Youzan Technology Limited — Capital/Financing Update 2015

Jun 18, 2015

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)

SHARE TRANSACTION

– (1) INVESTMENT IN MODERNTIMES PAYMENT LIMITED; (2) ACQUISITION OF SHAREHOLDER’S LOAN; AND (3) INCENTIVE AGREEMENT

THE SUBSCRIPTION AGREEMENT

On 18 June 2015 (after trading hours), Country Praise (a direct wholly-owned subsidiary of the Company) and the Target Company entered into the Subscription Agreement pursuant to which Country Praise has conditionally agreed to subscribe for the Subscription Shares at an aggregate consideration of HK$49,510,000.

Upon the Subscription Completion, the Group will hold approximately 51% interest of the Target Group and thus the financial results of the Target Company will be consolidated into the financial statements of the Group.

THE LOAN ASSIGNMENT

On 18 June 2015 (after trading hours), Country Praise, Essence Management and the Existing Shareholder entered into the Loan Assignment pursuant to which the Existing Shareholder has conditionally agreed to assign the Shareholder’s Loan of HK$13,090,000 to Country Praise in consideration of the sum of HK$13,090,000 payable by Country Praise to the Existing Shareholder on the Subscription Completion Date.

– 1 –

THE INCENTIVE AGREEMENT

On 18 June 2015 (after trading hours), the Company, the Existing Shareholder and Mr. Joong entered into the Incentive Agreement pursuant to which the Company shall reward the Existing Shareholder with an aggregate amount not exceeding RMB200,000,000 (equivalent to approximately HK$250,000,000) based on the number of Cumulative Virtual Prepaid Card Sold and/or the amount of Cumulative Virtual Prepaid Card Reload for the six months ending 31 December 2015 and each of the two years ending 31 December 2017, by way of issue and allotment of Incentive Shares.

GEM LISTING RULES IMPLICATIONS

As both the Loan Assignment and the Incentive Agreement are conditional upon the Subscription Completion, the Transactions are aggregated as if they were one transaction. As the relevant percentage ratios under Rule 19.07 of the GEM Listing Rules in respect of the Transactions are less than 5% and the Incentive Agreement involves the issue of the Incentive Shares, the entering into the Subscription Agreement, the Loan Assignment and the Incentive Agreement constitute a share transaction under the GEM Listing Rules for the Company and are subject to reporting and announcement requirements but exempt from the independent shareholders’ approval requirement under the GEM Listing Rules.

Set out below are the principal terms of the Subscription Agreement, the Loan Assignment and the Incentive Agreement:

THE SUBSCRIPTION AGREEMENT

Date

18 June 2015

Parties

• (i) Country Praise, a direct wholly-owned subsidiary of the Company; and

• (ii) the Target Company

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, the Target Company and its ultimate beneficial owner are Independent Third Parties.

Subscription Shares

Pursuant to the Subscription Agreement, the Target Company has conditionally agreed to allot and issue, and Country Praise has conditionally agreed to subscribe for, Subscription Shares at an aggregate consideration of HK$49,510,000, by way of cash on the Subscription Completion Date.

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The Subscription Shares, when allotted and issued on the Subscription Completion Date, shall be free from all encumbrances and together with all rights and benefits attaching to the Subscription Shares as at the Subscription Completion Date including the right to receive all dividends and other distributions thereafter declared, made or paid on the Subscription Shares save for any right or entitlement the record date for which precedes the date on which such Subscription Shares are allotted and issued, subject to the memorandum and articles of association for the time being of the Target Company.

The Subscription Shares will rank pari passu in all respects with all other ordinary shares of the Target Company in issue as at the Subscription Completion Date.

Conditions Precedent

The Subscription Agreement will become effective when the following conditions having been fulfilled or waived (as the case may be):

• (a) Country Praise is satisfied with the due diligence on the Target Company and its subsidiaries;

• (b) all the required government and/or regulatory and internal corporate approvals (including, without limitation, the board of directors’ approval for the transactions contemplated under the Subscription Agreement) having been obtained as necessary for the Target Company to issue the Subscription Shares and perform its obligations under the Subscription Agreement; and

• (c) completion of the Yu Chang Disposal.

