business of our Group;

(4) taking no account of Shares which may be taken up under the [REDACTED], none of our Directors or chief executive is aware of any person (not being a Director or chief executive of our Company) who will, immediately following completion of the [REDACTED], have an interest or short position in the Shares or underlying shares of our Company which would fall to be disclosed to our Company under the provisions of Divisions 2 and 3 of Part XV of SFO or be interested, directly or indirectly, in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of our Group; and

(5) so far as is known to our Directors, none of our Directors, Supervisors, their respective close associates (as defined under the Listing Rules) or our Shareholders who are interested in more than 5% of the issued share capital of our Company has any interest in the five largest customers or the five largest suppliers of our Group.

D. OTHER INFORMATION

1. Estate Duty

Our Directors have been advised that no material liability for estate duty is likely to fall on our Company or any of our subsidiaries.

2. Litigation

During the Track Record Period and up to the Latest Practicable Date, saved as disclosed in this document and so far as our Directors are aware, we were not engaged in any litigation, arbitration or claim of material importance and no litigation, arbitration or claim of material importance was known to our Directors to be pending or threatened by or against us, that would have a material adverse effect on our results of operations or financial conditions, taken as a whole.

3. Sole Sponsor

The Sole Sponsor has declared its independence pursuant to Rule 3A.07 of the Listing Rules. The Sole Sponsor’s fee in relation to the [REDACTED] is US$1 million.

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4. Compliance Adviser

We appointed Haitong International Capital Limited as our compliance adviser effective upon the [REDACTED] in compliance with Rules 3A.19 and 19A.05 of the Listing Rules.

5. Application for [REDACTED]

The Sole Sponsor has made an application on our behalf to the Listing Committee of the Stock Exchange for the [REDACTED] of, and permission to deal in, our H Shares. All necessary arrangements have been made to enable the H Shares to be admitted into [REDACTED].

6. Preliminary Expenses

We have not incurred any material preliminary expenses.

7. Promoter

The promoters of our Company are Mr. Wang, Anjian Hengyuan, Huamei Fude, Meirui Shilan, Zhuhai Yuehe, Mengmei Fude, Huatai Ruihe, Mr. Wang Muyuan and Shanghai Runwofeng. Save as disclosed in this document, within the two years immediately preceding the date of this document, no cash, securities or other benefit has been paid, allotted or given nor are any proposed to be paid, allotted or given to any promoter in connection with the [REDACTED] and the related transactions described in this document.

8. Taxation of holders of H Shares

(1) Hong Kong

The sale, purchase and transfer of H Shares are subject to Hong Kong stamp duty. The current rate charged on each of the seller and purchaser is HK$1.30 for every HK$1,000 (or part thereof) of the consideration or, if higher, the fair value of the H Shares being sold or transferred. For further information in relation to taxation, see “Taxation and Foreign Exchange – Overview of Tax Implications of Hong Kong” in Appendix III to this document.

(2) Consultation with professional advisers

Potential investors in the [REDACTED] are urged to consult their professional tax advisors if they are in any doubt as to the taxation implications of subscribing for, purchasing, holding or disposing of or dealing in our Shares (or exercising rights attached to them). None of us, the Sole Sponsor, the [REDACTED], the [REDACTED]orany other person or party involved in the [REDACTED] accept responsibility for any tax effects on, or liabilities of, any person, resulting from the subscription, purchase, holding or disposal of, dealing in or the exercise of any rights in relation to our Shares.

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9. Qualification of Experts

The following are the qualifications of the experts who have given opinion or advice which are contained in this document:

Name Qualifications

Haitong International Capital Limited Licensed corporation to conduct Type 6 (advising on corporate finance) regulated activity under the SFO

Tian Yuan Law Firm PRC legal advisors

KPMG Certified Public Accountants Public Interest Entity Auditor registered in accordance with the Financial Reporting Council Ordinance

Frost & Sullivan (Beijing) Inc., Shanghai Industry consultant Branch Co.

10. Consent of Experts

Each of Haitong International Capital Limited, Tian Yuan Law Firm, KPMG, and Frost & Sullivan (Beijing) Inc., Shanghai Branch Co. has given and has not withdrawn its written consent to the issue of this document with the inclusion of its report and/or letter and/or certificates and/or legal opinion (as the case may be), which is made as of the date of this document, and references to its name included herein in the form and context in which it respectively appears.

