China Treasures New Materials Group Ltd. — Proxy Solicitation & Information Statement 2025

Jun 26, 2025

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker, licensed securities dealer or registered institution in securities, bank manager, solicitor, professional accountant or other professional advisers.

If you have sold or transferred all your shares in China Treasures New Materials Group Ltd., you should at once hand this circular to the purchaser or transferee or to the bank, stockbroker, licensed securities dealer, registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, 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 circular.

China Treasures New Materials Group Ltd.

中寶新材集團有限公司
(Incorporated in the Cayman Islands with limited liability)
(Stock code: 2439)

MAJOR TRANSACTION

CONSTRUCTION CONTRACT

A letter from the Board is set out on page 4 to 11 of this circular.

Capitalised terms used in the lower portion of the cover and the first page of this circular shall have the same respective meanings as those defined in the section headed "DEFINITIONS" of this circular. The Company has obtained written Shareholders' approval in lieu of holding a general meeting of the Company pursuant to the Listing Rules for the Construction Contract and transactions contemplated thereunder pursuant to Rule 14.44 of the Listing Rules from Shareholders who hold more than 50% of the total issued Shares giving the right to attend and vote at a general meeting. Accordingly, no general meeting will be held to approve the Construction Contract and the transactions contemplated thereunder pursuant to Rule 14.44 of the Listing Rules.

26 June 2025

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CONTENTS

Page

DEFINITIONS ... I

LETTER FROM THE BOARD ... 4

APPENDIX I – FINANCIAL INFORMATION OF THE GROUP ... I-1

APPENDIX II – GENERAL INFORMATION ... II-1

• i -

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DEFINITIONS

In this circular, unless the context otherwise requires, the following expressions shall have the following respective meanings:

"Announcement"
the announcement of the Company dated 5 June 2025 in relation to, among other things, the Construction Contract and the transactions contemplated thereunder

"Board"
the board of Directors

"BVI"
British Virgin Islands

"Company"
China Treasures New Materials Group Ltd. (中寶新材集團有限公司), an exempted company with limited liability incorporated in the Cayman Islands on 21 January 2022, and registered as a non-Hong Kong company under Part 16 of the Companies Ordinance on 7 June 2022

"Construction Contract"
the construction contract dated 5 June 2025 entered into between the Jilin Kaishun and the Contractor in relation to the construction project of the Group's production base

"Contractor"
Henan Naiwo Construction Engineering Co., Ltd.* (河南耐沃建設工程有限公司), a company incorporated in the PRC with limited liability

"Controlling Shareholder(s)"
has the meaning ascribed to it under the Listing Rules and, in the context of this circular, refers to Lvsetianye Technology, Lvseenlin Technology, Daziran Technology and CPEP Holdings, Ms. Zhang and Mr. Shan

"CPEP Holdings"
China Plastic Environmental Protection Holdings Limited, a company incorporated in the BVI with limited liability on 1 February 2022, which currently holds 7,200,000 Shares (representing approximately 0.72% of the issued share capital of the Company as at the Latest Practicable Date) and is directly wholly owned by Lvseenlin Technology, and indirectly wholly owned by Mr. Shan. CPEP Holdings is one of the Controlling Shareholders

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DEFINITIONS

"Daziran Technology"
Daziran Technology Invest Holdings Limited, a company incorporated in the BVI with limited liability on 1 February 2022, which currently holds 92,599,460 Shares (representing approximately 9.26% of the issued share capital of the Company as at the Latest Practicable Date) and is directly wholly owned by Lvsenlin Technology, and indirectly wholly owned by Mr. Shan. Haziran Technology is one of the Controlling Shareholders

"Director(s)"
the director(s) of the Company

"Group"
the Company and its subsidiaries

"Hong Kong"
the Hong Kong Special Administrative Region of the PRC

"Independent Third Party"
individual or company who, to the best of the Directors' knowledge, information and belief having made all reasonable enquiry, is a third party independent of the Company and its connected person(s) within the meaning ascribed under the Listing Rules

"Jilin Kaishun"
Jilin Province Kaishun New Material Co., Ltd.* (吉林省開順新材料有限公司), a company incorporated in the PRC with limited liability and an indirect 99.01%-owned subsidiary of the Company

"Latest Practicable Date"
25 June 2025, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained in this circular

"Listing"
listing of the Company's shares on the Stock Exchange on 31 March 2023

"Listing Rules"
the Rules Governing the Listing of Securities on The Stock Exchange, as amended from time to time

"Lvsenlin Technology"
Lvsenlin Technology Holdings Limited, a company incorporated in the BVI with limited liability on 1 February 2022, which currently holds 91,022,880 Shares (representing approximately 9.10% of the issued share capital of the Company as at the Latest Practicable Date) and is directly wholly owned by Mr. Shan, the Chief Executive Officer of the Company, an executive Director and one of the Controlling Shareholders

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DEFINITIONS

"Lvsetianye Technology" Lvsetianye Technology Holdings Limited, a company incorporated in the BVI with limited liability on 1 February 2022, which currently holds 321,080,700 Shares (representing approximately 32.11% of the issued share capital of the Company as at the Latest Practicable Date) and is directly wholly owned by Ms. Zhang, the chair of the Board, an executive Director and one of the Controlling Shareholders

