THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Chanjet Information Technology Company Limited (暢捷通信息技術股份有限公司), you should at once hand this circular to the purchaser or transferee or to the bank or stockbroker 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.

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暢捷通信息技術股份有限公司 CHANJET INFORMATION TECHNOLOGY COMPANY LIMITED*

(A joint stock company incorporated in the People’s Republic of China with limited liability)

(Stock code: 1588)

(1) DISCLOSEABLE AND CONNECTED TRANSACTIONS PROPOSED DISPOSAL AND CAPITAL INCREASE (2) CONNECTED TRANSACTIONS PROPOSED AMENDMENTS TO THE NON-COMPETITION AGREEMENT AND THE CONFIRMATION AND NOTICE OF THE EGM

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

Capitalized terms used in this cover page shall have the same meanings as those defined in the section headed “Definitions” in this circular.

A letter from the Board is set out on pages 1 to 19 of this circular. A letter from the Independent Board Committee is set out on pages 20 to 21 of this circular. A letter from China Everbright Capital, containing its advice and recommendations to the Independent Board Committee and the Independent Shareholders is set out on pages 22 to 39 of this circular.

A notice convening the EGM to be held at Meeting Room E103, Building 8, Central District of Yonyou Industrial Park (Beijing), 68 Beiqing Road, Haidian District, Beijing, the PRC at 2:00 p.m. on Friday, 30 December 2016, is set out on pages 69 to 72 of this circular.

A form of proxy for use at the EGM is enclosed and is also published on the website of the Stock Exchange (http://www.hkexnews.hk) and the website of the Company (http://www.chanjet.com). If you intend to appoint a proxy to attend the EGM, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon not less than 24 hours before the time fixed for holding the EGM or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending the EGM and voting in person if you so wish. Shareholders who intend to attend the EGM in person or by proxy should complete and return the reply slip in accordance with the instructions printed thereon on or before Saturday, 10 December 2016.

11 November 2016

For identification purposes only

CONTENTS

	Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE INDEPENDENT BOARD COMMITTEE. . . . . . . . . . . . . . . . . . . . . . . .	20
LETTER FROM CHINA EVERBRIGHT CAPITAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22
APPENDIX I – PRINCIPAL ASSUMPTIONS AND BASES OF PREPARATION OF
THE VALUATION REPORT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	40
APPENDIX II – SUMMARY OF THE VALUATION REPORT. . . . . . . . . . . . . . . . . . . . . .	41
APPENDIX III – LETTER FROM THE AUDITOR ON PROFIT FORECAST. . . . . . . . .	58
APPENDIX IV – LETTER FROM THE BOARD ON PROFIT FORECAST. . . . . . . . . . . .	60
APPENDIX V – GENERAL INFORMATION	61
NOTICE OF THE EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	69

– i –

DEFINITIONS

Unless the context otherwise requires, the following expressions in this circular shall have the following meanings:

“Amended Confirmation” the amended confirmation issued by Yonyou to the Company on 21 October 2016 to amend and restate the Confirmation
“associate(s)” has the meaning ascribed to it under the Listing Rules “Board” the board of Directors of the Company “Capital Increase” the proposed capital increase by Yonyou to Chanjet Payment unilaterally pursuant to the terms of the Capital Increase Agreement
“Capital Increase Agreement” the capital increase agreement entered into by the Company, Yonyou and Chanjet Payment on 21 October 2016 in relation to the Capital Increase
“Chanjet Payment” Beijing Chanjet Payment Technology Co., Ltd.* (北京暢捷通支付技術有限公司), a company established in the PRC on 29 July 2013 with limited liability and is owned by the Company and Yonyou as to 75.1% and 24.9%, respectively, as of the Latest Practicable Date
“Company”
Chanjet Information Technology Company Limited* (暢捷通信息技術股份有限公司), a joint stock limited company incorporated in the PRC with limited liability, whose H Shares are listed and traded on the Stock Exchange
“Confirmation” the non-competition confirmation issued by Yonyou to the Company on 11 April 2014 in relation to cloud services and payment services
“connected person(s)”
has the meaning ascribed to it under the Listing Rules
“Consideration”
the consideration for the Disposal
“Director(s)”
the director(s) of the Company
“Disposal” the proposed disposal of the Sale Interest by the Company to Yonyou pursuant to the terms of the Disposal Agreement
“Disposal Agreement” the disposal agreement entered into by the Company and Yonyou on 21 October 2016 in relation to the Disposal

– ii –

DEFINITIONS

“Domestic Share(s)” ordinary Share(s) of the Company’s capital, with a nominal value of RMB1.00 each, which are subscribed for and paid up in RMB and are unlisted Shares which are currently not listed or traded on any stock exchange
“EGM” the extraordinary general meeting of the Company to be held to consider and approve, among other things, the Disposal Agreement, the Capital Increase Agreement, the Supplemental Non-Competition Agreement, the Amended Confirmation and the transactions contemplated thereunder
“Ernst & Young” Ernst & Young
“Group”

the Company and its subsidiaries

“Hong Kong”

the Hong Kong Special Administrative Region of the PRC

“H Share(s)”

overseas listed foreign invested ordinary Share(s) in the share capital of the Company with a nominal value of RMB1.00 each, which is/are listed and traded on the Stock Exchange

“Independent Board Committee”

the independent board committee comprising all independent non-executive Directors, namely Mr. Liu Yunjie, Mr. Chen, Kevin Chien-wen and Mr. Lau, Chun Fai Douglas, which was established to advise the Independent Shareholders on the resolutions regarding the Disposal Agreement, the Capital Increase Agreement, the Supplemental Non-Competition Agreement, the Amended Confirmation and the transactions contemplated thereunder

“Independent Financial Adviser” or “China Everbright Capital”

China Everbright Capital Limited, licensed to carry on type 1 (dealing in securities), type 4 (advising on securities) and type 6 (advising on corporate finance) regulated activities under the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong), being the independent financial adviser of the Company to advise the Independent Board Committee and the Independent Shareholders on the Disposal Agreement, the Capital Increase Agreement, the Supplemental Non-Competition Agreement, the Amended Confirmation and the transactions contemplated thereunder

– iii –

DEFINITIONS

“Independent Shareholders”
Shareholders who are not required to abstain from voting on the relevant resolutions to be proposed at the EGM
“large and medium scale enterprise(s)”
large and medium scale enterprises in China with reference to the standard set by the Ministry of Industry and Information of the PRC, the National Bureau of Statistics of the PRC, the National Development and Reform Commission of the PRC and the Ministry of Finance of the PRC as businesses and sole proprietors whose annual revenue, number of employees or assets (or a combination of the three factors) exceeds certain prescribed levels, and are larger than MSEs
“Latest Practicable Date” 7 November 2016, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein
“Listing Rules”
the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, as amended, supplemented or modified from time to time
“Model Code”
the Model Code for Securities Transactions by Director of Listed Issuers as set out in Appendix 10 of the Listing Rules
“MSE(s)”
micro and small scale enterprise(s) in China with reference to the standard set by Ministry of Industry and Information of the PRC, the National Bureau of Statistics of the PRC, the National Development and Reform Commission of the PRC and the Ministry of Finance of the PRC as businesses and sole proprietors whose annual revenue, number of employees or assets (or a combination of the three factors) do not exceed certain prescribed levels, which include businesses in the construction industry with revenue up to RMB60,000,000 and businesses in the wholesale industry with revenue up to RMB50,000,000, etc.
“Non-Competition Agreement”
the non-competition agreement entered into by Yonyou, Mr. Wang Wenjing and the Company on 17 February 2014
“percentage ratio”

has the meaning ascribed to it under Rule 14A.77 of the Listing Rules

– iv –

DEFINITIONS

“PRC” or “China”

the People’s Republic of China, which for the purpose of this circular only, excludes Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan

“Proposed Amendments” the proposed amendments to the Non-Competition Agreement and the Confirmation
“Prospectus”

the prospectus of the Company dated 16 June 2014

“Restricted Business”
any business carried on or contemplated to be carried on by any member of the Group from time to time, namely, providing management software and services targeting MSEs, including but not limited to providing MSEs with accounting and business management tools to improve their business and developing public cloud platforms for such MSEs
“RMB” Renminbi, the lawful currency of the PRC
“Sale Interest”
the 55.82% equity interest in Chanjet Payment owned by the Company as of the Latest Practicable Date, which is proposed to be disposed by the Company to Yonyou pursuant to the Disposal Agreement
“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time
“Share(s)” the Domestic Share(s) and the H Share(s)
“Shareholder(s)” holders of the Share(s)
“Supervisor(s)” the supervisor(s) of the Company
“Supplemental Non-Competition the supplemental agreement entered into by Yonyou, Mr. Wang Agreement” Wenjing and the Company on 21 October 2016 to amend the NonCompetition Agreement
“Stock Exchange”

The Stock Exchange of Hong Kong Limited

– v –

DEFINITIONS

“Valuation” the valuation of the fair value of Chanjet Payment conducted by Beijing Jingwei Dong Yuan Assets Appraisal Co., Ltd.* (北京經緯東元資產評估有限公司)
“Valuation Date” 31 August 2016, being the benchmark date of the Valuation in the Valuation Report
“Valuation Report” the asset valuation report dated 10 October 2016 in relation to the Valuation
“WIND Consulting System” a leading large-scale financial and economics database in China, which provides frontier financial and securities data in, among others, stocks, fund, bond, foreign exchange, insurance, futures, derivatives, commodities, macro-economics and financial news

“Yonyou”

Yonyou Network Technology Co., Ltd.* (用友網絡科技股份有限公司), a joint stock limited company incorporated in the PRC on 18 January 1995 and a controlling Shareholder, the shares of which are listed and traded on the Shanghai Stock Exchange (上海證券交易所) (Stock Code: 600588)

For identification purposes only

– vi –

LETTER FROM THE BOARD

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暢捷通信息技術股份有限公司 CHANJET INFORMATION TECHNOLOGY COMPANY LIMITED*

(A joint stock company incorporated in the People’s Republic of China with limited liability)

(Stock code: 1588)

Non-executive Directors: Registered Office: Mr. Wang Wenjing Unit D, Building 20 Mr. Wu Zhengping 68 Beiqing Road Haidian District Executive Director: Beijing, 100094 Mr. Zeng Zhiyong The PRC Independent Non-executive Directors: Principal Place of Business in Hong Kong: Mr. Liu Yunjie 18/F, Tesbury Centre Mr. Chen, Kevin Chien-wen 28 Queen’s Road East Mr. Lau, Chun Fai Douglas Wanchai Hong Kong 11 November 2016

To the Shareholders

Dear Sir or Madam,

(1) DISCLOSEABLE AND CONNECTED TRANSACTIONS PROPOSED DISPOSAL AND CAPITAL INCREASE

(2) CONNECTED TRANSACTIONS PROPOSED AMENDMENTS TO THE NON-COMPETITION AGREEMENT AND THE CONFIRMATION AND NOTICE OF THE EGM

INTRODUCTION

Reference is made to the announcement of the Company dated 21 October 2016 in relation to the Disposal Agreement, the Capital Increase Agreement, the Supplemental Non-Competition Agreement, the Amended Confirmation and the transactions contemplated thereunder.

– 1 –

LETTER FROM THE BOARD

The purpose of this circular is to provide you with, among other things, (i) further details of the Disposal Agreement, the Capital Increase Agreement, the Supplemental Non-Competition Agreement, the Amended Confirmation and the transactions contemplated thereunder; (ii) the recommendation of the Independent Board Committee to the Independent Shareholders; (iii) the advice of the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders; (iv) the summary of the Valuation Report; (v) the notice of the EGM; and (vi) other information as required by the Listing Rules.

PROPOSED DISPOSAL AND CAPITAL INCREASE

Given that Chanjet Payment has continued to record loss since its establishment in July 2013, in particular, it recorded a loss of approximately RMB18,936,329 for 2014 and a loss of approximately RMB31,719,717 for 2015, and it is expected that it will continue to record loss for 2016. Therefore, in order for the Group to optimize its asset quality and to improve its profitability, (i) the Company and Yonyou entered into the Disposal Agreement on 21 October 2016, pursuant to which the Company has conditionally agreed to sell and Yonyou has conditionally agreed to acquire, the Sale Interest, representing 55.82% of the equity interest in Chanjet Payment at the Consideration of RMB195,560,849; and (ii) the Company, Yonyou and Chanjet Payment entered into the Capital Increase Agreement on 21 October 2016, pursuant to which, Yonyou has conditionally agreed to make a capital contribution to Chanjet Payment unilaterally in the amount of RMB100,000,000, among which, RMB57,087,091 shall be contributed to the registered capital of Chanjet Payment and the remaining RMB42,912,909 shall be contributed to the capital reserve of Chanjet Payment.

As of the Latest Practicable Date, Chanjet Payment was owned by the Company and Yonyou as to 75.1% and 24.9%, respectively. Upon completion of the Disposal and the Capital Increase, Chanjet Payment, whose registered capital will be increased from RMB200,000,000 to RMB257,087,091, will be owned by the Company and Yonyou as to approximately 15% and 85%, respectively and it will cease to be a subsidiary of the Company.

(1) The Disposal Agreement

The principal terms of the Disposal Agreement are set out below:

Date

21 October 2016

– 2 –

LETTER FROM THE BOARD

Parties

(i) The Company; and
(ii) Yonyou

Subject Matter

Pursuant to the Disposal Agreement, the Company has conditionally agreed to sell, and Yonyou has conditionally agreed to acquire, the Sale Interest, representing 55.82% of the equity interest in Chanjet Payment at the Consideration of RMB195,560,849.

The Consideration and the Payment

The Consideration for the Disposal is RMB195,560,849 in cash, which shall be payable in full by Yonyou to the designated bank account of the Company within ten (10) business days upon the approvals of all relevant regulatory authorities on the Disposal having been obtained and all conditions precedent, the details of which are set out in the paragraph headed “– Conditions Precedent” below, having been satisfied.

Basis of Determination of the Consideration

The Consideration was agreed between the Company as the vendor and Yonyou as the purchaser after arm’s length negotiations and on normal commercial terms with reference to, among other things, (i) the financial information of Chanjet Payment, the details of which are set out in the paragraph headed “– (3) Financial Information of Chanjet Payment” below; (ii) the fair value of approximately RMB350,341,900 of Chanjet Payment as of 31 August 2016, which was appraised by Beijing Jingwei Dong Yuan Assets Appraisal Co., Ltd. (北京經緯東元資產評估有限公司), an independent valuer; and (iii) the 55.82% equity interest in Chanjet Payment, which was proposed to be disposed by the Company to Yonyou pursuant to the Disposal Agreement. No control premium was built into the Consideration after arm’s length negotiations between the Company and Yonyou taking into consideration including, among others, the loss-making financial situation of Chanjet Payment and the Valuation of the fair value of Chanjet Payment. Further, Yonyou has more resources to develop Chanjet Payment, and by retaining 15% of the equity interest in Chanjet Payment after the Disposal and the Capital Increase, the Company could also benefit from the future growth of Chanjet Payment if Chanjet Payment becomes profitable in the future. Therefore, the Directors are of the view that the Consideration is fair and reasonable although no control premium was built into the Consideration.

The principal assumptions and the bases of preparation of the Valuation are set out in Appendix I attached hereto.

– 3 –

LETTER FROM THE BOARD

As the Valuation is prepared based on income approach, it constitutes a profit forecast under Rule 14.61 of the Listing Rules, and accordingly, the requirements under Rules 14.60A and 14.62 of the Listing Rules are applicable. Pursuant to Rule 14.62 of the Listing Rules, the Board has reviewed the principal assumptions and bases upon which the Valuation is based and is of the view that the profit forecast has been made after due and careful enquiries.

Ernst & Young, the auditors of the Company, has reviewed the accuracy of the arithmetical calculations of the discounted cash flow forecast underlying the Valuation, which does not involve adoption of accounting policies. Ernst & Young reported that the calculation of the discounted cash flow forecast underlying the Valuation has been properly compiled in all material aspects in accordance with the bases and assumptions approved by the Board.

The letters issued by Ernst & Young and the Board in relation to, among other things, the profit forecast on Chanjet Payment are set out in Appendix III and Appendix IV attached hereto, respectively.

Conditions Precedent

Pursuant to the Disposal Agreement, completion of the Disposal shall be conditional upon the satisfaction of all of the following conditions precedent:

(a) the Disposal Agreement and the Disposal contemplated thereunder having been approved by the directors of the Company and Yonyou at their respective board meetings;
(b) the Disposal Agreement, the Capital Increase Agreement and the Disposal and the Capital Increase contemplated thereunder having been approved by the Independent Shareholders at the EGM;
(c) the Proposed Amendments to the Non-Competition Agreement and the Confirmation having been approved by the Independent Shareholders at the EGM;
(d) the entering into of the Disposal Agreement and the Proposed Amendments to the Non-Competition Agreement and the Confirmation having complied with the relevant PRC and overseas laws and regulations and having obtained the approvals by and having made the necessary filings at (if applicable) the relevant regulatory authorities; and
(e) the Disposal having obtained the approvals from the relevant authorities (including but not limited to the People’s Bank of China) regulating Chanjet Payment.

As of the Latest Practicable Date, only the first condition precedent for the completion of the Disposal as mentioned above has been fully satisfied. Pursuant to the Disposal Agreement, neither party is entitled or intended to waive any of the abovementioned conditions precedent.

– 4 –

LETTER FROM THE BOARD

Completion of the Disposal

Completion of the Disposal shall take place upon the Sale Interest having been transferred from the Company to Yonyou and the registration procedures with the relevant administration for industry and commerce in respect of the Sale Interest having been completed pursuant to the Disposal Agreement.

Upon completion of the Disposal, the Company and Yonyou will be interested in 19.28% and 80.72%, respectively, of the entire equity interest in Chanjet Payment. Chanjet Payment will become a non-wholly owned subsidiary of Yonyou and it will cease to be a subsidiary of the Company upon completion of the Disposal.