In the event of the above conditions not having been fulfilled or waived (save for condition (b) above which is not waivable) by 31 October 2015 (or such later date as may be agreed in writing by the Country Praise and the Target Company), the Subscription Agreement will not become effective, and all rights, obligations and liabilities of the parties hereunder shall cease and terminate and none of the parties shall have any claim against any other in respect of the Subscription, save for any antecedent breaches of the Subscription Agreement.

Completion

Completion shall take place on the third Business Day next following the fulfillment or waiver of all the conditions precedent, or such later date as may be agreed by the Target Company and Country Praise in writing.

USE OF PROCEEDS FROM THE SUBSCRIPTION

The proceeds from the Subscription will be used by the Target Company as general working capital of the Target Group.

Immediately upon the Subscription Completion, the Group will hold approximately 51% interest of the Target Company and thus, the financial results of the Target Company will be consolidated into the financial statements of the Group.

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BASIS FOR THE DETERMINATION OF THE CONSIDERATION OF THE SUBSCRIPTION

The consideration of the Subscription was determined after arm’s length negotiations among the parties to the Subscription Agreement with reference to, among others, (i) the business development and prospects of the Target Group; and (ii) potential synergies brought about by combining the existing business operations and senior management of the Group and Target Group.

The Group intends to finance the consideration of Subscription by its internal resources.

THE LOAN ASSIGNMENT

Date

18 June 2015

Parties

• (i) Country Praise, a direct wholly-owned subsidiary of the Company;

• (ii) Essence Management, a direct wholly-owned subsidiary of the Target Company; and

• (iii) the Existing Shareholder

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, Essence Management, the Existing Shareholder and their respective ultimate beneficial owners are Independent Third Parties.

Assignment of the Shareholder’s Loan

As at the date of the Loan Assignment, the amount of the Shareholder’s Loan is HK$13,090,000. Subject to the Subscription Completion, the Existing Shareholder agreed to assign, as beneficial owner, to Country Praise absolutely all its rights, title, interest and benefits in and to the Shareholder’s Loan at a consideration of HK$13,090,000, payable by way of cash by Country Praise to the Existing Shareholder in full on the Subscription Completion Date.

Acknowledgment by Essence Management

Essence Management hereby acknowledges receipt of the notice of assignment of the Shareholder’s Loan pursuant to the Loan Assignment and agrees and undertakes to Country Praise that it will make all payments of the Shareholder’s Loan and discharge all its obligations in respect thereof to Country Praise directly.

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BASIS FOR THE DETERMINATION OF THE CONSIDERATION OF THE SHAREHOLDER’S LOAN

The consideration of the Shareholder’s Loan was determined on the dollar-to-dollar basis with reference to the outstanding amount of the Shareholder’s Loan of HK$13,090,000 as at the date of the Loan Assignment.

The Group intends to finance the consideration of the Shareholder’s Loan by its internal resources.

THE INCENTIVE AGREEMENT

Date

18 June 2015

Parties

• (i) the Company;

• (ii) the Existing Shareholder; and

• (iii) Mr. Joong, the sole shareholder of the Existing Shareholder and ultimate beneficial owner of the Target Company as at the date of this announcement

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, the Existing Shareholder and its ultimate beneficial owner, being Mr. Joong are Independent Third Parties.

Effective Period

The Incentive Agreement will become effective from the Subscription Completion Date, until 31 December 2017 or the date when all the Incentive Shares have been duly allotted and issued to the Existing Shareholder, whichever is earlier, providing Mr. Joong shall remain as an employee of the Target Group.