"Mr. Shan" Mr. Shan Yuzhu (翠玉柱), an executive Director, the Chief Executive Officer of the Company and one of the Controlling Shareholders. Mr. Shan is also the spouse of Ms. Zhang

"Ms. Zhang" Ms. Zhang Yuqiu (張玉秋), an executive Director, the chair of the Board and one of the Controlling Shareholders. Ms. Zhang is also the spouse of Mr. Shan

"PRC" the People's Republic of China, excluding, for the purposes of this circular only, the Hong Kong Special Administrative Region, the Macau Special Administrative Region and Taiwan

"RMB" Renminbi, the lawful currency of the PRC

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

"Share(s)" the ordinary share(s) with par value of HK$0.01 each in the share capital of the Company

"Shareholder(s)" the shareholder(s) of the Company

"sq.m." square meter

"Stock Exchange" The Stock Exchange of Hong Kong Limited

"Supervising Engineer" the legal entity or other organization appointed by Jilin Kaishun to conduct engineering supervision in accordance with legal authorizations

"%" per cent

In this circular, the terms "close associate", "core connected person", "controlling shareholder", "subsidiary" and "substantial shareholder" shall have the meanings given to such terms in the Listing Rules, unless the context otherwise requires.

• For identification purposes only

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LETTER FROM THE BOARD

China Treasures New Materials Group Ltd.

中寶新材集團有限公司
(Incorporated in the Cayman Islands with limited liability)
(Stock code: 2439)

Executive Directors:
Ms. Zhang Yuqiu (Chair)
Mr. Shan Yuzhu (Chief Executive Officer)
Mr. Li Xiquan
Mr. Li Peng

Independent non-executive Directors:
Dr. Lai King Yin
Dr. Song Xiaofeng
Mr. Leung Tsz Wing

Registered office:
89 Nexus Way
Camana Bay
Grand Cayman
KY1-9009
Cayman Islands

Principal Place of Business and
Head Office in the PRC:
No. 3, Jing'Er Road
Kalun Industrial South Region
Jiutai Economics Development Zone
Changchun City
Jilin Province
PRC

Principal Place of Business in
Hong Kong:
Room 1910, 19/F., C C Wu Building
302-308 Hennessy Road
Wan Chai
Hong Kong
Hong Kong, 26 June 2025

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION

CONSTRUCTION CONTRACT

INTRODUCTION

Reference is made to the Announcement.

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LETTER FROM THE BOARD

The purpose of this circular is to provide the Shareholders with, among other things, (i) details of the Construction Contract and the transactions contemplated thereunder; and (ii) other general information of the Company.

On 5 June 2025 (after trading hours), Jilin Kaishun, an indirect 99.01%-owned subsidiary of the Company, entered into the Construction Contract with the Contractor, pursuant to which the Contractor agreed to perform the construction project of the Group's production base with gross area of approximately 80,298 sq.m. at the total consideration of approximately RMB236.7 million (the "Consideration") located at Changchun, Jilin province, PRC.

THE CONSTRUCTION CONTRACT

The principal terms of the Construction Contract are set out below:

Date: 5 June 2025

Parties:
(1) Jilin Kaishun
(2) Henan Naiwo Construction Engineering Co., Ltd.* (河南耐沃建設工程有限公司)

Subject matter: The Contractor will act as the general contractor responsible for performing the construction project services under the Construction Contract of the Group's production base located at Changchun, Jilin province, PRC, with a total gross area of approximately 80,298 sq.m., which include a six-story office building with gross area of approximately 4,064 sq.m., a workshop building with gross area of approximately 69,515 sq.m., a four-story research and development building with gross area of approximately 1,439 sq.m., a six-story dormitory building with gross area of approximately 5,268 sq.m., two gatehouses and auxiliary facilities. The construction project is situated in Changchun Changchun Jiutai Economic Development Zone* (長春市九台經濟開發區) with a total site area of 31,615 sq.m. (the "Land"). Pursuant to the Construction Contract, the scope of work for the Contractor in respect of the construction project includes all earthwork, main construction works, scaffolding works, water, electricity and fire protection installation works, secondary structure masonry and plastering works, external wall insulation and painting works, roofing, safety and civilized construction works, as well as various mechanical equipment, construction cables and distribution boxes, and others which are specified in the bill of quantities.

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LETTER FROM THE BOARD

Construction period: the Construction is proposed to commence on 5 June 2025 and complete on 30 October 2025, a total of 148 man days

The aforementioned construction period commencement date is solely an estimated and proposed date. The actual commencement date shall be determined based upon the date of full satisfaction of all conditions precedent as stipulated in the Construction Contract therein, and the actual commencement date shall be postponed accordingly. Notwithstanding the foregoing, the total man days for the project duration shall remain unchanged.

Consideration: the Consideration of the Construction Contract is approximately RMB236.7 million

The Consideration will be satisfied as follows: approximately 32% by the internal resources of the Group, approximately 20% by the unutilized net proceeds raised from the Listing, and approximately 48% by external borrowings.

