Investor Presentation

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Investor Presentation

(8292.HK)

2013Dec

1

The documents being given to you do not constitute, or form part of any offer for subscription or sale of, or solicitation of any

offer to subscribe for or sale, any securities of HC International, Inc. ( “HC International" or the “Group”) nor shall they or any

of them form the basis of, not can they be relied on in connection with, or constitute any advice to, any contract or

commitment whatsoever. Accordingly, any decision in connection with the acquisition of securities of the Group pursuant to

or in connection with any offering must be made solely on the basis of the information to be issued in connection with any

such offering.

This presentation may include forward-looking statements made based on current expectation and situation. The actual

results, performance or development of HC International may differ materially from those expressed or implied by these

forward-looking statements as a result of various factors, risks and uncertainties. The Company does not intend or assume

any obligation to update these forward-looking statements.

Confidentiality

This presentation contains information that is commercially sensitive, and is proprietary and confidential in nature. Any

professional privilege to which this presentation is subject is not waived or lost by reason of mistaken delivery or

transmission. If you receive a copy of this presentation but are not an authorized recipient, you must not use, distribute, copy,

disclose or take any action in reliance on this presentation or its contents.

The documents are given to you on a confidential basis and must not be passed to, or their contents disclosed to , any other

person and no copy shall be taken thereof.

Disclaimer

2

Company Information

Company Name HC International Inc.

Ticker 8292

Exchange Hong Kong Stock Exchange

Share Price (2013/11/08) HK$8.90/share

Market Cap (2013/11/08) US$755 million

Auditor PricewaterhouseCoopers

Commercial/Corporate

Website hc360.com / www.hcgroup.com

IPO Date 2003/12/17

Total # of Shares

issued (2013/11/08)

657.4 million

3

Presenters

Topic Presenter

1. Company Overview Mr. GUO Jiang

Chief Executive Officer

Mr. Alex LEE

Chief Financial Officer

2. Industry Overview

3. Investment Highlights

4. Our Strategies

5. Financial Overview

Company Overview

5

Company Overview

A leading domestic B2B e-commerce company in China, operating a

well-established marketplace, www.hc360.com, primarily servicing the

small to medium enterprises ("SME")

Note (1): iResearch

Note (2): For 2010 and 2011, figures include market research, a discontinued operation. USD/CNY=6.2

Note (3): If excluding discontinued operation, revenue CAGR will be 31.0%

Services

Complete marketing solutions for SMEs through web-based

products, supplemented by multi-channel, all-dimensional online and

offline services

Market Position

Overview

#3 in the Chinese B2B eCommerce market with 4.2% market share(1)

#2 in the Chinese domestic B2B eCommerce market

The only leading B2B player100% focused on the domestic market

Customers

A large and growing SME customer base

Strong brand name popularity among the SME community in China

Coverage

Users from 100+ cities with headquarters in Beijing and physical

branches in 12 cities of China

Covering 50 verticals primarily in capital goods and consumers

Has a service team of approx. 3,100 employees

Financial Snapshot

63.1

79.6 88.5

61.9

96.7

2010 2011 2012 - 2012.1-9 2013.1-9

Total Revenue(2) (US$ millions)

82%

5% 13%

Revenue Mix (2013.1-9)

Online services

Trade catalogues and yellow page directories

Seminars and other services

Market research and analysis (Discontinued)

6

History and Milestones

1992~1999 2000~2003 2004~2007 2008~2012 2013~Future

1992: establishment

1993 – 1998: increasing

industry coverage via

trade catalogues and

yellow page directories

1999: IDG made the initial

investment

Trade catalogues

& Yellow page

Market Research Online B2B

eCommerce

Online B2B

eCommerce

Trade catalogues

& Yellow page

Seminars and

Events

Trade catalogues

& Yellow page

Trade catalogues

& Yellow page Market Research

Online B2B

eCommerce

Seminars and

Events

Comprehensive

Offline services

2000: expanded

catalogues and industry

coverage significantly

2000: started to engage in

cross media business

2002: launched vertical

industry website

2003: listed on HK GEM

Board

2003: commenced

industry search services

2004: launched Mai-Mai-

Tong trial version,

HC360’s then flagship

B2B marketplace product

2005: streamlined

business model to focus

on B2B marketplace by

divesting market research

2006: launched sourcing

conference; formed fast

moving consumer goods

company

2007: launched Mai-Mai-

Tong v4.0 to improve user

experience; differentiate

with Alibaba

2008 – 2010: commenced

integration of internet

resources, and adopted

CRM for channel

management

2008: offered 3-year Mai-

Mai-Tong for ¥3,980, fee-

paying member doubled

2009: launched Biao-Wang

Search v1.0

2010: launched Biao-Wang

Search v2.0 collaborated

with major search engines

2011: organized 10 Trade

Fairs for different sectors

2012: launched Cai-Gou-

Tong v1.0 to enhance

buyers’ experience

2008 – 2012: turned from net

loss to net income and grew

at a CAGR of 145%

B2B business will focus

on domestic B2B, vertical

segmentation, integration

of trading and media

The offline business will

become an important

supplement to the online

business

Successfully raised

RMB4.1 million (net

proceeds) in a placement

mainly for the

development of new

services.

