HC Group Inc. — Capital/Financing Update 2015

Dec 7, 2015

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

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HC INTERNATIONAL, INC. 慧聰網有限公司[*]

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 02280)

MAJOR TRANSACTION IN RELATION TO

THE SUBSCRIPTION OF SHARES OF INNER MONGOLIA HOHHOT JINGU RURAL COMMERCIAL BANK LIMITED COMPANY*

THE SUBSCRIPTION AGREEMENT

The Board is pleased to announce that on 7 December 2015 (after trading hours), the Subscriber, an indirect wholly-owned subsidiary of the Company, entered into the Subscription Agreement with Hohhot Jingu, a commercial bank based in Inner Mongolia, pursuant to which the Subscriber has conditionally agreed to subscribe for 108,661,533 Subscription Shares (subject to Adjustment) at the Subscription Price of RMB3 per Subscription Share. The Consideration for the Subscription is RMB325,984,599 (subject to Adjustment), which shall be settled by the Subscriber in cash.

Assuming there is no Adjustment, the Subscription Shares represent approximately 13.94% of the existing issued share capital of Hohhot Jingu and approximately 8.49% of Hohhot Jingu’s entire issued share capital as enlarged by the Capital Increase. Assuming there is no Adjustment, upon completion of the Subscription, the Subscriber will, together with the 19,300,000 shares of Hohhot Jingu acquired by it through the Acquisition, own 127,961,533 shares of Hohhot Jingu, representing approximately 10.00% of Hohhot Jingu’s entire issued share capital as enlarged by the Capital Increase.

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios in respect of the Subscription Agreement and the transactions contemplated thereunder, in aggregate with the Acquisition, is more than 25% but less than 100%, the Subscription constitutes a major transaction for the Company and accordingly, is subject to the reporting, announcement and Shareholders’ approval requirements under Chapter 14 of the Listing Rules.

• For identification purposes only

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GENERAL

The EGM will be convened for the purpose of, among other matters, considering, and if thought fit, approving the Subscription Agreement and the transactions contemplated thereunder.

A circular containing, among other things, (i) further details of the Subscription Agreement and the transactions contemplated thereunder; (ii) other information as required to be disclosed under the Listing Rules; and (iii) the notice of the EGM and a form of proxy are expected to be despatched to the Shareholders on or before 29 December 2015.

The Subscription Agreement is conditional upon the fulfillment of certain conditions precedent. As the Subscription may or may not proceed, Shareholders and potential investors are advised to exercise caution when dealing in the Shares.

INTRODUCTION

The Board is pleased to announce that on 7 December 2015 (after trading hours), the Subscriber, an indirect wholly-owned subsidiary of the Company, entered into the Subscription Agreement with Hohhot Jingu, a commercial bank based in Inner Mongolia, pursuant to which the Subscriber has conditionally agreed to subscribe for, 108,661,533 Subscription Shares (subject to Adjustment) at the Subscription Price of RMB3 per Subscription Share. The Consideration for the Subscription is RMB325,984,599 (subject to Adjustment), which shall be settled by the Subscriber in cash.

Assuming there is no Adjustment, the Subscription Shares represent approximately 13.94% of the existing issued share capital of Hohhot Jingu and approximately 8.49% of Hohhot Jingu’s entire issued share capital as enlarged by the Capital Increase. Assuming there is no Adjustment, upon completion of the Subscription, the Subscriber will, together with the 19,300,000 shares of Hohhot Jingu acquired by it through the Acquisition, own 127,961,533 shares of Hohhot Jingu, representing approximately 10.00% of Hohhot Jingu’s entire issued share capital as enlarged by the Capital Increase.

Set out below is summary of the key terms of the Subscription Agreement:

PRINCIPAL TERMS OF THE SUBSCRIPTION AGREEMENT

Date

7 December 2015

Parties

• (i) The Subscriber; and

• (ii) Hohhot Jingu.

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Save for the holding of 19,300,000 shares of Hohhot Jingu by the Subscriber and the 20,700,000 shares of Hohhot Jingu held by an indirect wholly-owned subsidiary of Digital China Holdings Limited (a substantial shareholder of the Company), to the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, Hohhot Jingu and its ultimate beneficial owners are third parties independent of the Company and its connected persons (as defined under the Listing Rules).

