Value Convergence Holdings Limited — Proxy Solicitation & Information Statement 2018

Apr 13, 2018

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Value Convergence Holdings Limited (the “Company”), you should at once hand this circular accompanying with the form of proxy to the purchaser or transferee, or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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

This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities of the Company.

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Value Convergence Holdings Limited

(Incorporated in Hong Kong with limited liability) Website: http://www.vcgroup.com.hk (Stock Code: 821)

(1) DISCLOSEABLE TRANSACTION IN RELATION TO ACQUISITION OF SHARES IN HACKETT ENTERPRISES LIMITED INVOLVING ISSUE OF CONVERTIBLE BONDS UNDER SPECIFIC MANDATE AND

(2) NOTICE OF EXTRAORDINARY GENERAL MEETING

A notice convening the extraordinary general meeting of the Company to be held at 29th Floor, The Centrium, 60 Wyndham Street, Central, Hong Kong on Thursday, 3 May 2018 at 11:00 a.m. is set out on pages EGM-1 to EGM-2 of this circular.

Whether or not you are able to attend and/or vote at the extraordinary general meeting of the Company in person, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon to the Company’s share registrar and transfer office, Tricor Abacus Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, as soon as possible and in any event not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from subsequently attending and voting in person at the extraordinary general meeting of the Company or any adjournment thereof (as the case may be) should you so wish.

16 April 2018

CONTENTS

	Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
NOTICE OF EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	EGM-1

DEFINITIONS

The following terms have the following meanings in this circular unless the context otherwise requires:

• “Acquisition”

the acquisition of the Sale Shares by the Purchaser from the Vendor

• “Board”

the board of Directors

• “Business Day(s)” a day (other than a Saturday or a Sunday or any day on which a tropical cyclone warning no. 8 or above a “black” rainstorm warning is hoisted in Hong Kong at any time between 9:00 a.m to 5:00 p.m) on which banks generally are open for business in Hong Kong

• “Company” Value Convergence Holdings Limited, a company incorporated in Hong Kong with limited liability, the shares of which are listed on the Main Board of the Stock Exchange

• “Completion” completion of the sale and purchase of the Sale Shares pursuant to the Sale and Purchase Agreement

• “Completion Date” the third Business Day after all the conditions set out in the Sale and Purchase Agreement have been satisfied or waived

• “connected person(s)” has the meaning ascribed to it under the Listing Rules

• “Convertible Bonds” the 3-year two per cent. unsecured convertible bonds in the principal amount of HK$160,000,000 to be issued by the Company at Completion

• “Conversion Shares” new Shares to be allotted and issued by the Company upon conversion of the Convertible Bonds in accordance with the terms of the Convertible Bonds

• “Director(s)” director(s) of the Company

• “EGM”

an extraordinary general meeting of the Company to be convened and held to consider and, if thought fit, approve the Sale and Purchase Agreement and the transactions contemplated thereunder including the issue of the Convertible Bonds and the grant of the Specific Mandate

1

DEFINITIONS

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

• “Latest Practicable Date” 11 April 2018, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular

• “Listing Committee” the listing committee of the Stock Exchange “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange “MOU” the non-legally binding memorandum of understanding dated 16 January 2018 between the Vendor and the Company relating to the proposed acquisition of shares in the Target Company

• “PRC” The People’s Republic of China, which for the purposes of this circular excludes Hong Kong, the Macau Special Administrative Region of the People’s Republic of China and Taiwan

• “Purchaser” Apex Treasure International Limited, a company incorporated in the British Virgin Islands with limited liability and an indirect wholly-owned subsidiary of the Company

• “Sale and Purchase the sale and purchase agreement dated 8 March 2018 entered into Agreement” between the Vendor and the Purchaser in relation to the Acquisition

• “Sale Shares” 18 issued shares of US$1.00 each in the share capital of the Target Company, representing 18% of its existing entire issued share capital, which are legally and beneficially owned by the Vendor

• “Share(s)” the ordinary share(s) of the Company “Shareholder(s)” holder(s) of Share(s) “Specific Mandate” the specific mandate for the allotment and issue of the Conversion Shares to be granted to the Directors by the Shareholders at the EGM

• “Stock Exchange” The Stock Exchange of Hong Kong Limited “Takeovers Code” the Hong Kong Code on Takeovers and Mergers

2

DEFINITIONS

“Target Company” Hackett Enterprises Limited, a company incorporated in the Republic of Seychelles with limited liability on 3 September 2014 “Target Group” the Target Company and its subsidiaries “Vendor” CVP Financial Group Limited (遠見金融集團有限公司), a company incorporated in the British Virgin Islands “HK$” Hong Kong dollars, the lawful currency of Hong Kong “RMB” Renminbi, the lawful currency of the PRC “%” per cent.