Added in MSCI China

Index in Nov 2013

B2B total solutions

7

Products and Services

Online Services Offline Services

Mai-Mai-Tong （买卖通）

Search

Products

Online

Advertising

Trade

Catalogues

Yellow Page

Directories

Seminars &

Events

A powerful industrial vertical-oriented trade platform

for SMEs

Integrated eCommerce services such as product

display and search, trade match, industry news and

online trade events

Function-rich platform with interaction functions with

Weibo

Paid listing services in search results

Provides customers a strong and broad marketing

services across all the major search engines in

China

Supports simultaneous, multi-search engine

promotion, including Baidu, Sogou, 360 search,

Google and etc.

Internet advertising services on hc360.com

Each of the industry specific website under

hc360.com has entered into strategic co-operation

with the renowned enterprises of various dedicated

industries to facilitate corporate branding as well as

products and services in a comprehensive manner

Publishes “HC Trade Catalogues”, an

authoritative purchasing guide in China

One of the leading catalogues in B2B industry in

terms of coverage and influence

Covers information on over a thousand

enterprises and quotations of over ten thousand

products

A business yearbook for a number of industries

Offers readers a systematic compilation of

industry information, product technology and

industry news

Bridges manufacturers, suppliers, administrative

organizations and users in different industries

HC organizes the “Top 10 Enterprises Awards”

since 2008

An influential event that attracts a large number of

participants from over 40 industries and local

media

Cai-Gou-Tong （采购通）

Application designed specifically for servicing

buyers

Helps quick suppliers matching and manage

procurement process

8

Business Model and Revenue Streams

Seller Buyer

Online Platform

Offline Platform

Business Model Revenue Streams

Subscription

Revenue

Subscription fee is charged for

providing online services to

members

Advertising

Revenue

Advertising at HC’s industry portal

websites, trade catalogues, yellow

page directories etc.

Events

Revenue

Charged from sponsors and

participants to the trade exhibitions

and business seminars organized

by HC

Online Value-

added Services

Revenue

Search product (i.e. Biao-Wang

Search) subscribers are charged

for search ranking prioritization

9

Sales and Marketing

Sales Teams HC’s Branches in China

HC has established three major sales teams since 2006 to market its

online and offline products and services to different targeted market

segments

Description Target Customers

Industry Direct

Sales

Focuses on selling large

value and high-end online

and offline products

Provides in-depth

professional products and

services in different

industrial sectors

Value-based and

relationship-based

customers

Agency

Sales

Supplementary to the

Industry Direct Sales

Team

Covers over 70 cities in

China

Extends our market

coverage to regional areas

Regional online

service customers.

Key focus for

promoting online

value-added

services, i.e. Biao-

Wang Search

prioritization

Telemarketing

Sales

Focuses on the marketing

of online products

Provides standardized

products and services in

the market segment of fast

moving consumer goods

Mainly online service

customers

HC has established a strong coverage in China, having headquarters in

Bejing and with physical branches in 12 cities

Shanghai

Hangzhou

Ruian

Wenzhou

Cixi

Nanjing

Wuxi

Quanzhou

Guangzhou

Shenzhen Shunde

Bao’an

Headquarters - Beijing

Industry Overview

11

B2B eCommerce in China: A large and growing market

0.9 1.1 1.6

2.1 2.7

3.5

4.4

5.5

6.6

2008 2009 2010 2011 2012 - 2013E 2014E 2015E 2016E

Total Revenue of SME B2B eCommerce (US$ Billion)

Strong Growth of Total Market Size Expansion of SME User Base

China’s SME B2B eCommerce market is a US$2.7bn market ,

according to iResearch, a leading market research firm

The market has achieved strong growth in the past few years even

during the financial crisis, at a CAGR of 32% from 2008 to 2012

iResearch expects the total market will continue grow at a CAGR of

24% from 2013E to 2016E

Source : iResearch, 100EC

9.2

12.5 14.0

16.0 17.3

18.2

2008 2009 2010 2011 2012 - 2013E

Number of SME eCommerce Users (Millions)

According to 100EC, the number of SME B2B eCommerce users

will reach 18.2 million by the end of 2013

The strong growth of user base is mainly driven by the penetration

of eCommerce, support from local government and shifting of

marketing preference of business communities

The growth of user base is relatively slower than the growth of

revenue of eCommerce providers, indicating an increasing share of

wallet by the eCommerce platform providers

12

Domestic trade: A strong driver to domestic B2B eCommerce in

China

Source : National Bureau of Statistics, 13E~15E forecast based on 12th FYP target and broker resarch

