HC Group Inc. — Interim / Quarterly Report 2015

Sep 4, 2015

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HC INTERNATIONAL,INC. 慧聰網有限公司 Stock Code：HK2280 INTERIM REPORT 2015

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MESSAGE FROM THE CHIEF EXECUTIVE OFFICER

The board (the “Board”) of directors (the “Directors”) of HC International, Inc. (the “Company”) hereby announce the unaudited financial results of the Company and all its subsidiaries (collectively, the “Group”) for the six months ended 30th June 2015 (the “Reporting Period”), respectively, together with the comparative figures for the corresponding periods ended 30th June 2014 to the shareholders of the Company.

Financial Highlights

Financial Highlights	Financial Highlights
Unaudited Six months ended 30th June 2015 2014 RMB’000 RMB’000
Revenue 391,052 Gross profit 356,841 EBITDA 71,113 Profit attributable to equity holders of the Company 41,131 Diluted EPS 0.0599*	465,271 440,469 133,584 102,455 0.1474

Key financial figures for the six months ended 30th June 2015

• Revenue was approximately RMB391.1 million , decreased by approximately RMB74.2 million, or fall approximately 16.0% , when compared to approximately RMB465.3 million recorded for the corresponding period in 2014.

• Gross Profit Ratio was approximately 91.3%, decreased by approximately 3.4 percentage points over the same period last year.

• The Group’s EBITDA was approximately RMB71.1 million , decreased by approximately RMB62.5 million* from approximately RMB133.6 million.

• Profit Attributable to Equity Holders of the Company was approximately RMB41.1 million during this reporting period, while it was approximately RMB102.5 million for the same period a year before, representing a decrease of approximately 59.9%.

• The Diluted EPS was RMB0.0599 , decreased by approximately 59.4% when compared to RMB0.1474, on a period-on-period basis.

Notes: *Profit before interest, income tax, depreciation, amortisation of intangible assets, land use rights and share based payment

HC International, Inc. - Interim Report 2015

FINANCIAL AND BUSINESS REVIEW

		Trade
		catalogues		Anti-
		and yellow		counterfeiting
	On-line	page	Seminars and	products and
Revenue Analysis	services	directories	other services	services	Total
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
First Half of 2015	315,936	8,447	37,061	29,608	391,052
First Half of 2014	409,651	16,100	39,520	–	465,271
Variance	(22.9%)	(47.5%)	(6.2%)	100%	(16.0%)

2015 First Half Revenue

2014 First Half Revenue

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7.6% On-line services 12.9%
9.4% Trade catalogues 4.8% On-line services
2.2% and yellow pagedirectories Trade cataloguesand yellow page
Seminars and directories
other services Seminars and
80.8% Anti-counterfeiting 82.3% other services
products and services
----- End of picture text -----

During the period, the Group recorded a revenue of approximately RMB391.0 million (2014: RMB465.3 million).

The revenue was derived from the segments of on-line services, trade catalogues and yellow page directories, seminars and other services and anti-counterfeiting products and services, of which breakdowns are stated in the above table and charts. As a consequence of the new segment of anti-counterfeiting products and services, our overall gross profit ratio has decreased by approximately 3.4 percentage points to approximately 91.3% (2014: 94.7%).

The Group decrease its selling and marketing expenses from approximately RMB264.5 million for the half year ended 30th June 2014 to approximately RMB229.5 million in the same period of 2015 which was mainly due to the decrease in agency costs, sales staff salaries and commissions.

The Group’s profit attributable to equity holders had decreased to approximately RMB41.1 million for the six months ended 30th June 2015, represents a decrease of approximately 59.9% from the same period last year. The Board believes that the said decrease is mainly due to, among other things, the slow down of the PRC’s economic growth of the People’s Republic of China (the “PRC” or “China”), the decrease in number of fee-paying users resulting in a decline in the Group’s revenue, and the increase in input of resources by the Group on business of B2B 2.0 which included transactions and internet finance.

HC International, Inc. - Interim Report 2015

In the first half of 2015, the gross domestic product (GDP) in China grew at 7% year-on-year, which has slowed down as compared with the growth rate over the same period in 2014 (7.4%). In particular, the industrial growth in Northern regions of China declined with falling efficiency in certain enterprises coupled with a depressing investment inclination. The PMI of small enterprises was lingering in the contraction range between 46.4% and 48.4% during January to July 2015. Among clients of the Group, certain small and medium enterprises with relatively traditional operation models, mainly the small distributors, were facing more operational difficulties, leading to a reduction of the number of our fee-paying members, which in turn lend to a decrease in our revenue compared with the same period last year. In addition, since the “Internet+” concept had become popular during the “Two Sessions”, the quick development of various online-to-offline (“O2O”) models continuously impacted the traditional B2B business model.

The commencement of layout in 2013 has enabled the Group to create its own B2B ecosystem, including the building of transaction platform, HuiFuBao (慧付寶), and to improve user experience constantly. As for internet financing, from leveraging on the auxiliary internet financing products from the third party to forming a micro-credit financing company with Digital China Holdings Limited by way of joint venture as well as acquiring 2.49% of the shares of Hohhot Jingu Rural Commercial Bank in Inner Mongolia on 22th July 2015, the Group’s safe proliferation of internet financing generated blending effects and continued to brew, ultimately facilitating B2B transactions. Meanwhile, our development and utilisation of “Cai-Gou-Tong” and “Mai-Mai-Tong”, the mobile terminals, provide services for customers.

In the first half of 2015, the Group committed to develop the O2O business model of facilitating B2B transactions. Collaborating with the Group’s business partners, we acquired two pieces of land with areas of 43,965 sq.m. and 48,103 sq.m. in Shunde in Foshan, Guangdong Province and Yuyao City, Zhejiang Province, respectively. The Group continued the construction of the online to offline business exhibition centre (the O2O “Business Exhibition Centre”) in Shunde, which is expected to be completed by the end of 2015 and commence operation in the first half of 2016. In order to maintain the financial position for such project, as of the date of this report, the Group had presold the property of such project with total gross floor area of approximately 51,000 sq.m., contracted amount to approximately RMB928 million. Regarding the second household electrical appliances business exhibition centre located in Yuyao, Zhejiang Province, the construction has begun in the first half of 2015. Apart from the household electrical appliance end-products, such project covers plastic and plastic moulds for the manufacturing of household electrical appliances.

HC International, Inc. - Interim Report 2015

Despite that Shunde and Zhongshan accounted for one-third of the manufacturing of household electrical appliance by the country at a production value of more than RMB100 billion, the current B2B transactions of the home electrical appliance industry were not mainly realised in Shunde and Zhongshan. With an aim of utilising B2B in household electrical appliance transactions, the Business Exhibition Centre in Shunde is going to adopt the setting of “store in the front, factory at the back” to attract household electrical appliance manufacturers to settle in, including small to middle distributors that are trading cost sensitive, major distributors with specific requirements in product specifications and trading methods, and terminal distributors that serve consumers. Leveraging on the over 20 years of trading experience in the household electrical appliance industry of the Group, the Business Exhibition Centre in Shunde, operating under the model of “O2O”, is going to facilitate the de-stocking of the peripheral household electrical appliance factories and enable them to become more market-sensitive. We also assist the distributors of the household electrical appliance industry in completing online-to-offline B2B transactions. Currently, 20 to 30 items are possessed by the household from a developed country, and every Chinese household possesses five to seven items of household electrical appliances in average. This shows huge potential in market growth. Relying on about two-third of household electrical appliances manufacturers in China (the three largest Chinese electrical manufacturers are located at Shunde and Zhongshan in Guangdong, Qingdao in Shandong and Yuyao and Cixi in Zhejiang) and the two Business Exhibition Centres in Yuyao and Shunde, the Group will explore and increase the trading in the household electrical appliance industry.

Despite the declining results on the business of traditional B2B1.0, we have never been so excited about the future prospects of the B2B e-commerce. The Group is of the view that, in such situation, acquisition of B2B vertical portals of potential industries and commencement of strategic cooperation will promote the development on the potential of business growth for the business of B2B1.0 and lay a foundation for the business of B2B2.0 so as to build the Group’s own B2B ecosystem.

HC International, Inc. - Interim Report 2015

On 3rd July 2015, the Group completed the acquisition of “中關村在綫” (www.zol.com.cn) (“ZOL”),a domestic leading technology vertical-interactive portal which offers content and comprehensive IT-related products information, such as specifications, pricing, reviews, test reports and upcoming trends, and was undergoing resource consolidation. By combining the core technological strengths of the Group and ZOL, we are going to develop a new product for the provision of precise services to small to middle enterprises and middle-sized enterprises of the IT industry, increasing the added value of the original product. The ZOL’s B2B2C business model on top of the B2B1.0 in the IT industry prompted the Group’s objective to be embedding the B2B2C business model into industry with enormous market potential yet insufficiently developed, such as IT, household electrical appliance, automobile goods, building materials, furniture and renovation and clothing, providing the Group’s clients with products and services of “B2B1.0+B2B2C”.

While exploring potential industries deeply and vertically, we are committed to upgrading the Group’s procurement and search services to help buyers and sellers reaching a supply-demand balance, enabling quality trading services. During the Reporting Period, the Group’s Stock Keeping Unit (SKU) had been further strengthened by 46.6% to 352 million up from 240 million as of the end of 2014.

We believe the Group is witnessing, while be a significant part of, the gradual maturing of B2B e-commerce that involves: internet technologies, internet finance, O2O business models, mobile terminals & applications, anti-counterfeit deployment and etc. The business of the B2B2.0 is going to reshape client’s experience and ultimately contribute to the Group’s earnings. We strongly believe that the Group’s relentless efforts in building the B2B ecosystem will bring us to our destiny that definitely will be more blossoms with the patience and supports from our fellow investors.

On behalf of the Board, I would like to take this opportunity to thank the management team and every staff member of the Group for their on-going dedication and hard work.

Guo Jiang

Executive Director and Chief Executive Officer

Beijing, The People’s Republic of China, 25th August 2015

HC International, Inc. - Interim Report 2015

MANAGEMENT DISCUSSION AND ANALYSIS

Contractual arrangements

In light of the relevant PRC laws and regulations restricting the participation and operation of internet content services by foreign investors, the Group has engaged Beijing Huicong Construction Information Consulting Co., Ltd. (北京慧聰建設信息諮詢有限公司) (“Huicong Construction”) to operate its online platform, and disseminate its business information on the internet pursuant to certain contractual arrangements (the “Contractual Arrangements”). The Group relies on the Contractual Arrangements in respect of its online services. Please also refer to the prospectus of the Company dated 8th December 2003, the announcement of the Company dated 25th September 2014 in relation to the transfer of listing, and the 2014 annual report of the Company for further details of the Contractual Arrangements.

For the Reporting Period, there was no material change in the Contractual Arrangements and/or the circumstances under which they were adopted.

For the Reporting Period, none of the structured contracts under the Contractual Arrangements had been unwound as none of the restrictions that led to the adoption of the said structured contracts had been removed.

Liquidity and financial resources

As at 30th June 2015 the Group had cash and bank balance of approximately RMB867 million and net current assets of approximately RMB851 million. The Group maintained a strong working capital position during the six months ended 30th June 2015.

The Group had short-term loans amounting to approximately RMB141 million as at 30th June 2015 (including financial lease obligations). As at 30th June 2015, the Group was in net cash position, whereas the Group’s gearing ratio is calculated as net debt divided by total capital.

The capital and reserves attributable to equity holders of the Company increased by approximately RMB222 million from approximately RMB1,160 million as at 31st December 2014 to approximately RMB1,382 million as at 30th June 2015.

Significant investments

Saved as disclosed in this report, the Group had no significant investments during the six months ended 30th June 2015.

Future plans for material investments

Saved as disclosed in this report, the Group had no future plans for material investments during the six months ended 30th June 2015.

HC International, Inc. - Interim Report 2015

Staff

The continued success of the Group relies on the skills, motivation and commitment of its staff. As at 30th June 2015, the Group had 2,522 employees.

Remuneration of employees is generally in line with the market trend and commensurate with the rate in the industry. Share options and share awarded are granted to employees based on individual performance. Other benefits to the Group’s employees include medical insurance, retirement schemes, training programs and educational subsidies.