(2) The Capital Increase Agreement

The principal terms of the Capital Increase Agreement are set out below:

Date

21 October 2016

Parties

(i) The Company;
(ii) Yonyou; and
(iii) Chanjet Payment

Subject Matter

Yonyou has conditionally agreed to make a capital contribution to Chanjet Payment unilaterally in the amount of RMB100,000,000, among which, RMB57,087,091 shall be contributed to the registered capital of Chanjet Payment and RMB42,912,909 shall be contributed to the capital reserve of Chanjet Payment.

Payment Terms

As of the Latest Practicable Date, the registered capital of Chanjet Payment is RMB200,000,000. Pursuant to the Capital Increase Agreement, Yonyou will make a capital contribution to Chanjet Payment unilaterally in the amount of RMB100,000,000, among which, RMB57,087,091 will be contributed to the registered capital of Chanjet Payment and the remaining RMB42,912,909 will be contributed to the capital reserve of Chanjet Payment.

– 5 –

LETTER FROM THE BOARD

Pricing

The amount of capital contribution and the amount of contribution to the registered capital of Chanjet Payment were determined after arm’s length negotiations among the parties based on, among other things, (i) the existing amount of registered capital of Chanjet Payment; (ii) the fair value of approximately RMB350,341,900 of Chanjet Payment as of 31 August 2016, which was appraised by Beijing Jingwei Dong Yuan Assets Appraisal Co., Ltd. (北京經緯東元資產評估有限公司), an independent valuer; and (iii) the capital requirement of Chanjet Payment.

Conditions Precedent

Pursuant to the Capital Increase Agreement, completion of the Capital Increase shall be conditional upon the satisfaction of all of the following conditions precedent:

(a) the Disposal Agreement having been executed and all conditions precedent under the Disposal Agreement having been satisfied, including, among other things, the Disposal Agreement and the transactions contemplated thereunder having been approved by the Independent Shareholders at the EGM;
(b) the Capital Increase Agreement and the Capital Increase having been approved by the directors of the Company and Yonyou at their respective board meetings;
(c) the Capital Increase Agreement and the Capital Increase having been approved by the Independent Shareholders at the EGM;
(d) the entering into of the Capital Increase Agreement having complied with the relevant PRC and overseas laws and regulations and having obtained the approvals by and made the necessary filings at (if applicable) the relevant regulatory authorities; and
(e) the Capital Increase having obtained the approvals from the relevant authorities (including but not limited to the People’s Bank of China) regulating Chanjet Payment.

As of the Latest Practicable Date, only the second condition precedent for the completion of the Capital Increase as mentioned above has been fully satisfied. Pursuant to the Capital Increase Agreement, none of the parties is entitled or intended to waive any of the abovementioned conditions precedent.

Completion of the Capital Increase

Completion of the Capital Increase shall take place upon the registration procedures with the relevant administration for industry and commerce in respect of the Capital Increase having been completed pursuant to the Capital Increase Agreement.

– 6 –

LETTER FROM THE BOARD

Upon completion of the Capital Increase, the registered capital of Chanjet Payment will be increased from RMB200,000,000 to RMB257,087,091 and the Company and Yonyou will be interested in approximately 15% and 85%, respectively, of the entire equity interest in Chanjet Payment.

(3) Financial Information of Chanjet Payment

According to the unaudited financial information of Chanjet Payment, the value of total assets and net assets of Chanjet Payment as of 30 June 2016 was RMB170,749,116.38 and RMB131,847,208.47, respectively.

Set out below is the revenue and net loss (before and after taxation) of Chanjet Payment for the six months ended 30 June 2016 and for the years ended 31 December 2014 and 2015:

	For the six months	For the year ended	For the year ended
Item	ended 30 June 2016	31 December 2015	31 December 2014
	(unaudited)	(audited)	(audited)
	RMB	RMB	RMB
Revenue	3,625,814.58	8,955,795.66	5,127,514.25
Net loss before taxation	15,607,213.06	31,719,716.92	18,936,328.51
Net loss after taxation	15,607,213.06	31,719,716.92	18,936,328.51

Note: the financial information set out above has been prepared by Chanjet Payment in accordance with China Accounting Standards for Business Enterprises.

Chanjet Payment recorded net loss for the six months ended 30 June 2016 and for the years ended 31 December 2014 and 2015, respectively, mainly due to its large costs in research and development, business operation, risk management and maintenance, whereas Chanjet Payment, as a newly developed company engaged in payment service business, who has obtained its payment service licence only in July 2014 and was thus entitled to providing internet payment service and bank card acquiring service as a non-financial institution thereafter, has limited ability to generate sufficient revenue to cover its operation costs at its initial stage of development. For the same reasons, Chanjet Payment is expected to continue to record net loss in the near future. According to the Valuation Report, the summary of which is set out in Appendix II of this circular, it is forecasted that Chanjet Payment will record net loss for the years ending 31 December 2016 and 31 December 2017.

– 7 –

LETTER FROM THE BOARD

(4) Shareholding Structure

The following chart illustrates the shareholding in Chanjet Payment as of the Latest Practicable Date:

==> picture [211 x 157] intentionally omitted <==

----- Start of picture text -----

Yonyou The Company
24.9% 75.1%
Chanjet
Payment
----- End of picture text -----

The following chart illustrates the shareholding in Chanjet Payment immediately upon the completion of the Disposal but prior to the completion of the Capital Increase:

==> picture [210 x 157] intentionally omitted <==

----- Start of picture text -----

Yonyou The Company
80.72% 19.28%
Chanjet
Payment
----- End of picture text -----

– 8 –

LETTER FROM THE BOARD

The following chart illustrates the shareholding in Chanjet Payment immediately upon the completion of the Capital Increase:

==> picture [210 x 157] intentionally omitted <==

----- Start of picture text -----

Yonyou The Company
85.0% 15.0%
Chanjet
Payment
----- End of picture text -----

(5) Financial Effects of the Disposal and the Capital Increase and Use of Proceeds

After completion of the Disposal Agreement and the Capital Increase Agreement, Chanjet Payment will cease to be a subsidiary of the Company, and its financial results, assets and liabilities will no longer be consolidated in the consolidated financial statements of the Group. Instead, the remaining 15% investment by the Company in Chanjet Payment will be treated as the investment in an associate in the consolidated statement of financial position of the Group. After completion of the Disposal and the Capital Increase, among the five directors of Chanjet Payment, the Company will continue to retain one director on the board of directors of Chanjet Payment. Despite that after the completion of the Disposal and the Capital Increase, the Company will have less than 20% shareholding interest and voting power in Chanjet Payment, the Company will still be able to exercise significant influence through both its shareholding in Chanjet Payment and the active participation of its nominated director on the board of directors of Chanjet Payment.

The profit from the Disposal and the Capital Increase shall be calculated with reference to the relevant financial information at the time of completion of the Disposal and the Capital Increase and the exact time of completion is not currently ascertainable. Based on the formula and assumptions as set out below, the Group is expected to record an unaudited profit of approximately RMB179.24 million as a result of the Disposal and the Capital Increase.

– 9 –

LETTER FROM THE BOARD

The unaudited profit of the Disposal is calculated based on the following formula:

unaudited = Consideration of + fair value of the – the expected net x the shareholding profit of the the Disposal[1] remaining asset value percentage Disposal shareholding of Chanjet in Chanjet in Chanjet Payment at Payment by Payment by the the time of the the Company Company after Disposal[3] before the the Disposal Disposal but before the Capital Increase[2]

The unaudited profit of the Capital Increase is calculated based on the following formula:

unaudited profit = total amount of x the shareholding – fair value of x (shareholding – shareholding of the Capital capital to be percentage Chanjet percentage percentage Increase contributed in Chanjet Payment at in Chanjet in Chanjet by Yonyou Payment by the time of Payment by the Payment by to Chanjet the Company the Capital Company after the Company Payment[4] after the Capital Increase[5] the Disposal but after the Capital Increase before Capital Increase) Increase

Notes:

The Consideration of the Disposal is approximately RMB195.56 million;
The fair value of the remaining shareholding in Chanjet Payment by the Company after the Disposal but before the Capital Increase is approximately RMB67.55 million, which is arrived at by multiplying the fair value of Chanjet Payment of approximately RMB350.34 million as at 31 August 2016 as appraised by Beijing Jingwei Dong Yuan Assets Appraisal Co., Ltd. by the remaining 19.28% shareholding in Chanjet Payment by the Company;
The expected net asset value of Chanjet Payment at the time of the Disposal is estimated with reference to the expected net asset value of Chanjet Payment as at 31 December 2016, which is approximately RMB111.68 million. Subject to various conditions precedent of the Disposal, including but not limited to, the approvals of the Disposal by the Shareholders at the EGM and the approvals from relevant authorities having been obtained, the Disposal is expected to complete by the first quarter of 2017. Given that the net asset value of Chanjet Payment as at 31 December 2016 is the sum that is capable of being estimated and as at a point of time closest to the time of completion of the Disposal, it will better reflect the net asset value of Chanjet Payment as at the time of completion of the Disposal as compared to the historical net asset value of Chanjet Payment. Nevertheless, the actual profit of the Disposal shall be determined with reference to, among others, the net asset value of Chanjet Payment as at the actual time of completion of the Disposal;
The total amount of capital to be contributed by Yonyou to Chanjet Payment amounts to RMB100.00 million;
The fair value of Chanjet Payment at the time of the Capital Increase is estimated with reference to the fair value of Chanjet Payment as at 31 August 2016 of approximately RMB350.34 million as appraised by Beijing Jingwei Dong Yuan Assets Appraisal Co., Ltd., which is the fair value that is capable of being estimated and as at a point of time closest to the time of the Capital Increase. Nevertheless, the actual profit of the Capital Increase shall be determined with reference to, among others, the fair value of Chanjet Payment as at the actual time of the Capital Increase.

– 10 –

LETTER FROM THE BOARD

The net proceeds from the Disposal and the Capital Increase is expected to be approximately RMB182.37 million after deducting the relevant expenses, among which, 70% of the net proceeds is intended to be used for development of software and cloud service business of the Group and 30% of the net proceeds is intended to be used for general working capital of the Group.

The aforementioned financial effects are for illustrative purposes only. Given that the completion of the Disposal and the Capital Increase is conditional upon the fulfillment of the relevant conditions precedent set out herein, the actual profit from the Disposal and the Capital Increase will be determined after being reviewed by the auditors of the Company upon the completion of such matters.

(6) Reasons for and Benefits of the Disposal Agreement and the Capital Increase Agreement

(i) The payment service industry in the PRC is highly competitive, regulated and restricted and is dominated by several market pioneers. Since its establishment in July 2013, Chanjet Payment has recorded an aggregate loss of RMB68.93 million as of 30 June 2016. According to the Valuation Report, which is subject to a number of assumptions as more particularly set out in Appendix I of this circular, including but not limited to, continuous operation and maintenance of current market competitiveness of Chanjet Payment, which requires continuous capital contribution and support, it is forecasted that Chanjet Payment will start to record net profit from 2018 and onward. However, development of payment service business, especially at its initial stage, requires large amount of capital contribution and support to maintain its continuing operation and development, which would be demanding and burdensome for the Group. Hence, the Disposal and the Capital Increase could help to release the financial pressure of the Company;
(ii) The net proceeds from the Disposal and the Capital Increase is expected to be approximately RMB182.37 million after deducting the relevant expenses. The Company will benefit from the increased cash from the proceeds of the Disposal and the Capital Increase by optimizing its asset structure and focusing more resources on developing software and cloud service business;
(iii) Based on the aforementioned analysis on the financial effects of the Disposal and the Capital Increase and use of proceeds, it is expected that the Company will record an unaudited profit of RMB179.24 million upon completion of the Disposal and the Capital increase (the actual profit will be determined after being reviewed by the auditors of the Company upon the completion of such matters);
(iv) It would be time-consuming and costly for the Group to manage and develop payment service business given that the Group has been mainly engaged and devoted in the business of providing financial and management services for MSEs, which is a different type of business from the payment service business;

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LETTER FROM THE BOARD

(v) After the Disposal and the Capital Increase, by retaining 15% equity interest in Chanjet Payment, the Company could better maintain its strategic relationship and develop business cooperation with Chanjet Payment in relation to, inter alia, incorporation of value-added payment services to be provided by Chanjet Payment such as offline acquiring, mobile payment and Internet payment into the software products provided by the Company to MSEs, which could enhance the market competitiveness of the software products of the Company; and
(vi) After the Disposal and the Capital Increase, Yonyou, which is larger in scale and has more financial resources than the Company, could provide more support to Chanjet Payment in terms of, among other things, brand, market channel, technology and financial resources. If Chanjet Payment becomes profitable in the future, the Company could also benefit from the future appreciation in the equity interest of Chanjet Payment after the Disposal and Capital Increase by retaining 15% equity interest in Chanjet Payment.

Based on the aforementioned, the Directors (excluding the independent non-executive Directors who will give their recommendation after taking into consideration the advice of the Independent Financial Adviser) are of the view that although the Disposal and the Capital Increase are not in the ordinary course of business of the Company, the Disposal Agreement and the Capital Increase Agreement have been entered into on normal commercial terms, are fair and reasonable and are in the interest of the Company and its Shareholders as a whole.

(7) Listing Rules Implications

Yonyou is the controlling Shareholder of the Company and is therefore a connected person of the Company as defined under Rule 14A.07 of the Listing Rules. Chanjet Payment, which is owned by Yonyou and the Company as to 24.9% and 75.1%, respectively, as of the Latest Practicable Date, is a connected person of the Company as defined under Rule 14A.07 of the Listing Rules. Accordingly, the Disposal and Capital Increase constitute connected transactions of the Company under Chapter 14A of the Listing Rules.

Pursuant to Rule 14A.81 of the Listing Rules, the transactions contemplated under the Disposal Agreement and the Capital Increase Agreement shall be aggregated. After such aggregation, one or more of the applicable percentage ratios in respect of the transactions contemplated under the Disposal Agreement and the Capital Increase Agreement exceed 5%, and thus, the Disposal Agreement, the Capital Increase Agreement and the transactions contemplated thereunder are subject to the reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

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LETTER FROM THE BOARD

In addition, the Disposal and the Capital Increase constitute a disposal of subsidiary of the Company under Chapter 14 of the Listing Rules. Pursuant to Rule 14.22 of the Listing Rules, the transactions contemplated under the Disposal Agreement and the Capital Increase Agreement shall be aggregated. After such aggregation, one or more of the applicable percentage ratios in respect of the transactions contemplated under the Disposal Agreement and the Capital Increase Agreement exceed 5% but are less than 25%, and thus, the transactions contemplated thereunder also constitute a discloseable transaction of the Company under Rule 14.06 of the Listing Rules.

Our Directors, Mr. Wang Wenjing, Mr. Wu Zhengping and Mr. Zeng Zhiyong, who are also directors or senior management members of Yonyou or its subsidiaries, are deemed to have material interests in the Disposal Agreement, the Capital Increase Agreement and the transactions contemplated thereunder, and have abstained from voting on the relevant resolutions of the Board approving the Disposal Agreement, the Capital Increase Agreement and the transactions contemplated thereunder. Save as disclosed above, none of other Directors has any material interest in such transactions and is required to abstain from voting on the relevant resolutions of the Board.

To the best of the Directors’ knowledge, information and belief, and having made all reasonable enquiries, other than the above disclosure, there is no other transaction which has to be aggregated with the transactions contemplated under the Disposal Agreement and the Capital Increase Agreement as required under Rule 14.22 or Rule 14A.81 of the Listing Rules.

PROPOSED AMENDMENTS TO THE NON-COMPETITION AGREEMENT AND THE CONFIRMATION

(1) The Non-Competition Agreement and the Confirmation

Yonyou, Mr. Wang Wenjing and the Company entered into the Non-Competition Agreement on 17 February 2014, pursuant to which, Yonyou and Mr. Wang Wenjing undertook, among other things, that they would not and would use their best endeavors to procure their respective associates (except for any member of the Group) not to, directly or indirectly, at any time during the relevant period (as defined in the Prospectus), carry on, engage in, invest in, participate in, attempt to participate in, render any services to, provide any financial support to or otherwise be involved in or interested in, whether alone or jointly with another person and whether directly or indirectly or on behalf of or to assist or act in concert with any other person, any business which is the same as, similar to or in competition or will compete or may compete with, directly or indirectly, the Restricted Business.

Further, Yonyou issued to the Company the Confirmation on 11 April 2014, pursuant to which, Yonyou undertook, among other things, that:

(i) neither of Yonyou or any of its associates (other than through the Company) is or will, directly or indirectly, engage in, operate or participate in any business that provides public cloud platforms or cloud services to MSEs; and

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LETTER FROM THE BOARD

(ii) neither of Yonyou or any of its associates (other than through the Company and its subsidiary, Chanjet Payment) is or will, directly or indirectly, engage, operate or participate in any business that competes or may compete with the payment services of non-financial institutions as defined under the Measures for the Administration of Payment Services of Non-Financial Institutions (《非金融機構支付服務管理辦法》, as amended from time to time).

(2) Backgrounds of the Proposed Amendments

Upon completion of the Disposal Agreement and the Capital Increase Agreement, the details of which are set out above, Yonyou and its associates will directly or indirectly engage, operate or participate in payment service business through Chanjet Payment and may thus constitute continuing breaches of the Non-Competition Agreement and the Confirmation. Given that the Company proposed to transfer the controlling shareholding in Chanjet Payment to Yonyou pursuant to the Disposal Agreement and the Capital Increase Agreement and that Yonyou and/ or its subsidiaries will engage in and operate payment service business upon the completion of the Disposal Agreement and the Capital Increase Agreement, the Company, Yonyou and Mr. Wang Wenjing proposed to enter into the Supplemental Non-Competition Agreement and the Confirmation shall be amended to the effect that payment service business shall be excluded from the Restricted Business under the Non-Competition Agreement and the relevant undertakings made by Yonyou under the Confirmation.