Incentive Shares

The Company shall reward the Existing Shareholder with aggregate amount not exceeding the Maximum Incentive of RMB200,000,000 (equivalent to approximately HK$250,000,000) being the sum of the Incentive based on the number of Cumulative Virtual Prepaid Card Sold and the Incentive based on the amount of Cumulative Virtual Prepaid Card Reload for each of the following period/year, by way of issue and allotment of Incentive Shares, in the following manner:

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For the six months ending 31 December 2015

Set out below shows the amount of Incentive payable to the Existing Shareholder based on the number of 2H15 Cumulative Virtual Prepaid Card Sold (“ 2H15 Card Sold Incentive ”):

If the 2H15 Cumulative Virtual Prepaid Card Sold equals to 3,500,000 or more, the Company will allot and issue such number of the Incentive Shares of an amount equivalent to RMB40,000,000 to the Existing Shareholder.

For avoidance of doubt, if the 2H15 Cumulative Virtual Prepaid Card Sold is less than 3,500,000, no Incentive Shares will be issued to the Existing Shareholder for the six months ending 31 December 2015.

No Incentive is payable to the Existing Shareholder based on the Cumulative Virtual Prepaid Card Reload for the six months ending 31 December 2015.

For the financial year ending 31 December 2016

Set out below shows the amount of Incentive payable to the Existing Shareholder based on the number of 2016 Cumulative Virtual Prepaid Card Sold (“ 2016 Card Sold Incentive ”):

• (a) zero if the 2016 Cumulative Virtual Prepaid Card Sold is less than 30,000,000; or

• (b) RMB100,000,000 less 2H15 Card Sold Incentive (if any) if the 2016 Cumulative Virtual Prepaid Card Sold equals to 30,000,000 or more.

Set out below shows the amount of Incentive payable to the Existing Shareholder based on the amount of 2016 Cumulative Virtual Prepaid Card Reload (“ 2016 Card Reload Incentive ”) in addition to 2016 Card Sold Incentive:

• (a) zero if the 2016 Cumulative Virtual Prepaid Card Reload is less than RMB30,000,000,000; or

• (b) RMB20,000,000 if the 2016 Cumulative Virtual Prepaid Card Reload equals to RMB30,000,000,000 or more.

For the financial year ending 31 December 2017

Set out below shows the amount of Incentive payable to the Existing Shareholder based on the number of 2017 Cumulative Virtual Prepaid Card Sold (“ 2017 Card Sold Incentive ”):

• (a) zero if the 2017 Cumulative Virtual Prepaid Card Sold is less than 43,750,000; or

• (b) RMB 75,000,000 less the sum of 2H15 Card Sold Incentive and 2016 Card Sold Incentive awarded (if any) if the 2017 Cumulative Virtual Prepaid Card Sold equals to 43,750,000 or more but is less than 70,000,000; or

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• (c) RMB90,000,000 less the sum of 2H15 Card Sold Incentive and 2016 Card Sold Incentive awarded (if any) if 2017 Cumulative Virtual Prepaid Card Sold equals to 70,000,000 or more but is less than 87,500,000; or

• (d) RMB150,000,000 less the sum of 2H15 Card Sold Incentive and 2016 Card Sold Incentive awarded (if any) if 2017 Cumulative Virtual Prepaid Card Sold equals to 87,500,000 or more;

For avoidance of doubt, if the sum of 2H15 Card Sold Incentive and 2016 Card Sold Incentive exceeds (i) RMB75,000,000 under the preceding scenario (b) immediately above; or (ii) RMB90,000,000 under the preceding scenario (c) immediately above, accordingly, no 2017 Card Sold Incentive shall be payable to the Existing Shareholder.

Set out below shows the amount of Incentive payable to the Existing Shareholder based on the amount of 2017 Cumulative Virtual Prepaid Card Reload (“ 2017 Card Reload Incentive ”) in addition to 2017 Card Sold Incentive:

• (a) zero if the 2017 Cumulative Virtual Prepaid Card Reload is less than RMB43,750,000,000; or

• (b) RMB25,000,000 less the 2016 Card Reload Incentive (if any) if the 2017 Cumulative Virtual Prepaid Card Reload equals to RMB43,750,000,000 or more but is less than RMB70,000,000,000; or

• (c) RMB30,000,000 less the 2016 Card Reload Incentive (if any) if the 2017 Cumulative Virtual Prepaid Card Reload equals to RMB70,000,000,000 or more but is less than RMB87,500,000,000; or

• (d) RMB50,000,000 less the 2016 Card Reload Incentive (if any) if the 2017 Cumulative Virtual Prepaid Card Reload equals to RMB87,500,000,000 or more.