3

LETTER FROM THE BOARD

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Value Convergence Holdings Limited

(Incorporated in Hong Kong with limited liability)

Website: http://www.vcgroup.com.hk (Stock Code: 821)

Executive Directors: Mr. Fu Yiu Man (Chairman) Mr. Zhou, Francis Bingrong (Vice Chairman) Mr. Tin Ka Pak, Timmy (Chief Executive Officer)

Mr. Lin Hoi Kwong, Aristo Mr. Xie Jintai

Registered Office: 28th Floor, The Centrium 60 Wyndham Street Central Hong Kong

Ms. Shen Li

Independent Non-Executive Directors:

Mr. Wong Chung Kin, Quentin Mr. Wong Kam Choi, Kerry, MH Mr. Siu Miu Man, Simon

16 April 2018

To the Shareholders

Dear Sir or Madam,

(1) DISCLOSEABLE TRANSACTION IN RELATION TO ACQUISITION OF SHARES IN HACKETT ENTERPRISES LIMITED INVOLVING ISSUE OF CONVERTIBLE BONDS UNDER SPECIFIC MANDATE AND

(2) NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

Reference is made to the announcement of the Company dated 8 March 2018 in relation to, among other things, the Acquisition involving issue of the Convertible Bonds. It was announced that on 8 March 2018 (after trading hours), the Vendor and the Purchaser, which is an indirect wholly-owned subsidiary of the Company, entered into the Sale and Purchase Agreement pursuant to which the Vendor has agreed to sell, and the Purchaser has agreed to purchase, the Sale Shares for a consideration of HK$160,000,000. The consideration will be satisfied by way of issue of the Convertible Bonds. The Conversion Shares (upon conversion of the Convertible Bonds) will be allotted and issued pursuant to the Specific Mandate. Further particulars of the Acquisition and the Sale and Purchase Agreement are set out below.

4

LETTER FROM THE BOARD

The purpose of this circular is to provide you with, among other things, (i) further details of the Sale and Purchase Agreement and the transaction contemplated thereunder, including the issue of the Convertible Bonds and the grant of the Specific Mandate; and (ii) notice of the EGM.

THE SALE AND PURCHASE AGREEMENT

Parties to the Sale and Purchase Agreement

Date : 8 March 2018 Vendor : CVP Financial Group Limited Purchaser : Apex Treasure International Limited, an indirect wholly-owned subsidiary of the Company

To the best of the knowledge, information and belief of the Directors, having made all reasonable enquiries, the Vendor and its ultimate beneficial owners are third parties independent of and not connected with the Company and its connected persons as at the Latest Practicable Date, save as disclosed on page 16 of this circular.

Assets acquired

The Sale Shares, representing 18% of the issued share capital of the Target Company.

Consideration

The total consideration for the Acquisition is HK$160,000,000. Upon Completion, the consideration will be satisfied by way of issue of the Convertible Bonds. The consideration was determined after arm’s length negotiations between the Vendor and the Purchaser and with reference to the consideration for the acquisition of 25% of the issued share capital of the Target Company by an independent third party on 28 July 2016. The Consideration represents a discount of approximately 15% to such valuation.

By way of background, on 28 July 2016, SRA Holdings Inc (“SRA”), a listed company in Japan engaged in information technology with a market capitalization of approximately JPY47.9 billion acquired 25% of the entire issued share capital of the Target Company for JPY3.5 billion (which is equivalent to approximately HK$285 million at the then prevailing exchange rate), valuing the Target Company at approximately HK$1.03 billion. Ever since SRA’s acquisition, the business of the Target Company has grown tremendously. For instance, its loan and interest receivables have increased dramatically from RMB240 million as of 31 December 2016 to RMB318 million as of 31 December 2017. In addition, the Target Company has since managed to procure and continue to procure additional loan financing at a rate substantially below its usual borrowing rate. As a result of the incremental funding, the Target Company is able to increase its loan book substantially to fulfil the growing loan demand from customers, whilst widening its net interest margins and enhancing profitability. Despite the increase in business growth in the past few years, our current entry valuation is at an attractive discount of 15% to SRA’s purchase valuation in 2016 when the Target Company was operating in a much smaller scale. On this basis, the Directors consider that the Consideration is fair and reasonable.

5

LETTER FROM THE BOARD

In light of the above, the Directors consider that the Acquisition is on normal commercial terms which are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

The Conversion Shares (upon conversion of the Convertible Bonds) will be allotted and issued pursuant to the Specific Mandate proposed to be obtained at the EGM.

Principal Terms of the Convertible Bonds

Principal amount: HK$160,000,000

Interest:

The Convertible Bonds shall bear interest at a rate of 2% per annum, payable annually on the last Business Day of each 12 months, provided that interest for the last 12-month period shall be paid on the maturity date of the Convertible Bonds.

Maturity Date:

The date falling on the third (3rd) anniversary of the date of issue of the Convertible Bonds.

