Huitongda Network Co., Ltd. — Capital/Financing Update 2023

Oct 17, 2023

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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Huitongda Network Co., Ltd. 匯通達網絡股份有限公司

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

(Stock Code: 9878)

PROPOSED CHANGE IN THE USE OF PROCEEDS FROM THE INITIAL PUBLIC OFFERING OF H SHARES

References are made to (i) the prospectus dated January 31, 2022 (the “ Prospectus ”) of Huitongda Network Co., Ltd. (the “ Company ”, together with its subsidiaries, the “ Group ”) in relation to the global offering (the “ Global Offering ”); (ii) the announcement on the offer price and allotment results of the Company dated February 17, 2022; and (iii) the announcement of the Company in relation to the partial exercise of the over-allotment option dated March 13, 2022. Unless the context otherwise requires, the terms used in this announcement shall have the same meanings as those defined in the Prospectus.

USE OF PROCEEDS FROM THE INITIAL PUBLIC OFFERING OF H SHARES

On February 18, 2022, the H Shares of the Company were listed on the main board of the Hong Kong Stock Exchange. A total of 53,911,800 H Shares with a nominal value of RMB1.00 each were issued under the Global Offering (including the issuance of H Share upon the partial exercise of the over-allotment option). The offer price is HK$43.00 per H Share (exclusive of brokerage of 1.0%, SFC transaction levy of 0.0027%, FRC transaction levy of 0.00015% and the Hong Kong Stock Exchange trading fee of 0.005%). The gross proceeds from the Global Offering (including the additional gross proceeds from the partial exercise of over-allotment option amounted to approximately HK$99.1 million) were approximately HK$2,318.2 million, and after deduction of underwriting fees and other related expenses, the aggregate net proceeds amounted to approximately HK$2,185.0 million (equivalent to approximately RMB1,782.3 million) (the “ Proceeds from the Initial Public Offering of H Shares ”).

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As of September 30, 2023, the Company had utilised approximately RMB789.0 million of the Proceeds from the Initial Public Offering of H Shares in total in accordance with the intended use set out in the Prospectus, with the unused portion of the proceeds amounting to approximately RMB993.3 million. Details are set out below:

Use of proceeds Itemized use Enhancing relationships with our existing customers and further expanding our customer base (1) Digitalizing our member stores and upgrading their storefronts (2) Offering solutions to certain wholesalers (3) Strategically expanding into northern and southern regions of China where there is great potential for further development (4) Expanding client managers team network with more digitalized solutions Sub-total Optimizing the capability and efficiency of the supply chain (1) Increasing spending on joint product R&D with our industry partners, brand licensing and tailored manufacturing (2) Improving the digitalization and automation of order and fulfillment management systems Sub-total Increasing investment in the IT infrastructure of our platform and enhancing SaaS+ business monetization capability (1) Acquiring IT talents for developing SaaS+ business and merchant solutions (2) Upgrading data infrastructure and enhancing data analysis capabilities (3) Continuously upgrading transaction and marketplace technology and infrastructure Sub-total Selectively pursuing strategic alliances, investments, or acquisitions (1) Brand manufacturers within each merchandise segment (2) Third-party SaaS technology and service providers (3) Third-party operators within the industry value chain Sub-total Working capital – Total	Proportion 10% 10% 5% 5% 30% 15% 10% 25% 10% 5% 5% 20% 5% 5% 5% 15% 10% 100%	Total amount (RMB in millions) 178.2 178.2 89.1 89.1 534.7 267.3 178.2 445.6 178.2 89.1 89.1 356.5 89.1 89.1 89.1 267.3 178.2 1,782.3	Used amount as of September 30, 2023 (RMB in millions) 7.5 98.7 14.4 89.1 209.7 267.3 51.6 318.9 10.8 38.3 21.1 70.1 12.0 0 0 12.0 178.2 789.0	Unused amount as of September 30, 2023 (RMB in millions) 170.7 79.6 74.7 0 325.0 0 126.7 126.7 167.5 50.8 68.0 286.3 77.1 89.1 89.1 255.3 0
				993.3

Note: Any discrepancies in the above table between total and sum of amounts listed therein are due to rounding.