The issue of the Incentive Shares by the Company based on the number of Cumulative Virtual Prepaid Card Sold and/or the amount of Cumulative Virtual Prepaid Card Reload during the six months ending 31 December 2015 and each of the two financial years ending 31 December 2017 shall be made within 30 days upon the auditors have certified the relevant results.

Issue price of the Incentive share

The issue price for each Incentive Share is HK$1.08 (“ Issue Price ”). The number of the Incentive Shares to be allotted and issued to the Existing Shareholder upon achieving the number of Cumulative Virtual Prepaid Card Sold and/or the amount of Cumulative Virtual Prepaid Card Reload in each of the relevant period or financial year will be calculated by converting the relevant amount of the Incentive denominated in RMB to HK$ at the median exchange rate of RMB1 to HK$1.25 and then divided by the Issue Price. For the avoidance of doubt, the number of Incentive Shares to be issued and allotted to the Existing Shareholder shall be the number so calculated being rounded down to the nearest whole number and any remaining Incentive will not be payable to the Existing Shareholder in cash or any other form.

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Maximum number of Incentive Shares

Set out below is the summary of the maximum cumulative Incentive based on the number of Cumulative Virtual Prepaid Card Sold and the amount of Cumulative Virtual Prepaid Card Reload and the maximum number of Incentive Shares to be allotted and issued to the Existing Shareholder during the effective period of the Incentive Agreement.

Maximum cumulative	Maximum cumulative
Incentive based on	Incentive based on		Maximum number of
Cumulative Virtual	Cumulative Virtual	Aggregate maximum	Incentive Shares to
Prepaid Card Sold	Prepaid Card Reload	cumulative Incentive	be issued
(RMB)	(RMB)	(RMB)
150,000,000	50,000,000	200,000,000	231,481,481

The maximum number of the Incentive Shares to be issued to the Existing Shareholder by the Company is 231,481,481 Incentive Shares, representing approximately (i) 4.07% of the issued share capital of the Company as at the date of this announcement; and (ii) 3.91% of the Company’s issued share capital as enlarged by the issue of the maximum number of the Incentive Shares.

The Incentive Shares, when allotted and issued, will rank pari passu in all respects with the existing Shares in issue.

General Mandate

The Incentive Shares will be allotted and issued under the General Mandate subject to the limit of 1,121,101,291 Shares (representing approximately 20% of the aggregate nominal amount of the share capital of the Company in issue as at the date of the AGM). Up to the date of this announcement, the General Mandate has not been previously utilized.

Conditions Precedent

The Incentive Agreement will become effective upon fulfillment of the following conditions:

• (a) completion of the Subscription Agreement in accordance with its terms and conditions;

• (b) the Listing Committee having granted the listing of and the permission to deal in the Incentive Shares; and

• (c) members of the Target Group and Mr. Joong having duly executed an employment agreement in respect of the Target Group employing Mr. Joong as an employee of the Target Company (or any of its subsidiaries) with the employment period expiring no earlier than all the Incentive Shares having been duly allotted and issued to the Existing Shareholder in accordance with the terms and conditions of the Incentive Agreement.

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If the above conditions are not fulfilled on or before 31 October 2015 (or such later date as the Company, the Existing Shareholder and Mr. Joong may agree in writing), the Incentive Agreement shall not become effective, and that the parties to the Incentive Agreement shall not claim one another for any losses or liabilities of the other party under the Incentive Agreement.

Undertaking given by Mr. Joong

Mr. Joong undertakes that he shall remain as an employee and/or a director of the Target Company (or any of its subsidiaries) during the effective period of the Incentive Agreement.