Payment terms: The parties adopted a milestone payment methodology as set out below:

(1) 15% of the Consideration shall be paid upon entering into the Construction Contract;
(2) 50% of the Consideration shall be paid upon commencement of the construction works;
(3) 20% of the Consideration shall be paid upon satisfactory completion of the main structure, which is subject to the approval of the Supervising Engineer;
(4) 12% of the Consideration shall be paid upon the Construction passing the final inspection and acceptance (the “Final Inspection and Acceptance”); and
(5) The balance of 3% shall be retained as the warranty bond and shall be paid within 14 days upon expiry of the 24-month warranty period.

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LETTER FROM THE BOARD

The Contractor may apply for the Final Inspection and Acceptance when the construction project satisfies the following conditions:

(1) all works within the scope of the Construction Contract (including tests, trial operations, and inspections required under the Construction Contract) have been completed and comply with contractual requirements, except for omitted works and defect remediation works agreed upon by Jilin Kaishun;

(2) a list of omitted works and defect remediation works, along with corresponding construction plans, has been prepared as stipulated in the Construction Contract; and

(3) completion documentation has been compiled in full compliance with the Construction Contract.

After the Contractor applies for the Final Inspection and Acceptance, the Contractor’s application shall follow this procedure unless otherwise specified:

(1) the Contractor shall submit a completion acceptance application report (the “Completion Report”) to the Supervising Engineer for review. If such review indicates unmet conditions, the Supervising Engineer shall notify the Contractor of the outstanding work item(s). The Contractor shall resubmit the Completion Report after completing all notified work item(s);

(2) if the Supervising Engineer confirms acceptance conditions are met, the Completion Report shall be forwarded to Jilin Kaishun within 14 days of receipt. Jilin Kaishun shall complete approval within 28 days of receiving the reviewed Completion Report and organize the Supervising Engineer, the Contractor, and relevant parties to conduct completion’s inspection and acceptance (“Acceptance”);

(3) for the successful Acceptance, Jilin Kaishun shall issue a project acceptance certificate to the Contractor within 14 days after Acceptance. Failure to issue without justified reason shall result in the certificate being deemed issued on the 15th day post-Acceptance;

(4) for the failed Acceptance, the Supervising Engineer shall issue instructions requiring the Contractor to rework, repair, or remediate defective portions. All associated costs and/or delays shall be borne by the Contractor. The Contractor shall resubmit the Completion Report and repeat the procedure upon completing remedial work; and

(5) if Jilin Kaishun uses the project without Acceptance or despite the failed Acceptance, an acceptance certificate shall be issued to the Contractor within 7 days after taking possession. Failure to issue without justified reason shall result in the certificate being deemed issued on the 15th day after taking possession.

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LETTER FROM THE BOARD

Conditions precedent

The Construction Contract shall take effect subject to the following conditions precedent having been satisfied:

(1) The full amount of the Consideration has been secured by Jilin Kaishun, including but not limited to loans from banks or other financial institutions; and

(2) all necessary consents, confirmations, approvals (including approval of the Construction Contract and the transactions contemplated thereunder by the directors and/or the shareholders of Jilin Kaishun and the Company) and authorisations under the Listing Rules and other regulatory regime having been granted to and/or obtained by the Group (collectively, the "Necessary Approvals"), and the Necessary Approvals having remained valid and effective, and not being threatened with any revocation, withdrawal, cancellation or suspension at any time prior to completion of the Construction Contract.

If any of the above conditions is not satisfied, the Construction Contract shall not be effective. None of the conditions precedent can be waived. As at the Latest Practicable Date, condition precedent (1) has been fulfilled and condition precedent (2) has not been fulfilled.

Basis of Consideration

The Consideration was determined based on arm's length negotiations and in accordance with normal commercial terms, with reference to the scope and complexity of the construction works, price quotations (including average construction costs per sq.m.) obtained from the Contractor and two other vendors, and their relevant background, capacity, qualifications and experiences.

After taking into account the scope and complexity of the construction works, prevailing market rates of average construction cost per sq.m. for low-rise factory buildings in Northern PRC cities in recent years – ranging from RMB2,800 to RMB3,800 per sq.m., based on available public data and reports – as compared to the average construction cost for this construction project offered by the Contractor of approximately RMB2,900 per sq.m., the alignment of payment terms with market practice, and the Contractor's background, capacity, qualifications and experiences as set out in the section headed "INFORMATION ON THE CONTRACTOR" below, the Directors consider that the Consideration is fair and reasonable.

INFORMATION ON JILIN KAISHUN

Jilin Kaishun is a company established in the PRC and an indirect 99.01%-owned subsidiary of the Company. Jilin Kaishun is principally engaged in the development and manufacture of biodegradable plastic products and non-biodegradable automobile plastic parts.