To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, the identities of the other subscribers have not yet been confirmed as at the date of this announcement.

Subscription Shares and Subscription Price

The registered capital of Hohhot Jingu will be increased from RMB779,615,333 to RMB1,279,615,333 through the Capital Increase.

Pursuant to the Subscription Agreement and assuming there is no Adjustment, the Subscriber will subscribe for 108,661,533 Subscription Shares, representing approximately 13.94% of the existing issued share capital of Hohhot Jingu and approximately 8.49% of the issued share capital of Hohhot Jingu as enlarged by the Capital Increase, at the Subscription Price of RMB3 per Subscription Share. Assuming there is no Adjustment, the Consideration for the Subscription is RMB325,984,599, which shall be settled by the Subscriber in cash on the Completion Date.

The Subscription shall be funded by the Group with its internal resources.

The Subscription Price was fixed by Hohhot Jingu with reference to the net asset value per share of Hohhot Jingu as at 31 December 2014. The Directors (including the independent non-executive Directors) consider that each of the Subscription Price and the Consideration is fair and reasonable and on normal commercial terms and in the interests of the Company and the Shareholders as a whole.

Assuming there is no Adjustment, upon completion of the Subscription, the Subscriber will, together with the 19,300,000 shares of Hohhot Jingu acquired by it through the Acquisition, own 127,961,533 shares of Hohhot Jingu, representing approximately 10.00% of Hohhot Jingu’s entire issued share capital as enlarged by the Capital Increase.

Conditions precedent

The Subscription Agreement is conditional upon the following conditions having been fulfilled:

1. the Subscriber and Hohhot Jingu having obtained all necessary authorizations, consents and approvals as to the Subscription Agreement and the transactions contemplated thereunder (including but not limited to the board approval and shareholders’ approval of Hohhot Jingu);

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1. the financial target of the Subscriber having complied with the supervisory regulatory requirements is relation to the capital injection by legal persons and passed the examination procedure of the relevant bank supervisory departments as to its shareholder’s qualification;

2. the Company having complied with the requirements under the Listing Rules in respect of the Subscription Agreement, and the Shareholders having approved the Subscription Agreement and the transactions contemplated thereunder at the EGM;

3. Hohhot Jingu having obtained its shareholders’ approval on the amendment of its memorandum and articles of association pursuant to the terms and conditions with respect to the Subscription in the Subscription Agreement;

4. there is no major adverse change to Hohhot Jingu in respect of its business, laws and finance; and

5. the representations and warranties made by Hohhot Jingu remain accurate and valid in all material respects and there is no material adverse change thereto.

If any of the above conditions precedent is not fulfilled on or before 30 June 2016 (or such other date as may be agreed by the parties to the Subscription Agreement), the Subscription Agreement shall be terminated and, save for any antecedent breach, the rights and obligations of each of the parties to the Subscription Agreement shall cease and determine.

Completion

The Completion Date shall be determined by the Subscriber and Hohhot Jingu within 10 business days after the conditions precedent in the Subscription Agreement have been satisfied.

INFORMATION OF HOHHOT JINGU

The predecessor of Hohhot Jingu was 呼和浩特金谷農村合作銀行 (Hohhot Jingu Rural Cooperative Bank*) which has been transformed into Hohhot Jingu in April 2014 under the approval from the Inner Mongolia Office of the China Banking Regulatory Commission. Hohhot Jingu was duly incorporated in Inner Mongolia, PRC, on 18 April 2014 as a joint stock company with 779,615,333 total issued shares and registered capital of RMB779,615,333 as at the date of this announcement. Hohhot Jingu has obtained the Approval in November 2015 for the Capital Increase. Upon completion of the Capital Increase, Hohhot Jingu will have a total issued shares of 1,279,615,333 and registered capital of RMB1,279,615,333.

