HC Group Inc. — M&A Activity 2018

Dec 20, 2018

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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HC GROUP INC. 慧聰集團有限公司

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 02280)

DISCLOSEABLE TRANSACTION IN RELATION TO (i) THE ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF ZALE INC. ; AND (ii) ISSUANCE AND ALLOTMENT OF Z.TECH CONSIDERATION SHARES AND DEEMED DISPOSAL OF 10.66% OF INTEREST IN Z.TECH

Financial Adviser

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Celestial Capital Limited

THE SALE AND PURCHASE AGREEMENT

The Board is pleased to announce that on 20 December 2018 (after trading hours), the Vendors, the Purchaser and the Vendor Guarantors entered into the Sale and Purchase Agreement, pursuant to which the Vendors have conditionally agreed to sell, and the Purchaser has conditionally agreed to acquire the Sale Shares, representing the entire issued share capital of the Target Company for an aggregate consideration of RMB392,220,000 in equivalent Hong Kong dollars at an exchange rate of HK$1.00 to RMB0.88 (i.e. HK$445,704,545) to be settled at Completion by way of (i) cash; and (ii) issuance and allotment of Z.TECH Consideration Shares (subject to downward adjustments).

Completion is conditional upon the satisfaction of the Conditions Precedent as more particularly set out in the section headed “Conditions Precedent” below.

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LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios in respect of the Acquisition calculated in accordance with Rule 14.07 of the Listing Rules are more than 5% but less than 25%, the Acquisition constitutes a discloseable transaction of the Company under the Listing Rules and is subject to the reporting and announcement requirements but is exempt from Shareholders’ approval.

Assuming the Acquisition has been completed, upon completion of the issue of the Z.TECH Consideration Shares (assuming the maximum number of Z.TECH Consideration Shares are issued), the interest of the Company held in Z.TECH will be diluted from 100% to approximately 89.34%. Such dilution in interest in Z.TECH as a result of the issue of the Z.TECH Consideration Shares will constitute a deemed disposal of interest in Z.TECH held by the Company. As one or more of the applicable percentage ratios (as defined under the Listing Rules) for the issue of Z.TECH Consideration Shares are more than 5% but less than 25%, the dilution of the Company’s interest in Z.TECH constitutes a discloseable transaction of the Company under the Listing Rules and the transactions are therefore subject to announcement and reporting requirements but is exempt from Shareholders’ approval.

INTRODUCTION

The Board is pleased to announce that on 20 December 2018 (after trading hours), the Vendors, the Purchaser and the Vendor Guarantors entered into the Sale and Purchase Agreement, pursuant to which the Vendors have conditionally agreed to sell, and the Purchaser has conditionally agreed to acquire the Sale Shares, representing the entire issued share capital of the Target Company for an aggregate consideration of RMB392,220,000 in equivalent Hong Kong dollars at an exchange rate of HK$1.00 to RMB0.88 (i.e. HK$445,704,545) to be settled at Completion by way of (i) cash; and (ii) issuance and allotment of the Z.TECH Consideration Shares (subject to downward adjustments). The principal terms and conditions of the Sale and Purchase Agreement are as follows:

THE SALE AND PURCHASE AGREEMENT

Date: 20 December 2018

Parties: (i) Zalef, Ruthfly and Fejack as the Vendors; (ii) Z.TECH as the Purchaser; and (iii) Ms. Yang, Ms. Geng and Mr. Li as the Vendor Guarantors

As at the date of this announcement, each of Zalef, Ruthfly and Fejack is wholly-owned by Ms. Yang, Ms. Geng and Mr. Li, respectively. To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, each of the Vendors and the Vendor Guarantors is an Independent Third Party.

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Subject matter of the Sale and Purchase Agreement

Pursuant to the Sale and Purchase Agreement, the Vendors have conditionally agreed to sell, and the Purchaser has conditionally agreed to acquire the Sale Shares, representing the entire issued share capital of the Target Company.

As at the date of this announcement, each of Zalef, Ruthfly and Fejack is holding 75.15%, 11.85% and 13% of the issued share capital in the Target Company, respectively. The Target Company holds the entire issued share capital in Zale HK, which in turn holds the entire equity interest in Beijing Rongrui. Beijing Rongrui then holds 65.37% equity interest in Beijing Rongshang.