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LETTER FROM THE BOARD

INFORMATION ON THE CONTRACTOR

The Contractor is a company incorporated in the PRC with limited liability in 2023 with registered capital of RMB100 million and is principally engaged in the provision of construction services across the PRC, holding Construction Enterprise Qualification Certificate including but not limited to (i) Class II Qualification for General Contracting: Building Construction Works, Power Engineering Works, Road Construction Works, Petrochemical Project Works, Municipal and Public Works, and Mechanical Engineering Works; and (ii) Class II Qualification for Professional Contracting: Foundation and Base Construction Works, Lifting Equipment Installation, Electronics and Intelligent Engineering Works, Fire Protection Facility Project, Waterproof, Anticorrosive and Insulation Works, Steel Structure Construction Works, Building Decoration and Renovation Works, Electromechanical Equipment Installation, Building Curtain Wall Construction Works, Power Transmission Works, and Environmental Protection Works. The Contractor also holds Certificate of Safety Production Permit, ISO certification 9001:2015, and Certificate of AAA Credit with nationwide client coverage in over 15 provinces and 30 cities in the PRC, and enrollment in over 50 customers' procurement platforms.

The Contractor is wholly owned by Haikou Zhongchu Hengcheng Engineering Co., Ltd. (海口中楚恒誠工程有限公司), which is held as to (i) 99.99% by Wang Yuan (王媛); and (ii) 0.01% by Ye Jing* (葉敬). To the best of the Directors' knowledge, information and belief and having made all reasonable enquiries, the Contractor and its respective ultimate beneficial owners of the Contractor are Independent Third Parties.

REASONS FOR AND BENEFITS OF ENTERING INTO THE CONSTRUCTION CONTRACT

The Group is principally engaged in development and manufacturing of biodegradable plastic product in Northeast China, with its main production base situated in Changchun, Jilin province, the PRC.

As disclosed in the Annual Report of the Company for the year ended 31 December 2024 (the "Annual Report 2024"), the Group acquired the Land in Changchun Changchun Jiutai Economic Development Zone* (長春市九台經濟開發區), Changchun, Jilin province, the PRC, with plans to establish a new production base in the coming years to strengthen the Group's production capabilities and enhance the production lines for biodegradable plastic products in Changchun. Moving forward, the Group will prioritize its bases in Changchun as the cornerstone of its production strategy, ensuring scalability, cost competitiveness, and resilience in a dynamic market. The Board believes that establishing a new production base in Changchun after the acquisition of the Land and centralizing operations in Changchun provides the benefits of (i) strategic consolidation and cost efficiency; (ii) market realignment to serve core customer base; (iii) enhance control and proven execution capability in Changchun; and (iv) resource optimization. Please refer to the Annual Report 2024 for further details of the Land and the reason for establishing a new production base in Changchun. As a result, the Directors believe that the entering into the Construction Contract is necessary to establish a new production base in Changchun.

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LETTER FROM THE BOARD

After taking into account the scope and complexity of the construction works, the Consideration and payment terms as well as the Contractor's background, capacity, qualifications and experiences, the Group is of the view that the Contractor is the most suitable contractor and the Directors (including the independent non-executive directors) consider that the terms and conditions of the Construction Contract (including the Consideration and the payment terms) and the transactions contemplated thereunder are fair and reasonable, on normal commercial terms and in the interests of the Company and its Shareholders as a whole.

LISTING RULES IMPLICATIONS

As the highest applicable percentage ratio (as defined under the Listing Rules) in respect of the transactions contemplated under the Construction Contract exceeds 25% but is less than 100%, the transactions contemplated thereunder constitutes a major transaction of the Company pursuant to Rule 14.06(3) of the Listing Rules and is therefore subject to reporting, announcement, circular and Shareholders' approval requirement under Chapter 14 of the Listing Rules.

WRITTEN SHAREHOLDERS' APPROVAL

Pursuant to Rule 14.44 of the Listing Rules, written Shareholders' approval may be accepted in lieu of holding a general meeting of the Company if (i) no Shareholder is required to abstain from voting if the Company were to convene a general meeting for the approval of the Construction Contract and the transactions contemplated thereunder; and (ii) the written shareholders' approval has been obtained from a Shareholder or a closely allied group of Shareholders who together hold more than 50% of the voting rights at that general meeting of the Company to approve the Construction Contract and the transactions contemplated thereunder.

To the best of the Directors' knowledge, information and belief, and having made all reasonable enquiries, no Shareholder or any of their respective close associates has any material interest in, and is required to abstain from voting on, any resolution to approve the Construction Contract and the transactions contemplated thereunder if the Company were to convene a general meeting to approve the same.

On 5 June 2025, the Company has obtained written Shareholders' approval in lieu of holding a general meeting to approve the Construction Contract and the transactions contemplated thereunder pursuant to Rule 14.44 of the Listing Rules from the Controlling Shareholders, holding in aggregate of 511,903,040 Shares, representing 51.19% of the total issued share capital of the Company as at the Latest Practicable Date. Accordingly, no Shareholders' meeting will be held to approve the Construction Contract and the transactions contemplated thereunder pursuant to Rule 14.44 of the Listing Rules.