Capital structure

During the six months ended 30th June 2015, 658,000 shares of the Company (“Shares”) were issued upon the exercise of share options. The total number of issued Shares was 667,824,618 as at 30th June 2015.

Charges on Group assets

As at 30th June 2015, the Group has bank borrowings amounting to RMB198 million and undrawn banking facilities of RMB12 million, which are secured by land use rights.

Exchange risk

As the Group’s operations are principally in the PRC, and majority of the Group’s assets and liabilities are denominated in Renminbi (“RMB”), the Directors believe that the operations of the Group are not subject to significant exchange risk.

Contingent liabilities

As at 30th June 2015, the Group had no material contingent liabilities.

Material acquisition and disposal

Further to the entering into of the letter of intent dated 17th March 2015, on 8th May 2015, the Company (as purchaser), NAVI-IT Limited (as seller) and Mr. Liu Xiaodong (劉小東), Ms. Wang Qian (王倩), Mr. Shi Shilin (施世林) and Ms. Yang Ye (as seller’s guarantors) entered into a sale and purchase agreement (the “Sale and Purchase Agreement”). Pursuant to the Sale and Purchase Agreement, the Seller conditionally agreed to sell, and the Company conditionally agreed to acquire all the issued share capital of Orange Triangle Inc. (the “Target Company”) for a consideration of RMB1,500,000,000.

The consideration is proposed to be settled as to 30% (being US$ equivalent amount of RMB450,000,000) in cash and as to 70% (being US$ equivalent amount of RMB1,050,000,000) by allotment of 155,684,485 new Shares at HK$8.5 each (as to 40% to Mr. Liu Xiaodong, as to 25% to Ms. Wang Qian, as to 20% to Mr. Shi Shilin and as to 15% to Ms. Yang Ye, respectively, and subject to adjustment mechanism stipulated in the Sale and Purchase Agreement). The allotment had been approved by Shareholders in the extraordinary general meeting held on 19th June 2015.

HC International, Inc. - Interim Report 2015

Completion of the transactions contemplated under the Sale and Purchase Agreement is also conditional upon satisfaction of the conditions precedent set out in the Sale and Purchase Agreement.

Subject to fulfillment or waiver (as the case may be) of the conditions precedent set out in the Sale and Purchase Agreement, the Target Company or Orange Beijing (a company to be incorporated under the laws of the PRC and which will be indirectly wholly and beneficially owned by the Target Company) will enter into certain structured contracts (the“Structured Contracts”) with Beijing Zhixing Ruijing Technology Co., Ltd. (“Beijing Zhixing Ruijing”) and/or its shareholders. Pursuant to such Structured Contracts to be entered, Orange Beijing or the Target Company will provide certain technical consultation and service, including but not limited to technical services support, intellectual property licensing, and business and management consultation, whereas Beijing Zhixing Ruijing will pay the service fee equal to a certain percentage of its net income. Relevant parties will also enter into certain agreements in relation to, among other things, the pledge of, and grant of exclusive acquisition rights of, the equity interests in Beijing Zhixing Ruijing.

Please also refer to the announcement of the Company dated 8th May 2015 for further details, including among others, the principal terms and conditions of the Sale and Purchase Agreement, and the Structured Contracts.

On 3rd July 2015, the Group has fulfilled all the conditions precedent of the sale and purchase agreement previously entered with Orange Triangle Inc., The acquisition of 100% of share capital of Orange Triangle Inc. has been completed accordingly. Please also refer to the announcement of the Company dated 3rd July 2015 for further details.

Resignation of Executive Director

Mr. Yang Ning resigned as an executive Director and president of the Company with effect from 30th March 2015.

Adoption of new share option scheme

Following the listing of the Shares being transferred from Growth Enterprise Market to the Main Board of the Stock Exchange on 10th October 2014, the share option scheme adopted on 30th November 2003 was terminated while share options granted remain valid. It was proposed that a new share option scheme (the “2015 Share Option Scheme”) in compliance with the Rules Governing the Listing of Securities (the ”Listing Rules”) of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) be adopted. The resolution of the proposed adoption were duly passed by the shareholders by way of poll at the extraordinary general meeting of the Company held on 22nd May 2015. Please refer to the circular of the Company dated 5th May 2015 for further details of the adoption of the 2015 Share Option Scheme, including its terms and conditions.

HC International, Inc. - Interim Report 2015

Increase in authorised share capital

Pursuant to a resolution passed on 19th June 2015, it is resolved that the authorised share capital of the Company increased to HK$200,000,000 divided into 2,000,000,000 shares of HK$0.10 each by the creation of an additional 1,000,000,000 shares of HK$0.10 each. The increase in authorised share capital provides the Company with flexibility for fund raising by allotting and issuing Shares in future for future investment opportunities. For further details, please refer to the announcements of the Company dated 13th May 2015 and 19th June 2015 respectively.

Subsequent Events

On 8th May 2015, the Group (“the Purchaser”) entered into a sale and purchase agreement with NAVI-IT LIMITED (“the Seller”) and Mr. Liu Xiaodong, Ms. Wang Qian, Mr. Shi Shilin, Ms. Yang Ye (collectively referred to as “the Seller Guarantors”), pursuant to which the Purchaser has conditionally agreed to acquire all the issued share capital of Orange Triangle Inc. On 3rd July 2015, the Group has fulfilled all the conditions precedent of the sale and purchase agreement previously entered with the Seller and the Seller Guarantors, and the acquisition has been completed accordingly. Please also refer to the announcements of the Company dated 19th June 2015 and 3rd July 2015 for further details.

On 3rd July 2015, the Group has entered into a letter of intent, in which the Group has intended to enter into a share purchase agreement with 杭州賽點科技有限公司 (Hang Zhou Sai Dian Technology Company Limited), 浙江浩遠創業投資有限公司 (Zhejiang Hao Yuan Chuang Ye Investment Company Limited), Chen Xue Jun, He Shun Sheng and Cao Guo Xiong (“the Vendors”), to acquire approximately 80% of the equity interest of 浙江中服網絡科技有限公司 (Zhe Jiang Zhong Fu Interest Technology Company Limited*), a company incorporated in the PRC for a total consideration of RMB120,570,000. The acquiree is principally engaged in the provision of vertical websites in the garment industry in the PRC. 30% of the total consideration shall be paid in cash and the remaining 70% of which shall be paid by way of issuing new shares by the Group as calculated at HK$10 per share. Please also refer to the announcement of the Company dated 3rd July 2015 for further details.

On 22th July 2015, HC Internet Information Technology Company Limited, a wholly-owned subsidiary of the Group (“the Purchaser”), entered into a sale and purchase agreement with Wang Feng Feng (“the Vendor”), pursuant to which the Purchaser has conditionally agreed to acquire representing approximately 2.49% of the issued share capital of the 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 commercial bank based in Inner Mongolia, for a consideration of RMB57,900,000. The acquisition constitutes a discloseable transaction of the Group under Chapter 14 of the Listing Rules. Please also refer to the announcement of the Group dated 22nd July 2015 for further details.

• For identification purposes only

HC International, Inc. - Interim Report 2015

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

INCOME
		Unaudited
		Six months ended
		30th	June
	Note	2015	2014
		RMB’000	RMB’000
Revenue	6	391,052	465,271
Cost of revenue	9	(34,211)	(24,802)
Gross profit		356,841	440,469
Other income		2,080	3,521
Selling and marketing expenses	9	(229,511)	(264,530)
Administrative expenses	9	(99,124)	(76,629)
Operating profit		30,286	102,831
Finance income	10	26,680	15,936
Finance cost	10	(21,640)	(429)
Share of post-tax losses of associates	7	(2,493)	(127)
Share of post-tax profits of joint ventures	8	9,127	–
Profit before income tax		41,960	118,211
Income tax expense	11	(7,977)	(18,997)
Profit for the period		33,983	99,214
Other comprehensive income and item that may be
reclassified to profit or loss:
Fair value gain on available-for-sale financial assets	28	164,358	–
Currency translation difference	28	821	2,057
Total comprehensive income for the period		199,162	101,271
Profit attributable to:
– Equity holders of the Company		41,131	102,455
– Non-controlling interests		(7,148)	(3,241)
		33,983	99,214

HC International, Inc. - Interim Report 2015

Unaudited Six months ended 30th June Note 2015 2014 RMB’000 RMB’000	Unaudited Six months ended 30th June Note 2015 2014 RMB’000 RMB’000
Total comprehensive income attributable to: – Equity holders of the Company 206,310 – Non-controlling interests (7,148)	104,512 (3,241)
199,162	101,271
Earnings per share attributable to the equity holders of the Company during the period (expressed in RMB per share) Basic earnings per share: 12 0.0616	0.1547
Diluted earnings per share: 12 0.0599	0.1474

The notes on pages 17 to 46 form an integral part of this unaudited condensed consolidated interim financial information.

Unaudited Six months ended 30th June Note 2015 2014 RMB’000 RMB’000	Unaudited Six months ended 30th June Note 2015 2014 RMB’000 RMB’000
Dividends 13 –	–

HC International, Inc. - Interim Report 2015

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET

Unaudited Note 30th June 2015 RMB’000	Audited 31st December 2014 RMB’000 180,882 105,687 194,974 359,415 296,052 4,452 92,649 45,523 270,840 174,267 1,724,741 31,692 57,467 113,746 520 1,321,989 1,525,414 3,250,155 66,465 741,008 352,807 1,160,280 154,887 1,315,167
ASSETS Non-current assets Land use rights 14 178,513 Intangible assets 14 102,677 Investment properties 14 337,591 Properties under development 15 499,877 Property, plant and equipment 14 286,877 Deferred income tax assets 21 8,701 Long-term deposit, prepayments and other receivables 16 138,929 Investment in associates 7 80,030 Investment in joint ventures 8 409,967 Available-for-sale financial assets 17 371,103
Total non-current assets 2,414,265
Current assets Trade receivables 18 54,210 Deposits, prepayments and other receivables 16 353,735 Direct selling costs 19 104,188 Inventories 231 Cash and cash equivalents 867,166
Total current assets 1,379,530
Total assets 3,793,795
EQUITY Capital and reserves attributable to the equity holders of the Company Share capital 27 66,517 Other reserves 28 921,574 Retained earnings 393,938
1,382,029 Non-controlling interests 148,359
Total equity 1,530,388

HC International, Inc. - Interim Report 2015

Unaudited Note 30th June 2015 RMB’000	Audited 31st December 2014 RMB’000 519,532 23,987 979 206,300 32,766 8,373 553,956 1,345,893 2,988 72,782 90,000 8,525 1,175 371,747 15,357 26,521 589,095 1,934,988 3,250,155 936,319 2,661,060
LIABILITIES Non-current liabilities Receipt in advance 20 825,895 Deferred income tax liabilities 21 59,541 Non-current portion of finance lease obligations 534 Deferred government grants 26 206,300 Non-current portion of bank borrowings 23 57,901 Non-current portion of other borrowings 23 25,215 Issued convertible bonds – liability portion 24 559,099
Total non-current liabilities 1,734,485
Current liabilities Trade payables 22 8,207 Accrued expenses and other payables 61,161 Current portion of bank borrowings 23 140,000 Current portion of other borrowings 23 – Current portion of finance lease obligations 853 Deferred revenue 294,197 Other taxes payable 25 13,235 Income tax payable 25 11,269
Total current liabilities 528,922
Total liabilities 2,263,407
Total equity and liabilities 3,793,795
Net current assets 850,608
Total assets less current liabilities 3,264,873

The notes on pages 17 to 46 form an integral part of this unaudited condensed consolidated interim financial information.