ISSUE PRICE OF THE INCENTIVE SHARES

The Issue Price of HK$1.08 per Incentive Share was determined after arm’s length negotiation between the Company, the Existing Shareholder and Mr. Joong with reference to 90% of the average daily closing price per Share as quoted on the Stock Exchange for the last five consecutive trading days immediately preceding the date of Incentive Agreement, which also represents:

• (i) a discount of approximately 12.20% to the closing price per Share as at the date of the Incentive Agreement of HK$1.23 as quoted on the daily quotation sheet of the Stock Exchange; and

• (ii) a discount of approximately 10% to the average closing price per Share for the five consecutive trading days up to and including the date of the Incentive Agreement of approximately HK$1.20 as quoted on the daily quotation sheet of the Stock Exchange.

BASIS FOR THE DETERMINATION OF THE TERMS OF THE INCENTIVE AGREEMENT

The terms of the Incentive Agreement was determined after arm’s length negotiation between the Company and the Existing Shareholder with reference to the performance targets of the Target Group.

APPLICATION FOR LISTING

An application will be made to the Stock Exchange for the listing of, and permission to deal in, the Incentive Shares.

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SHAREHOLDING STRUCTURE OF THE TARGET GROUP

Set out below is the shareholding structure of the Target Group (i) as at the date of this announcement; and (ii) immediately after the Subscription Completion:

Shareholding structure of the Target Group as at the date of this announcement

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Existing Shareholder
100%
Target Company
100%
Essence Management
100%
Yu Shun
49%
Yu Chang
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Shareholding structure of the Target Group immediately after the Subscription Completion

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Country Praise Existing Shareholder
51% 49%
Target Company
100%
Essence Management
100%
Yu Shun
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INFORMATION ON THE TARGET GROUP

The Target Company

The Target Company is an investment holding company incorporated in the British Virgin Islands with limited liability. The Target Company is the 100% direct holding company of Essence Management.

Essence Management

Essence Management is an investment holding company incorporated in Hong Kong with limited liability. Essence Management is wholly owned by the Target Company. Essence Management is the 100% direct holding company of Yu Shun.

Yu Shun

Yu Shun is a company incorporated in the PRC as a wholly foreign owned enterprise with limited liability. Yu Shun is principally engaged in (i) providing consultancy services in strategy and implementation in the traditional finance industry and the internet finance industry; (ii) development, operation and promotion of innovative products in the internet and finance fields; and (iii) customer value management. Yu Shun is wholly owned by Essence Management. Yu Shun holds 49% equity interests in Yu Chang as at the date of this announcement.

Yu Chang

Yu Chang is a company incorporated in the PRC with limited liability. It is principally engaged in the micro business lending. As at the date of this announcement, Yu Chang is owned as to 49% by Yu Shun, and 51% by an Independent Third Party. Immediately after completion of the Yu Chang Disposal, the Target Group will cease to have any equity interests in Yu Chang.

Financial information of the Target Group

Set out below is the unaudited consolidated combined financial information of the Target Company as prepared in accordance with Hong Kong Financial Reporting Standards for the two financial years ended 31 December 2014:

	For the year ended 31 December	For the year ended 31 December
	2014	2013
	RMB’000	RMB’000
Turnover	2,108	1,746
Profit/(loss) before tax	(2,403)	1,197
Profit/(loss) after tax	(2,403)	1,197

As at 31 May 2015, the unaudited combined net assets value of the Target Company is approximately RMB0.52 million.

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BIOGRAPHICAL INFORMATION OF MR. JOONG

Mr. Joong is currently the director and the chief executive officer of Yu Shun, being the principal operating subsidiary of the Target Group. Mr. Joong has over 30 years of senior management experience in consumer finance and payment system in the PRC, Taiwan and U.S.. From 2010 to 2012, Mr. Joong acted as the chairman of the strategy committee and the chief executive of the offline and cross-border business division of Alipay.com Co., Ltd (“ Alipay ”), a company which provides payment processing and escrow services to Alibaba Group Holding Limited. From 2004 to 2010, Mr. Joong has been the general manager and president for the credit card division of China Merchants Bank. From 1999 to 2004, he was an executive vice president of the retail banking division of Chinatrust Commercial Bank. From 1997 to 1998, he served as the financial director of AIG Credit Card Company (Taiwan). Between 1995 and 1997, he served as financial director for the credit card division of the Citibank (Taiwan). He also worked at American Express in the U.S. Mr. Joong is currently a director of Cathay Financial Holdings., Ltd (“ CFH ”), a company providing various financial services primarily in Taiwan. He is also a director of Cathay United Bank Co., Ltd, a subsidiary of CFH. Mr. Joong holds a bachelor degree in accounting in KEAN College of New Jersey.