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PROPOSED CHANGE IN THE USE OF PROCEEDS FROM THE INITIAL PUBLIC OFFERING OF H SHARES

The Board proposed to make the following adjustments to certain intended use of the Proceeds from the Initial Public Offering of H Shares (the “ Proposed Change in the Use of Proceeds from the Initial Public Offering of H Shares ”) to improve the efficiency of the use of raised funds, reduce financial costs, and accelerate the integration of various business resources:

			Unused
			amount				Unused
		Total amount	as of			Total amount	amount
		before	September 30,	Amount to		after	after
		the change	2023	be adjusted		the change	the change	Expected timeline
		(RMB in	(RMB in	(RMB in	Particulars of the	(RMB in	(RMB in	of the remaining
Use of proceeds	Itemized use	millions)	millions)	millions)	proposed adjustment	millions)	millions)	unused amount
Enhancing	(1) Digitalizing our member	178.2	170.7	(150.0)	(1) RMB70.0 million is	28.2	20.7	By December 31,
relationships	stores and upgrading their				adjusted to be used for			2024
with our existing	storefronts				“Offering solutions to
customers and					certain wholesalers”; and
further expanding					(2) RMB80.0 million is
our customer base					adjusted to be used
					for “Expanding client
					managers team network
					with more digitalized
					solutions”.
	(2) Offering solutions to	178.2	79.6	100.0	–	278.2	179.6	By December 31,
	certain wholesalers							2024
	(3) Strategically expanding	89.1	74.7	(30.0)	RMB30.0 million is adjusted	59.1	44.7	By December 31,
	into northern and southern				to be used for “Offering			2024
	regions of China where				solutions to certain
	there is great potential for				wholesalers”.
	further development
	(4) Expanding client managers	89.1	0	80.0	–	169.1	80.0	By December 31,
	team network with more							2024
	digitalized solutions
	Sub-total	534.7	325.0	0.0		534.7	325.0
Optimizing the	(1) Increasing spending on	267.3	0	150.0	–	417.3	150.0	By December 31,
capability	joint product R&D with							2024
and efficiency of	our industry partners, brand
the supply chain	licensing and tailored
	manufacturing
	(2) Improving the	178.2	126.7	(90.0)	RMB90.0 million is adjusted	88.2	36.7	By December 31,
	digitalization and				to be used for “Increasing			2024
	automation of order and				spending on joint
	fulfillment management				product R&D with our
	systems				industry partners, brand
					licensing and tailored
					manufacturing”.
	Sub-total	445.6	126.7	60.0		505.6	186.7

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Use of proceeds Itemized use Total amount before the change (RMB in millions) Unused amount as of September 30, 2023 (RMB in millions) Amount to be adjusted (RMB in millions) Particulars of the proposed adjustment Total amount after the change (RMB in millions) Increasing investment in the IT infrastructure of our platform and enhancing SaaS+ business monetization capability (1) Acquiring IT talents for developing SaaS+ business and merchant solutions 178.2 167.5 (150.0) (1) RMB60.0 million is adjusted to be used for “Increasing spending on joint product R&D with our industry partners, brand licensing and tailored manufacturing”; and (2) RMB90.0 million is adjusted to be used for “Working capital”. 28.2 (2) Upgrading data infrastructure and enhancing data analysis capabilities 89.1 50.8 (20.0) RMB20.0 million is adjusted to be used for “Working capital”. 69.1 (3) Continuously upgrading transaction and marketplace technology and infrastructure 89.1 68.0 (30.0) RMB30.0 million is adjusted to be used for “Working capital”. 59.1 Sub-total 356.5 286.3 (200.0) 156.5 Selectively pursuing strategic alliances, investments, or acquisitions (1) Brand manufacturers within each merchandise segment 89.1 77.1 60.0 (1) The RMB60.0 million under “Third-party SaaS technology and service providers” is adjusted to be used for “Brand manufacturers within each merchandise segment”; and (2) Flexible adjustments are made to the investment subjects, cooperative objects of investment and investment methods using the raised funds (Note 2) . 149.1 (2) Third-party SaaS technology and service providers 89.1 89.1 (60.0) 29.1 (3) Third-party operators within the industry value chain 89.1 89.1 0.0 89.1 Sub-total 267.3 255.3 0.0 267.3 Working capital – 178.2 0 140.0 – 318.2 Total 1,782.3 993.3 1,782.3