HC International, Inc. - Interim Report 2015

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

Note	Unaudited Attributable to equity holders of the Company Share capital Other reserves Retained earnings Non- controlling interests Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Balance as at 1st January 2015 Profit/(loss) for the period Other comprehensive income: Fair value gains on available-for-sale assets 28 Currency translation difference 28	66,465 741,008 352,807 154,887 1,315,167 – – 41,131 (7,148) 33,983 – 164,358 – – 164,358 – 821 – – 821
Total comprehensive income/(loss) for the period ended 30th June 2015	– 165,179 41,131 (7,148) 199,162
Transactions with owners: Share based compensation-value of employee services 28 Exercise of share options 27,28 Contribution from non-controlling interest	– 14,775 – – 14,775 52 612 – – 664 – – – 620 620
Balance as at 30th June 2015	66,517 921,574 393,938 148,359 1,530,388

HC International, Inc. - Interim Report 2015

Unaudited Attributable to equity holders of the Company

					Non-
		Share	Other	Retained	controlling
	Note	capital	reserves	earnings	interests	Total
		RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Balance as at 1st January 2014		65,865	666,239	165,174	113,196	1,010,474
Profit/(loss) for the period		–	–	102,455	(3,241)	99,214
Other comprehensive income:
Currency translation difference	28	–	2,057	–	–	2,057
Total comprehensive income/(loss) for the
period ended 30th June 2014		–	2,057	102,455	(3,241)	101,271
Transactions with owners:
Share purchase for share-award scheme	28	–	(20,358)	–	–	(20,358)
Share based compensation-value of
employee services	28	–	16,623	–	–	16,623
Changes in ownership interests in
subsidiaries without change of control	29	–	72	–	98	170
Exercise of share options	27,28	255	4,010	–	–	4,265
Balance as at 30th June 2014		66,120	668,643	267,629	110,053	1,112,445

PRC companies are required to allocate 10% of the companies’ net profit to a subsidiary reserve fund until such fund reaches 50% of the companies’ registered capital. The statutory reserve fund can be utilised upon approval of relevant authorities, to offset accumulated losses or to increase registered capital of the companies, provided that such fund is maintained at a minimum of 25% of the companies’ registered capital. As at 30th June 2015, retained earnings comprised statutory reserve fund amounting to RMB52,730,000 (2014 June: RMB28,641,000).

HC International, Inc. - Interim Report 2015

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

	Unaudited	Unaudited
	Six months ended
	30th	June
	2015	2014
	RMB’000	RMB’000
Cash flows from operating activities
Cash generated from operations	101,041	196,450
Interest paid	(21,834)	(188)
The People’s Republic of China (“PRC”) income tax paid	(24,402)	(22,328)
Net cash generated from operating activities	61,092	173,934
Cash flows from investing activities
Interest received	18,555	11,979
Additions of property, plant and equipment	(10,233)	(67,177)
Additions of investment properties	(140,462)	(49,287)
Proceeds from disposal of property, plant and equipment	3,318	18
Loans to an associate	(19,200)	–
Loans to an joint venture	(8,000)	–
Loans to third parties	(222,613)	–
Loan repayment received from a third party and employees	17,780	20,668
Investment in associates	(37,000)	–
Investment in joint venture	(130,000)	(150,000)
Net cash used in investing activities	(599,855)	(233,799)
Cash flows from financing activities
Proceeds from borrowings	142,817	25,191
Repayments of borrowings	(60,000)	–
Purchase of shares under share award scheme	–	(20,358)
Capital contribution from non-controlling shareholders	620	170
Exercise of share options	664	4,265
Repayments for finance lease obligations	(767)	(293)
Net cash generated from financing activities	83,334	8,975
Net decrease in cash and cash equivalents	(455,429)	(50,890)
Cash and cash equivalents at beginning of the period	1,321,989	1,025,089
Exchange gain on cash and cash equivalents	606	2,057
Cash and cash equivalents at end of the period	867,166	976,256

The notes on pages 17 to 46 form an integral part of this unaudited condensed consolidated interim financial information.

HC International, Inc. - Interim Report 2015

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

1 General information

The core business of HC International, Inc. (the “Company”) and its subsidiaries (together, the “Group”) is to organise a business-to-business (“B2B”) community across the People’s Republic of China (“China” or the “PRC”) by providing business information through both on-line and offline channels.

The Group is principally involved in the following activities in the PRC:

• Providing industrial search result prioritising services through its B2B website “hc360.com”;

• Publishing its own trade catalogues and yellow page directories;

• Hosting exhibitions and seminars;

• Providing anti-counterfeiting products and services to enterprises;

• Engaging in micro-credit internet financing business through its joint venture;

• In the process of constructing O2O business exhibition center.

The Company is a limited liability company incorporated in the Cayman Islands. The address of its registered office is 4th Floor, One Capital Place, P.O. Box 847, George Town, Grand Cayman, Cayman Islands, British West Indies. The Company has its primary listing on the Main Board of The Stock Exchange of Hong Kong Limited since 10th October 2014.

The condensed consolidated interim financial information are presented in Renminbi (“RMB”), unless otherwise stated. The condensed consolidated interim financial information has been approved for issue by the Board on 25th August 2015.

This condensed consolidated interim financial information has not been audited.

2 Basis of preparation

This condensed consolidated interim financial information for the six months ended 30th June 2015 has been prepared in accordance with Hong Kong Accounting Standard (“HKAS”) 34, “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). The condensed consolidated interim financial information should be read in conjunction with the annual financial statements of the Group for the year ended 31st December 2014, which have been prepared in accordance with the Hong Kong Financial Reporting Standards (“HKFRS”).

3 Accounting policies

Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended 31st December 2014, as described in those annual financial statements.

Amendments to HKFRSs effective for the financial year ending 31 December 2015 do not have a material impact on the Group.

HC International, Inc. - Interim Report 2015

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

The following new standards and amendments to standards and interpretations have been issued but not yet to be effective for the financial year beginning 1st January 2015 and have not been early adopted:

HKAS 1 (Amendment)	Disclosure initiative1
HKAS 16 and 38 (Amendments)	Clarification of acceptance methods of depreciation and amortisation1
HKAS 16 and 41 (Amendment)	Agriculture: bearer plants1
HKAS 27 (Amendment)	Equity method in separate financial statements1
HKFRS 10 and HKAS 28	Sale or contribution of assets between an investor and its associate or
(Amendments)	joint venture1
HKFRS 9	Financial instruments3
HKFRS 10, HKFRS 12 and	Investment entities: applying the consolidation exception1
HKAS 28 (Amendments)
HKFRS 11 (Amendment)	Accounting for acquisitions of interests in joint operations1
HKFRS 14	Regulatory deferred accounts1
HKFRS 15	Revenue from contracts with customers2
Annual improvements project	Annual improvements 2012–2014 cycle1

(1) Effective for annual periods beginning on or after 1 January 2016

(2) Effective for annual periods beginning on or after 1 January 2017

(3) Effective for annual periods beginning on or after 1 January 2018

Management is assessing the impact of the above amendments to standards and interpretations, which have been issued but are not yet effective for 2015, on the Group’s operations, and is yet to be in the position to conclude the impact.

There are no other HKFRSs or HK(IFRIC) interpretations that are effective for the first time for this interim period that could be expected to have a material impact on this Group.

4 Estimates

The preparation of interim financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial information, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31st December 2014, with the exception of changes in estimates that are required in determining the provision for income taxes.

HC International, Inc. - Interim Report 2015

5 Financial risk management and financial instruments

5.1 Financial risk factors

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk.

The interim condensed consolidated financial information do not include all financial risk management information and disclosures required in the annual financial statements, and should be read in conjunction with the Group’s annual financial statements as at 31 December 2014.

There have been no changes in the risk management policies since year end.

5.2 Liquidity risk

Compared to year end, there was no material change in the contractual undiscounted cash out flows for financial liabilities.

5.3 Fair value estimation

• The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).

• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

The following table presents the Group’s financial assets and liabilities that are at fair value at 30th June 2015.

	Level 1	Level 2	Level 3	Total
	RMB’000	RMB’000	RMB’000	RMB’000
Assets
Available-for-sale financial assets
– Equity securities	327,248	–	43,855	371,103

HC International, Inc. - Interim Report 2015

The following table presents the Group’s financial assets and liabilities that are at fair value at 31st December 2014.

	Level 1	Level 2	Level 3	Total
	RMB’000	RMB’000	RMB’000	RMB’000
Assets
Available-for-sale financial assets
– Equity securities	130,412	–	43,855	174,267

There were no transfers between Level 1 and 3 and no other changes in valuation techniques during the year.

(a) Financial instruments in level 1

The fair value of financial instruments traded in active markets is based on quote market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, price services or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis.

(b) Financial instruments in level 3

Available-for-sale financial assets 2015 2014 RMB’000 RMB’000	Available-for-sale financial assets 2015 2014 RMB’000 RMB’000
Opening balance at 1st January 174,267 Fair value charged to other comprehensive income 196,836	– –
Closing balance at 30th June 371,103	–

The Groups’ finance department includes a team that performs the valuation of financial asset required for financial reporting purposes, including Level 3 fair values. This team reports directly to the Chief Financial Officer (CFO) and the Audit Committee (AC). Discussion of valuation processes and results are held between the CFO, AC and the valuation team at leave once every quarter, in line with the Group’s quarterly reporting dates.

The main Level 3 input used by the Group in estimating the fair value of available-for-sale financial assets, which is based on the latest unit selling price of the financial assets on an arm’s length basis.

HC International, Inc. - Interim Report 2015

6 Segment information

The chief operating decision-maker (“CODM”) has been identified as the Executive Directors. The Executive Directors review the Group’s internal report in order to assess performance and allocate resources. Management has determined the operating segments based on these reports.

The Executive Directors assess the performance of the operating segments based on a measure of profit/ (loss) before income tax. This measurement basis excludes the effects of non-recurring expenditure from the operating segments.

As at 30th June 2015, the Group is organised into the following business segments:

• (i) On-line services – provision of a reliable platform to customers to do business and meet business partners on-line.

• (ii) Trade catalogues and yellow page directories – provision of trade information through trade catalogues and yellow page directories operated/published by the Group.

• (iii) Seminars and other services – services for hosting of seminars.

• (iv) O2O business exhibition centre – originally known as B2B household electrical appliances business exhibition centres, sales of properties and provision of property rental and management services.

• (v) Anti-counterfeiting products and services – provision of products meticulous digital identity management services, consumer goods tracing and anti-counterfeiting services to enterprise.

• (vi) Micro-credit financing services – engaging in micro-credit internet financing business in the PRC.

HC International, Inc. - Interim Report 2015

There were no sales or other transactions between the business segments for the period ended 30th June 2015 and 2014.

	Unaudited Six months ended 30th June 2015 Trade catalogues and yellow page directories On-line services Seminars and other services O2O business exhibition centre Anti- counterfeiting products and services Micro-credit business segment Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Revenue	8,447 315,936 37,061 – 29,608 – 391,052
Segment results	(2,129) 36,318 1,438 (9,827) 2,406 – 28,206
Share of post-tax losses of
associates	– 27 – (2,520) – – (2,493)
Share of post-tax profits of joint
ventures	– – – – – 9,127 9,127
Other income	– – – – – 2,080
Finance income, net	5,040
Profit before income tax	41,960
Depreciation and amortisation	277 14,232 1,343 274 3,292 – 19,418
Share based compensation
expenses	338 12,653 1,484 104 196 – 14,775

				Unaudited
			Six months	ended 30th June	2014
	Trade
	catalogues			O2O	Anti-
	and			business	counterfeiting	Micro-credit
	yellow page	On-line	Seminars and	exhibition	products and	business
	directories	services	other services	centre	services	segment	Total
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Revenue	16,100	409,650	39,521	–	–	–	465,271
Segment results	(18,963)	117,764	7,173	(6,664)	–	–	99,310
Other income				3,521		–	3,521
Shares of post-tax losses of
associates				(127)			(127)
Finance income, net						–	15,507
Profit before income tax						–	118,211
Depreciation and amortisation	1,098	12,529	571	59	–	–	14,257
Share based compensation
expenses	576	14,633	1,414	–	–	–	16,623

The Group is domiciled in the PRC. All revenues for the six months ended 30th June 2015 are from external customers in the PRC (six months ended 30th June 2014: same).

HC International, Inc. - Interim Report 2015

7 Investment in associates

Unaudited Six months ended 30th June 2015 2014 RMB’000 RMB’000	Unaudited Six months ended 30th June 2015 2014 RMB’000 RMB’000
Beginning of the period 45,523 Addition 37,000 Share of post-tax losses of associates (2,493)	20,000 – (127)
End of the period 80,030	19,873

Set out below are associates of the Group as at 30th June 2015. The associates as listed below have share capital consisting solely of ordinary shares, which are held directly by the Group; the country of establishment or registration is also their principal place of business.

