Youzan Technology Limited - M&A Activity 2021

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 is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of China Youzan or Youzan Technology, nor is it an invitation or offer to or a solicitation of any offer to acquire, purchase or subscribe for securities of China Youzan or Youzan Technology in any jurisdiction in which such invitation, offer, solicitation or sale would be unlawful absent the filing of a registration statement or the availability of an applicable exemption from registration or other waiver. This Announcement is not for release, publication or distribution in or into any other jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction.

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BetaCafe Holdings Limited

(incorporated in the British Virgin Islands with limited liability)

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(Incorporated in Bermuda with limited liability)

(Stock Code: 8083)

JOINT ANNOUNCEMENT

UPDATE ON

(1) TAKE PRIVATE PROPOSAL FOR CHINA YOUZAN LIMITED BY BETACAFE HOLDINGS LIMITED BY WAY OF A SCHEME OF ARRANGEMENT UNDER SECTION 99 OF THE COMPANIES ACT (2) PROPOSED DISTRIBUTION IN SPECIE OF YOUZAN TECHNOLOGY SHARES (3) PROPOSED WITHDRAWAL OF LISTING OF CHINA YOUZAN

Financial Adviser to the Offeror

Valuer to China Youzan

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Independent Financial Adviser to the Independent Board Committee

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INTRODUCTION

UPDATES ON THE PROPOSED YOUZAN TECHNOLOGY LISTING AND REVISIONS TO THE TERMS OF THE PROPOSAL

As at the Announcement Date, the Offeror and China Youzan were informed that Youzan Technology has re-filed its application with the Stock Exchange for the listing of the Youzan Technology Shares by way of an offering of new shares, instead of by way of introduction. As a result of this change, the Offeror has requested the Board to update certain terms of the Proposal to reflect that the Youzan Technology Shares are now proposed to be listed by way of an offering of new shares, including:

(a) revising the definition of the term “Youzan Technology Listing” to mean the proposed listing of all of the Youzan Technology Shares on the Main Board of the Stock Exchange by way of an offering of new shares;
(b) removing the Scheme Pre-Condition as set out under paragraph (a) in the paragraph headed “2. TERMS OF THE PROPOSAL – 2.6 Scheme Pre-Conditions” in the Rule 3.5 Announcement (being, the in-principle approval of the Stock Exchange for the listing of the Youzan Technology Shares on the Stock Exchange for the Youzan Technology Listing); and
(c) adding a new Scheme Condition in respect of the underwriting agreements being entered into between, among others, Youzan Technology and the underwriters for the Youzan Technology Offering and having become effective and unconditional and not having been terminated by the latest time at which termination is permitted thereunder as set out under paragraph (o) in the paragraph headed “2. REVISIONS TO THE TERMS OF THE PROPOSAL – 2.7. Updates on the Scheme Conditions” in this Announcement.

Save as mentioned above, no other changes are being made to the Proposal. In particular, there is no change to the Scheme Consideration, the terms of the Distribution and the pro rata entitlement of Youzan Technology Shares to be distributed in respect of each China Youzan Share under the Distribution.

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Under the revised terms, the Youzan Technology Listing will not only enable Youzan Technology to achieve the primary listing of 100% of its shares on the Main Board of the Stock Exchange which can realize value for the China Youzan Shareholders through unlocking the growth potential in the Youzan Technology Group, but will also allow Youzan Technology to, at the same time, raise additional funds for its future capital needs and further development and expansion of its SaaS Business.

It is contemplated that the Youzan Technology Offering will comprise a retail tranche to public retail investors and an international tranche to institutional and professional investors and other investors. The potential size of the Youzan Technology Offering (including any over-allotment option thereof) could be up to a maximum of 84,973,000 new Youzan Technology Shares, representing approximately 5% of a total of 1,699,463,094 Youzan Technology Shares in issue immediately prior to the Youzan Technology Offering (after taking into account the proposed issuance of Youzan Technology Shares under the Youzan Technology Share Award Plan B, Anti-Dilution Issue and Youzan Technology RSU Plan C). Further details of the Youzan Technology Listing, including the final size of the Youzan Technology Offering and the offer price range of the Youzan Technology Shares for the Youzan Technology Offering, will be contained in the prospectus in respect of the Youzan Technology Listing which will be issued by Youzan Technology prior to the Court Meeting.

Based on the terms of the revised Proposal, all Scheme Pre-Conditions have been fulfilled as at the Announcement Date. For further details regarding the revised Proposal, please refer to the sections headed “2. REVISIONS TO THE TERMS OF THE PROPOSAL” in this Announcement.

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UPDATED ESTIMATED VALUE OF YOUZAN TECHNOLOGY SHARES AND UPDATED VALUATION OF THE PAYMENT & OTHER BUSINESS AS AT THE UPDATED VALUATION REFERENCE DATE

Updated estimated value of Youzan Technology Shares

Jones Lang LaSalle Corporate Appraisal and Advisory Limited, the Valuer, has estimated, solely for illustration and reference purposes, that the updated estimated value of each Youzan Technology Share and all the issued shares in Youzan Technology as at the Updated Valuation Reference Date, being 30 June 2021 (on the basis of 1,699,463,094 Youzan Technology Shares in issue, after taking into account the proposed issuance of Youzan Technology Shares under the Youzan Technology Share Award Plan B, AntiDilution Issue and Youzan Technology RSU Plan C but before taking into account the proposed offering of up to a maximum of 84,973,000 new shares under the Youzan Technology Offering) is RMB21.76 (equivalent to approximately HK$26.2 applying the Reference Exchange Rate) (being the Updated Youzan Technology Reference Value) and RMB36,975,000,000 (equivalent to approximately HK$44,528,992,500 applying the Reference Exchange Rate) respectively.

The foregoing paragraph is subject to and should be read in conjunction with the bases, limitations and assumptions set out in the Updated Youzan Technology Share Value Assessment Report in Annex I of this Announcement. The updated estimation of the value of Youzan Technology Share in the Updated Youzan Technology Share Value Assessment Report and the qualification and experience of the Valuer have been reported on by the Financial Adviser, the full text of which is set out in Annex I of this Announcement.

Due to the time gap between the Updated Valuation Reference Date and the Announcement Date, the above updated estimated value of the Youzan Technology Shares is not the most up-to-date and may not necessarily reflect the fair value of the Youzan Technology Shares as at the Announcement Date. Whilst the Valuer has adopted the market approach for assessing the updated estimated value of the Youzan Technology Shares in the Updated Youzan Technology Share Value Assessment Report, such assessment has not taken into account the changes and volatility in the trading price of the market comparable companies and the general market after 30 June 2021 and up to the Announcement Date.

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The offer price range and the final offer price for the Youzan Technology Offering will be determined by Youzan Technology and the global coordinator(s) and bookrunner(s) engaged for the Youzan Technology Offering through a price discovery process typically undertaken in an offering of shares of this kind, which will be independent from the preparation of the Updated Youzan Technology Share Value Assessment Report by the Valuer. Accordingly, the offer price range of the Youzan Technology Shares in the Youzan Technology Offering to be contained in the prospectus to be issued by Youzan Technology for the Youzan Technology Listing and the final offer price for the Youzan Technology Offering may be higher or lower than the updated estimated value of the Youzan Technology Shares assessed by the Valuer as set out in the Updated Youzan Technology Share Value Assessment Report.

As such, Scheme Shareholders and investors and potential investors of China Youzan and Youzan Technology should note that the Updated Youzan Technology Reference Value estimated by the Valuer (based on a total of 1,699,463,094 Youzan Technology Shares, after the proposed issuance of Youzan Technology Shares under the Youzan Technology Share Award Plan B, Anti-Dilution Issue and Youzan Technology RSU Plan C but before the proposed offering of up to a maximum of 84,973,000 new shares under the Youzan Technology Offering) does not represent the offer price range or the final offer price of the Youzan Technology Shares in the Youzan Technology Offering, which may be higher or lower than the Updated Youzan Technology Reference Value.

In addition, the Updated Youzan Technology Reference Value estimated by the Valuer also does not represent the trading price of the Youzan Technology Shares immediately following completion of the Youzan Technology Listing or at any time. Upon the Youzan Technology Listing, the trading price of Youzan Technology Shares may fluctuate subject to prevailing market conditions and may materially differ from the updated value estimated by the Valuer.

Accordingly, Scheme Shareholders and investors and potential investors of China Youzan and Youzan Technology should not rely on the Valuer’s estimated Updated Youzan Technology Reference Value as the basis for the subscription for or the offer price of the Youzan Technology Shares as part of the Youzan Technology Offering or the trading price of the Youzan Technology Shares upon completion of the Youzan Technology Listing.

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Updated valuation of the Payment & Other Business

The Valuer has also evaluated that the updated value of the Payment & Other Business (being the remaining business carried out by China Youzan assuming the Distribution had been completed) as at the Updated Valuation Reference Date (being 30 June 2021) as evaluated by the Valuer is RMB2,050,000,000 (equivalent to approximately HK$2,468,815,000 applying the Reference Exchange Rate).

The foregoing paragraph is subject to and should be read in conjunction with the bases, limitations and assumptions set out in the Updated POB Valuation Report in Annex II of this Announcement. The updated valuation of the Payment & Other Business and the qualification and experience of the Valuer have been reported on by the Financial Adviser, the full text of which is set out in Annex II of this Announcement.

The estimation of the value of Youzan Technology Shares and the valuation of the Payment & Other Business may be further updated in accordance with the Takeovers Code or other applicable laws and regulations.

Comparison of value

On the basis of (a) 17,260,003,617 China Youzan Shares in issue as at the Announcement Date; (b) 785,249,026 Youzan Technology Shares held by China Youzan as at the Announcement Date (representing approximately 51.90% of the total issued share capital of Youzan Technology as at the Announcement Date) plus 91,087,206 Youzan Technology Shares proposed to be issued to China Youzan under the Youzan Technology Share Award Plan B, together amounting to an aggregate of 876,336,232 Youzan Technology Shares (representing approximately 51.90% of the total issued share capital of Youzan Technology after the proposed issuance of the total number of Youzan Technology Shares under the Youzan Technology Share Award Plan B and Anti-Dilution Issue, but prior to the dilution impact resulting from the proposed issuance of new Youzan Technology Shares under the Youzan Technology RSU Plan C and the proposed offering of up to a maximum of 84,973,000 new shares under the Youzan Technology Offering) which will be distributed to China Youzan Shareholders under the Distribution; and (c) none of the outstanding China Youzan Options will be exercised or lapsed from the Announcement Date up to and immediately before the Scheme Effective Date, and assuming there is no other change in (i) the total number of China Youzan Shares in issue and (ii) the total number of Youzan Technology Shares held by China Youzan between the Announcement Date and the Record Date, each China Youzan Shareholder will be entitled to receive 0.05077265 Youzan Technology Share for every China Youzan Share under the Distribution.

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Based on the above, the Aggregate Amount per Scheme Share to be received by a Scheme Shareholder for every Scheme Share cancelled under the Proposal (being the theoretical total value of (i) 0.05077265 Youzan Technology Share for every China Youzan Share under the Distribution multiplied by the Updated Youzan Technology Reference Value, being HK$26.2 per Youzan Technology Share (based on a total of 1,699,463,094 Youzan Technology Shares in issue, after the proposed issuance of Youzan Technology Shares under the Youzan Technology Share Award Plan B, Anti-Dilution Issue and Youzan Technology RSU Plan C but before the proposed offering of up to a maximum of 84,973,000 new shares under the Youzan Technology Offering), together with (ii) the Scheme Consideration in cash) is equivalent to HK$1.4654 and represents:

(a) a premium of approximately 100.7% over the closing price of HK$0.73 per China Youzan Share as quoted on the Stock Exchange on the Last Trading Day;
(b) a discount of approximately 1.0% to the closing price of HK$1.48 per China Youzan Share as quoted on the Stock Exchange on the Updated Valuation Reference Date, being 30 June 2021;
(c) a premium of approximately 48.0% over the average closing price of approximately HK$0.99 per China Youzan Share based on the daily closing prices as quoted on the Stock Exchange for the 30 trading days up to and including the Last Trading Day;
(d) a premium of approximately 19.1% over the average closing price of approximately HK$1.23 per China Youzan Share based on the daily closing prices as quoted on the Stock Exchange for the 60 trading days up to and including the Last Trading Day;
(e) a discount of approximately 3.0% to the average closing price of approximately HK$1.51 per China Youzan Share based on the daily closing prices as quoted on the Stock Exchange for the 90 trading days up to and including the Last Trading Day;
(f) a discount of approximately 17.7% to the average closing price of approximately HK$1.78 per China Youzan Share based on the daily closing prices as quoted on the Stock Exchange for the 120 trading days up to and including the Last Trading Day;
(g) a discount of approximately 55.7% to the closing price of HK$3.31 per China Youzan Share as quoted on the Stock Exchange on the Rule 3.5 Announcement Last Trading Day;
(h) a discount of approximately 28.5% to the closing price of HK$2.05 per China Youzan Share as quoted on the Stock Exchange on the Rule 3.5 Announcement Valuation Reference Date, being 30 November 2020;

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(i) a premium of approximately 486.2% over the unaudited consolidated NAV attributable to owners of China Youzan of RMB0.21 (equivalent to approximately HK$0.25 applying the Reference Exchange Rate) per China Youzan Share based on the interim report of China Youzan for the six months ended 30 June 2021 (which, for the avoidance of doubt, has not reflected the effect of the Distribution);
(j) a premium of approximately 463.6% over the audited consolidated NAV attributable to owners of China Youzan as at 31 December 2020 of RMB0.22 (equivalent to approximately HK$0.26 applying the Reference Exchange Rate) per China Youzan Share based on the 2020 Annual Report (which, for the avoidance of doubt, has not reflected the effect of the Distribution); and
(k) a premium of approximately 486.2% over the audited consolidated NAV attributable to owners of China Youzan as at 31 December 2019 of RMB0.21 (equivalent to approximately HK$0.25 applying the Reference Exchange Rate) per China Youzan Share based on the 2019 Annual Report (which, for the avoidance of doubt, has not reflected the effect of the Distribution).

WARNING: The Rule 3.5 Announcement was dated 26 February 2021, and due to the approximate six-month time gap between the Rule 3.5 Announcement Date and the Announcement Date, the above comparisons of value are therefore not the most up-to-date. Further, the comparisons of value with the average closing price for the 90 and 120 trading days up to and including the Last Trading Day should be read in conjunction with the several downward trend in the trading price of the China Youzan Shares. Accordingly, investors and China Youzan Shareholders shall exercise caution when placing value on such comparisons. This is particularly so due to the recent volatility in the trading price of China Youzan, the market comparable companies and the general market.

SHAREHOLDING STRUCTURE OF CHINA YOUZAN AND THE SCHEME SHARES

As at the Announcement Date, (i) there are 17,260,003,617 China Youzan Shares in issue and 292,804,000 outstanding China Youzan Options; (ii) the Offeror and parties acting in concert with it directly or indirectly hold and/or control the exercise of voting rights over 4,029,960,465 China Youzan Shares in aggregate, representing approximately 23.36% of the outstanding issued share capital of China Youzan.

Based on the shareholding as at the Announcement Date, out of the 4,029,960,465 China Youzan Shares held by the Offeror and parties acting in concert with it:

(i) a total of 2,571,960,931 China Youzan Shares held by the China Youzan Excluded Shareholders (representing approximately 14.90% of the outstanding issued share capital of China Youzan as at the Announcement Date) will not form part of the Scheme Shares; and
(ii) the remaining 1,457,999,534 China Youzan Shares held by the Offeror and/or parties acting in concert with the Offeror (representing approximately 8.46% of outstanding issued share capital of China Youzan as at the Announcement Date) will form part of the Scheme Shares and will be cancelled upon the Scheme becoming effective.

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REASONS AND BENEFITS FOR COMBINING THE PROPOSAL WITH THE YOUZAN TECHNOLOGY LISTING

Other than the reasons and benefits in relation to the Proposal disclosed in “3. REASONS AND BENEFITS OF THE PROPOSAL” in the Rule 3.5 Announcement, the Youzan Technology Listing, which includes the Youzan Technology Offering, is expected to enable Youzan Technology to (i) marketise the price of its equity interests; (ii) broaden its investor base; and (iii) have access to new sources of capital.

Youzan Technology intends to use the net proceeds received from the Youzan Technology Offering for (a) enhancing its research and development capabilities and improve its IT infrastructure; (b) enhancing its sales and marketing capabilities and brand awareness; (c) selective strategic investments and acquisitions; and (d) working capital and general corporate purposes.

YOUZAN TECHNOLOGY SHARE INCENTIVE PLANS

Youzan Technology intends to adopt the Youzan Technology Share Incentive Plans, as further detailed in the paragraph headed “5. INFORMATION ON YOUZAN TECHNOLOGY – 5.5 Youzan Technology Share Incentive Plans” of the Rule 3.5 Announcement.

As disclosed in the joint announcement dated 6 May 2021 issued by the Offeror and China Youzan, the progress and status of each of the Youzan Technology Share Incentive Plans is set out below:

(i) Youzan Technology Share Award Plan A : the amendment and substitution of the Youzan Technology 2019 Share Award Plan by the Youzan Technology Share Award Plan A has become effective. Share awards will be granted to the proposed grantees under the Youzan Technology Share Award Plan A prior to (and regardless of) the Youzan Technology Listing and prior to the Record Date;
(ii) Youzan Technology Share Award Plan B and the Anti-Dilution Issue to China Youzan : as at the Announcement Date, the Plan B Effectiveness Condition as set out in paragraph (b) (being, the Stock Exchange having granted its in-principle approval for the listing of the Youzan Technology Shares on the Stock Exchange pursuant to the Youzan Technology Listing) of the paragraph headed “YOUZAN TECHNOLOGY SHARE AWARD PLAN B – CONNECTED TRANSACTION – Conditionality – Plan B Effectiveness Conditions” of the First SGM Circular remains to be outstanding. Such outstanding Plan B Effectiveness Condition shall be construed to mean the Stock Exchange having granted its in-principle approval for the listing of the Youzan Technology Shares on the Stock Exchange pursuant to the Youzan Technology Listing to be carried out by way of an offering of new shares; and

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(iii) China Youzan Options Conversion Proposal and Youzan Technology RSU Plan C : as at the Announcement Date, the Plan C Effectiveness Condition as set out in paragraphs (d) (being, the Stock Exchange having granted its formal approval for the listing of, and permission to deal in, the Youzan Technology Shares on the Stock Exchange pursuant to the Youzan Technology Listing) and (e) (being, the Scheme becoming effective) of the paragraph headed “YOUZAN TECHNOLOGY RSU PLAN C – SPECIAL DEAL ARRANGEMENT – Conditionality – Plan C Effectiveness Conditions” of the First SGM Circular remains to be outstanding. The outstanding Plan C Effectiveness Condition set out in the above-mentioned paragraph (d) shall be construed to mean the Stock Exchange having granted its formal approval for the listing of, and permission to deal in, the Youzan Technology Shares on the Stock Exchange pursuant to the Youzan Technology Listing to be carried out by way of an offering of new shares.

The outstanding Plan C Effectiveness Condition set out in the above-mentioned paragraph (e) shall remain unchanged.

Save as mentioned above, there is no other change to the terms of the Youzan Technology Share Incentive Plans as set out in the First SGM Circular. For the avoidance of doubt, the matters approved by the relevant China Youzan Shareholders at the First SGM and the number of Youzan Technology Shares or RSUs (as the case may be) to be issued pursuant to the respective Youzan Technology Share Incentive Plans will not be affected as a result of the proposed offering of new shares by Youzan Technology under the Youzan Technology Offering and as part of the Youzan Technology Listing.

DESPATCH OF SCHEME DOCUMENT

As disclosed in the joint announcement dated 15 June 2021 issued by the Offeror and China Youzan, an application was made to the Executive pursuant to Rule 8.2 of the Takeovers Code for, and the Executive has granted consent to, a further extension of the latest time to despatch the Scheme Document to 19 October 2021.

A Scheme Document containing, among other things, further details about the Scheme, the Distribution, a letter of advice from the Independent Financial Adviser to the Independent Board Committee, the recommendations of the Independent Board Committee, and notices to convene the Court Meeting and the Second SGM will be despatched to the China Youzan Shareholders as soon as possible in accordance with the Takeovers Code, the requirements of the Court, the GEM Listing Rules and other applicable laws and regulations.

WARNING: Shareholders and potential investors of China Youzan should be aware that, even if the Proposal is made, the implementation of the Proposal (including the effectiveness of the Scheme), is subject to the satisfaction or waiver (as applicable) of the Scheme Conditions, and therefore the Proposal may or may not be implemented and the Scheme may or may not become effective. Shareholders and potential investors of China Youzan should therefore exercise caution when dealing in the securities of China Youzan. Persons who are in doubt as to the action they should take should consult their stockbrokers, bank managers, solicitors or other professional advisers.

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1. INTRODUCTION

1.1 Proposal made in the Rule 3.5 Announcement

Reference is made to (i) the Rule 3.5 Announcement, (ii) the joint announcement dated 19 March 2021 issued by the Offeror and China Youzan in relation to the extension of time for the despatch of the Scheme Document, (iii) the joint announcement dated 16 April 2021 issued by the Offeror and China Youzan regarding the fulfilment of Scheme Pre-Condition relating to the Optionholder Irrevocable Undertakings, (iv) the First SGM Circular, (v) the joint announcement dated 6 May 2021 issued by the Offeror and China Youzan regarding, amongst others, (a) the poll results of the First SGM, (b) fulfilment of Scheme Pre-Conditions concerning the approval of the Rollover Arrangement and the Youzan Technology Share Incentive Plans and (c) fulfilment of certain effectiveness conditions relating to the Youzan Technology Share Incentive Plans, (vi) the joint announcements dated 4 June, 15 July and 13 August 2021 respectively issued by the Offeror and China Youzan in relation to monthly updates on the Proposal, and (vii) the joint announcement dated 15 June 2021 issued by the Offeror and China Youzan in relation to the extension of the Scheme Pre-Condition Longstop Date and the Scheme Longstop Date and a further extension of the time limit for the despatch of the Scheme Document.

Pursuant to the Rule 3.5 Announcement dated 26 February 2021, the Offeror and China Youzan jointly announced that the Offeror had requested the Board to, subject to the satisfaction or waiver (as applicable) of the Scheme Pre-Conditions, put forward the Proposal which comprises (a) the Distribution of the Youzan Technology Shares held by China Youzan to all China Youzan Shareholders (including, for the avoidance of doubt, the China Youzan Excluded Shareholders and/or the China Youzan Excluded Shareholders Entities), such shares which were proposed to be listed on the Main Board of the Stock Exchange by way of introduction; and (b) the taking private of China Youzan by the Offeror, after completion of the Distribution, by way of a scheme of arrangement under section 99 of the Companies Act between China Youzan and the Scheme Shareholders by cancellation of the Scheme Shares in consideration for the Scheme Consideration of HK$0.1352 per Scheme Share in cash. As disclosed in the Previous A1 Announcement issued by China Youzan, an application was made to the Stock Exchange for the listing of all of the Youzan Technology Shares on the Main Board of the Stock Exchange by way of introduction.

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1.2 Updates on the proposed Youzan Technology Listing and the Proposal

Therefore, the Offeror has requested the Board to update certain terms of the Proposal to reflect that the Youzan Technology Shares are now proposed to be listed by way of an offering of new shares, including the following changes:

(i) revising the definition of the term “Youzan Technology Listing” to mean the proposed listing of all of the Youzan Technology Shares on the Main Board of the Stock Exchange by way of an offering of new shares;
(ii) removing the Scheme Pre-Condition as set out under paragraph (a) in the paragraph headed “2. TERMS OF THE PROPOSAL – 2.6 Scheme Pre-Conditions” in the Rule 3.5 Announcement (being, the in-principle approval of the Stock Exchange for the listing of the Youzan Technology Shares on the Stock Exchange for the Youzan Technology Listing); and
(iii) adding a new Scheme Condition in respect of the underwriting agreements being entered into between, among others, Youzan Technology and the underwriters for the Youzan Technology Offering and having become effective and unconditional and not having been terminated by the latest time at which termination is permitted thereunder as set out under paragraph (o) in the paragraph headed “2. REVISIONS TO THE TERMS OF THE PROPOSAL – 2.7 Updates on the Scheme Conditions” in this Announcement.

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Upon completion of the Proposal combined with the Youzan Technology Listing:

(a) the China Youzan Shareholders whose names appear on the register of members of China Youzan as at the Record Date will become shareholders of Youzan Technology pursuant to the Distribution, and will own Youzan Technology together with the existing Youzan Technology Financial Investors and the other new investors who have subscribed for new Youzan Technology Shares as part of the Youzan Technology Offering;
(b) the entire Youzan Technology Shares will become listed on the Main Board of the Stock Exchange by way of an offering of new shares;
(c) the listing of China Youzan Shares on GEM of the Stock Exchange will be withdrawn; and
(d) the privatised China Youzan will be beneficially owned as to 93.45% by Mr. Zhu Ning (through his 100% beneficial ownership in the Offeror and Whitecrow), 2.10% by Youzan Teamwork and 4.45% by the other China Youzan Excluded Shareholders (directly or indirectly through each of their respective China Youzan Excluded Shareholders Entities).

2. REVISIONS TO THE TERMS OF THE PROPOSAL

2.1 The Scheme Consideration and the Distribution

In light of the fact that the Youzan Technology Shares are now proposed to be listed by way of a new share offering, the Offeror has requested the Board to update certain terms of the Proposal to reflect such change and to put forward the Proposal, subject to the revised Scheme Pre-Conditions as set out in this Announcement which have all been satisfied as at the Announcement Date. As a result of this change, the definition of the term “Youzan Technology Listing” has been revised, and shall, with effect from the Announcement Date, be construed to mean the proposed listing of all of the Youzan Technology Shares on the Main Board of the Stock Exchange by way of an offering of new shares.

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No change has been made to the Scheme Consideration and the terms of the Distribution.