EFFECTS ON SHAREHOLDING STRUCTURE OF THE COMPANY

The table below sets forth the shareholding structure of the Company (i) as at the date of this announcement; and (ii) immediately upon allotment and issue of the maximum number of the Incentive Shares, assuming the maximum number of Incentive Shares will be allotted and issued to the Existing Shareholder and no Shares will be issued or repurchased from the date of this announcement up to and including the date of allotment and issue of the last batch of the Incentive Shares pursuant to the terms of the Incentive Agreement:

Directors Mr. Guan Guisen_(Note) Dr. Lei Chunxiong Mr. Cao Chunmeng Mr. Wang Zhongmin Mr. Gu Jiawang Mr. Yan Xiaotian _Public Shareholders Existing Shareholder Other public Shareholders Total	As at the date of this announcement Number of Shares Percentage (approx.) 1,300,200,000 22.87% 159,290,000 2.80% 47,620,000 0.84% 600,000 0.01% 600,000 0.01% 21,640,000 0.38% – – 4,155,556,457 73.09% 5,685,506,457 100.00%	Immediate upon the allotment and issue of the maximum number of the Incentive Shares Number of Shares Percentage (approx.) 1,300,200,000 21.97% 159,290,000 2.69% 47,620,000 0.81% 600,000 0.01% 600,000 0.01% 21,640,000 0.37% 231,481,481 3.91% 4,155,556,457 70.23% 5,916,987,938 100.00%

Note: The 1,300,200,000 Shares are held by Mighty Advantage Enterprises Limited (“ Mighty Advantage ”). Mighty Advantage is incorporated in the British Virgin Islands and is beneficially owned by Mr. Guan Guisen.

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REASONS FOR AND BENEFITS OF THE TRANSACTIONS

The Company is principally engaged in general trading of electronic products, prepaid card business, and development and operation of tourism VIP card products, online booking services of air tickets and hotels.

The Directors are of the view that through the Subscription, the Target Group is expected to bring the following synergies to the Group:

• (i) strengthen the existing management team of the Group as the senior management team of the Target Group which are consisted of inter-disciplinary talents equipped with over 20 years’ experiences in both the finance and internet industries could provide new operating concepts and strategies to the Group;

• (ii) optimize the Group’s operation of virtual prepaid cards by applying Target Group’s knowledge and expertise in Gaohuitong’s prepaid card system to accelerate the acquisition of the virtual prepaid card holders and stimulate the acceptance of the virtual prepaid cards; and

• (iii) create business opportunities by leveraging and reaching the Target Group’s client resources to promote and provide the Group’s products and services.

In view of the fact that the control of the Target Company will be transferred from the Existing Shareholder to Country Praise upon the Subscription Completion, Country Praise conditionally agreed to purchase and assume the right, obligations of the Shareholder’s Loan from the Existing Shareholder on the Subscription Completion Date at the consideration equivalent to the face value of the Shareholder’s Loan on a dollar-to-dollar basis.

The Directors consider that Mr. Joong, who had acted as the president of the credit card division at China Merchants Bank and the chairman of Alipay’s strategy committee, has the expertise in consumer finance and payment system in the PRC and the issue of Incentive Shares to the Existing Shareholder (of which Mr. Joong is the sole shareholder and director) provides sufficient incentives to the Existing Shareholder and Mr. Joong to make contribution as defined under the Incentive Agreement.

Accordingly, the Directors are of the view that the Subscription Agreement, the Loan Assignment and the Incentive Agreement are entered into upon normal commercial terms following arm’s length negotiation between the Company and the respective parties and consider that the terms of the Subscription Agreement, the Loan Assignment and the Incentive Agreement are fair and reasonable and the Transactions are in the interests of the Company and Shareholders as a whole.

