Our transfer pricing arrangements during the Track Record Period principally concerned related-party transactions in mineral product sales and purchases, which accounted for approximately 99% of all such transactions, supplemented by a limited number of fund financing and service arrangements accounted for approximately 1% of the total value of related transactions.
Business · p. 169
Based on KPMG’s professional opinion, our transfer pricing arrangements for our related-party transactions during the Track Record Period and up the Latest Practicable Date comply with the arm’s length principle as set forth in the OECD Transfer Pricing Guidelines and applicable local laws and regulations during the Track Record Period and up to the Latest Practicable Date, assuming that the functional and risk profiles of the related parties within the value chain of the related party transactions are not expected to undergo significant changes.
Business · p. 170
The results indicate that the applicable interest rates of the tested fund financing transactions all fall within the comparable interest rate range.
During the Track Record Period, there were certain intra-Group transactions conducted amongst our Company, branches and subsidiaries in Chinese mainland and overseas.
Business · p. 166
We have engaged Ernst & Young (China) Advisory Limited, an international professional accounting firm (the “Transfer Pricing Consultant”) to review our transfer pricing arrangements from an arm’s length perspective for the Intra-Group Transactions.
Business · p. 166
Based on the analysis performed, the Intra-Group Transactions that took place during the Track Record Period are considered by the Transfer Pricing Consultant to have been conducted in line with the arm’s length principle according to the OECD Guidelines and the transfer pricing regulations in the PRC.
During the Track Record Period and up to the Latest Practicable Date, our Company and our summary controlled affiliates and subsidiaries have engaged in intra-company transactions involving: (i) advertising operations services, (ii) agency sales services and (iii) marketing support services (collectively referred to as the “Covered Transactions”), the details of which are set out as follows:
Business · p. 125
We have appointed an international professional firm as our adviser on transfer pricing to review our transfer pricing arrangements.
Business · p. 125
Based on the assessment of the Covered Transactions and the transfer pricing benchmarking analysis, which involved screening and evaluating comparable companies, we understand that the net profit margin levels of the relevant entities are reasonable and commensurate with their respective functions and risks.
Our subsidiaries in China, the United States, Australia and Thailand adhere to this principle.
Business · p. 152
In order to ensure assess compliance with the relevant transfer pricing regulations, we engaged an independent transfer pricing consultant to review our intra-group transactions and transactions with major related party outside the consolidation scope during the Track Record Period, in accordance with PRC transfer pricing regulations and the OECD Transfer Pricing Guidelines.
We have engaged in material cross-border related-party transactions during the Track Record Period, according to the transfer pricing analysis report.
Business · p. 185
In 2022, 2023, 2024 and the ten months ended October 31, 2025, wafer sales from our Company to Fourier Technology were RMB37.9 million, RMB27.2 million, RMB19.3 million and RMB10.2 million, respectively, and chip sales amounted to RMB59.0 million, RMB83.7 million, RMB222.6 million and RMB190.9 million in the same periods, and sales from Fourier Technology back to our Company of processed chips under specific arrangements amounted to RMB9.1 million, RMB24.9 million, RMB21.0 million and RMB16.3 million in the same periods.
Business · p. 185
Our transfer pricing advisor is of the view that the risk of these arrangements in violating the arm’s length principle under Hong Kong and PRC transfer pricing rules is remote, and that the transfer pricing arrangements fundamentally comply with the arm’s length principle, in accordance with the below basis.
We have engaged an independent transfer pricing consultant, an international professional accounting firm in the PRC (“Transfer Pricing Consultant”), to review our transfer pricing arrangements outlined above from an arm’s length compliance perspective during the Track Record Period.
Business · p. 198
the relative ratio of the combined operating profits of each of the PRC Operating Entities and Hope Sea Import & Export was consistent with their relative ratio of full operating costs borne. Therefore, our transfer pricing arrangement complies with the arm's length principle.
Business · p. 199
Accordingly, our Transfer Pricing Consultant is of the view, with the Sole Sponsor concurring that the above-mentioned intra-group transactions were in compliance with the relevant transfer pricing laws and regulations during the Track Record Period.
For Transaction II, we recorded intra-group transactions of RMB1,413.4 million, RMB1,590.2 million, RMB1,977.8 million and RMB1,425.3 million in 2022, 2023, 2024 and the nine months ended September 30, 2025, respectively.