Unused amount after the change (RMB in millions) Expected timeline of the remaining unused amount 17.5 By December 31, 2024 30.8 By December 31, 2024 38.0 By December 31, 2024 86.3 137.1 By December 31, 2024 29.1 By December 31, 2024 89.1 By December 31, 2024 255.3 140.0 By December 31, 2024 993.3

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Notes: 1. Any discrepancies in the above table between total and sum of amounts listed therein are due to rounding.

1. Particulars of the proposed adjustments are as follows:

2. (1) In terms of investment subjects, to facilitate the flexible use of the proceeds, users of the proceeds shall include not only the Company, but also the subsidiaries of the Company;

3. (2) In terms of cooperative objects of investment, not only the investment of potential partners, but also the resource re-investment of existing investment partners are included. In terms of selection criteria for cooperative objects, as long as the risks are controllable, objects which are able to improve the Group’s supply chain capability, technical capability and channel service capability can be regarded as the Group’s cooperative objects of investment;

4. (3) In terms of investment methods, it includes not only equity investment and working capital supporting the investment cooperation, but also participation in private placement and strategic placement of cooperative objects, as well as other diversified ways such as participation in investment in industrial funds in line with the Group’s industrial direction.

Save for the above changes, there is no other change in the intended use of the Proceeds from the Initial Public Offering of H Shares.

REASONS AND BENEFITS OF THE PROPOSED CHANGE IN THE USE OF PROCEEDS FROM THE INITIAL PUBLIC OFFERING OF H SHARES

1. Enhancing relationships with our existing customers and further expanding our customer base

In view of the improving independent research and development capability of the Group, the digital transformation of member stores mainly relies on the empowerment on the member stores by the Group’s independent research and development of SaaS products, thus reducing the demand for digital transformation funds. In the meanwhile, the Group is proposed to increase funding in client managers team so as to provide better services to member stores. According to the Group’s strategic plan, the Group will focus on channel optimization and deploy cooperative customer network of service providers; therefore, the demand for funds to provide solutions to wholesalers will rise. At the same time, subsidiaries in various regions will step up promotion efforts to improve their services to member stores in an all-round way, while service providers will also help expand member stores, thereby reducing capital needs for “Strategically expanding into northern and southern regions of China where there is great potential for further development”. Taking into account the above factors, it is proposed to adjust the internal structure of the itemized uses under the use of proceeds of “Enhancing relationships with our existing customers and further expanding our customer base”.

2. Optimizing the capability and efficiency of the supply chain

Since the Group has strengthened its independent research and development capability, and the digitalization and automation of order and fulfillment management systems have basically met the Group’s current supply chain needs, it is proposed to adjust the internal structure of the itemized uses under the use of proceeds of “Optimizing the capability and efficiency of the supply chain”, which adjusts the expected remaining proceeds to be used for “Increasing spending on joint product R&D with our industry partners, brand licensing and tailored manufacturing” to further enhance the Group’s product supply chain capability. In addition, in order to provide better service to fulfill the needs of customers and rapidly improve the supply chain capability of the Group, it is proposed to transfer in the remaining proceeds of RMB60.0 million under the use of proceeds of “Increasing investment in the IT infrastructure of our platform and enhancing SaaS+ business monetization capability”.