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LETTER FROM THE BOARD

RECOMMENDATION

The Directors (including the independent non-executive Directors) are of the opinion that the terms of the Construction Contract and the transactions contemplated thereunder are on normal commercial terms and fair and reasonable and the entering into the Construction Contract is in the interests of the Company and the Shareholders as a whole. If a general meeting were to be convened for the approval of Construction Contract and the transactions contemplated thereunder, the Board would recommend the Shareholders to vote in favour of the resolution to approve the Construction Contract and the transactions contemplated thereunder at such general meeting.

GENERAL

Your attention is drawn to the additional information set out in the appendices to this circular.

MISCELLANEOUS

The English text of this circular shall prevail over the Chinese text for the purpose of interpretation.

Yours faithfully,

For and on behalf of the Board

China Treasures New Materials Group Ltd.

Zhang Yuqiu

Chair and Executive Director

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

1. FINANCIAL INFORMATION OF THE GROUP

Details of the financial information of the Group for each of the financial years ended 31 December 2022, 2023 and 2024 are disclosed in the following documents which have been published on the website of the Stock Exchange (www.hkex.com.hk) and the website of the Company (www.jl-ks.cn):

• Annual report of the Company for the year ended 31 December 2024 published on 24 April 2025 (pages 98 to 171);
• Annual report of the Company for the year ended 31 December 2023 published on 25 April 2024 (pages 94 to 169); and
• Annual report of the Company for the year ended 31 December 2022 published on 28 April 2023 (pages 88 to 163).

2. INDEBTEDNESS STATEMENT

As at the close of business on 1 May 2025, being the latest practicable date for the purpose of ascertaining the indebtedness of the Group prior to the printing of this circular, the Group had the following indebtedness:

Interest-bearing borrowings

The Group has outstanding interest-bearing borrowings of approximately RMB186,079,000 which comprised unsecured and unguaranteed bank loans and other borrowings of approximately RMB14,770,000 and secured and guaranteed bank loans of approximately RMB171,309,000 at 1 May 2025.

		At 1 May
		2025
		RMB'000
	Note	(Unaudited)
Borrowings – secured and guaranteed	(a), (c)	171,309
Borrowings – unsecured and unguaranteed	(b)	14,770
		186,079
Current portion		70,163
Non-current portion		115,916
		186,079

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The carrying amounts of the interest-bearing borrowings are denominated in the following currencies:

| | At 1 May 2025
RMB’000
(Unaudited) |
| --- | --- |
| RMB | 181,309 |
| HK$ | 4,770 |
| | 186,079 |

Notes:

(a) The secured and guaranteed borrowings carry weighted average effective interest rate of approximately 3.72% per annum.

(b) The unsecured and unguaranteed borrowings carry effective interest rate of 8.17% per annum.

(c) The secured and guaranteed borrowings are secured/guaranteed by:

(i) patents held by Jilin Kaishun with net carrying amount of approximately RMB68,000 at 1 May 2025;

(ii) leasehold lands of the Group with aggregate net carrying amount of approximately RMB10,737,000 at 1 May 2025;

(iii) buildings of the Group with aggregate net carrying amount of approximately RMB18,527,000 at 1 May 2025;

(iv) personnel guarantees provided by Mr. Shan Yuzhu and/or Ms. Zhang Yuqiu, executive directors of the Company against outstanding loans with aggregate carrying amounts of approximately RMB117,059,000 at 1 May 2025; and

(v) properties held by Mr. Shan Yuzhu against a loan with carrying amount of approximately RMB16,000,000.

In addition, the secured borrowings are guaranteed by a non-wholly owned subsidiary, 儀徵市聚鑫源生物科技有限公司 Yizheng City Juxinyuan Biotechnology Co., Ltd. (“Yizheng Juxinyuan”), 長春廣科科技有限公司 Changchun Guangke Technology Co., Ltd. (“Changchun Guangke”) and the Company.

• English name for identification purpose only.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Lease liabilities

At 1 May 2025, the Group had lease liabilities of approximately RMB6,000, which will be settled within one year and the weighted average incremental borrowing rate for lease liabilities of the Group was 1.96% per annum.

Amount due to a director

At 1 May 2025, the amount due to a director of approximately RMB2,000 is unsecured, unguaranteed, interest-free and repayable on demand.

Save as aforesaid and apart from intra-group liabilities, the Group did not, at the close of the business on 1 May 2025, have any loan capital issued and outstanding or agreed to be issued, bank overdrafts, charges or debentures, mortgages, loans or other similar indebtedness, finance leases or hire purchase commitment, liabilities under acceptance (other than normal trade payables), acceptance credits, or any guarantees or other material contingent liabilities.

3. WORKING CAPITAL SUFFICIENCY

The Directors are satisfied that, after due and careful consideration and taking into account the present financial resources available to the Group, the effect of the Construction Contract and the transactions contemplated thereunder and in the absence of unforeseen circumstances, the working capital of the Group is sufficient for its present requirements for at least the next twelve months from the date of this circular. The Company has obtained the relevant confirmation as required under Rule 14.66(12) of the Listing Rules.