In considering these proposals, the Board (excluding the independent non-executive Directors who will give their recommendation after taking into consideration the advice of the Independent Financial Adviser) took into account a number of factors, including:

(i) that the principal business of the Company will no longer involve payment service business upon completion of the Disposal Agreement and the Capital Increase Agreement;
(ii) it would be impractical for Yonyou and Mr. Wang Wenjing to continue to comply with the original scope of the Restricted Business under the Non-Competition Agreement and the original undertakings in respect of the payment service business under the Confirmation, as the case may be, given that Chanjet Payment, which is principally engaged in payment service business, will become a non-wholly owned subsidiary of Yonyou;
(iii) the estimated time and costs required to be incurred by the management of the Company in monitoring the compliance with, and periodically reporting on, the non-competition restrictions in respect of an area of business which is no longer directly engaged by the Group;

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LETTER FROM THE BOARD

(iv) the Company will continue to benefit from the other protections provided under the Non-Competition Agreement (as supplemented by the Supplemental Non-Competition Agreement) and the Amended Confirmation, pursuant to which, Yonyou and Mr. Wang Wenjing and their respective associates will still be obliged to, inter alia, not to directly or indirectly, carry on or engage or be interested in the Restricted Business (other than the payment service business).

(3) The Supplemental Non-Competition Agreement and the Amended Confirmation

Supplemental Non-Competition Agreement

Yonyou, Mr. Wang Wenjing and the Company entered into the Supplemental Non-Competition Agreement on 21 October 2016, pursuant to which, the payment service business shall be excluded from the scope of Restricted Business under the Non-Competition Agreement.

The details of the abovementioned amendments are set out below:

Clause 1 (1 .1) – Definition of “Restricted Business”

Which originally read as:

“any business carried on or contemplated to be carried on by any member of the Group from time to time, namely, providing management software and services targeting MSEs, including but not limited to providing MSEs with accounting and business management tools to improve their business and developing public cloud platforms for such MSEs”

is proposed to be amended as follows:

“any business (other than the payment service business as defined under the Measures for the Administration of Payment Services of Non-Financial Institutions, as amended from time to time) carried on or contemplated to be carried on by any member of the Group from time to time, namely, providing management software and services targeting MSEs, including but not limited to providing MSEs with accounting and business management tools to improve their business and developing public cloud platforms for such MSEs”

The Supplemental Non-Competition Agreement is conditional upon, among other things, the approval of the Independent Shareholders at the EGM.

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LETTER FROM THE BOARD

Amended Confirmation

Further, Yonyou amended the Confirmation on 21 October 2016 to the effect that payment service business shall be excluded from the relevant undertakings made by Yonyou under the Confirmation.

The relevant part of the abovementioned amendments are set out below:

The Relevant Undertakings Made by Yonyou under the Confirmation

Which originally read as:

“Yonyou undertakes that in respect of the cloud service business, neither of Yonyou or any of its associates (other than through the Company) is or will, directly or indirectly, engage, operate or participate in any business that provides public cloud platforms and cloud services to MSEs.

Yonyou undertakes that neither of Yonyou or any of its associates (other than through the Company and its subsidiary, i.e. Chanjet Payment) is or will, directly or indirectly, engage, operate or participate in any business that competes or may compete with the payment services of non-financial institutions as defined under the Measures for the Administration of Payment Services of Non-Financial Institutions, as amended from time to time.”

Is proposed to be amended as follows:

The Amended Confirmation is conditional upon, among other things, the approval of the Independent Shareholders at the EGM.

(4) Reasons for and Benefits of the Supplemental Non-Competition Agreement and the Amended Confirmation

In light of the reasons stated in the section headed “– (2) Backgrounds of the Proposed Amendments” above, subject to the approvals of the Independent Shareholders at the EGM and completion of the proposed Disposal and the Capital Increase, the Directors (excluding the independent non-executive Directors who will give their recommendation after taking into consideration the advice of the Independent Financial Adviser) consider that although the Proposed Amendments are not in the ordinary course of business of the Company, the Supplemental Non-Competition Agreement and the Amended Confirmation are entered into on normal commercial terms, are fair and reasonable and are in the interest of the Company and its Shareholders as a whole.

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LETTER FROM THE BOARD

(5) Listing Rules Implications

As both Yonyou and Mr. Wang Wenjing are controlling Shareholders of the Company, the Proposed Amendments to the Non-Competition Agreement and the Confirmation constitute connected transactions of the Company under Chapter 14A of the Listing Rules which are subject to the reporting, announcement and Independent Shareholders’ approval requirements under the Listing Rules.

Our Directors, Mr. Wang Wenjing, Mr. Wu Zhengping and Mr. Zeng Zhiyong, who are also directors or senior management members of Yonyou or its subsidiaries, are deemed to have material interests in the Supplemental Non-Competition Agreement and the Amended Confirmation, and have abstained from voting on the relevant resolution of the Board approving the Supplemental Non-Competition Agreement and the Amended Confirmation. Save as disclosed above, none of other Directors has any material interest in such transactions and is required to abstain from voting on the relevant resolutions of the Board.

INFORMATION ABOUT THE PARTIES

The Company

The Company is a leading provider of enterprise software and services designed for MSEs in China. The core business of the Company is to develop and provide software and services designed to satisfy the informatization needs of MSEs.

Youyou

Yonyou, which is a leading solutions and professional service provider for large and medium scale enterprises and organizations in China and our controlling shareholder, was established in January 1995 and listed on the Shanghai Stock Exchange in May 2001.

Chanjet Payment

Chanjet Payment is principally engaged in internet payment, bank card acquiring business, technology development and software development.

In respect of the payment services, Chanjet Payment obtained the payment services licence of non-financial institution issued by the People’s Bank of China, which is valid from 10 July 2014 to 9 July 2019. Commencing from 10 July 2014, Chanjet Payment was entitled to providing internet payment service and bank card acquiring service nationwide as a non-financial institution.

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LETTER FROM THE BOARD

Mr . Wang Wenjing

Mr. Wang Wenjing is the ultimate controlling Shareholder, chairman of the Board and a non-executive Director. He is also one of the covenantors under the Non-Competition Agreement and the Supplemental Non-Competition Agreement.

RECOMMENDATION

Based on its views set out above, the Board (other than the independent non-executive Directors whose opinions and recommendations are contained in the letter from the Independent Board Committee, the text of which is set out on pages 20 to 21 of this circular) recommends that the Independent Shareholders vote in favour of the resolutions in respect of the Disposal Agreement, the Capital Increase Agreement, the Supplemental Non-Competition Agreement, the Amended Confirmation and the transactions contemplated thereunder to be proposed at the EGM.

Your attention is drawn to the letter from the Independent Board Committee to the Independent Shareholders, the text of which is set out on pages 20 to 21 of this circular. Your attention is also drawn to the letter from China Everbright Capital which contains its advice to the Independent Board Committee and the Independent Shareholders, the text of which is set out on pages 22 to 39 of this circular. The Independent Board Committee, having taken into account the advice of China Everbright Capital, considers that although the proposed Disposal, Capital Increase and the Proposed Amendments are not in the ordinary and usual course of business of the Company, the Disposal Agreement, the Capital Increase Agreement, the Supplemental Non-Competition Agreement, the Amended Confirmation and the transactions contemplated thereunder are on normal commercial terms, and the terms and conditions therein are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Accordingly, the Independent Board Committee recommends that the Independent Shareholders vote in favour of the resolutions in respect of the Disposal Agreement, the Capital Increase Agreement, the Supplemental Non-Competition Agreement, the Amended Confirmation and the transactions contemplated thereunder to be proposed at the EGM.

EGM

The EGM will be held at Meeting Room E103, Building 8, Central District of Yonyou Industrial Park (Beijing), 68 Beiqing Road, Haidian District, Beijing, the PRC at 2:00 p.m. on Friday, 30 December 2016. A notice to convene the EGM is set out on pages 69 to 72 of this circular.

At the EGM, ordinary resolutions will be proposed to approve the Disposal Agreement, the Capital Increase Agreement, the Supplemental Non-Competition Agreement, the Amended Confirmation and the transactions contemplated thereunder.

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LETTER FROM THE BOARD

As of the Latest Practicable Date, Yonyou and its associates, who directly and indirectly hold 153,588,258 Shares (representing approximately 70.72% of the issued share capital of the Company), will abstain from voting on the resolutions in relation to the Disposal Agreement, the Capital Increase Agreement, the Supplemental Non-Competition Agreement, the Amended Confirmation and the transactions contemplated thereunder. Yonyou and its associates were entitled to control the voting rights in respect of their Shares in the Company.

To the best of the Directors’ knowledge, information and belief, and having made all reasonable enquiries, other than Yonyou and its associates, no other Shareholder has a material interest in the aforementioned transactions to be considered and approved at the EGM, and therefore no other Shareholder will be required to abstain from voting on the resolutions to consider and approve such transactions at the EGM.

PROCEDURES FOR VOTING AT THE EGM

According to Rule 13.39(4) of the Listing Rules, the vote of Shareholders at the EGM will be taken by poll.

ADDITIONAL INFORMATION

Your attention is also drawn to the letter from the Independent Board Committee and the letter from China Everbright Capital to the Independent Board Committee and the Independent Shareholders set out in this circular.

For and on behalf of the Board

Chanjet Information Technology Company Limited* Wang Wenjin Chairman

For identification purposes only

– 19 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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暢捷通信息技術股份有限公司 CHANJET INFORMATION TECHNOLOGY COMPANY LIMITED*

(A joint stock company incorporated in the People’s Republic of China with limited liability)

(Stock code: 1588)

11 November 2016

To the Independent Shareholders

Dear Sir or Madam,

(1) DISCLOSEABLE AND CONNECTED TRANSACTIONS PROPOSED DISPOSAL AND CAPITAL INCREASE (2) CONNECTED TRANSACTIONS PROPOSED AMENDMENTS TO THE NON-COMPETITION AGREEMENT AND THE CONFIRMATION

We refer to the circular of the Company dated 11 November 2016 (the “ Circular ”) of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the Circular unless the context otherwise requires.

We have been appointed by the Board as the Independent Board Committee to consider and advise the Independent Shareholders in respect of the Disposal Agreement, the Capital Increase Agreement, the Supplemental Non-Competition Agreement, the Amended Confirmation and the transactions contemplated thereunder, the details of which are set out in the letter from the Board on pages 1 to 19 of the Circular.

China Everbright Capital has been appointed to advise the Independent Shareholders and the Independent Board Committee in respect of the Disposal Agreement, the Capital Increase Agreement, the Supplemental Non-Competition Agreement, the Amended Confirmation and the transactions contemplated thereunder. Details of the advice from China Everbright Capital, together with the principal factors taken into consideration in arriving at such advice, are set out on pages 22 to 39 of the Circular.

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having taken into account the terms of the Disposal Agreement, the Capital Increase Agreement, the Supplemental Non-Competition Agreement and the Amended Confirmation and the advice of China Everbright Capital, we are of the opinion that although the proposed Disposal, Capital Increase and the Proposed Amendments are not in the ordinary and usual course of business of the Company, the Disposal Agreement, the Capital Increase Agreement, the Supplemental Non-Competition Agreement, the Amended Confirmation and the transactions contemplated thereunder are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole.

We, therefore, recommend that you vote in favor of the resolutions to be proposed at the EGM to approve the Disposal Agreement, the Capital Increase Agreement, the Supplemental Non-Competition Agreement, the Amended Confirmation and the transactions contemplated thereunder.

Yours faithfully,

For and on behalf of the Independent Board Committee of

Chanjet Information Technology Company Limited*

Liu Yunjie Chen, Kevin Chien-wen Lau, Chun Fai Douglas Independent non-executive Director Independent non-executive Director Independent non-executive Director

For identification purposes only

– 21 –

LETTER FROM CHINA EVERBRIGHT CAPITAL

The following is the full text of a letter of advice from China Everbright Capital Limited to the Independent Board Committee and the Independent Shareholders prepared for the purpose of inclusion in this circular.

11 November 2016

To the Independent Board Committee and the Independent Shareholders of Chanjet Information Technology Company Limited

Dear Sir or Madam,

(1) DISCLOSEABLE AND CONNECTED TRANSACTIONS PROPOSED DISPOSAL AND CAPITAL INCREASE (2) CONNECTED TRANSACTION PROPOSED AMENDMENTS TO THE NON-COMPETITION AGREEMENT AND THE CONFIRMATION

I . INTRODUCTION

We refer to our engagement as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to (i) the Proposed Disposal and the Capital Increase; and (ii) the Proposed Amendments to the Non-Competition Agreement and the Confirmation (“ Proposed Amendments ”), details of which are set out in the letter from the Board (the “ Letter from the Board ”) contained in this circular (the “ Circular ”) dated 11 November 2016 issued by the Company, of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the Circular unless the context otherwise requires.

Reference is made to the announcement (“ Announcement ”) of the Company dated 21 October 2016, in relation to, among other things, (i) the Disposal Agreement entered into by the Company and Yonyou on 21 October 2016, pursuant to which the Company has conditionally agreed to sell and Yonyou has conditionally agreed to acquire, the Sale Interest, representing 55.82% of the equity interest in Chanjet Payment, at the Consideration of RMB195,560,849; and (ii) the Capital Increase Agreement entered into between the Company, Yonyou and Chanjet Payment on 21 October 2016, pursuant to which, Yonyou has conditionally agreed to make a capital contribution to Chanjet Payment unilaterally in the amount of RMB100,000,000, among which, RMB57,087,091 shall be contributed to the registered capital of Chanjet Payment and the remaining RMB42,912,909 shall be contributed to the capital reserve of Chanjet Payment.

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LETTER FROM CHINA EVERBRIGHT CAPITAL

As stated in the Letter from the Board, as at the Latest Practicable Date, Chanjet Payment is owned by the Company and Yonyou as to 75.1% and 24.9%, respectively. Upon completion of the Proposed Disposal and Capital Increase, Chanjet Payment, whose registered capital will be increased from RMB200,000,000 to RMB257,087,091, will be owned by the Company and Yonyou as to approximately 15.0% and 85.0%, respectively and it will cease to be a subsidiary of the Company.

Yonyou is the controlling Shareholder of the Company and is therefore a connected person of the Company as defined under Rule 14A.07 of the Listing Rules. Chanjet Payment, which is owned by the Company and Yonyou as to 75.1% and 24.9%, respectively, as of the Latest Practicable Date, is a connected person of the Company as defined under Rule 14A.07 of the Listing Rules. Accordingly, the Proposed Disposal and the Capital Increase constitutes connected transactions of the Company under Chapter 14A of the Listing Rules.

Pursuant to Rule 14A.81 of the Listing Rules, the transactions contemplated under the Disposal Agreement and the Capital Increase Agreement shall be aggregated. Since one or more of the applicable percentage ratios in respect of the transactions contemplated under the Disposal Agreement and Capital Increase Agreement, when aggregated, exceed 5%, the Disposal Agreement and Capital Increase Agreement and the transactions contemplated thereunder are subject to, among other things, the reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

Reference is also made to the Announcement, in relation to, among other things, the Supplemental Non-Competition Agreement and the Amended Confirmation entered into by Yonyou, Mr. Wang Wenjing and the Company on 21 October 2016, pursuant to which, the payment service business shall be excluded from the Restricted Business under the Non-Competition Agreement and the relevant undertakings made by Yonyou under the Confirmation.

As both Yonyou and Mr. Wang Wenjing are controlling Shareholders of the Company, the Proposed Amendments to the Non-Competition Agreement and the Confirmation constitute connected transactions under Chapter 14A of the Listing Rules which are subject to reporting, announcement and Independent Shareholders’ approval requirements under the Listing Rules.

The Independent Board Committee, comprising all of the three independent non-executive Directors, has been formed to advise the Independent Shareholders in relation to (i) the Proposed Disposal and the Capital Increase; and (ii) the Proposed Amendments. We, China Everbright Capital, have been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

– 23 –

LETTER FROM CHINA EVERBRIGHT CAPITAL

During the past two years, Mr. Alvin Kam, for and on behalf of China Everbright Capital, signed the opinion letter from the independent financial adviser contained in the Company’s circular published on 21 May 2015 in respect of the connected transaction between the Company and Yonyou. The past engagement was limited to providing independent advisory services to Independent Board Committee and Independent Shareholders pursuant to the Listing Rules. Apart from normal professional fees for our services to the Company in connection with the engagement described above, no arrangement exists whereby we will receive any fees and benefits from the Group, Yonyou or any of their respective associates. As at the Latest Practicable Date, there were no relationships or interests between (a) China Everbright Capital and (b) the Group, Yonyou or any of their respective associates that could reasonably be regarded as a hindrance to our independence as defined under Rule 13.84 of the Listing Rules to act as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of (i) the Proposed Disposal and Capital Increase; and (ii) the Proposed Amendments as detailed in the Circular.

BASIS OF OUR OPINION

In formulating our advice and recommendation, we have reviewed, among the other things, (i) the Disposal Agreement and Capital Increase Agreement; (ii) the Supplemental Non-Competition Agreement and the Amended Confirmation; (iii) the unaudited interim report for the six months ended 30 June 2016 of the Company (the “ 2016 Interim Report ”) and the audited annual reports for the years ended 31 December 2014 and 2015 of the Company (the “ 2015 Annual Reports ”); (iv) the unaudited interim financial statements for the six months ended 30 June 2016 (the “ Chanjet Payment 2016 Interim Financial Statements ”) and the audited financial statements of Chanjet Payment for the years ended 31 December 2014 and 2015 (the “ Chanjet Payment 2015 Financial Statements ”); (v) the 2016 Interim Report of Yonyou and 2015 Annual Reports of Yonyou; (vi) the valuation report of Chanjet Payment dated 10 October 2016 (the “ Valuation Report ”) issued by Beijing Jingwei Dong Yuan Assets Appraisal Co. Ltd. (北京經緯東元資產評估有限公司) (the “ Valuer ”); and (vii) the Announcement. Furthermore, we have discussed with the Valuer in relation to the valuation method adopted and the assumptions used in arriving at the valuation of Chanjet Payment.

We have relied on the information and facts supplied, and the opinions expressed, by the management of the Company (“ Management ”) and have assumed that such information, facts and opinions are true and accurate. We have also sought and received confirmation from the Management that no material facts have been omitted from the information supplied and opinions expressed to us. However, we have not conducted any independent investigation into the business, operations or financial condition of the Group. We have assumed that all statements and representations made or referred to in the Circular were accurate at the time when they were made and are true at the date of the Circular.