Conversion Price:

HK$1.30 per Conversion Share, subject to adjustments as set out and in accordance with the terms and conditions of the Convertible Bonds. The initial conversion price of HK$1.30 represents:

• (i) a discount of approximately 19.25% to the closing price of HK$1.61 per Share as quoted on the Stock Exchange on the date of the MOU;

• (ii) a discount of approximately 44.68% to the closing price of HK$2.35 per Share as quoted on the Stock Exchange on the date of the Sale and Purchase Agreement;

• (iii) a discount of approximately 45.01% to the average closing price of HK$2.364 per Share as quoted on the Stock Exchange for the five consecutive trading days immediately prior to the date of the Sale and Purchase Agreement;

• (iv) a discount of approximately 18.24% to the closing price of HK$1.59 per Share as quoted on the Stock Exchange on the Latest Practicable Date;

• (v) a premium of approximately 25% over the unaudited consolidated net asset value per Share of approximately HK$1.04 as at 30 June 2017; and

• (vi) a premium of approximately 36.84% over the audited consolidated net asset value per Share of approximately HK$0.95 as at 31 December 2017.

6

LETTER FROM THE BOARD

Conversion Rights:

Holder of the Convertible Bonds will have the right, during the period commencing on the date of issue of the Convertible Bonds up to and ending on the third (3rd) Business Day prior to the maturity date of the Convertible Bonds, to convert the Convertible Bonds in whole or in part of the outstanding principal amount of the Convertible Bonds into Conversion Shares, provided that the exercise of the conversion rights will not result in:

• (a) any mandatory offer obligation under Rule 26.1 of the Takeovers Code being triggered by the holder of the Convertible Bonds and/ or parties acting in concert (as defined in the Takeovers Code) with such holder; or

• (b) the Company being in breach of any provision of the Listing Rules, including the requirement to maintain any prescribed minimum percentage of the issued share capital of the Company held by the public.

Conversion Shares:

123,076,923 Conversion Shares (based on the initial conversion price of HK$1.30), representing:

• (i) approximately 13.75% of the existing issued share capital of the Company; and

• (ii) approximately 12.09% of the enlarged issued share capital of the Company upon full conversion of the Convertible Bonds (assuming no change in the number of issued Shares up to the issue of the Conversion Shares).

Adjustment events:

The conversion price shall from time to time be subject to adjustment in accordance with the followings if, whilst any of the Convertible Bonds remains outstanding, any of the following events or circumstances in relation to the shares of the Company shall occur: (i) consolidation and subdivision; (ii) capitalisation of profits or reserves; (iii) capital distribution; and (iv) purchase of new shares or securities by the Company or making of relevant offer and invitation by the Company.

7

LETTER FROM THE BOARD

For item (iv), if and whenever the Company shall be permitted by law and, by the Listing Rules and in accordance with the provisions of its articles of association to purchase and shall make an offer or invitation to the Shareholders to tender for sale to the Company any Shares or if the Company shall purchase any Shares or securities convertible into Shares or any rights to acquire Shares (excluding any such purchase made on the Stock Exchange, or any recognised stock exchange, being a stock exchange recognised for this purpose by the Securities and Futures Commission or equivalent authority and the Stock Exchange) and the Directors consider that it may be appropriate to make an adjustment to the conversion price, at that time the Directors shall appoint an independent reputable merchant bank or other reputable financial institution in Hong Kong selected by the Directors (the “ approved merchant bank ”) or the auditors of the Company to consider whether, for any reason whatever as a result of such purchases, an adjustment should be made to the conversion price fairly and appropriately to reflect the relative interests of the persons affected by such purchases by the Company and, if such approved merchant bank or the auditors of the Company shall consider in its opinion that it is appropriate to make an adjustment to the conversion price, an adjustment to the conversion price shall be made in such manner as such approved merchant bank or the auditors of the Company shall certify to be, in its opinion, appropriate.

The above arrangement aims to ensure that the relative interest of the persons (i.e. the holders of the Convertible Bonds) which may be affected as a result of such corporate activity will be fairly and appropriately treated and the conversion will be made at a fair value. In order to strike a balance between the interest of the holders of the Convertible Bonds and the interest of the Company and the Shareholders and to ensure justification of a possible adjustment, an approved merchant bank or the auditors of the Company is required to be appointed by the Directors to determine whether there is an actual need for the adjustment and/or the manner in which the adjustment should be made to ensure that the imposition of an adjustment or the absence of the adjustment are fairly and appropriately dealt with. In light of the above, neither the Company nor the holders of the Convertible Bonds shall be unfairly treated, and the Directors are of the view that the arrangement under such provisions is in the interests of the Company and the Shareholders as a whole.

Redemption:

The Company shall redeem the Convertible Bonds by repaying the holder(s) of the Convertible Bonds all outstanding principal amount of the Convertible Bonds on the maturity date of the Convertible Bonds.

8

LETTER FROM THE BOARD

Transferability:

The Convertible Bonds are transferable except that no Convertible Bonds shall be transferred to any person who:

• (a) is not independent of the Group or the connected persons of the Company (unless otherwise permitted with prior written consent of the Company); or

• (b) is a party acting in concert (as defined in the Takeovers Code) with any person or shareholder of the Company to the effect that any transfer of the Convertible Bonds to such transferee(s) and/or the exercise by such transferee(s) of any conversion right attaching to the Convertible Bonds subject to such transfer will trigger the mandatory offer obligation under Rule 26.1 of the Takeovers Code.

• Ranking of Conversion Shares:

The Conversion Shares allotted and issued upon conversion of the Convertible Bonds will in all respects rank pari passu in all respects with the Shares already in issue on the conversion date.