Business · p. 225
Based on the above analysis, our Transfer Pricing Advisor is of the view that the major intra-group transactions during the Track Record Period complied with the arm’s length principle in accordance with applicable regulations and guidelines.
Business · p. 226
During the Track Record Period and up to the Latest Practicable Date, we were not aware of any audit, investigation or challenge by any relevant tax authorities in relation to our intra-Group transactions.
We have engaged an independent transfer pricing consultant (the “Transfer Pricing Consultant”) to conduct a review of our intra-group transactions during the Track Record Period.
Business · p. 172
The independent transfer pricing consultant has reviewed these arrangements and found that most loans were interest-bearing and priced in line with market rates.
Business · p. 173
Based on the above analysis regarding our intra-group transactions, as advised by the Transfer Pricing Consultant, our Directors are of the view that (i) our Group sets reasonable pricing arrangement for the Covered Transactions, (ii) the Covered Transactions were in line with the arm’s length principle, that our transfer pricing practice did not have any material compliance issues and no material adjustment is required, and (iii) our transfer pricing arrangements should not result in material transfer pricing exposure for Track Record Period and the practical transfer pricing adjustment risk should be low.
In the year ended December 31, 2024 and the nine months ended September 30, 2025 and up to the Latest Practicable Date, we entered into certain Transfer Pricing Arrangements, primarily including the licensing of our literary works.
Business · p. 153
We carried out the Transfer Pricing Arrangements in line with the arm’s length principle.
Business · p. 153
During the Track Record Period and up to the Latest Practicable Date, we were not subject to any penalties, investigations, inquiries or transfer pricing audits conducted by local tax authorities in connection with the Transfer Pricing Arrangements.
Approximately 22% of our total revenue came from direct sales by our PRC subsidiary to overseas customers, while only approximately 10% involved sales by our PRC subsidiary to our Hong Kong or other overseas subsidiaries and subsequently to overseas customers.
Business · p. 165
We consider our overall transfer pricing tax risk to be relatively low.
We have engaged a tax services firm (the “Transfer Pricing Consultant”) to conduct transfer pricing analyses on intra-Group transactions during the Track Record Period in accordance with the OECD Transfer Pricing Guidelines and applicable transfer pricing rules and regulations in the Chinese mainland, Hong Kong, the Netherlands, the United States and the United Kingdom, and to provide transfer pricing reviews on intra-Group transactions.
Business · p. 125
Based on the transfer pricing review and analyses prepared in accordance with the representations made by and information provided by the Company, the Transfer Pricing Consultant is of the view that the Group as a whole was not exposed to the risk of underpayment of corporate income tax in the Chinese mainland, Hong Kong, the Netherlands, the United States and the United Kingdom where the relevant subsidiaries were located during the Track Record Period from the perspective of local applicable transfer pricing laws and regulations as well as the OECD Transfer Pricing Guidelines.
Business · p. 126
Our Directors confirm that during the Track Record Period and up to the Latest Practicable Date, we were not aware of any outstanding inquiry, audit, investigation or challenge by any tax authorities in relation to the intra-Group transactions.
Our domestic R&D entities, primarily responsible for R&D activities, grant technology IP rights to our certain overseas subsidiary as sales entity, and charge IP royalty fees for such grants.
Business · p. 219
Our transfer pricing advisor reviewed the intra-group transactions on annual basis and confirmed that the pricing of the intra-group transactions aligns with the arm’s length principle.
Business · p. 219
During the Track Record Period and up to the Latest Practicable Date, we had not received any audits, investigations or challenges from the relevant authorities in respect of such transactions.
During the Track Record Period, we have engaged, and are continuing to engage in the following intra-group transactions which can be broadly categorized into four categories, namely (i) purchases and sales of mineral products; (ii) purchases and sales of equipment and material; (iii) service provisions and (iv) financing arrangements.
Business · p. 218
We have engaged an independent transfer pricing tax consultant (the “Transfer Pricing Consultant”), to assess the reasonability of the terms of our intra-group transactions described above during the Track Record Period.
Business · p. 220
After considering the analysis results and reviewing the transfer pricing reports prepared by the Transfer Pricing Consultant, our Directors are of the view that the transfer pricing arrangements under the aforementioned intra-group transactions are considered arm’s length in nature, reasonable and in compliance with the applicable transfer pricing rules, guidance in all jurisdictions involved.