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LETTER FROM CHINA EVERBRIGHT CAPITAL

We consider we have reviewed sufficient information to reach an informed view, to justify reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our recommendation.

PRINCIPAL FACTORS AND REASONS TAKEN INTO ACCOUNT

In formulating our view on (i) the Proposed Disposal and the Capital Increase; and (ii) the Proposed Amendments, we have taken into consideration the principal factors and reasons as set out below. In reaching our conclusion, we have considered the results of the analysis in light of each other and ultimately reached our opinion based on the results of all analysis taken as a whole.

(A) Background information of the relevant parties

Information of the Company

Set out below are the key financial figures of the Group extracted from (i) the management accounts, (ii) 2015 Annual Reports and (iii) 2016 Interim Report of the Group for the two years ended 31 December 2014 and 2015 and the six months ended 30 June 2016 (the “ Track Record Period ”), which were prepared in accordance with the International Financial Reporting Standards:

	For the year	ended	For the six months	ended
	31 December		30 June
	2014	2015	2015	2016
	RMB’000	RMB’000	RMB’000	RMB’000
Revenue	335,075	345,796	189,456	233,654
Sale of software	301,888	302,093	170,096	206,782
Rendering of services	31,088	42,986	18,898	26,579
Product support	20,070	25,903	13,625	17,285
Cloud service business	457	5,664	691	4,069
Payment service business	4,226	8,796	3,408	3,624
Others	6,335	2,623	1,174	1,601
Product sales	2,099	717	462	293
Profit/(loss) for the period,
attributable to the Company	101,640	(72,617)	54,480	(40,566)

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LETTER FROM CHINA EVERBRIGHT CAPITAL

Below is a brief analysis on the financial performances during the Track Record Period of the Group.

i. The Group recorded a revenue of approximately RMB233.65 million for the first half of 2016, representing an increase of approximately 23.0% as compared with the same period in 2015, of which the revenues generated from sales of software and rendering of services increased by approximately 22.0% and 41.0%, respectively. Among the revenue generated from rendering of services, the revenue generated from cloud service business was approximately RMB4.07 million, representing an increase of approximately 489.0% as compared with the same period of last year; and the revenue generated from payment service business was approximately RMB3.62 million, representing a mere increase of approximately 6.0% as compared with the same period of last year;
ii. The revenue of the Group amounted to approximately RMB345.80 million for the year ended 31 December 2015, representing an increase of approximately 3.0% as compared to that of 2014 with approximately RMB335.08 million. The revenue growth was mainly due to the increase in service revenue, including the service income generated from cloud service business and payment service business, which increased by approximately 1,139.0% and 108.0% respectively;
iii. As shown above, in terms of revenue, the service income contributed from the cloud service business increased more significantly during the Track Record Period compared to that of payment service business;
iv. The Group recorded loss attributable to owners of the parent of approximately RMB40.57 million for the first half of 2016, as compared with the profit attributable to owners of the parent of approximately RMB54.48 million for the same period of last year. The loss was mainly attributable to the increase in the costs of Employee Trust Benefit Scheme and research & development (“ R&D ”), operation, promotion and maintenance of cloud service business;
v. The loss attributable to the owners of the parent was approximately RMB72.62 million for the year ended 31 December 2015 as compared with the profit attributable to the owners of the parent of approximately RMB101.64 million for the previous year. The loss was primarily caused by the increased costs of Employee Trust Benefit Scheme and increased input in operation and R&D of cloud services business.

Background of Chanjet Payment

Chanjet Payment is principally engaged in internet payment, bank card acquiring business, technology development and software development.

– 26 –

LETTER FROM CHINA EVERBRIGHT CAPITAL

In respect of the payment services, Chanjet Payment obtained the third party payment service license (the “ Payment Clearance Operator License ”) of non-financial institution issued by the People’s Bank of China, with effect from 10 July 2014 to 9 July 2019. Commencing from 10 July 2014, Chanjet Payment was entitled to providing (i) internet payment service and (ii) bank card acquiring service nationwide as a non-financial institution.

Set out below are the key financial figures of Chanjet Payment extracted from Chanjet Payment 2015 Financial Statements and Chanjet Payment 2016 Interim Financial Statements, which were prepared in accordance with the China Accounting Standards for Business Enterprises:

	For the year	ended	For the six months ended	For the six months ended
	31 December		30	June
	2014	2015	2015	2016
	(Audited)	(Audited)	(Unaudited)	(Unaudited)
	RMB’000	RMB’000	RMB’000	RMB’000
Revenue	5,128	8,956	3,563	3,626
Net loss after taxation	18,936	31,720	11,759	15,607

According to the Chanjet Payment 2015 Financial Statements and Chanjet Payment 2016 Interim Financial Statements, Chanjet Payment experienced a deteriorating loss for the year (i) from approximately RMB18.94 million in 2014 to approximately RMB31.72 million in 2015 and (ii) from approximately RMB11.76 million for the first half of 2015 to approximately RMB15.61 million for the first half in 2016.

Background of Yonyou

Yonyou, a leading solutions and professional service provider for large and medium scale enterprises and organizations in China, was established in January 1995 and listed on the Shanghai Stock Exchange in May 2001.

Set out below are the key financial figures of the Yonyou extracted from 2015 Annual Reports and the 2016 Interim Report of Yonyou, which were prepared in accordance with the China Accounting Standards for Business Enterprises:

	December	December	30 June
	2014	2015	2016
	(Audited)	(Audited)	(Unaudited)
	RMB’000	RMB’000	RMB’000
Net assets	4,394,812	6,062,707	5,731,764

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LETTER FROM CHINA EVERBRIGHT CAPITAL

With reference to the financial position of Yonyou as at 31 December 2014 and 2015 and 30 June 2016, the net assets for the respective dates of Yonyou, with over RMB4.39 billion, were consistently higher than that of the Group, with less than RMB1.30 billion. As such, it implies that Yonyou is larger in scale and can offer more financial resources to Chanjet Payment than that of the Group.

Background of Mr. Wang Wenjing

Mr. Wang Wenjing is the ultimate controlling Shareholder of the Company, a non-executive Director and chairman of the Board. He is also one of the covenanters under the Non-Competition Agreement and the Supplemental Non-Competition Agreement.

(B) Reasons for and benefits of Proposed Disposal and Capital Increase

As advised by the Management and discussed in this Letter from the Board, we noted that the following reasons for and benefits of entering into the Disposal Agreement and Capital Increase Agreement:

(i) The payment service industry in the PRC is highly competitive, regulated and restricted and is dominated by several market pioneers. Since its establishment in July 2013, Chanjet Payment has recorded an aggregate loss of RMB68.93 million as of 30 June 2016. According to the Valuation Report, which is subject to a number of assumptions as more particularly set out in Appendix I of this circular, including but not limited to, continuous operation and maintenance of current market competitiveness of Chanjet Payment, which requires continuous capital contribution and support, it is forecasted that Chanjet Payment will start to record net profit from 2018 and onward. However, development of payment service business, especially at its initial stage, requires large amount of capital contribution and support to maintain its continuing operation and development, which would be demanding and burdensome for the Group. Hence, the Disposal and the Capital Increase could help to release the financial pressure of the Company;
(ii) The net proceeds from the Disposal and the Capital Increase is expected to be approximately RMB182.37 million after deducting the relevant expenses. The Company will benefit from the increased cash from the proceeds of the Disposal and the Capital Increase by optimizing its asset structure and focusing more resources on developing software and cloud service business;
(iii) Based on the aforementioned analysis on the financial effects of the Disposal and the Capital Increase and use of proceeds, it is expected that the Company will record an unaudited profit of RMB179.24 million upon completion of the Disposal and the Capital increase (the actual profit will be determined after being reviewed by the auditors of the Company upon the completion of such matters);

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LETTER FROM CHINA EVERBRIGHT CAPITAL

(iv) It would be time-consuming and costly for the Group to manage and develop payment service business given that the Group has been mainly engaged and devoted in the business of providing financial and management services for MSEs, which is a different type of business from the payment service business;
(v) After the Disposal and the Capital Increase, by retaining 15% equity interest in Chanjet Payment, the Company could better maintain its strategic relationship and develop business cooperation with Chanjet Payment in relation to, inter alia, incorporation of value-added payment services to be provided by Chanjet Payment such as offline acquiring, mobile payment and Internet payment into the software products provided by the Company to MSEs, which could enhance the market competitiveness of the software products of the Company; and
(vi) After the Disposal and the Capital Increase, Yonyou, which is larger in scale and has more financial resources than the Company, could provide more support to Chanjet Payment in terms of, among other things, brand, market channel, technology and financial resources. If Chanjet Payment becomes profitable in the future, the Company could also benefit from the future appreciation in the equity interest of Chanjet Payment after the Disposal and Capital Increase by retaining 15% equity interest in Chanjet Payment.

In addition to the above, we have also considered the following factors:

i. As demonstrated in the section headed “Background of Chanjet Payment”, payment services business continuously generated losses during the Track Record Period;
ii. Based on our review of the Group’s 2016 Interim Report and management record, the Group has focused its efforts in R&D and operation spending on cloud services business. As per our discussion with the Management, they expect to continue contributing more R&D and operating expenses in cloud service business. We also noted that R&D costs in cloud services business represented approximately 43.0% in the first half of 2015 and approximately 60.0% in the first half of 2016. The growth in R&D costs on cloud service business in the first half of 2016 increased by approximately 69.4% from approximately RMB28.39 million in the first half of 2015 to approximately RMB48.08 million for the same period in 2016. Although the Company has increased R&D costs on cloud service business during the Track Record Period, the Management expected that the R&D costs that contributed to cloud service business will remain stable in the coming years. The Company will divert more of its funding to cover the increasing expense in operating, promotion and maintenance of cloud service business as the Company aims to maintain its leading position in the cloud service business market;

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LETTER FROM CHINA EVERBRIGHT CAPITAL

iii. Upon the completion, the Group will receive in cash of approximately RMB195.56 million, or a net proceeds of approximately RMB182.37 million after deducting relevant expenses, which would have a positive impact on the Group’s cash flow and liquidity, the net proceeds is intended to be used for the development of software and cloud business of the Group and/ or general working capital of the Group;
iv. The Group would record a gain of approximately RMB179.24 million. Such gain is estimated based on the Consideration of the Proposed Disposal and Capital Increase, the fair value of Chanjet Payment as at 31 August 2016 (“ Valuation Date ”) and the expected unaudited net asset book value of Chanjet Payment as of 31 December 2016, which would have a positive impact on the Group’s profitability;
v. We have discussed with the Management and reviewed relevant internal management record and understand that third party payment service business has been a low margin business for the Group, except for several market pioneers, which have successfully dominated the market. Chanjet Payment started to engage in this business since 2013. As most of the customers have already been captured by other payment companies since 2011, Chanjet Payment has to put in more efforts to secure its market shares;
vi. the PRC government has issued more stringent regulation requirements in 2015 and the first half of 2016, such as “The Notice on the improving the pricing mechanism of bank card handling fee” (關於完善銀行卡手續費定價機制的通知) jointly promulgated by China National Development and Reform Commission (中華人民共和國國家發展和改革委員會) and the People’s Bank of China (中國人民銀行) in 2016 to lower the handling fee charged by the operators. Amid the fierce competition in the market and the recent stringent regulatory requirements, it has become increasingly more difficult for Chanjet Payment to improve its profitability;
vii. In view of the fact that (i) Yonyou owns the largest distributor and service network of management software in China with a larger customer base of over 2 million customers in different industries according to the 2015 Annual Reports of Yonyou; and (ii) Yonyou is larger in scale by having significantly more net assets as at 30 June 2016 compared to that of the Group. Youyou is able to provide more financial resources and other support such as large and medium scale enterprises customer base to Chanjet Payment for its development;
viii. Upon the completion of the Proposed Disposal and Capital Increase, the Company will retain 15.0% equity interest in Chanjet Payment. Despite the loss making track record, the Management is of the view that there will still be synergies between the Group’s software products and payment services of Chanjet Payment, for example, incorporation of value-added payment services to be provided by Chanjet Payment such as offline acquiring, mobile payment and Internet payment into the software products provided by the Company to MSEs; and

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LETTER FROM CHINA EVERBRIGHT CAPITAL

ix. The Directors considered that the Proposed Disposal and Capital Increase are not in the ordinary course of business of the Company.

Therefore, we are of the view that the Proposed Disposal and Capital Increase, although not in the ordinary course of business in the Company, are fair and reasonable and were entered into in the interest of the Company and the Shareholders as a whole.

(C) Principal terms of the Disposal Agreement and Capital increase Agreement

1. Principal terms in relation to the Disposal Agreement

The Consideration and the Payment

The consideration for the Proposed Disposal (“ Consideration ”) is RMB195,560,849, which shall be payable in full by Yonyou to the designated bank account of the Company within ten (10) business days upon the approvals of all relevant authorities on the Proposed Disposal having been obtained and all conditions precedent. We also noted that the Consideration was 55.82% of the fair value of RMB350.34 million of Chanjet Payment as at the Valuation Date stated on the Valuation Report.

Basis of Determination of the Consideration

As illustrated in the Letter of the Board, the Consideration was determined with reference to the agreed price between the Company as the vendor and Yonyou as the purchaser after arm’s length negotiations and on normal commercial terms with reference to, among other things, (i) the financial information of Chanjet Payment; (ii) the fair value of approximately RMB350,341,900 of Chanjet Payment, as specified by the Valuation Report; and (iii) the 55.82% equity interest in Chanjet Payment proposed to be disposed by the Company to Yonyou pursuant to the Disposal Agreement.

In assessing the fairness and reasonableness of the Consideration, we have reviewed and taken into account of (i) the Disposal Agreement; (ii) historical price to revenue multiple analysis; (iii) the Valuation Report; and (iv) no control premium built in the Consideration is fair and reasonable as (a) the Consideration was determined after arm’s length negotiations between the Company and Yonyou taking into consideration including, among others, the loss-making financial situation of Chanjet Payment and the Valuation of the fair value of Chanjet Payment, and (b) Yonyou has more resources to develop Chanjet Payment, and by retaining 15.0% equity interest in Chanjet Payment after the Proposed Disposal and Capital Increase, the Company could benefit from the potential future growth of Chanjet Payment.

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LETTER FROM CHINA EVERBRIGHT CAPITAL

(a) Historical price to revenue multiple (“ PRR ”) analysis

As Chanjet Payment incurred losses during the Track Record Period, historical price to earnings multiples for the Proposed Disposal cannot be calculated. In addition, we have also considered to use the price to book value multiples for analyzing the Proposed Disposal, however, as the third party payment industry is an assetlight industry, the comparison will not be meaningful. Due to the past performance of Chanjet Payment as set out in the paragraph headed “Background of Chanjet Payment” of this letter, we consider that it is appropriate to assess the fairness and reasonableness of the consideration for the Proposed Disposal by reference to their respective PRR on the basis that the multiple is useful as Chanjet Payment has revenue but is not yet profitable.

In evaluating the Consideration, we have also searched all comparable companies listed on the Main Board and GEM Board of the Stock Exchange (the “ Comparable Companies ”) which are (i) principally engaged in third party payment business, (ii) the balance of the net assets was less than RMB3.00 billion by reference to their latest published interim or annual report and (iii) hold the Payment Clearance Operator License with at least one common entitled businesses, (a) internet payment service or (b) bank card acquiring service, with that of Chanjet Payment. Based on such criteria, we have identified the following Comparable Companies:

	Market
	capitalization		Historical PRR
	as at the Latest		Approximately
Company name	Practicable Date	Revenue	times
	RMB billion	RMB billion
	(Note 1)	(Note 2)	(Note 3)
Hi Sun Technology (China)
Limited (stock code: 0818)	3.28	1.15	2.9
China Smart Group Holdings
Limited (stock code: 8325)	2.43	0.50	4.9
Mean			3 9

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LETTER FROM CHINA EVERBRIGHT CAPITAL

			Estimated PRR
			Approximately
	Fair value	Revenue	times
	RMB million	RMB million
	(Note 4)	(Note 5)	(Note 6)
Chanjet Payment	350.34	8.96	39.1

Notes:

Source: Bloomberg
The figures are extracted from the latest published financial information (extracted from (i) audited annual report of Smart Group Holdings Limited for the year ended 31 March 2016 and (ii) audited annual report of Hi Sun Technology (China) Limited for the year ended 31 December 2015) of the Comparable Companies, and, where applicable, the amounts in Hong Kong dollar has been translated into RMB at the exchange rate of RMB1.0 to Hong Kong dollar 1.2.
The historical PRR of the Comparable Companies is calculated based on its revenue and its closing market capitalization as at the Latest Practicable Date.
The figure is extracted from the Valuation Report.
The revenue generated by Chanjet Payment during the year ended 31 December 2015 was extracted from Chanjet Payment 2015 Financial Statements.
The estimated PRR of Chanjet Payment is calculated based on its revenue and the fair value of the Valuation.

As indicated in the table above, the historical PRR of the Comparable Companies ranged from approximately 2.9 times to 4.9 times, with an average of approximately 3.9 times. The estimated PRR of Chanjet Payment of approximately 39.1 times is substantially higher than all the historical PRRs of the Comparable Companies.

In the consideration of the premium in PRR that Yonyou has offered to the Group to acquire 55.82% of the equity interest of Chanjet Payment, we considered that the Proposed Disposal and Capital Increase are in the interests of the Group and the Shareholders as a whole.

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LETTER FROM CHINA EVERBRIGHT CAPITAL

(b) Valuation Report of Chanjet Payment

As set out in Valuation Report and also based on our discussions with the Valuer, in arriving at their opinion of value that the fair value of RMB350.34 million of Chanjet Payment as at the Valuation Date, the Valuer made reference to three generally accepted approaches to value, namely the market approach, the asset approach and the income approach. The income approach has been adopted by the Valuer in the valuation. The income approach is the conversion of expected periodic income into an indication of value, based on the principle that an informed buyer would pay no more for asset than an amount equal to the present worth of anticipated future income from the same or equivalent asset with similar risk. The market approach is not applicable since (i) the market information in the Chinese market is not transparent; and (ii) it is difficult to find more than three comparable transactions in Chinese market. The asset approach assesses the value of assets on a cost basis and would not consider (i) the future development and the discount rate of cash flow of Chanjet Payment, and (ii) other factors not accounted for in the financial statements, such as human resources, marketing networks and stable client base.