Upon the fulfilment or waiver (as applicable) of the Scheme Conditions and the Scheme becoming effective, all Scheme Shares (which, for the avoidance of doubt, exclude the Excluded Shares, being the China Youzan Shares held by the China Youzan Excluded Shareholders and/or the China Youzan Excluded Shareholders Entities) will be cancelled and the Scheme Shareholders will receive from the Offeror:

For every Scheme Share cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . .HK$0.1352 in cash

In compliance with Rule 20.1(a) of the Takeovers Code, upon the Scheme becoming effective, the Scheme Consideration will be paid by the Offeror to the Scheme Shareholders as soon as possible, but in any event within seven (7) Business Days after the Scheme Effective Date.

In addition to the Scheme Consideration, under the Proposal and by way of the Distribution, all China Youzan Shareholders whose names appear on the register of members of China Youzan as at the Record Date will also receive their pro rata entitlement of all of the Youzan Technology Shares held by China Youzan, such shares which are proposed to be listed on the Main Board of the Stock Exchange pursuant to the Youzan Technology Listing. The Distribution will be made by China Youzan. Notwithstanding that the Youzan Technology Offering forms part of the Youzan Technology Listing, the pro rata entitlement of Youzan Technology Shares to be distributed in respect of each China Youzan Share pursuant to the Distribution shall not be affected and shall remain unchanged. Please refer to the paragraph headed “2. REVISIONS TO THE TERMS OF THE PROPOSAL – 2.8 No change to the Distribution” below for further details.

The Offeror will not increase the Scheme Consideration and does not reserve the right to do so. Shareholders and potential investors of China Youzan should be aware that, following the making of this statement, the Offeror will not be allowed to increase the Scheme Consideration, unless in wholly exceptional circumstances.

The Distribution will only be made by China Youzan if the Distribution Conditions are satisfied. The Scheme Consideration will only be paid by the Offeror if the Scheme becomes effective.

The Youzan Technology Listing will only take place if the Scheme becomes effective.

Neither China Youzan nor Youzan Technology has declared or made any dividend or distribution which remains unpaid as at the Announcement Date. China Youzan and Youzan Technology do not intend to declare, pay and/or make any dividend or other distribution (other than the Distribution to be made by China Youzan) between the Announcement Date and the Scheme Effective Date or the date on which the Scheme is not approved or the Proposal otherwise lapses (as the case may be). Upon completion of the Proposal and the Scheme becoming effective, Scheme Shareholders will not be entitled to the dividends and/or other distribution declared, paid or made by China Youzan by reference to a record time on or after the Scheme Effective Date.

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Events following the Scheme becoming effective

If the Scheme Conditions are fulfilled and upon the Scheme becoming effective:

(a) all of the Scheme Shares will be cancelled;
(b) the Scheme Consideration in the cash amount of HK$0.1352 for every Scheme Share cancelled will be paid by the Offeror to the Scheme Shareholders;
(c) the issued share capital of China Youzan will be reduced by the cancellation of the Scheme Shares. Immediately after such reduction, China Youzan will issue to the Offeror such number of China Youzan Shares as is equal to the number of Scheme Shares cancelled, such that the issued share capital of China Youzan so reduced will be restored to the amount in issue immediately before the capital reduction. The reserve created in the books of accounts of China Youzan as a result of the cancellation of the Scheme Shares will be applied in paying up in full at par the new China Youzan Shares so issued; and
(d) the listing of the China Youzan Shares on GEM of the Stock Exchange will be withdrawn pursuant to Rule 9.23 of the GEM Listing Rules.

Basis for determining the Scheme Consideration and the Distribution

From the perspective of the Scheme Shareholders, under the Proposal, each Scheme Shareholder will be entitled to receive (i) his/her/its pro-rata entitlement of all of the Youzan Technology Shares held and to be distributed by China Youzan pursuant to the Distribution and (ii) the Scheme Consideration in the cash amount of HK$0.1352 for every Scheme Share cancelled under the Scheme. The aggregate value to be received by the Scheme Shareholders under the Proposal has been determined on arm’s length basis after taking into account the following matters, among other things:

(i) the historical business and financial performance of the Payment & Other Business and SaaS Business;
(ii) the terms of the Proposal which comprise (a) the Distribution which will allow the Scheme Shareholders to continue to participate in the performance of the SaaS Business upon the Youzan Technology Listing; and (b) the Scheme Consideration which will allow the Scheme Shareholders to capitalise the value of the Payment & Other Business, being the remaining assets held by China Youzan after implementation of the Distribution, with a certain level of cash consideration;
(iii) the challenging environment and limited growth of the Payment & Other Business in the market as its scale is relatively small compared with that of its peers (including other leading Chinese third-party payment service providers);

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(iv) the business potential of the SaaS Business after implementation of the Proposal, and the potential benefits of the Youzan Technology Listing (in particular, the listing of the entire Youzan Technology Shares) and the Proposal for the Scheme Shareholders as stated in the paragraph headed “3. REASONS AND BENEFITS OF THE PROPOSAL” in the Rule 3.5 Announcement;
(v) the value of the Payment & Other Business as evaluated by the Valuer, and the historical and the then current trading multiples of certain of its respective comparable companies as at the Rule 3.5 Announcement Valuation Reference Date; and
(vi) the fact that the Scheme Consideration could provide a partial exit to the Scheme Shareholders.
2.2 Updated estimated value of Youzan Technology Shares and updated valuation of the Payment & Other Business as at the Updated Valuation Reference Date

Solely for illustration and reference purposes, the Valuer (being Jones Lang LaSalle Corporate Appraisal and Advisory Limited) has updated the estimated value of Youzan Technology Shares and the valuation of the Payment & Other Business based on the Updated Valuation Reference Date, being 30 June 2021.

Updated estimated value of Youzan Technology Shares

Based on the Updated Youzan Technology Share Value Assessment Report prepared by the Valuer solely for reference purposes, the updated estimated value of each Youzan Technology Share and all the issued shares in Youzan Technology as at the Updated Valuation Reference Date, being 30 June 2021 (on the basis of 1,699,463,094 Youzan Technology Shares in issue, after taking into account the proposed issuance of Youzan Technology Shares under the Youzan Technology Share Award Plan B, AntiDilution Issue and Youzan Technology RSU Plan C but before taking into account the proposed offering of up to a maximum of 84,973,000 new shares under the Youzan Technology Offering) is RMB21.76 (equivalent to approximately HK$26.2 applying the Reference Exchange Rate) (being the Updated Youzan Technology Reference Value) and RMB36,975,000,000 (equivalent to approximately HK$44,528,992,500 applying the Reference Exchange Rate) respectively.

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The offer price range and the final offer price for the Youzan Technology Offering will be determined by Youzan Technology and the global coordinator(s) and bookrunner(s) engaged for the Youzan Technology Offering through a price discovery process typically undertaken in an offering of shares of this kind, which will be independent from the preparation of the Updated Youzan Technology Share Value Assessment Report by the Valuer. Accordingly, the offer price range in the Youzan Technology Offering to be contained in the prospectus to be issued by Youzan Technology for the Youzan Technology Listing and the final offer price for the Youzan Technology Offering may be higher or lower than the updated estimated value of the Youzan Technology Shares assessed by the Valuer as set out in the Updated Youzan Technology Share Value Assessment Report.

In addition , the Updated Youzan Technology Reference Value estimated by the Valuer also does not represent the trading price of the Youzan Technology Shares immediately following completion of the Youzan Technology Listing or at any time. Upon the Youzan Technology Listing, the trading price of Youzan Technology Shares may fluctuate subject to prevailing market conditions and may materially differ from the updated value estimated by the Valuer.

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Updated valuation of the Payment & Other Business

Based on the Updated POB Valuation Report prepared by the Valuer solely for reference purposes, the updated value of the Payment & Other Business (being the remaining business carried out by China Youzan assuming the Distribution had been completed) as at the Updated Valuation Reference Date (being 30 June 2021) as evaluated by the Valuer is RMB2,050,000,000 (equivalent to approximately HK$2,468,815,000 applying the Reference Exchange Rate).

The foregoing paragraph is subject to and should be read in conjunction with the bases, limitations and assumptions set out in the Updated POB Valuation Report in Annex II of this Announcement. The valuation of the Payment & Other Business and the qualification and experience of the Valuer have been reported on by the Financial Adviser, the full text of which is set out in Annex II of this Announcement.

Pursuant to Rule 10 of the Takeovers Code, (i) the unaudited revenue from contracts with customers within the scope of HKFRS 15 (excluding transaction fee income from merchants) of Youzan Technology Group for the period from 1 July 2020 to 30 June 2021; (ii) the unaudited accounting balances of Youzan Technology Group as at 30 June 2021, including (a) loan to a director; (b) loan to an employee; (c) financial asset at fair value through other comprehensive income; (d) financial assets at fair value through profit or loss; (e) earnest money paid for potential investments; (f) loan to others (included in prepayments, deposits and other receivables); (g) amount due from a related company; (h) amount due from a fellow subsidiary; (i) restricted bank balances; (j) time deposit; (k) bank and cash balances; (l) amount due to fellow subsidiaries; (m) amount due to noncontrolling shareholders of subsidiaries; (n) amount due to China Youzan Limited; and (o) lease liabilities; (iii) the unaudited revenue from contracts with customers within the scope of HKFRS 15 from 1 July 2020 to 30 June 2021 (excluding transaction fee income from Youzan Technology Group); and (iv) unaudited accounting balances of China Youzan Group’s (excluding Youzan Technology Group) as at 30 June 2021 including (a) investments in associates; (b) financial assets at fair value through other comprehensive income; (c) amount due from a non-controlling shareholder of subsidiaries; (d) amount due from a subsidiary of Youzan Technology Group; (e) amount due from Youzan Technology Inc.; (f) receivable from others (included in prepayments, deposits and other receivables); (g) restricted bank balances; (h) balances with central bank; (i) bank and cash balances; (j) amount due to a subsidiary of Youzan Technology Group; (k) lease liabilities; and (l) settlement obligations, as respectively set out in the Updated Youzan Technology Share Value Assessment Report and the Updated POB Valuation Report each constitutes a profit forecast (the “ Unaudited Financial Figures ”), and is required to be reported on by each of the independent financial adviser of China Youzan and auditors or accountants of China Youzan in accordance with Rule 10.1 and Rule 10.2 of the Takeovers Code.

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The Unaudited Financial Figures have been reported on by RSM, the auditors of China Youzan, and Red Sun Capital, the Independent Financial Adviser. RSM has reported that, so far as the accounting policies and calculations are concerned, the Unaudited Financial Figures have been properly compiled in accordance with the bases adopted by the Directors as set out in the appendix of its comfort letter, and is presented on a basis in all material respects with the accounting policies normally adopted by the China Youzan Group as set out in the audited consolidated financial statements of China Youzan Limited for the year ended 31 December 2020.

Red Sun Capital has discussed with the Board the bases upon which the Unaudited Financial Figures were prepared. Red Sun Capital has also considered the letter on the Unaudited Financial Figures dated 30 August 2021 issued by RSM, the auditors of China Youzan, to China Youzan, which stated that, so far as the accounting policies and calculations are concerned, the Unaudited Financial Figures have been properly compiled in accordance with the bases adopted by the Directors as set out in the appendix of the comfort letter issued by RSM, and is presented on a basis consistent in all material respects with the accounting policies normally adopted by the China Youzan Group as set out in the audited consolidated financial statements of China Youzan Limited for the year ended 31 December 2020. Based on the above, Red Sun Capital is satisfied that the Unaudited Financial Figures, for which the Directors are solely responsible, have been made with due care and consideration.

The comfort letters issued by each of RSM and Red Sun Capital have been lodged with the Executive and the text of which are respectively set out in Annex III of this Announcement.

Each of RSM and Red Sun Capital has given and has not withdrawn their consent to the issue of this Announcement with the inclusion of its letter and references to its name in the form and context in which they appear in this Announcement.

Comparison of value

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lapsed from the Announcement Date up to and immediately before the Scheme Effective Date, and assuming there is no other change in (i) the total number of China Youzan Shares in issue and (ii) the total number of Youzan Technology Shares held by China Youzan between the Announcement Date and the Record Date, each China Youzan Shareholder will be entitled to receive 0.05077265 Youzan Technology Share for every China Youzan Share under the Distribution.

Based on the above, the Aggregate Amount per Scheme Share to be received by a Scheme Shareholder for every Scheme Share cancelled under the Proposal (being the theoretical total value of (i) 0.05077265 Youzan Technology Share for every China Youzan Share under the Distribution multiplied by the Updated Youzan Technology Reference Value, being HK$26.2 per Youzan Technology Share (based on a total of 1,699,463,094 Youzan Technology Shares in issue, after the proposed issuance of Youzan Technology Shares under the Youzan Technology Share Award Plan B, AntiDilution Issue and Youzan Technology RSU Plan C but before the proposed offering of up to a maximum of 84,973,000 new shares under the Youzan Technology Offering), together with (ii) the Scheme Consideration in cash) is equivalent to HK$1.4654 and represents:

(a) a premium of approximately 100.7% over the closing price of HK$0.73 per China Youzan Share as quoted on the Stock Exchange on the Last Trading Day;
(b) a discount of approximately 1.0% to the closing price of HK$1.48 per China Youzan Share as quoted on the Stock Exchange on the Updated Valuation Reference Date, being 30 June 2021;
(c) a premium of approximately 48.0% over the average closing price of approximately HK$0.99 per China Youzan Share based on the daily closing prices as quoted on the Stock Exchange for the 30 trading days up to and including the Last Trading Day;
(d) a premium of approximately 19.1% over the average closing price of approximately HK$1.23 per China Youzan Share based on the daily closing prices as quoted on the Stock Exchange for the 60 trading days up to and including the Last Trading Day;
(e) a discount of approximately 3.0% to the average closing price of approximately HK$1.51 per China Youzan Share based on the daily closing prices as quoted on the Stock Exchange for the 90 trading days up to and including the Last Trading Day;
(f) a discount of approximately 17.7% to the average closing price of approximately HK$1.78 per China Youzan Share based on the daily closing prices as quoted on the Stock Exchange for the 120 trading days up to and including the Last Trading Day;

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(g) a discount of approximately 55.7% to the closing price of HK$3.31 per China Youzan Share as quoted on the Stock Exchange on the Rule 3.5 Announcement Last Trading Day;
(h) a discount of approximately 28.5% to the closing price of HK$2.05 per China Youzan Share as quoted on the Stock Exchange on the Rule 3.5 Announcement Valuation Reference Date, being 30 November 2020;
(i) a premium of approximately 486.2% over the unaudited consolidated NAV attributable to owners of China Youzan of RMB0.21 (equivalent to approximately HK$0.25 applying the Reference Exchange Rate) per China Youzan Share based on the interim report of China Youzan for the six months ended 30 June 2021 (which, for the avoidance of doubt, has not reflected the effect of the Distribution);
(j) a premium of approximately 463.6% over the audited consolidated NAV attributable to owners of China Youzan as at 31 December 2020 of RMB0.22 (equivalent to approximately HK$0.26 applying the Reference Exchange Rate) per China Youzan Share based on the 2020 Annual Report (which, for the avoidance of doubt, has not reflected the effect of the Distribution); and
(k) a premium of approximately 486.2% over the audited consolidated NAV attributable to owners of China Youzan as at 31 December 2019 of RMB0.21 (equivalent to approximately HK$0.25 applying the Reference Exchange Rate) per China Youzan Share based on the 2019 Annual Report (which, for the avoidance of doubt, has not reflected the effect of the Distribution).

2.3 Highest and Lowest Prices in trading of China Youzan Shares

During the six-month period preceding the Rule 3.5 Announcement Date and up to the Announcement Date, the highest closing price of China Youzan Shares as quoted on the Stock Exchange was HK$4.50 on 17 February 2021, and the lowest closing price of China Youzan Shares as quoted on the Stock Exchange was HK$0.71 on 23 August 2021.

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2.4 China Youzan Options

As at the Announcement Date:

(a) there are no outstanding China Youzan Options under the China Youzan 2012 Share Option Scheme; and
(b) there are an aggregate of 292,804,000 outstanding China Youzan Options which have been granted under the China Youzan 2019 Option Scheme, each entitling an option holder to subscribe for one China Youzan Share, of which (i) 100,000,000 outstanding China Youzan Options were granted to Mr. Zhu Ning, (ii) 20,000,000 outstanding China Youzan Options were granted to Mr. Cui Yusong; (iii) 15,000,000 outstanding China Youzan Options were respectively granted to each of Mr. Yu Tao and Ms. Ying Hangyan; (iv) 15,000,000 outstanding China Youzan Options were granted to Mr. Zhou Kai (a Senior Vice President of Youzan Technology); (v) 11,252,000 outstanding China Youzan Options were granted to Mr. Huan Fang; and (vi) the remaining 116,552,000 outstanding China Youzan Options were granted to certain other employees of the China Youzan Group.

China Youzan does not intend to grant any further China Youzan Options under the China Youzan Option Schemes up to the earlier of the Scheme Effective Date or the date of which the Scheme otherwise lapses.

Pursuant to the terms of the Optionholder Irrevocable Undertakings and the China Youzan Options Conversion Proposal, it is expected that there will not be any further exercise of the 292,804,000 outstanding China Youzan Options (whether vested or unvested) by the China Youzan Optionholders up to the Scheme Effective Date or the date on which the Scheme lapses.

Accordingly, no offer will be made by the Offeror in respect of the outstanding China Youzan Options (whether or not vested) as part of the Proposal or the take private of China Youzan. Instead, it is proposed that the China Youzan Options Conversion Proposal be implemented. Upon the effectiveness of the Youzan Technology RSU Plan C, all such outstanding China Youzan Options will lapse and the entitlements of the China Youzan Optionholders will be substituted by the Plan C See Through Entitlements of such China Youzan Optionholders under the proposed Youzan Technology RSU Plan C.

Pursuant to the terms of the China Youzan 2019 Option Scheme, the China Youzan Options will lapse automatically upon the Scheme becoming effective.

In the event that the China Youzan Options Conversion Proposal fails to become effective as a result of the failure to fulfil any of the outstanding Plan C Effectiveness Conditions, but the Scheme subsequently becomes effective, the China Youzan Options will lapse automatically upon the Scheme becoming effective.

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2.5 Confirmation of financial resources

As at the Announcement Date, there are 14,688,042,686 Scheme Shares in issue. Assuming there will be no changes in the total number of China Youzan Shares in issue and the shareholding in China Youzan on or prior to the Record Date, the maximum amount of cash required for the Offeror to effect the Proposal is therefore approximately HK$1,985,823,371.

The Offeror intends to finance the entire cash amount required for the Proposal by external debt financing.

Messis Capital Limited, as the financial adviser to the Offeror in connection with the Scheme, is satisfied that sufficient financial resources are available to the Offeror for satisfying its obligations in respect of the full implementation of the Proposal in accordance with its terms.

2.6 Updates on the Scheme Pre-Conditions and fulfilment of all Scheme Pre-Conditions

The making of the Proposal is conditional upon the satisfaction or waiver (as applicable) of the Scheme Pre-Conditions. As at the Announcement Date, the only outstanding Scheme Pre-Condition is the Scheme Pre-Condition set out under paragraph (a) in the paragraph headed “2. TERMS OF THE PROPOSAL – 2.6 Scheme Pre-Conditions” in the Rule 3.5 Announcement (being, the Stock Exchange having granted its in-principle approval for the listing of the Youzan Technology Shares on the Stock Exchange for the Youzan Technology Listing).

As the Youzan Technology Listing is now proposed to be undertaken together with the Youzan Technology Offering, it is proposed that the prospectus for the Youzan Technology Listing will only be issued after the despatch of the Scheme Document but before the Second SGM and the Court Meeting. The Stock Exchange’s in-principle approval for the listing of the Youzan Technology Shares on the Stock Exchange for the Youzan Technology Listing will therefore be obtained after the despatch of the Scheme Document and before the registration and issuance of the prospectus for the Youzan Technology Listing. The Offeror has therefore requested the Board to revise a term of the Proposal by way of removing the Scheme Pre-Condition set out under paragraph (a) in the paragraph headed “2. TERMS OF THE PROPOSAL – 2.6 Scheme PreConditions” in the Rule 3.5 Announcement.

Accordingly, all Scheme Pre-Conditions have been fulfilled as at the Announcement Date.

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2.7 Updates on the Scheme Conditions

The Scheme will become binding and effective on China Youzan and all Scheme Shareholders upon the satisfaction or waiver (as applicable) of the Scheme Conditions. There is no change to the Scheme Conditions, except that:

(i) the Scheme Condition set out under paragraph (h) in the paragraph headed “2. TERMS OF THE PROPOSAL – 2.7 Scheme Conditions” in the Rule 3.5 Announcement shall be construed to mean the Stock Exchange having granted its formal approval for the listing of, and permission to deal in, the Youzan Technology Shares on the Stock Exchange for the Youzan Technology Listing to be carried out by way of an offering of new shares; and
(ii) a new Scheme Condition as set out under paragraph (o) in this paragraph is added in respect of the underwriting agreements being entered into between, among others, Youzan Technology and the underwriters for the Youzan Technology Offering and having become effective and unconditional and not having been terminated by the latest time at which termination is permitted thereunder.

The revised Scheme Conditions are set out below:

Shareholders’ approval

(a) the approval of the Scheme (by way of poll) by a majority in number of Scheme Shareholders representing not less than three-fourths in value of the Scheme Shares held by the Scheme Shareholders present and voting either in person or by proxy at the Court Meeting;
(b) (i) the approval of the Scheme (by way of poll) by the Disinterested Scheme Shareholders holding at least 75% of the votes attaching to the Disinterested Scheme Shares that are voted either in person or by proxy at the Court Meeting; and (ii) the number of votes cast (by way of poll) by the Disinterested Scheme Shareholders present and voting either in person or by proxy at the Court Meeting against the resolution to approve the Scheme at the Court Meeting is not more than 10% of the votes attaching to all Disinterested Scheme Shares held by all the Disinterested Scheme Shareholders;
(c) the passing of a special resolution by a majority of not less than three-fourths of the votes cast by the China Youzan Shareholders present and voting, in person or by proxy, at the Second SGM to approve, among other things, (i) the reduction of the issued share capital of China Youzan by the cancellation of the Scheme Shares, and (ii) the restoration of the issued share capital of China Youzan to the amount immediately prior to the cancellation of the Scheme Shares by the issuance to the Offeror such number of new China Youzan Shares as is equal to the number of Scheme Shares cancelled, credited as fully paid at par;

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(d) the passing of a special resolution by a majority of not less than three-fourths of the votes cast by the China Youzan Shareholders present and voting, in person and by proxy, at the Second SGM to approve (i) the reduction of the share premium of China Youzan by cancellation of the whole amount standing in the share premium account of China Youzan; (ii) the transfer of the credit arising from such share premium reduction to the contributed surplus account of China Youzan; and (iii) the making of the Distribution;

Other Bermuda law requirements

(e) the sanction of the Scheme (with or without modifications) by the Court, and the delivery to the Registrar of Companies in Bermuda of a copy of the Court Order for registration;
(f) the necessary compliance with the procedural requirements and conditions, if any, of Section 46(2) of the Companies Act in relation to the reduction of the issued share capital and the reduction in the share premium of China Youzan referred to in paragraphs (c) and (d) above;

Distribution

(g) the Distribution having been made by China Youzan to the China Youzan Shareholders;

Third party consents and other governmental or regulatory approvals

(h) the Stock Exchange having granted its formal approval for the listing of, and permission to deal in, the Youzan Technology Shares on the Stock Exchange for the Youzan Technology Listing;
(i) all applicable authorisations, approvals, permissions, waivers and consents and all registrations and filings (including without limitation any which are required or desirable under or in connection with any applicable laws or regulations) in connection with the Proposal or its implementation and the withdrawal of listing of the China Youzan Shares from GEM of the Stock Exchange having been made or obtained and remaining in full force and effect;
(j) all necessary third party consents in relation to the Proposal which may be required under any existing contractual obligations to which any member of the China Youzan Group is a party (where any failure to obtain a consent would have a material adverse effect on the implementation of the Proposal or the business of the China Youzan Group as a whole) having been obtained or waived;

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(k) no relevant government, governmental, quasi-governmental, statutory or regulatory body, court or agency having granted any order or made any decision that would make the Proposal void, unenforceable or illegal, or restrict or prohibit the implementation of, or impose any additional material conditions or obligations with respect to, the Proposal (other than such order(s) or decision(s) that would not have a material adverse effect on the legal ability of the Offeror to proceed with the Proposal or the Scheme);

Other conditions

(l) no event having occurred which would make the Proposal or the cancellation of the Scheme Shares void, unenforceable or illegal or which would prohibit the implementation of the Proposal or impose any additional material conditions or obligations with respect to the Proposal or any part thereof or on the cancellation of the Scheme Shares (other than such event(s) that would not have a material adverse effect on the legal ability of the Offeror to proceed with the Proposal);
(m) since the Announcement Date, there having been no material adverse change to the business, financial or trading position of the China Youzan Group taken as a whole (to an extent which is material in the context of the China Youzan Group taken as a whole or in the context of the Proposal);
(n) save in connection with the implementation of the Proposal, the listing of the China Youzan Shares on GEM of the Stock Exchange not having been withdrawn, and no indication having been received from the SFC and/or the Stock Exchange, to the effect that the listing of the China Youzan Shares on GEM of the Stock Exchange is or is likely to be withdrawn; and

(o) the underwriting agreements being entered into between, among others, Youzan Technology and the underwriters for the Youzan Technology Offering and having become effective and unconditional and not having been terminated by the latest time at which termination is permitted thereunder. Scheme Conditions (a) to (h) (inclusive) cannot be waived in any event. The Offeror reserves the right (but is not obliged) to waive any of Scheme Conditions (i) to (o) (inclusive) either in whole or in part, and either generally or in respect of any particular matter. All of the Scheme Conditions will have to be satisfied or waived, as applicable, on or before the Scheme Longstop Date, failing which the Proposal and the Scheme will lapse. China Youzan has no right to waive any of the Scheme Conditions.