	Place of business/	% of
	country of	ownership	Nature of the	Measurement
Name of entity	establishment	interest	relationship	method
慧德控股有限公司	PRC	12	Note 1	Equity
(Hui De Holding Co., Ltd.*)
浙江慧聰投資有限公司	PRC	29.6	Note 2	Equity
(Zhejiang Huicong
Investment Co., Ltd*)
北京優螞科技有限公司	PRC	20	Note 3	Equity
(Beijing Urmbo Technology Limited*)
中模（北京）國際品牌管理有限公司	PRC	20	Note 4	Equity
(China Formwork (Beijing)
International Brand
Management Limited*)

• English names are translated for identification purpose only

Note 1: Hui De Holding Co., Ltd* (“慧德控股”) provides investment management and projects investments in the PRC. The Group holds 60% interests of its subsidiary, 慧聰（天津）電子商 務有限公司, which in turn holds 20% of interests in 慧德控股.

Note 2: Zhejiang Huicong Investment Co., Limited* (“浙江慧聰”) engages in investment in real estate consultation and management.

Note 3: Beijing Urmbo Technology Limited* (“北京優螞”) provides maintenance, repair and operation (MRO) industrial products centralised purchasing in the PRC.

Note 4: China Formwork (Beijing) International Brand Management Limited* (“北京中模”) provides e-commerce business for formwork industry in the PRC.

HC International, Inc. - Interim Report 2015

The Group’s share of profits/(losses) in associates and its aggregate assets and liabilities are shown below:

慧德控股 浙江慧聰 北京優螞 北京中模 Unaudited Unaudited Unaudited Unaudited Six months ended 30th June Six months ended 30th June Six months ended 30th June Six months ended 30th June 2015 2014 2015 2014 2015 2014 2015 2014 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000	慧德控股 浙江慧聰 北京優螞 北京中模 Unaudited Unaudited Unaudited Unaudited Six months ended 30th June Six months ended 30th June Six months ended 30th June Six months ended 30th June 2015 2014 2015 2014 2015 2014 2015 2014 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000	慧德控股 浙江慧聰 北京優螞 北京中模 Unaudited Unaudited Unaudited Unaudited Six months ended 30th June Six months ended 30th June Six months ended 30th June Six months ended 30th June 2015 2014 2015 2014 2015 2014 2015 2014 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000	慧德控股 浙江慧聰 北京優螞 北京中模 Unaudited Unaudited Unaudited Unaudited Six months ended 30th June Six months ended 30th June Six months ended 30th June Six months ended 30th June 2015 2014 2015 2014 2015 2014 2015 2014 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000	慧德控股 浙江慧聰 北京優螞 北京中模 Unaudited Unaudited Unaudited Unaudited Six months ended 30th June Six months ended 30th June Six months ended 30th June Six months ended 30th June 2015 2014 2015 2014 2015 2014 2015 2014 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Assets 400,227 Liabilities 303,401 Profits/(losses) for the period ended 30th June (816) Share of profits/(losses) for the period ended 30th June (98) Percentage held 12%	119,365 346,245 20,000 105,084 (635) (8,183) (127) (2,422) 12% 29.6%	– 4,536 – 225 – (76) – (15) – 20%	– 39,360 – 18,830 – 208 – 42 – 20%	– – – – –

8 Investment in joint ventures

Investment in joint ventures	Investment in joint ventures
Unaudited Six months ended 30th June 2015 2014 RMB’000 RMB’000
Beginning of the period 270,840 Addition 130,000 Share of post-tax profits of joint ventures 9,127	– 150,000 –
End of the period 409,967	150,000

Set out below are joint ventures of the Group as at 30th June 2015. The joint ventures as listed below have share capital consisting solely of ordinary shares, which are held directly by the Group; the country of establishment or registration are also their principal place of business.

HC International, Inc. - Interim Report 2015

Nature of investment in joint ventures as at 30th June 2015:

	Place of business/	% of
	country of	ownership	Nature of the	Measurement
Name of entity	establishment	interest	relationship	method
重慶神州數碼慧聰小額貸款有限	PRC	40	Note 1	Equity
公司(Chongqing Digital China
Huicong Micro-Credit Co., Ltd.*)
北京神州數碼慧聰信息咨詢有限	PRC	40	Note 2	Equity
公司(Beijing Digital China
Huicong Micro-Credit Consulting
Co, Ltd.*)

Note 1: Chongqing Digital China Huicong Micro-Credit Co., Ltd.* provides development and operation of the micro-credit internet financing business in the PRC.

Note 2: Beijing Digital China Huicong Micro-Credit Consulting Co., Ltd.* provides consulting services for the micro-credit internet financing business in the PRC.

• English names are translated for identification purpose only

The Group’s share of profit in Chongqing Digital China Huicong Micro-Credit Co., Ltd and its aggregate assets and liabilities are shown below:

Unaudited Six months ended 30th June 2015 2014 RMB’000 RMB’000	Unaudited Six months ended 30th June 2015 2014 RMB’000 RMB’000
Assets 1,236,145 Liabilities 225,528 Profits for the period ended 30 June 22,789 Share of profit for the period ended 30 June 9,116	375,000 – – –
Percentage held 40%	40%

HC International, Inc. - Interim Report 2015

The Group’s share of profit in Beijing Digital China Huicong Micro-Credit Consulting Co., Ltd and its aggregate assets and liabilities are shown below:

Unaudited Six months ended 30th June 2015 2014 RMB’000 RMB’000	Unaudited Six months ended 30th June 2015 2014 RMB’000 RMB’000
Assets 341 Liabilities 133 Profit for the period ended 30 June 28 Share of profit for the period ended 30 June 11	– – – –
Percentage held 40%	–

9 Expenses by nature

Expenses including cost of revenue, selling and marketing expenses and administrative expenses are analysed as follows:

Unaudited Six months ended 30th June 2015 2014 RMB’000 RMB’000	Unaudited Six months ended 30th June 2015 2014 RMB’000 RMB’000
Direct expenses of trade catalogues and yellow page directories 4,702 Direct expenses of on-line services 1,445 Direct expenses of seminars and other services 14,668 Direct expenses of anti-counterfeiting products and services 13,396 Agency costs 51,789 Marketing expenses 45,647 Network and telephone expenses 7,624 Auditor’s remuneration 1,425 Other professional fees 7,587 Staff costs, including directors’ emoluments 138,324 Amortisation of land use rights 214 Amortisation of intangible assets 3,010 Share based compensation expenses 14,775 Depreciation of property, plant and equipment 16,194 Provision for impairment and direct write-off of trade and other receivables 1,957 Loss on disposal of property, plant and equipment 104 Operating lease payments in respect of land and buildings 11,755 Travelling expenses 5,048 Other expenses 23,182	7,643 2,675 14,484 – 90,960 29,973 7,633 1,189 3,957 140,946 214 2 16,623 14,041 1,895 28 8,647 3,789 21,262
Total cost of revenue, selling and marketing expenses and administrative expenses 362,846	365,961

HC International, Inc. - Interim Report 2015

10 Finance income, net

Unaudited Six months ended 30th June 2015 2014 RMB’000 RMB’000	Unaudited Six months ended 30th June 2015 2014 RMB’000 RMB’000
Interest expense: – Bank borrowings (6,214) – Other borrowings (672) – Issued convertible bonds_(Note 24)_ (20,771) – Finance lease liabilities (139)	– (5,097) – (118)
Finance expenses (27,796) Less: amounts capitalised on qualifying assets 6,156	(5,215) 4,786
Total finance expenses (21,640)	(429)
Finance income 26,680	15,936
Net finance income 5,040	15,507

11 Income tax expense

Unaudited Six months ended 30th June 2015 2014 RMB’000 RMB’000	Unaudited Six months ended 30th June 2015 2014 RMB’000 RMB’000
Current income tax – Hong Kong profits tax (i) – – The PRC corporate income tax (“CIT”) (ii) (9,150) Deferred income tax 1,173	– (14,200) (4,797)
(7,977)	(18,997)

(i) No Hong Kong profits tax has been provided as there is no assessable profit arising in Hong Kong for the period (2014: Nil).

(ii) The PRC corporate income tax represents taxation charged on assessable profits for the year at the rates of taxation prevailing in the cities in the PRC in which the Group operates.

The tax rate applicable to the subsidiaries in the PRC is 25%, except for subsidiaries granted with preferential tax treatment as High/New Technology Enterprise of which the applicable tax rates is 15%.

HC International, Inc. - Interim Report 2015

12 Earnings per share

Unaudited Six months ended 30th June 2015 2014 RMB’000 RMB’000	Unaudited Six months ended 30th June 2015 2014 RMB’000 RMB’000
Profit attributable to equity holders 41,131	102,455
Unaudited Six months ended 30th June 2015 2014 No. of Shares No. of Shares ‘000 ‘000
Weighted average number of shares in issue 667,478 Incremental shares from assumed exercise of share options granted 19,407	662,109 33,125
Diluted weighted average number of shares 686,885	695,234
Unaudited Six months ended 30th June 2015 2014
Basic earnings per share (in RMB) 0.0616	0.1547
Diluted earnings per share (in RMB) 0.0599	0.1474

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of the share options, the dilutive potential ordinary shares of the Company. A calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average market share price of the Company’s shares over the period) based on the monetary value of the subscription rights attached to outstanding share options. The weighted average number of issued shares as at 30th June 2015 is compared with the number of shares that would have been issued assuming the exercise of the share options.

13 Dividends

No dividends was paid or declared by the Company during the period (2014: Nil).

HC International, Inc. - Interim Report 2015

14 Property, plant and equipment, land use rights, intangible assets, goodwill and investment properties

	Property,
	plant and	Land use	Intangible		Investment
	equipment	rights	assets	Goodwill	properties
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Opening net book amount
as at 1st January 2015	296,052	180,882	55,373	50,314	194,974
Additions	10,233	–	–	–	137,384
Interest capitalised	–	–	–	–	3,078
Disposals	(3,214)	–	–	–	–
Depreciation and
amortisation	(16,194)	(214)	(3,010)	–	–
Amortisation charge
capitalised in investment
properties	–	(2,155)	–	–	2,155
Closing net book amount
as at 30th June 2015	286,877	178,513	52,363	50,314	337,591
Opening net book amount
as at 1st January 2014	214,586	185,619	5	–	39,518
Additions	89,977	–	–	–	46,894
Interest capitalised	–	–	–	–	2,393
Disposals	(663)	–	–	–	–
Depreciation and amortisation	(14,041)	(214)	(2)	–	–
Amortisation charge
capitalised in investment
properties	–	(2,155)	–	–	2,155
Closing net book amount
as at 30th June 2014	289,859	183,250	3	–	90,960

The investment properties are carried at cost. They are under construction in progress as at 30th June 2015.

An independent valuation of the Group’s land use rights and Investment properties was performed to determine the fair value of the investment properties amounting to RMB839,000,000 as at 30th June 2015 (31st December 2014: RMB792,000,000). Valuation was based on residual method of valuation by establishing the market value of the properties with appropriate deduction on construction costs.

The above fair value measurement at 30th June 2015 is using significant unobservable inputs (level 3). The Group’s investment property was valued at 30th June 2015 by independent professionally qualified valuer who holds a recognised relevant professional qualification and has recent experience in the location of the investment property valued.

The Group’s finance department includes a team that review the valuation performed by the independent valuer for financial reporting purpose. This team reports directly to the chief financial officer (“CFO”) and the audit committee of the Company.

At each financial period end, finance department

• verifies all major inputs to the independent valuation report;

• assess property valuations movements when compared to the prior year valuation report;

• holds discussion with the independent valuer.

HC International, Inc. - Interim Report 2015

15 Properties under development

Properties under development
Unaudited 30th June 2015 RMB’000	Audited 31st December 2014 RMB’000
Properties under development comprise: – Construction cost and other capitalised expenditures 315,352 – Interest capitalised 12,184 – Land use rights 172,341	177,968 9,106 172,341
499,877	359,415

The properties under development include cost of acquiring rights to use certain lands, which are located in the PRC, for property development over a fixed period. Land use rights are held on leases of 40 years.