As set out in the Valuation Report, the income approach generally provides a better analysis on the value as it has considered the factors that has not been reflected in the financial statements, such as a stable customer network and sales network. Therefore, as stated in the Valuation Report, and we concur, the income approach is appropriate to be adopted in the valuation.

We have reviewed and discussed with the Valuer regarding the methodology of, and key basis and assumptions adopted for, the valuation including but not limited to the assumption that Chanjet Payment will be able to renew the Payment Clearance Operator License in 2019 and the profit forecast provided by the Group on the amount of revenue, selling and distribution expenses, administrative expenses and capital expenditure. We understand that the Valuer had considered all relevant factors affecting the operation of the business and its ability to generate future investment returns. A list of information reviewed and major assumptions made by Valuer and the summary of the Valuation Report are set out in Appendix I and Appendix II, respectively.

We understand from the Valuer that the Free Cash Flow to Firm (“ FCFF ”) in Discounted Cash Flow Method (“ DCF ”) was used in the valuation. The use of FCFF in DCF method is considered appropriate because (a) Chanjet is a going-concern; (b) FCFF is a measure of operating cash flow after the deduction of operating expenses, possible capital expenditure and additional working capital. Therefore, the FCFF reflects the net cash flow being received by Chanjet Payment in the future from September 2016 to the end of 2023; and (c) the value of the interest being considered is determined by the future income attributed to Chanjet Payment, less any outstanding debt as of the Valuation Date, that is, the net present value of FCFF.

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LETTER FROM CHINA EVERBRIGHT CAPITAL

We set forth below our analysis on the principal parameters adopted in the Valuation Report:

(i) Revenue

We have obtained the financial projection for the valuation of Chanjet Payment, noting that the projected revenue is calculated based on multiplying the projected number of merchants and customers by the estimated average spending for each merchant/ customer. We further assessed that the growth rate of the number of merchants and the estimated average spending for each merchant/customer, noting that they were determined with reference to the historical figures of Chanjet Payment and the market conditions, as the Management expects that there will be more competitions within the third party payment market in the coming years.

(ii) Enterprise income tax

We have also reviewed the Valuer’s assumption on the enterprise income tax of Chanjet Payment. As Chanjet Payment has submitted high and new technology enterprise status application in 2016. It is expected that Chanjet Payment will obtain the status in 2017 and be charged with a lower enterprise income tax rate of 15% from 2017.

We have obtained the tax payment receipt on Chanjet Payment and checked the application of the Company on high and new technology enterprise status application and noted that the estimated applicable tax rates are in line with the tax rates adopted in the financial projection.

(iii) Discount rate

We have reviewed the calculation of the discount rate, which is approximately 11.7%, noting that the Valuer has taken into account of the followings: (i) the weighted average cost of capital calculated using Capital Asset Pricing Model; (ii) the lending cost; (iii) the average yield of long term PRC government bonds, with remaining life of more than 10 years, is approximately 3.9% as at the Valuation Date; (iv) the equity risk premium, which was derived by considering the country default spread of China and the risk premium spread between the US stocks and US treasury bonds from 1928 to 2014; (v) the firm specific risk of Chanjet Payment; and (vi) the leverage beta, which was derived by comparing the unleveraged beta with a group of listed companies in China with similar principal business, financial performance and scale of business as Chanjet Payment possibility. We are of the view that the discount rate is calculated using a commonly adopted formula.

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LETTER FROM CHINA EVERBRIGHT CAPITAL

Besides, we have also performed the followings steps regarding the Valuation conducted by the Valuer:

(i) interviewed the Valuer, inspected operating license and Valuer’s professional certificates and were satisfied with their experience and expertise;
(ii) confirmed with the Valuer that it has no current or prior relationship with the Group, Chanjet Payment and Yonyou, or their respective core connected persons, other than the engagement of appraisals in relation to the Proposed Disposal and Capital Increase;
(iii) reviewed the terms of engagement and the scope of work of the Valuer and considered that the scope of work is appropriate to the opinion required to be given and without any limitations on the scope of work which might adversely impact on the degree of assurance given by the Valuation Report, opinion or statement;
(iv) upon our interview with the Valuer, save and except those disclosed in the Valuation Report, we were not aware that each of the Group, Chanjet Payment and Yonyou has made any other formal or informal representations to the Valuer;
(v) reviewed and discussed with the Valuer the assumptions used for the valuation and the approaches used by the Valuer and were satisfied with their work performed and satisfied that the assumptions, rationale in applying the financial projection to the valuation and the approaches are appropriate and objective in such circumstances; and
(vi) reviewed the letter issued by Ernst & Young in relation to the profit forecast set out in Appendix III.

Having considered the above, we are of the view that the Consideration is determined on normal commercial term, fair and reasonable, and are in the interests of the Group and the Shareholders as a whole.

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LETTER FROM CHINA EVERBRIGHT CAPITAL

2. Principal terms in relation to the Capital Increase Agreement

Payment Terms

As of 21 October 2016, the registered capital of Chanjet Payment is RMB200,000,000. Pursuant to the Capital Increase Agreement, Yonyou will make a capital contribution to Chanjet Payment unilaterally in the amount of RMB100,000,000, among which, RMB57,087,091 will be contributed to the registered capital of Chanjet Payment and the remaining RMB42,912,909 will be contributed to the capital reserve of Chanjet Payment. As the Group will not make any capital increase on Chanjet Payment, its shareholding on Chanjet Payment will be further diluted.

Pricing

With reference to the Letter from the Board, the amount of capital contribution and the amount of contribution to the registered capital of Chanjet Payment by Yonyou were determined after arm’s length negotiation among the parties based on, among other things, (i) the existing amount of registered capital of Chanjet Payment; (ii) the fair value of RMB350,341,900 of Chanjet Payment as at the Valuation Date in accordance to the Valuation Report; and (iii) the capital requirement of Chanjet Payment.

Given the basis of the amount of capital contribution and the amount of contribution to the registered capital of Chanjet Payment were based on the fair value under the Valuation Report, and the financial position of Chanjet Payment will be improved for its continuous development upon the completion of the Capital Increase, we consider that it is justifiable for the dilution of Group’s equity interest on Chanjet Payment as a result of the Capital Increase.

(D) Reasons for and Benefits of the Supplemental Non-Competition Agreement and the Amended Confirmation

As mentioned in the Letter from the Board, Yonyou, Mr. Wang Wenjing and the Company entered into the Non-Competition Agreement on 17 February 2014 and Yonyou issued to the Company the Confirmation on 11 April 2014.

In addition, the Letter from the Board mentioned that upon completion of the Proposed Disposal and the Capital Increase, Yonyou and its associates will directly or indirectly engage, operate or participate in payment service business through Chanjet Payment and may thus constitute continuing breaches of the Non-Competition Agreement and the Confirmation. Given that the Company proposed to transfer the controlling shareholding in Chanjet Payment to Yonyou pursuant to the Disposal Agreement and the Capital Increase Agreement and that Yonyou and/ or its subsidiaries will engage in and operate payment service business upon the completion of

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LETTER FROM CHINA EVERBRIGHT CAPITAL

the Disposal Agreement and the Capital Increase Agreement, the Company, Yonyou and Mr. Wang Wenjing proposed to enter into the Supplemental Non-Competition Agreement and the Confirmation shall be amended to the effect that payment service business shall be excluded from the Restricted Business under the Non-Competition Agreement and the relevant undertakings made by Yonyou under the Confirmation.

Furthermore, the Management is of the view that:

(i) the principal business of the Company will no longer involve payment service business upon completion of the Disposal Agreement and Capital Increase Agreement;
(ii) it would be impractical for Yonyou and Mr. Wang Wenjing to continue to comply with the original scope of the Restricted Business under the Non-Competition Agreement and the original undertakings in respect of the payment service business under the Confirmation, as the case may be, given that Chanjet Payment, which is principally engaged in payment service business, will become a non-wholly owned subsidiary of Yonyou;
(iii) the estimated time and costs required to be incurred by the Management in monitoring the compliance with, and periodically reporting on, the non-competition restrictions in respect of an area of business which is no longer directly engaged by the Group;
(iv) the Company will continue to benefit from the other protections provided under the Non-Competition Agreement (as supplemented by the Supplemental Non-Competition Agreement) and the Amended Confirmation, among which, Yonyou and Mr. Wang Wenjing and their respective associates will still be obliged to, inter alia, not to directly or indirectly, carry on or engage or be interested in the Restricted Business (other than the payment service business).

Our view on Supplemental Non-Competition Agreement and Amended Confirmation

Having considered that, (i) the Proposed Disposal and Capital Increase is fair and reasonable based on the sub-section headed “Reason for and benefits of Proposed Disposal and Capital Increase” above; (ii) as discussed before, it would be beneficial for the Company to maintain a stronger cash position to optimizing its asset structure and focusing more resources on developing software and cloud service business; and (iii) this is one of the condition precedents for satisfying the completion of the Proposed Disposal and Capital Increase, we are of the view that (i) Supplemental Non-Competition Agreement and Amended Confirmation; and (ii) the terms of the amendment of Supplemental Non-Competition Agreement and Amended Confirmation, although not in the ordinary course of business in the Company, are entered on normal commercial terms, fair and reasonable so far as the Company and the Independent Shareholders are concerned and in the interests of the Group and the Shareholders as a whole.

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LETTER FROM CHINA EVERBRIGHT CAPITAL

RECOMMENDATION

Having considered the principal factors and reasons described in the above sections, we are of the view that (i) the Proposed Disposal and Capital Increase and (ii) the Proposed Amendment, although not in the ordinary course of business in the Company, are entered on normal commercial terms and fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole.

Therefore, we advise the Independent Board Committee to recommend, and we ourselves recommend, the Independent Shareholders to vote in favour of the ordinary resolutions for approving (i) the Proposed Disposal and Capital Increase, and (ii) the Proposed Amendments and the transactions contemplated thereunder, as detailed in the notice of the EGM as set out at the end of the Circular.

Yours faithfully, For and on behalf of

China Everbright Capital Limited Alvin Kam Managing Director

Mr. Alvin Kam is a licensed person registered with the Securities and Future Commission of Hong Kong and a responsible officer of China Everbright Capital Limited to carry out type 6 (advising on corporate finance) regulated activities under the Securities and Futures Ordinance. Mr. Alvin Kam has over thirteen years of experience in corporate finance industry.

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PRINCIPAL ASSUMPTIONS AND BASES OF PREPARATIONS OF THE VALUATION REPORT

APPENDIX I

The following sets out the principal bases and assumptions of the Valuation. Unless otherwise defined, capitalized terms used herein shall have the same meanings as defined in the circular of the Company dated 11 November 2016.

Given that the Valuation involves the use of income approach, such Valuation is regarded as a profit forecast under Rule 14.61 of the Listing Rules.

The Valuation contained in the Valuation Report has been prepared on the following principal bases and assumptions:

(i) Chanjet Payment will continuously operate after the Valuation Date;
(ii) there will be no material changes in the macro-economic, industrial and regional development policies of the PRC;
(iii) there will be no material adverse effect caused by irresistible and unforeseeable factors to Chanjet Payment;
(iv) the information provided by Chanjet Payment and other relevant parties is true, legal and complete, and Chanjet Payment will operate adhering to its original plans, and realize its pre-set operation plans and targets;
(v) there will be no material changes in, among other things, interest rates, exchange rates, tax base, tax rates and policy charges, in respect of Chanjet Payment;
(vi) the accounting policy adopted by Chanjet Payment after the Valuation Date will remain consistent with the one adopted in the Valuation Report in material aspects;
(vii) the products and services of Chanjet Payment will maintain the current market competitiveness after the Valuation Date;
(viii) Chanjet Payment will not suffer significant loss of core professionals in terms of its technology team and senior management in the following years;
(ix) the third party payment service licence of Chanjet Payment, which is effective until 9 July 2019, can be further applied for and obtained by Chanjet Payment upon expiration, and its normal operation will not be affected by such renewal of payment service licence; and
(x) the current corporate tax rate applicable to Chanjet Payment is 25%, and it shall be reduced to 15% if Chanjet Payment could obtain the certificate of high technology company (which it has applied for in 2016) in 2017, and Chanjet Payment could obtain such certificate and enjoy the corporate tax rate of 15% upon expiration of such certificate.

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SUMMARY OF THE VALUATION REPORT

APPENDIX II

The following is a summary of the Valuation Report prepared by Beijing Dong Yuan Assets Appraissal Co., Ltd., in relation to Chanjet Payment. Unless otherwise defined, capitalized terms used herein shall have the same meanings as defined in the circular of the Company dated 11 November 2016.

Purpose of Valuation:

The purpose of the valuation was to appraise the total value of shareholders’ equity of Chanjet Payment, so as to provide basis of reference in respect of the Disposal.

Subject under Valuation:

The total value of shareholders’ equity of Chanjet Payment as of the Valuation Date.

Scope of Valuation:

The total assets and liabilities of Chanjet Payment, including current assets, fixed assets, intangible assets and current liabilities.

Type of value:

Market value.

Valuation Date: 31 August 2016

Valuation methods:

The Valuation Report considered the asset-based approach and income approach, and has selected the income approach as the basis for conclusion of the Valuation.

Result of Valuation:

The total value of shareholders’ equity of Chanjet Payment as of 31 August 2016 was RMB350,341,900 using income approach.

Restrictions on the use of the Valuation Report:

This Valuation Report is prepared only to provide a value reference for the economic behavior described in the Valuation Report. The effective period for the use of the conclusion of the Valuation shall be one year from the date of the Valuation Date.

Date of the Valuation Report: 10 October 2016

Special issues which may affect the conclusion of the Valuation:

As Chanjet Payment is newly established, historical information is not sufficient to objectively reflect the overall profit of the enterprise. The income approach predicted the future of the enterprise in accordance with the feasibility study reports of projects and returns of income prediction provided by the enterprise, together with the advantage of the trend of market development.

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SUMMARY OF THE VALUATION REPORT

APPENDIX II

Users of this report shall give due consideration to the assumptions, limitations, and explanations for specific issues stated in the valuation report as well as their impact on the valuation conclusions.

SCOPE OF VALUATION

The scope of this Valuation covers all assets and liabilities of Chanjet Payment. As of the Valuation Date, the carrying amounts of each class of assets and liabilities in the scope of Valuation are set out in the table below:

Unit: RMB’0000

Item Current assets Monetary capital Accounts receivable Other receivables Inventories Total current assets Non-current assets Long-term equity investments Fixed assets Intangible assets Total non-current assets Total assets	31 August 2016 17,978.72 194.16 72.97 6.62 18,252.47
	500.00 71.46 182.87 754.33
	19,006.80

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SUMMARY OF THE VALUATION REPORT

APPENDIX II

Item Current liabilities Accounts payable Receipts in advance Salaries payable Tax payable Other payables Non-current liabilities due within one year Other current liabilities Total current liabilities Total non-current liabilities Total liabilities Total owner’s equity	31 August 2016 302.44 22.55 256.83 -20.76 349.87 5,270.39 2.30 6,183.62
	–
	6,183.62

	12,823.18

VALUATION METHODS

(1) Introduction of the Valuation Methods

The valuation methods used for calculating the enterprise value include the income approach, market approach and asset-based approach.

The income approach used for calculating the enterprise value refers to the valuation method used for determining the value of the subject of valuation by capitalizing or discounting the expected income. Specific methods commonly used by the income approach include the dividend discount method and the cash flow discount method.

The market approach used for calculating the enterprise value refers to the valuation method used for determining the value of the subject of valuation by comparing the subject of valuation with comparable listed companies or with comparable transaction cases. Two specific methods used by the market approach are the listed company comparison method and the transaction case comparison method.

The asset-based approach used for calculating the enterprise value refers to the valuation method, based on the balance sheets of the subject of valuation as at the Valuation Date, used for determining the value of the subject of valuation by reasonably appraising the value of various assets and liabilities recorded in and outside balance sheets.

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SUMMARY OF THE VALUATION REPORT

APPENDIX II

(2) Selection of Valuation Methods

Selection of valuation methods should not only adapt to the purpose of the valuation, the market conditions prevailing at the time of the valuation and the type of value, it should also consider the sufficiency of, among others, the statistics and information required by the selected valuation methods and the key economic indicators, and to analyze the applicability of the three approaches before determining the applicable valuation methods for the valuation.

(a) The reasons why the market approach was not applicable to this Valuation are as follows:

It is hard to find more than three transaction cases which are similar to the enterprise subject to valuation due to the underdeveloped marketization and informatization in the state, inactive equity trading market and lack of transparency in exchange information. The information of operations and finance and relevant information of transaction cases with sufficient and comparable market statistics are harder to collect, resulting in difficulty in adjustment of comparative analysis to determine the value of the enterprise of the entrusted valuation. Therefore, market approach is not appropriate for this Valuation.

(b) The reasons why income approach is applicable to this Valuation are as follows:
i. The future expected income of the enterprise can be predicted and be measured in monetary term;
ii. The risks borne by the expected income of the enterprise that is closely related to discount can also be predicted and be measured in monetary term;
iii. The expected profit life can be predicted.
(c) The reasons why asset-based approach is applicable to this Valuation are as follows:
i. The information of each asset and liability of the enterprise subject to Valuation is basically complete;
ii. The data, major technology parameters and the financial data for the benchmark date collected by the valuators required for the Valuation of cost approach are sufficient and complete.

