Youzan Technology Limited — Capital/Financing Update 2012

Jul 16, 2012

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.

This announcement 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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China Innovationpay Group Limited 中國創新支付集團有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 8083)

ISSUE OF NON-LISTED WARRANTS UNDER GENERAL MANDATE

On 16 July 2012 (after trading hours), the Company and the Subscriber entered into the Subscription Agreement, pursuant to which the Company agreed to issue and the Subscriber agreed to subscribe for the Warrants, at the Issue Price of HK$0.002 per Warrant.

The aggregate face value of the Warrants is HK$120 million and the Warrants entitle the Subscriber to subscribe for the Warrant Shares at the initial Subscription Price of HK$0.40 per Warrant Share for a period of five (5) years commencing from the date of issue of the Warrants. Assuming there is no further issue or repurchase of the Shares and there is no adjustment to the initial Subscription Price of HK$0.40 per Warrant Share, a maximum of 300,000,000 Warrant Shares will be allotted and issued by the Company upon full exercise of the subscription rights attaching to the Warrants. Such Warrant Shares represent approximately 6.67% of the issued share capital of the Company as at the date of this announcement and approximately 6.25% of the issued share capital of the Company as enlarged by the issue of the Warrant Shares.

Each Warrant carries the right to subscribe for one Warrant Share. The Warrant Shares will be issued under the General Mandate.

The Company will apply to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Warrant Shares which may fall to be allotted and issued upon exercise of the subscription rights attaching to the Warrants. No listing of the Warrants will be sought on the GEM or any other stock exchanges.

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It is intended that the net proceeds from the Warrant Subscription of approximately HK$500,000 will be applied as general working capital of the Group and the additional net proceeds from the full exercise of the subscription rights attaching to the Warrants of approximately HK$119.9 million will be utilised by the Group for its general working capital and as funds for future business development.

Shareholders and potential investors should note that completion of the Subscription Agreement is subject to the fulfillment of the conditions stated in the paragraph headed “Issue of Non-listed Warrants under General Mandate - Conditions of the Subscription Agreement” in this announcement. As the Warrant Subscription may or may not proceed, Shareholders and potential investors are reminded to exercise caution when dealing in the Shares.

ISSUE OF NON-LISTED WARRANTS UNDER GENERAL MANDATE

The Board is pleased to announce that on 16 July 2012 (after trading hours), the Company and the Subscriber entered into the Subscription Agreement, pursuant to which the Company agreed to issue and the Subscriber agreed to subscribe for the Warrants, at the Issue Price of HK$0.002 per Warrant.

THE SUBSCRIPTION AGREEMENT

Date: 16 July 2012 (after trading hours)

Parties: (i) Issuer: the Company (ii) Subscriber: the Subscriber

Information of the Subscriber

The Subscriber is Senrigan Master Fund, which is managed by Senrigan Capital Group Limited, an Asian hedge fund manager based in Hong Kong with in excess of US$900 million in assets under management for the Senrigan Master Fund.

To the best of Directors’ knowledge, information and belief, having made all reasonable enquiries, each of the Subscriber and its ultimate beneficial owners is an Independent Third Party who is independent of and not connected with the Company and its connected persons (as defined in the GEM Listing Rules). As at the date of this announcement, the Subscriber has interest in 173,956,000 Shares, representing approximately 3.87% of the issued share capital of the Company.

Securities to be issued

Subject to the fulfillment of the conditions to the Subscription Agreement, the Company shall issue, and the Subscriber shall subscribe for, the Warrants. Further details about the Warrants are set out in the section headed “Information about the Warrants” below.

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Conditions of the Subscription Agreement

Completion of the Warrant Subscription shall be subject to and conditional upon, the following conditions:

• (1) (if required) the Listing Committee of the Stock Exchange shall have approved the issue of the Warrants either unconditionally or subject to conditions to which neither the Company nor the Subscriber shall reasonably object and the satisfaction of such conditions; and

• (2) the Listing Committee of the Stock Exchange shall have granted (either unconditionally or subject to conditions to which neither the Company nor the Subscriber shall reasonably object) the listing of, and the permission to deal in, the Warrant Shares.

If the above conditions are not fulfilled at or before 5:00 p.m. (Hong Kong time) on 30 August 2012 or such later date as may be agreed between the Company and the Subscriber, the Subscription Agreement will lapse and become null and void and the parties thereto shall be released from all obligations thereunder, save for any liabilities for any antecedent breaches of the provisions in the Subscription Agreement.

Completion

Completion of the Warrant Subscription shall take place within three (3) business days after the date on which all conditions set out in the paragraph headed “Conditions of the Subscription Agreement” above have been fulfilled.