The properties under development are expected to be completed after 30th June 2016.

16 Deposits, prepayments and other receivables

Deposits, prepayments and other receivables
Unaudited 30th June 2015 RMB’000	Audited 31st December 2014 RMB’000
Non-current portion: – Deposits 2,905 – Prepayments_(Note (i)) 67,815 – Loans to employees(Note (ii)) 26,887 – Loans to an associate(Note (iii))_ 41,322	2,905 42,544 26,244 20,956
138,929	92,649
Current portion: – Deposits 14,432 – Prepayments 22,345 – Amount due from a former associated company_(Note (iv)) 439 – Loans to employees(Note (ii)) 5,800 – Loan to a joint venture(Note (v)) 80,467 – Loans to third parties(Note (vi))_ 230,252	12,097 21,385 405 23,580 – –
353,735	57,467
492,664	150,116

HC International, Inc. - Interim Report 2015

Unaudited 30th June 2015 RMB’000	Audited 31st December 2014 RMB’000
The fair values are as follows: – Deposits 17,337 – Prepayments 90,160 – Other receivables 385,167	15,002 63,929 71,185
492,664	150,116
Unaudited 30th June 2015 RMB’000	Audited 31st December 2014 RMB’000
Denominated in: HK dollars 5,800 US dollars 146,258 RMB 340,606	23,580 – 126,536
492,664	150,116

The fair values of the deposits and other receivables approximate their carrying value.

Note (i): The balance represents prepayment of tax associated with the presale of properties on O2O business exhibition centre under development.

Note (ii): The non-current portion includes a balance of RMB26,887,000 (31st December 2014: RMB26,244,000) which represents loans granted to several management members of Beijing Panpass Information Technology Co., Ltd (“Panpass”), a subsidiary acquired by the Group on 8th October 2014, for their sole purpose of purchase of shares of Panpass at market price and the shares purchased are pledged to secure the loans. The loans will mature on 28th September 2017, and is interest bearing at a rate of 5% per annum. These management members hold 20% issued share capital of Panpass after the acquisition of Panpass by the Group on 8th October 2014.

The current portion includes a balance of RMB5,800,000 (31st December 2014: RMB23,580,000) granted in connection with the Employee Share Scheme. On 21st December 2012, the Group granted loans to several employees of the Group for the sole purpose of purchase of shares of the Group at market price. The loans will mature on 21st December 2015, and is interest bearing at a rate of 5% per annum. The loans are denominated in HK dollars.

Note (iii): This balance represents loan and interest receivable from 慧德控股有限公司, an associate of the Group, amounting to RMB41,322,000. (At 31st December 2014: RMB20,956,000). The loan will mature on 14th November 2017, and is interest bearing at a rate of 7% per annum (2014: 7% per annum).

Note (iv): The balance represents receivable for provision of data library services from 北京鄧白氏慧聰 市場信息諮詢有限公司, a former associated company, which was disposed of in 2011.

HC International, Inc. - Interim Report 2015

Note (v): This balance represents loan and interest receivable from 重慶神州數碼慧聰小額貸款有限公 司, a joint venture, amounting to RMB80,467,000 (2014: Nil). On 27th May 2015, the Group granted a loan amounting to RMB80,000,000 to the joint venture. The loan will mature on 26th November 2015, and is interest bearing at a rate of 6% per annum.

Note (vi): The balance includes loan and interest receivable from an independent third party, amounting RMB146,258,000 (2014: Nil), for its sole purpose of funding the acquisition of Orange Triangle Inc.. The balance shall be automatically converted into a prepayment by the Group towards the cash settlement of the consideration, upon completion of the acquisition. The balance bears interest at a rate of 10% per annum and was converted as part of the cash consideration on the completion of the acquisition on 3rd July 2015. Please also refer to note 33 of this report for the subsequent event disclosure.

The balance also includes an entrusted loan advanced to an independent third party amounting RMB48,994,000 (2014: Nil), through a financial institution in the PRC, as lending agent. The loan is interest bearing at 10% per annum, repayable on 9th September 2015.

The balance also includes an entrusted loans advanced to an independent third party amounting RMB35,000,000 (2014: Nil), through a financial institution in the PRC, as lending agent. The loan is interest bearing at 8% per annum, repayable on 20th December 2015.

17 Available-for-sale financial assets

		Zamplus
		(Cayman)
	Cogobuy	Holdings
	Group	Limited
	(Note a)	(Note b)	Total
	RMB’000	RMB’000	RMB’000
Beginning balance as at 1st January 2015	130,412	43,855	174,267
Fair value gain recognised in other
comprehensive income	196,836	–	196,836
Ending balance as at 30th June 2015	327,248	43,855	371,103

Note a:

In July 2014, the Group subscribed for 38,758,000 ordinary shares of Cogobuy Group for an aggregate amount of US$20,000,000 (equivalent to approximately RMB124,281,000). Cogobuy Group is a corporation listed on the Main Board of the Stock Exchange of Hong Kong Limited, the investment from the Group represents 2.8% of all issued share capital of Cogobuy Group.

HC International, Inc. - Interim Report 2015

Note b:

In August 2014, the Group subscribed for 89,286 shares of Zamplus (Cayman) Holdings Limited (“Zamplus”) for an aggregate amount of US$5,000,000 (equivalent to approximately RMB30,743,000). Zamplus is a private company incorporated in the Cayman Islands. Its subsidiaries provide consulting services on online advertisement to the customers. The investment from the Group represents 4.76% of all shares of Zamplus.

There were no impairment provisions on available-for-sale financial assets (“AFS”) made during the period ended 30th June 2015.

18 Trade receivables

The Group generally grants a credit period of 30 days to 90 days to customers. The ageing analysis of the trade receivables as at 30th June 2015 and 31st December 2014 are as follows:

Unaudited 30th June 2015 RMB’000	Audited 31st December 2014 RMB’000
Current to 90 days 47,371 91 to 180 days 3,479 181 to 365 days 2,673 Over 1 year 7,216	27,815 2,464 2,827 2,810
60,739 Less: provision for impairment of trade receivables (6,529)	35,916 (4,224)
54,210	31,692

19 Direct selling costs

Upon the receipt of subscription revenue from third party customers, the Group is obliged to pay sales commissions and agency fees to the salespersons and agents. The subscription revenue are initially deferred and recognised in the consolidated statement of comprehensive income in the period during which the services are rendered. Accordingly, the commissions and agency fees, which are directly attributable to earning from such subscription revenue during the service period, are deferred and recognised, in employees benefit expense and direct expenses of on-line services respectively, of the consolidated statement of comprehensive income throughout the same period.

HC International, Inc. - Interim Report 2015

20 Receipt in advance

Receipt in advance
Unaudited 30th June 2015 RMB’000	Audited 31st December 2014 RMB’000
Receipt in advance 825,895	519,532

The amount represents deposits received from independent third parties on the presale of properties on O2O business exhibition centre under development.

21 Deferred income tax

The net movement of the deferred income tax account is as follows:

Unaudited Six months ended 30th June 2015 2014 RMB’000 RMB’000	Unaudited Six months ended 30th June 2015 2014 RMB’000 RMB’000
Opening balance at 1st January (19,535) Credit/(charged) to the consolidated statement of comprehensive income 1,173 Charged to the other comprehensive income (32,478)	(10,802) (4,797) –
Closing balance at 30th June (50,840)	(15,599)

22 Trade payables

The ageing analysis of the trade payables are as follows:

Unaudited 30th June 2015 RMB’000	Audited 31st December 2014 RMB’000
Current to 90 days 5,221 91 to 180 days 2,515 181 to 365 days 283 Over 1 year 188	2,479 247 152 110
8,207	2,988

HC International, Inc. - Interim Report 2015

23 Borrowings

Borrowings
Unaudited 30th June 2015 RMB’000	Audited 31st December 2014 RMB’000
Non-current portion: Bank borrowings 57,901 Other borrowings 25,215	32,766 8,373
83,116 Current portion: Current portion of non-current bank borrowing 140,000 Other borrowings –	41,139 90,000 8,525
223,116	139,664

Movements in borrowings are analysed as follows:

Unaudited 30th June 2015 RMB’000	Unaudited 30th June 2014 RMB’000
Six months ended 30th June Opening amount 1st January 139,664 Additions of borrowings 149,739 Repayments of borrowings (66,287)	113,671 25,191 –
Closing amount as at 30th June 223,116	138,862

Bank borrowings of RMB140,000,000 (31st December 2014: RMB90,000,000) is a current portion to be repaid in the next twelve months by instalments, while the remaining portion of RMB57,901,000 (31st December 2014: RMB32,766,000) will mature on 10th May 2017. The bank borrowings bear interest rate of 7.8% per annum (31st December 2014: 7.7% per annum). The bank borrowings are secured by land use rights, investment properties and properties under development amounting to RMB1,001,642,000 (31st December 2014: RMB718,831,000). The carrying amounts of bank borrowings approximate their fair values and are denominated in RMB.

Other borrowings are provided by the non-controlling shareholders of a subsidiary of the Group for the investment in associates. The borrowings are unsecured, and bear average interest of 6.3% per annum (31st December 2014: 6.5%). The carrying amounts of other borrowings approximate their fair values and are denominated in RMB.

HC International, Inc. - Interim Report 2015

As at 30th June 2015, the Group’s borrowings were repayable as follows:

Unaudited 30th June 2015 RMB’000	Audited 31st December 2014 RMB’000
Within 1 year 140,000 Between 1 and 2 years 57,901 Between 2 and 5 years 25,215	98,525 32,766 8,373
223,116	139,664

24 Convertible bonds

The Group issued convertible bonds with a coupon rate of 5% per annum at a total principal value of HK$780,000,000, equivalent to approximately RMB615,342,000 on 27th November 2014. The convertible bonds will mature on 27th November 2019 at its principal amount or can be converted into the Group’s shares at the bondholder’s option at rate of HK$11.63 per share.

The fair values of the convertible bonds were valued by an independent valuer as at 27th November 2014. The convertible bonds comprise a liability component and an equity conversion component.

The fair values of the bond component were calculated by using a market interest rate of similar nonextendable and non-convertible bonds. The fair values of the convertible bonds were valued by using the Binomial Option Pricing Model. The residual amount, representing the value of the equity conversion component, is included in the convertible bond-equity conversion reserve under equity attributable to equity holders of the Company.

HC International, Inc. - Interim Report 2015

The convertible bonds recognised in the consolidated balance sheet are as follows:

	RMB’000
Cash received	615,342
Fair values of convertible bonds issued on 27th November 2014	615,342
Less: Legal and professional fee paid	(14,594)
Less: Equity conversion component_(Note 28)_	(50,858)
Liability component on initial recognition at 27th November 2014	549,890
Add: Effective interest expense	3,960
Add: Exchange reserve	106
Less: Interest paid	–
Liability component as at 31st December 2014 and 1st January 2015	553,956
Add: Effective interest expense_(Note 10)_	20,771
Less: Interest paid	(15,413)
Add: Exchange reserve	(215)
Liability component as at 30th June 2015	559,099

The fair value of the bond component of the convertible bonds is calculated using cash flows discounted at a rate based on the discount rate of 7.5%.

The convertible bonds – liability component are classified under non-current liabilities. The carrying amounts of convertible bonds – liability component are denominated in HK$.

25 Income tax payable and other taxes payable

Income tax payable and other taxes payable
Unaudited 30th June 2015 RMB’000	Audited 31st December 2014 RMB’000
Income tax payable: Corporate income tax 11,269 Other taxes payable: Value added tax 2,759 Cultural and development tax 1,624 Other taxes 8,852	26,521 3,422 1,555 10,380
13,235	15,357

HC International, Inc. - Interim Report 2015

26 Deferred government grants

The deferred government grants represented (i) Grants received from government to subsidise the Group for the rental discount that the Group will provide to its prospective tenants of the O2O business exhibition centre in Shunde of Guangzhou, which is still under construction. (ii) To subsidise the Group’s purchase of property, plant and equipment for the Group’s expansion in Beijing.

The conditions attached to these grants have not been satisfied as at 30th June 2015.