– 44 –

SUMMARY OF THE VALUATION REPORT

APPENDIX II

VALUATION CONCLUSIONS

(1) Valuation Result Using Asset-based Approach

Based on the Valuation, as of the Valuation Date, the carrying amount of the total assets included in the scope of Valuation of Chanjet Payment is approximately RMB190.0680 million, the appraisal value is approximately RMB188.0270 million, with an impairment of RMB2.0410 million and the impairment rate is 1.07%; the carrying amount of the liabilities is RMB61.8362 million with an appraisal value of RMB61.8362 million; the carrying amount of the net assets is RMB128.2318 million, on the premise of maintaining the current existing use and going concern operation, the appraisal value of the net assets is RMB126.1908 million with an impairment of RMB2.0410 million and the impairment rate is 1.59%. The specific Valuation results are as follow:

Summary of Asset Valuation Results

Unit: RMB’0000

Item Current Assets Non-current assets Including: Available-for-sale financial assets Held-to-maturity investments Long-term equity investments Investment properties Fixed assets Construction in progress Intangible assets Other non-current assets Total assets	Book value A 18,252.47 754.33 500.00 71.46 182.87 19,006.80	Appraisal value B 18,252.47 550.23 254.74 104.04 191.45 18,802.70	Increase/ decrease C = B-A -204.10 -245.26 32.58 8.58 -204.10	Increase/ decrease Ratio(%) D = (B-A)/A -27.06 -49.05 45.60 4.69 -1.07

– 45 –

SUMMARY OF THE VALUATION REPORT

APPENDIX II

Item Current liabilities Non-current liabilities Total liabilities Net assets	Book value A 6,183.62 6,183.62 12,823.18	Appraisal value B 6,183.62 6,183.62 12,619.08	Increase/ decrease C = B-A -204.10	Increase/ decrease Ratio(%) D = (B-A)/A
				-1.59

(2) Valuation Result Using Income Approach

As of the Valuation Date, after the valuation on income approach, under the premise on going concern, the total equity value of the shareholders of Chanjet Payment is approximately RMB350.3419 million compared with the carrying value of RMB128.2318 million, the appraisal value is approximately RMB222.1101 million, with an appraisal rate of 173.21%.

Cash Flow Forecast Statement

Unit: RMB’0000

				Forecasts	for future	figures
	2016
	September to
Item	December	2017	2018	2019	2020	2021	2022	2023	Final Value
Operating revenue	2,469.00	9,338.74	13,218.78	16,570.72	20,632.65	24,606.28	29,262.88	34,657.83	34,657.83
Operating cost	1,711.20	6,618.82	9,393.98	11,609.07	14,327.68	16,972.82	20,078.71	23,717.16	23,717.16
Business tax and surcharges	4.54	16.32	22.94	29.77	37.84	45.80	55.10	65.64	65.64
Gross operating profit	753.26	2,703.60	3,801.86	4,931.88	6,267.13	7,587.66	9,129.07	10,875.03	10,875.03
Selling expenses	305.64	997.39	1,097.14	1,206.87	1,327.57	1,460.33	1,606.37	1,767.01	1,767.01
Administrative expenses	721.56	2,296.46	2,437.27	2,587.70	2,748.49	2,920.47	3,104.52	3,301.58	3,301.58
Finance costs	3.00	10.00	10.00	10.00	10.00	10.00	10.00	10.00	10.00
Asset impairment losses
Investment income

– 46 –

SUMMARY OF THE VALUATION REPORT

APPENDIX II

				Forecasts	for future	figures
	2016
	September to
Item	December	2017	2018	2019	2020	2021	2022	2023	Final Value
Operating profit	-276.94	-600.25	257.45	1,127.31	2,181.07	3,196.86	4,408.18	5,796.44	5,796.44
Non-operating income
Non-operating expenses
Total profit	-276.94	-600.25	257.45	1,127.31	2,181.07	3,196.86	4,408.18	5,796.44	5,796.44
Income tax	–	–	–	–	–	90.16	661.23	869.47	869.47
Net profit	-276.94	-600.25	257.45	1,127.31	2,181.07	3,106.70	3,746.95	4,926.97	4,926.97
Add: depreciation/amortization	43.75	131.25	131.25	131.25	131.25	131.25	131.25	131.25	131.25
Add: interest expense* (1-
income tax rate)	–	–	–	–	–	–	–	–	–
Less: capital expenditures	43.75	131.25	131.25	131.25	131.25	131.25	131.25	131.25	131.25
Increase in working capital	174.03	864.01	556.40	477.56	574.37	565.90	658.24	760.44	–
Free cash flow	-450.97	-1,464.26	-298.95	649.75	1,606.70	2,540.80	3,088.71	4,166.53	4,926.97
Discount rate(1)	11.73%	11.73%	11.73%	11.73%	11.73%	11.73%	11.73%	11.73%
Discounting period(2)	0.33	1.33	2.33	3.33	4.33	5.33	6.33	7.33
Discount factors	0.9641	0.8628	0.7723	0.6912	0.6186	0.5537	0.4955	0.4435	3.7809
Present value of net cash flow	-434.78	-1,263.36	-230.88	449.11	993.90	1,406.84	1,530.46	1,847.86	18,628.38
Total present value of
cash flow								4,299.15	18,628.38
*Fair market value of shareholders’*			*equity*
Value of operating assets								22,927.53
Add: surplus funds								17,122.31
Add: non-operating assets									254.74
Less: non-operating liabilities									5,270.39
Less: interest-bearing liabilities									–
Value of shareholders’ equity								35,034.19

Notes:

(1) Please refer to the paragraph headed “– Calculation of Discount Rate” below for details of the calculation method for discount rate.

(2) Given that the Valuation Date is 31 August 2016, which is approximately 0.33, 1.33, 2.33, 3.33, 4.33, 5.33, 6.33 and 7.33 years away from the end of 2016, 2017, 2018, 2019, 2020, 2021, 2022 and 2023, respectively, the relevant discounting period for 2016, 2017, 2018, 2019, 2020, 2021, 2022 and 2023 shall be 0.33, 1.33, 2.33, 3.33, 4.33, 5.33, 6.33 and 7.33 years, respectively.

– 47 –

SUMMARY OF THE VALUATION REPORT

APPENDIX II

Calculation of Discount Rate

Upon estimation of the free cash flow of Chanjet Payment for the forecasting period, we calculate the weighted average cost of capital (WACC) on the same basis with calculation of the revenue, to determine the discount rate.

Determination of risk-free yield

The risk-free yield may normally be determined with reference to the maturity yield of long-term treasury bonds issued by the government. The average yield of 3.88% of long-term treasury bonds (with the remaining period of more than ten years) in the stock market on the Valuation Date can be considered as risk-free yield according to the information disclosed by WIND Consulting System.

Determination of market risk premium

The domestic stock market is an emerging and relatively closed market. On one hand, China’s stock market has relatively shorter history and the speculative atmosphere in the market was intense for the early years after it was established, resulting in higher level of volatility of the market. On the other hand, China currently has a stricter control over foreign exchange under the capital account in addition to the unique share fragmentation on the Chinese market. Hence, directly determining the equity risk premiums based on historical data is unreliable, as opposed to a developed market, which has longer history and where the equity risk premiums for the overall market could be directly determined through analysis of historical data. As such, the risk premium for the emerging market generally can be adjusted and determined by adopting those of the developed market in the world.

Market risk premium = basic compensation amount for developed stock market + state risk compensation amount

The basic compensation amount of developed stock market is 6.25%, which is derived from the difference of mathematical average return between the US stock and treasury bonds from 1928 to 2014 and the state risk compensation amount is 0.90%.

Accordingly, ERP=6.25%+0.90%=7.15%

Hence, market risk premium (ERP) is valued at 7.15%.

– 48 –

SUMMARY OF THE VALUATION REPORT

APPENDIX II

Determination of the stock market risk factor of Beta ( β ) of the comparable companies

As the enterprise subject to the Valuation is a non-listed company without readily available β, the valuers indirectly obtained its applicable β via analysis of domestic listed companies. To this end, our method was to look for listed companies whose principal business scope, operation performance and asset size that were relatively similar to the enterprise subject to the Valuation to the extent possible as comparable companies for calculation of β. Although the comparable companies set out below, whose principal businesses are similar to that of Chanjet Payment, are larger in size than Chanjet Payment in terms of, among other things, revenue, profit and asset, it is common practice to refer to listed companies in the same industry who are larger in size to determine the applicable Beta (β) where it is hard to find any listed company in the same industry as and of similar size to the enterprise subject to the valuation. In addition, calculation of the discount rate has incorporated such further adjustments as, inter alia, the corporate income tax rate (T) specific to Chanjet Payment and the enterprise-specific risk yield (Rs) of Chanjet Payment. For details of determination of enterprise-specific risk yield, please refer to the paragraph headed “– Determination of enterprisespecific risk yield” as set out below. The valuer is of the view that both the determination of Beta (β) and the calculation of the discount rate herein are fair and reasonable.

Unit: RMB

				Operating	Performance	Asset Size
	Name of		Principal	Revenue	Net profit for	Total assets
	Comparable	Stock	Scope of	for the year ended	the year ended	as of 31
No	Companies	Code	Business	31 December 2015	31 December 2015	December 2015
1	Yonyou	600588	Yonyou is a leading solution and	4,451,272,019	342,992,489	10,918,585,280
		(Shanghai	professional service provider for large and
		Stock Exchange)	medium scale enterprises and organizations
			in China.
2	Shenzhen Tempus	300178	Tempus Global provides professional	928,203,237	156,882,309	3,283,726,947
	Global Business	(Shenzhen	business service solutions for its customers
	Service Holdings Ltd.	Stock Exchange)	through its world-wide service network.
	(深圳市騰邦國際商業		Its business covers four major segments,
	服務股份有限公司)		namely, air ticket platform, travel platform,
	(“Tempus Global”)		business trip management and online
			financial services.

– 49 –

SUMMARY OF THE VALUATION REPORT

APPENDIX II

				Operating	Performance	Asset Size
	Name of		Principal	Revenue	Net profit for	Total assets
	Comparable	Stock	Scope of	for the year ended	the year ended	as of 31
No	Companies	Code	Business	31 December 2015	31 December 2015	December 2015
3	Hengbao Co.Ltd.	002104	The principal business of Hengbao	1,820,661,778	374,171,224	1,920,722,746
	(恒寶股份有限公司)	(Shenzhen	includes smart cards (IC card, citizen card,
	(“Hengbao”)	Stock Exchange)	SIN card, health card, transportation card,
			ETC, transportation permit, electronic
			business license and other smart card
			products) terminals (online payment
			terminal, mPOS, smart POS, tax control
			disk and other terminal products), mobile
			payment security products (eSE, visual
			card and wearable devices, HCE Quick
			Pass, TEE-TA and others), system
			platform (I Pass system, online and
			offline integrated bill collecting system,
			air-issuing system, TSM system) and other
			digital certification, data security and
			mobile payment business as well as service
			businesses featuring merchant membership
			promotion business, third party financial
			and customer business.
4	Suning Cloud	002024	Suning Cloud Commerce is a leading	135,547,633,000	757,732,000	88,075,672,000
	Commerce Group	(Shenzhen	commercial service provider which
	Holdings Limited	Stock Exchange)	provides quality shopping experience
	(蘇寧雲商集團股份		featured “Any time, Anywhere and
	有限公司) (“Suning		On-demand” based upon its nation-wide
	Cloud Commerce”)		offline chain network and online
			e-commerce platform.
5	Fujian Newland	000997	Newland’s principal businesses include	3,045,275,354	368,965,765	4,797,901,747
	Computer Co. Ltd.	(Shenzhen	provision of systematic solutions
	(福建新大陸電腦	Stock Exchange)	relating to information identification
	股份有限公司)		and electronic payment to customers.
	(“Newland”)		Moreover, the company provides
			information-based services for mobile
			operators and expressway operators. It
			also proactively explores such businesses
			as data operation and Internet-based
			finance.

– 50 –

SUMMARY OF THE VALUATION REPORT

APPENDIX II

The specific determination process is as follows:

First, we calculated the Beta (βu) without financial leverage of the comparable listed companies (or industries) based on their published Beta. And then we calculated the Beta (βL) with financial leverage of the enterprise using its effective corporate tax rate and capital structure indicator D/E as reasonably determined according to its operating interest-bearing liabilities.

The formula is:

βL=(1+(1-T)×D/E)×βu

Where,

βL: Beta with financial leverage;

D/E: Capital structure of the enterprise;

βu: Beta without financial leverage;

T: Corporate Income tax rate.

The enterprise’s D/E was calculated based on the following formula:

D = market value of long and short-term borrowings

E = market value of total equity interests of shareholders

Based on the related industry segment data, the βu without financial leverage was determined at 0.9857 after adjustment.

The target capital structure indicator D/E was determined with the comparable companies’ average debt ratio of 9.10% and average equity ratio of 90.90%.

In terms of income tax rate, assuming that the income tax rate of Chanjet Payment is 15%, the βL of the enterprise (including financial leverage) that is applicable in future is:

βL=(1+(1-T)×D/E)×βu

=1.0696

– 51 –

SUMMARY OF THE VALUATION REPORT

APPENDIX II

Determination of enterprise-specific risk yield

Risks relating to the enterprise subject to Valuation are different from the industry average risk level represented by the comparable listed companies, which are therefore subject to further adjustment. Specific risks of the enterprise subject to Valuation are mainly categorized into four aspects: technique risks, capital risks, management risks and market risks. Based on the actual situation of the enterprise and after overall analysis, the enterprise-specific risk factor was determined at 1%.

Calculation of discount rate

(1) Calculation of cost of equity capital

The cost of equity capital of the enterprise subject to Valuation is arrived at by putting the above determined parameters into the calculation formula for the cost of equity capital:

Re = Rf+βL(Rm-Rf)+ Rs

=3.88%+1.0696×7.15%+1%

=12.53%
(2) Calculation of WACC

So long as the enterprise subject to Valuation as of the Valuation Date has no interestbearing debts, the WACC of the enterprise subject to Valuation is arrived at by putting the parameters determined above into the calculation formula for the WACC.

R = W1×Re+W2×Rd×(1-T)

=11.73%

Based on the abovementioned, the discount rate should be 11.73%.

– 52 –

SUMMARY OF THE VALUATION REPORT

APPENDIX II

Projection Bases

The profit forecast of Chanjet Payment for the forecast period is made based on the figures from the financial statements for the period from 2013 to 31 August 2016, taking into account the status quo and prospect of the internet financial industry in which Chanjet Payment operates and after an analysis of the advantages and risks of Chanjet Payment, in particular, the market environment facing Chanjet Payment, its future development potential and the development strategies and objectives of Chanjet Payment.

Forecast of Revenue

According to its business adjustment plan, no more revenue from POS machine sales would be generated after the Valuation Date. Revenue from bank card settlement business, online gateway handling fees, collection and paying agent fees and advance payment fees for online payment, and one-off business are calculated using various parameters including the annual average number of customers, the average monthly transaction amount per customer and yield or each charge, with the number of customers and customer growth rate being estimated based on its historical data, macroeconomic analysis, industry characteristics, business planning, market demands, etc.

Forecast of Operating Costs

The operating costs mainly comprise bank payment channel costs and profit shares paid to the agents incurred from three business lines, i.e. offline bank card settlement business, online payment gateway handling fee business, and collection and paying agent fee business of online payment. As advance payments for online payment are sourced from its self-owned funds, advance payment business incurs no more costs. Incomes of one-off business are mainly access fees, the cost of which mainly composes of cost of sales staff, which have been counted towards expenses, and thus such business generates no more costs.

Forecast of Business Tax and Surcharges

Pursuant to the PRC tax law, the taxes and surcharges required to be paid by Chanjet Payment include urban maintenance and construction tax, education surcharge and local education surcharge whose taxation bases comprise value-added tax (VAT) and business tax. Chanjet Payment is subject to levying of VAT at a tax rate of 6% or 17% and exempt from business tax. Since Chanjet Payment has no POS machine sales plan going forward, it only has to pay value-added tax at the rate of 6%. After enquiry with relevant person-in-charge of Chanjet Payment, we learned that the profit shares paid are deductible from the VAT at 6% tax rate and thus VAT shall be levied at 6% on its revenue after deducting such costs. VAT payables are calculated based on the forecast of revenue, and on this basis, urban maintenance and construction tax, education surcharge, local education surcharge and local education surcharge are calculated according to their effective tax rates (5%, 3% and 2% respectively).

– 53 –

SUMMARY OF THE VALUATION REPORT

APPENDIX II

Forecast of Period Expenses

Based on the actual historical figures of sales expenses, administrative expenses and financial expenses for the period from 2013 to August 2016 as well as the particulars of sales expenses and administrative expenses, the estimated figures of such expenses for the coming five years are projected according to their different growth rates. As Chanjet Payment uses its self-owned funds to finance its advance payment business without generating interest income, financial expenses incorporate no interest income of self-owned funds but handling fees.

Forecast of Non-operating Revenue/Expenses

In recent years, non-operating revenue of Chanjet Payment mainly came from the disposal of fixed assets and its non-operating expenses mainly represented a small amount of fines. As such, its nonoperating expenses for previous years were highly contingent, added to that it has no plan on any major disposal of tangible and intangible assets in the coming years, thus no forecast is made as to non-operating revenue/expenses.

Forecast of Income Tax

Currently, the applicable corporate income tax rate for Chanjet Payment is 25%. It submitted the application for the certificate of high-tech enterprise in 2016 and expected to obtain such certificate in 2017. If so, its applicable corporate income tax rate will be 15% after 2017. The estimated corporate income taxes are calculated by multiplying the estimated total profit for each year by the applicable corporate income tax rate. As of the Valuation Date, Chanjet Payment had accumulated losses and needs to make up for the losses for previous five years after recording profit, which will not be done until 2021. And corporate income tax will be levied on the remaining profit at a rate of 15% during the loss-recovering period and thereafter when it no longer has losses to make up for.

Forecast of Depreciation and Amortisation

Depreciations of fixed assets comprise three parts, namely, depreciation of existing fixed assets, depreciation of updated fixed assets and depreciation of newly-added fixed assets. Depreciations of fixed assets are projected according to the size and status of existing fixed assets, investment scale of newly-added fixed assets and the depreciation policy of Chanjet Payment. After investigation, we learned that its existing equipment has been able to meet its normal operation and thus assumed that there will be no addition of fixed assets in the future. As a result, depreciations of existing fixed assets and updated fixed assets are calculated based on the equipment owned by Chanjet Payment as at the base date. Its intangible assets are mainly software use rights which are amortized on a straight-line basis according to their book balances as at the Valuation Date and their original book values.