Listing:

No application will be made by the Company for the listing of the Convertible Bonds on the Stock Exchange or any other stock exchange. An application will be made by the Company to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Conversion Shares that may be issued upon the conversion of the Convertible Bonds.

The Conversion Price was determined after arm’s length negotiations between the Company and the Vendor with reference to, amongst other things, the current financial performance and the unaudited net asset value of the Group of approximately HK$1.04 as at 30 June 2017. The Conversion Price represents a significant premium of approximately 25% to such net asset value and also a discount of approximately 19.25% to the closing price of HK$1.61 per Share as quoted on the Stock Exchange on the date of the MOU.

In the course of negotiation over the Conversion Price, the Company has made reference to the price to net asset value of the other comparable listed companies which engage in brokerage and financing in Hong Kong that were trading on the Stock Exchange with a market capitalization below HK$2 billion at the date of the MOU.

9

LETTER FROM THE BOARD

The details are set out as follows:

		Closing Price
		as of date of
		MOU/latest
		published net
		asset value per
		share (“Price to
Name of listed company	Stock code	NAV”)(1)
		approximately
Cinda International Holdings Limited	111	0.62
Goldbond Group Holdings Limited	172	0.61
Sunwah Kingsway Capital Holdings Limited	188	0.58
First Shanghai Investment Limited	227	0.50
Cash Financial Services Group Limited	510	1.50
South China Financial Holdings Limited	619	0.62
Pinestone Capital Limited	804	1.72
Orient Securities International Holdings Limited	8001	0.97
Sinofortune Financial Holdings Limited	8123	1.18
Average		0.92
The Company	821	1.25
		1.37(2)
_Note 1:_based on latest unaudited interim figures
_Note 2:_based on latest audited figures

As shown above, the Price to NAV of comparable listed companies ranges from 0.50 to 1.72 times with an average of 0.92 times. Taking into account the fact that the Conversion Price represents (i) a significant premium of approximately 24.95% to the Company’s latest unaudited net asset value per Share of approximately HK$1.04 available as at the date of MOU, i.e. a Price to NAV of approximately 1.25 times, (ii) a significant premium of approximately 36.84% to the Company’s audited net asset value per Share of approximately HK$0.95 as at 31 December 2017, i.e. a Price to NAV of approximately 1.37 times, the Board is of the view that the Conversion Price is fair and reasonable.

Furthermore, the Group has also made reference to notifiable transactions of other listed issuers on the Stock Exchange that were announced within one month prior to the execution of the MOU involving issuance of consideration shares and convertible bonds.

10

LETTER FROM THE BOARD

The details are set out as follows:

			Premium/
			(discount)
			of the conversion
			price to
			the closing price
			on the last
			trading
			day/the date
Date of			of the Relevant
announcement	Name of listed issuer	Stock code	Announcement
			Approximately
18 December 2017	Sunshine 100 China Holdings Limited	2608	(10.66)%
19 December 2017	SMI Holdings Group Limited	198	(4.94)%
21 December 2017	New Concept Holdings Limited	2221	(18.82)%
27 December 2017	Shaanxi Northwest New Technology	8258	3.33%
	Industry Company Limited
27 December 2017	China VAST Industrial Urban Development	6166	12.83%
	Company Limited
28 December 2017	Beijing Gas Blue Sky Holdings Limited	6828	(5.66)%
28 December 2017	Green Leader Holdings Group Limited	61	(13.95)%
29 December 2017	Amax International Holdings Limited	959	(0.40)%
29 December 2017	Future World Financial Holdings Limited	572	(59.72)%
29 December 2017	China Environmental Technology Holdings	646	40.14%
	Limited
29 December 2017	Sheng Yuan Holdings Limited	851	34.62%
4 January 2018	V1 Group Limited	82	27.68%
5 January 2018	China Zenith Chemical Group Limited	362	(10.34)%
5 January 2018	Sino Biopharmaceutical Limited	1177	(9.97)%
5 January 2018	Echo International Holdings Group Limited	8218	(9.63)%
10 January 2018	Asia Investment Finance Group Limited	33	(12.28)%
11 January 2018	China Creative Global Holdings Limited	1678	(0.99)%
15 January 2018	Munsun Capital Group Limited	1194	12.36%
16 January 2018	Ourgame International Holdings Limited	6899	(5.42)%
16 January 2018	The Company	821	(19.25)%

Based on the above analysis, the issue of consideration shares for the notifiable transactions during the one-month period ranged from a discount of approximately 59.72% to market price to a premium of approximately 40.14% over market price. The Conversion Price of the Conversion Shares, on the other hand, represents a discount of approximately 19.25% to the closing price of HK$1.61 per Share as quoted on the Stock Exchange on the date of the MOU. As the discount of the Conversion Price to market price falls within the market range, the Board is of the view that the Conversion Price is fair and reasonable.

11

LETTER FROM THE BOARD

Furthermore, as the issue of Convertible Bonds in lieu of cash would reduce the immediate cash outflow of the Group, the Directors believe that the settlement of the Consideration by way of the issue of the Convertible Bonds is fair and reasonable and is in the interest of the Company and the Shareholders as a whole.