27 Share capital

Share capital
	Number of	Ordinary
	Shares	Shares
As at 1st January 2015	667,166,618	66,465
Exercise of share options	658,000	52
As at 30th June 2015	667,824,618	66,517
As at 1st January 2014	659,579,618	65,865
Exercise of share options	3,237,000	255
As at 30th June 2014	662,816,618	66,120

The total authorised number of ordinary shares is 2,000 million shares (30th June 2014: 1,000 million shares) with a par value of HK$0.1 per share (30th June 2014: HK$0.1 per share). All issued shares are fully paid.

During the six months ended 30th June 2015, 658,000 shares (30th June 2014: 3,237,000 shares) of the Company were issued upon the exercise of share options under the share option scheme of the Company at exercise price of HK$1.24, HK$0.82 HK$1.108 and HK$9.84 and resulted in approximately RMB612,000 (30th June 2014: RMB4,010,000) increase in share premium.

The total number of issued shares of the Company was 667,824,618 as at 30th June 2015 (30th June 2014: 662,816,618).

HC International, Inc. - Interim Report 2015

Share options

Movements in the number of share options outstanding and their exercise prices are as follows:

(a) Share Option Scheme

2015 Exercise price in HK$ per share Share options	2015 Exercise price in HK$ per share Share options	2014 Exercise price in HK$ per share Share options
	Share options
As at 1st January 2.40 Lapsed 2.40 Exercise 2.40		2.40 1,396,000 2.40 – 2.40 (1,396,000)
	–
	–
	–
As at 30th June 2.40		2.40 –
	–
As at 1st January 1.49 Lapsed 1.49 Exercised 1.49		1.49 1,844,000 1.49 – 1.49 (316,000)
	1,528,000
	–
	–
As at 30th June 1.49		1.49 1,528,000
	1,528,000
As at 1st January 1.24 Lapsed 1.24 Exercised 1.24		1.24 5,370,000 1.24 – 1.24 (895,000)
	4,375,000
	–
	(80,000)
As at 30th June 1.24		1.24 4,475,000
	4,295,000
As at 1st January 0.604 Lapsed 0.604 Exercised 0.604		0.604 4,200,000 0.604 – 0.604 (200,000)
	3,000,000
	–
	–
As at 30th June 0.604		0.604 4,000,000
	3,000,000
As at 1st January 0.82 Lapsed 0.82 Exercised 0.82		0.82 15,868,000 0.82 – 0.82 (400,000)
	12,218,000
	–
	(500,000)
As at 30th June 0.82		0.82 15,468,000
	11,718,000
As at 1st January 1.108 Lapsed 1.108 Exercised 1.108		1.108 280,000 1.108 – 1.108 (30,000)
	250,000
	–
	(50,000)
As at 30th June 1.108		1.108 250,000
	200,000

HC International, Inc. - Interim Report 2015

2015 Exercise price in HK$ per share Share options	2015 Exercise price in HK$ per share Share options	2 Exercise price in HK$ per share	014 Share options
	Share options
As at 1st January 4.402 Granted 4.402 Lapsed 4.402 Exercise 4.402		4.402 4.402 4.402 4.402	1,500,000 – – –
	1,500,000
	–
	–
	–
As at 30th June 4.402		4.402	1,500,000
	1,500,000
As at 1st January 9.84 Granted 9.84 Lapsed 9.84 Exercise 9.84		– 9.84 9.84 9.84	– 10,000,000 – –
	10,000,000
	–
	–
	(28,000)
As at 30th June 9.84		9.84	10,000,000
	9,972,000
Expiry date	Exercise price HK$ per share	Share options	31st December 2014
		30th June 2015
18th February 2014 23rd June 2016 11th July 2017 29th September 2018 7th April 2020 28th March 2021 3rd April 2023 18th November 2023	2.4 1.49 1.24 0.604 0.82 1.108 4.402 9.84		– 1,528,000 4,375,000 3,000,000 12,218,000 250,000 1,500,000 10,000,000
		–
		1,528,000
		4,295,000
		3,000,000
		11,718,000
		200,000
		1,500,000
		9,972,000

Share Award Scheme

On 23rd November 2011 and pursuant to the Share Award Scheme, the Board resolved to grant an aggregate of 24,181,000 shares to 72 selected employees (including an executive director of the Company).

On 14th June 2012, the Board resolved to grant Lee Wee Ong, an executive director of the Company, 3,000,000 shares, subjected to a vesting period of 36 months.

On 20th August 2012, the shareholders resolved to grant Guo Jiang, an executive director of the Company, 16,700,000 shares, subjected to a vesting period of 72 months.

Since the commencement of the share award scheme, 45,566,000 shares had been purchased by the trustee as awarded shares pursuant to the terms of the Share Award Scheme. The awarded shares will be held by the trustee in accordance with the rules of the Share Award Scheme and the relevant trust period.

The awarded shares are subject to vesting periods from 6 months to 72 months.

HC International, Inc. - Interim Report 2015

The following table represents the movement for number of unvested shares under the Share Award Scheme for the period ended 30th June 2015.

	Number of
	Shares
As at 1st January 2015	31,435,399
Shares purchased from the market	–
Amount vested during the period	(2,738,281)
As at 30th June 2015	28,697,118
As at 1st January 2014	34,749,335
Shares purchased from the market	1,492,000
Amount vested during the period	(4,056,936)
As at 30th June 2014	32,184,399

28 Other reserves

Other reserves
					Share-based	Share		Share held
	Share	Convertible	Others	Merger	compensation	redemption	Exchange	for share	AFS
	premium	bond reserve	reserve	reserve	reserves	reserve	reserve	award scheme	reserve	Total
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
As at 1st January 2015	640,820	50,858	(17,421)	109,817	81,801	496	(10,478)	(130,952)	16,067	741,008
Currency translation difference	–	–	–	–	–	–	821	–	–	821
Share based compensation-
value of employee services	–	–	–	–	14,775	–	–	–	–	14,775
Fair value gain on available-for-
sale assets, net of deferred
tax(Note 17 & 21)	–	–	–	–	–	–	–	–	164,358	164,358
Vesting of share award	1,454	–	–	–	(5,226)	–	–	3,772	–	–
Exercise of share options	612	–	–	–	–	–	–	–	–	612
As at 30th June 2015	642,886	50,858	(17,421)	109,817	91,350	496	(9,657)	(127,180)	180,425	921,574
As at 1st January 2014	633,269	–	(17,493)	109,817	60,797	496	(12,833)	(107,814)	–	666,239
Currency translation difference	–	–	–	–	–	–	2,057	–	–	2,057
Share based compensation-
value of employee services	–	–	–	–	16,623	–	–	–	–	16,623
Share purchased for share award
scheme	–	–	–	–	–	–	–	(20,358)	–	(20,358)
Changes in ownership interest in
subsidiaries without change of
control_(Note 29)_	–	–	72	–	–	–	–	–	–	72
Vesting of share award	–	–	–	–	(4,902)	–	–	4,902	–	–
Exercise of share options	4,010	–	–	–	–	–	–	–	–	4,010
As at 30th June 2014	637,279	–	(17,421)	109,817	72,518	496	(10,776)	(123,270)	–	668,643

HC International, Inc. - Interim Report 2015

29 Changes in ownership interests in subsidiaries without change of control

• (a) Disposal of interest in a subsidiary without loss of control

On 24th February 2014, a new shareholder injected capital amounting to RMB170,000 into 佛山市 慧從匯電子商務有限公司, a subsidiary of the Group which is owned as to 59% by 慧聰（天津）電子 商務投資有限公司 (“Tianjin HC”). The new shareholder subscribes 10% of the equity interest. After this transaction, the equity interest in 佛山市慧從匯電子商務有限公司 was diluted from 59% to 53.1%.

The carrying amount of the non-controlling interest acquired and consideration paid in excess of carrying value recognised within equity as a result of the transaction with non-controlling interest were as follows:

	Unaudited
	30th June
	2014
	RMB’000
Carrying amount of non-controlling interest acquired	98
Consideration received for the non-controlling interests	(170)
Consideration paid in excess of carrying value recognised within equity	(72)

30 Related-party transactions

Apart from the transactions already disclosed in other notes in these financial statements, the Group has the following significant transactions that were carried out with related parties:

(a) Sales of services

Unaudited Six months ended 30th June 2015 2014 RMB’000 RMB’000	Unaudited Six months ended 30th June 2015 2014 RMB’000 RMB’000
Sales of services –北京慧聰建設信息諮詢有限公司(technology services) (i) – –北京慧聰建設信息諮詢有限公司(granted the right to use the domain names and trademark) (ii) –	106 120
–	226

HC International, Inc. - Interim Report 2015

• (i) 北京慧聰建設信息諮詢有限公司 (“HC Construction”), a company owned as to 50% by Mr. Guo Fansheng, the Chairman of the Board and an Executive Director of the Company and as to 50% by Mr. Guo Jiang, an Executive Director and the chief executive officer of the Company, entered into a three-year Technology Services Agreement with the Group in 2002, and on 31st December 2004, the parties entered into a supplemental agreement which extended the term of the Technology Services Agreement to 31st December 2007 and on 30th December 2007, 2009, 2011, and 15th September 2014, the parties entered into another supplemental agreement which extended the term of the Technology Services Agreement to 31st December 2009, 2011, 2014 and 15th September 2017 respectively.

Pursuant to the Technology Service Agreement (as supplemented), the Group received technical service income from HC Construction based on the working hours devoted to the service and support.

• (ii) HC Construction entered into a three-year Domain Names and Trademark Licence Agreement with the Group in 2002, and on 31st December 2004, the parties entered into a supplemental agreement which extended the term of the Domain Names and trademark Licence Agreement to 31st December 2007 and on 30th December 2007, 2009, 2011, and 15th September 2014, the parties entered into another supplemental agreement which extended the term of the Domain Names and Trademark Licence Agreement to 31st December 2009, 2011, 2014 and 15th September 2017 respectively.

Pursuant to the Domain Names and Trademark Licence Agreement (as supplemented), HC Construction was granted the right to use the domain names and trademark owned or attained by the Group during the agreement period for a fixed fee.

Started from 15th September 2014, the financial condition and results of operation of HC Construction are consolidated into the Group and the sales of service transactions with HC Construction are no longer related party transactions of the Group.

HC International, Inc. - Interim Report 2015

(b) Purchases of services

Unaudited Six months ended 30th June 2015 2014 RMB’000 RMB’000	Unaudited Six months ended 30th June 2015 2014 RMB’000 RMB’000
Purchases of services: –北京慧聰建設信息諮詢有限公司(on-line information distribution services) (i) – –北京慧聰建設信息諮詢有限公司(on-line advertisement publication services) (ii) –	120 50
–	170

(i) HC Construction entered into a three-year Online Information Distribution Agreement with the Group in 2002, and on 31st December 2004, 2007, 2009, 2011, and 15th September 2014, the parties entered into a supplemental agreement which extended the term of the Online Information Distribution Agreement to 31st December 2007, 2009, 2011, 2014 and 15th September 2017 respectively.

Pursuant to the Online Information Distribution Agreement (as supplemented), HC Construction received distribution income from the Group at a fixed rate per annum. It disseminated the Group’s business information and research reports on its web-site and on those as stipulated by the Group.

• (ii) HC Construction entered into a three-year Online Advertisement Publication Agreement with the Group in 2002, and on 31st December 2004, 2007, 2009, 2011, and 15th September 2014, the parties entered into supplemental agreements which extended the term of Online Advertisement Publication Agreement to 31st December 2007, 2009, 2011, 2014 and 15th September 2017 respectively.

Pursuant to the Online Advertisement Publication Agreement (as supplement), HC Construction received publication income from the Group at a fixed fee. It published the Group’s advertisements on its website and on those as stipulated by the Group.

Started from 15th September 2014, the financial condition and results of operation of HC Construction are consolidated into the Group and the purchases of service transactions with HC Construction are no longer related party transactions of the Group.