Upon Completion, Zalef, Ruthfly and Fejack will transfer their respective interest in the Target Company to the Purchaser and the Target Group will become indirect subsidiaries of the Company. Upon completion of the Acquisition and the issue and allotment of Z.TECH Consideration Shares, the Company will indirectly own 89.34% of the equity interest in Beijing Rongshang in aggregate.

Consideration

The Consideration is RMB392,220,000, payable in part by cash (i.e. RMB100,000,000) and the remaining part by Z.TECH Consideration Shares (RMB292,200,000), in equivalent Hong Kong dollars at an exchange rate of HK$1.00 to RMB0.88 (i.e. HK$445,704,545). The Consideration was determined after arm’s length negotiations between the Purchaser and the Vendors after taking into account, among others, (i) the valuation of Beijing Rongshang at RMB600,000,000 as at 9 December 2018 using market approach pursuant to the valuation report prepared by an independent valuer appointed by the parties; and (ii) the percentage of the total registered capital of Beijing Rongshang ultimately held by the Target Company (i.e. 65.37%) before the Acquisition.

The Consideration shall be payable by the Company at Completion in the following manner:

• (i) RMB75,150,000 shall be payable by the Company in cash to Zalef;

• (ii) RMB11,850,000 shall be payable by the Company in cash to Ruthfly;

• (iii) RMB13,000,000 shall be payable by the Company in cash to Fejack;

• (iv) a sum of RMB219,603,330 shall be paid to Zalef by way of allotment and issue of the Z.TECH Consideration Shares, representing approximately 8.01% of the issues shares of Z.TECH;

• (v) a sum of RMB34,628,070 shall be paid to Ruthfly by way of allotment and issue of the Z.TECH Consideration Shares, representing approximately 1.26% of the issues shares of Z.TECH; and

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• (vi) a sum of RMB37,988,600 shall be paid to Fejack by way of allotment and issue of the Z.TECH Consideration Shares, representing approximately 1.39% of the issues shares of Z.TECH.

The part of the Consideration which is payable by cash by the Purchaser (i.e. RMB100,000,000) to the Vendors, shall be financed by the internal resources of the Purchaser.

After the allotment and issue of Z.TECH Consideration Shares, the Vendors shall hold approximately 10.66% of the issued share capital of Z.TECH in aggregate. The number of Z.TECH Consideration Shares to be issued is based on the valuation of the interest in Orange Triangle Inc. (100%), Beijing Rongshang (100%) and Huicong Yunshang (65.6%) held or to be held by Z.TECH as at 9 December 2018 using market approach by an independent valuer at approximately RMB2,740,000,000.

Performance Target and adjustment mechanism

The part of the Consideration which is payable to the Vendors by the allotment and issuance of the aggregate number of the Z.TECH Consideration Shares is subject to repurchase and cancellation on the basis of the Performance Target.

Pursuant to the Sale and Purchase Agreement, the Vendor Guarantors jointly, severally and irrevocably covenant and undertake to the Purchaser that Beijing Rongshang shall achieve the Performance Target (i.e. a GMV of RMB1,800,000,000) for the financial year ending 31 December 2019.

The Performance Target shall be based on the audited report which shall be issued within 30 business days of the end of each Performance Undertaking Year and prepared by the auditors jointly appointed by the parties.

If the Performance Target cannot be achieved, the Purchaser shall have the right, at its absolute discretion, to repurchase and cancel all or part of the Z.TECH Consideration Shares held by each of the Vendors at HK$1 in accordance with the following formula:

Each of the Vendor’s proportion of the allotted Z.TECH Consideration Shares x (1 – actual GMV for the Performance Undertaking Year/Performance Target).

The Vendor Guarantors further agree to achieve, on a best effort basis, the GMV of Beijing Rongshang of RMB4,000,000,000 and RMB9,000,000,000, for each of the two financial years ending 31 December 2020 and 31 December 2021 respectively.