4. MATERIAL ADVERSE CHANGE

The Directors confirm that, as at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2024, being the date to which the latest published audited consolidated accounts of the Group were made up.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

5. FINANCIAL EFFECTS OF THE CONSTRUCTION CONTRACT ON THE GROUP

As of 31 December 2024, the audited consolidated total assets and total liabilities of the Group amounted to approximately RMB690.6 million and RMB130.2 million, respectively. The Consideration payable under the Construction Contract will be satisfied by the internal resources of the Group, the unutilized net proceeds raised from the Listing and external borrowings.

When the Consideration payable under the Construction Contract is incurred, the relevant portion will be capitalized to “property, plant and equipment”. Consequently, the amount of the Group’s property, plant and equipment is expected to increase by approximately RMB236.7 million following the completion of the Construction Contract. The payment of the Consideration, along with payments and expenses incurred and to be incurred in connection with the construction works under the Construction Contract, would result in a decrease in ‘cash and cash equivalents’ of approximately RMB122.1 million and an increase in ‘interest-bearing borrowings’ of approximately RMB114.6 million.

The Company considers that the execution of the Construction Contract will not have any material effect on the Group’s earnings immediately. Since the Consideration is expected to be satisfied by the internal resources of the Group, the unutilized net proceeds raised from the Listing, and external borrowings, the Group’s cash and cash equivalents will decrease and its interest-bearing borrowings will increase. As a result, the Group’s bank interest income will be reduced and its finance costs from interest-bearing loans will increase. The finance costs from interest-bearing loans directly attributable to the construction works will be capitalized into the construction cost of the production base during the construction period.

6. FINANCIAL AND TRADING PROSPECTUS OF THE GROUP

Overview

The Group principally engages in development and manufacturing of biodegradable plastic product bags in Northeast China and the production base locates in Changchun, Jilin province, the PRC. Given the growing global emphasis on environmental conservation, the promotion of sustainable development initiatives, and the PRC government’s significant efforts to mitigate plastic pollution, the Group has remained committed to its core business strategies by focusing firmly on its core business development and manufacturing of biodegradable plastic product bags with a view in eliminating the threats of White Pollution in the PRC throughout the Year. The growth of the biodegradable plastic products market is closely linked to the environmental protection policies and regulations established by the PRC government, which aim to restrict and prohibit the use of non-biodegradable plastics and manage plastic pollution (the “Policies and Regulations”).

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

In response to the Policies and Regulations, the Group, since 2015, had gradually diversified the business into the development and manufacturing of biodegradable plastic products while maintaining the operation for non-biodegradable automobile plastic parts which accounted for approximately 6.5% and approximately 5.2% of the Group’s total revenue during the year ended 31 December 2024 and 2023, respectively.

The Group had contributed the discussion and formulation of the national standard for biodegradable plastic shopping bags, namely, “GB/T 38082–2019”, which was issued by The State Administration for Market Regulation of the PRC and The Standardization Administration of the PRC in October 2019. The “GB/T 38082–2019” has remained as the sole and only national standard in the PRC for biodegradable plastic shopping bags since then. In view of our expertise in the industry and the recognition earned from the PRC Government, we have possessed the competitive strength in the areas of production capabilities, technology level and quality control, which positioned us as the market leader in this policy-driven market.

The Group continued to devote resources to further strengthen the Group’s production capacity and deepen cooperation with major research organizations, including R&D of biodegradable plastic products through collaboration with The Changchun Institute of Applied Chemistry Chinese Academy of Science (“CIAC”), a third-party research institute, in which the Group owned the rights to the R&D results. As biodegradable material technology continues to advance, the Board are optimising both the performance and cost of these materials, which enhances the Group’s competitive edge in the market.

The Group also joined as members of those plastic production related industry associations in the PRC, including the Degradable Plastics Committee of China Plastic Processing Industry Association and The Changchun Die & Mold Industry Association so as to embrace the changing market trends and bring new growth momentum to the Group’s business development.

The Group’s biodegradable products mainly comprise (i) biodegradable produce bag rolls; (ii) biodegradable shopping bags; and (iii) biodegradable stretch wraps. During the year ended 31 December 2024, the Group’s biodegradable products were sold to customers in the PRC, mainly in the Northeast China, which accounted for approximately 80.4% of the Group’s total revenue, whilst the sales to other cities in the PRC accounted for the remaining approximately 19.6%.

Anticipating an increase in demand for biodegradable plastic products, the Group entered into a transfer agreement to acquire a land situated in Changchun Changchun Jiutai Economic Development Zone* (長春市九台經濟開發區) with a total site area of 31,615 sq.m. (the “Land”) during the Year to establish a new production base, aimed at enhancing production capabilities and expanding the production lines for biodegradable plastic products. Moving forward, the Group will prioritize its bases in Changchun as the cornerstone of its production strategy, ensuring scalability, cost competitiveness, and resilience in a dynamic market.

• I-5 -

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Future Prospect

The development of the biodegradable plastic products market in the PRC is driven by the Policies and Regulations. Since 2021, the PRC Government has gradually imposed the Policies and Regulations in different provinces and further imposed the Policies and Regulations in Henan province, which shopping malls, supermarkets, pharmacies, bookstores and other places across Henan province have been prohibited the use of non-biodegradable plastics. In align with the prohibition on use of non-biodegradable plastic products in more provinces in the PRC, the market demand on the Group's biodegradable plastic products has been increased.