22.7

15.5 18.3 17.1

14.3 15.0 15.0 15.0 17.3

-15.9

31.3

20.3

7.9 12.0 12.0 12.0

2008 2009 2010 2011 2012 - 2013E 2014E 2015E

Growth Rates of Export v.s. Domestic consumption of Consumer Goods (%)

Growth of Retail Consumer Goods Growth of Export

Domestic consumption has shown more steady and strong growth compared to export

With strong fundamentals to drive domestic B2B eCommerce growth…

China government has

committed unprecedented

efforts to promote the domestic

consumption with an objective

to switch the economy growth

model

Consumption Policy eCommerce Demand Infrastructure

China has laid out a clear

roadmap in the 12th Five-Year-

Plan to further grow its

consumption, with a target of

annual growth of 15%

Domestic consumption of

consumer goods is the major

driver to the growth of domestic

trade in China

Unlike companies engaged in

import / export trades which

have adopted eCommerce,

penetration of eCommerce is

still relatively low for domestic

trade activities

Modernization of economy

ecosystem will naturally require

expansion of eCommerce

applications

Most infrastructure requirement,

such as network and hardware,

have already become

economically viable to most

SMEs

Improvement and penetration of

electronic payment system, back-

office applications, 3rd-party

online supports, O2O integration

and internet-for-things will

facilitate the trades through B2B

eCommerce platforms

13

B2B eCommerce: An everlasting business model

Manufacturer of

parts / supplies

Distributor /

Service Provider

Raw Materials

Consumer Manufacturer of

final products

B2B

Why B2B will never be replaced by B2C business model

B2C / B2B2C

Business Model Characteristics Representative Sectors

B2B Relatively mid-to-small manufacturers across the supply chain

Parts and products customized at different level and features

Products with high complexity for end users to handle customization

Intensive professional services are needed throughout the order-delivery-

installment-use process

Auto parts / repair and maintenance

services

Construction materials and equipment

Machinery products and tools

Security and safety products

B2C /

B2B2C

Large and Integrated manufacturers across the supply chain

Standardized products with limited / low frequency need of services

Highly modulized, enables customization / DIY by end users

Rapidly-changing demand for product features and specifications

Fast-moving consumer goods

Apparels, shoes and accessories

Stationery and office consumables

“3C” products

Manufacturer of

final products

14

B2B eCommerce: a high-entry-barrier business

Potential new

entrants

Industry

Knowledge

Unlike C2C platforms, the operation of a B2B platform needs extensive

industry knowledge to provide specialized services to customers

Characteristics of products normally differ a lot from each other, leading to

difficulties of standardization

User Base

Business users’ switching cost is relatively higher than in C2C given the need

for process continuity and stability

Operators need to spend substantial investment to build up a sizable user

base and maintain the rollover of paying users

Customer

Service

Operators need to build up comprehensive customer service capabilities given

the higher need for reliability of business users

Compared to C2C platform, B2B platform operators have to maintain a larger

service team for its users especially SMEs

Reputation

Compared to C2C platform, the impact of short-term aggressive marketing is

relatively limited to attract new customers

Word-of-mouth marketing normally plays a very important role in growing user

base for B2B platforms

Spreads of

Behavior A B2B platform normally requires integration of services from online and offline

15

B2B eCommerce: Unique competition dynamics

No Winner-Takes-All Competition Widely Affordable Subscription Fee

27.2%

48.3%

15.7%

8.8%

1 2~3 4~9 10+

Distribution of B2B eCommerce Customers Using One or More B2B

eCommerce Providers (%)

Source : Analysys International, B2B company website

33,700

30,000

4,800 3,688 3,199 1,840 1,500 420

GS GMG MIC Ali DHG HC MS Toocle

Annual Subscription Fee Charged by Major B2B eCommerce Providers

(RMB Yuan / Year)