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Conditions Precedent

The Completion is conditional upon the following conditions being satisfied or waived in accordance with the Sale and Purchase Agreement:

• (a) the completion of the business, legal and financial due diligence of each of the Vendors, the Vendor Guarantors and the Target Group by the Purchaser and its advisers to its satisfaction in the Purchaser’s absolute discretion;

• (b) the Company having obtained all necessary approvals, authorisations, consents and permits from the Stock Exchange and relevant authorities;

• (c) having obtained the agreements, consents, authorisations, permits and any other form of approval that may be necessary pursuant to any existing contractual arrangements of the Target Group, the Vendors and the Vendor Guarantors for the completion of the transactions contemplated under the Sale and Purchase Agreement;

• (d) having obtained all necessary consents, authorisations and permits or any other form of approval from any statutory governmental or regulatory authorities, and having fulfilled all legal requirements that the Target Group, the Vendors and the Vendor Guarantors may be required to comply with, for the completion of transactions contemplated under the Sale and Purchase Agreement; and

• (e) the warranties remaining true, accurate and not misleading in all material respects at Completion, as though the Vendors and the Vendor Guarantors have been repeatedly giving such warranties from the date of the Sale and Purchase Agreement until the Completion.

The Vendors shall use their best endeavours to ensure that the Conditions Precedent set out above to be fulfilled as soon as possible and to the satisfaction of the Purchaser.

If all the Conditions Precedent are not fulfilled or waived by the Purchaser in writing on or before the Long Stop Date (or a later date as agreed by the Vendors and the Purchaser in writing), the Sale and Purchase Agreement shall become void and unenforceable.

Guarantee

Pursuant to the Sale and Purchase Agreement, the Vendor Guarantors (as primary obligors and not merely as guarantors) unconditionally and irrevocably guarantee to the Purchaser that the Vendors shall duly perform all obligations under, arising from and in connection with the Sale and Purchase Agreement (the “ Guaranteed Obligations ”). The Vendor Guarantors guarantee that, in the case that the Vendors fail to perform any of the Guaranteed Obligations due to any reason, the Vendor Guarantors shall forthwith duly perform or procure the Vendors to perform the Guaranteed Obligations.

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The Vendor Guarantors agree to fully indemnify the Purchaser and/or its representatives all losses, liabilities and damages (including but not limited to all legal fees and costs) arising from, incurred by or in connection with the failure of the Vendors to fully perform the Guaranteed Obligations.

Completion

Completion shall take place on the Completion Date which shall be the day falling on the 5th Business Days (or any other time as agreed by the Vendors and the Purchaser) after the date on which all the Conditions Precedent have been satisfied or otherwise waived in accordance with the Sale and Purchase Agreement.

The simplified structure of the Target Group immediately before and after the Completion (assuming the Z.TECH Consideration Shares were issued in full) are set out below:

Immediately before the Completion

Ms. Yang	Ms. Yang		Ms. Geng	Ms. Geng		Mr. Li	Mr. Li
	100%			100%			100%
Za	lef		Rut	hfy		Fej	ack
	75.15%			11.85%

Note: As at the date of this announcement, Beijing Rongshang is jointly owned by Beijing Rongrui as to 65.37% and as to 34.63% indirectly held by the Company.

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Immediately after completion of the Acquisition and issuance and allotment of Z.TECH Consideration Shares

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

Ms. Yang Ms. Geng Mr. Li
The Company
100% 100% 100%
Zalef Ruthfly Fejack
8.01% 1.26% 1.39% 89.34%
Z.TECH
100% 100%
Orange Triangle
Target Company
Inc.
100% 100%
Zale HK Orange Triangle
(HK) Limited
100% 100%
Structured Contracts
Beijing Zhixing
Beijing Rongrui Orange Beijing
Ruijing
65.37% 34.63% 65.6%
Huicong
Yunshang
Beijing Rongshang
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INFORMATION OF THE TARGET GROUP

The Target Group is principally engaged in SaaS (Software as a Service) services in 3C industrial internet and new technology retail in PRC. Beijing Rongshang uses its SaaS services, internet marketing and ERP management service to empower the retail capacity and offline inventory flow of its customers. At the same time, through supply chain and internet finance, Beijing Rongshang also helps its customers improve their operating income and profit. In the future, the Target Group aims to combine more regional customers to form a community of businesses through integration of resources and introduction of partners creating an internet of businesses.