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3. Increasing investment in the IT infrastructure of our platform and enhancing SaaS+ business monetization capability

The Group has continued to strengthen the capacity building for systematic research and development, and established core competitiveness in key products, thereby reducing its dependence on external resources. At the same time, the rapidly developing artificial intelligence technology ensures the efficiency of research and development while bringing down the investment in the research and development on human resource. Consequently, the Group’s demand for funds in research and development investment is lowered.

It is proposed to adjust the expected remaining proceeds of RMB60.0 million to be used for “Increasing spending on joint product R&D with our industry partners, brand licensing and tailored manufacturing” under the use of proceeds of “Optimizing the capability and efficiency of the supply chain”, which will help improve the supply chain capability of the Company and provide more competitive products for the lower-tier market. And it is proposed to adjust the expected remaining proceeds of RMB140.0 million to be used for “Working capital”, to be mainly used for the daily business activities of the Company, which will help lower financial expenses and maximize the interests of the Company and all Shareholders.

4. Selectively pursuing strategic alliances, investments, or acquisitions

The Group has always stayed focused on improving the supply chain capability, constantly strengthened the construction and management of the supply chain, and increased the control and service capability of the industry value chain. And following the rapid development of the Group, the research and development system of the Group has continued to be optimized, the research and development capability has continued to be improved, the research and development team has continued to be scaled up, and the dependence of the Group on thirdparty SaaS technology and service providers has been gradually reduced. In light of the above, it is proposed to adjust the internal structure of the itemized uses under the use of proceeds of “Selectively pursuing strategic alliances, investments, or acquisitions”, which adjusts the RMB60.0 million under “Third-party SaaS technology and service providers” to be used for “Brand manufacturers within each merchandise segment”.

At the same time, in order to further improve the efficiency of the use of the proceeds and accelerate the integration with resource parties, it is proposed to further optimize and clarify the use of the proceeds, which flexibly adjusts the investment subjects, cooperative objects of investment and investment methods in respect to the use of proceeds.

The adjustments will neither adversely affect the Group’s financial position and production and operation, nor involve related party (connected) transactions.

5. Working capital

It is proposed to adjust the RMB140.0 million under “Increasing investment in the IT infrastructure of our platform and enhancing SaaS+ business monetization capability” to be used for “Working capital”, and the balance interest income from the Proceeds from the Initial Public Offering of H Shares will be used to supplement the working capital for funding the daily business activities of the Group, which will help reduce finance costs and enhance capital efficiency.

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IMPACT OF THE PROPOSED CHANGE IN THE USE OF PROCEEDS FROM THE INITIAL PUBLIC OFFERING OF H SHARES ON THE COMPANY

The Company, based on the principle of prudence, proposes to change the use of the Proceeds from the Initial Public Offering of H Shares. Such change is in line with the Group’s future strategic plan, and will be conducive to improving services to member stores, deploying the cooperative customer network of service providers and enhancing the Group’s supply chain capabilities.

The Board confirms that there is no material change in the business nature of the Group as set out in the Prospectus, and considers that the Proposed Change in the Use of Proceeds from the Initial Public Offering of H Shares will not have any material adverse impact on the operations of the Group and is in the best interests of the Company and its Shareholders as a whole.

GENERAL

The Proposed Change in the Use of Proceeds from the Initial Public Offering of H Shares shall be subject to the consideration and approval by the Shareholders at the general meeting by way of ordinary resolution. A circular containing, among other things, details of the Proposed Change in the Use of Proceeds from the Initial Public Offering of H Shares, together with a notice of the general meeting of the Company, will be dispatched to the Shareholders in due course.

By order of the Board Huitongda Network Co., Ltd. WANG Jianguo Chairman

Nanjing, the PRC October 17, 2023

As at the date of this announcement, the Board comprises the Chairman and non-executive Director, namely Mr. Wang Jianguo; the executive Directors, namely Mr. Xu Xiuxian, Mr. Zhao Liangsheng and Mr. Sun Chao; the non-executive Directors, namely Mr. Cai Zhongqiu and Mr. Wang Ran; and the independent non-executive Directors, namely Ms. Yu Lixin, Mr. Liu Xiangdong and Mr. Cheng Zichuan.

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