In respect of Scheme Condition (i), as at the Announcement Date, the Offeror is not aware of any authorisations, approvals, permissions, waivers, consents, registrations or filings (including without limitation any which are required or desirable under or in connection with any applicable laws or regulations) which may be required, save for the those already set out above as a Scheme Condition.

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In respect of Scheme Condition (j), as at the Announcement Date, the Offeror is not aware of any necessary third party consents in relation to the Proposal which may be required under any existing contractual obligations to which any member of the China Youzan Group is a party, save for the third party consents already set out above as a Scheme Condition.

Pursuant to Note 2 to Rule 30.1 of the Takeovers Code, the Offeror may only invoke any or all of the Scheme Conditions as a basis for not proceeding with the Scheme if the circumstances which give rise to a right to invoke any such Scheme Condition are of material significance to the Offeror in the context of the Proposal.

2.8 No change to the Distribution

No change is made to the terms of the Distribution under the Proposal.

Under the Proposal, subject to the fulfilment of the Distribution Conditions, China Youzan will make the Distribution which shall be effected by way of a distribution in specie of all of the Youzan Technology Shares held by China Youzan to all the China Youzan Shareholders (including the China Youzan Excluded Shareholders and/or the China Youzan Excluded Shareholders Entities) as at the Record Date. All of the Youzan Technology Shares are now proposed to be listed on the Main Board of the Stock Exchange by way of an offering of new shares pursuant to the Youzan Technology Listing.

Notwithstanding the Youzan Technology Offering, the pro rata entitlement of Youzan Technology Shares to be distributed in respect of each China Youzan Share pursuant to the Distribution shall not be affected and shall remain unchanged.

The China Youzan Shareholders whose names appear on the register of members of China Youzan as at the Record Date will receive their pro rata entitlement of all of the Youzan Technology Shares held and to be distributed by China Youzan as at the Record Date, which will be calculated using the following formula:

==> picture [75 x 31] intentionally omitted <==

where:

A = the total number of Youzan Technology Shares held by China Youzan as at the Record Date (including, for the avoidance of doubt, the 91,087,206 Youzan Technology Shares that may be issued to China Youzan under the Anti-Dilution Issue proposed to be effected prior to the Record Date, if approved)

B = the total number of China Youzan Shares in issue as at the Record Date (which is before the proposed issuance of new Youzan Technology Shares under the Youzan Technology RSU Plan C and the proposed offering of new shares pursuant to the Youzan Technology Offering)

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C = the approximate number of Youzan Technology Shares entitled to be received by China Youzan Shareholders (which, for the avoidance of doubt, includes the China Youzan Excluded Shareholders and/or the China Youzan Excluded Shareholders Entities) for every China Youzan Share held as at the Record Date

It is proposed that fractions of a Youzan Technology Share will not be distributed to the China Youzan Shareholders under the Distribution. It is intended that fractional entitlements of China Youzan Shareholders to Youzan Technology Shares under the Distribution will be aggregated (and if necessary, rounded down to the nearest whole number of a Youzan Technology Share) and retained by China Youzan for its benefit.

For illustration purposes only , on the basis of (a) 17,260,003,617 China Youzan Shares in issue as at the Announcement Date; (b) 785,249,026 Youzan Technology Shares held by China Youzan as at the Announcement Date (representing approximately 51.90% of the total issued share capital of Youzan Technology as at the Announcement Date) plus 91,087,206 Youzan Technology Shares proposed to be issued to China Youzan pursuant to the Youzan Technology Share Award Plan B, together amounting to an aggregate of 876,336,232 Youzan Technology Shares (representing approximately 51.90% of the total issued share capital of Youzan Technology after the proposed issuance of the total number of Youzan Technology Shares under the Youzan Technology Share Award Plan B and Anti-Dilution Issue, but prior to the dilution impact resulting from the proposed issuance of new Youzan Technology Shares under the Youzan Technology RSU Plan C and the proposed offering of up to a maximum of 84,973,000 new shares under the Youzan Technology Offering); and (c) none of the outstanding China Youzan Options will be exercised or lapsed from the Announcement Date up to the Scheme Effective Date, and assuming there is no other change in (i) the total number of China Youzan Shares in issue and (ii) the total number of Youzan Technology Shares held by China Youzan between the Announcement Date and the Record Date, each China Youzan Shareholder will be entitled to receive 0.05077265 Youzan Technology Share for every China Youzan Share under the Distribution. This means that, for every 19.69564077 China Youzan Shares held by a China Youzan Shareholder, 1 Youzan Technology Share will be distributed to such China Youzan Shareholder.

As fractions of a Youzan Technology Share will not be distributed to the China Youzan Shareholders under the Distribution, it is intended that for any holding of less than 19.69564077 China Youzan Shares, no Youzan Technology Share will be distributed under the Distribution accordingly, and any entitlement of such China Youzan Shareholders to Youzan Technology Share will be retained for the benefit of China Youzan.

The Youzan Technology Shares to be distributed by China Youzan under the Distribution will be fully paid and will be distributed free from all liens, charges and encumbrances and together with all rights attaching to them, including the right to receive all dividends and other distributions, if any, made or paid by reference to a record time at or after the Record Date.

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Distribution Conditions

The Distribution will be subject to the following Distribution Conditions:

(a) the passing of a special resolution by a majority of not less than three-fourths of the votes cast by the China Youzan Shareholders present and voting, in person and by proxy, at the Second SGM to approve (i) the reduction of the share premium of China Youzan by cancellation of the whole amount standing in the share premium account of China Youzan, (ii) the transfer of the credit arising from such share premium reduction to the contributed surplus account of China Youzan, and (iii) the making of the Distribution;
(b) the Scheme (with or without modifications) having been sanctioned by the Court and the order of the Court in relation thereto having been granted; and
(c) the Stock Exchange having granted its formal approval for the listing of, and permission to deal in, the Youzan Technology Shares on the Stock Exchange pursuant to the Youzan Technology Listing.

There is no change to the Distribution Conditions, save that the Distribution Condition set out under paragraph (c) in the paragraph headed “2. TERMS OF THE PROPOSAL – 2.8 The Distribution” in the Rule 3.5 Announcement shall be construed to mean the Stock Exchange having granted its formal approval for the listing of, and permission to deal in, the Youzan Technology Shares on the Stock Exchange for the Youzan Technology Listing to be carried out by way of an offering of new shares.

None of the Distribution Conditions can be waived in any event.

It is currently expected that China Youzan will instruct the share registrar of Youzan Technology to effect the Distribution after the Stock Exchange has granted its formal approval for the listing of, and permission to deal in, the Youzan Technology Shares on the Stock Exchange pursuant to the Youzan Technology Listing (i.e. fulfilment of Scheme Condition (h)) and the Court has sanctioned the Scheme and granted the order in relation thereto (i.e. fulfilment of the first part of Scheme Condition (e)). The process of transfer of the Youzan Technology Shares held by China Youzan to the China Youzan Shareholders will take approximately two (2) Business Days. After the Distribution is made to the China Youzan Shareholders (i.e. fulfilment of Scheme Condition (g)), a copy of the Court Order will be delivered to the Registrar of Companies in Bermuda for registration (i.e. fulfilment of the last part of Scheme Condition (e)), and the Scheme will become effective and the Youzan Technology Listing will become effective.

The Scheme Document, which will be despatched to the Scheme Shareholders in due course, will set out the details of the Distribution, including the arrangements regarding the making of the Distribution and overseas China Youzan Shareholders’ entitlements thereto and the expected timetable of the Distribution, the Scheme and the Youzan Technology Listing.

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2.9 Approved Special Deal Arrangement in respect of the Rollover Arrangement to exclude the China Youzan Excluded Shareholders and/or the China Youzan Excluded Shareholders Entities from the Scheme

Each of the China Youzan Excluded Shareholders, each being a party acting in concert or presumed to be acting in concert with the Offeror under the definition of “acting in concert” under the Takeovers Code, has (i) agreed with the Offeror that the China Youzan Shares held by himself/herself/it and the China Youzan Excluded Shareholders Entities owned or controlled by him/her/it (if relevant) (the “ Excluded Shares ”) will be excluded from the Scheme and will not form part of the Scheme Shares, and (ii) indicated that if the Scheme is approved at the Court Meeting, to exercise or procure the exercise of all voting rights attached to the Excluded Shares held by himself/herself/ it and his/her/its controlled entities or nominees (where relevant) at the Second SGM in favour of all the resolutions which are necessary to implement or otherwise relate to the Proposal.

However, for the avoidance of doubt, the China Youzan Excluded Shareholders and/or the China Youzan Excluded Shareholders Entities whose names appear on the register of members of China Youzan as at the Record Date will be entitled to receive their pro rata entitlement of the Youzan Technology Shares held and to be distributed by China Youzan under the Distribution.

The China Youzan Excluded Shareholders comprise Mr. Zhu Ning, Mr. Cui Yusong, Mr. Cao Chunmeng, Mr. Yan Xiaotian, Mr. Yu Tao, Ms. Ying Hangyan (each being an executive Director), Mr. Guan Guisen (being a former Director), Mr. Huang Rongrong (being a former director of Youzan Technology), Mr. Huan Fang (a director of Youzan Technology), Mr. Zhou Kai and Youzan Teamwork.

As disclosed in the joint announcement dated 6 May 2021 issued by the Offeror and China Youzan, the Rollover Arrangement was approved by the relevant Disinterested Scheme Shareholders at the First SGM and consented to by the Executive as a special deal under Rule 25 of the Takeovers Code. Accordingly, the Rollover Arrangement will be implemented subject to and upon the Scheme becoming effective.

WARNING: Shareholders and potential investors of China Youzan and Youzan Technology should be aware that, even if the Proposal is made, the implementation of the Proposal (including the effectiveness of the Scheme), is subject to the satisfaction or waiver (as applicable) of the Scheme Conditions, and therefore the Proposal may or may not be implemented and the Scheme may or may not become effective. Shareholders and potential investors of China Youzan and Youzan Technology should therefore exercise caution when dealing in the securities of China Youzan and Youzan Technology. Persons who are in doubt as to the action they should take should consult their stockbrokers, bank managers, solicitors or other professional advisers.

– 30 –

3. REASONS AND BENEFITS FOR COMBINING THE PROPOSAL WITH THE YOUZAN TECHNOLOGY LISTING

4. INFORMATION ON CHINA YOUZAN

4.1 General Information on China Youzan

China Youzan Shares are listed on GEM of the Stock Exchange. China Youzan is an investment holding company. The China Youzan Group, of which China Youzan forms part, mainly focuses on offering online and offline merchants suites of comprehensive solutions comprising third party payments and variety of SaaS products and comprehensive service through its e-commerce platform, like marketing and customer engagement tools to facilitate the process of transactions between merchants and their customers.

4.2 Shareholding Information of China Youzan

As at the Announcement Date, there are 17,260,003,617 China Youzan Shares in issue. Other than the 292,804,000 outstanding China Youzan Options granted under the China Youzan 2019 Share Option Scheme, China Youzan does not have any outstanding options, warrants, convertible securities, or other relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in issue.

On the assumption that there is no other change in the total number of China Youzan Shares in issue and no other change in the shareholding of China Youzan between the Announcement Date and the Scheme Effective Date, the table below sets out the shareholding structure of China Youzan as at the Announcement Date and immediately upon completion of the Proposal (and the Scheme becoming effective):

– 31 –

			Immediately upon completion of	Immediately upon completion of
			the Proposal (and the Scheme
			becoming effective) (assuming none
			of the outstanding China Youzan
Shareholders	As at the Announcement Date		Options are exercised)
		Approximate %		Approximate %
	Number of	of the issued	Number of	of the issued
	China Youzan	share capital of	China Youzan	share capital of
	Shares	China Youzan	Shares	China Youzan
Offeror_(Note 2)_	–	–	14,688,042,686	85.10
Whitecrow_(Note 2)_	1,440,601,703	8.35	1,440,601,703	8.35
Mr. Cao Chunmeng_(Note 1)_	53,420,000	0.31	53,420,000	0.31
Mr. Yan Xiaotian_(Note 1)_	21,640,000	0.13	21,640,000	0.13
Ms. Ying Hangyan_(Note 1)_	852,000	0.00	852,000	0.00
Mighty Advantage Enterprises Limited_(Note 3)_	411,592,000	2.38	411,592,000	2.38
V5. Cui Investment Ltd.(Note 4)	241,885,127	1.40	241,885,127	1.40
Youzan Teamwork Inc.(Note 5)	363,170,101	2.10	363,170,101	2.10
Rory Huang Investment Ltd.(Note 6)	25,800,000	0.15	25,800,000	0.15
Mr. Huan Fang	3,000,000	0.02	3,000,000	0.02
Mr. Zhou Kai	10,000,000	0.06	10,000,000	0.06
Sub-total of Offeror and parties acting in
concert with the Offeror not subject to
the Scheme (i.e. China Youzan Excluded
Shareholders)	2,571,960,931	14.90	17,260,003,617	100.00
Aves Capital, LLC_(Note 8)_	201,123,478	1.17	–	–
Franchise Fund LP_(Note 8)_	686,680,679	3.98	–	–
Tembusu HZ II Limited_(Note 8)_	100,000,000	0.58	–	–
Matrix Partners China III, L.P.(Note 8)	180,000,000	1.04	–	–
Matrix Partners China III-A, L.P.(Note 8)	20,000,000	0.12	–	–
GCYZ Holdings Limited_(Note 8)_	257,735,849	1.49	–	–
Haitong International Securities Company
Limited_(Note 9)_	1,252,000	0.01	–	–
Dr. Fong Chi Wah_(Note 1)_	1,000,000	0.01	–	–
Mr. Gu Jiawang_(Note 1)_	1,000,000	0.01	–	–
Mr. Zhu Kun_(Note 10)_	9,207,528	0.05
Sub-total of other parties acting or presumed
to be acting in concert with the Offeror
subject to the Scheme	1,457,999,534	8.46	–	–
Aggregate number of China Youzan Shares
held by the Offeror and parties acting or
presumed to be acting in concert with the
Offeror	4,029,960,465	23.36	17,260,003,617	100.00
China Youzan Trustee_(Note 7)_	127,006,600	0.74	–	–
Other Disinterested Scheme Shareholders	13,103,036,552	75.90	–	–
Total number of Scheme Shares held by the
Disinterested Scheme Shareholders	13,230,043,152	76.64	–	–
Total number of China Youzan Shares	17,260,003,617	100.00	17,260,003,617	100.00
Total number of Scheme Shares	14,688,042,686	85.10	–	–

– 32 –

Notes:

Each a Director.
A company beneficially wholly-owned by Mr. Zhu Ning, a Director and the sole beneficial owner of the Offeror.
A company beneficially wholly-owned by Mr. Guan Guisen, a former Director.
A company beneficially wholly-owned by Mr. Cui Yusong, a Director.
A company beneficially owned as to 26% by Mr. Zhu Ning, 8% by Mr. Cui Yusong, 8% by Mr. Yu Tao and 8% by Ms. Ying Hangyan (each a Director), 38% by Mr. Huang Rongrong (a former director of Youzan Technology), 6% by Mr. Huan Fang (a director of Youzan Technology) and 6% by Mr. Zhou Kai.
A company beneficially wholly-owned by Mr. Huang Rongrong, a former director of Youzan Technology.
The China Youzan Shares held by the China Youzan Trustee are held on trust for the China Youzan 2018 Share Award Plan. The China Youzan 2018 Share Award Plan was adopted by China Youzan on 31 May 2018 for the purpose of recognising the contributions by eligible persons of the China Youzan 2018 Share Award Plan and providing them with incentives in order to retain them for continuing operation and development of the China Youzan Group, and attracting suitable personnel for further development of the China Youzan Group.

As at the Announcement Date, the China Youzan Trustee holds a total of 127,006,600 China Youzan Shares as trustee under the China Youzan 2018 Share Award Plan, comprising:

(i) a total of 85,406,600 China Youzan Shares held as China Youzan Awarded Shares granted but yet to be vested with the relevant grantees;
(ii) a total of 7,090,800 China Youzan Shares held as China Youzan Awarded Shares which have vested but yet to be transferred to the relevant grantees; and
(iii) a total of 34,509,200 China Youzan Shares held as a reserve for future awards under the China Youzan 2018 Share Award Plan (the “ Reserve ”).

Out of the 127,006,600 China Youzan Shares held by the China Youzan Trustee as trustee under the China Youzan 2018 Share Award Plan, 17,600,000 China Youzan Shares are held as China Youzan Awarded Shares granted but yet to be vested with Mr. Huan Fang, who is one of the China Youzan Excluded Shareholders and a party acting or presumed to be acting in concert with the Offeror under the definition of “acting in concert” under the Takeovers Code. It is expected that such unvested 17,600,000 China Youzan Awarded Shares will not vest with Mr. Huan Fang during the offer period in respect of the Proposal. None of the other China Youzan Awarded Shares held by the China Youzan Trustee as trustee are granted to or are vested with the Offeror or parties acting or presumed to be acting in concert with the Offeror.

Subject to compliance with any relevant requirements under the Takeovers Code, the GEM Listing Rules and all other applicable laws and regulations from time to time, the Board may grant further awards under the China Youzan 2018 Share Award Plan out of the pool of existing China Youzan Shares in the Reserve to either existing or future eligible persons from time to time.

However, the Board does not intend to allot or issue any further new China Youzan Shares to the China Youzan Trustee for the purpose of the China Youzan 2018 Share Award Plan up to the Scheme Effective Date or the date of which the Scheme otherwise lapses.

– 33 –

The China Youzan Shares held by the China Youzan Trustee under sub-paragraphs (i) and (iii) above on the Record Date will form part of the Scheme Shares and be subject to and be entitled to participate in the Scheme. Accordingly, subject to the Scheme becoming effective, as part of the Proposal, the China Youzan Trustee will be entitled to receive with respect to those China Youzan Shares (I) its pro-rata entitlement of the Youzan Technology Shares distributed by China Youzan under the Distribution; and (II) the Scheme Consideration for every Scheme Share cancelled under the Scheme. The participation in the Scheme with respect to the China Youzan Shares held by the China Youzan Trustee under sub-paragraph (ii) above will depend on whether or not the corresponding grantees are included as the Scheme Shareholders.

Under the rules of the China Youzan 2018 Share Award Plan, the selected participants shall have no voting rights in respect of any China Youzan Awarded Shares which are yet to be vested.

Under the rules of the China Youzan 2018 Share Award Plan, the China Youzan Trustee is prohibited from exercising the voting rights attached to the China Youzan Shares held by it which are yet to be vested or which form part of the Reserve under the China Youzan 2018 Share Award Plan. Accordingly, the China Youzan Trustee will abstain from voting at the Court Meeting and the Second SGM (other than on behalf of selected participants under the China Youzan 2018 Share Award Plan in respect of their vested China Youzan Awarded Shares).

Each a Youzan Technology Financial Investor, which is or may be regarded as acting in concert with the Offeror as a result of an existing shareholders’ agreement entered into among Youzan Technology together with the existing shareholders of the Youzan Technology in respect of Youzan Technology (which is proposed to be terminated prior to the completion of the Youzan Technology Listing).
A company within the same group as Haitong International Capital (HK) Limited, being the underwriter of the facility provided to the Offeror for the purpose of satisfying payment under the Scheme and which is therefore presumed to be acting in concert with the Offeror under class (9) of the presumptions in the definition of acting in concert under the Takeovers Code.
The brother of Mr. Zhu Ning, who is a party presumed to be acting in concert with the Offeror under class (2) of the presumptions in the definition of acting in concert under the Takeovers Code.
As confirmed by Messis Capital Limited, as at the Announcement Date, members of Messis Capital Limited, being persons acting in concert with the Offeror, do not legally or beneficially own, control or have direction over any China Youzan Shares. Nor were there any borrowing or lending of, or dealing in, China Youzan Shares (or options, rights over China Youzan Shares, warrants or derivatives in respect of them) by any members of Messis Capital Limited during the period commencing from six months prior to the Rule 3.5 Announcement Date up to the Announcement Date.
The percentages of the China Youzan Shares are rounded to the nearest 2 decimal places, and the total number of the percentages may not add up to 100% due to rounding.

– 34 –

4.3 Financial Information of China Youzan

Set out below is a summary of certain financial information of the China Youzan Group extracted from the interim report of China Youzan for the six months ended 30 June 2021, and the annual reports of China Youzan for the two years ended 31 December 2020 and 31 December 2019:

	Six months	Year ended	Year ended
	ended	31 December	31 December
	30 June 2021	2020	2019
			(audited)
	(unaudited)	(audited)	(Re-presented)
	*(RMB’000)*	(RMB’000)	(RMB’000)
Revenue	803,399	1,820,723	1,168,857
Gross profit	487,402	1,082,084	593,402
Loss for the year	(370,053)	(545,653)	(915,569)
	As at	As at	As at
	30 June	31 December	31 December
	2021	2020	2019
			(audited)
	(unaudited)	(audited)	(re-presented)
	*(RMB’000)*	(RMB’000)	(RMB’000)
Total assets	9,942,377	12,212,480	10,498,860
Total liabilities	5,653,796	7,582,381	6,599,813
Net assets	4,288,581	4,630,099	3,899,047

Note:

As previously disclosed by China Youzan in the 2020 Annual Report, China Youzan Group represented certain comparative figures for the year ended 31 December 2019 to conform to the presentation for the year ended 31 December 2020. The new classification of the accounting items is considered to provide a more appropriate presentation of the state of affairs of the China Youzan Group and provide more relevant information to reflect the China Youzan Group’s nature of assets, liabilities, income and expenses.

– 35 –

5. INFORMATION ON YOUZAN TECHNOLOGY

5.1 General Information on Youzan Technology

Youzan Technology is an investment holding company. The Youzan Technology Group is principally engaged in providing a variety of cloud-based commerce services to merchants through its subscription solutions and merchant solutions. Subscription solutions mainly comprise SaaS products designed for merchants of various industries including Youzan WeiMall (有贊微商城), Youzan Retail (有贊零售), Youzan Chain (有贊連鎖), Youzan Beauty (有贊美業), and Youzan Education (有贊教育). Merchant solutions mainly comprise value-added services offered to merchants to address their online and/or offline operational needs. Through its subscription solutions and merchant solutions, merchants can establish online presence, digitalise critical business operations, integrate online/offline activities, take ownership of and manage their online/offline customer traffic, boost customer acquisition and repeat purchases, and enhance operating efficiency.

5.2 Shareholding Information of Youzan Technology

As at the Announcement Date, there are 1,513,127,641 Youzan Technology Shares in issue. Youzan Technology does not have any outstanding options, warrants, convertible securities, or other relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in issue.

On the basis of 1,513,127,641 Youzan Technology Shares in issue as at the Announcement Date and taking into account (a) the proposed transfer of Youzan Technology Shares by Qima Teamwork to Trustee A pursuant to the Youzan Technology Share Award Plan A; (b) the proposed issue of new Youzan Technology Shares under Youzan Technology Share Award Plan B and the Anti-Dilution Issue; (c) the proposed issue of new Youzan Technology Shares under the Youzan Technology RSU Plan C; and (d) a proposed offering of up to a maximum of 84,973,000 new Youzan Technology Shares under the Youzan Technology Offering and as part of the Youzan Technology Listing (representing up to approximately 5% of a total of 1,699,463,094 Youzan Technology Shares in issue immediately prior to the Youzan Technology Offering), and assuming there is no other change in the total number of Youzan Technology Shares and China Youzan Shares in issue and no other change in the shareholding of Youzan Technology and China Youzan between the Announcement Date and the Scheme Effective Date, the table below sets out the shareholding structure of Youzan Technology (i) as at the Announcement Date, (ii) as at the Record Date, and (iii) immediately upon completion of the Youzan Technology Listing and the Proposal (and the Scheme becoming effective) (assuming none of the outstanding China Youzan Options are exercised or lapsed):

– 36 –

					Immediately upon completion	Immediately upon completion
					of the Proposal and the
					Youzan Technology Listing
					(and the Scheme becoming
					effective) (assuming none
					of the outstanding China
	As at the		As at the		Youzan Options	are exercised
Shareholders	Announcement Date		Record Date(Note 1)		or has lapsed)(Note 2)
		Approximate		Approximate		Approximate
	Number of	% of issued	Number	% of issued	Number of	% of issued
	Youzan	share capital	of Youzan	share capital	Youzan	share capital
	Technology	of Youzan	Technology	of Youzan	Technology	of Youzan
	Shares	Technology	Shares	Technology	Shares	Technology
China Youzan	785,249,026	51.90	876,336,232	51.90	245	–
					(Note 4)
Whitecrow	155,833,263	10.30	240,265,623	14.23	313,408,789	17.56
V5. Cui Investment Ltd.	26,165,281	1.73	26,165,281	1.55	38,446,429	2.15
Rory Huang Investment Ltd	5,288,544	0.35	5,288,544	0.31	6,598,478	0.37
Youzan Teamwork	66,835,954	4.42	66,835,954	3.96	85,275,062	4.78
Qima Teamwork	106,428,391	7.03	–	–	–	–
Trustee A_(Note 3)_	–	–	106,428,391	6.30	106,428,391	5.96
Xincheng Investment Limited	32,101,782	2.12	32,101,782	1.90	32,101,782	1.80
Baidu (Hong Kong) Limited	17,737,531	1.17	17,737,531	1.05	17,737,531	0.99
Aves Capital, LLC	21,755,998	1.44	21,755,998	1.29	31,967,569	1.79
Hillhouse KDWD Holdings Limited	75,812,422	5.01	75,812,422	4.49	75,812,422	4.25
Ralston Global Holdings Limited	8,401,392	0.56	8,401,392	0.50	8,401,392	0.47
Hangzhou San Ren Yan Xing
Partnership (LLP) (杭州三仁焱興
投資合夥企業（有限（合夥）)	8,401,392	0.56	8,401,392	0.50	8,401,392	0.47
Franchise Fund LP	30,659,587	2.03	30,659,587	1.82	65,524,184	3.67
Happy Zan Holdings Limited	3,332,997	0.22	3,332,997	0.20	3,332,997	0.19
Tembusu HZ II Limited	90,268,812	5.97	90,268,812	5.35	95,346,077	5.34
Matrix Partners China III, L.P.	38,148,261	2.52	38,148,261	2.26	47,287,338	2.65
Matrix Partners China III-A, L.P.	4,238,696	0.28	4,238,696	0.25	5,254,149	0.29
GCYZ Holdings Limited	6,118,075	0.40	6,118,075	0.36	19,204,007	1.08
GCQM Holdings Limited	30,350,237	2.01	30,350,237	1.80	30,350,237	1.70
Trustee C_(Note 4)_	–	–	–	–	10,815,887	0.61
Other China Youzan Shareholders
under the Distribution_(Note 5)_	–	–	–	–	697,768,736	39.10
Public shareholders under
the Youzan Technology Offering	–	–	–	–	84,973,000	4.76
					(Note 7)
Total	1,513,127,641	100	1,688,647,207	100	1,784,436,094	100

– 37 –

Notes:

(1) Assuming each of (a) the proposed transfer of Youzan Technology Shares from Qima Teamwork to Trustee A pursuant to the Youzan Technology Share Award Plan A; and (b) the proposed issues of new Youzan Technology Shares pursuant to Youzan Technology Share Award Plan B and the AntiDilution Issue have been completed prior to the Record Date.
(2) After taking into account the effecting of the Distribution and assuming the issue of new Youzan Technology Shares pursuant to the China Youzan Option Conversion Proposal and the Youzan Technology RSU Plan C has been completed (after the Distribution being made and the Scheme becoming effective but prior to the Youzan Technology Listing).
(3) Trustee A will be holding the Youzan Technology Shares for the grantees under and pursuant to the Youzan Technology Share Award Plan A.
(4) Assuming the proposed issue of Youzan Technology Shares pursuant to the China Youzan Option Conversion Proposal and the Youzan Technology RSU Plan C has been completed after the Distribution being made and the Scheme becoming effective but prior to the Youzan Technology Listing.
(5) This represents the other China Youzan Shareholders who receive Youzan Technology Shares under the Distribution.
(6) The indicative amount of Youzan Technology Shares held by China Youzan for its benefit as a result of the aggregation of the fractional entitlements of the China Youzan Shareholders to Youzan Technology Shares under the Distribution, calculated by reference to the number of China Youzan Shares held by China Youzan Shareholders as shown in the register of members of China Youzan as at the Announcement Date. The number of Youzan Technology Shares to be retained by China Youzan as a result of the aggregation of fractional entitlements of China Youzan Shareholders will be subject to further changes by reference to the shareholding information as at the Record Date.
(7) The number of offer shares in the Youzan Technology Offering as part of the Youzan Technology Listing is only an approximate number and will be subject to change, but such number of offer shares will not exceed 84,973,000 new Youzan Technology Shares.
(8) The percentages of the China Youzan Shares are rounded to the nearest 2 decimal places, and the total number of the percentages may not add up to 100% due to rounding.