Conditions

Completion of the Sale and Purchase Agreement is conditional upon the satisfaction (or, where applicable, waiver) of the following conditions:

• (i) the results of the due diligence review conducted by the Purchaser against the Target Group’s assets, liabilities, activities, operations, prospects and affairs being satisfactory to the Purchaser;

• (ii) (if so required by the Purchaser) such legal opinion(s) as may be issued by qualified legal advisers of the relevant jurisdictions (including without limitation the PRC), in such form and substance to the satisfaction of the Purchaser having been obtained;

• (iii) (where required) the passing by the Shareholders or independent Shareholders (as appropriate) of the Company in general meeting of all resolutions required under relevant laws and regulations, including but not limited to the Listing Rules and the applicable laws of the transactions contemplated under the Sale and Purchase Agreement, including without limitation the Specific Mandate;

• (iv) the granting of the approval for the listing of, and permission to deal in, the Conversion Shares by the Listing Committee;

• (v) the Directors having approved and authorised the transactions contemplated under the Sale and Purchase Agreement, including without limitation the creation and issue of the Convertible Bonds and the allotment and issue of the Conversion Shares on the exercise of the conversion rights attaching to the Convertible Bonds;

• (vi) the deed of adherence as required under the existing shareholders Agreement in respect of the Target Company having been duly executed by the Purchaser and delivered to the Vendor;

• (vii) all license, permit, consent, authorisation, permission, clearance, warrant, confirmation, certificate or approval of any competent governmental, administrative, supervisory, regulatory, judicial, determinative, disciplinary, enforcement or tax raising body, authority, agency, board, department, court or tribunal of any jurisdiction (including any relevant securities exchange) and whether supranational, national, regional or local or any other person which are required for the consummation of the transactions contemplated under the Sale and Purchase Agreement having been obtained or made, if any;

• (viii) none of the representations, warranties and undertakings of the Vendor given in the Sale and Purchase Agreement having been breached in any material respect (or, if capable of being remedied, not having been remedied), or being untrue or inaccurate or misleading;

12

LETTER FROM THE BOARD

• (ix) no material adverse change in respect of the Target Group having occurred; and

• (x) written consents (in the form satisfactory to the Purchaser) from all the other existing shareholders of the Target Company to the transfer of the Sale Shares by the Vendor to the Purchaser pursuant to the Sale and Purchase Agreement having been obtained, where required.

If the conditions set out above are not fulfilled, or in respect of the conditions (i), (ii), (viii) and (ix) are not waived in writing by the Purchaser, on or before 30 June 2018 or such later date as the Vendor and the Purchaser may agree, the Sale and Purchase Agreement shall terminate and none of the parties thereto shall have any claim against the other for costs, damages, compensation or otherwise (save in respect of any prior breach of the Sale and Purchase Agreement). None of the parties may waive any of the conditions, save as mentioned above.

Completion

Subject to the satisfaction and/or fulfillment of the above conditions (unless otherwise waived), Completion shall take place on the Completion Date.

EFFECT OF THE ACQUISITION ON SHAREHOLDING STRUCTURE

Shareholder Power Global Group Limited (Note 1) Mr. Chung Chi Shing, Eric (Note 1) Mr. Wong Chung Kin, Quentin (Note 2) The Vendor and its ultimate beneficial owner_(Note 3)_ Public Shareholders Total	As at the Latest Practicable Date Number of Shares Approximate % 75,000,000 8.38 117,352,000 13.12 500,000 0.06 48,536,000 5.42 653,428,829 73.02 894,816,829 100	After the issue of the Convertible Bonds and assuming the conversion rights attaching to the Convertible Bonds are fully exercised Number of Shares Approximate % 75,000,000 7.37 117,352,000 11.53 500,000 0.05 171,612,923 16.86 653,428,829 64.19 1,017,893,752 100

Notes:

1. Power Global Group Limited is a company 100% owned by Mr. Chung Chi Shing, Eric, a former executive Director who resigned on 2 March 2018. Currently, Mr. Eric Chung is the Honorable Chairman and substantial shareholder of the Company.

2. Mr. Wong Chung Kin, Quentin is an independent non-executive Director.

3. Mr. Ting Pang Wan Raymond, the ultimate beneficial owner of the Vendor, is interested in 48,536,000 Shares as at the Latest Practicable Date.

13

LETTER FROM THE BOARD

Given the Vendor and its ultimate beneficial owner will own in aggregate approximately 16.86% of the enlarged issued share capital of the Company after Completion and full conversion of the Convertible Bonds (assuming that there will be no other changes in the issued share capital of the Company), there will be no change in control of the Company as a result of the Acquisition which involves the issue of the Convertible Bonds.

INFORMATION OF THE GROUP

The Group is principally engaged in (i) the provision of financial services including securities, futures and options brokering and dealing, margin financing and money lending, and placing and underwriting services, corporate financial advisory services and asset management services; and (ii) proprietary trading including the trading of equity securities, debt securities and other financial products.

