Zuoli Kechuang Micro finance : CONNECTED TRANSACTION - TRANSFER OF CREDITOR'S RIGHTS

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.

佐 力 科 創 小 額 貸 款 股 份 有 限 公 司

(Zuoli Kechuang Micro-finance Company Limited*)

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

(Stock Code: 6866)

CONNECTED TRANSACTION

TRANSFER OF CREDITOR'S RIGHTS

On 18 October 2019, after trading hours, Xing Yao Micro-finance entered into the Creditor's Rights Transfer Agreement with Xing Yao Construction pursuant to which, Xing Yao Micro-finance agreed to sell and transfer, Xing Yao Construction agreed to accept the Creditor's Rights at a consideration of RMB10,789,320 (equivalent to approximately HK$11,976,145.2).

Xing Yao Construction is a substantial shareholder of Xing Yao Micro-finance, a 60%-owned subsidiary of the Company, and thus a connected person of the Company at the subsidiary level according to Rule 14A.07(1) under the Listing Rules. Therefore, the transaction under the Creditor's Rights Transfer Agreement constitutes a connected transaction under Chapter 14A of the Listing Rules.

Pursuant to Rule 14A.81 of the Listing Rules, as the Previous Creditor's Rights Transfer Agreement and the Creditor's Rights Transfer Agreement were entered into by Xing Yao Micro-finance and Xing Yao Construction and are of a similar nature, the transactions contemplated under the Previous Creditor's Rights Transfer Agreement and the Creditor's Rights Transfer Agreement should be aggregated.

Since one or more of the applicable percentage ratios (as set out in Rule 14.07 of the Listing Rules) in respect of the transaction contemplated under the Creditor's Rights Transfer Agreement, when aggregated with the Previous Transaction, exceed 1% but are less than 5%, the transaction contemplated under the Creditor's Rights Transfer Agreement is subject to the reporting and announcement requirements but exempt from independent Shareholders' approval requirement under Chapter 14A of the Listing Rules.

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INTRODUCTION

On 18 October 2019, after trading hours, Xing Yao Micro-finance entered into the Creditor's Rights Transfer Agreement with Xing Yao Construction pursuant to which, Xing Yao Micro-finance agreed to sell and transfer, and Xing Yao Construction agreed to accept the Creditor's Rights (as defined below) at a consideration of RMB10,789,320 (equivalent to approximately HK$11,976,145.2).

THE CREDITOR'S RIGHTS TRANSFER AGREEMENT

The principal terms of the Creditor's Rights Transfer Agreement are as follows:

The consideration under the Creditor's Rights Transfer Agreements was determined based on the value of the relevant Creditor Rights as of the date of the relevant Creditor's Rights Transfer Agreement, being the aggregate of the outstanding amount of the loans of the Borrowers under the Creditor's Rights Transfer Agreement.

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BACKGROUND OF THE BORROWERS AND THE ORIGINAL LOANS

To the best of the Directors' knowledge, information and belief having made all reasonable enquiries, all of them are Independent Third Parties with respect to the Group. To the best of knowledge of Xing Yao Micro-finance, these Borrowers have had business relationship with Xing Yao Construction.

Background and details of the original loans of the Borrowers (the ''Original Loans'') are as follows:

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The interests incurred under the Original Loans are as follows:

The Original Loans were made on normal commercial terms and were approved by Xing Yao Micro- finance based on its standard credit assessment process. Since the overdue in repayment of the Original Loans, Xing Yao Micro-finance has taken steps to actively procure the repayment including negotiating with the Borrowers to restructure a repayment plan. Xing Yao Micro-finance initiated legal proceedings against Borrower A in May 2018, against Borrower B, Borrower C and Borrower D in March 2019 in respect of the Original Loans and has obtained civil verdict or civil mediation agreements from Binjiang District People's Court of Hangzhou Municipality, Zhejiang Province. The Borrowers then subsequently arranged Xing Yao Construction to take over the responsibility for the repayment of the Original Loans pursuant to which Xing Yao Construction entered into the Creditor's Rights Transfer Agreement with Xing Yao Micro-finance.

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The total amount of the Original Loans and their respective incurred interests is RMB10,789,320 (equivalent to approximately HK$11,976,145.2), being the amount that Xing Yao Construction agreed to accept the Creditor's Rights under the Creditor's Rights Transfer Agreement.