On the assumption that (a) there is no other change in the number of China Youzan Shares in issue and the shareholding in China Youzan between the Announcement Date and the Scheme Effective Date; (b) 51.90% of the total issued share capital of Youzan Technology held by China Youzan shall be distributed under the Distribution; (c) each of the Youzan Technology Share Incentive Plans becoming effective; and (d) a proposed offering of up to a maximum of 84,973,000 new Youzan Technology Shares under the Youzan Technology Offering and as part of the Youzan Technology Listing (representing up to approximately 5% of a total of 1,699,463,094 Youzan Technology Shares in issue immediately prior to the Youzan Technology Offering), set out below are simplified shareholding structure charts of Youzan Technology (i) as at the Announcement Date; and (ii) immediately upon completion of the Youzan Technology Listing and the Proposal (and the Scheme becoming effective):

– 38 –

(a) Simplified shareholding structure of Youzan Technology as at the Announcement Date:

==> picture [399 x 194] intentionally omitted <==

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

Disinterested Scheme China Youzan
Scheme Shareholders Excluded Shareholders
Shareholders acting in
concert with
the Offeror
76.64% 8.46% 14.90%
Other Youzan
China Youzan
Qima Technology
Teamwork Shareholders
(Notes 1)
51.90% 16.79% 7.03% 24.27%
Youzan Technology
----- End of picture text -----

(b) Simplified shareholding structure of China Youzan immediately upon the completion of the Proposal and the Youzan Technology Listing (and the Scheme becoming effective):

==> picture [207 x 138] intentionally omitted <==

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

China Youzan
Offeror Excluded
Shareholders
93.45% 6.55%
China Youzan
----- End of picture text -----

(c) Simplified shareholding structure of Youzan Technology immediately upon completion of the Proposal and the Youzan Technology Listing (and the Scheme becoming effective):

==> picture [398 x 132] intentionally omitted <==

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

Public
Scheme Other Youzan
shareholders
China Youzan Disinterested Shareholders Technology under the
Excluded Scheme acting in Financial Youzan
Trustee A and Shareholders Shareholders concert with Investors Technology
Trustee C the Offeror (Note 2) (Note 3)
6.57% 26.29% 37.65% 14.86% 9.87% 4.76%
Youzan Technology
----- End of picture text -----

– 39 –

Note:

(1) For the avoidance of doubt, these other Youzan Technology Shareholders include some of the existing Scheme Shareholders acting in concert with the Offeror.
(2) The other Youzan Technology Financial Investors comprise the Youzan Technology Financial Investors excluding Aves Capital, LLC, Franchise Fund LP, Tembusu HZ II Limited, Matrix Partners China III, L.P., Matrix Partners China III-A, L.P. and GCYZ Holdings Limited, which are Scheme Shareholders acting in concert with the Offeror.
(3) The number of offer shares in the Youzan Technology Offering as part of the Youzan Technology Listing is only an approximate number and will be subject to change, but such number of offer shares will not exceed 84,973,000 new Youzan Technology Shares (representing up to approximately 5% of a total of 1,699,463,094 Youzan Technology Shares in issue immediately prior to the Youzan Technology Offering). As members of the public (including existing China Youzan Shareholders and existing Youzan Technology Shareholders (save for the Offeror and save for connected persons of Youzan Technology and their respective associates) are expected to be entitled to participate in the Youzan Technology Offering as part of the Youzan Technology Listing, there may be overlap between the identity of the new public shareholders of Youzan Technology and other shareholders of Youzan Technology as shown in this shareholding structure.
(4) It is expected that China Youzan will hold a very small shareholding in Youzan Technology immediately upon completion of the Proposal and the Youzan Technology Listing as a result of the aggregation of the fractional entitlements of Youzan Technology Shares arising from the Distribution which will not be distributed to China Youzan Shareholders but will instead be retained by China Youzan for its benefit.

– 40 –

5.3 Financial Information of Youzan Technology

Set out below is a summary of the financial information of the Youzan Technology Group, based on the unaudited consolidated financial statements of Youzan Technology Group for the six months ended 30 June 2021 and two financial years ended 31 December 2020 and 31 December 2019 as set out in the Updated Application Proof in respect of the proposed Youzan Technology Listing:

	For the
	six months	For the	For the
	ended	year ended	year ended
	30 June	31 December	31 December
	2021	2020	2019
	(unaudited)	(unaudited)	(unaudited)
	*(RMB’000)*	(RMB’000)	(RMB’000)
Loss before tax	(376,855)	(351,102)	(569,811)
Loss for the period/year	(299,123)	(333,016)	(503,484)
	As at	As at	As at
	30 June	31 December	31 December
	2021	2020	2019
	(unaudited)	(unaudited)	(unaudited)
	*(RMB’000)*	(RMB’000)	(RMB’000)
Total assets	1,967,158	2,617,504	1,689,949
Total liabilities	1,427,738	1,800,976	2,198,163
Net asset/(liabilities)	539,420	816,528	(508,214)

The draft financial information and the draft accountants’ report of Youzan Technology for the financial years ended 31 December 2018, 2019 and 2020 and for the six months ended 30 June 2021 included in the Updated Application Proof (the “ Relevant Financial Information ”) constitute a profit forecast under Rule 10 of the Takeovers Code and should be reported on by the financial advisers and auditors or accountants of China Youzan in accordance with Rule 10.4 of the Takeovers Code. In view of the applicable disclosure requirements for the Youzan Technology Listing under the MB Listing Rules, China Youzan has encountered genuine practical difficulties (time-wise or otherwise) in meeting the reporting requirements set out in Rule 10.4 of the Takeovers Code.

– 41 –

Under Rule 10.4 of the Takeovers Code, if the Relevant Financial Information is first published in an announcement, it must be repeated in full, together with the reports from the financial advisers and auditors or accountants of China Youzan on such profit forecast, in the next document to be sent to the China Youzan Shareholders, which is likely to be the Scheme Document. If the audited financial information and the final accountants’ report for the financial years ended 31 December 2018, 2019 and 2020 and the six months ended 30 June 2021 of Youzan Technology have been published by the time of release of the next shareholders’ document and the relevant audited financial information and the final accountants’ report are included in the next shareholders’ document, the requirements to report on the Relevant Financial Information under Rule 10.4 of the Takeovers Code will no longer apply at the time of despatch of the relevant shareholders’ document.

Shareholders and/or potential investors of China Youzan and Youzan Technology should note that the Relevant Financial Information has not been reported on in accordance with the requirements under Rule 10 of the Takeovers Code and does not meet the standard required by Rule 10 of the Takeovers Code. Shareholders and/or potential investors of China Youzan and Youzan Technology should therefore exercise caution in placing reliance on the Relevant Financial Information in assessing the merits and demerits of the Proposal.

5.4 Proposed Youzan Technology Listing

In connection with the Proposal, on the Announcement Date, Youzan Technology has re-filed its application to the Stock Exchange for the listing of Youzan Technology Shares on the Main Board of the Stock Exchange by way of an offering of new shares. Reference is made to the Updated A1 Announcement.

The purpose of the Youzan Technology Listing is to unlock the growth potential in the Youzan Technology Group and further develop the SaaS Business. At the same time, the distribution of Youzan Technology Shares to the China Youzan Shareholders pursuant to the Distribution (subject to the fulfilment of the Distribution Conditions) will enable Youzan Technology to satisfy the minimum public float requirements under Rule 8.08 of the MB Listing Rules. Accordingly, one of the Scheme Conditions is that the Stock Exchange having granted its formal approval for the listing of, and permission to deal in, the Youzan Technology Shares on the Stock Exchange for the Youzan Technology Listing.

It is contemplated that the Youzan Technology Offering will comprise a retail tranche to public retail investors and an international tranche to institutional and professional investors and other investors. The potential size of the Youzan Technology Offering (including any over-allotment option thereof) could be up to a maximum of 84,973,000 new Youzan Technology Shares representing approximately 5% of a total of 1,699,463,094 Youzan Technology Shares in issue immediately prior to the Youzan Technology Offering (after taking into account the proposed issuance of Youzan Technology Shares under the Youzan Technology Share Award Plan B, Anti-Dilution Issue and Youzan Technology RSU Plan C). Further details of the Youzan Technology

– 42 –

Listing, including the final size of the Youzan Technology Offering and the offer price range of the Youzan Technology Shares for the Youzan Technology Offering, will be contained in the prospectus in respect of the Youzan Technology Listing which will be issued by Youzan Technology prior to the Court Meeting.

It is expected that through the Youzan Technology Listing, Youzan Technology can (i) marketise the price of its equity interests; (ii) broaden its shareholder base; (iii) raise additional funds for its future capital needs and further development and expansion of the SaaS Business; and (iv) have access to a platform for further fundraising in the future.

Based on the above, it is expected that, upon the Youzan Technology Listing becoming effective, not less than 25% of the total issued share capital of Youzan Technology will be held by the public shareholders. On this basis, upon the fulfilment of the Scheme Conditions and upon completion of the Youzan Technology Listing, it is expected that Youzan Technology will be able to satisfy the minimum public float requirements under Rule 8.08(1)(a) of the MB Listing Rules.

It is expected that the subsidiaries of China Youzan which are also subsidiaries of Youzan Technology will form part of the Youzan Technology Group to be listed on the Main Board of the Stock Exchange, while all the other subsidiaries of China Youzan will remain in the China Youzan Group upon the Scheme becoming effective and the withdrawal of listing of China Youzan on GEM of the Stock Exchange. A simplified corporate structure chart of Youzan Technology which is expected to form part of the Youzan Technology Group to be listed on the Main Board of the Stock Exchange immediately upon the completion of the Proposal is represented in the chart below:

==> picture [467 x 232] intentionally omitted <==

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

Youzan Technology
100% 100%
Qima Investment Limited Menlo Innovation Investment Limited
100% 66.65% 51%
Hangzhou Youzan Technology Co., Ltd. Youzan Japan Youzan
(��) Kabushiki Technology Inc.
Kaisha
100% 100% 100% 100% 100% 100%
Hainan Youzan Shenzhen Youzan Tianjin Youzan Hangzhou Hangzhou
Hangzhou
Internet Information Information Kuaima Internet Caichuan Qianxi
Youzan Dining
Technology Co., Technology Co., Technology Co., Technology Co., Cultural Media
Co., Ltd. (��
Ltd. (�� Ltd. (�� Ltd. (�� Ltd. (�� Co., Ltd. (��
��
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----- End of picture text -----

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5.5 Youzan Technology Share Incentive Plans

As disclosed in the joint announcement dated 6 May 2021 issued by the Offeror and China Youzan, the relevant shareholders’ approval in respect of the Youzan Technology Share Award Plan A, the Youzan Technology Share Award Plan B and the Anti-Dilution Issue to China Youzan, and the China Youzan Options Conversion Proposal and Youzan Technology RSU Plan C have been obtained in the First SGM held on 6 May 2021.

5.5.1 Youzan Technology Share Award Plan A

As disclosed in the joint announcement dated 6 May 2021 issued by the Offeror and China Youzan, the amendment and substitution of the Youzan Technology 2019 Share Award Plan by the Youzan Technology Share Award Plan A has become effective. Share awards will be granted to the proposed grantees under the Youzan Technology Share Award Plan A prior to (and regardless of) the Youzan Technology Listing and prior to the Record Date.

5.5.2 Youzan Technology Share Award Plan B and the Anti-Dilution Issue to China Youzan

As disclosed in the joint announcement dated 6 May 2021 issued by the Offeror and China Youzan, as at the Announcement Date, the Plan B Effectiveness Condition as set out in paragraph (b) of the paragraph headed “YOUZAN TECHNOLOGY SHARE AWARD PLAN B – CONNECTED TRANSACTION – Conditionality – Plan B Effectiveness Conditions” of the First SGM Circular remains to be outstanding:

(b) the Stock Exchange having granted its in-principle approval for the listing of the Youzan Technology Shares on the Stock Exchange pursuant to the Youzan Technology Listing.

Such outstanding Plan B Effectiveness Condition shall be construed to mean the Stock Exchange having granted its in-principle approval for the listing of the Youzan Technology Shares on the Stock Exchange pursuant to the Youzan Technology Listing to be carried out by way of an offering of new shares.

Save as mentioned above, there is no other change to the terms of the Youzan Technology Share Award Plan B and the Anti-Dilution Issue to China Youzan as set out in the First SGM Circular.

Conditional upon the fulfilment of the outstanding Plan B Effectiveness Condition, 84,432,360 new Youzan Technology Shares will be issued to Mr. Zhu Ning (or Whitecrow) under the Youzan Technology Share Award Plan B and 91,087,206 new Youzan Technology Shares will be issued to China Youzan under the AntiDilution Issue concurrently after the Stock Exchange has granted the in-principle approval for the Youzan Technology Listing to be carried out by way of an offering of new shares but before the Scheme becoming effective.

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5.5.3 China Youzan Options Conversion Proposal and Youzan Technology RSU Plan C

As disclosed in the joint announcement dated 6 May 2021 issued by the Offeror and China Youzan, as at the Announcement Date, the following Plan C Effectiveness Conditions as set out in paragraphs (d) and (e) of the paragraph headed “YOUZAN TECHNOLOGY RSU PLAN C – SPECIAL DEAL ARRANGEMENT – Conditionality – Plan C Effectiveness Conditions” of the First SGM Circular remains to be outstanding:

(d) the Stock Exchange having granted its formal approval for the listing of, and permission to deal in, the Youzan Technology Shares on the Stock Exchange pursuant to the Youzan Technology Listing; and
(e) the Scheme becoming effective.

The outstanding Plan C Effectiveness Condition set out in the above-mentioned paragraph (d) shall be construed to mean the Stock Exchange having granted its formal approval for the listing of, and permission to deal in, the Youzan Technology Shares on the Stock Exchange pursuant to the Youzan Technology Listing to be carried out by way of an offering of new shares.

The outstanding Plan C Effectiveness Condition set out in the above-mentioned paragraph (e) shall remain unchanged.

Save as mentioned above, there is no other change to the terms of the China Youzan Options Conversion Proposal and Youzan Technology RSU Plan C as set out in the First SGM Circular.

Conditional upon the fulfilment of the outstanding Plan C Effectiveness Conditions, 10,815,887 new Youzan Technology Shares will be issued and allotted by Youzan Technology to Trustee C immediately after the Scheme becoming effective but prior to the Youzan Technology Listing.

Save as mentioned above, there is no other change to the terms of the Youzan Technology Share Incentive Plans as set out in the First SGM Circular. For the avoidance of doubt, the matters approved by the relevant China Youzan Shareholders at the First SGM and the number of Youzan Technology Shares or RSUs (as the case may be) to be issued under the respective Youzan Technology Share Incentive Plans will not be affected as a result of the proposed offering of new shares by Youzan Technology under the Youzan Technology Offering and as part of the Youzan Technology Listing.

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6. INFORMATION ON THE OFFEROR

The Offeror is a company incorporated in the British Virgin Islands with limited liability, and is 100% beneficially owned by Mr. Zhu Ning.

Mr. Zhu Ning joined China Youzan in April 2018 and was appointed as an executive Director and the chief executive officer of China Youzan in May 2018. Mr. Zhu Ning is the founder and the chief executive officer of Youzan Technology Group (comprising Youzan Technology and its subsidiaries) and is responsible for formulation of the overall development planning, business strategies as well as the general management of Youzan Technology Group. Before establishing Youzan Technology Group, Mr. Zhu Ning was a product experience planner of Alipay and an interaction designer of Baidu. He graduated from Henan Radio & Television University with a diploma in art. He is also the executive officer of China Prepay Group Limited, an indirect wholly-owned subsidiary of China Youzan.

7. WITHDRAWAL OF LISTING OF CHINA YOUZAN SHARES

Upon the Scheme becoming effective, all Scheme Shares will be cancelled and the share certificates for the Scheme Shares will thereafter cease to have effect as documents or evidence of title. China Youzan will apply to the Stock Exchange in accordance with Rule 9.23 of the GEM Listing Rules for the withdrawal of the listing of the China Youzan Shares on GEM of the Stock Exchange.

The Board intends that the listing of the China Youzan Shares on GEM of the Stock Exchange shall be maintained in the event the Scheme does not become effective.

Upon the satisfaction or waiver (as applicable) of the Scheme Conditions and the Scheme becoming effective, the Scheme Shareholders will be notified by way of an announcement of the exact date of the last day for dealing in the China Youzan Shares and the day on which the Scheme and the withdrawal of the listing of the China Youzan Shares on GEM of the Stock Exchange will become effective.

A detailed timetable of the Scheme will be included in the Scheme Document, which will also contain, among other things, further details of the Scheme and the Distribution as an integral part of the Proposal.

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8. IF THE SCHEME IS NOT APPROVED OR IF THE PROPOSAL OTHERWISE LAPSES

The Scheme will lapse if any of the Scheme Conditions has not been satisfied or waived, as applicable, on or before the Scheme Longstop Date. If the Scheme is not approved or if the Proposal otherwise lapses, the listing of the China Youzan Shares on GEM of the Stock Exchange will not be withdrawn.

If the Scheme is not approved or if the Proposal otherwise lapses, neither the Offeror nor any parties acting in concert with it under the Proposal (nor any person who is subsequently acting in concert with any of them) may, except with the consent of the Executive, within 12 months thereafter, announce an offer or possible offer for the China Youzan Shares.

If the Independent Board Committee or the Independent Financial Adviser does not recommend the Proposal, and the Scheme is not approved, all expenses incurred by China Youzan in connection with the Scheme will be borne by the Offeror in accordance with Rule 2.3 of the Takeovers Code.

9. SCHEME SHARES, COURT MEETING AND THE SECOND SGM

As at the Announcement Date, the Offeror does not hold any China Youzan Shares. Mr. Zhu Ning (through its 100% beneficial ownership in Whitecrow) holds 1,440,601,703 China Youzan Shares in issue, representing approximately 8.35% of the issued share capital of China Youzan. The other China Youzan Excluded Shareholders (directly or indirectly through their respective beneficial ownership in their respective China Youzan Excluded Shareholders Entities, where relevant) holds 1,131,359,228 China Youzan Shares in issue, representing approximately 6.55% of the issued share capital of China Youzan. Such 2,571,960,931 China Youzan Shares held by the China Youzan Excluded Shareholders in total, representing approximately 14.90% of the total issued share capital of China Youzan, will not form part of the Scheme Shares. Such China Youzan Shares will not be voted on at the Court Meeting and will not be cancelled upon the Scheme becoming effective.

All of the China Youzan Shares held by the other persons acting in concert with the Offeror (other than those held by the China Youzan Excluded Shareholders, directly or indirectly through their respective beneficial ownership in their respective China Youzan Excluded Shareholders Entities, where relevant) will form part of the Scheme Shares and will be cancelled upon the Scheme becoming effective.

Under the Takeovers Code, persons acting in concert with the Offeror will not be permitted to vote on the Scheme at the Court Meeting, and only Disinterested Scheme Shareholders will be permitted to vote on the Scheme at the Court Meeting.

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All China Youzan Shareholders will be entitled to attend the Second SGM and vote on the special resolutions to approve and give effect to, amongst other things, (a)(i) the reduction of the issued share capital of China Youzan by the cancellation of the Scheme Shares, and (ii) immediately thereafter, the restoration of the issued share capital of China Youzan to its amount in issue prior to the cancellation of the Scheme Shares by issuing to the Offeror such number of China Youzan Shares as is equal to the number of Scheme Shares cancelled, credited as fully paid at par, by applying the reserve created in the books of accounts of China Youzan as a result of the cancellation of the Scheme Shares; and (b)(i) the reduction of the share premium of China Youzan by cancellation of the whole amount standing in the share premium of China Youzan, (ii) the transfer of the credit arising from such share capital reduction to the contributed surplus account of China Youzan, and (iii) the making of the Distribution.

Each of the China Youzan Excluded Shareholders has agreed, if the Scheme is approved at the Court Meeting, to exercise or procure the exercise of all voting rights attached to the Excluded Shares held by him/her/it and the China Youzan Excluded Shareholders Entities owned or controlled by him/her/it (where relevant) at the Second SGM in favour of all the resolutions which are necessary to implement or otherwise relate to the Proposal.

Each of the Offeror, the China Youzan Excluded Shareholders and China Youzan Excluded Shareholders Entities will undertake to the Court that if the Scheme Conditions are satisfied and the Scheme becomes effective, it will be bound by the Scheme, so as to ensure that it will comply with and be subject to the terms and conditions of the Scheme.

10. DESPATCH OF SCHEME DOCUMENT

A Scheme Document containing, among other things, further details about the Scheme, the Distribution, a letter of advice from the Independent Financial Adviser to the Independent Board Committee, the recommendations of the Independent Board Committee, and notices to convene the Court Meeting and the Second SGM will be despatched to the China Youzan Shareholders as soon as possible and in any event by 19 October 2021 in accordance with the Takeovers Code, the requirements of the Court and other applicable laws and regulations.

Further announcement(s) will be made as and when appropriate in compliance with the Takeovers Code upon the despatch of the Scheme Document.

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11. NUMBER OF RELEVANT SECURITIES IN ISSUE

As at the Announcement Date:

(a) the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Offeror in issue are 50,000 shares;
(b) the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the China Youzan in issue are 17,260,003,617 China Youzan Shares and 292,804,000 China Youzan Options; and
(c) the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Youzan Technology in issue are 1,513,127,641 shares.

12. APPOINTMENT OF VALUER, THE UPDATED YOUZAN TECHNOLOGY SHARE VALUE ASSESSMENT REPORT AND THE UPDATED POB VALUATION REPORT

China Youzan has appointed Jones Lang LaSalle Corporate Appraisal and Advisory Limited, the Valuer, to advise on the updated value of the Payment & Other Business carried out by China Youzan and the Youzan Technology Shares respectively.

The Updated Youzan Technology Share Value Assessment Report containing the Valuer’s appraisal of the updated estimated value of the Youzan Technology Share and the letter from the Financial Adviser on the updated valuation of the Youzan Technology Shares are set out in Annex I of this Announcement. The Updated POB Valuation Report containing the Valuer’s appraisal of the updated value of the Payment & Other Business carried out by China Youzan and the letter from the Financial Adviser on the updated valuation of the Payment & Other Business are set out in Annex II of this Announcement.

Each of the Updated Youzan Technology Share Value Assessment Report and the Updated POB Valuation Report of Jones Lang LaSalle Corporate Appraisal and Advisory Limited has been reported on by RSM, the auditors of China Youzan, and Red Sun Capital, the Independent Financial Adviser in accordance with the requirements under Rule 11.1(b) of the Takeovers Code and the reports from RSM and Red Sun Capital have been lodged with the Executive. Copies of the reports from RSM and Red Sun Capital are also set out in Annex III of this Announcement.