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IMPLICATIONS UNDER THE GEM LISTING RULES

As both the Loan Assignment and the Incentive Agreement are conditional upon the Subscription Completion, the Transactions are aggregated as if they were one transaction. As the relevant percentage ratios under Rule 19.07 of the GEM Listing Rules in respect of the Transactions are less than 5% and the Incentive Agreement involves the issue of the Incentive Shares, the entering into the Subscription Agreement, the Loan Assignment and the Incentive Agreement constitute a share transaction under the GEM Listing Rules for the Company and are subject to reporting and announcement requirements but exempt from the independent shareholders’ approval requirement under the GEM Listing Rules.

DEFINITIONS

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

“2016 Cumulative Virtual Prepaid the cumulative monetary amount for reloading to the Card Reload” Virtual Prepaid Cards for the period from 1 July 2015 to 31 December 2016, as certified by the auditors appointed by the Company “2016 Cumulative Virtual Prepaid the cumulative number of Virtual Prepaid Cards sold Card Sold” for the period between 1 July 2015 to 31 December 2016, as certified by the auditors appointed by the Company “2017 Cumulative Virtual Prepaid the cumulative monetary amount for reloading to the Card Reload” Virtual Prepaid Cards for the period from 1 July 2015 to 31 December 2017, as certified by the auditors appointed by the Company “2017 Cumulative Virtual Prepaid the cumulative number of Virtual Prepaid Cards sold Card Sold” for the period between 1 July 2015 to 31 December 2017, as certified by the auditors appointed by the Company

“2H15 Cumulative Virtual Prepaid the cumulative number of Virtual Prepaid Cards sold Card Sold” for the six months ending 31 December 2015, as certified by the auditors of appointed by the Company “AGM” the annual general meeting held by the Company on 6 May 2015 “Board” the board of Directors

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• “Business Day”

• “Company”

• “connected person(s)”

• “Country Praise”

• “Cumulative Virtual Prepaid Card Reload”

• “Cumulative Virtual Prepaid Card Sold”

• “Director(s)”

• “Essence Management”

• “Existing Shareholder”

• “Gaohuitong”

• “GEM”

• “GEM Listing Rules”

• a day (that is not a Saturday, a Sunday and or a day on which a tropical cyclone warning number 8 or above is hoisted or remains hoisted between 9:00 a.m. and 12:00 noon and is not lowered at or before 12:00 noon or a day on which a “black” rainstorm warning signal is hoisted or remains in effect between 9:00 a.m. and 12:00 noon and is not discontinued at or before 12:00 noon) on which banks in Hong Kong are generally open for business

• China Innovationpay Group Limited, a company incorporated in Bermuda with limited liability, the issued Shares of which are listed on the GEM

• has the meanings ascribed thereto in the GEM Listing Rules

• Country Praise Enterprises Limited, a company incorporated in the British Virgin Islands with limited liability, which is a direct wholly-owned subsidiary of the Company

• the cumulative monetary amount for reloading to the Virtual Prepaid Cards as certified by the auditors appointed by the Company

• the cumulative number of Virtual Prepaid Cards sold as certified by the auditors of appointed by the Company

• the director(s) of the Company

• Essence Management Services Limited, a company incorporated in Hong Kong with limited liability, which is a wholly-owned subsidiary of the Target Company

• ModernTimes Information Co., Ltd, a company incorporated in Brunei Darussalam with limited liability, of which Mr. Joong is the sole shareholder and sole director

• Beijing Gaohuitong Commercial Management Company Limited* (北京高匯通商業管理有限公司), an indirect wholly owned subsidiary of the Company

• the Growth Enterprise Market of the Stock Exchange

• the Rules Governing the Listing of Securities on the GEM

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“General Mandate”

the unconditional mandate granted to the Directors to allot and issue no more than 20% of the nominal value of the Shares in issue as at the date of AGM

• “Group”

the Company and its subsidiaries

• “HK$”