During the Track Record Period and up to the Latest Practicable Date, we entered into certain transfer pricing arrangements (“Transfer Pricing Arrangements”), primarily including intercompany loans and allocation of general and administrative expenses, and the transfer of interest in certain intellectual properties.
Business · p. 240
We carried out the Transfer Pricing Arrangements in line with our transfer pricing policy and followed the fundamental arm’s length principle as stated in the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations published by Organization for Economic Cooperation and Development.
Business · p. 241
During the Track Record Period and up to the Latest Practicable Date, we were not subject to any penalties, investigations, inquiries or transfer pricing audits conducted by local tax authorities in connection with the Transfer Pricing Arrangements.
During the same period, our international intra-group transactions mainly included: (i) software customization development services provided by Wanjing Xiangjing Technology (Chengdu) Co., Ltd. under the entrustment of Beijing 51world Digital Twin Technology Co., Ltd., ultimately completing service delivery to customers; and (ii) overseas orders undertaken by 51VR PTY Ltd., which entrusted Beijing 51world Digital Twin Technology Co., Ltd. to provide software development and technical support services (collectively referred to as the "Covered Transactions").
Business · p. 253
(i) the selection of appropriate transfer pricing methods (cost-plus method and profit split method) based on the functional and risk profiles of each party; (ii) comparability analyses demonstrating that the profit margins fall within the arm's length range; and (iii) value contribution analyses confirming that profit allocations reflect the functions performed and risks assumed by each party.
Generally, a mark-up of 3.5% to 5% is applied to the raw material price.
Business · p. 282
Therefore, the Transfer Pricing Consultant concluded that the transfer pricing of our intra-group transactions in 2024 and the six months ended June 30, 2025 complied with the arm's length principle.
Such deferred tax asset was attributable to deductible temporary differences arising mainly from the elimination of unrealized profits on intercompany transactions during the consolidation of our financial statements.
Since we have Covered Transactions among our operating entities, in preparation for the Listing, our Group has engaged an independent transfer pricing consultant (the “Transfer Pricing Consultant”), to conduct a transfer pricing review and to analyze the transfer pricing arrangements within our Group during the Track Record Period.
Business · p. 244
For the years ended December 31, 2022, 2023 and 2024, from a transfer pricing perspective, the total corporate income tax expense on the Transfer Pricing Adjustments of the Covered Entities are US$472,000, US$554,000 and US$110,000, primarily related to Guangzhou Sengong amounting to US$453,000, US$504,000 and nil, respectively, which were subsequently paid, with the insignificant remainders attributable to the other Covered Entities.
Business · p. 246
Balancing all the facts and in light of the foregoing, and having consulted the Transfer Pricing Consultant, our Directors are of the view that the transfer pricing arrangements of the Covered Entities in the Covered Transactions were consistent and in compliance with OECD Transfer Pricing Guidelines and the transfer pricing regulations of the jurisdictions where the Covered Entities are located during the Track Record Period in material aspects.
Based on the overall value chain of our Group, the positioning of 111 companies were categorized into the following types: (i) contract manufacturer, (ii) manufacturer bearing market risks; (iii) limited risk distributor; (iv) full risk distributor; (v) technical service provider; and (vi) operational service provider.
Business · p. 291
As a result, it was concluded that our Group’s risk of material transfer pricing adjustments and additional tax payments is considered low.
Business · p. 295
Given that the applied royalty rate of our major intercompany licensing arrangement ranged between 0.5% and 1%, all within the inter-quartile range, it was concluded that the Group’s intercompany trademark royalty arrangements during the Track Record Period were consistent with the arm’s length principle according to both OECD guidelines and local applicable laws and regulations.
We confirm that the transactions among the subsidiaries within our Group are implemented on an arm’s-length basis according to the transfer pricing guidelines for multinational enterprises and tax administrations (the “OECD Transfer Pricing Guidelines”) promulgated by the Organization for Economic Cooperation and Development (the “OECD”), an international organization of international cooperation.
Business · p. 270
the Transfer Pricing Adviser is of the view, and our Directors concur, that, during the Track Record Period and up to the Latest Practicable Date, the transfer pricing arrangements were consistent with the arm’s length principle under both OECD Transfer Pricing Guidelines and the applicable local laws and regulations related to transfer pricing in the relevant jurisdictions in all material respects, and the risk for our Group to conduct material transfer pricing adjustment and pay additional tax can be considered as low.