Undoubtedly, the PRC Government is committed to uphold a clean and green environment and will continue to strongly support environmental protection industries relating to development and manufacturing of environmental products. It has been clearly stated that the prohibition on the use of non-degradable plastic bags will be expanded to the various marketplaces by the end of 2025. In recent years, the PRC Government has successively issued a series of policies to support the development of biodegradable materials, such as the "Opinions on Further Strengthening the Control of Plastic Pollution (關於進一步加強塑料污染治理的意見)" and "Catalogue of Plastic Products Prohibited or Restricted From Production, Sale and Use (Draft for comments) (禁止、限制生產、銷售和使用的塑料製品目錄(徵求意見稿))", which clearly stipulate and promote the application of biodegradable materials.

In view of (i) the increase in demand of biodegradable plastic products in compliance with the Policies and Regulations; (ii) a number of favorable policies and initiatives promulgated by the PRC Government; and (iii) the fundamental change to the dining and consumption habits of the local residents in the PRC from eating out to preparing meals at home and/or ordering takeaway which, contributed to the increase of sale of perishable food and fruits, and thus, in turn, stimulated the use of biodegradable shopping bags and biodegradable produce bag rolls, the Board have confidence that against this backdrop, the prospects for biodegradable plastic products business are optimistic and our Group is well positioned to navigate the business opportunities and challenges ahead.

• I-6 -

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APPENDIX II

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DISCLOSURE OF INTERESTS

(i) Interests and short positions of Directors and chief executives in the Shares, underlying Shares and debentures of the Company or any associated corporation

As of the Latest Practicable Date, the interests and short positions of Directors and the chief executive of the Company in the Shares, underlying Shares and debentures of the Company or any of the associated corporations, within the meaning of Part XV of the SFO, which have been notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of the SFO (including any interests and short positions which they have taken or are deemed to have taken under such provisions of the SFO); or which were required, pursuant to section 352 of the SFO, to be recorded in the register referred to therein; or which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers in the Listing Rules ("Model Code") were as follows:

(a) Interests in the Shares

Name of Shareholder	Capacity/Nature of interest	Number of Shares held (L)(1)	Approximate percentage of the Company’s issued share capital (%)
Ms. Zhang(2)(5)	Interests in controlled corporation	321,080,700	32.11
Mr. Shan(3)(5)	Interests in controlled corporations	190,822,340	19.08
Mr. Li Xiquan (“Mr. Li”)(4)	Interest in a controlled corporation	11,250,090	1.13

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APPENDIX II

GENERAL INFORMATION

Notes:

(1) The Letter "L" demonstrates long position.

(2) Ms. Zhang beneficially owns the entire issued shares of Lvsetianye Technology Holdings Limited (“Lvsetianye Technology”). Lvsetianye Technology is a company incorporated in the British Virgin Islands (the “BVI”), which in turn holds 321,080,700 Shares or approximately 32.11% of the issued share capital of the Company. Therefore, Ms. Zhang is deemed, or taken to be, interested in all the Shares held by Lvsetianye Technology for the purpose of the SFO.

(3) Mr. Shan beneficially owns the entire issued shares of Lvsenlin Technology Holdings Limited (“Lvsenlin Technology”). Lvsenlin Technology is a company incorporated in the BVI which in turn holds 91,022,880 Shares or approximately 9.10% of the issued share capital of the Company. Daziran Technology Invest Holdings Limited (“Daziran Technology”) and China Plastic Environmental Protection Holdings Limited (“CPEP Holdings”), the companies incorporated in the BVI and are wholly owned by Lvsenlin Technology, in turn holds 92,599,460 Shares or approximately 9.26% and 7,200,000 Shares or approximately 0.72% of the issued share capital of the Company, respectively. Therefore, Mr. Shan is deemed, or taken to be, interested in all the Shares held by Lvsenlin Technology, Daziran Technology and CPEP Holdings for the purpose of the SFO.

(4) Mr. Li beneficially owns the entire issued shares of Languang Technology Invest Holdings Limited (“Languang Technology”). Languang Technology is a company incorporated in the BVI which in turn holds 11,250,090 Shares or approximately 1.13% of the issued share capital of the Company. Therefore, Mr. Li is deemed, or taken to be, interested in all the Shares held by Languang Technology for the purpose of the SFO.

(5) Ms. Zhang and Mr. Shan are wife and husband. They are therefore deemed to be interested in the Shares that the other is interested in under the SFO.

(b) Long positions in associated corporation

Changchun Guangke Technology Co., Ltd

Name of Director	Capacity/Nature of interest	Approximate percentage of shareholding in Changchun Guangke (%)
Ms. Zhang	Beneficial owner	0.0039
Mr. Shan	Beneficial owner	0.0036
Mr. Li	Beneficial owner	0.0001

Save as disclosed above, as of the Latest Practicable Date, no Directors or chief executives of the Company had an interest or short position in the shares, underlying shares or debentures of the Company or its associated corporations, within the meaning of Part XV of the SFO, which were required to be notified to the Company and the Stock Exchange; or an interest or short position which were required, pursuant to section 352 of the SFO, to be recorded in the register referred to therein, or be notified to the Company and the Stock Exchange pursuant to the Model Code.