HC International, Inc. - Interim Report 2015

(c) Key management compensation

Unaudited Six months ended 30th June 2015 2014 RMB’000 RMB’000 Salaries and other short-term employee benefits 2,993 2,916 Share-based payments 4,027 6,128	Unaudited Six months ended 30th June 2015 2014 RMB’000 RMB’000 Salaries and other short-term employee benefits 2,993 2,916 Share-based payments 4,027 6,128
Salaries and other short-term employee benefits 2,993 Share-based payments 4,027
7,020	9,044

31 Contingent liabilities

As at 30th June 2015, there were no material contingent liabilities to the Group (31st December 2014: Nil).

32 Commitments

• (a) Capital commitments

Capital commitments as at 30th June 2015 and 31st December 2014 are analysed as follows:

Unaudited 30th June 2015 RMB’000	Audited 31st December 2014 RMB’000
Property, plant and equipment – Investment properties and properties under development 74,514	594 88,291
74,514	88,885

• (b) Financial commitments

Financial commitments as at 30th June 2015 and 31st December 2014 are analysed as follows:

Unaudited 30th June 2015 RMB’000	Audited 31st December 2014 RMB’000
Financial commitment on investment in investees 303,742	154,000

HC International, Inc. - Interim Report 2015

(c) Commitments under operating leases

The future aggregate minimum lease payments under non-cancellable operating leases in respect of buildings which expire as follows:

Unaudited 30th June 2015 RMB’000	Audited 31st December 2014 RMB’000
Within one year 14,710 In the second to fifth year inclusive 9,947	13,132 14,991
24,657	28,123

33 Subsequent event

On 8th May 2015, the Group (“the Purchaser”) entered into a sale and purchase agreement with NAVIIT LIMITED (“the Seller”) and Mr. Liu Xiaodong, Ms. Wang Qian, Mr. Shi Shilin, Ms. Yang Ye (collectively referred to as “the Seller Guarantors”), pursuant to which the Purchaser has conditionally agreed to acquire all the issued share capital of Orange Triangle Inc.. The acquiree operates one of the leading IT vertical portals which is mainly providing information on product reviews and specifications regarding consumer electronics to the internet consumer users and integrated marketing solutions to the business users in the PRC. The consideration is proposed to be settled as to 30% (being US$ equivalent amount of RMB450,000,000) in cash and as to 70% (being US$ equivalent amount of RMB1,050,000,000) by allotment of 155,684,485 new Shares at HK$8.5 each (as to 40% to Mr. Liu Xiaodong, as to 25% to Ms. Wang Qian, as to 20% to Mr. Shi Shilin and as to 15% to Ms. Yang Ye, respectively, and subject to adjustment mechanism stipulated in the Sale and Purchase Agreement). The allotment had been approved by Shareholders in the extraordinary general meeting held on 19th June 2015. On 3rd July 2015, the Group has fulfilled all the conditions precedent of the sale and purchase agreement previously entered with the Seller and the Seller Guarantors, and the acquisition has been completed accordingly.

On 3rd July 2015, the Group has entered into a letter of intent, in which the Group has intended to enter into a share purchase agreement with 杭州賽點科技有限公司 (Hang Zhou Sai Dian Technology Company Limited), 浙江浩遠創業投資有限公司 (Zhejiang Hao Yuan Chuang Ye Investment Company Limited), Chen Xue Jun, He Shun Sheng and Cao Guo Xiong (“the Vendors”), to acquire approximately 80% of the equity interest of 浙江中服網絡科技有限公司 (Zhe Jiang Zhong Fu Interest Technology Company Limited*), a company incorporated in the PRC for a total consideration of RMB120,570,000. The acquiree is principally engaged in the provision of vertical websites in the garment industry in the PRC. 30% of the total consideration shall be paid in cash and the remaining 70% of which shall be paid by way of issuing new shares by the Group as calculated at HK$10 per share. Please also refer to the announcement of the Company dated 3rd July 2015 for further details.

On 22th July 2015, HC Internet Information Technology Company Limited, a wholly-owned subsidiary of the Group (“the Purchaser”), entered into a sale and purchase agreement with Wang Feng Feng (“the Vendor”), pursuant to which the Purchaser has conditionally agreed to acquire representing approximately 2.49% of the issued share capital of the 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 commercial bank based in Inner Mongolia, for a consideration of RMB57,900,000. The acquisition constitutes a discloseable transaction of the Group under Chapter 14 of the Listing Rules. Please also refer to the announcement of the Group dated 22nd July 2015 for further details.

HC International, Inc. - Interim Report 2015

DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS AND SHORT POSITIONS IN THE SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY AND ITS ASSOCIATED CORPORATIONS

As at 30th June 2015, the interests and short positions of the Directors and the chief executive in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (the “SFO”)) which were 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 are taken or deemed to have under such provisions of the SFO) or required to be entered in the register maintained by the Company pursuant to Section 352 of the SFO or which were notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transaction by Directors of Listed Issuers (the “Model Code”) contained in the Listing Rules, were as follows:

(a) Directors’ and chief executive’s long positions in the shares of the Company

								Percentage of
Name of	Class of		Personal	Family	Corporate	Other	Total number	shareholding
Director	Shares	Capacity	interests	interests	interests	interests	of Shares	(approximate)
Guo Jiang	Ordinary	Beneficial owner/	79,425,146	10,784,625	–	–	90,209,771	13.51%
		family interest	(Note 1)	(Note 1)			(Note 1)
Guo Fansheng	Ordinary	Beneficial owner	57,749,015	–	–	–	57,749,015	8.65%
Li Jianguang	Ordinary	Interest of	–	–	32,000,384	–	32,000,384	4.79%
		controlled			(Note 2)		(Note 2)
		corporation
Lee Wee Ong	Ordinary	Beneficial owner	4,850,672	–	–	–	4,850,672	0.73%
			(Note 3)				(Note 3)
(b) Directors’ short positions
								Percentage of
Name of	Class of		Personal	Family	Corporate	Other	Total number	shareholding
Director	Shares	Capacity	interests	interests	interests	interests	of Shares	(approximate)
Guo Jiang	Ordinary	Beneficial owner	5,000,000		–	–	5,000,000	0.75%

HC International, Inc. - Interim Report 2015

Notes:

1. Such interest in the Company comprises:

2. (a) 61,158,771 Shares of which 5,150,625 Shares are held by Ms. Geng Yi, who is Mr. Guo Jiang’s spouse;

3. (b) 13,910,000 underlying Shares derived from the awarded shares granted to Mr. Guo Jiang under the employees’ share award scheme adopted on 17th November 2011; and

4. (c) 15,134,000 underlying Shares derived from the share options granted under the Share Option Scheme adopted on 30th November 2003 of which 5,634,000 underlying Shares derived from the share options granted to Ms. Geng Yi under the Share Option Scheme.

Mr. Guo is deemed, or taken to have, interested in the shares and underlying shares held by Ms. Geng Yi pursuant to the SFO.

1. The references to 32,000,384 shares of the Company relate to the same block of shares of the Company held by Callister Trading Limited, the entire share capital of which is owned by Mr. Li Jianguang. Accordingly, Mr. Li Jianguang is deemed, or taken to have, interested in the said 32,000,384 shares of the Company pursuant to the SFO.

2. Such interests in the Company comprises: (i) 2,350,672 Shares, (ii) 1,000,000 underlying shares derived from the awarded share granted to Mr. Lee Wee Ong under the employees’ share award scheme of the Company adopted on 17th November 2011 and (iii) 1,500,000 underlying Shares derived from the share options granted under the Share Option Scheme.

Save as disclosed above, none of the Directors and chief executive of the Company has any interest or short position in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were 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 are taken or deemed to have under such provision of the SFO) or required to be entered in the register maintained by the Company pursuant to section 352 of the SFO or which were notified to the Company and the Stock Exchange pursuant to the Model Code.

SHARE OPTION SCHEME

Pursuant to written resolutions of the shareholders of the Company dated 30th November 2003, among others, a share option scheme (the “Share Option Scheme”) was adopted by the Company. The principal terms of the Share Option Scheme were summarised in the paragraph headed “Share options” under the section headed “Statutory and General Information” in Appendix V of the prospectus of the Company dated 8th December 2003.

HC International, Inc. - Interim Report 2015

OUTSTANDING SHARE OPTIONS

(b) Share Option Scheme

As at 30th June 2015, options to subscribe for an aggregate of 32,213,000 Shares granted pursuant to the Share Option Scheme were outstanding. Details of which were as follows:

Name of grantee Date of grant Exercise price per share HK$	Number of share options As at 1st January 2015 Granted during the period Exercised during the period Lapsed during the period As at 30th June 2015 (Note1) 1,000,000 1,000,000 2,200,000 2,200,000 1,500,000 1,500,000 4,800,000 4,800,000 1,500,000 1,500,000 434,000 434,000 1,000,000 1,000,000 4,200,000 4,200,000 50,000 (50,000) 0 220,000 220,000 400,000 400,000 800,000 800,000 94,000 94,000 1,955,000 (80,000) 1,875,000 100,000 100,000 2,418,000 (500,000) 1,918,000 200,000 200,000 10,000,000 (28,000) 9,972,000
Directors Guo Jiang 23rd June 2006 1.49 11th July 2007 1.24 29th September 2008 0.604 7th April 2010 0.82 Lee Wee Ong 3rd April 2013 4.402 Senior management Geng Yi 23rd June 2006 1.49 29th September 2008 0.604 7th April 2010 0.82 Guo Gang 28th March 2011 1.108 Li Tao 11th July 2007 1.24 29th September 2008 0.604 7th April 2010 0.82 Other employees In aggregate_(Note 2) 23rd June 2006 1.49 In aggregate(Note 3) 11th July 2007 1.24 In aggregate(Note 4) 29th September 2008 0.604 In aggregate(Note 5) 7th April 2010 0.82 In aggregate(Note 6) 28th March 2011 1.108 In aggregate(Note 7)_ 18th November 2013 9.84
Total	32,871,000 (658,000) 32,213,000

HC International, Inc. - Interim Report 2015

Notes:

1. Each option has a 10-year exercise period, which may be exercised after the expiry of twelve months from the date of the grant of options.

For the options exercisable at HK$2.40 granted on 18th February 2004, the relevant grantees may exercise options up to 33.3%, 66.6% and 100%, respectively, of the Shares comprised in his or her option (less any number of Shares in respect of which the option has been previously exercised), commencing from the first, second and third anniversaries of the date of the grant of options.

For the options exercisable at HK$1.49 granted on 23rd June 2006, the relevant grantees may exercise these options in a 10-year period starting from the expiry of twelve months from the date of the grant of options.

For the options exercisable at HK$1.24 granted on 11th July 2007, the relevant grantees may exercise options up to 50% and 100%, respectively, of the Shares comprised in his or her option (less any number of Shares in respect of which the option has been previously exercised), commencing from the first and second anniversaries of the date of the grant of options.

For the options exercisable at HK$0.604 granted on 29th September 2008, the relevant grantees may exercise these options in a 10-year period starting from the expiry of twelve months from the date of the grant of options.

For the options exercisable at HK$0.82 granted on 7th April 2010, the relevant grantees may exercise options up to 50% and 100%, respectively, of the Shares comprised in his or her option (less any number of Shares in respect of which the option has been previously exercised), commencing from the first and second anniversaries of the date of the grant of options.

For the options exercisable at HK$1.108 granted on 28th March 2011, the relevant grantees may exercise options up to 50% and 100%, respectively, of the Shares comprised in his or her option (less any number of Shares in respect of which the option has been previously exercised), commencing from the first and second anniversaries of the date of the grant of options.

For the options exercisable at HK$9.84 granted on 18th November 2013, the relevant grantees may exercise options up to 10%, 20%, 40%, 70% and 100%, respectively, of the shares of the Company comprised in his or her option (less any number of shares of the Company in respect of which the option has been previously exercised), commencing from the first, second, third, fourth and fifth anniversaries of the date of the grant of options.

1. 2 employees have been granted options under the Share Option Scheme to acquire an aggregate of 94,000 Shares at HK$1.49 per share.

2. 6 employees have been granted options under the Share Option Scheme to acquire an aggregate of 1,875,000 Shares at HK$1.24 per share.

3. 1 employee has been granted options under the Share Option Scheme to acquire an aggregate of 100,000 Shares at HK$0.604 per share.