– 54 –

SUMMARY OF THE VALUATION REPORT

APPENDIX II

Forecast of Capital Expenditure

Capital expenditure for the coming years considered in the Valuation mainly represents renewal and supplement of the existing fixed assets of Chanjet Payment. By means of communication with relevant personnel of the enterprise and on the basis of the judgment of commencement date for usage of the existing fixed assets, term of economic life, remaining usable life, replacement and rate of residual value, etc., the valuer can determine the amount of capital expenditure of the enterprise for each of the coming years. As to the perpetual annual capital expenditure after year 2020, it shall be the renewal of depreciation of fixed assets.

Forecast of Increase in Working Capital

Increased working capital represents the newly added working capital needed to maintain continuing operation of the enterprise under the condition that no change is incurred to the principal business of the enterprise. Increase in working capital represents, in the wake of changes of operational activities of the enterprise, the occupied cash gained by obtaining business credit of other units, or the cash and inventories etc. needed for normal operation. In the meantime, in economic activities, the provision of business credit can correspondingly reduce occasions of prompt cash payment. Generally speaking, since audited items of other receivables and other payables are mainly irrelevant or only temporarily relevant with principal business, specific examination on relevancy with the estimated operational business is needed for determination. Therefore, in principle, only dominant factors such as cash needed for normal operation, receivables, inventory and payables are needed to be considered into the estimation of increase in working capital. The definition of increase in working capital in this report is as follow:

Increase in working capital = working capital of the current period – working capital of the previous period

Among other things, working capital = monetary capital (minimum amount of monetary capital) + receivables + inventory – payables

According to interviews with the financial personnel of enterprises, minimum amount of monetary capital is deemed reasonable as it is considered as the cost of cash payment for two months.

Receivables = Total operating revenue/turnover rate of receivables

Receivables mainly include accounts receivable, bills receivable and prepayments.

– 55 –

SUMMARY OF THE VALUATION REPORT

APPENDIX II

Inventory only consists of Ukey which is a not-for-sale product attached to principal business with relatively low value and is forecast independently according to actual business circumstances of the enterprise.

Payables = Total operating cost/turnover rate of payables

Payables mainly include accounts payable, bills payable and deposits from customers.

Valuation of Surplus Funds

Surplus funds represent superfluous assets that have no direct link to and exceed the required amount for the operation of the enterprise, generally referring to surplus monetary capital.

Surplus funds are determined by the monetary capital deducted by the balance of minimum amount of monetary capital on Valuation Date. With reference to the operational circumstances and operational plans for the coming years, we regard the cost of cash payment for two months as the minimum amount of monetary capital. Thus,

Estimate of surplus funds = estimate of monetary capital – minimum amount of cash

Valuation of Non-operating Assets

Non-operating assets represent assets that have no direct link to the operating income of the enterprise and value of which is not included in the free cash flow of the enterprise. Non-operating assets in the Valuation are long-term equity investment.

Valuation of Non-operating Liabilities

Non-operating liabilities represent liabilities that have no direct link to the operating income of the enterprise and value of which is not included in the free cash flow of the enterprise. Non-operating liabilities in the Valuation are non-current liabilities due within one year, namely, deposits from customers, and are valuated independently by means of cost method.

Calculation of Value of Interest-bearing Debts

Interest-bearing debts represent the liabilities bearing interest payable by Chanjet Payment on the Valuation Date. No interest-bearing debts are involved in the Valuation.

– 56 –

SUMMARY OF THE VALUATION REPORT

APPENDIX II

(3) Determination of Valuation Results

After comparing the results of asset-based approach and income approach, the difference between the results using income approach and the result using asset-based approach is RMB224.1511 million, the difference rate of which is 177.63%. The income-based approach focuses on the future earnings of the company, which is based on the premise of the assessment of assumptions, whereas the asset-based approach focuses on the history and reality of the company. The difference in the nature of focus of different approaches result in the difference in the assessment result.

Asset-based approach determines the value of the company from a static point of view, without taking into account the future development and the discounted of cash flow of the company, and other factors not accounted for in the financial statements, such as human resources, marketing networks, stable client base and other factors, which often makes the value of the company being undervalued.

The income approach takes into account not only the value of all tangible assets, intangible assets and liabilities that are present on the company’s balance sheet, but also the value of the company brand, human resources, marketing network and stable client base and other goodwill that are not shown on the balance sheet. Taking into account the purpose of this Valuation, the result using income approach better reflects the true business value of Chanjet Payment. Therefore, the Valuation is based on the results using income approach as the value reference, and the total value of shareholders’ equity of Chanjet Payment was RMB350.3419 million.

– 57 –

APPENDIX III LETTER FROM THE AUDITOR ON PROFIT FORECAST

The following is the text of the letter to the Directors from the auditor of the Company, Ernst & Young, dated 21 October 2016 prepared for, among other purposes, inclusion in this circular.

==> picture [86 x 70] intentionally omitted <==

REPORT FROM REPORTING ACCOUNTANTS ON THE DISCOUNTED CASH FLOW FORECAST IN CONNECTION WITH THE VALUATION OF EQUITY INTEREST IN BEIJING CHANJET PAYMENT TECHNOLOGY CO ., LTD .

To the Directors of Chanjet Information Technology Company Limited

We have been engaged to report on the arithmetical accuracy of the calculations of the discounted cash flow forecast (the “ Forecast ”) on which the valuation dated 10 October 2016 prepared by Beijing Jingwei Dong Yuan Assets Appraisal Co., Ltd. (北京經緯東元資產評估有限公司) in respect of Beijing Chanjet Payment Technology Co., Ltd. (“ Chanjet Payment ”) as at 31 August 2016 is based. The valuation is set out in the announcement of Chanjet Information Technology Company Limited (the “ Company ”) dated 21 October 2016 (the “ Announcement ”) in connection with the proposed disposal and the capital increase. The valuation based on the Forecast is regarded by The Stock Exchange of Hong Kong Limited as a profit forecast under paragraph 14.61 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “ Listing Rules ”).

Directors’ Responsibilities

The directors of the Company (the “ Directors ”) are solely responsible for the Forecast. The Forecast has been prepared using a set of bases and assumptions (the “ Assumptions ”), the completeness, reasonableness and validity of which are the sole responsibility of the Directors. The Assumptions are set out in Appendix I of the announcement.

Our Independence and Quality Control

We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”), which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior.

– 58 –

APPENDIX III LETTER FROM THE AUDITOR ON PROFIT FORECAST

Our firm applies Hong Kong Standard on Quality Control 1 Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements , and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Reporting Accountants’ Responsibilities

Our responsibility is to express an opinion on the arithmetical accuracy of the calculations of the Forecast based on our work. The Forecast does not involve the adoption of accounting policies.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3000 (Revised) Assurance Engagements Other Than Audits or Reviews of Historical Financial Information issued by the HKICPA. This standard requires that we plan and perform our work to obtain reasonable assurance as to whether, so far as the arithmetical accuracy of the calculations are concerned, the Directors have properly compiled the Forecast in accordance with the Assumptions adopted by the Directors. Our work consisted primarily of checking the arithmetical accuracy of the calculations of the Forecast prepared based on the Assumptions made by the Directors. Our work is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing issued by the HKICPA. Accordingly, we do not express an audit opinion.

We are not reporting on the appropriateness and validity of the Assumptions on which the Forecast are based and thus express no opinion whatsoever thereon. Our work does not constitute any valuation of Chanjet Payment. The Assumptions used in the preparation of the Forecast include hypothetical assumptions about future events and management actions that may or may not occur. Even if the events and actions anticipated do occur, actual results are still likely to be different from the Forecast and the variation may be material. Our work has been undertaken for the purpose of reporting solely to you under paragraph 14.62(2) of the Listing Rules and for no other purpose. We accept no responsibility to any other person in respect of our work, or arising out of or in connection with our work.

Opinion

Based on the foregoing, in our opinion, so far as the arithmetical accuracy of the calculations of the Forecast is concerned, the Forecast has been properly compiled in all material respects in accordance with the Assumptions adopted by the Directors.

Ernst & Young

Certified Public Accountants Hong Kong

21 October 2016

– 59 –

APPENDIX IV LETTER FROM THE BOARD ON PROFIT FORECAST

The following is the text of the letter from the Board on profit forecast dated 21 October 2016 for, among other purposes, inclusion in this circular.

==> picture [60 x 41] intentionally omitted <==

暢捷通信息技術股份有限公司

CHANJET INFORMATION TECHNOLOGY COMPANY LIMITED*

(A joint stock company incorporated in the People’s Republic of China with limited liability)

(Stock code: 1588)

21 October 2016

The Stock Exchange of Hong Kong Limited 11/F, One International Finance Centre 1 Harbour View Street Hong Kong

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTIONS PROPOSED DISPOSAL AND CAPITAL INCREASE

We refer to the announcement of the Company dated 21 October 2016 (the “ Announcement ”). Unless the context otherwise requires, terms defined in the Announcement shall have the same meanings when used herein.

We have reviewed the bases and assumptions based upon which the valuation of Chanjet Payment has been prepared by Beijing Jingwei Dong Yuan Assets Appraisal Co., Ltd. for which Beijing Jingwei Dong Yuan Assets Appraisal Co., Ltd. is responsible. We have also considered the letter from the auditor of the Company, Ernst & Young, in respect of, among other things, whether the discounted cash flow of Chanjet Payment, so far as the calculation are concerned, have been properly compiled, in all material respects, in accordance with their respective bases and assumptions.

On the basis of the foregoing, in accordance with the requirements under Rule 14.62(3) of the Listing Rules, we confirm that the profit forecast of Chanjet Payment has been made after due and careful enquiry by us.

For and on behalf of the Board

Chanjet Information Technology Company Limited* Wang Wenjing

Chairman

* For identification purposes only

– 60 –

GENERAL INFORMATION

APPENDIX V

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 . INTERESTS AND SHORT POSITIONS OF DIRECTORS, SUPERVISORS AND CHIEF EXECUTIVE IN THE SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY AND ITS ASSOCIATED CORPORATIONS

As of the Latest Practicable Date, the interests or short positions of the Directors, Supervisors and the chief executives of the Company in the Shares, underlying Shares and debentures of the Company and 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 pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO) or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or which will were required, pursuant to the Model Code, to be notified to the Company and the Stock Exchange, were as follows:

				Approximate
				percentage of
				shareholdings
			Number of	in the total
			class of shares	share capital of	Approximate
			of the relevant	the Company/	percentage of
			corporation	relevant	shareholdings
			(including	corporation	in the relevant
		Relevant corporation	associated	(including	class of share
Name of Directors/		(including associated	corporation)	associated	capital of the
Supervisors	Nature of interest	corporation)	held	corporation)(1)	Company(2)
Directors
Mr. Wang Wenjing	Interest in controlled	the Company	153,588,258	70.72%	94.70%
	corporation(3)		Domestic Shares
	Interest in controlled	Yonyou(4)	656,291,265	44.82%	N/A
	corporation(3)		shares
	Interest in controlled	Happiness Investment	N/A(5)	64%(5)	N/A
	corporation	Co., Ltd. (“Happiness
		Investment”)(5)

– 61 –

GENERAL INFORMATION

APPENDIX V

				Approximate
				percentage of
				shareholdings
			Number of	in the total
			class of shares	share capital of	Approximate
			of the relevant	the Company/	percentage of
			corporation	relevant	shareholdings
			(including	corporation	in the relevant
		Relevant corporation	associated	(including	class of share
Name of Directors/		(including associated	corporation)	associated	capital of the
Supervisors	Nature of interest	corporation)	held	corporation)(1)	Company(2)
	Interest in controlled	Beijing Yonyou Chuangxin	N/A(6)	100%(6)	N/A
	corporation	Investment Centre
		(Limited Partnership)
		(“Yonyou Chuangxin
		Investment”)(6)
Mr. Wu Zhengping(7)	Beneficial owner	Yonyou(4)	1,119,682 shares	0.08%	N/A
	Interest in controlled	Yonyou(4)	42,000,000	2.87%	N/A
	corporation		shares
	Beneficial owner	Happiness Investment(5)	N/A(5)	15%(5)	N/A
Mr. Zeng Zhiyong(8)	Interest in controlled	the Company	2,061,008	0.95%	1.27%
	corporation		Domestic Shares
Supervisors
Mr. Guo Xinping(9)	Interest in controlled	Yonyou(4)	68,665,508	4.69%	N/A
	corporation		shares
Mr. Zhang Peilin	Beneficial owner	Yonyou(4)	655,681 shares	0.04%	N/A
Notes:

(1) The calculation is based on the total number of 217,181,666 Shares in issue of the Company as of the Latest Practicable Date;
(2) The calculation is based on the total number of 162,181,666 Domestic Shares in issue of the Company as of the Latest Practicable Date;
(3) Mr. Wang Wenjing is the beneficial owner of 100%, 85.14% and 76.26% equity interest of Beijing Yonyou Technology Co., Ltd. (北京用友科技有限公司), Shanghai Yonyou Consultant Co., Ltd. (上海用友科技諮詢有限公司) and Beijing Yonyou Enterprise Management Research Co., Ltd. (北京用友企業管理研究所有限公司), respectively, which in turn hold approximately 28.63%, 12.19% and 4.00% of the issued shares of Yonyou, respectively. Therefore, Mr. Wang Wenjing is deemed to be interested in the Shares held by Yonyou;

– 62 –

GENERAL INFORMATION

APPENDIX V

(4) Yonyou is the holding company of the Company and therefore an associated corporation of the Company. As of the Latest Practicable Date, Yonyou held 153,588,258 Domestic Shares which accounted for approximately 70.72% of the total share capital of the Company;
(5) Happiness Investment is a limited liability company incorporated in the PRC with a registered capital of RMB6.25 million and does not have any issued shares under the PRC laws. As the shareholding percentage of Yonyou in Happiness Investment is 64%, Happiness Investment is deemed as a controlled corporation of Mr. Wang Wenjing. In addition, the shareholding of Mr. Wu Zhengping in Happiness Investment is 15%. Happiness Investment holds 670,784 Domestic Shares, representing approximately 0.31% of the total share capital of the Company;
(6) Yonyou Chuangxin Investment is a limited partnership incorporated in the PRC with the total amount of subscription and capital contribution of RMB200 million and does not have any issued shares under the PRC laws. Yonyou Chuangxin Investment is owned by Yonyou and Happiness Investment as to 99% and 1%, respectively. Therefore, Yonyou Chuangxin Investment is deemed as a controlled corporation of Mr. Wang Wenjing. Yonyou Chuangxin Investment holds 3,185,000 Domestic Shares, representing approximately 1.47% of the total share capital of the Company;
(7) Mr. Wu Zhengping directly holds 1,119,682 shares of Yonyou. Meanwhile, he is the beneficial owner of 80% equity interest of Gongqingcheng Youfu Investment Management Partnership Enterprise (LLP) (共青城優富投資管理合夥企業（有限合夥）) (“ Gongqingcheng Youfu ”) which in turn holds 2.87% of the issued shares of Yonyou. Therefore, Mr. Wu Zhengping is deemed to be interested in the shares of Yonyou held by Gongqingcheng Youfu;
(8) Mr. Zeng Zhiyong is a general partner of Beijing Huiyun Jiechang Investment Management Centre (Limited Partnership) (“ Huiyun Jiechang Investment ”), Beijing Yuntong Changda Investment Management Centre (Limited Partnership) (“ Yuntong Changda Investment ”), Beijing Puyun Huitian Investment Management Centre (Limited Partnership) (“ Puyun Huitian Investment ”), Beijing Tongyun Jitian Investment Management Centre (Limited Partnership) (“ Tongyun Jitian Investment ”) and Beijing Huicai Juneng Investment Management Centre (Limited Partnership) (“ Huicai Juneng Investment ”) and has a beneficial interest in the above limited liability partnership as to approximately 0.51%, 15.44%, 48.73%, 20.07% and 75.28%, respectively. Therefore, by virtue of Part XV of SFO, Mr. Zeng Zhiyong is deemed to be interested in the Domestic Shares held by Huiyun Jiechang Investment, Yuntong Changda Investment, Puyun Huitian Investment, Tongyun Jitian Investment and Huicai Juneng Investment in the Company, respectively;
(9) Mr. Guo Xinping is the beneficial owner of 90% equity interest of Shanghai Yibei Management Consulting Co., Ltd. (上海益倍管理諮詢有限公司) (“ Shanghai Yibei ”), which in turn holds 4.69% of the issued shares of Yonyou. Therefore, Mr. Guo Xinping is deemed to be interested in the shares of Yonyou held by Shanghai Yibei.

Save as disclosed above, as of the Latest Practicable Date, none of the Directors, Supervisors or chief executive of the Company had interests or short positions in the Shares, underlying Shares and debentures of the Company or any its associated corporations (as defined in Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 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 which were required to be entered in the register kept under section 352 of the SFO, or required to be notified to the Company and the Stock Exchange in accordance with the Model Code.