The Target Company is an investment holding company incorporated in the Cayman Islands with limited liability and issued capital of US$50,000. The entire issued share capital of the Target Company is legally and beneficially owned by the Vendors, i.e. Zalef as to 75.15%, Ruthfly as to 11.85% and Fejack as to 13%. As at the date of this announcement, each of Ms. Yang, Ms. Geng and Mr. Li is holding the entire issued share capital in Zalef, Ruthfly and Fejack, respectively. To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, each of the Vendors and the Vendor Guarantors is an Independent Third Party.

As at the date this announcement, the Target Company holds the entire issued shares of Zale HK, an investment holding company incorporated in Hong Kong with limited liability and issued shares of HK$10,000, which in turn holds the entire equity interest in Beijing Rongrui, a holding company established under the laws of the PRC. Beijing Rongrui was established on 5 December 2018 with registered capital of US$8,000,000.

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Beijing Rongrui holds 65.37% equity interest in Beijing Rongshang, a company established in the PRC with limited liability with registered capital of RMB36,820,728. Based on the valuation report issued by an independent valuer mutually agreed appointed by the parties, Beijing Rongshang is valued at RMB600,000,000 as at 9 December 2018.

Financial information of the Target Group

Given the Target Company, Zale HK and Beijing Rongrui have no business activities since their respective incorporation, they have not recorded any profit/loss from their respective dates of incorporation/establishment to the date of this announcement. The following table sets out the unaudited financial information of Beijing Rongshang for the two financial years ended 31 December 2016 and 2017, respectively:

	For the year ended 31 December	For the year ended 31 December
	2016	2017
	RMB	RMB
(Loss)before taxation	(30,888,000)	(26,456,000)
(Loss)after taxation	(30,888,000)	(26,456,000)
Net liabilities	1,449,000	11,904,000

INFORMATION ON Z.TECH AND ITS SUBSIDARIES

Z.TECH is an investment holding company incorporated in the Cayman Islands with limited liability, which, as at the date of this announcement, is wholly owned by the Company.

Orange Triangle Inc. is an investment holding company incorporated in the United States of America.

The ZOL Group includes the following major operating subsidiaries:

Beijing Zhixing Ruijing is a company established in the PRC with limited liability, and a wholly-owned subsidiary of the Company through structured contracts. Beijing Zhixing Ruijing mainly operates the information technological vertical portal of the Group www.zol.com.cn and www.zol.com. Such websites are internet portal websites, mainly providing product reviews and specifications in respect of consumer electronics products to internet consumers and providing integrated marketing solutions to corporate clients.

Huicong Yunshang is a company established in the PRC with limited liability, and a nonwholly owned subsidiary of the Company, which, as at the date of this announcement, is indirectly owned by the Company as to 65.6%. It is an integrated supply chain of home electrical appliances, which provides traditionally b-services and home electrical appliances B2B internet online platform. The main products it operate include “Jia Dian Hui”(家電滙) and “Hui Maimai” (慧買賣), which endeavours to provide new retailing solutions for home electrical appliances and is the first in the PRC to provide membership program for B2B transaction and information services platform in respect of home electrical appliances.

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Financial information of Z.TECH and its subsidiaries

Given Z.TECH and Orange Triangle Inc. is an investment holding company, they have not recorded any material profit/loss from their respective dates of incorporation/establishment to the date of this announcement. The following table sets out the unaudited financial information of ZOL Group (excluding Huicong Yunshang) for the two financial years ended 31 December 2016 and 2017, respectively:

	For the year ended 31 December	For the year ended 31 December
	2016	2017
	RMB	RMB
Profit before taxation	123,931,000	148,001,000
Profit after taxation	109,497,000	133,319,000
Net assets	223,885,000	357,204,000

The following table sets out the unaudited financial information of Huicong Yunshang for the two financial years ended 31 December 2016 and 2017, respectively:

	For the year ended 31 December	For the year ended 31 December
	2016	2017
	RMB	RMB
(Loss) before taxation	–	(7,858,405)
(Loss) after taxation	–	(7,858,405)
Net assets	–	2,141,403

REASONS FOR AND THE BENEFITS OF THE SALE AND PURCHASE AGREEMENT

The Group is a provider of information services, transaction services and data services.