None of the experts named above has any shareholding interests in our Company or any of our subsidiaries or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in our Company or any of our subsidiaries.

11. Personal guarantees

Save as disclosed herein, as of the Latest Practicable Date, our Directors and Supervisors had not provided personal guarantees in favor of lenders in connection with banking facilities granted to us.

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12. Bilingual Document

The English language and Chinese language versions of this document are being published separately, in reliance upon the exemption provided under Section 4 of the Companies (Exemption of Companies and Prospectuses from Compliance with Provisions) Notice (Chapter 32L of the Laws of Hong Kong).

13. Binding Effect

This document shall have the effect, if an application is made in pursuance hereof, of rendering all persons concerned bound by all of the provisions (other than the penal provisions) of sections 44A and 44B of the Companies (Winding Up and Miscellaneous Provisions) Ordinance so far as applicable.

14. No Material Adverse Change

Our Directors confirm that there has been no material adverse change in the financial or trading position or prospects of our Group since March 31, 2021 (being the date to which the latest audited consolidated financial statements of our Group were prepared).

15. Miscellaneous

Save as disclosed in this document,

(1) within the two years immediately preceding the date of this document:

(i) no share or loan capital of our Company or any of our subsidiaries had been issued or agreed to be issued or proposed to be fully or partly paid either for cash or a consideration other than cash;

(ii) no commissions, discounts, brokerages or other special terms had been granted or agreed to be granted in connection with the issue or sale of any share or loan capital of our Company or any of our subsidiaries; and

(iii) no commission had been paid or payable for subscription, agreeing to subscribe, procuring subscription or agreeing to procure subscription of any share in our Company or any of our subsidiaries;

(2) no share or loan capital of our Company or any of our subsidiaries had been under option or agreed conditionally or unconditionally to be put under option;

(3) our Company has no outstanding convertible debt securities or debentures;

(4) there are no founder, management or deferred shares nor any debentures in our Company or any of our subsidiaries;

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(5) there has not been any interruption in the business of our Group which may have or has had a significant effect on the financial position of our Group in the 12 months preceding the date of this document;

(6) no company within our Group is listed on any stock exchange or traded on any trading system and at present, and our Group is not seeking or proposing to seek any listing of, or permission to deal in, the share or loan capital of our Company on any other stock exchange; and

(7) there is no arrangement under which future dividends are waived or agreed to be waived.

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A. DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES

The documents attached to the copy of this document delivered to the Registrar of Companies in Hong Kong for registration were:

(a) a copy of the [REDACTED];

(b) the written consents referred to in “Statutory and General Information – D. Other Information – 10. Consent of experts” in Appendix VI to this document; and

(c) a copy of each of the material contracts referred to in “Statutory and General Information – B. Further Information about Our Business – 1. Summary of Material Contracts” in Appendix VI to this document.

B. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the offices of William Ji & Co. LLP (in Association with Tian Yuan Law Firm Hong Kong Office) at Suites 3304-3309, 33/F, Jardine House, One Connaught Place, Central, Hong Kong during normal business hours up to and including the date which is 14 days from the date of this document:

(a) the Articles of Association;

(b) the Accountants’ Report from KPMG, the text of which is set out in Appendix I to this document;

(c) the report from KPMG in respect of the unaudited pro forma financial information of our Group, the text of which is set out in Appendix II to this document;

(d) the audited consolidated financial statements of our Group for the three years ended December 31, 2018, 2019, 2020 and the three months ended March 31, 2021;

(e) the material contracts referred to in “Statutory and General Information – B. Further Information about Our Business – 1. Summary of Material Contracts” in Appendix VI to this document;

(f) the service contracts referred to in “Statutory and General Information – C. Further Information about our Directors, Supervisors and Substantial Shareholders – 2. Particulars of service contracts” in Appendix VI to this document;

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(g) the legal opinion issued by Tian Yuan Law Firm, our PRC Legal Advisors, in respect of certain aspects of our Company;

(h) the written consents referred to “Statutory and General Information – D. Other Information – 10. Consent of experts” in Appendix VI to this document;

(i) the PRC Company Law, the PRC Securities Law, the Mandatory Provisions and the Special Regulations together with their unofficial English translation; and

(j) the industry report issued by Frost & Sullivan (Beijing) Inc., Shanghai Branch Co.

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