– 63 –

GENERAL INFORMATION

APPENDIX V

3 . SUBSTANTIAL SHAREHOLDERS’ INTERESTS

As of the Latest Practicable Date, so far as was known to the Directors or chief executive of the Company and as required by Divisions 2 and 3 of Part XV of the SFO to be disclosed to the Company or as recorded in the register required to be kept under section 336 of the SFO, the interests or short positions of persons other than the Directors, Supervisers and chief executive of the Company in the Shares and underlying Shares of the Company were as follows:

					Approximate	Approximate
			Approximate		percentage of
			percentage of		shareholdings
			shareholdings			in the
			in the total		relevant class
			share capital			of Shares
Name of				of the		of the
Shareholders	Number and class of Shares held	Nature of interest	Company(2)		Company(3)
Yonyou(4)	149,732,474 Domestic Shares	Beneficial owner
	3,855,784 Domestic Shares	Interest in controlled corporation
	Total: 153,588,258 Domestic Shares			70.72%		94.70%
UBS Group AG	9,209,200 H Shares (L)	Interest in controlled corporation		4.24%		16.74%
UBS AG	22,203 H Shares (L)	Beneficial owner
	22,200 H Shares (S)	Beneficial owner
	9,675,800 H Shares (L)	Interest in controlled corporation
	Total: 9,698,003 H Shares (L)			4.47%		17.63%
	22,200 H Shares (S)			0.01%		0.04%

Notes:

(1) (L) – long position; (S) – short position.
(2) The calculation was based on the total number of 217,181,666 Shares in issue as of the Latest Practicable Date.
(3) The calculation was based on the number of 162,181,666 Domestic Shares in issue and 55,000,000 H Shares in issue as of the Latest Practicable Date, respectively.
(4) As of the Latest Practicable Date, Yonyou directly held 149,732,474 Domestic Shares and indirectly held 3,855,784 Domestic Shares through Happiness Investment and Yonyou Chuangxin Investment, respectively. As Happiness Investment and Yonyou Chuangxin Investment were both controlled corporations of Yonyou, Yonyou was deemed to be interested in the Domestic Shares held by Happiness Investment and Yonyou Chuangxin Investment.

– 64 –

GENERAL INFORMATION

APPENDIX V

Save as disclosed above, as of the Latest Practicable Date, the Directors had not been notified by any other persons (other than the Directors, Supervisors or chief executive of the Company) who had interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company under Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be kept by the Company under section 336 of the SFO.

4 . DIRECTORS’ AND SUPERVISORS’ INTEREST IN ASSETS OR CONTRACTS

Save for the Disposal and the Capital Increase, the details of which are set out in the letter from the Board of this circular on pages 1 to 19, as of the Latest Practicable Date, none of the Directors or Supervisors had any direct or indirect interests in any assets which had been, since 31 December 2015 (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 of the Latest Practicable Date, none of the Directors or Supervisors was materially interested in any contract or arrangement which was significant in relation to the business of the Group.

5 . COMPETING INTERESTS

As of the Latest Practicable Date, so far as the Directors were aware of, none of the Directors, Supervisors or their respective associates had any interest in a business which competes or is likely to compete, either directly or indirectly, with the business of the Group.

6 . SERVICE CONTRACTS

As of the Latest Practicable Date, none of the Directors or the Supervisors had any existing or proposed service contracts with any member of the Group which will not expire or is not determinable by the employer within one year without payment of compensation (other than statutory compensation).

– 65 –

GENERAL INFORMATION

APPENDIX V

7 . DIRECTORS’ AND SUPERVISOR’S EMPLOYMENT WITH SUBSTANTIAL SHAREHOLDERS

As of the Latest Practicable Date, the following Directors and Supervisors were in the employment of those companies which had interests or short positions in the shares or underlying shares of the Company which are required to be notified to the Company pursuant to Divisions 2 and 3 of Part XV of the SFO:

Name of Director/Supervisor Company Mr . Wang Mr . Wu Mr . Zeng Mr . Guo Mr . Zhang name Wenjing Zhengping Zhiyong Xinping Peilin Yonyou Chairman of Director N/A Vice chairman Chief financial the board of of the board officer directors, of directors president

8 . LITIGATION

As far as the Directors were aware of, none of the members of the Group was engaged in any litigation, arbitration or claim of material importance and no litigation or claim of material importance was known to the Directors to be pending or threatening by or against any member of the Group as of the Latest Practicable Date.

9 . EXPERT’S QUALIFICATION AND CONSENT

As of the Latest Practicable Date, each of the experts named below has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and references to its name in the form and context in which it appears.

The following is the qualification of the experts who have given their opinions or advice which are contained in this circular:

Name

Qualification

China Everbright Capital Licensed corporation to carry out type 1 (dealing in securities), type 4 (advising on securities) and type 6 (advising on corporate finance) regulated activities as defined under the SFO

Beijing Jingwei Dong Yuan Independent qualified PRC valuer Assets Appraisal Co., Ltd.

Ernst & Young Certified public accountants

– 66 –

GENERAL INFORMATION

APPENDIX V

10 . EXPERT’S INTEREST

As of the Latest Practicable Date, each of the above experts did not have any direct or indirect interest in any asset which had been acquired, or disposed of by, or leased to any member of the Group since 31 December 2015, being the date to which the latest audited consolidated financial statements of the Group were made up, or was proposed to be acquired, or disposed of by, or leased to any member of the Group, and was not beneficially interested in the shares of any member of the Group and did not have any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

11 . METHOD OF VOTING AT THE EGM

According to Rule 13.39(4) of the Listing Rules, any vote of shareholders at a general meeting must be taken by way of poll. Accordingly, the chairman of the EGM will demand a poll in relation to the proposed resolutions at the EGM.

12 . DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours on any working day (public holidays excepted) at the Company’s principal place of business in Hong Kong at 18/F, Tesbury Centre, 28 Queen’s Road East, Wan Chai, Hong Kong from the date of this circular up to and including the date of the EGM:

(i) the Disposal Agreement;
(ii) the Capital Increase Agreement;
(iii) the Supplemental Non-Competition Agreement;
(iv) the Amended Confirmation;
(v) the letter from the Independent Board Committee to the Independent Shareholders as set out on pages 20 to 21 of this circular;
(vi) the letter from China Everbright Capital to the Independent Board Committee and the Independent Shareholders as set out on pages 22 to 39 of this circular;
(vii) the written consent of China Everbright Capital referred to in paragraph 9 of this appendix;
(viii) the written consent of Beijing Jingwei Dong Yuan Assets Appraisal Co., Ltd. referred to in paragraph 9 of this appendix;

– 67 –

GENERAL INFORMATION

APPENDIX V

(ix) the written consent of Ernst & Young referred to in paragraph 9 of this appendix; and
(x) this circular.

13 . GENERAL

(i) As of the Latest Practicable Date, save for the material decrease in profit attributable to owners of the parent of the Group as compared to that of last year mainly due to the cost of employee trust benefit scheme of the Group and the R&D costs for continuous improvement and the operation promotion and maintenance expenses of cloud service business, the details of which have been disclosed in the announcements of the Company dated 22 April 2016, 25 July 2016 and 27 July 2016 and the interim report of the Company dated 5 September 2016 the Directors were not aware of any material adverse change in the Group’s financial or trading position since 31 December 2015, being the date to which the latest published audited consolidated financial statements of the Group were made up.
(ii) The registered office of the Company is located at Unit D, Building 20, 68 Beiqing Road, Haidian District, Beijing, the PRC.
(iii) The H share registrar and transfer office of the Company is Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(iv) The joint company secretaries of the Company are Mr. You Hongtao and Dr. Ngai Wai Fung. Mr. You Hongtao is a joint member of The Hong Kong Institute of Chartered Secretaries with a master’s degree, while Dr. Ngai Wai Fung is a fellow of the Association of Chartered Certified Accountants in the United Kingdom, a member of the Hong Kong Institute of Certified Public Accountants, a fellow of the Institute of Chartered Secretaries and Administrators and a fellow of the Hong Kong Institute of Company Secretaries.
(v) The English text of this circular shall prevail over the Chinese text in the event of any inconsistency.

– 68 –

NOTICE OF THE EGM

==> picture [60 x 41] intentionally omitted <==

暢捷通信息技術股份有限公司

CHANJET INFORMATION TECHNOLOGY COMPANY LIMITED*

(A joint stock company incorporated in the People’s Republic of China with limited liability)

(Stock code: 1588)

NOTICE OF THE EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the “ EGM ”) of Chanjet Information Technology Company Limited (the “ Company ”) will be held at 2:00 p.m. on Friday, 30 December 2016 at Meeting Room E103, Building 8, Central District of Yonyou Industrial Park (Beijing), 68 Beiqing Road, Haidian District, Beijing, the PRC for the purpose of considering and, if thought fit, passing with or without modifications the following resolutions. Unless otherwise defined, capitalized terms used in this notice shall have the same meanings as defined in the circular of the Company dated 11 November 2016.

ORDINARY RESOLUTION

1 . “THAT:

(a) the Disposal Agreement entered into by the Company and Yonyou on 21 October 2016, copies of which have been produced to the EGM and marked “A” and initiated by the chairman of the EGM for identification purpose, and the transactions contemplated thereunder and the implementation thereof be and are hereby confirmed, approved, authorized and ratified; and the Board and/or any other person(s) from the management of the Company who is/are authorized by the Board from time to time be and are hereby authorized to make the necessary variations, revisions and/or amendments as required by the relevant governmental and regulatory authorities to the legal documents in connection with the transactions contemplated under the Disposal Agreement, except for such variations, revisions and/or amendments where the approval from the Shareholders is required pursuant to the relevant laws, regulations and regulatory rules; and

– 69 –

NOTICE OF THE EGM

(b) the Capital Increase Agreement entered into by the Company, Yonyou and Chanjet Payment on 21 October 2016, copies of which have been produced to the EGM and marked “B” and initiated by the chairman of the EGM for identification purpose, and the transactions contemplated thereunder and the implementation thereof be and are hereby confirmed, approved, authorized and ratified; the Board and/or any other person(s) from the management of the Company who is/are authorized by the Board from time to time be and are hereby authorized to make the necessary variations, revisions and/or amendments as required by the relevant governmental and regulatory authorities to the legal documents in connection with the transactions contemplated under the Capital Increase Agreement, except for such variations, revisions and/or amendments where the approval from the Shareholders is required pursuant to the relevant laws, regulations and regulatory rules.”

2 . “THAT:

the Supplemental Non-Competition Agreement entered into by Yonyou, Mr. Wang Wenjing and the Company on 21 October 2016 to amend the Non-Competition Agreement dated 17 February 2014, copies of which have been produced to the EGM and marked “C” and initiated by the chairman of the EGM for identification purpose, and the transactions contemplated thereunder and the implementation thereof be and is hereby confirmed, approved, authorized and ratified.”

3 . “THAT:

the Amended Confirmation issued by Yonyou in favour of the Company on 21 October 2016 to amend the Confirmation dated 11 April 2014, copies of which have been produced to the EGM and marked “D” and initiated by the chairman of the EGM for identification purpose, and the transactions contemplated thereunder and the implementation thereof be and is hereby confirmed, approved, authorized and ratified.”

For and on behalf of the Board

Chanjet Information Technology Company Limited* Wang Wenjing Chairman

Beijing, the PRC 11 November 2016

For identification purposes only

– 70 –

NOTICE OF THE EGM

Notes:

For the purpose of holding the EGM, the register of members of Shares will be closed from Wednesday, 30 November 2016 to Friday, 30 December 2016 (both days inclusive), during which period no transfer of Shares will be registered.

In order to be qualified to attend and vote at the EGM, all transfer documents accompanied by the relevant share certificates must be lodged with the H share registrar of the Company, Computershare Hong Kong Investor Services Limited (for holders of H Shares), or to the Board Office of the Company in PRC (for holders of Domestic Shares) no later than 4:30 p.m. on Tuesday, 29 November 2016.

The Shareholders whose names appear on the register of members of the Company on Wednesday, 30 November 2016 are entitled to attend and vote at the EGM.

Votes on the resolutions to be proposed at the EGM shall be taken by way of poll.
Shareholders who are entitled to attend and vote at the EGM may appoint one or more proxies to attend and vote on their behalf. A proxy need not be a Shareholder of the Company.
The instrument appointing a proxy must be in writing under the hand of a Shareholder or his attorney duly authorized in writing. If the Shareholder is a legal person, that instrument must be executed either under its seal or under the hand of its director or other attorney duly authorized to sign the same.
In order to be valid, the proxy form must be deposited, for holders of H Shares, to the H share registrar of the Company, Computershare Hong Kong Investor Services Limited or for holders of Domestic Shares, to the Board Office of the Company in the PRC not less than 24 hours before the time appointed for holding the EGM. If the proxy form is signed by a person under a power of attorney or other authority, a notarially certified copy of that power of attorney or other authority shall be deposited at the same time to the same place as mentioned in the proxy form. Completion and return of the proxy form will not preclude Shareholders from attending and voting in person at the EGM or any adjourned meetings should they so wish.
Shareholders shall produce their identity documents and supporting documents in respect of the shares held when attending the EGM. If corporate Shareholders appoint authorized representative to attend the EGM, the authorized representative shall produce his/her identity documents and a notarially certified copy of the relevant authorization instrument signed by the board of directors or other authorized parties of the corporate Shareholders or other notarially certified documents allowed by the Company. Proxies shall produce their identity documents and the proxy form signed by the Shareholders or their attorney when attending the EGM.
Holders of H Shares who intend to attend the EGM should complete the reply slip and return it to the H share registrar of the Company in Hong Kong, Computershare Hong Kong Investor Services Limited by hand, by post or by fax on or before Saturday, 10 December 2016.
Domestic Shareholders who intend to attend the EGM should complete the reply slip and return it to the Board Office of the Company in the PRC by hand, by post or by fax on or before Saturday, 10 December 2016.
The EGM is expected to take for less than half a day. Shareholders attending the EGM shall be responsible for their own travel and accommodation expenses.

– 71 –

NOTICE OF THE EGM

Contact details of the H share registrar of the Company, Computershare Hong Kong Investor Services Limited are as follows:

Address: 17M Floor, Hopewell Centre, 183 Queens Road East, Wanchai, Hong Kong

Telephone: (+852) 2862 8555

Fax No.: (+852) 2865 0990/(+852) 2529 6087

Contact details of the Board Office of the Company in the PRC are as follows:

Address: Unit D, Building 20, Yonyou Industrial Park (Beijing), 68 Beiqing Road, Haidian District, Beijing, the PRC

Telephone No.: (8610) 6243 4214

Fax No.: (8610) 6243 8765

– 72 –

AI assistant

Chanjet Information Technology Company Limited — Proxy Solicitation & Information Statement 2016

50023_rns_2016-11-11_8a9c883a-7084-4c25-920a-da68e607eaee.pdf

暢捷通信息技術股份有限公司 CHANJET INFORMATION TECHNOLOGY COMPANY LIMITED*

(1) DISCLOSEABLE AND CONNECTED TRANSACTIONS PROPOSED DISPOSAL AND CAPITAL INCREASE (2) CONNECTED TRANSACTIONS PROPOSED AMENDMENTS TO THE NON-COMPETITION AGREEMENT AND THE CONFIRMATION AND NOTICE OF THE EGM

DEFINITIONS

DEFINITIONS

暢捷通信息技術股份有限公司 CHANJET INFORMATION TECHNOLOGY COMPANY LIMITED*

(1) DISCLOSEABLE AND CONNECTED TRANSACTIONS PROPOSED DISPOSAL AND CAPITAL INCREASE

(2) CONNECTED TRANSACTIONS PROPOSED AMENDMENTS TO THE NON-COMPETITION AGREEMENT AND THE CONFIRMATION AND NOTICE OF THE EGM

INTRODUCTION

PROPOSED DISPOSAL AND CAPITAL INCREASE

(1) The Disposal Agreement

Date

Parties

Subject Matter

The Consideration and the Payment

Basis of Determination of the Consideration

Conditions Precedent

Completion of the Disposal

(2) The Capital Increase Agreement

Date

Parties

Subject Matter

Payment Terms

Pricing

Conditions Precedent

Completion of the Capital Increase

(3) Financial Information of Chanjet Payment

(4) Shareholding Structure

(5) Financial Effects of the Disposal and the Capital Increase and Use of Proceeds

(6) Reasons for and Benefits of the Disposal Agreement and the Capital Increase Agreement

(7) Listing Rules Implications

PROPOSED AMENDMENTS TO THE NON-COMPETITION AGREEMENT AND THE CONFIRMATION

(1) The Non-Competition Agreement and the Confirmation

(2) Backgrounds of the Proposed Amendments

(3) The Supplemental Non-Competition Agreement and the Amended Confirmation

Supplemental Non-Competition Agreement

Clause 1 (1 .1) – Definition of “Restricted Business”

Which originally read as:

is proposed to be amended as follows:

Amended Confirmation

The Relevant Undertakings Made by Yonyou under the Confirmation

Which originally read as:

Is proposed to be amended as follows:

(4) Reasons for and Benefits of the Supplemental Non-Competition Agreement and the Amended Confirmation

(5) Listing Rules Implications

INFORMATION ABOUT THE PARTIES

The Company

Youyou

Chanjet Payment

Mr . Wang Wenjing

RECOMMENDATION

EGM

LETTER FROM THE BOARD

PROCEDURES FOR VOTING AT THE EGM

ADDITIONAL INFORMATION

暢捷通信息技術股份有限公司 CHANJET INFORMATION TECHNOLOGY COMPANY LIMITED*

(1) DISCLOSEABLE AND CONNECTED TRANSACTIONS PROPOSED DISPOSAL AND CAPITAL INCREASE (2) CONNECTED TRANSACTIONS PROPOSED AMENDMENTS TO THE NON-COMPETITION AGREEMENT AND THE CONFIRMATION

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Yours faithfully,

Chanjet Information Technology Company Limited*

(1) DISCLOSEABLE AND CONNECTED TRANSACTIONS PROPOSED DISPOSAL AND CAPITAL INCREASE (2) CONNECTED TRANSACTION PROPOSED AMENDMENTS TO THE NON-COMPETITION AGREEMENT AND THE CONFIRMATION

I . INTRODUCTION

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS TAKEN INTO ACCOUNT

(A) Background information of the relevant parties

Information of the Company

Background of Chanjet Payment

Background of Yonyou

Background of Mr. Wang Wenjing

(B) Reasons for and benefits of Proposed Disposal and Capital Increase

(C) Principal terms of the Disposal Agreement and Capital increase Agreement

1. Principal terms in relation to the Disposal Agreement

The Consideration and the Payment

Basis of Determination of the Consideration

(a) Historical price to revenue multiple (“ PRR ”) analysis

(b) Valuation Report of Chanjet Payment

(i) Revenue

(ii) Enterprise income tax

Chanjet Information Technology Company Limited Proxy Solicitation & Information Statement 2016