INFORMATION ABOUT THE WARRANTS

The aggregate face value of the Warrants is HK$120 million and the Warrants will be issued in registered form and constituted by a deed poll. The Warrants will rank pari passu in all respects among themselves.

Each Warrant carries the right to subscribe for one Warrant Share at the Subscription Price and is issued at the Issue Price.

The subscription rights attaching to the Warrants may be exercised at any time during a period of five (5) years commencing from the date of issue of the Warrants at integral multiples of 1,000,000 Warrants.

Based on the initial Subscription Price of HK$0.40 per Warrant Share, a maximum of 300,000,000 Warrant Shares will be allotted and issued by the Company upon full exercise of the subscription rights attaching to the Warrants. Assuming there is no further issue or repurchase of the Shares and there is no adjustment to the initial Subscription Price of HK$0.40 per Warrant Share, a maximum of 300,000,000 Warrant Shares will be allotted and issued by the Company upon full exercise of the subscription rights attaching to the Warrants. Such Warrant Shares represent approximately 6.67% of the issued share capital of the Company as at the date of this announcement and approximately 6.25% of the issued share capital of the Company as enlarged by the issue of the Warrant Shares.

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The Warrant Shares, when fully paid and allotted, will rank pari passu in all respects with the then existing Shares.

Issue Price

The Issue Price is HK$0.002 per Warrant payable in cash. The net Issue Price per Warrant, after deduction of relevant expenses, is approximately HK$0.0017.

Subscription Price

The initial Subscription Price is HK$0.40 per Warrant Share. The net Subscription Price per Warrant Share, after deduction of relevant expenses, is approximately HK$0.399.

Both the Subscription Price and the aggregate number of the Warrant Shares to be allotted and issued upon exercise of the subscription rights attaching to the Warrants in full are subject to adjustment based on the prescribed formulas as set out in the instrument constituting the Warrants upon occurrence of the following adjustment events:

• (i) an alteration of the nominal amount of each Share by reason of any consolidation or subdivision;

• (ii) an issue (other than pursuant to a scrip dividend scheme in lieu of a cash dividend) by the Company of Shares credited as fully paid by way of capitalisation of profits or reserves (including any share premium account or capital redemption reserve fund);

• (iii) a capital distribution in cash or in specie other than out of distributable profits of the Company being made by the Company, whether on a reduction of capital or otherwise, to Shareholders (in their capacity as such); or a grant by the Company to Shareholders (in their capacity as such) of rights to acquire for cash assets of the Company or any of its subsidiaries;

• (iv) an offer of Shares for subscription by way of rights, or a grant of options or warrants to subscribe for Shares, at a price which is less than 90 per cent. of the market price of one Share on the date of the announcement of the terms of the of the offer or grant (whether or not such offer or grant is subject to the approval of the holders of Shares or other persons) (the “Market Price”);

• (v) an issue wholly for cash being made by the Company or any of its subsidiaries of securities convertible into or exchangeable for or carrying rights of subscription for shares, if in any case the total effective consideration per new Share is less than 90 per cent. of the Market Price, or the conversion, exchange or subscription rights of any such issue are altered so that the said total effective consideration is less than 90 per cent. of such Market Price; and

• (vi) an issue of Shares being made wholly for cash at a price less than 90 per cent. of the market price.

Every adjustment to the Subscription Price shall be certified either (at the option of the Company) by the auditors of the Company or by an approved merchant bank.

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No adjustment will however be made to the Subscription Price in any case where the Warrant Shares to be allotted and issued by the Company upon full exercise of the subscription rights attached attaching to the Warrants at the adjusted Subscription Price (the “Adjusted Warrant Shares”) will exceed the maximum number of Shares that may be allotted and issued by the Company pursuant to the General Mandate until and after the Company has obtained a specific mandate from the Shareholders in respect of such issue of the Adjusted Warrant Shares and all other consents and approvals as may be necessary for such issue.

The initial Subscription Price of HK$0.40 represents:

• (i) a premium of approximately 29.03% over the closing price of HK$0.31 per Share as quoted on the GEM on 16 July 2012, being the last trading day prior to signing of the Subscription Agreement;

• (ii) a premium of approximately 33.33% over the average closing price of HK$0.30 per Share as quoted on the GEM for the last five trading days up to and including 16 July 2012, being the last trading day prior to signing of the Subscription Agreement;

• (iii) a premium of approximately 42.86% over the average closing price of HK$0.28 per Share as quoted on the GEM for the last ten trading days up to and including 16 July 2012, being the last trading day prior to signing of the Subscription Agreement; and

• (iv) a premium of 100% over the latest audited net asset value per Share of approximately HK$0.20 as at 31 December 2011.