INFORMATION OF THE VENDOR

The Vendor is an investment holding company incorporated in the British Virgin Islands with limited liability.

INFORMATION OF THE TARGET GROUP

The Target Group is principally engaged in the provision of loan financing and financial consultancy services in Chongqing, the PRC and provision of money lending services in Hong Kong.

The Target Company is an investment holding company incorporated in the Republic of Seychelles

with limited liability on 3 September 2014.

The Target Company grants small loans, entrusted loans and real estate backed loans. In 2017, the aggregate outstanding principal amount of these types of loans is approximately HK$364,409,004 (approximately HK$269,814,686 for small loans, HK$588,550 for entrusted loans and HK$34,240,296 for real estate backed loans). As at the Latest Practicable Date, the Target Group held a money lender license issued under and pursuant to the Money Lenders Ordinance (Chapter 163 of the Laws of Hong Kong).

The primary source of revenue for the Target Company is generated from interest received from loans provided to customers. The Target Company operated its business through different channels such as loan referral from other financial institutions, as well as direct sales.

Interest rates for each individual borrower are calculated on a case-by-case basis, in accordance with the Target Company’s internal credit guidelines and consideration to various factors, including, amongst others, the overall credit history and profile of the applicant and the underlying assets as security.

The major customers of the Target Company include individuals as well as small and medium enterprises. The loan term of the clients of the Target Company are mainly from 6 months to 30 months.

14

LETTER FROM THE BOARD

The existing shareholding and group chart of the Target Group as at the Latest Practicable Date is shown below:

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

Vendor
Company A Company B
(Incorporated in
(Note 1) (Note 1)
the British Virgin Islands)
5% 70% 25%
Target Company
Company C Company D
(Incorporated in
(Note 1) (Note 1)
the Republic of Seychelles)
25% 70% 5%
Starlight Financial Holdings Limited
中國星火金融控股有限公司
(Incorporated in Hong Kong)
100% 100% 100% 100% 100% 100%
China Runking
Ace Dynamic Limited Financing City Eagle Rosy Market Top Synergy Choice Ace
奇躍有限公司 Group Limited Holdings Limited Holdings Limited Holdings Limited Holdings Limited
中國潤金小貸集團 欣穎控股有限公司 境裕控股有限公司 極盛控股有限公司 鼎達控股有限公司
(Incorporated in 有限公司 (Incorporated in (Incorporated in (Incorporated in (Incorporated in
Hong Kong)
(Incorporated in Hong Kong) Hong Kong) Hong Kong) Hong Kong)
Hong Kong)
100%
Wine Financier
Limited
酩酒貸有限公司
(Incorporated in
Hong Kong)
100% 100% 100%
重慶潤坤企業管理
重慶市兩江新區潤通 康潤企業管理
諮詢有限公司
小額貸款有限公司 諮詢(重慶)有限公司
(Chongqing Run-
(Chongqing Liangjiang (Kangrun Enterprise
kun Enterprise
Xinqu Runtong Management Consulting
Management
Microfinance Limited) (Chongqing) Limited)
Consulting Limited)
(Incorporated in PRC) (Incorporated in PRC)
(Incorporated in PRC)
100%
上海康鍇商務諮詢
有限公司
(Shanghai Kang Yi
Business Consulting
Limited)
(Incorporated in PRC)
99% 1%
重慶鎧岳商業管理
有限公司
(Chongqing
Kai-yue Business
Management
Limited)
(Incorporated in PRC)
----- End of picture text -----*

Note 1 : Each of Company A, Company B (namely SRA), Company C and Company D is a third party independent of and not connected with the Company and its connected persons as at the Latest Practicable Date.

• For identification purposes only

15

LETTER FROM THE BOARD

Mr. Ting Pang Wan Raymond, the ultimate beneficial owner of the Vendor, was interested in 48,536,000 Shares (representing approximately 5.42% of the issued share capital of the Company) as at the Latest Practicable Date. Save as aforesaid, to the best of the knowledge, information and belief of the Directors having made all reasonable enquiries, the members of the Target Group and their respective ultimate beneficial owners are independent of and not connected with the Company and its connected persons.

Set out below are the audited and the unaudited consolidated financial information of the Target Company for the two years ended 31 December 2016 and 31 December 2017, respectively:

	For the year ended	For the year ended
	31 December 2016	31 December 2017
	(Audited)	(Unaudited)
	RMB’000	RMB’000
Revenue	78,824	60,616
Profit before taxation	24,117	9,009
Profit after taxation	15,142	2,405
	As at	As at
	31 December 2016	31 December 2017
	(Audited)	(Unaudited)
	RMB’000	RMB’000
Net current assets	60,491	274,982
Net assets	108,211	299,256

Upon Completion, the Target Company will be accounted for as an equity investment of the Company and its financial results will not be consolidated with those of the Group.

REASONS FOR AND BENEFITS OF THE ACQUISITION

The Group is principally engaged in (i) the provision of financial services including securities, futures and options brokering and dealing, margin financing and money lending, and placing and underwriting services, corporate financial advisory services and asset management services; and (ii) proprietary trading including the trading of equity securities, debt securities and other financial products.