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APPENDIX II

GENERAL INFORMATION

(ii) Substantial Shareholders' interests and short positions in Shares and underlying Shares of the Company

As of the Latest Practicable Date, the following persons held an interest or short positions in the Shares or underlying shares of the Company which would be required to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which would be required to be recorded in the register required to be kept by the Company pursuant to section 336 of the SFO, or who were, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group were as follow:

Name of Shareholder	Capacity/ Nature of Interest	Number of Shares held (L)(1)	Approximate percentage of the Company’s issued share capital (L)(1) (%)
Ms. Zhang(2)(4)	Interest in a controlled corporation	321,080,700	32.11
Mr. Shan(3)(4)	Interest in controlled corporations	190,822,340	19.08
Lvsetianye Technology(2)	Beneficial owner	321,080,700	32.11
Lvsesenlin Technology(3)	Beneficial owner	91,022,880	9.10
	Interest in controlled corporations	99,799,460	9.98
Daziran Technology(3)	Beneficial owner	92,599,460	9.26
CPEP Holdings(3)	Beneficial owner	7,200,000	0.72

Notes:

(1) The Letter "L" demonstrates long position.

(2) Lvsetianye Technology held approximately 32.11% of the issued share capital of the Company. Lvsetianye Technology is wholly owned by Ms. Zhang. Ms. Zhang is therefore deemed to be interested in the Shares that Lvsetianye Technology is interested in.

(3) Lvsenlin Technology, Haziran Technology and CPEP Holdings held approximately 9.10%, 9.26% and 0.72% of the issued share capital of the Company, respectively. Each of Haziran Technology and CPEP Holdings is wholly owned by Lvsenlin Technology, which is in turn wholly owned by Mr. Shan, the executive Director of the Company. Mr. Shan is therefore deemed to be interested in the Shares that each of Lvsenlin Technology, Haziran Technology and CPEP Holdings is interested in.

(4) Ms. Zhang and Mr. Shan are wife and husband. They are therefore deemed to be interested in the Shares that the other is interested in under the SFO.

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APPENDIX II

GENERAL INFORMATION

Save as disclosed above, as of the Latest Practicable Date, the Directors are not aware of any other person who had beneficial interests or short positions in any Shares or underlying Shares, which will be required to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who is, directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meeting of any member of the Group.

3. DIRECTORS' SERVICE CONTACT

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contracts with any member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation)).

4. DIRECTORS' INTEREST IN COMPETING BUSINESS

None of the Directors or their respective close associates had any interests in any business which competed or might compete, either directly or indirectly, with the business of the Group as at the Latest Practicable Date.

5. MATERIAL INTEREST

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which had been, since 31 December 2024, being the date to which the latest published audited consolidated financial statements of the Company were made up, acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement subsisting on the date of this circular which was significant in relation to the business of the Group.

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APPENDIX II

GENERAL INFORMATION

6. MATERIAL CONTRACTS

The Group has entered into the following contract (not being contracts entered into in the ordinary course of business) within the two years preceding the date of this circular which is or may be material:

(i) the construction land use rights transfer agreement dated 23 September 2024 entered into between Jilin Kaishun, as the transferee, and Changchun City Jiutai District Natural Resources Bureau (the “Natural Resources Bureau”, 長春市九台區自然資源局), pursuant to which the transferer agrees to transfer a land located in Changchun Changchun Jiutai Economic Development Zone (長春市九台經濟開發區) with a total site area of 31,615 sq.m to the transferee at a consideration of approximately RMB10.0 million; and

(ii) the Construction Contract.

7. LITIGATION AND CLAIMS

As at the Latest Practicable Date, the Group was not engaged in any litigation or arbitration of material importance and no litigation or claim of material importance was known to the Directors to be pending or threatened by or against the Group.

8. GENERAL

The company secretary of the Company is Ms. Wong Po Lam, who is a Certified Public Accountant of the Hong Kong Institute of Certified Public Accountants.

The registered office of the Company is at 89 Nexus Way, Camana Bay, Grand Cayman, KY1-9009, Cayman Islands. The Head office and principal place of business in the PRC is at No. 3, Jing'Er Road, Kalun Industrial South Region, Jiutai Economics Development Zone, Changchun City, Jilin Province, the PRC. The principal place of business in Hong Kong is at Room 1910, 19/F., C C Wu Building, 302-308 Hennessy Road, Wanchai, Hong Kong. The Hong Kong Share Registrar of the Company is Tricor Investor Services Limited, located at 17/F, Far East Finance Centre, 16 Harcourt Road, Hong Kong.

9. DOCUMENTS AVAILABLE ON DISPLAY

Copies of the following documents are published on the websites of the Stock Exchange (www.hkexnews.hk) and the Company (www.jl-ks.cn) during the period of 14 days from the date of this circular:

(i) the Construction Contract.