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13. TAXATION AND INDEPENDENT ADVICE

Scheme Shareholders are recommended to consult their own professional advisers if they are in any doubt as to the taxation implications of accepting the Proposal. It is emphasised that none of the Offeror, China Youzan, Youzan Technology or any of their respective directors, officers or associates or any other person involved in the Proposal accepts responsibility (other than in respect of themselves, if applicable) for any taxation effects on, or liabilities of, any other persons as a result of their acceptance or rejection of the Proposal.

14. OVERSEAS SCHEME SHAREHOLDERS

The making and implementation of the Proposal to Scheme Shareholders, and the making of the Distribution to the China Youzan Shareholders, who are not resident in Hong Kong may be subject to the laws of the relevant jurisdictions in which such Scheme Shareholders and China Youzan Shareholders are located.

Such overseas Scheme Shareholders and China Youzan Shareholders should inform themselves about and observe any applicable legal, tax or regulatory requirements. It is the responsibility of any overseas Scheme Shareholders and China Youzan Shareholders wishing to take any action in relation to the Proposal to satisfy themselves as to the full observance of the laws of the relevant jurisdiction in connection therewith, including the obtaining of any governmental, exchange control or other consents which may be required, or the compliance with any other necessary formalities and the payment of any issue, transfer or other taxes in such jurisdiction.

Any acceptance by the overseas Scheme Shareholders and China Youzan Shareholders will be deemed to constitute a representation and warranty from such persons to the Offeror, China Youzan and Youzan Technology and their respective advisers, that those laws and regulatory requirements have been complied with. If such overseas Scheme Shareholders are in doubt as to their positions, they should consult their professional advisers.

In the event that the despatch of the Scheme Document to overseas Scheme Shareholders is prohibited by any relevant law or regulation or may only be effected after compliance with conditions or requirements that the Directors regard as unduly onerous or burdensome (or otherwise not in the best interests of China Youzan or the China Youzan Shareholders), the Scheme Document may not be despatched to such overseas Scheme Shareholders. For that purpose, China Youzan may apply for any waiver(s) as may be required by the Executive pursuant to Note 3 to Rule 8 of the Takeovers Code at such time. Any such waiver will only be granted if the Executive is satisfied that it would be unduly burdensome to despatch the Scheme Document to such overseas Scheme Shareholders. In granting the waiver, the Executive will be concerned to see that all material information in the Scheme Document is made available to such Scheme Shareholders.

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15. NOTICE TO U.S. INVESTORS

The Proposal is being made to cancel the securities of a Bermuda company by means of a scheme of arrangement provided for under the laws of Bermuda and is subject to Hong Kong disclosure requirements which are different from those of the United States.

A transaction effected by means of a scheme of arrangement is not subject to the tender offer rules of the U.S. Securities Exchange Act of 1934, as amended. Accordingly, the Proposal is subject to the disclosure requirements and practices applicable in Bermuda and Hong Kong to schemes of arrangement which differ from the disclosure and procedural requirements applicable under the U.S. federal securities laws.

The receipt of cash pursuant to the Proposal by a U.S. holder of Scheme Shares as consideration for the cancellation of the Scheme Shares pursuant to the Scheme may be a taxable transaction for U.S. federal income tax purposes and under applicable U.S. state and local, as well as foreign and other tax laws. Each holder of Scheme Shares is urged to consult his independent professional adviser immediately regarding the tax consequences of the Proposal applicable to him.

It may be difficult for U.S. holders of Scheme Shares to enforce their rights and claims arising out of the U.S. federal securities laws, since the Offeror and China Youzan are located in a country other than the United States, and some or all of their officers and directors may be residents of a country other than the United States. U.S. holders of Scheme Shares may not be able to sue a non-U.S. company or its officers or directors in a non-U.S. court for violations of the U.S. securities laws. Further, it may be difficult to compel a non-U.S. company and its affiliates to subject themselves to a U.S. court’s judgement.

16. PRECAUTIONARY LANGUAGE REGARDING FORWARD-LOOKING STATEMENTS

All statements, other than statements of historical facts included in this Announcement, are or may be forward-looking statements. Forward-looking statements include, but are not limited to, those using words such as “seek”, “expect”, “envisage”, “anticipate”, “estimate”, “believe”, “intend”, “project”, “plan”, “strategy”, “forecast” and similar expressions or future or conditional verbs such as “will”, “would”, “should”, “could”, “may” and “might”. These statements reflect the Offeror’s or China Youzan’s (as the case may be) current expectations, beliefs, hopes, intentions or strategies regarding the future and assumptions in light of currently available information. Such forward-looking statements are not guarantees of future performance or events and involve known and unknown risks and uncertainties.

– 51 –

Accordingly, actual results may differ materially from those described in such forwardlooking statements as a result of a number of factors, including, without limitation:

(a) the satisfaction or waiver (as applicable) of the Scheme Conditions;
(b) any changes in the regulatory regime and significant policies for the industries in which China Youzan and/or Youzan Technology respectively operates, or any in the regulatory policies of the relevant government authorities of the PRC;
(c) any changes in the effects of competition on the market demand and sale price of the products provided by China Youzan and Youzan Technology; and
(d) any changes in political, economic, legal and social conditions in the PRC and other countries in which the Offeror, China Youzan and/or Youzan Technology operates.

Other unknown or unpredictable factors could cause actual results to differ materially from those in the forward-looking statements. China Youzan Shareholders and investors should not place undue reliance on such forward-looking statements.

All written and oral forward-looking statements attributable to the Offeror and China Youzan or persons acting on behalf of either of them are expressly qualified in their entirety by the cautionary statements above. The forward-looking statements included herein are made only as at the Announcement Date. Subject to the requirements of the applicable laws, rules and regulations, including the Takeovers Code, neither the Offeror and China Youzan undertake any obligation to update publicly or revise any forwardlooking statements contained in this Announcement.

17. WARNINGS

Shareholders and potential investors of China Youzan should be aware that, even if the Proposal is made, the implementation of the Proposal (including the effectiveness of the Scheme), is subject to the satisfaction or waiver (as applicable) of the Scheme Conditions, and therefore the Proposal may or may not be implemented and the Scheme may or may not become effective. Shareholders and potential investors of China Youzan should therefore exercise caution when dealing in the securities of China Youzan. Persons who are in doubt as to the action they should take should consult their stockbrokers, bank managers, solicitors or other professional advisers.

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18. DEFINITIONS

In this Announcement, the following expressions have the meanings set out below unless the context requires otherwise:

“2019 Annual Report”

the annual report of China Youzan for the financial year ended 31 December 2019

“2020 Annual Report”

the annual report of China Youzan for the financial year ended 31 December 2020

“acting in concert”

has the meaning ascribed to it in the Takeovers Code, and “persons acting in concert” shall be construed accordingly

“Aggregate Amount per Scheme Share”
the amount equal to (I)(a) the number of Youzan Technology Share to be distributed for every China Youzan Share under the Distribution, multiplied by (b) the Updated Youzan Technology Reference Value, being HK$26.2 per Youzan Technology Share, together with (II) the Scheme Consideration
“Announcement”
this joint announcement issued by the Offeror and China Youzan
“Announcement Date”
3 0 A u g u s t 2 0 2 1 , b e i n g t h e d a t e o f t h i s Announcement
“Anti-Dilution Issue”
has the meaning ascribed to it in the paragraph h e a d e d “ Y O U Z A N T E C H N O L O G Y SHARE AWARD PLAN B – CONNECTED TRANSACTION – Anti-Dilution Issue of new Youzan Technology Shares to China Youzan” in the First SGM Circular
“associate”
has the meaning ascribed to it under the Takeovers Code
“Board”

the board of directors of China Youzan

“Business Day”
has the meaning ascribed to it in the Takeovers Code
“China Youzan”

China Youzan Limited, a company incorporated in Bermuda with limited liability, the shares of which are listed on GEM of the Stock Exchange (stock code: 8083)

“China Youzan 2012 Option Scheme”

the share option scheme of China Youzan adopted by China Youzan on 3 May 2012

– 53 –

“China Youzan 2018 Share Award Plan”

the share award plan of China Youzan adopted by China Youzan on 31 May 2018

“China Youzan 2019 Option Scheme”

the share option scheme of China Youzan adopted by China Youzan on 12 June 2019

“China Youzan Awarded Share(s)”
the awarded share(s) granted under the China Youzan 2018 Share Award Plan from time to time
“China Youzan Excluded Shareholders”

Mr. Zhu Ning, Mr. Cui Yusong, Mr. Cao Chunmeng, Mr. Yan Xiaotian, Mr. Yu Tao, Ms. Ying Hangyan (each being an executive Director), Mr. Guan Guisen (a former Director), Mr. Huang Rongrong (being a former director of Youzan Technology ), Mr. Huan Fang (a director of Youzan Technology ), Mr. Zhou Kai and Youzan Teamwork, each being a party acting in concert or presumed to be acting in concert with the Offeror under the definition of “acting in concert” under the Takeovers Code, and “ China Youzan Excluded Shareholder ” means any of them

“China Youzan Excluded Shareholders Entities”
China Youzan Shareholders which are companies beneficially owned or controlled by, or nominee companies of, any of the China Youzan Excluded Shareholders (where relevant)
“China Youzan Group” China Youzan and its subsidiaries
“China Youzan Optionholder(s)” holder(s) of China Youzan Option(s)
“China Youzan Option(s)”
the share option(s) granted under the China Youzan Option Schemes and outstanding from time to time
“China Youzan Option Schemes”
the China Youzan 2012 Option Scheme and the China Youzan 2019 Option Scheme
“China Youzan Options has the meaning ascribed to it in the paragraph Conversion Proposal” headed “YOUZAN TECHNOLOGY RSU PLAN C – SPECIAL DEAL ARRANGEMENT – China Youzan Options Conversion Proposal and adoption of the Youzan Technology RSU Plan C” of the First SGM Circular
“China Youzan Share(s)” share(s) of HK$0.01 each in the share capital of China Youzan
“China Youzan Shareholders” registered holder(s) of China Youzan Shares

– 54 –

“China Youzan Trustee”
“Companies Act”
“connected person(s)”
“Court”
“Court Meeting”
“Court Order”
“Director(s)”
“Disinterested Scheme Share(s)”
“Disinterested Scheme Shareholder(s)”
“Distribution”
“Distribution Conditions”
the trustee of the China Youzan 2018 Share Award Plan appointed by China Youzan from time to time
the Companies Act 1981 of Bermuda (as amended)
has the meaning ascribed to this term under the GEM Listing Rules
the Supreme Court of Bermuda
the meeting of the Scheme Shareholders to be convened at the direction of the Court at which the Scheme (with or without modification) will be voted upon, or any adjournment thereof
the order of the Court pursuant to Section 99(2) of the Companies Act sanctioning the Scheme
the director(s) of China Youzan
the China Youzan Shares held by the Disinterested Scheme Shareholder(s)
the Scheme Shareholder(s) other than the Offeror and the parties acting in concert with it. Persons acting or presumed to be acting in concert with the Offeror include each of the China Youzan Excluded Shareholders, Qima Teamwork, each of the Youzan Technology Financial Investors, and each of the Directors (in their capacity as China Youzan Shareholders)
the distribution in specie by China Youzan of all the Youzan Technology Shares directly held by it to all China Youzan Shareholders (including, for the avoidance of doubt, the China Youzan Excluded Shareholders and/or the China Youzan Excluded Shareholders Entities) whose names appear on the register of members of China Youzan as at the Record Date
the conditions to the Distribution, as described in the paragraph headed “2. REVISIONS TO THE TERMS OF THE PROPOSAL – 2.8 No change to the Distribution” of the Rule 3.5 Announcement

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“Excluded Shares”
“Executive”
“Financial Adviser”
“First SGM”
“First SGM Circular”
“GEM Listing Rules”
“HK$” or “HKD”
“Hong Kong”
“Independent Board Committee”
has the meaning given to it in the paragraph headed “2. REVISIONS TO THE TERMS OF THE PROPOSAL – 2.9 Approved Special Deal Arrangement in respect of the Rollover Arrangement to exclude the China Youzan Excluded Shareholders from the Scheme” of this Announcement
the Executive Director of the Corporate Finance Division of the SFC or any delegate for the time being of the Executive Director
Messis Capital Limited, a company incorporated in Hong Kong and licensed under the SFO to carry on Type 1 (Dealing in Securities) and Type 6 (Advising on Corporate Finance) regulated activities, and the financial adviser to the Offeror in respect of the Proposal and the Scheme
a special general meeting of the China Youzan Shareholders held on 6 May 2021 which approved, among other things, the resolutions for the implementation of the Special Deal Arrangements and the Connected Transactions (as such terms are defined in the First SGM Circular)
the circular of China Youzan dated 20 April 2021 in relation to, amongst others, the Special Deal Arrangements and the Connected Transactions (as defined in the First SGM Circular)
the Rules Governing the Listing of Securities on GEM of the Stock Exchange
Hong Kong dollars, the lawful currency of Hong Kong
the Hong Kong Special Administrative Region of the PRC
the independent board committee of China Youzan established by the Board to make a recommendation to the Scheme Shareholders in respect of the Proposal, the Special Deal Arrangements and the Scheme

– 56 –

“Independent Financial Adviser” Red Sun Capital Limited, a company incorporated or “Red Sun Capital” in Hong Kong and licensed under the SFO to carry on Type 1 (Dealing in Securities) and Type 6 (Advising on Corporate Finance) regulated activity, and the independent financial adviser in respect of the Proposal, the Special Deal Arrangements, the Scheme and the connected transactions under Chapter 20 of the GEM Listing Rules constituted by the proposed Youzan Technology Share Award Plan A and the proposed Youzan Technology Share Award Plan B, appointed by the Board with the approval of the Independent Board Committee
“Last Trading Day”
27 August 2021, being the last day on which China Youzan Shares were traded on GEM of the Stock Exchange prior to the publication of this Announcement
“MB Listing Rules”
The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
“Mr. Cao Chunmeng”
Mr. Cao Chunmeng, an executive Director
“Mr. Cui Yusong”
Mr. Cui Yusong, an executive Director and the chief technology officer of China Youzan
“Mr. Guan Guisen”
Mr. Guan Guisen, a former Director
“Mr. Huan Fang”
Mr. Huan Fang, a director of Youzan Technology
“Mr. Huang Rongrong”
Mr. Huang Rongrong, a former director of Youzan Technology
“Mr. Yan Xiaotian”
Mr. Yan Xiaotian, an executive Director and the chief investment officer of China Youzan
“Mr. Yu Tao”
Mr. Yu Tao, an executive Director and the chief financial officer of China Youzan
“Mr. Zhou Kai”
Mr. Zhou Kai, a member of the senior management of the China Youzan Group
“Mr. Zhu Ning” Mr. Zhu Ning, an executive Director and the chairman and chief executive officer of China Youzan, and being the sole beneficial owner of the Offeror and Whitecrow

– 57 –

“Ms. Ying Hangyan”

“NAV”
“Offeror”
“Optionholder Irrevocable Undertakings”
“Payment & Other Business”
“Plan B Effectiveness Conditions”
“Plan C Effectiveness Conditions”
“PRC”
“Previous A1 Announcement”
Ms. Ying Hangyan, an executive Director and the chief service officer of China Youzan

net asset value

B e t a C a f e H o l d i n g s L i m i t e d , a c o m p a n y incorporated in the British Virgin Islands with limited liability and is 100% beneficially owned by Mr. Zhu Ning

has the meaning given to it in the paragraph headed “2. TERMS OF THE PROPOSAL – 2.6 Scheme Pre-Conditions” of the Rule 3.5 Announcement
has the meaning given to in the paragraph headed “ 3 . R E A S O N S A N D B E N E F I T S O F T H E PROPOSAL – 3.1 Objectives and reasons of the Proposal” of the Rule 3.5 Announcement
the conditions to the effectiveness of the proposed adoption of the Youzan Technology Share Award Plan B and the Anti-Dilution Issue to China Youzan, as described in the paragraph headed “YOUZAN TECHNOLOGY SHARE AWARD PLAN B – CONNECTED TRANSACTION – Conditionality – Plan B Effectiveness Conditions” of the First SGM Circular
the conditions to the effectiveness of the China Youzan Options Conversion Proposal and the proposed adoption of the Youzan Technology RSU Plan C, as described in the paragraph headed “YOUZAN TECHNOLOGY RSU PLAN C – S P E C I A L D E A L A R R A N G E M E N T – Conditionality – Plan C Effectiveness Conditions” of the First SGM Circular

the People’s Republic of China

the announcement dated 26 February 2021 issued by China Youzan in relation to an application made to the Stock Exchange for the listing of Youzan Technology Shares on the Main Board of the Stock Exchange by way of introduction

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“Proposal”

the proposal by the Offeror to take China Youzan private by way of the Scheme, comprising both the Scheme and the Distribution, and the withdrawal of listing of the China Youzan Shares, on the terms and subject to the conditions as set out in this Announcement

“Qima Teamwork”
Qima Teamwork Inc., a company incorporated in the British Virgin Islands with limited liability, which is a special purpose vehicle which holds Youzan Technology Shares for the purposes of the Youzan Technology 2019 Share Award Plan and is 100% beneficially owned by Mr. Hong Bo, an independent third party to the Offeror and China Youzan
“Record Date”
the record date (to be jointly announced by the Offeror and China Youzan) for determining entitlements of the Scheme Shareholders under the Scheme and for determining the entitlements of the China Youzan Shareholders under the Distribution
“Relevant Financial Information”
has the meaning given to in the paragraph headed “5. INFORMATION ON YOUZAN TECHNOLOGY – 5.3 Financial Information of Youzan Technology” of this Announcement
“RMB”
Renminbi, the lawful currency of the PRC
“Rollover Arrangement”
the arrangement between the Offeror and the China Youzan Excluded Shareholders to exclude the China Youzan Excluded Shareholders and/or the China Youzan Excluded Shareholders Entities from the Scheme, as more particularly described in the paragraph headed “ROLLOVER ARRANGEMENT – SPECIAL DEAL ARRANGEMENT” of the First SGM Circular
“RSM”
RSM Hong Kong, certified public accountants and the auditors of China Youzan
“RSU” restricted share unit
“Rule 3.5 Announcement” the joint announcement dated 26 February 2021 issued by the Offeror and China Youzan in relation to the Proposal pursuant to Rule 3.5 of the Takeovers Code

– 59 –

“Rule 3.5 Announcement Date”
26 February 2021, being the date of the Rule 3.5 Announcement
“Rule 3.5 Announcement Last Trading Day”

25 February 2021, being the last day on which China Youzan Shares were traded on GEM of the Stock Exchange prior to the date of publication of the Rule 3.5 Announcement

“Rule 3.5 Announcement 30 November 2020 Valuation Reference Date”
“SaaS Business”

has the meaning given to in the paragraph headed “ 3 . R E A S O N S A N D B E N E F I T S O F T H E PROPOSAL – 3.1 Objectives and reasons of the Proposal” of the Rule 3.5 Announcement

“Scheme”

a scheme of arrangement under Section 99 of the Companies Act, involving, among other matters, the cancellation of all of the Scheme Shares and the restoration of the issued share capital of China Youzan to the amount immediately prior to the cancellation of the Scheme Shares by the issuance to the Offeror such number of new China Youzan Shares as is equal to the number of Scheme Shares cancelled, credited as fully paid at par by applying the reserve created in the books of accounts of China Youzan as a result of the cancellation of the Scheme Shares

“Scheme Condition(s)”
the condition(s) of the Scheme as described in the paragraph headed “2. REVISIONS TO THE TERMS OF THE PROPOSAL – 2.6 Updates on the Scheme Conditions” of this Announcement
“Scheme Consideration”
the amount of HK$0.1352 per Scheme Share to be paid by the Offeror in cash to the Scheme Shareholders for the cancellation of their Scheme Shares under the Scheme
“Scheme Document”
the composite scheme document to be despatched to the China Youzan Shareholders containing details of the Scheme and the Distribution
“Scheme Effective Date”

the date on which the Scheme becomes effective in accordance with the Companies Act

– 60 –

“Scheme Longstop Date”

26 November 2021, or such later date as may be agreed by the Offeror and China Youzan, or to the extent applicable, as the Court may direct, and in all cases, as permitted by the Executive

“Scheme Pre-Condition(s)”

the pre-condition(s) to the making of the Proposal as described in the paragraph headed “2. TERMS OF THE PROPOSAL – 2.6 Scheme Pre-Conditions” of the Rule 3.5 Announcement, all of which have been fulfilled as at the Announcement Date

“Scheme Pre-Condition Longstop Date”
12 October 2021, or such later date as may be determined by the Offeror in its discretion and as permitted by the Executive
“Scheme Share(s)”
all of the China Youzan Shares in issue and such further China Youzan Shares as may be issued prior to the Record Date, other than those in which the China Youzan Excluded Shareholders and/or the China Youzan Excluded Shareholders Entities are interested
“Scheme Shareholder(s)”
the registered holder(s) of the Scheme Shares
“Second SGM”
a special general meeting of the China Youzan Shareholders to be convened to consider and if thought fit, approve, among other things, the necessary resolutions for the implementation of the Proposal and the Distribution or any adjournment thereof
“SFC” the Securities and Futures Commission of Hong Kong
“SFO” Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
“Special Deal Arrangements”
(i) the Rollover Arrangement, (ii) the Youzan Technology Share Award Plan A and (iii) the China Youzan Options Conversion Proposal (which includes the adoption of the Youzan Technology RSU Plan C), each a “Special Deal Arrangement”
“Stock Exchange”

The Stock Exchange of Hong Kong Limited

“Takeovers Code”

the Hong Kong Code on Takeovers and Mergers

– 61 –

“Trustee A”

the trustee of Youzan Technology Share Award Plan A to be appointed by Youzan Technology

“Trustee C”

the trustee of Youzan Technology RSU Plan C to be appointed by Youzan Technology

“U.S.” or “United States” the United States of America

“Updated A1 Announcement”

the announcement issued by China Youzan on the same day as the Announcement Date in relation to an application made to the Stock Exchange for the listing of Youzan Technology Shares on the Main Board of the Stock Exchange by way of an offering of new shares

“Updated Application Proof”

the draft listing document submitted by Youzan Technology to the Stock Exchange together with its listing application for the Youzan Technology Listing by way of an offering of new shares on or around the same day as the Announcement Date

“Updated POB Valuation Report”

the valuation report issued by the Valuer on the value of the Payment & Other Business carried out by China Youzan as at the Updated Valuation Reference Date

“Updated Valuation Reference Date”
30 June 2021
“Updated Youzan Technology Reference Value”

the reference estimated value per Youzan Technology Share as determined by reference to the valuation of each Youzan Technology Share estimated by the Valuer, being of RMB21.76 (equivalent to approximately HK$26.2 applying the Reference Exchange Rate) as at the Updated Valuation Reference Date, based on a total of 1,699,463,094 Youzan Technology Shares in issue, after taking into account the proposed issuance of Youzan Technology Shares under the Youzan Technology Share Award Plan B, Anti-Dilution Issue and Youzan Technology RSU Plan C but before the offering of new shares under the Youzan Technology Offering

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“Updated Youzan Technology Share Value Assessment Report”
“Valuer”
“Whitecrow”
“Youzan Teamwork”
“Youzan Technology”
“Youzan Technology 2019 Share Award Plan”

the report issued by the Valuer on the estimated value of the Youzan Technology Shares as at the Updated Valuation Reference Date

Jones Lang LaSalle Corporate Appraisal and Advisory Limited, the valuer appointed by China Youzan to value the Youzan Technology Shares and the Payment & Other Business, and which is a company incorporated in Hong Kong

W h i t e c r o w I n v e s t m e n t L t d . , a c o m p a n y incorporated in the British Virgin Islands with limited liability and is 100% beneficially owned by Mr. Zhu Ning
Youzan Teamwork Inc., a company incorporated in the British Virgin Islands with limited liability, which is controlled by Mr. Zhu Ning by virtue of being its sole director. Youzan Teamwork Inc. is beneficially owned as to 26% by Mr. Zhu Ning, 38% by Mr. Huang Rongrong, 8% by Mr. Cui Yusong, 8% by Ms. Ying Hangyan, 8% by Mr. Yu Tao, 6% by Mr. Huan Fang and 6% by Mr. Zhou Kai
Youzan Technology Inc. ( 有贊科技有限公司) (formerly known as Qima Holdings Ltd.), a company incorporated in the Cayman Islands with limited liability, and is a non-wholly owned subsidiary of China Youzan as at the Announcement Date

the share award plan of Youzan Technology adopted by Youzan Technology on 2 August 2019

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“Youzan Technology the shareholders of Youzan Technology as Financial Investors” at the Rule 3.5 Announcement Date and the Announcement Date, other than China Youzan, Mr. Zhu Ning, Mr. Cui Yusong, Youzan Teamwork, Mr. Huang Rongrong and Qima Teamwork (and, if applicable, companies which are beneficially owned or controlled by, or nominee companies of, any of them), being:

i. Baidu (Hong Kong) Limited;
ii. Xincheng Investment Limited;
iii. Aves Capital, LLC;
iv. Hillhouse KDWD Holdings Limited;
v. Ralston Global Holdings Limited;
vi. Hangzhou San Ren Yan Xing Investment Partnership (LLP) (杭州三仁焱興投資合夥企業（有限合夥）);

vii. Franchise Fund LP;

viii. Happy Zan Holdings Limited;

ix. Tembusu HZ II Limited;
x. Matrix Partners China III, L.P.; xi. Matrix Partners China III-A, L.P.;

xii. GCYZ Holdings Limited; and xiii. GCQM Holdings Limited “Youzan Technology Group” Youzan Technology and its subsidiaries “Youzan Technology Listing” the proposed listing of all of the Youzan Technology Shares on the Main Board of the Stock Exchange by way of an offering of new shares

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“Youzan Technology Offering”

the proposed offering of new Youzan Technology Shares to the public as part of the Youzan Technology Listing, which will comprise of up to a maximum number of 84,973,000 new Youzan Technology Shares (including any share that will be issued under any over-allotment option in such offering)

“Youzan Technology RSU Plan C”

the RSU plan proposed to be adopted by Youzan Technology, as described in the paragraph headed “YOUZAN TECHNOLOGY RSU PLAN C – SPECIAL DEAL ARRANGEMENT – General Information” of the First SGM Circular

“Youzan Technology Share(s)”

ordinary share(s) of a par value of US$0.00001 each in the share capital of Youzan Technology

“Youzan Technology Share Award Plan A”

the share award plan adopted by Youzan Technology for the amendment to and substitution of the Youzan Technology 2019 Share Award Plan, as described in the paragraph headed “YOUZAN TECHNOLOGY SHARE AWARD PLAN A – SPECIAL DEAL ARRANGEMENT AND CONNECTED TRANSACTION – General Information” of the First SGM Circular

“Youzan Technology Share Award Plan B”

the share award plan proposed to be adopted by Youzan Technology, as described in the paragraph headed “YOUZAN TECHNOLOGY SHARE AWARD PLAN B – CONNECTED TRANSACTION – General Information” of the First SGM Circular

“Youzan Technology Share Youzan Technology Share Award Plan A, Youzan Incentive Plans” Technology Share Award Plan B and Youzan Technology RSU Plan C

For the purpose of this Announcement, unless otherwise indicated, conversion of RMB into HK$ is calculated at the approximate exchange rate of HK$1.00 to RMB0.83039 (the “ Reference Exchange Rate ”), being the central parity rate published by the People’s Bank of China on its website on 30 August 2021. The Reference Exchange Rate is for illustration purpose only and does not constitute a representation that any amounts have been, could have been, or may be exchanged at this or any other rate at all.