The total loan portfolio outstanding for Xing Yao Micro-finance amounted to approximately RMB180.7 million as at 30 September 2019 and the Original Loans represented only around 5.53% of such loan portfolio. Save for the Original Loans, Xing Yao Micro-finance has not witnessed a material increase in overdue loan of its loan portfolio.

REASONS FOR AND BENEFITS OF THE TRANSACTION

The Group is principally engaged in the business of providing loan products and services to customers engaged in AFR, SMEs, as well as to online retailers engaged in lifestyle products, agricultural products, cultural supplies, industrial products in Hangzhou and Huzhou city of Zhejiang province, the PRC. Xing Yao Micro-finance is a licensed micro-finance company established in the PRC and is engaged in the provision of micro and small loans, consultation services on areas such as small enterprises' development, management and finance in Hangzhou, Zhejiang Province, the PRC. The terms of the Creditor's Rights Transfer Agreement are negotiated on an arm's length basis between Xing Yao Micro-Finance and Xing Yao Construction. The entering into the Creditor's Rights Transfer Agreement allows Xing Yao Micro-finance the chance to recoup the Original Loans (including the incurred interests) in full by reducing the default risks exposure to the Borrowers. The Directors (including independent non-executive Directors) consider that the terms of the Creditor's Rights Transfer Agreement are fair and reasonable and entering into of the Creditor's Rights Transfer Agreement is in the interests of the Company and its Shareholders as a whole.

INFORMATION OF XING YAO CONSTRUCTION

Xing Yao Construction is a company incorporated in the PRC and is the substantial shareholder of Xing Yao Micro-finance, a 60%-owned subsidiary of the Company. Xing Yao Construction is principally engaged in undertaking, construction and engineering, foundation installation and construction decoration work.

LISTING RULES IMPLICATIONS

Xing Yao Construction is a substantial shareholder of Xing Yao Micro-finance, a 60%-owned subsidiary of the Company, and thus a connected person of the Company at the subsidiary level according to Rule 14A.07(1) under the Listing Rules. Therefore, the transaction under the Creditor's Rights Transfer Agreement constitutes a connected transaction under Chapter 14A of the Listing Rules.

Pursuant to Rule 14A.81 of the Listing Rules, as the Previous Creditor's Rights Transfer Agreement and the Creditor's Rights Transfer Agreement were entered into by Xing Yao Micro-finance and Xing Yao Construction and are of a similar nature, the transactions contemplated under the Previous Creditor's Rights Transfer Agreement and the Creditor's Rights Transfer Agreement should be aggregated.

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Since one or more of the applicable percentage ratios (as set out in Rule 14.07 of the Listing Rules) in respect of the transaction contemplated under the Creditor's Rights Transfer Agreement, when aggregated with the Previous Transaction, exceed 1% but are less than 5%, the transaction contemplated under the Creditor's Rights Transfer Agreement is subject to the reporting and announcement requirements but exempt from independent Shareholders' approval requirement under Chapter 14A of the Listing Rules.

To the best knowledge of the Directors, none of the Directors has a material interest in the transaction contemplated under the Creditor's Rights Transfer Agreement. Accordingly, no Director is required to abstain from voting on the relevant board resolution to approve the Creditor's Rights Transfer Agreement.

DEFINITIONS

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

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Amounts denominated in RMB in this announcement have been converted into HK$ at the rate of RMB1.00 = HK$1.11 for illustration purpose. No representation is made that any amount in HK$ or RMB is or could have been or could be converted at such rate or at any other rate or at all.

By Order of the Board

佐力科創小額貸款股份有限公司

(Zuoli Kechuang Micro-finance Company Limited*)

Yu Yin

Chairman

Hong Kong, 18 October 2019

As at the date of this announcement, the executive Directors of the Company are Mr. Yu Yin, Mr. Zheng Xuegen, Mr. Yang Sheng and Ms. Hu Fangfang, the non-executive Director is Mr. Pan Zhongmin, and the independent non-executive Directors are Mr. Ho Yuk Ming, Hugo, Mr. Jin Xuejun and Ms. Huang Lianxi.

• For identification purposes only

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