Hohhot Jingu’s banking products and services primarily consist of bank deposits; short term, medium term and long term loans and advances; settlement services in the PRC; bill discounting; issuance of government bonds; trading of government bonds and financial bonds; agency services for receivables and insurance; bank cards; provision of safety boxes services and other businesses approved by 中國銀行業監督管理委員會 (China Banking Regulatory Commission*). Currently, Hohhot Jingu has around 18 primary sub-branches and 89 secondary sub-branches in Hohhot, Inner Mongolia, the PRC.

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Financial information of Hohhot Jingu

Set out below is a summary of the financial information of the Hohhot Jingu for the two years ended 31 December 2014 and for the nine months ended 30 September 2015:

	Audited
	financial		Unaudited
	information	Audited	financial
	of Hohhot	financial	information
	Jingu Rural	information	of Hohhot
	Cooperative	of Hohhot	Jingu for the
	Bank for the	Jingu for the	nine months
	year ended	year ended	ended
	31 December	31 December	30 September
	2013	2014	2015
	RMB’000	RMB’000	RMB’000
Revenue	1,364,536	1,545,866	1,161,960
Profit before taxation	658,377	608,855	331,461
Profit after taxation	487,636	448,852	248,596
Net assets	2,134,767	2,436,411	2,795,699

Upon the completion of the Subscription, the financial results of Hohhot Jingu will be recorded as a long term investment in the consolidated financial statements of the Company.

INFORMATION OF THE GROUP

Currently, the Group has five business segments, namely: (i) on-line services, (ii) trade catalogues and yellow page directories, (iii) seminars and other services, (iv) B2B household electrical appliances business exhibition centre, and (v) anti-counterfeiting products and services.

REASONS AND BENEFITS FOR THE SUBSCRIPTION

As mentioned in the annual report of the Company for the year ended 31 December 2014 and the announcement of the Company dated 22 July 2015, the Company will continue to focus on domestic trade and enhance the capabilities of its B2B eCommerce platform by providing vertical in-depth interactive portals with transaction enablement module and internet finance cluster to satisfy the needs of small to medium enterprises (the “ SMEs ”), also via constant products innovation and value-added services offerings to both SMEs and established companies.

At the moment, the services and products under the internet finance cluster are offered through (1) Digital China Huicong Micro-Credit Co., Ltd (重慶神州數碼慧聰小額貸款有限 公司), a joint venture company providing micro-loan to the Group’s B2B customers via Mai Mai Loan; and (2) Huicong Finance Leasing Company Limited, a wholly-owned subsidiary of the Company registered in Tianjing, PRC to serve lease financing to customers of sectors which have such needs.

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In addition to Mai Mai Loan and lease financing, leveraging on the Company’s further investment in Hohhot Jingu from approximately 2.49% of equity interests to approximately 10.00% of equity interests, the Company will explore more potential business opportunities of Hohhot Jingu in provision of internet micro-loan and lease financing product to SMEs. This is in line with the Company’s strategy to develop transaction enablement along with internet finance services through vertical integration. With the banking products and services of Hohhot Jingu, the Company expects there will be considerable synergies in the area of B2B internet finance cluster.

The Directors (including the independent non-executive Directors) consider the terms and conditions of the Subscription Agreement are fair and reasonable and on normal commercial terms and are in the interests of the Company and the Shareholders as a whole.

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios in respect of the Subscription Agreement and the transactions contemplated thereunder, in aggregate with the Acquisition, is more than 25% but less than 100%, the Subscription constitutes a major transaction for the Company and accordingly, is subject to the reporting, announcement and Shareholders’ approval requirements under Chapter 14 of the Listing Rules.

GENERAL

The EGM will be convened for the purpose of, among other matters, considering, and if thought fit, approving the Subscription Agreement and the transactions contemplated thereunder.

A circular containing, among other things, (i) further details of the Subscription Agreement and the transactions contemplated thereunder; (ii) other information as required to be disclosed under the Listing Rules; and (iii) the notice of the EGM and a form of proxy are expected to be despatched to the Shareholders on or before 29 December 2015.

The Subscription Agreement is conditional upon the fulfillment of certain conditions precedent. As the Subscription may or may not proceed, Shareholders and potential investors are advised to exercise caution when dealing in the Shares.