• Hong Kong dollars, the lawful currency of Hong Kong

• “Hong Kong”

• the Hong Kong Special Administrative Region of the People’s Republic of China

• “Incentive” the amount payable to Existing Shareholder by the Company in the form of Incentive Shares based on the number of Cumulative Virtual Prepaid Card Sold and the amount of Cumulative Virtual Prepaid Card Reload pursuant to the terms and conditions of the Incentive Agreement

• “Incentive Agreement” the agreement dated 18 June 2015 entered into between the Company, the Existing Shareholder and Mr. Joong in relation to the Incentive

• “Incentive Share(s)” new Shares that shall be allotted and issued by the Company to the Existing Shareholder as the Incentive

• “Independent Third Party(ies)”

• a party(ies) who is/are a third party independent of the Company and its connected persons (such term has the meaning ascribed to it under of the GEM Listing Rules)

• “Listing Committee”

• has the meaning ascribed to it under the GEM Listing Rules

• “Loan Assignment” the assignment dated 18 June 2015 entered into between the Existing Shareholder, Country Praise and Essence Management in relation to the assignment of the Shareholder’s Loan

• “Maximum Incentive” RMB200,000,000, being the maximum amount of Incentive payable to the Existing Shareholder by way of allotment and issue of Incentive Shares pursuant to terms and conditions of the Incentive Agreement

• “Mr. Joong”

• Joong Chi Wei, the ultimate beneficial owner of the Target Company as at the date of this announcement

• “PRC”

• the People’s Republic of China, excluding Hong Kong, Macau and Taiwan for the purpose of this announcement

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“RMB” Renminbi, the lawful currency of the PRC “Share(s)” share(s) of HK$0.01 each in the share capital of the Company “Shareholder’s Loan” the aggregate amount of all advances, loans, accrued interest and indebtedness which shall remain due or owing from Essence Management to the Existing Shareholder as at the date of the Loan Assignment

• “Stock Exchange” The Stock Exchange of Hong Kong Limited “Subscription” the subscription of the Subscription Shares by Country Praise pursuant to the terms and conditions of the Subscription Agreement

• “Subscription Agreement” the agreement dated 18 June 2015 entered into between Country Praise and the Target Company in relation to the Subscription

• “Subscription Completion” completion of the Subscription in accordance with the terms and conditions of the Subscription Agreement

• “Subscription Completion Date” the date of the Subscription Completion “Subscription Shares” 52,041 new shares of the Target Company in accordance with the terms of Subscription Agreement

• “Taiwan” Republic of China “Target Company” M o d e r n T i m e s P a y m e n t L i m i t e d , a c o m p a n y incorporated in the British Virgin Islands with limited liability

• “Target Group” Target Company and its subsidiaries

• “Transactions” the transactions contemplated under the Subscription Agreement, the Loan Assignment and the Incentive Agreement

• “U.S.” the United States of America

• “Virtual Prepaid Cards” the virtual prepaid cards sold by the Target Group via Gaohuitong’s prepaid card system

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“Yu Chang” Shanghai Yu Chang Financial Information Services Company Limited* (上海裕暢金融資訊服務有限公 司), a company incorporated in the PRC with limited liability

“Yu Chang Disposal” the disposal of Yu Chang by Yu Shun, upon completion of which the Target Company will cease to have any retained equity interests in Yu Chang

“Yu Shun” Yu Shun Investment Consultancy (Shanghai) Company Limited* ( 裕順投資諮詢（上海）有限公司 ), a company incorporated in the PRC with limited liability “%” per cent

• The English translation is for identification purposes only

For the purpose of illustration only, amounts denominated in RMB in this announcement have been translated into HK$ at the rate of RMB1 = HK$1.25. Such translations should not be construed as a representation that the amounts in question have been, could have been or could be converted at any particular rate at all.

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

Hong Kong, 18 June 2015

As at the date of this announcement, the Board comprises four executive Directors, namely Mr. Guan Guisen, Dr. Lei Chunxiong, Mr. Cao Chunmeng and Mr. Yan Xiaotian; and three independent non-executive 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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