The Group aims at building up a leading “Industrial Internet Group”. With transaction service as setting, information service as support, data service as basis, the Group traditional industry are enpowered with “Internet” and “data”. Under the dual demand of the market and the nation’s strategies, the Group empowered the enterprises for transformation and facilitating industry upgrade and reformation by providing services to upstream and downstream enterprises across the entire industrial chain through “information + transaction + data”. As the Target Group is principally engaged in SaaS services and new technology retailing services in the PRC and aims to combine more regional customers for form a community of businesses through integration of resources and introduction of partners creating an internet of businesses, the Directors believe that the Acquisition will assist the Group’s expansion into the China’s B2B and 3C e-commence sector and complement the business of Z.TECH and its subsidiaries. The Directors believe that after the Acquisition, greater synergies could be created mainly in (i) managing SaaS and marketing Saas products to empower 3C and appliance retailers; (ii) building a supply chain revolving around 3C and home appliances and other product lines to support trading and induce demand for product technology; and (iii) the integration of zol.com.cn, Beijing Rongshang and household electrical appliances, promoting a rapid growth of new technology retail business through product technology to support the new technology retail business.

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The Directors (including the independent non-executive Directors) consider that the Sale and Purchase Agreement and the transactions contemplated thereunder were entered into on normal commercial terms after arm’s length negotiation and in the ordinary and usual course of business of the Group, and that the terms of the Sale and Purchase Agreement and the transactions contemplated thereunder are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios in respect of the Acquisition calculated in accordance with Rule 14.07 of the Listing Rules are more than 5% but less than 25%, the Acquisition constitutes a discloseable transaction of the Company under the Listing Rules and is subject to the reporting and announcement requirements but is exempt from Shareholders’ approval.

Assuming the Acquisition has been completed, upon completion of the issue of the Z.TECH Consideration Shares (assuming the maximum number of Z.TECH Consideration Shares are issued), the interest of the Company held in Z.TECH will be diluted from 100% to approximately 89.34%. Such dilution in interest in Z.TECH as a result of the issue of the Z.TECH Consideration Shares will constitute a deemed disposal of interest in Z.TECH held by the Company. As one or more of the applicable percentage ratios (as defined under the Listing Rules) for the issue of Z.TECH Consideration Shares are more than 5% but less than 25%, the dilution of the Company’s interest in Z.TECH constitutes a discloseable transaction of the Company under the Listing Rules and the transactions are therefore subject to announcement and reporting requirements but is exempt from Shareholders’ approval.

DEFINITIONS

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

• “Acquisition” the acquisition of the entire issued share capital of the Target Company pursuant to the Sale and Purchase Agreement

• “associate(s)” has the meanings ascribed to it under the Listing Rules “Beijing Rongshang” 北京融商通聯科技有限公司 (Beijing Rongshang Tonglian Technology Co., Ltd.*), a company established in the PRC which is owned as to 65.37% by Beijing Rongrui and 34.63% indirectly by the Company

“Beijing Rongrui” 北京融銳互聯科技有限公司 (Beijing Rongrui Internet Technology Co., Ltd.*), a company established in the PRC, a direct wholly-owned subsidiary of Zale HK which in turn is wholly-owned by the Target Company

“Beijing Zhixing Ruijing” 北京知行銳景科技有限公司 (Beijing Zhixing Ruijing Technology Co., Ltd.*), a company incorporated under the laws of the PRC

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“Board” the board of Directors “Business Day(s)” means a day on which licensed banks in Hong Kong is generally open for business (other than a Saturday or Sunday or public holiday in Hong Kong) “BVI” British Virgin Islands “Company” HC Group Inc., a company incorporated with limited liability under the laws of the Cayman Islands, the Shares of which are listed on the main board of the Stock Exchange “Completion” completion of the transactions contemplated under the Sale and Purchase Agreement “Completion Date” a day falling on the 5th Business Days after the date on which all the conditions precedent have been satisfied or otherwise waived in accordance with the Sale and Purchase Agreement (or any other time as agreed by the Vendors and the Purchaser)

• “Conditions Precedent” the conditions precedent of the Sale and Purchase Agreement as set out under the paragraph headed “Conditions Precedent” in this announcement

• “connected person(s)” has the meaning ascribed to it under the Listing Rules “Consideration” the aggregate consideration for the Sale Shares payable by the Purchaser pursuant to the Sale and Purchase Agreement

• “Director(s)” directors of the Company “Fejack” Fejack Limited, a company incorporated in the BVI with limited liability whose entire issued share capital is owned by Mr. Li