The aggregate of the Issue Price and the initial Subscription Price of HK$0.402 represents:

• (i) a premium of approximately 29.68% over the closing price of HK$0.31 per Share as quoted on the GEM on 16 July 2012, being the last trading day prior to signing of the Subscription Agreement;

• (ii) a premium of 34.00% over the average closing price of HK$0.30 per Share as quoted on the GEM for the last five trading days up to and including 16 July 2012, being the last trading day prior to signing of the Subscription Agreement;

• (iii) a premium of approximately 43.57% over the average closing price of HK$0.28 per Share as quoted on the GEM for the last ten trading days up to and including 16 July 2012, being the last trading day prior to signing of the Subscription Agreement; and

• (iv) a premium of 101% over the latest audited net asset value per Share of approximately HK$0.20 as at 31 December 2011.

The initial Subscription Price and the aggregate of it with the Issue Price were determined with reference to the prevailing market price of the Shares and were negotiated on an arm’s length basis between the Company and the Subscriber.

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Having considered that the aggregate of the Issue Price and the initial Subscription Price represents a substantial premium over the recent trading prices of the Shares prior to the entering into of the Subscription Agreement, the Board is of the view that both the initial Subscription Price and the aggregate of it with the Issue Price are fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

Transferability

The Warrants shall not be transferable unless prior written consent from the Company have been obtained.

Rights for the holders of the Warrants

The holder of the Warrants will not have any right to attend or vote at any meeting of the Company by virtue of them being the holders of the Warrants. The holder of the Warrants shall not have the right to participate in any distributions and/or offers of further securities made by the Company.

Mandate to issue the Warrant Shares

The Warrant Shares will be allotted and issued under the General Mandate granted to the Directors by the Shareholders at the annual general meeting of the Company held on 3 May 2012 to allot and issue up to 792,927,891 Shares, being 20% of the aggregate nominal amount of the issued share capital of the Company on that date.

The 300,000,000 Warrant Shares will utilise approximately 37.83% of the General Mandate. The General Mandate has not been previously utilised prior to the Warrant Subscription.

No Shareholders’ approval is required under the constitutional documents of the Company to issue the Warrants.

Application for listing

The Company will apply to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Warrant Shares which may fall to be allotted and issued upon exercise of the subscription rights attaching to the Warrants. No listing of the Warrants will be sought on the GEM or any other stock exchanges.

IMPLICATIONS UNDER THE GEM LISTING RULES

Pursuant to Rule 21.02(1) of the GEM Listing Rules, the Warrant Shares to be allotted and issued upon exercise of the Warrants must not, when aggregated with all other equity securities which remain to be issued on exercise of any other subscription rights, if all such rights were immediately exercised, whether or not such exercise is permissible, exceed 20% of the issued share capital of the Company at the time the Warrants are issued. Options granted under employee or executive share schemes which comply with Chapter 23 of the GEM Listing Rules, convertible preference shares and convertible bonds are excluded for the purpose of such limit.

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As at the date of this announcement, save for the 300,000,000 Warrant Shares to be allotted and issued upon full exercise of the subscription rights attaching to the Warrants, the Company does not have other securities with subscription rights outstanding and not yet exercised. The number of 300,000,000 Warrant Shares to be allotted and issued will not exceed 20% of the issued share capital of the Company.

REASONS FOR AND BENEFITS OF THE WARRANT SUBSCRIPTION

The Group is an investment holding company. Its subsidiaries are principally engaged in (i) the development and operation of electronic payment tool; (ii) the trading of computers and communication equipment; and (iii) the operations of prepaid card business, including the issuance of various prepaid cards, part of which have multiple functions, in the PRC.

The Directors are of the view that the Warrant Subscription represents a good opportunity to raise further capital which will strengthen the financial position of the Group for its future business development and general working capital requirement. The Board considers that issuance of the Warrants is appropriate as the Warrants does not have any immediate dilution effect on the shareholding of the existing Shareholders and they are non-interest bearing in nature. In addition, further capital will be raised in the event the Subscriber exercises its subscription rights attaching to the Warrants.

The Directors consider the terms of the Subscription Agreement (including the Issue Price and the initial Subscription Price) are fair and reasonable, and are in the interest of the Company and the Shareholders as a whole.

USE OF PROCEEDS

It is intended that the net proceeds from the Warrant Subscription of approximately HK$500,000 will be applied as general working capital of the Group and the additional net proceeds from the full exercise of the subscription rights attaching to the Warrants of approximately HK$119.9 million will be utilised by the Group for its general working capital and as funds for future business development.

The net price per Warrant Share, which is calculated by dividing the aggregate net proceeds from the issue and full exercise of the Warrants at the initial Subscription Price by the initial maximum number of Warrant Shares, is approximately HK$0.399.