DEFINITIONS

In this announcement, unless the context otherwise requires, the following words and expressions shall have the following meanings ascribed to them respectively:

• “Acquisition”

the acquisition of 19,300,000 shares of Hohhot Jingu, representing approximately 2.49% of the then existing issued share capital of Hohhot Jingu, by the Subscriber pursuant to the sale and purchase agreement entered into between the Subscriber and 王鳳鳳 (Wang Feng Feng) dated 22 July 2015, details of which were set out in the announcement of the Company dated 22 July 2015

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“Adjustment”

if the proposed capital increase and allotment by Hohhot Jingu pursuant to the Approval is ultimately less than 500,000,000 shares, the Company will subscribe such number of shares that, together with the 19,300,000 shares of Hohhot Jingu held by the Company as at the date of this announcement, represent not more than 10% of the issued share capital of Hohhot Jingu as enlarged by the actual number of shares issued and allotted by Hohhot Jingu pursuant to the Approval

• “Approval”

• the approval by 中國銀行業監督管理委員會內蒙古監管 局 (China Banking Regulatory Commission Inner Mongolia Supervisory Authority*) dated 25 November 2015, pursuant to which the Capital Increase has been approved

• “Board”

• the board of Directors

• “Capital Increase”

• the proposed capital increase and allotment of 500,000,000 shares by Hohhot Jingu pursuant to the Approval

• “Company” HC INTERNATIONAL, INC. ( 慧聰網有限公司 *), a company incorporated in Cayman Islands with limited liability, the issued shares of which are listed on the Main Board of the Stock Exchange

• “Completion Date” the date which shall be determined by the Subscriber and Hohhot Jingu within 10 business days after the conditions precedent in the Subscription Agreement have been satisfied

• “Consideration” RMB325,984,599 (subject to Adjustment), being the aggregate subscription price payable by the Subscriber for the Subscription

• “Director(s)”

• the director(s) of the Company

• “EGM”

• an extraordinary general meeting of the Company to be convened for the purpose of considering and, if thought fit, approving the Subscription Agreement and the transactions contemplated thereunder

• “Group”

• the Company and its subsidiaries

• “HK$”

• Hong Kong dollars, the lawful currency of Hong Kong

• “Hohhot Jingu”

內蒙古呼和浩特金谷農村商業銀行股份有限公司 (Inner Mongolia Hohhot Jingu Rural Commercial Bank Limited Company*), a joint stock company incorporated in the PRC

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• “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

• “PRC” the People’s Republic of China “RMB” Renminbi, the lawful currency of the PRC “Shareholder(s)” holder(s) of the ordinary share(s) of HK$0.10 each in the issued share capital of the Company

• “Stock Exchange” The Stock Exchange of Hong Kong Limited “Subscriber” 北京慧聰互聯信息技術有限公司 (HC Internet Information Technology Company Limited*), a company incorporated in the PRC and an indirect wholly-owned subsidiary of the Company

• “Subscription” the proposed subscription of the 108,661,533 Subscription Shares (subject to Adjustment), each at the Subscription Price, by the Subscriber pursuant to the Subscription Agreement

• “Subscription Agreement” the conditional subscription agreement entered into between the Subscriber and Hohhot Jingu in respect of the Subscription dated 7 December 2015

• “Subscription Price” RMB3 per Subscription Share

• “Subscription Share(s)” 108,661,533 shares (subject to Adjustment) of Hohhot Jingu proposed to be subscribed by the Subscriber pursuant to the Subscription Agreement

• “%” per cent

By order of the Board of

HC International, Inc. Guo Jiang Chief Executive Officer and Executive Director

Beijing, the People’s Republic of China, 7 December 2015

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As at the date of this announcement, the Board comprises:

• Mr. Guo Fansheng (Executive Director and Chairman)

• Mr. Guo Jiang (Executive Director and Chief Executive Officer)

• Mr. Lee Wee Ong (Executive Director and Chief Financial Officer)

• Mr. Li Jianguang (Non-executive Director)

• Mr. Guo Wei (Non-executive Director)

• Mr. Zhang Ke (Independent Non-executive Director)

• Mr. Xiang Bing (Independent Non-executive Director)

• Mr. Zhang Tim Tianwei (Independent Non-executive Director)

• For identification purposes only

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