The Target Company is a company incorporated in the Republic of Seychelles with limited liability. The Target Group is principally engaged in the provision of loan financing and financial consultancy services in Chongqing, the PRC and the provision of money lending services in Hong Kong.

As mentioned in the 2017 annual report of the Company, the Group intended to devote increased resources to business diversification and acquisition when opportunities arose, with the view to strengthening the Group’s all-rounded market position in Hong Kong as well as to exploring business opportunities in the PRC market. Given the increased competition in the local brokerage and investment banking businesses in Hong Kong, the Group has been striving to improve its business operations and

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LETTER FROM THE BOARD

financial position by proactively seeking potential investment opportunities that can diversify the Group’s existing business portfolio, broaden its source of income and enhance value to its Shareholders. The Directors believe that the Acquisition represents a good opportunity for the Group to enter the PRC market enabling it to capitalize on the growth potential of the loan financing market in Chongqing whilst increasing its market share in its existing money lending business in Hong Kong.

The Directors have also considered the following factors and benefits of the Acquisition:

1. Potential Synergies between the Target Company and the Group

The Target Company has gained a strong reputation in the loan financing business in Chongqing, the PRC. The Group is able to leverage on the existing market position of the Target Company as well as its extensive relationships with the municipal government of Chongqing and the business community in the region which should contribute significantly to the Group’s entry to the PRC loan financing market and possible development of other financial products and services in the PRC market.

2. Growth Prospects of the Target Company

The macro economic environment in China is growing steadily. According to the National Bureau of Statistics, China’s 2017 GDP increased to RMB82.71 trillion from RMB59.52 trillion in 2013, representing a CAGR of 6.8%, with a YoY growth rate of 6.9%. 2017 GDP of Chongqing increased to RMB1.95 trillion from RMB1.76 trillion in 2016, representing a CAGR of 8.81%, with a YoY growth rate of 9.3%, well above the country’s average. Chongqing continues to rank 5th in terms of regional GDP amongst all cities in China.

According to the latest information published by the People’s Bank of China, the total loan balance of banking institutions in the PRC has increased from RMB71.9 trillion in 2013 to RMB125.61 trillion in 2017, representing a CAGR of approximately 11.8%.

As for the microfinance industry in Chongqing, the loan balance of microfinance companies increased to RMB146.74 Billion from RMB50.81 Billion in 2013, with a YoY growth rate of 48.01%, representing a 5-year CAGR of 23.63%. Moreover, Chongqing has ranked 1st in the PRC for the 2nd consecutive year in respect of the total loan balance of microfinance companies. Looking forward, in view of the continued expansion of the loan financing market in the PRC, Chongqing in particular, the Target Company is well positioned to capitalize on such growth potential.

Furthermore, it is expected that the Target Company has taken initiatives to diversify and expand its funding source which will lead to substantial loan growth and profitability. It will also continue its marketing campaign to promote its products and attract new clients outside the existing client pool.

Taking into account the sustainable growth of Chongqing’s loan financing service market and the Target Company’s business direction, the Directors consider that the Acquisition provides an excellent platform for its foray into the PRC loan financing market.

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LETTER FROM THE BOARD

3. Attractive Discount to the Previous Round of Funding

The consideration of the Acquisition was arrived at after arm’s length negotiations between the Target Company and the Group with reference to the acquisition of the Target Company by SRA in 2016. The Acquisition represents a 15% discount to the valuation of the Target Company in 2016. At the same time, the loan book of the Target Company has increased by approximately 32% from 2016 to 2017.

In view of the above, the Directors (including the independent non-executive Directors) consider that the terms of the Sale and Purchase Agreement and the transactions contemplated thereunder are on normal commercial terms that are fair and reasonable, and the transactions contemplated under the Sale and Purchase Agreement are in the interests of the Company and the Shareholders as a whole.

The Sale and Purchase Agreement was approved by the Directors. None of the Directors was required to abstain from voting on the relevant resolutions of the Directors.

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios (as defined under Rule 14.07 of the Listing Rules) in respect of the transactions contemplated under the Sale and Purchase Agreement are greater than 5% but less than 25%, the Acquisition constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules, and is therefore subject to the reporting and announcement requirements thereunder.

Further, as the Conversion Shares will be allotted and issued pursuant to the Specific Mandate, an EGM will be convened by the Company to consider and, if thought fit, approve the Sale and Purchase Agreement and the transactions contemplated thereunder (including the issue of the Convertible Bonds and the grant of the Specific Mandate).

To the best of the knowledge, information and belief of the Directors having made all reasonable enquiries, other than Mr. Ting Pang Wan Raymond who is the ultimate beneficial owner of the Vendor, no Shareholders is required to abstain from voting in favour of the resolutions approving the Sale and Purchase Agreement and the transactions contemplated thereunder including the issue of the Convertible Bonds and the grant of the Specific Mandate.