SUMMARY OF FUND RAISING ACTIVITIES IN THE PAST TWELVE MONTHS

No fund raising activities have been carried out by the Company during the past twelve months immediately preceding the date of this announcement.

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CHANGES IN SHAREHOLDING STRUCTURE OF THE COMPANY

As at the date of this announcement, the Company has 4,499,639,457 Shares in issue. Below is the shareholding structure of the Company immediately before and after the full exercise of the subscription rights attaching to the Warrants based on the best knowledge of the Directors and on the assumption that there will be no further issue or repurchase of Shares from the date of this announcement.

Shareholders Mighty Advantage Enterprises Limited (Note) Public The Subscriber Other public Shareholders Total	As at the date of this announcement Number of Shares Approximate % 1,198,750,000 26.64% 173,956,000 3.87% 3,138,389,457 69.49% 4,499,639,457 100.00%	Immediately after full exercise of the subscription rights attaching to the Warrants Number of Shares Approximate % 1,198,750,000 24.98% 473,956,000 9.87% 3,138,389,457 65.15% 4,799,639,457 100.00%

Note :

Mighty Advantage Enterprises Limited (“Mighty Advantage”) is a limited liability company incorporated in the British Virgin Islands and is wholly owned by Mr. Guan Guisen, an executive Director and the chairman of the Company.

In addition to the 1,198,750,000 Shares currently held by Mighty Advantage, Mighty Advantage is also deemed to be interested in 582,500,000 Shares as a result of its interest in a maximum of 582,500,000 Shares to be allotted and issued by the Company upon full conversion of the convertible bonds in the outstanding principal amount of HK$186,400,000 issued by the Company on 29 March 2012. In aggregate, Mighty Advantage is deemed to be interested in 1,781,250,000 Shares.

DEFINITIONS

Terms or expressions used in this announcement shall, unless the context otherwise requires, have the meanings ascribed to them below:

“Board”	the board of Directors from time to time
“Company”	China Innovationpay Group Limited, a company incorporated
	in Bermuda with limited liability, the issued Shares of which
	are listed on the GEM
“Director(s)”	the director(s) of the Company from time to time
“GEM”	the Growth Enterprise Market of the Stock Exchange

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“GEM Listing Rules” the Rules Governing the Listing of Securities on the GEM “General Mandate” the general mandate granted to the Directors to exercise the power of the Company to issue securities up to 20% of the Company’s issued share capital as at the date of the annual general meeting of the Company held on 3 May 2012

“Group” the Company and its subsidiaries from time to time “HK$” Hong Kong dollars, the lawful currency of Hong Kong “Hong Kong” the Hong Kong Special Administrative Region of the PRC “Independent Third Party(ies)” third party(ies) independent of the Company and is/are not connected persons (as defined under the GEM Listing Rules) of the Company; “Issue Price” HK$0.002 per Warrant to be issued pursuant to the Warrant Subscription “Listing Committee” the listing sub-committee of the board of the Stock Exchange “PRC” the People’s Republic of China, which for the purpose of this announcement, excludes Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan “Share(s)” ordinary share(s) of HK$0.01 each in the share capital of the Company “Shareholder(s)” holder(s) of the Share(s) “Stock Exchange” The Stock Exchange of Hong Kong Limited “Subscriber” Senrigan Master Fund, the subscriber of the Warrants “Subscription Agreement” the subscription agreement dated 16 July 2012 entered into between the Company and the Subscriber relating to the Warrant Subscription “Subscription Price” HK$0.40 per Warrant Share “Warrant(s)” the non-listed warrants constituted by the warrant instrument which entitle the Subscriber to subscribe for the Warrant Shares at the Subscription Price

“Warrant Share(s)” the new Shares to be allotted and issued by the Company upon the exercise by the Subscriber of its subscription rights attaching to the Warrants

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“Warrant Subscription”

the issue by the Company of, and the subscription by the Subscriber for, the Warrants in accordance with the terms and subject to the conditions of the Subscription Agreement

“%”

per cent

By Order of the Board China Innovationpay Group Limited Guan Guisen Chairman

Hong Kong, 16 July 2012

As at the date of this announcement, the Board comprises three executive Directors, namely Mr. Guan Guisen, Dr. Lei Chunxiong and Mr. Cao Chunmeng; and three independent nonexecutive Directors, namely Dr. Fong Chi Wah, Mr. Wang Zhongmin and Mr. Gu Jiawang.

This announcement, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the GEM 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 announcement 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 announcement misleading.

This announcement will remain on the “Latest Company Announcements” page of the GEM website for at least 7 days from the date of its posting and on the Company’s website at www.innovationpay.com.hk.

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