By Order of the sole director of By Order of the Board of BetaCafe Holdings Ltd. China Youzan Limited Mr. Zhu Ning Yu Tao Director Director

Hong Kong, 30 August 2021

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As at the Announcement Date, the sole director of the Offeror is Mr. Zhu Ning.

The sole director of the Offeror accepts full responsibility for the accuracy of the information contained in this Announcement (other than any information relating to China Youzan) and confirms, having made all reasonable inquiries, that to the best of his knowledge, opinions expressed in this Announcement (other than those expressed by the directors of China Youzan) have been arrived at after due and careful consideration and there are no other facts not contained in this Announcement, the omission of which would make any statement in this Announcement misleading.

As at the Announcement Date, the executive Directors are Mr. Cao Chunmeng, Mr. Yan Xiaotian, Mr. Zhu Ning, Mr. Cui Yusong, Mr. Yu Tao and Ms. Ying Hangyan; the independent non-executive Directors are Dr. Fong Chi Wah, Mr. Gu Jiawang, Mr. Xu Yanqing and Mr. Deng Tao.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in this Announcement (other than any information relating to the Offeror) and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed in this Announcement (other than those expressed by the sole director of the Offeror) have been arrived at after due and careful consideration and there are no other facts not contained in this Announcement, the omission of which would make any statement in this Announcement misleading.

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 China Youzan. 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 China Youzan’s website at www.chinayouzan.com.

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ANNEX I

UPDATED YOUZAN TECHNOLOGY SHARE VALUE ASSESSMENT REPORT

I. LETTER FROM THE FINANCIAL ADVISER ON THE ASSESSMENT OF THE UPDATED YOUZAN TECHNOLOGY SHARES

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MESSIS CAPITAL LIMITED

Room 1606, 16/F Tower 2, Admiralty Centre 18 Harcourt Road Hong Kong 30 August 2021

The Sole Director BetaCafe Holdings Limited

Craigmuir Chambers, Road Town, Tortola, VG 1110, British Virgin Islands

The Board of Directors China Youzan Limited Victoria Place, 5th Floor, 31 Victoria Street, Hamilton HM10, Bermuda

Dear Sirs,

PRE-CONDITIONAL TAKE PRIVATE PROPOSAL FOR CHINA YOUZAN LIMITED BY BETACAFE HOLDINGS LIMITED BY WAY OF A SCHEME OF ARRANGEMENT UNDER SECTION 99 OF THE COMPANIES ACT

We refer to the joint announcement dated 30 August 2021 issued by BetaCafe Holdings Limited (the “ Offeror ”) and China Youzan Limited (“ China Youzan ”) in connection with the proposed Youzan Technology Listing and the Proposal (the “ Announcement ”). Unless otherwise stated, capitalised terms used in this letter have the same meanings as defined in the Announcement.

Pursuant to the requirements of the Takeovers Code, China Youzan has engaged Jones Lang LaSalle Corporate Appraisal and Advisory Limited (the “ Valuer ”) to undertake a valuation exercise to assess the estimated values of each Youzan Technology Share and all the issued shares in Youzan Technology as at 30 June 2021, contained in the letter dated 30 August 2021 addressed to China Youzan from the Valuer as set out in the Announcement (the “ Estimated Values ”). The responsible person of the Valuer is a Chartered Valuer and Appraiser, and a fellow member of the Hong Kong Institute of Certified Public Accountants, CPA Australia as well as the Royal Institution of Chartered Surveyors, and who has over 20 years of experience in valuation and advisory business in different industries in Asia Pacific region.

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Pursuant to the requirements of Rule 11.1(b) of the Takeovers Code, we, in our capacity as the financial adviser solely to the Offeror in connection with the proposed Youzan Technology Listing and the Proposal, is required to report on the Estimated Values and the qualifications and experience of the Valuer.

OUR REVIEW

For the purpose of providing this letter, we have conducted the following due diligence:

(a) conducted reasonable checks to assess the relevant qualifications and experience of the Valuer, including reviewing the supporting documents on the qualifications of the Valuer and discussing with the Valuer on its qualifications and experience;
(b) reviewed the Estimated Values, for which China Youzan and the Valuer are solely responsible; and
(c) discussed, from the perspective of financial adviser, with the Valuer, the Estimated Values and the bases and assumptions underlying the Estimated Values.

Based on the information provided by the Valuer and China Youzan as of the date of this letter, without giving any other opinion or expressing any other view on the Estimated Values, for which the Valuer and China Youzan are solely responsible, we are satisfied that the Estimated Values have been made after due care and consideration. Based on the information provided by the Valuer, we are also satisfied that the Valuer is suitably qualified and experienced to prepare the Estimated Values.

For the purpose of this letter, we have relied on and assumed the accuracy and completeness of all information provided to us and/or discussed with the Valuer and China Youzan. We have not assumed any responsibility for independently verifying the accuracy and completeness of such information or undertaken any independent evaluation or appraisal of the Estimated Values.

This letter has been provided to the sole director of the Offeror and the board of directors of China Youzan only and solely for the purposes of compliance with Rule 11.1(b) of the Takeovers Code. We do not accept any responsibility to any person(s), other than the Offeror and China Youzan, in respect of, arising out of, or in connection with this letter.

Yours faithfully For and on behalf of Messis Capital Limited Erica Law Director

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II. LETTER FROM THE VALUER ON THE UPDATED ESTIMATED VALUE OF THE YOUZAN TECHNOLOGY SHARES

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Jones Lang LaSalle Corporate Appraisal and Advisory Limited 7/F One Taikoo Place 979 King’s Road Hong Kong tel +852 2846 5000 fax +852 2169 6001 Licence No.: C-030171

30 August 2021

The Board of Directors CHINA YOUZAN LIMITED Unit 2708, The Centre, 99 Queen’s Road Central, Hong Kong

Dear Sirs,

In accordance with the instructions from China Youzan Limited (the “ Company ” or “ China Youzan ”), we have undertaken an investigation and analysis to assess the estimated value (the “ Estimated Value ”) of Youzan Technology Share (the “ Subject ”) as at 30 June 2021 (the “ Assessment Date ”). Each Youzan Technology Share refers to one ordinary share in the issued share capital in Youzan Technology Inc. (the “ Target Company ” or “ Youzan Technology ”, formerly known as Qima Holdings Ltd., and together with its subsidiaries, the “ Youzan Technology Group ” or “ Target Group ”).

We are given to understand that the Company made a joint announcement dated 26 February 2021 with BetaCafe Holdings Limited (the “ Offeror ”) pursuant to Rule 3.5 of the Hong Kong Code on Takeovers and Mergers (“ Takeovers Code ”) (the “ Rule 3.5 Announcement ”) on a proposal (the “ Proposal ”) involving: (i) the Distribution of Youzan Technology Shares held by China Youzan to all China Youzan Shareholders as at a record date for determining entitlement thereto; and (ii) the taking private of China Youzan by way of a scheme of arrangement under section 99 of the Companies Act in consideration for the Scheme Consideration payable by the Offeror to the Scheme Shareholders in cash. Pursuant to a joint announcement issued by China Youzan and the Offeror on the date of this letter (the “ Supplemental Announcement ”), certain terms of the Proposal have been revised. Unless otherwise defined herein, capitalized terms shall have the same meanings given to them in the Supplemental Announcement.

This assessment (the “ Assessment ”) is prepared for the inclusion in its public disclosure by the Company. The Assessment does not constitute an opinion as to the price at which Youzan Technology Share may trade at any point in the future, or represent the value that a holder of Youzan Technology Share may realise on any future sale, where such a value may be higher or lower than the Estimated Value per Youzan Technology Share in this Report. We are not aware of any material changes to the Subject between the Assessment Date and the Report Date; and we shall endeavor to notify shareholders through the Company should there be any material changes throughout the offer period.

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This Assessment was carried out with consideration of the requirements under International Financial Reporting Standard 13 – Fair Value Measurement (“ IFRS 13 ”) issued by the International Accounting Standards Board. In this Assessment, we define Estimated Value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date”.

INTRODUCTION

China Youzan

China Youzan is a listed company on GEM of The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) with stock code 8083. China Youzan and its subsidiaries (“ China Youzan Group ”) mainly focuses on offering online and offline merchants suites of comprehensive solutions comprising third party payments and variety of SaaS (Software as a Service) products and comprehensive service through its e-commerce platform, like marketing and customer engagement tools to facilitate the process of transactions between merchants and their customers.

The operations of the China Youzan Group may be classified into two main groups of business operations. The first group of business operations consists of the business operations carried out by Youzan Technology, of which China Youzan holds approximately 51.9% of the total issued shares of Youzan Technology as at the Assessment Date and as the date of this Report. Youzan Technology focuses on the provision of online and offline e-commerce platform with a variety of cloud-based commerce services in the PRC carried out through the Youzan Technology Group (the “ SaaS Business ”). The second group of business operations is generally referred to as the “Payment & Other Business” (the “ Payment & Other Business ”).

The Subject

Youzan Technology is an investment holding company. The Youzan Technology Group is principally engaged in providing a variety of cloud-based commerce services to merchants through its subscription solutions and merchant solutions. Subscription solutions mainly comprise SaaS products designed for merchants of various industries including Youzan WeiMall (有贊微商城), Youzan Retail (有贊零售), Youzan Chain (有贊連鎖), Youzan Beauty (有贊美業), and Youzan Education (有贊教育). Merchant solutions mainly comprise value-added services offered to merchants to address their online and/or offline operational needs. Through its subscription solutions and merchant solutions, the Youzan Technology Group enables merchants to establish online presence, digitalise critical business operations, integrate online/offline activities, take ownership of and manage their online customer traffic, boost customer acquisition and repeat purchases, as well as enhance operating efficiency.

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The Proposal

We are given to understand that China Youzan made the Rule 3.5 Announcement with the Offeror on a proposal involving: (i) the Distribution of Youzan Technology Shares held by China Youzan to all China Youzan Shareholders as at a record date for determining entitlement thereto; and (ii) the taking private of China Youzan by way of a scheme of arrangement under section 99 of the Companies Act in consideration for the Scheme Consideration payable by the Offeror to the Scheme Shareholders in cash. Pursuant to the Supplemental Announcement, certain terms of the Proposal have been revised.

The key changes to the Proposal as set out in Supplemental Announcement are summarized below:

(i) revising the definition of the term “Youzan Technology Listing” to mean the proposed listing of all of the Youzan Technology Shares on the Main Board of the Stock Exchange by way of an offering of new shares;
(ii) removing the Scheme Pre-Condition as set out under paragraph (a) in the paragraph headed “2. TERMS OF THE PROPOSAL – 2.6 Scheme Pre-Conditions” in the Rule 3.5 Announcement (being the in-principle approval of the Stock Exchange for the listing of the Youzan Technology Shares on the Stock Exchange for the Youzan Technology Listing); and
(iii) adding a new Scheme Condition in respect of the underwriting agreements being entered into between, among others, Youzan Technology and the underwriters for the Youzan Technology Offering and having become effective and unconditional and not having been terminated by the latest time at which termination is permitted thereunder as set out under paragraph (o) in the paragraph headed “2. REVISIONS TO THE TERMS OF THE PROPOSAL – 2.7 Updates on the Scheme Conditions” in the Supplemental Announcement.

BASIS OF ASSESSMENT

We have been guided by IFRS 13 and the International Valuation Standards issued by the International Valuation Standards Council when we carried out the Assessment. The procedures employed include a review of legal status and economic conditions of the Subject and an assessment of key assumptions, estimates, and representations made by the Company. All matters essential to the proper understanding of the Assessment are disclosed in this Report.

The following factors form an integral part of our basis of opinion:

The economic outlook in general;
The nature of business and history of the operation concerned;
The financial condition and performance of the Target Group;

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Market-driven investment returns of companies engaged in similar lines of business;
Financial and business risk of the business;
Consideration and analysis on the micro and macro economy affecting the business of the Target Group; and
Assessment of the liquidity of the business of the Target Group.

We have planned and performed our Assessment in order to obtain all the information and explanations that we considered necessary in order to provide us with sufficient evidence to express our opinions on assess the Estimated Value.

We would like to draw your attention that China Youzan Shares are, and Youzan Technology Shares will become, publicly traded securities. China Youzan Shares and the Youzan Technology Shares will be subject to the fluctuations of the capital market. Those market uncertainties and contingencies are difficult to predict and are beyond our control. Consequently, our view expressed in this Report is not necessarily indicative of the price at which China Youzan Shares or Youzan Technology Shares might actually trade in any public market as at the date of this Report or at any future date, or the amount which might be realised upon a sale of China Youzan Shares or Youzan Technology Shares to a third party. In addition, the Estimated Value as at any future date would be expected to fluctuate with changes in prevailing market conditions, the financial conditions and prospects of Youzan Technology and other factors which generally influence the economic value of Youzan Technology. As a result, there can be no assurance that the actual price of China Youzan Shares or Youzan Technology Shares will be higher or lower than that implied by the Estimated Value.

PRINCIPAL ASSUMPTIONS

In the Assessment of the Estimated Value of the Subject, we make the following assumptions:

The Proposal had been completed and the entire Youzan Technology Shares had been listed on the Main Board of the Stock Exchange;
In order to realize the growth potential of the business and maintain a competitive edge, additional manpower, equipment and facilities are necessary to be employed. For the purposes of this Report, we have assumed and China Youzan has confirmed to us that additional facilities and systems proposed are sufficient for future expansion and will be grown at the same speed with the market;
We have assumed that there will be no material change in the existing political, legal, technological, fiscal or economic conditions, which might adversely affect the business of the Target Group;
We have assumed that the operational and contractual terms stipulated in the relevant contracts and agreements between Youzan Technology and any other party will be honored;

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We have assumed the accuracy of the financial and operational information provided to us by the Company and relied to a considerable extent on such information in arriving at our view; and
We have assumed that there are no hidden or unexpected conditions (such as natural disaster, war, government intervention, major change in management and etc.) associated with the subject valued that might adversely affect the reported value. Further, we are not aware of any material changes to the Subject between the Assessment Date and the Report Date and we shall endeavor to notify shareholders through the Company should there be any material changes throughout the offer period.

ASSESSMENT METHODOLOGY

To select the most appropriate approach, we have considered the purpose of the Assessment, the basis of value, as well as the availability and reliability of information provided to us to perform an analysis. We have also considered the relative advantages and disadvantages of each approach to the nature and circumstances of this Subject. In our opinion, the cost approach is inappropriate for valuing the Subject, as it does not directly incorporate information about the economic benefits contributed by the Subject. The income approach is inappropriate as this approach require detailed operational information and long-term financial projection of the Subject and income approach requires lots of assumptions and unobservable inputs.

In view of the above, we have adopted the market approach for the Assessment. The market approach considers prices recently paid for similar assets, with adjustments made to market prices to reflect condition and utility of the appraised assets relative to the market comparable. Assets for which there is an established secondary market may be valued by this approach. Benefits of using this approach include its simplicity, clarity, speed and the need for few or no assumptions. It also introduces objectivity in application as publicly available inputs are used.

There are three common methods under market approach, namely, prior transaction method, guideline public company method and guideline transaction method. The prior transaction method refers mostly to the recent transaction price of the calculation subject. The guideline public company method requires identifying suitably comparable companies and selection of appropriate trading multiples. The guideline transaction method takes reference to recent transactions of comparable companies between unrelated parties and the multiple of transaction price to the Subject’s financial metrics.

In this Report, the Estimated Value of the Subject was developed through the guideline transaction method under the Market Approach. This method requires identification of recent transactions of assets similar to the Subject. As China Youzan Shares is publicly traded and Youzan Technology accounts for the majority of the revenue of China Youzan (more than 80% for the year of 2020), it is considered that the quoted market price of China Youzan Shares to be a recent transaction price of a similar asset to Youzan Technology Shares. Furthermore, a cross check was performed using the guideline public company method under the Market Approach. This requires the research of comparable companies’ benchmark multiples and selection of an appropriate multiple. The prior transaction method is not adopted due to lack of recent market transactions of the Subject.

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ASSESSMENT USING THE GUIDELINE TRANSACTION METHOD

IFRS 13 requires the use of valuation technique which requires maximize the use of relevant observable inputs and minimize the use of unobservable inputs. The quoted market price of China Youzan Shares is considered as the most relevant observable input to the Assessment. China Youzan consists of Youzan Technology and Payment & Other Business; and as at the Assessment Date, China Youzan holds 51.9% of all issued shares in Youzan Technology. As such, the Estimated Value of 51.9% of all the issued shares in Youzan Technology can be calculated by deducting the market value of Payment & Other Business from the market capitalization of China Youzan, which is the product of the last quoted market price of shares of China Youzan as at the Assessment Date multiplied by the total number of shares of China Youzan in issue. For the evaluation of the market value of Payment & Other Business, please refer to our separate report also included in the Supplemental Announcement.

The following table shows the calculation of the Estimated Value of Youzan Technology Share:

Amounts in RMB’000 unless otherwise stated

Parameter	Input
Last quoted market price of China Youzan Shares as at the
Assessment Date (HKD per share)	1.48
Total number of shares of China Youzan in issue	17,260,003,617
Market Capitalisation of China Youzan (HKD’000)	25,544,805
Market Capitalisation of China Youzan at an exchange rate of
RMB1 = HKD1.2027	21,239,549
Market Value of Payment & Other Business (Please refer to
the valuation report on Payment & Other Business in the
Supplemental Announcement)	2,049,660
Estimated Value of 51.90% of Youzan Technology	19,189,889
Estimated Value of 100% of Youzan Technology	36,974,738
Total Number of Youzan Technology Shares1	1,699,463,094
Estimated Value of Youzan Technology Share (RMB)	21.76

1 After taking into account the proposed issuance of Youzan Technology Shares pursuant to Youzan Technology Share Award Plan B, the Anti-Dilution Issue and Youzan Technology RSU Plan C but before taking into account the proposed offering of new shares pursuant to the Youzan Technology Offering.

Note: The total may not correspond with the sum of the individual figures due to rounding.

CROSS-CHECK USING THE GUIDELINE PUBLIC COMPANY METHOD

We have considered the following commonly used benchmark multiples when we performed the cross-check on the Estimated Value using the guideline public company method:

Price to earnings ratio (“ P/E ”) is not adopted as the differences in balance sheet positions cannot be fully incorporated into a P/E analysis. In particular, the Target Group did not generate any profit in the past 12 months. Therefore, the P/E multiple is not adopted under this perspective.

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Price to book ratio (“ P/B ”) is not adopted as P/B multiple is common for asset intensive industries which is not the case for the Target Group.
It is considered that the suitable multiple in this Report is Enterprise Value to Sales ratio (“ EV/S ”), as EV/S can incorporate the differences in balance sheet positions between the Target Group and the comparable companies. In this Report, EV/S is calculated as enterprise value as at the Assessment Date divided by the Sales over the last twelve months from the Assessment Date, reflecting the Target Group’s latest financial performance.

In determining the price multiple, a list of comparable companies was identified. The selection criteria include the following:

Companies are searchable in Bloomberg;
Companies derive their revenues from the same industry of the Target Group, i.e., Software as a Service for commerce or e-commerce. The search was performed in Bloomberg using the key word “commerce[1] ”. Companies which are not classified as “Application Software[2] ” companies under the Bloomberg Industry Classification Standard and derive less than 50% of their revenues from e-commerce and Software as a Service for retail companies are excluded. These companies are operating on similar technology and business model as the Target Group and are considered as relevant even though they may not serve in the same geographical location;
Companies with market capitalization higher than RMB5 billion[3] as at the Assessment Date; and
Sufficient and applicable data, including the EV/S Ratios as at the Assessment Date, of the companies are available.
1 A non-specific key word “commerce” was used for the search so as to include as many potential comparable companies as possible. We have then investigated into the business scope of each of the companies to select the most comparable companies. It is confirmed that those are the most relevant key words and as such no other searches is necessary.
2 It is considered that “Application Software” is the only applicable industry classification for Youzan Technology. It is also noted that China Youzan is currently classified as “Application Software”.
3 According to the valuation report on the Subject with an assessment date of 30 November 2020 as previously disclosed in the Rule 3.5 Announcement dated 26 February 2021, the searching criteria of comparable companies include companies with market capitalization higher than RMB10 billion and the company 688365 CH Equity was adopted. As at 30 June 2021, this company has market capitalization of RMB7.63 billion, which could have been excluded based on the previous criteria with market capitalization. However, due to the limited number of comparable companies, we have revised the criteria to include companies with market capitalization higher than RMB5 billion.
Note: It is considered that the US and China (Hong Kong, Shenzhen and Shanghai) stock exchanges are the most active for technology companies. As there are only a very limited list of comparable companies which are in the same industry, with similar business model and at a similar size as the Target Company, it is considered that the list of comparable companies is the most relevant notwithstanding their differences in listing locations and geographical coverages. It is also considered that for a technology company, its business model and size have more impact on the value of the company than its listing location and geographic coverages. As such we have not made consider that it is not necessary to any adjustments adjust to the EV/S multiples of the comparable companies.

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As sourced from Bloomberg, the market multiples of the comparable companies, excluding China Youzan, satisfying the above criteria are exhaustively listed in below table:

				Market	EV/S
Bloomberg Ticker	Company Name	Exchange	Company Description	Capitalization	Multiple
				(RMB billion)
SHOP US Equity	Shopify Inc.	New York Stock	Shopify Inc. provides a cloud-	1,176.10	45.54
		Exchange	based commerce platform. The
			company offers a platform for
			merchants to create an omni-
			channel experience that helps
			showcase the merchant’s brand.
2013	Weimob Inc.	Hong Kong Stock	Weimob Inc. is a China based	34.61	13.73
HK Equity		Exchange	company which provides a cloud-
			based commerce and marketing
			solutions. The company’s
			products are categorized into three
			cloud service offerings, namely
			Commerce Cloud, Marketing
			Cloud, and Sales Cloud. Weimob
			conducts business in China.
BIGC US Equity	BigCommerce	NASDAQ	BigCommerce Holdings, Inc. operates	29.47	24.50
	Holding Inc.		as a software company. The
			company offers SaaS platform
			for cross-channel commerce and
			cloud-based e-commerce solution
			that scales with business growth.
			BigCommerce Holdings serves
			customers worldwide.
688365 CH Equity	Hangzhou Raycloud	Shanghai Stock	Hangzhou Raycloud Technology Co.,	7.63	13.02
	Technology	Exchange	Ltd develops and sells software
	Co., Ltd		products. The Company develops
			and markets electronic commerce
			software, express software, data
			analysis software, and other
			products. Hangzhou Raycloud
			Technology markets its products
			throughout China.

The median of the EV/S ratios of the comparable companies is 19.11.

Note 1: It is considered that the US and China (Hong Kong, Shenzhen and Shanghai) stock exchanges are the most active for technology companies. As there are only a very limited list of comparable companies which are in the same industry, with similar business model and at a similar size as the Target Company, it is considered that the list of comparable companies is the most relevant notwithstanding their differences in listing locations and geographical coverages. It is also considered that for a technology company, its business model and size have more impact on the value of the company than its listing location and geographic coverages. As such, we considered that it is not necessary to make any adjustments to the EV/S multiples of the comparable companies.
Note 2: The median (at 19.11), which usually is the more common and preferred measurement, has been selected as the reference point. As an additional information, the average EV/S ratio of the comparable companies is 24.20.
Note 3: The financial information of the comparable companies was extracted on 26 August 2021, and the latest available financial information was adopted for the calculation of the EV/S multiple.