EGM

The Company will convene an EGM for the Shareholders to consider and, if thought fit, approve by way of poll, the Sale and Purchase Agreement and the transactions contemplated thereunder including the issue of the Convertible Bonds and the grant of the Specific Mandate. A notice convening the EGM to be held at 29th Floor, The Centrium, 60 Wyndham Street, Central, Hong Kong on Thursday, 3 May 2018 at 11:00 a.m. is set out on pages EGM-1 to EGM-2 of this circular.

18

LETTER FROM THE BOARD

Whether or not you are able to attend and/or vote at the EGM in person, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon to the Company’s share registrar and transfer office, Tricor Abacus Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from subsequently attending and voting in person at the EGM or any adjournment thereof (as the case may be) should you so wish.

RECOMMENDATION

Having considered the reasons set out herein, the Board is of the view that the Acquisition and the transactions contemplated thereunder including the allotment and issue of the Conversion Shares under the Specific Mandate are fair and reasonable, and are in the interests of the Company and the Shareholders as a whole. The Board hereby recommends the Shareholders to vote in favour of the relevant resolution to be proposed at the EGM to approve the Acquisition and the allotment and issue of the Conversion Shares under the Specific Mandate.

RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

ADDITIONAL INFORMATION

As completion of the Sale and Purchase Agreement is subject to the fulfillment (or waiver, as the case may be) of a number of conditions (which are detailed in this circular), the transactions contemplated under the Sale and Purchase Agreement may or may not be completed. Shareholders and potential investors should exercise caution when dealing in the securities of the Company.

Yours faithfully For and on behalf of the Board Value Convergence Holdings Zhou, Francis Bingrong

Vice Chairman & Executive Director

19

NOTICE OF EGM

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Value Convergence Holdings Limited

(Incorporated in Hong Kong with limited liability)

Website: http://www.vcgroup.com.hk (Stock Code: 821)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE is hereby given that an extraordinary general meeting (the “ Meeting ”) of Value Convergence Holdings Limited (the “ Company ”) will be held at 29th Floor., The Centrium, 60 Wyndham Street, Central, Hong Kong at 11:00 a.m. on Thursday, 3 May 2018 for the purpose of considering, and if thought fit, passing, with or without amendments or modifications, the following as an ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT :

• (a) the sale and purchase agreement dated 8 March 2018 (the “ Sale and Purchase Agreement ”) entered into between CVP Financial Group Limited as vendor (the “ Vendor ”) and Apex Treasure International Limited, an indirect wholly-owned subsidiary of the Company, as purchaser (the “ Purchaser ”) in relation to the sale and purchase of 18 issued shares of US$1.00 each in the share capital of Hackett Enterprises Limited for a consideration of HK$160,000,000 (the “ Acquisition ”), a copy of which has been produced to the Meeting and marked “A” and initialed by the Chairman of the Meeting for the purposes of identification, and the transactions contemplated thereunder be and are hereby confirmed, approved and ratified;

• (b) all the transactions contemplated under the Sale and Purchase Agreement, including but not limited to, the issue of the 3-year two per cent. unsecured convertible bonds in the principal amount of HK$160,000,000 (the “ Convertible Bonds ”) convertible into new ordinary shares of the Company (the “ Conversion Shares ”) at the conversion price of HK$1.30 per Conversion Share to satisfy the consideration of the Acquisition, be and are hereby approved;

• (c) conditional upon The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) granting the listing of, and permission to deal in, the Conversion Shares, the directors of the Company (the “ Directors ”) be and are hereby granted a specific mandate to allot and issue the Conversion Shares provided that this specific mandate shall be in addition to, and shall not prejudice nor revoke, any existing or such other general or special mandates which may from time to time be granted to the Directors prior to the passing of this resolution; and

EGM-1

NOTICE OF EGM

• (d) the Directors be and are hereby authorised to do all such acts, deeds and things and to sign, execute and deliver all such documents as they may, in their absolute discretion, consider necessary, desirable or expedient to give effect, determine, revise, supplement or complete any matters relating to or in connection with the Sale and Purchase Agreement and the transactions contemplated thereunder, including, without limitation, the issue of the Convertible Bonds.”

By Order of the board of directors of Value Convergence Holdings Limited Zhou, Francis Bingrong Vice Chairman & Executive Director

Hong Kong, 16 April 2018

Registered Office:

28th Floor, The Centrium 60 Wyndham Street Central Hong Kong

Notes:

1. A member entitled to attend and vote at the Meeting is entitled to appoint one or more proxies to attend and on a poll vote instead of him. A proxy need not be a member of the Company.

2. In order to be valid, a form of proxy and the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of such power of authority, must be deposited at the Company’s share registrar and transfer office, Tricor Abacus Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong not less than 48 hours before the time fixed for holding the Meeting or any adjourned meeting thereof. Completion and return of the form of proxy will not preclude any member from attending and voting in person at the Meeting or any adjourned meeting thereof should he so wishes.

3. In case of joint shareholdings, the vote of the senior joint shareholder who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the votes of the other joint shareholder(s) and for this purposes seniority will be determined by the order in which the names stand in the register of members of the Company in respect of the joint shareholding.

4. Pursuant to the requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, the resolution set out in this notice of extraordinary general meeting will be put to Shareholders to vote taken by way of a poll.

EGM-2