4. 4 employees have been granted options under the Share Option Scheme to acquire an aggregate of 1,918,000 Shares at HK$0.82 per share.

HC International, Inc. - Interim Report 2015

1. 2 employees have been granted options under the Share Option Scheme to acquire an aggregate of 200,000 Shares at HK$1.108 per share.

2. 56 employees have been granted options under the Share Option Scheme to acquire an aggregate of 9,972,000 Shares at HK$9.84 per share.

3. The fair value of options granted under the Share Option Scheme on 18th February 2004, determined using the Binomial Model value model, was approximately RMB20,193,000. The significant inputs into the model were the exercise price of HK$2.4, standard deviation of expected share price returns of 32%, expected life of options ranging from 5.4 to 6.6 years, expected dividend paid out rate of 0% and annual risk-free interest rate ranging from 1.34% to 4.43%. The volatility measured at the standard deviation of expected share price returns is based on statistical analysis of historical price movement of the Company and other comparable companies with similar business nature.

4. The fair value of options granted under the Share Option Scheme on 23rd June 2006, determined using the Binomial Model valuation model, was approximately RMB3,919,000. The significant inputs into the model were exercise price of HK$1.49, standard deviation of expected share price returns of 34.8%, expected life of options ranging from 3.2 to 5.5 years expected dividend paid out rate of 0% and annual risk free interest rate 4.911%. The volatility measured at the standard deviation of expected share price returns is based on statistical analysis of historical price movement of the Company and other comparable companies with similar business nature.

5. The fair value of options granted under the Share Option Scheme on 11th July 2007, determined using the Binomial Model valuation model, was approximately RMB9,390,000. The significant inputs into the model were exercise price of HK$1.24 standard deviation of expected share price returns of 49.0%, expected life of options ranging from 2.4 to 6.2 years expected dividend paid out rate of 0% and annual risk-free interest rate 4.757%. The volatility measured at the standard deviation of expected share price returns is based on statistical analysis of historical price movement of the Company and other comparable companies with similar business nature.

6. The fair value of options granted under the Share Option Scheme on 29th September 2008, determined using the Binomial Model valuation model, was approximately RMB2,756,000. The significant inputs into the model were exercise price of HK$0.604 standard deviation of expected share price returns of 72.2%, expected life of options ranging from 3.8 to 4.8 years expected dividend paid out rate of 0% and annual risk-free interest rate 3.133%. The volatility measured at the standard deviation of expected share price returns is based on statistical analysis of historical price movement of the Company and other comparable companies with similar business nature.

7. The fair value of options granted under the Share Option Scheme on 7th April 2010, determined using the Binomial Model valuation model, was approximately RMB12,527,000. The significant inputs into the model were exercise price of HK$0.82 standard deviation of expected share price returns of 79.8%, expected life of options ranging from 3.4 to 5.9 years expected dividend paid out rate of 0% and annual risk-free interest rate 2.865%. The volatility measured at the standard deviation of expected share price returns is based on statistical analysis of historical price movement of the Company and other comparable companies with similar business nature.

HC International, Inc. - Interim Report 2015

1. The fair value of options granted under the Share Option Scheme on 28th March 2011, determined using the Binomial Model valuation model, was approximately RMB1,377,000. The significant inputs into the model were exercise price of HK$1.108 standard deviation of expected share price returns of 77.4%, expected life of options ranging from 3.8 to 4.9 years expected dividend paid out rate of 0% and annual risk-free interest rate 2.82%. The volatility measured at the standard deviation of expected share price returns is based on statistical analysis of historical price movement of the Company and other comparable companies with similar business nature.

2. The fair value of options granted under the Share Option Scheme on 3rd April 2013, determined using the Binomial Model valuation model, was approximately RMB3,754,000. The significant inputs into the model were exercise price of HK$4.402 standard deviation of expected share price returns of 75%, expected life of options ranging from 9.1 to 9.6 years expected dividend paid out rate of 0% and annual risk-free interest rate 1.111%. The volatility measured at the standard deviation of expected share price returns is based on statistical analysis of historical price movement of the Company and other comparable companies with similar business nature.

3. The fair value of options granted under the Share Option Scheme on 18th November 2013, determined using the Binomial Model valuation model, was approximately RMB50,125,000. The significant inputs into the model were exercise price of HK$9.84 standard deviation of expected share price returns of 71.5%, expected life of options ranging from 4.7 to 7.9 years expected dividend paid out rate of 0% and annual risk-free interest rate 1.915%. The volatility measured at the standard deviation of expected share price returns is based on statistical analysis of historical price movement of the Company and other comparable companies with similar business nature.

4. The valuation of share options is subject to a number of assumptions and with regard to the subjectivity and uncertainty of the model.

5. In respect of employees resigned during the period whose share options have not been vested, such share options are lapsed, and the share compensation costs recognised previously are credited to condensed consolidated final statement of comprehensive income.

6. The weighted average closing price of the Shares immediately before the date on which these options were exercised was approximately HK$11.38 per share.

HC International, Inc. - Interim Report 2015

EMPLOYEES’ SHARE AWARD SCHEME

On 17th November 2011, the Board adopted an employees’ share award scheme pursuant to which existing shares of the Company will be acquired by the trustee from the market at the cost of the Company and be held in trust for the selected employees until such shares are vested with the relevant selected employees in accordance with the provision of the share award scheme. For principal terms of the employees’ share award scheme, please refer to the announcement of the Company dated 17th November 2011.

Since the adoption date, a total of 46,881,000 shares has been granted up to the date of this report, representing approximately 5.69% of the issued share capital of the Company as at the date of this report. The awarded shares remain outstanding as at 30th June 2015 are set out below:

		Number of	As at	Granted	Vested	As at
		awarded	1st January	during	during	30 June
Name of Grantee	Date of grant	shares	2015	the period	the period	2015
Directors
Guo Jiang	20th August 2012	16,700,000	13,917,000		–	13,917,000
Lee Wee Ong	14th June 2012	3,000,000	1,000,000		–	1,000,000
Senior management
Guo Gang	23rd November 2011	300,000	100,000		(85,000)	15,000
Li Tao	23rd November 2011	300,000	100,000		(85,000)	15,000
Other employees
In aggregate_(Note 1)_	23rd November 2011	23,581,000	14,633,399		(1,568,281)	13,065,118
	17th January 2014	3,000,000	3,000,000		(1,000,000)	2,000,000
Total		46,881,000	32,750,399		(2,738,281)	30,012,118

Note:

1. 70 employees have been granted an aggregate of 20,581,000 awarded shares.

HC International, Inc. - Interim Report 2015

SUBSTANTIAL SHAREHOLDERS’ AND OTHER PERSONS’ INTERESTS AND SHORT POSITIONS IN THE SHARES AND UNDERLYING SHARES OF THE COMPANY

As at 30th June 2015, the interests and short positions of substantial shareholders (not being Directors and the chief executive of the Company) in the shares and underlying shares of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were notified to the Company and the Stock Exchange pursuant to Divisions 2 and 3 of Part XV of the SFO and required to be entered in the register maintained by the Company pursuant to Section 336 of the SFO were as follows:

				Approximate
				percentage of
				shareholding
	Class of			as at 30th June
Name of Shareholder	Shares	Long position	Short position Capacity	2015
Talent Gain Developments	Ordinary	161,166,107	Beneficial owner and	24.13%
Limited		(Note 1)	Interest in controlled
			corporation
Digital China Holdings	Ordinary	161,166,107	Interest in controlled	24.13%
Limited		(Note 1)	corporations
Geng Yi	Ordinary	90,209,771	5,000,000 Beneficial owner and	13.51%
		(Note 2)	Family interest	(long position)
				0.75%
				(short position)
Credit Suisse Group AG	Ordinary	55,636,609	40,387,813 Interest in controlled	8.33%
			corporation	(long position)
				6.04%
				(short position)

Notes:

1. The references to 161,166,107 Shares comprises 137,758,107 Shares and 23,408,000 Shares held by Talent Gain Developments Limited and Unique Golden Limited, respectively. Unique Golden Limited is wholly and beneficially owned by Talent Gain Developments Limited, which in turn is wholly and beneficially owned by Digital China (BVI) Limited and indirectly wholly and beneficially owned by Digital China Holdings Limited, a company whose shares are listed on the Stock Exchange (stock code: 861). Therefore, Talent Gain Developments Limited, is deemed to be interested in the Shares held by Unique Golden Limited, and each of Digital China (BVI) Limited and Digital China Holdings Limited is deemed to be interested in the Shares held by Talent Gain Developments Limited and Unique Golden Limited.

HC International, Inc. - Interim Report 2015

1. Ms. Geng Yi is the spouse of Mr. Guo Jiang. Such interest in the Company comprises: (a) 61,158,771 Shares (long position) and 5,000,000 (short position) of which 56,008,146 Shares (long position) and 5,000,000 (short position) are held by Mr. Guo Jiang and 5,150,625 Shares are held by Ms. Geng Yi; (b) 13,917,000 underlying Shares derived from the awarded shares granted to Mr. Guo Jiang under the employees’ share award scheme adopted on 17th November 2011; and (c) 15,134,000 underlying Shares derived from the share options granted under the share option scheme adopted on 30th November 2003 of which 9,500,000 underlying Shares derived from the share options granted to Mr. Guo Jiang under the share option scheme, and 5,634,000 underlying Shares derived from the share options granted to Ms. Geng Yi. Ms. Geng is deemed, or taken to have, interested in the shares and underlying shares held by Mr. Guo Jiang pursuant to the SFO.

Save as disclosed above, as at 30th June 2015, the Company had not been notified of any interests or short positions of substantial shareholders or other persons in the shares and underlying shares of the Company which are required to be kept under Section 336 of the SFO.

DIRECTORS’ SECURITIES TRANSACTIONS

The Company has adopted written guidelines regarding Directors’ securities transactions on terms no less exacting than the required standard of dealings as set out in Appendix 10 to the Listing Rules. Having made specific enquiry of all Directors, the Directors confirmed that they have complied with the required standard of dealings and the said guidelines regarding Directors’ securities transactions during the six months ended 30th June 2015.

AUDIT COMMITTEE

The Company established an audit committee (the “Audit Committee”) on 24th July 2003 with written terms of reference based on the guidelines set out in “A Guide for Effective Audit Committees” published by the Hong Kong Institute of Certified Public Accountants.

The primary duties of the Audit Committee are to review and supervise the financial reporting process and internal control procedures of the Group. The Audit Committee comprises two independent non-executive Directors Mr. Zhang Ke and Mr. Xiang Bing and a non-executive Director, Mr. Li Jianguang. Mr. Zhang Ke is the Chairman of the Audit Committee.

The Audit Committee has reviewed with management of the Company the accounting principles and practices adopted by the Group, and the interim results of the Group for the period ended 30th June 2015.

AUDITOR

PricewaterhouseCoopers, the auditor of the Company has reviewed these unaudited interim financial information of the Group for the period ended 30th June 2015.

HC International, Inc. - Interim Report 2015

DIRECTORS’ AND MANAGEMENT SHAREHOLDERS’ INTERESTS IN COMPETING BUSINESS

Each of the Directors or the management shareholders of the Company and their respective associates (as defined in the Listing Rules) has confirmed that none of them had any business or interest in any business that competes or may compete with the business of the Group or any other conflict of interests with the interests of the Group during the six months ended 30th June 2015.

PRE-EMPTIVE RIGHTS

There is no provision for pre-emptive rights under the Company’s Articles of Association, or the laws of Cayman Islands, which would oblige the Company to offer new shares on a pro-rata basis to existing shareholders of the Company.

COMPLIANCE WITH CODE ON CORPORATE GOVERNANCE PRACTICES

The Board had reviewed the Company’s corporate governance practices and was satisfied that the Company had been in compliance with the code provisions set out in the Code on Corporate Governance Practices contained in Appendix 14 to the Listing Rules during the six months ended 30th June 2015.

PURCHASE, SALE OR REDEMPTION OF SECURITIES

Neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the Company’s listed shares during the six months ended 30th June 2015.

By order of the board HC International, Inc.

Guo Jiang

Chief Executive Officer and Executive Director

Beijing, PRC, 25th August 2015

As at the date of this report, 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)

HC International, Inc. - Interim Report 2015