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Under the cross-check, the calculation of the Estimated Value of Youzan Technology Share is shown as follows:

Amounts in RMB’000 unless otherwise stated

Parameter	Input
Median EV/S Multiple of the Comparable Companies (times)	19.11
Unaudited Revenue from contracts with customers within the scope of
HKFRS 15 (Excluding transaction fee income from merchants) of
the Target Group from 1 July 2020 to 30 June 2021	1,415,844
Enterprise Value of the Target Group as at the Assessment Date	27,063,371
Add: Unaudited Restricted bank balances of the Target Group as at
the Assessment Date	843
Add: Unaudited Time deposit of the Target Group as at the Assessment Date	120,000
Add: Unaudited Bank and cash balances of Target Group as at the Assessment Date	590,727
Add: Unaudited Loan to a director of the Target Group as at the Assessment Date	2,650
Add: Unaudited Loan to an employee of the Target Group as at the Assessment Date	500
Add: Unaudited Amount due from a related company of the Target Group
as at the Assessment Date	463
Add: Unaudited Loans to a fellow subsidiary of the Target Group as at
the Assessment Date	3,879
Add: Unaudited Financial assets at fair value through other comprehensive income
(FVTOCI) of the Target Group as at the Assessment Date	11,847
Add: Unaudited Financial assets at fair value through profit or loss
(FVTPL) of the Target Group as at the Assessment Date	253,247
Add: Earnest money paid for potential investment of the Target Group
as at the Assessment Date	52,000
Add: Unaudited Loan to others (Included in prepayments, deposits and
other receivables) of the Target Group as at the Assessment Date	10,093
Less: Unaudited Lease liabilities of the Target Group as at the Assessment Date	238,710
Less: Unaudited Amount due to fellow subsidiaries of the Target Group
as at the Assessment Date	16,363
Less: Unaudited Amounts due to non-controlling shareholders of subsidiaries of
the Target Group as at the Assessment Date	291
Less: Unaudited Amount due to China Youzan Limited of the Target Group
as at the Assessment Date	672
Estimated Value of all shareholding interest in the Target Group	27,853,584
Total Number of Youzan Technology Shares1	1,699,463,094
Per share Estimated Value of all shareholding interest in the Subject (RMB)	16.39

The cross-checked using the guideline public company method which suggested the value of each Youzan Technology Share is RMB16.39 based on the number of shares of Youzan Technology[1] .

1 After taking into account the proposed issuance of Youzan Technology Shares pursuant to Youzan Technology Share Award Plan B, the Anti-Dilution Issue and Youzan Technology RSU Plan C but before taking into account the proposed offering of new shares pursuant to the Youzan Technology Offering.

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Note 1: The unaudited financial figures of the Target Company listed in the above table are prepared by directors of the Target Group based on unaudited management accounts of Youzan Technology and its subsidiaries. The unaudited management accounts are prepared in accordance with Hong Kong Financial Reporting Standards and the accounting policies adopted by China Youzan as set out in China Youzan annual report for the year ended 31 December 2020.
Note 2: The total may not correspond with the sum of the individual figures due to rounding.
Note 3: As an additional information, if the average EV/S ratio of the Comparable Companies (at 24.20) were adopted, the per share Estimated Value would be RMB20.62.

ASSESSMENT COMMENT

The conclusion in this Report is based on accepted procedures and practices that rely substantially on the use of assumptions which have been set out in this Report and the consideration, some of which may not be readily quantifiable. Further, while the assumptions and other relevant factors are considered by us to be reasonable, they are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of the Target Group, the Company and Jones Lang LaSalle Corporate Appraisal and Advisory Limited.

We do not intend to express any opinion on matters which require legal or other specialized expertise or knowledge, beyond what is customarily employed by valuers. Our conclusions assume continuously prudent management of the Target Group that is reasonable and necessary to maintain the character and integrity of the assets valued.

This Report is issued subject to our Limiting Conditions as attached.

CONCLUSION

The Estimated Value of each Youzan Technology Share is calculated at RMB21.76 based on a total of 1,699,463,094 Youzan Technology Shares using the guideline transaction method.

The number of Youzan Technology Shares adopted in the Estimated Value takes into account the proposed issuance of Youzan Technology Shares pursuant to Youzan Technology Share Award Plan B, the Anti-Dilution Issue and Youzan Technology RSU Plan C but before the proposed offering of new shares pursuant to the Youzan Technology Offering.

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Based on the results of our investigations and analyses, we are of the view that the Estimated Values of each Youzan Technology Share and all the issued shares in the Youzan Technology as at the Assessment Date are reasonably stated at the amount of RMB21.76 and RMB36,975,000,000 respectively.

Yours faithfully, For and on behalf of Jones Lang LaSalle Corporate Appraisal and Advisory Limited

Simon M.K. Chan Executive Director

Note: Simon M.K. Chan is a Chartered Valuer and Appraiser, and a fellow member of Hong Kong Institute of Certified Public Accountants (HKICPA), CPA Australia as well as the Royal Institution of Chartered Surveyors (RICS). Simon has extensive experience in valuation and corporate advisory business, providing a wide range of valuation and advisory services to numerous listed and private companies in different industries in Asia Pacific region for over 20 years.

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LIMITING CONDITIONS

In the preparation of our reports, we relied on the accuracy, completeness and reasonableness of the financial information, forecast, assumptions and other data provided to us by the Company/engagement parties and/or its representatives. We did not carry out any work in the nature of an audit and neither are we required to express an audit or viability opinion. We take no responsibility for the accuracy of such information. Our reports were used as part of the Company’s/engagement parties’ analysis in reaching their conclusion of value and due to the above reasons, the ultimate responsibility of the derived value of the subject property rests solely with the Company/ engagement parties.
We have explained as part of our service engagement procedure that it is the director’s responsibility to ensure proper books of accounts are maintained, and the financial information and forecast give a true and fair view and have been prepared in accordance with the relevant standards and companies ordinance.
Public information and industry and statistical information have been obtained from sources we deem to be reputable; however we make no representation as to the accuracy or completeness of such information, and have accepted the information without any independent verification.
The management and the board of the Company/engagement parties have reviewed and agreed on this report and confirmed that the basis, assumptions, calculations and results are appropriate and reasonable.
Jones Lang LaSalle Corporate Appraisal and Advisory Limited shall not be required to give testimony or attendance in court or to any government agency by reason of this exercise, with reference to the project described herein. Should there be any kind of subsequent services required, the corresponding expenses and time costs will be reimbursed from you. Such kind of additional work may incur without prior notification to you.
No opinion is intended to be expressed for matters which require legal or other specialized expertise, which is out of valuers’ capacity.
The use of and/or the validity of the report is subject to the terms of engagement letter/ proposal and the full settlement of the fees and all the expenses.
Our conclusions assume continuation of prudent and effective management policies over whatever period of time that is considered to be necessary in order to maintain the character and integrity of the assets valued.
We assume that there are no hidden or unexpected conditions (such as natural disaster, war, government intervention, major change in management and etc.) associated with the subject matter under review that might adversely affect the reported review result. Further, we assume no responsibility for changes in market conditions, government policy or other conditions after the offer period.

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This report has been prepared solely for the use as stated in engagement letter. The report should not be otherwise referred to, in whole or in part, or quoted in any document, circular or statement in any manner, or distributed in whole or in part or copied to any third party without our prior written consent. Even with our prior written consent for such, we are not be liable to any third party except for our client for this report. Our client should remind of any third party who will receive this report and the client will need to undertake any consequences resulted from the use of this report by the third party. We shall not under any circumstances whatsoever be liable to any third party.
This report is solely for the use by our client and the calculation of values expressed herein is valid only for the purpose stated in the engagement letter/or proposal as of the Assessment/Reference Date. In accordance with our standard practice, we must state that this report and exercise is for the use only by the party to whom it is addressed to and no responsibility is accepted with respect to any third party for the whole or any part of its contents.
Where a distinct and definite representation has been made to us by party/parties interested in the assets valued, we are entitled to rely on that representation without further investigation into the veracity of the representation.
You agree to indemnify and hold us and our personnel harmless against and from any and all losses, claims, actions, damages, expenses or liabilities, including reasonable attorney’s fees, to which we may become subjects in connection with this engagement. Our maximum liability relating to services rendered under this engagement (regardless of form of action, whether in contract, negligence or otherwise) shall be limited to the fee paid to us for the portion of its services or work products giving rise to liability. In no event shall we be liable for consequential, special, incidental or punitive loss, damage or expense (including without limitation, lost profits, opportunity costs, etc.), even if it has been advised of their possible existence.
We are not environmental, structural or engineering consultants or auditors, and we take no responsibility for any related actual or potential liabilities exist, and the effect on the value of the asset is encouraged to obtain a professional assessment. We do not conduct or provide such kind of assessments and have not considered the potential impact to the subject property.
This exercise is premised in part on the historical financial information provided by the management of the Company/engagement parties and/or its representatives. We have assumed the accuracy and reasonableness of the information provided and relied to a considerable extent on such information in our calculation of value. Accordingly, to the extent any of the above mentioned information requires adjustments, the resulting value may differ significantly.
This report and the conclusion of values arrived at herein are for the exclusive use of our client for the sole and specific purposes as noted herein. Furthermore, the report and conclusion of values are not intended by the author, and should not be construed by the reader, to be investment advice or as transaction reference in any manner whatsoever. The conclusion of values represents the consideration based on the information furnished by China Youzan/engagement parties and other sources. Actual transactions involving the subject assets/business might be concluded at a higher or lower value, depending upon the circumstances of the transaction and the business, and the knowledge and motivation of the buyers and sellers at that time.

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ANNEX II

UPDATED POB VALUATION REPORT

I. LETTER FROM THE FINANCIAL ADVISER ON THE UPDATED VALUATION OF THE PAYMENT & OTHER BUSINESS

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MESSIS CAPITAL LIMITED

Room 1606, 16/F Tower 2, Admiralty Centre 18 Harcourt Road Hong Kong 30 August 2021

The Sole Director BetaCafe Holdings Limited Craigmuir Chambers, Road Town, Tortola, VG 1110, British Virgin Islands

The Board of Directors China Youzan Limited

Victoria Place, 5th Floor, 31 Victoria Street, Hamilton HM10, Bermuda

Dear Sirs,

PRE-CONDITIONAL TAKE PRIVATE PROPOSAL FOR CHINA YOUZAN LIMITED BY BETACAFE HOLDINGS LIMITED BY WAY OF A SCHEME OF ARRANGEMENT UNDER SECTION 99 OF THE COMPANIES ACT

We refer to the joint announcement dated 30 August 2021 issued by BetaCafe Holdings Limited (the “ Offeror ”) and China Youzan Limited (“ China Youzan ”) in connection with the proposed Youzan Technology Listing and the Proposal (the “ Announcement ”). Capitalised terms used in this letter will, unless otherwise stated, have the same meaning as defined in the Announcement.

Pursuant to the requirements of the Takeovers Code, the Offeror has engaged Jones Lang LaSalle Corporate Appraisal and Advisory Limited (the “ Valuer ”) to undertake a valuation exercise to express an independent opinion on the market value of all shareholding interest in China Youzan excluding Youzan Technology Inc. and its subsidiaries (the businesses carried on by which referred to as the Payment & Other Business) as at 30 June 2021, contained in the letter dated 30 August 2021 addressed to you from the Valuer as set out in the Announcement (the “ POB Valuation ”). The responsible person of the Valuer is a Chartered Valuer and Appraiser, and a fellow member of Hong Kong Institute of Certified Public Accountants, CPA Australia as well as the Royal Institution of Chartered Surveyors, and who has over 20 years of experience in valuation and advisory business in different industries in Asia Pacific region.

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Pursuant to the requirements of Rule 11.1(b) of the Takeovers Code, we, in our capacity as the financial adviser solely to the Offeror in connection with the Proposal, is required to report on the POB Valuation and the qualifications and experience of the Valuer.

OUR REVIEW

For the purpose of providing this letter, we have conducted the following due diligence:

(a) conducted reasonable checks to assess the relevant qualifications and experience of the Valuer, including reviewing the supporting documents on the qualifications of the Valuer and discussing with the Valuer on its qualifications and experience;
(b) reviewed the POB Valuation, for which the Offeror and the Valuer are solely responsible; and
(c) discussed, from the perspective of financial adviser, with the Valuer, the POB Valuation and the bases and assumptions underlying the POB Valuation.

Based on the information provided by the Valuer and the Offeror as of the date of this letter, without giving any other opinion or expressing any other view on the POB Valuation, for which the Valuer and the Offeror are solely responsible, we are satisfied that the POB Valuation has been made after due care and consideration. Based on the information provided by the Valuer, we are also satisfied that the Valuer is suitably qualified and experienced to prepare the POB Valuation.

For the purpose of this letter, we have relied on and assumed the accuracy and completeness of all information provided to us and/or discussed with the Valuer and the Offeror. We have not assumed any responsibility for independently verifying the accuracy and completeness of such information or undertaken any independent evaluation or appraisal of POB Valuation.

This letter has been provided to the sole director of the Offeror only and solely for the purposes of compliance with Rule 11.1(b) of the Takeovers Code. We do not accept any responsibility to any person(s), other that the Offeror, in respect of, arising out of, or in connection with this letter.

Yours faithfully For and on behalf of Messis Capital Limited Erica Law Director

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II. LETTER FROM THE VALUER ON THE UPDATED VALUATION OF THE PAYMENT & OTHER BUSINESS

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Jones Lang LaSalle Corporate Appraisal and Advisory Limited 7/F One Taikoo Place 979 King’s Road Hong Kong tel +852 2846 5000 fax +852 2169 6001 Licence No.: C-030171

30 August 2021

The Board of Directors CHINA YOUZAN LIMITED Unit 2708, The Centre, 99 Queen’s Road Central, Hong Kong

Dear Sirs,

In accordance with the instructions received from China Youzan Limited (the “ Company ” or “ China Youzan ” and together with its subsidiaries, the “ China Youzan Group ”), we have undertaken a valuation exercise which requires Jones Lang LaSalle Corporate Appraisal and Advisory Limited to express an independent opinion on the market value of all shareholding interest in “China Youzan Group excluding Youzan Technology Inc. (“ Youzan Technology ”, formerly known as Qima Holdings Ltd.) and its subsidiaries” (the “ Subject ”, the businesses carried on by which referred to as the “Payment & Other Business” and as elaborated in further detail below in this report) as at 30 June 2021 (the “ Valuation Date ”).

The purpose of this valuation is for inclusion in its public disclosure by the Company.

Our valuation was carried out on a market value basis. Market value is defined as “ estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion ”.

INTRODUCTION

China Youzan

China Youzan is a listed company on GEM of the Stock Exchange with stock code 8083. China Youzan and its subsidiaries mainly focuses on offering online and offline merchants suites of comprehensive solutions comprising third party payments and variety of SaaS (Software as a Service) products and comprehensive service through its e-commerce platform, like marketing and customer engagement tools to facilitate the process of transactions between merchants and their customers.

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The operations of the China Youzan Group may be classified into two main groups of business operations. The first group of business operations consists of the business operations carried out by Youzan Technology, of which China Youzan holds approximately 51.9% of its total issued shares. Youzan Technology focuses on the provision of online and offline e-commerce platform with a variety of cloud-based commerce services in the PRC carried out through the Youzan Technology Group (the “ SaaS Business ”). The second group of business operations is the Subject of this report and is generally referred to as the “Payment & Other Business”.

The Subject

The Payment & Other Business consists of the following three segments: (i) third party payment services segment which provides third party payment services and related consultancy services; (ii) the Onecomm segment which provides third party payment system solutions and the sales of integrated smart point of sales devices; and (iii) the general trading segment. The Company holds a 100% interest in the subsidiaries carrying on the Payment & Other Business.

The Proposal

We are given to understand that China Youzan made a joint announcement with BetaCafe Holdings Limited (the “ Offeror ”) dated 26 February 2021 pursuant to Rule 3.5 of the Takeovers Code (the “ Rule 3.5 Announcement ”) on a proposal (the “ Proposal ”) involving: (i) the Distribution of Youzan Technology Shares held by China Youzan to all China Youzan Shareholders as at a record date for determining entitlement thereto; and (ii) the taking private of China Youzan by way of a scheme of arrangement under section 99 of the Companies Act in consideration for the Scheme Consideration payable by the Offeror to the Scheme Shareholders in cash. Pursuant to the joint announcement issued by China Youzan and the Offeror on the date of this letter (the “ Supplemental Announcement ”), certain terms of the Proposal have been revised.

The key changes to the Proposal as set out the Supplemental Announcement are summarized below:

(i) revising the definition of the term “Youzan Technology Listing” to mean the proposed listing of all of the Youzan Technology Shares on the Main Board of the Stock Exchange by way of an offering of new shares;
(ii) removing the Scheme Pre-Condition as set out under paragraph (a) in the paragraph headed “2. TERMS OF THE PROPOSAL – 2.6 Scheme Pre-Conditions” in the Rule 3.5 Announcement (being the in-principle approval of the Stock Exchange for the listing of the Youzan Technology Shares on the Stock Exchange for the Youzan Technology Listing); and
(iii) adding a new Scheme Condition in respect of the underwriting agreements being entered into between, among others, Youzan Technology and the underwriters for the Youzan Technology Offering and having become effective and unconditional and not having been terminated by the latest time at which termination is permitted thereunder as set out under paragraph (o) in the paragraph headed “2. REVISIONS TO THE TERMS OF THE PROPOSAL – 2.7 Updates on the Scheme Conditions” in the Supplemental Announcement.

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BASIS OF OPINION

We have conducted our valuation with reference to the International Valuation Standards issued by the International Valuation Standards Council. The valuation procedures employed include a review of legal status and economic conditions of the Subject and an assessment of key assumptions, estimates, and representations made by the Company. All matters essential to the proper understanding of the valuation are disclosed in this report.

The following factors form an integral part of our basis of opinion:

The economic outlook in general;
The nature of business and history of the operation concerned;
The financial condition and performance of the Subject;
Market-driven investment returns of companies engaged in similar lines of business;
Financial and business risk of the business;
Consideration and analysis on the micro and macro economy affecting the business of the Subject; and
Assessment of the liquidity of the business of the Subject.

We have planned and performed our valuation in order to obtain all the information and explanations that we considered necessary in order to provide us with sufficient evidence to express our opinions on the Subject.

VALUATION METHODOLOGY

To select the most appropriate approach, we have considered the purpose of the Valuation and the resulting basis of value as well as the availability and reliability of information provided to us to perform an analysis. We have also considered the relative advantages and disadvantages of each approach to the nature and circumstances of this Subject. In our opinion, the cost approach is inappropriate for valuing the Subject, as it does not directly incorporate information about the economic benefits contributed by the Subject. The income approach is inappropriate as this approach require detailed operational information and long-term financial projection of the Subject but such information is not available to us.

In view of the above, we have adopted the market approach for the valuation. The market approach considers prices recently paid for similar assets, with adjustments made to market prices to reflect condition and utility of the appraised assets relative to the market comparable. Assets for which there is an established secondary market may be valued by this approach. Benefits of using this approach include its simplicity, clarity, speed and the need for few or no assumptions. It also introduces objectivity in application as publicly available inputs are used.

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There are three common methods under market approach, namely, prior transaction method, guideline public company method and guideline transaction method. Guideline transaction method refers mostly to the recent transaction price of the valuation subject. The guideline public company method requires identifying suitably comparable companies and selection of appropriate trading multiples. The guideline transaction method takes reference to recent transactions of comparable private companies between unrelated parties and the multiple of transaction price to the Subject’s financial metrics.

In this report, the market value of all shareholding interest in the Subject was developed through the guideline public company method. The guideline transaction method is not adopted due to lack of recent market transactions with similar nature as the Subject. The guideline public company method requires the research of comparable companies’ benchmark multiples and selection of an appropriate multiple. In this report, we have considered the following commonly used benchmark multiples:

Price to earnings ratio (“ P/E ”) is not adopted as the differences in balance sheet positions cannot be fully incorporated into a P/E analysis. In particular, the Subject did not generate any profit in the past 12 months. Therefore, the P/E multiple is not adopted under this perspective.
Price to book ratio (“ P/B ”) is not adopted as P/B multiple is common for asset intensive industries which is not the case for the Subject.
It is considered that the suitable multiple in this report is Enterprise Value to Sales ratio (“ EV/S ”), as EV/S can incorporate the differences in balance sheet positions between the Subject and the comparable companies. In this report, EV/S is calculated as enterprise value as at the Valuation Date divided by the Sales over the last twelve months from the Valuation Date, reflecting the Subject’s latest financial performance.

PRINCIPAL ASSUMPTIONS

In determining the market value of the equity interest in the Subject, we make the following assumptions:

In order to realize the growth potential of the business and maintain a competitive edge, additional manpower, equipment and facilities are necessary to be employed. For the purposes of this report, we have assumed and China Youzan has confirmed to us that additional facilities and systems proposed are sufficient for future expansion and will be grown at the same speed with the market;
We have assumed that there will be no material change in the existing political, legal, technological, fiscal or economic conditions, which might adversely affect the business of the Subject;
We have assumed that the operational and contractual terms stipulated in the relevant contracts and agreements between China Youzan and any other party will be honored;

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We have assumed the accuracy of the financial and operational information provided to us by China Youzan and relied to a considerable extent on such information in arriving at our opinion of value;
We have assumed that there are no hidden or unexpected conditions (such as natural disaster, war, government intervention, major change in management and etc.) associated with the asset valued that might adversely affect the reported value. Further, we are not aware of any material changes to the Subject between the Assessment Date and the Report Date and we shall endeavor to notify shareholders through the Company should there be any material changes throughout the offer period.

MARKET MULTIPLES

In determining the price multiple, a list of comparable companies was identified. The selection criteria include the following:

Companies are searchable in Bloomberg;
Companies derive their revenues from the same industry of the Subject, i.e., third party payment services. The search was performed in Bloomberg using the key word “payment services[1] ”. Companies which derive less than 50% of their revenues from third party payment services are excluded;
Companies are publicly listed in the stock exchanges of Shanghai, Shenzhen and Hong Kong; and
Sufficient and applicable data, including the EV/S Ratios as at the Valuation Date, of the companies are available.

As sourced from Bloomberg, the market multiples of the comparable companies satisfying the above criteria are listed exhaustively in below table:

				Market	EV/S
Bloomberg Ticker	Company Name	Exchange	Company Description	Capitalization	Multiple
				(USD million)
8325 HK Equity	China Smartpay	Hong Kong Stock	China Smartpay Group Holdings	52.08	9.76
	Group Holdings	Exchange	Limited is an integrated financial
	Ltd		and payment services provider.
			The Company specializes in smart
			payment and internet finance.

1 A non-specific key word “payment services” was used for the search so as to include as many potential comparable companies as possible. We have then investigated into the business scope of each of the companies to select the most comparable companies. It is confirmed that those are the most relevant key words and as such no other searches is necessary.

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				Market	EV/S
Bloomberg Ticker	Company Name	Exchange	Company Description	Capitalization	Multiple
				(USD million)
1806 HK Equity	Huifu Payment	Hong Kong Stock	Huifu Payment Limited provides	N/A	N/A
	Limited	Exchange	third party payment services.
			The Company offers merchant
			payment solutions and fintech
			enabling services to Internet
			finance providers and commercial
			banks. Huifu Payment also offers
			related artificial intelligence, big
			data, and cloud services.
9923 HK Equity	Yeahka Limited	Hong Kong Stock	Yeahka Limited provides payment	2,842.43	6.09
		Exchange	and business services to merchants
			and consumers. Yeahka Limited
			offers one-stop payment services,
			app-based payment services, and
			other services. Yeahka provides
			services in China.
300773 CH Equity	Lakala Payment	Shenzhen Stock	Lakala Payment Co., Ltd. operates	3,497.58	3.28
	Co., Ltd.	Exchange	as a third party payment company.
			The Company offers kala mini
			household type swipe card reader,
			kala shield personal computer
			reader, and phone card reader.
			Lakala Payment provides services
			in China.
				Average	6.38

Note 1: 1806 HK was delisted on 29 March 2021. The EV/S of 1806 HK was not available.
Note 2: It is considered that the stock exchanges in China (Hong Kong, Shenzhen and Shanghai) are the most active for Chinese payment service companies. It is also considered that the company’s industry and its business model affect the value of the company more than its listing location. Further, it is considered that the multiple of the only Shenzhen listed comparable company does not deviate from the other comparable companies. Therefore, no adjustment is considered necessary to any of the comparable companies.
Note 3: The Target Company has only 3 comparable companies after excluding 1806 HK. Due to the limited number of comparable companies, we have considered that the median value may not be relevant. Hence, we considered that the average is more relevant in this case and adopted it the average as the reference point for the valuation multiple.
Note 4: The financial information of the comparable companies was extracted on 26 August 2021, and the latest available financial information was adopted for the calculation of the EV/S multiple.

– 89 –

ADDITIONAL CONSIDERATION

Discount for Lack of Marketability (“DLOM”)

The concept of marketability deals with the liquidity of an ownership interest, that is how quickly and easily it can be converted to cash if the owner chooses to sell. The lack of marketability discount reflects the fact that there is no ready market for shares in privately held companies which are typically not readily marketable compared to similar interest in public companies. Therefore, a share of stock in a privately held company is usually worth less than an otherwise comparable share in a publicly held company. The DLOM is applicable to the Subject as it is proposed that the Subject will be privatized according to the Proposal.

We have assessed the DLOM of this interest using a put option method. The concept is that when comparing a public share and a private share, the holder of a public share has the ability to sell the shares (i.e. a put option) to the stock market right away. As the time to a liquidity event becomes shorter, the degree of the DLOM becomes smaller.

We have adopted the Black Scholes Option Pricing Model with the following parameters to estimate the DLOM.

Parameter	Input	Source	Remark
Spot Price (%)	100	Not Applicable	Assumed
Exercise Price (%)	100	Not Applicable	Assumed
Risk Free Rate (%)	2.060	Bloomberg L.P.	China Sovereign Curve
Maturity Period (year)	0.50	Not Applicable	The input of maturity period represents
			“how long does a holder need to
			transact the shares to another”. The
			transaction time is dependent mainly
			on the time for the potential buyer’s
			due diligence process. Given that
			the Subject is a group of business
			operations under a public company, the
			Subject has the systems and procedures
			to produce timely the documents
			required for a typical due diligence
			work. As such, the Valuer assumed that
			a maturity period of 0.5-year for this
			case. The longer (shorter) the maturity
			period, the higher (lower) will be the
			Implied DLOM, assuming everything
			else remains constant.
Volatility (%)	70.74	Bloomberg L.P.	Historical volatility of
			the Target Company
Implied DLOM (%)	19.14	Not Applicable	Calculated

– 90 –

Control Premium

Control premium is an amount by which the pro rata value of a controlling interest exceeds the pro rata value of a non-controlling interest a business enterprise that reflects the power of a control. Both factors recognize that control owners have rights that minority owners do not and that the difference in those rights and, perhaps more importantly, how those rights are exercisable and to what economic benefits, cause a differential in the per-share value of a control ownership block versus a minority ownership block.