• “GMV” gross merchandise volume of Beijing Rongshang through its SaaS system

• “Group” the Company and its subsidiaries “Hong Kong” Hong Kong Special Administrative Region of the People’s Republic of China

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“Huicong Yunshang”	慧聰雲商（佛山）網絡科技有限公司(Huicong Yunshang
	(Foshan) Internet Technology Co., Ltd.*), a company with
	limited liability established in the PRC
“Independent Third Party(ies)”	any person or company and their respective ultimate
	beneficial owner(s), to the best knowledge, information
	and belief of the Directors and having made all reasonable
	enquiries, are parties independent of and not connected with
	the Company and its connected person
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“Long Stop Date”	31 December 2018 or such other subsequent date as the
	parties agree in writing
“Mr. Li”	LI Song (李松)
“Ms. Yang”	YANG Fan (楊帆)
“Ms. Geng”	GENG Qian (耿茜)
“Orange Beijing”	北京橙三角科技有限公司(Beijing Orange Triangle
	Technology Co., Ltd.*), a company established in the
	PRC with limited liability and an indirectly wholly-owned
	subsidiary of the Company and Z.TECH
“Performance Target”	a yearly target amount of RMB1,800,000,000 of the GMV of
	Beijing Rongshang for the Performance Undertaking Year
“Performance Undertaking	the financial year ending 31 December 2019
Year”
“PRC”	the People’s Republic of China, excluding Hong Kong,
	Macao Special Administrative Region of the People’s
	Republic of China and Taiwan
“Ruthfly”	Ruthfly Limited, a company incorporated in the BVI with
	limited liability, whose entire issued share capital is owned
	by Ms. Geng
“Sale and Purchase	the conditional sale and purchase agreement dated 20
Agreement”	December 2018 entered into between the Purchaser, the
	Vendors and the Vendor Guarantors in respect of the
	Acquisition

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“Sale Shares” 500,000,000 ordinary shares with par value of US$0.0001 each in the issued share capital of the Target Company, representing the entire issued share capital of the Target Company, of which Zalef, Ruthfly and Fejack is holding 375,750,000, 59,250,000 and 65,000,000 shares in the Target Company, respectively “Share(s)” ordinary share(s) of HK$0.10 each in the share capital of the Company “Shareholder(s)” holder(s) of the Shares “Stock Exchange” The Stock Exchange of Hong Kong Limited “substantial shareholder” as the meaning ascribed to it under the Listing Rules “Takeovers Code” the Hong Kong Code on Takeovers and Mergers “Target Company” Zale Inc., a limited liability company incorporated under the laws of the Cayman Islands, which is owned as to 75.15%, 11.85% and 13% by Zalef, Ruthfly and Fejack, respectively “Target Group” the Target Company and its subsidiaries, namely Zale HK, Beijing Rongshang and Beijing Rongrui “Vendor Guarantors” Ms. Yang, Ms. Geng and Mr. Li “Vendors” Zalef, Ruthfly and Fejack “Zale HK” Zale (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability and a direct wholly-owned subsidiary of the Target Company “Zalef” Zalef Limited, a company incorporated in the BVI with limited liability, whose entire issued share capital is owned by Ms. Yang “Z.TECH” or “Purchaser” Z.TECH Holdings Limited, a company incorporated in the Cayman Islands with limited liability, a direct wholly-owned subsidiary of the Company “Z.TECH Consideration an aggregate of 5,966 new ordinary shares in Z.TECH to be Share(s)” allotted and issued to the Vendors, which form part of the Consideration “ZOL Group” Orange Triangle Inc. and its subsidiaries

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“HK$” Hong Kong Dollars, the lawful currency of Hong Kong “RMB” Renminbi, the lawful currency of the PRC “%” per cent.

By Order of the board of the Directors HC GROUP INC. Liu Jun Chief Executive Officer and Executive Director

Hong Kong, 20 December 2018

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

• Mr. Liu Jun (Executive Director, Chairman and Chief Executive Officer)

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

• Mr. Liu Xiaodong (Executive Director and Co-President)

• Mr. Guo Fansheng (Non-executive Director)

• Mr. Li Jianguang (Non-executive Director)

• Mr. Wong Chi Keung (Non-executive Director)

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

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

• Ms. Qi Yan (Independent Non-executive Director)

• For identification purposes only

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