We have made reference to the Control Premium Study 2Q21 published by FactSet Mergerstat, LLC, which is a leading information provider publishing global merger and acquisition information, for an estimation of the control premium. The study has examined ninety transactions in which 50.01 percent or more of a company was acquired, and the median control premium observed was 20.00%. Therefore, a control premium of 20.00% is adopted in arriving at the market value of the equity interest in Subject as at the Valuation Date.

CALCULATION OF VALUATION RESULT

Under the guideline public company method, the market value depends on the market multiples of the comparable companies derived from Bloomberg as at the Valuation Date. We have also taken into account the DLOM and control premium.

– 91 –

The calculation of the market value of all shareholding interest in the Subject as at the Valuation Date is as follows:

Amounts in RMB’000 unless otherwise stated

Parameter	Input
Average EV/S ratio of the Comparable Companies (times)	6.38
Unaudited Revenue of the Subject from 1 July 2020 to 30 June 2021
(Excluding transaction fee income from Youzan Technology Group)	268,603
Enterprise Value of the Subject as at the Valuation Date	1,713,525
Add: Unaudited Restricted bank balances of the Subject as at
the Valuation Date	3,760
Add: Unaudited Balances with central bank of the Subject as at
the Valuation Date	3,852,443
Add: Unaudited Bank and cash balances of Subject as at the Valuation Date	413,525
Add: Unaudited Amount due from a non-controlling shareholder of
subsidiaries of the Subject as at the Valuation Date	260
Add: Unaudited Amount due from a subsidiary of Youzan Technology
Group as at the Valuation Date	16,363
Add: Unaudited Amount due from Youzan Technology Inc. as at
the Valuation Date	672
Add: Unaudited Receivable from others (Included in prepayments,
deposits and other receivables) as at the Valuation Date	5,000
Add: Unaudited Investments in associates of the Subject as at
the Valuation Date	5,286
Add: Unaudited Financial assets at FVTOCI of the Subject as at
the Valuation Date	116,651
Less: Unaudited Settlement obligations of the Subject as at
the Valuation Date	3,998,366
Less: Unaudited Lease liabilities of Subject as at
the Valuation Date	12,921
Less: Unaudited Amount due to a subsidiary of Youzan Technology Group
as at the Valuation Date	3,879
Subtotal before DLOM and Control Premium	2,112,319
DLOM (%)	19.14
Control Premium (%)	20.00
Market value of all shareholding interest in the Subject	2,049,658
Number of Shares (as at the Valuation Date)	17,260,003,617
Per share Market value of all shareholding interest in the Subject (RMB)	0.1188

Note: The unaudited financial figures of the Subject listed in the above table are prepared by directors of the Subject based on unaudited management accounts of the subsidiaries of the Subject that carry on the “Payment & Other Business”. The unaudited management accounts are prepared in accordance with Hong Kong Financial Reporting Standards and the accounting policies adopted by China Youzan as set out in its annual report for the year ended 31 December 2020. The unaudited revenue presented above is before elimination of intercompany transactions with Youzan Technology and its subsidiaries.

– 92 –

VALUATION COMMENT

The conclusion of value is based on accepted valuation procedures and practices that rely substantially on the use of assumptions which have been set out in this report and the consideration, some of which may not be readily quantifiable. Further, while the assumptions and other relevant factors are considered by us to be reasonable, they are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of Subject, China Youzan and Jones Lang LaSalle Corporate Appraisal and Advisory Limited.

We do not intend to express any opinion on matters which require legal or other specialized expertise or knowledge, beyond what is customarily employed by valuers. Our conclusions assume continuously prudent management of the Subject that is reasonable and necessary to maintain the character and integrity of the assets valued.

This report is issued subject to our Limiting Conditions as attached.

OPINION OF VALUE

Based on the results of our investigations and analyses, we are of the opinion that:

The market value of all shareholding interest in the Subject as at the Valuation Date is reasonably stated at the amount of RMB2,050,000,000.

Yours faithfully, For and on behalf of Jones Lang LaSalle Corporate Appraisal and Advisory Limited

Simon M.K. Chan

Executive Director

Note: Simon M.K. Chan is a Chartered Valuer and Appraiser, and a fellow member of Hong Kong Institute of Certified Public Accountants (HKICPA), CPA Australia as well as the Royal Institution of Chartered Surveyors (RICS). Simon has extensive experience in valuation and corporate advisory business, providing a wide range of valuation and advisory services to numerous listed and private companies in different industries in Asia Pacific region for over 20 years.

– 93 –

LIMITING CONDITIONS

In the preparation of our reports, we relied on the accuracy, completeness and reasonableness of the financial information, forecast, assumptions and other data provided to us by the Company/engagement parties and/or its representatives. We did not carry out any work in the nature of an audit and neither are we required to express an audit or viability opinion. We take no responsibility for the accuracy of such information. Our reports were used as part of the Company’s/engagement parties’ analysis in reaching their conclusion of value and due to the above reasons, the ultimate responsibility of the derived value of the subject property rests solely with the Company/ engagement parties.
We have explained as part of our service engagement procedure that it is the director’s responsibility to ensure proper books of accounts are maintained, and the financial information and forecast give a true and fair view and have been prepared in accordance with the relevant standards and companies ordinance.
Public information and industry and statistical information have been obtained from sources we deem to be reputable; however we make no representation as to the accuracy or completeness of such information, and have accepted the information without any independent verification.
The management and the board of the Company/engagement parties have reviewed and agreed on this report and confirmed that the basis, assumptions, calculations and results are appropriate and reasonable.
Jones Lang LaSalle Corporate Appraisal and Advisory Limited shall not be required to give testimony or attendance in court or to any government agency by reason of this exercise, with reference to the project described herein. Should there be any kind of subsequent services required, the corresponding expenses and time costs will be reimbursed from you. Such kind of additional work may incur without prior notification to you.
No opinion is intended to be expressed for matters which require legal or other specialized expertise, which is out of valuers’ capacity.
The use of and/or the validity of the report is subject to the terms of engagement letter/ proposal and the full settlement of the fees and all the expenses.
Our conclusions assume continuation of prudent and effective management policies over whatever period of time that is considered to be necessary in order to maintain the character and integrity of the assets valued.
We assume that there are no hidden or unexpected conditions (such as natural disaster, war, government intervention, major change in management and etc.) associated with the subject matter under review that might adversely affect the reported review result. Further, we assume no responsibility for changes in market conditions, government policy or other conditions after the offer period.

– 94 –

This report has been prepared solely for the use as stated in engagement letter. The report should not be otherwise referred to, in whole or in part, or quoted in any document, circular or statement in any manner, or distributed in whole or in part or copied to any third party without our prior written consent. Even with our prior written consent for such, we are not be liable to any third party except for our client for this report. Our client should remind of any third party who will receive this report and our client will need to undertake any consequences resulted from the use of this report by the third party. We shall not under any circumstances whatsoever be liable to any third party.
This report is solely for the use by our client and the calculation of values expressed herein is valid only for the purpose stated in the engagement letter/or proposal as of the Valuation/Reference Date. In accordance with our standard practice, we must state that this report and exercise is for the use only by the party to whom it is addressed to and no responsibility is accepted with respect to any third party for the whole or any part of its contents.
Where a distinct and definite representation has been made to us by party/parties interested in the assets valued, we are entitled to rely on that representation without further investigation into the veracity of the representation.
You agree to indemnify and hold us and our personnel harmless against and from any and all losses, claims, actions, damages, expenses or liabilities, including reasonable attorney’s fees, to which we may become subjects in connection with this engagement. Our maximum liability relating to services rendered under this engagement (regardless of form of action, whether in contract, negligence or otherwise) shall be limited to the fee paid to us for the portion of its services or work products giving rise to liability. In no event shall we be liable for consequential, special, incidental or punitive loss, damage or expense (including without limitation, lost profits, opportunity costs, etc.), even if it has been advised of their possible existence.
We are not environmental, structural or engineering consultants or auditors, and we take no responsibility for any related actual or potential liabilities exist, and the effect on the value of the asset is encouraged to obtain a professional assessment. We do not conduct or provide such kind of assessments and have not considered the potential impact to the subject property.
This exercise is premised in part on the historical financial information provided by the management of the Company/engagement parties and/or its representatives. We have assumed the accuracy and reasonableness of the information provided and relied to a considerable extent on such information in our calculation of value. Accordingly, to the extent any of the above mentioned information requires adjustments, the resulting value may differ significantly.
This report and the conclusion of values arrived at herein are for the exclusive use of our client for the sole and specific purposes as noted herein. Furthermore, the report and conclusion of values are not intended by the author, and should not be construed by the reader, to be investment advice or as transaction reference in any manner whatsoever. The conclusion of values represents the consideration based on the information furnished by China Youzan/engagement parties and other sources. Actual transactions involving the subject assets/business might be concluded at a higher or lower value, depending upon the circumstances of the transaction and the business, and the knowledge and motivation of the buyers and sellers at that time.

– 95 –

ANNEX III

I. COMFORT LETTER ISSUED BY RED SUN CAPITAL

30 August 2021

The Board of Directors CHINA YOUZAN LIMITED Unit 2708, 27/F, The Center, 99 Queen’s Road Central, Hong Kong

Dear Sirs,

We refer to the supplemental joint announcement dated 30 August 2021 (the “ Supplemental Announcement ”) issued by BetaCafe Holdings Limited (the “ Offeror ”) and China Youzan Limited (“ China Youzan ”, together with its subsidiaries, the “ China Youzan Group ”) pursuant to Rule 3.5 of the Hong Kong Code on Takeovers and Mergers (the “ Takeovers Code ”). Capitalised terms used in this letter shall have the same meanings as defined in the Supplemental Announcement unless otherwise specified.

We refer to (i) the unaudited revenue from contracts with customers within the scope of HKFRS 15 (excluding transaction fee income from merchants) of Youzan Technology Group for the period from 1 July 2020 to 30 June 2021; (ii) the unaudited accounting balances of Youzan Technology Group as at 30 June 2021, including (a) loan to a director; (b) loan to an employee; (c) financial asset at fair value through other comprehensive income; (d) financial assets at fair value through profit or loss; (e) earnest money paid for potential investments; (f) loan to others (included in prepayments, deposits and other receivables); (g) amount due from a related company; (h) amount due from a fellow subsidiary; (i) restricted bank balances; (j) time deposit; (k) bank and cash balances; (l) amount due to a fellow subsidiary; (m) amount due to a non-controlling shareholder of a subsidiary; (n) amount due to China Youzan Limited; and (o) lease liabilities; (iii) the unaudited revenue from contracts with customers within the scope of HKFRS 15 (excluding transaction fee income from Youzan Technology Group) derived from China Youzan’s Payment & Other Business for the period from 1 July 2020 to 30 June 2021; and (iv) unaudited accounting balances of China Youzan Group’s (excluding Youzan Technology Group) as at 30 June 2021 including (a) investments in associates; (b) financial assets at fair value through other comprehensive income; (c) amount due from a non-controlling shareholder of subsidiaries; (d) amount due from a subsidiary of Youzan Technology Group; (e) amount due from Youzan Technology Inc.; (f) receivable from others (included in prepayments, deposits and other receivables); (g) restricted bank balances; (h) balances with central bank; (i) bank and cash balances; (j) amount due to a subsidiary of Youzan Technology Group; (k) lease liabilities; and (l) settlement obligations (together, the “ Unaudited Financial Figures ”) and details of the Unaudited Financial Figures are also set out in the appendix of the letter issued by RSM Hong Kong. The Unaudited Financial Figures are regarded as a profit forecast under the Takeovers Code and therefore, are required to be reported on pursuant to Rule 10 of the Takeovers Code.

– 96 –

The Unaudited Financial Figures have been prepared by the Directors based on Youzan Technology Group’s unaudited management accounts and the China Youzan Group’s (excluding Youzan Technology Group) unaudited management accounts which have not been confirmed, reviewed or audited by the auditor or audit committee of the Company.

The letter is issued in compliance with the requirement under Note 1(c) to Rules 10.1 and 10.2 and Rule 10.4 of the Takeovers Code. We have discussed with you the bases upon which the Unaudited Financial Figures were prepared. We have also considered the letter on the Unaudited Financial Figures dated 30 August 2021 issued by RSM Hong Kong, the auditors of China Youzan, to you, which stated that, so far as the accounting policies and calculations are concerned, the Unaudited Financial Figures have been properly compiled in accordance with the bases adopted by the Directors as set forth in the appendix of the letter issued by RSM Hong Kong, and are presented on a basis consistent in all material respects with the accounting policies normally adopted by China Youzan Group as set out in the audited consolidated financial statements of China Youzan Limited for the year ended 31 December 2020.

Based on the above, we are satisfied that the Unaudited Financial Figures, for which the Directors are solely responsible, have been made with due care and consideration.

Yours faithfully, For and on behalf of RED SUN CAPITAL LIMITED Robert Siu Managing Director

– 97 –

II. COMFORT LETTER ISSUED BY RSM

29th Floor Lee Garden Two 28 Yun Ping Road Causeway Bay Hong Kong 30 August 2021

The Board of Directors CHINA YOUZAN LIMITED Unit 2708, 27/F, The Center, 99 Queen’s Road Central, Hong Kong

Dear Sirs,

We refer to the joint announcement dated 30 August 2021 (the “ Announcement ”) jointly issued by China Youzan Limited (the “ Company ”) and BetaCafe Holdings Limited. We refer to (i) the unaudited revenue from contracts with customers within the scope of HKFRS 15 (excluding transaction fee income from merchants) of Youzan Technology Group for the period from 1 July 2020 to 30 June 2021; (ii) the unaudited accounting balances of Youzan Technology Group as at 30 June 2021, including (a) loan to a director; (b) loan to an employee; (c) financial asset at fair value through other comprehensive income; (d) financial assets at fair value through profit or loss; (e) earnest money paid for potential investments; (f) loan to others (included in prepayments, deposits and other receivables); (g) amount due from a related company; (h) amount due from a fellow subsidiary; (i) restricted bank balances; (j) time deposit; (k) bank and cash balances; (l) amount due to a fellow subsidiary; (m) amount due to a non-controlling shareholder of a subsidiary; (n) amount due to China Youzan Limited; and (o) lease liabilities; (iii) the unaudited revenue from contracts with customers within the scope of HKFRS 15 (excluding transaction fee income from Youzan Technology Group) derived from China Youzan’s Payment & Other Business for the period from 1 July 2020 to 30 June 2021; and (iv) unaudited accounting balances of China Youzan Group’s (excluding Youzan Technology Group) as at 30 June 2021 including (a) investments in associates; (b) financial assets at fair value through other comprehensive income; (c) amount due from a non-controlling shareholder of subsidiaries; (d) amount due from a subsidiary of Youzan Technology Group; (e) amount due from Youzan Technology Inc.; (f) receivable from others (included in prepayments, deposits and other receivables); (g) restricted bank balances; (h) balances with central bank; (i) bank and cash balances; (j) amount due to a subsidiary of Youzan Technology Group; (k) lease liabilities; and (l) settlement obligations as set forth in Annex I and Annex II of the Announcement, respectively. The aforementioned unaudited figures being used in the preparation of valuation are regarded as profit forecasts under Rule 10 of the Hong Kong Code on Takeovers and Mergers (“ Takeovers Code ”) and therefore, are required to be reported on pursuant to Rule 10 of the Takeovers Code.

Capitalised items used in this letter shall have the same meanings as defined in the Announcement unless otherwise specified.

– 98 –

Directors’ Responsibilities

The unaudited revenue from contracts with customers within the scope of HKFRS 15 (excluding transaction fee income from merchants) of Youzan Technology Group for the period from 1 July 2020 to 30 June 2021, the unaudited revenue from contracts with customers within the scope of HKFRS 15 (excluding transaction fee income from Youzan Technology Group) of Payment & Other Business for the period from 1 July 2020 to 30 June 2021, together with certain unaudited accounting balances as at 30 June 2021 has been prepared by the directors of the Company (“ Directors ”) based on Youzan Technology Group’s unaudited management accounts and the China Youzan Group’s (excluding Youzan Technology Group) unaudited management accounts (both of which have not been confirmed, reviewed or audited by us or audit committee of the Company). Details of the aforementioned unaudited revenue and accounting balances (“ Unaudited Financial Figures ”) are set out in the Appendix of this report.

The Company’s directors are solely responsible for the Unaudited Financial Figures as set out in the Appendix of this report.

Our Independence and Quality Control

We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the Hong Kong Institute of Certified Public Accountants (the “ HKICPA ”), which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior.

The firm applies Hong Kong Standard on Quality Control 1 and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Reporting Accountants’ Responsibilities

Our responsibility is to express an opinion on the accounting policies and calculations of the Unaudited Financial Figures set out in the Appendix, based on our procedures.

We conducted our engagement in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 500 “Reporting on Profit Forecasts, Statements of Sufficiency of Working Capital and Statements of Indebtedness” and with reference to Hong Kong Standard on Assurance Engagements 3000 (Revised) “Assurance Engagements Other Than Audits or Reviews of Historical Financial Information” issued by the HKICPA. Those standards require that we plan and perform our work to obtain reasonable assurance as to whether, so far as the accounting policies and calculations are concerned, the Directors have properly compiled the Unaudited Financial Figures in accordance with the bases adopted by the Directors and as to whether the Unaudited Financial Figures are presented on a basis consistent in all material respects with the accounting policies normally adopted by the Group. Our work is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing issued by the HKICPA. Accordingly, we do not express an audit opinion.

– 99 –

Opinion

In our opinion, so far as the accounting policies and calculations are concerned, the Unaudited Financial Figures have been properly compiled in accordance with the bases adopted by the Directors as set out in the Appendix of this report and is presented on a basis consistent in all material respects with the accounting policies normally adopted by China Youzan Group as set out in the audited consolidated financial statements of China Youzan Limited for the year ended 31 December 2020.

Emphasis of Matter – Basis of Accounting

We draw attention to the Appendix of this report which describes the basis of accounting for the Unaudited Financial Figures. The Unaudited Financial Figures were prepared by the Directors to assist the Valuer in the preparation of the Youzan Technology Share Value Assessment Report and the POB Valuation Report as of Valuation Reference Date. As a result, the Unaudited Financial Figures may not be suitable for another purpose. Our opinion is not modified in respect of this matter.

RSM Hong Kong Certified Public Accountants Hong Kong

– 100 –

APPENDIX

UNAUDITED FINANCIAL FIGURES

Youzan Technology Group

The following unaudited financial figures are prepared by the directors of China Youzan Limited (the “Company”) based on unaudited management accounts of the entities comprising the Youzan Technology Group. The unaudited management accounts are prepared in accordance with Hong Kong Financial Reporting Standards and the accounting policies adopted by Company to prepare the unaudited management accounts are the same as set out in the Company’s audited consolidated financial statements for the year ended 31 December 2020.

	RMB’000
	Unaudited
For the period from 1 July 2020 to 30 June 2021 (12 months)
Revenue from contracts with customers within the scope of HKFRS 15
(Excluding transaction fee income from merchants)	1,415,844
As at 30 June 2021
Loan to a director	2,650
Loan to an employee	500
Financial asset at fair value through other comprehensive income
(FVTOCI)	11,847
Financial assets at fair value through profit or loss (FVTPL)	253,247
Earnest money paid for potential investments	52,000
Loan to others (Included in prepayments, deposits and other
receivables)	10,093
Amount due from a related company	463
Amount due from a fellow subsidiary	3,879
Restricted bank balances	843
Time deposit	120,000
Bank and cash balances	590,727
Amount due to a fellow subsidiary	(16,363)
Amount due to a non-controlling shareholder of a subsidiary	(291)
Amount due to China Youzan Limited	(672)
Lease liabilities	(238,710)

Payment & Other Business (China Youzan Group Excluding Youzan Technology Group)

The following unaudited financial figures are prepared by the directors of the Company based on unaudited management accounts of the entities comprising China Youzan Group excluding Youzan Technology Group. The unaudited management accounts are prepared in accordance with Hong Kong Financial Reporting Standards and the accounting policies adopted by Company to prepare the unaudited management accounts are the same as set out in the Company’s audited consolidated financial statements for the year ended 31 December 2020.

– 101 –

RMB’000 Unaudited

For the period from 1 July 2020 to 30 June 2021 (12 months)
Revenue from contracts with customers within the scope of HKFRS 15
(Excluding transaction fee income from Youzan Technology Group)	268,603
As at 30 June 2021
Investments in associates	5,286
Financial assets at fair value through other comprehensive income
(FVTOCI)	116,651
Amount due from a non-controlling shareholder of subsidiaries	260
Amount due from a subsidiary of Youzan Technology Group	16,363
Amount due from Youzan Technology Inc.	672
Receivable from others (Included in prepayments, deposits and other
receivables)	5,000
Restricted bank balances	3,760
Balances with central bank	3,852,443
Bank and cash balances	413,525
Amount due to a subsidiary of Youzan Technology Group	(3,879)
Lease liabilities	(12,921)
Settlement obligations	(3,998,366)

– 102 –

AI assistant

Youzan Technology Limited — M&A Activity 2021

51261_rns_2021-08-30_f768aa20-94ae-4a1b-b7dd-08bea911766b.pdf

BetaCafe Holdings Limited

JOINT ANNOUNCEMENT

UPDATE ON

Financial Adviser to the Offeror

Valuer to China Youzan

Independent Financial Adviser to the Independent Board Committee

INTRODUCTION

UPDATES ON THE PROPOSED YOUZAN TECHNOLOGY LISTING AND REVISIONS TO THE TERMS OF THE PROPOSAL

Updated estimated value of Youzan Technology Shares

Updated valuation of the Payment & Other Business

Comparison of value

SHAREHOLDING STRUCTURE OF CHINA YOUZAN AND THE SCHEME SHARES

REASONS AND BENEFITS FOR COMBINING THE PROPOSAL WITH THE YOUZAN TECHNOLOGY LISTING

YOUZAN TECHNOLOGY SHARE INCENTIVE PLANS

DESPATCH OF SCHEME DOCUMENT

1. INTRODUCTION

1.1 Proposal made in the Rule 3.5 Announcement

1.2 Updates on the proposed Youzan Technology Listing and the Proposal

2. REVISIONS TO THE TERMS OF THE PROPOSAL

2.1 The Scheme Consideration and the Distribution

Events following the Scheme becoming effective

Basis for determining the Scheme Consideration and the Distribution

Updated estimated value of Youzan Technology Shares

Updated valuation of the Payment & Other Business

Comparison of value

2.3 Highest and Lowest Prices in trading of China Youzan Shares

2.4 China Youzan Options

Pursuant to the terms of the China Youzan 2019 Option Scheme, the China Youzan Options will lapse automatically upon the Scheme becoming effective.

2.5 Confirmation of financial resources

2.6 Updates on the Scheme Pre-Conditions and fulfilment of all Scheme Pre-Conditions

2.7 Updates on the Scheme Conditions

Shareholders’ approval

Distribution

2.8 No change to the Distribution

Distribution Conditions

3. REASONS AND BENEFITS FOR COMBINING THE PROPOSAL WITH THE YOUZAN TECHNOLOGY LISTING

4. INFORMATION ON CHINA YOUZAN

4.1 General Information on China Youzan

4.2 Shareholding Information of China Youzan

4.3 Financial Information of China Youzan

5. INFORMATION ON YOUZAN TECHNOLOGY

5.1 General Information on Youzan Technology

5.2 Shareholding Information of Youzan Technology

5.3 Financial Information of Youzan Technology

5.4 Proposed Youzan Technology Listing

5.5 Youzan Technology Share Incentive Plans

5.5.1 Youzan Technology Share Award Plan A

5.5.2 Youzan Technology Share Award Plan B and the Anti-Dilution Issue to China Youzan

5.5.3 China Youzan Options Conversion Proposal and Youzan Technology RSU Plan C

6. INFORMATION ON THE OFFEROR

7. WITHDRAWAL OF LISTING OF CHINA YOUZAN SHARES

8. IF THE SCHEME IS NOT APPROVED OR IF THE PROPOSAL OTHERWISE LAPSES

9. SCHEME SHARES, COURT MEETING AND THE SECOND SGM

10. DESPATCH OF SCHEME DOCUMENT

11. NUMBER OF RELEVANT SECURITIES IN ISSUE

12. APPOINTMENT OF VALUER, THE UPDATED YOUZAN TECHNOLOGY SHARE VALUE ASSESSMENT REPORT AND THE UPDATED POB VALUATION REPORT

13. TAXATION AND INDEPENDENT ADVICE

14. OVERSEAS SCHEME SHAREHOLDERS

15. NOTICE TO U.S. INVESTORS

16. PRECAUTIONARY LANGUAGE REGARDING FORWARD-LOOKING STATEMENTS

17. WARNINGS

18. DEFINITIONS

ANNEX I

UPDATED YOUZAN TECHNOLOGY SHARE VALUE ASSESSMENT REPORT

I. LETTER FROM THE FINANCIAL ADVISER ON THE ASSESSMENT OF THE UPDATED YOUZAN TECHNOLOGY SHARES

MESSIS CAPITAL LIMITED

The Sole Director BetaCafe Holdings Limited

PRE-CONDITIONAL TAKE PRIVATE PROPOSAL FOR CHINA YOUZAN LIMITED BY BETACAFE HOLDINGS LIMITED BY WAY OF A SCHEME OF ARRANGEMENT UNDER SECTION 99 OF THE COMPANIES ACT

OUR REVIEW

II. LETTER FROM THE VALUER ON THE UPDATED ESTIMATED VALUE OF THE YOUZAN TECHNOLOGY SHARES

INTRODUCTION

China Youzan

The Subject

The Proposal

BASIS OF ASSESSMENT

PRINCIPAL ASSUMPTIONS

ASSESSMENT METHODOLOGY

Youzan Technology Limited M&A Activity 2021