More than 72% of China’s B2B eCommerce customers use one

or more B2B eCommerce platforms at the same time, according

to a research from Analysys International

The typical “Winner-Takes-All” situation in other internet verticals

is usually not the case in B2B eCommerce, given the unique

characteristics of B2B business model

Major B2B players cover different groups of buyers, therefore they

are more complementary rather than substitute to each other

Most B2B eCommerce providers charge a subscription fee (basic

package, excluding add-on services) of less than RMB5,000 per

year, except for Global Sources and Global Markets, who focus

on a small number of larger scale exporters

The cost of B2B eCommerce is still highly competitive compared

to any other marketing alternatives available to SMEs, especially

when labor cost continues to increase

It is not unusual that SMEs allocate more marketing budget to

B2B eCommerce from sales team during a sector downturn

GS – Global Sources

GMG – Global Markets

MIC – Made-in-China

Ali- Alibaba

DHG – DHGate

HC – HC360.com

MS – My Steel

Investment Highlights

17

Investment Highlights

1 Leading B2B player 100% focused on domestic trade

2 Vertical-oriented business model: Unique value to customers

3 Uniquely-positioned with extensive experience in both eCommerce and

conventional business

4 Incremental service offerings through cooperation with strategic partners

5 Strong financial performance demonstrating excellence in both growth and

profitability

6 Solid management team and sound shareholding structure

18

Leading B2B player 100% focused on domestic trade

Top B2B eCommerce Players in China

43.1%

7.9% 4.2% 3.5% 2.7%

1.3% 1.0%

0.8%

35.5%

Market Share by B2B eCommerce Revenue, Q3 2013

Alibaba.com Global Sources

HC360.com DHGate.com

Made-in-China.com Globalmarket.com

Mysteel.com Toocle.com

Others

Companies Market Share Business Focus

Alibaba.com 43.1% Export+Domestic

Global Sources 7.9% Export

HC360.com 4.2% Domestic

DHGate.com 3.5% Export

Made-in-China.com 2.7% Export

Globalmarket.com 1.3% Export

Mysteel.com 1.0% Domestic

Toocle.com 0.8% Domestic

Top 8 Players 64.5%

Others players 35.5%

Total 100.0%

Source : iResearch

HC is uniquely-positioned as a market leader 100% focused on domestic trade

19

Leading B2B player 100% focused on domestic trade (cont’d)

Our Brand Name is Widely Recognized in China

Source : CNIT-Research

245.0

151.4

88.0 79.0 76.3 58.3 52.6 47.9

Alibaba HC360.com Made-in-China DHGate 315.com Global Sources My Steel Toocle

Top 8 B2B eCommerce Players in China by Brand Name Popularity Index (Q2, 2013) (BNPI(*))

(*) Brand Name Popularity Index (BNPI) is calculated based on website traffic, media coverage, user base, internet search popularity etc.

20-Year History as a

leading B2B company

serving the vast SME

customers

Deeply rooted at the

heart of the large

SME ecosystems in

China

Unparalleled position

combining both the

online and offline

presence

Well-known story of

successful strategic

shift into the internet

eCommerce

20

Vertical-oriented business model: Unique value to customers

Source : iResearch

Hotel Equipment

Professional Lightings

Hardware

Construction Materials

Gifts & Souvenirs

Home Decoration

Machinery

Other verticals

Home Appliances

Auto Parts

Security & Survilliance

Paintings &

Coatings

HC International has established a vertical-oriented business model

that offers in-depth services, ranging from trade matching,

advertising, content and offline events, to users in a number of

industries

As of first nine months of 2013, HC has established 50 vertical

websites

Verticals

Vertical-oriented model and industry coverage Unique value to customers

Industry

Knowledge

Walk-through taxonomy

Extensive content offering beyond

traditional platforms

Day-to-day industry updates plus in-

depth analysis provided by HC’s media

and content teams

Specialized

Platform

Well-designed structure and

functionalities specially for the needs of

industry users

User-friendly tools and interfaces

Communication

Offers more opportunities of interaction

with supply chain counterparties and

peers

Market intelligence of competitors

Offline

Events

HC’s well-targeted offline events attract a

large number of quality participants by

providing physical “shake-hand”

opportunities

21

Uniquely-positioned with extensive experience in both eCommerce

and traditional business

Unlike other major players, HC emerged as a leader in domestic B2B eCommerce following the successful

strategic shift from a traditional catalogue / yellow page provider

Our experience in traditional business provides unique value to our customers:

Trade Catalogues

& Yellow page

20+ Years Ago Today Future (3 years)

Trade Catalogues

& Yellow page

Online B2B

eCommerce

Seminars and

Events

Online B2B eCommerce

with trade services

Comprehensive

Offline services

We have deep

knowledge on local

customers’ needs in

B2B services across

different sectors

We have an extensive

understanding on

SME’s learning curve

and acceptance to

eCommerce

We have built up

valuable relationship

resources which can be

leveraged to expand

our user base

We have the capability

to provide value-added

quality content and to

attract online

customers

We are naturally well-

positioned to offer

quality O2O services in

both online and offline

environment

B2B total solutions –

integration of online and

offline (e.g. Shunde

Household Appliance Mall)

Cover 50 industry sectors Expect to cover 100 industry sectors

22

Incremental service offerings through cooperation with strategic

partners

Powerful search offerings through partnership with leading players

Innovative financing solutions through partnership with leading bank

23

Strong financial performance demonstrating excellence in both

growth and profitability

Strong Growth of Revenue

72 80

87 87 91

8 15 18 16

24

2 8 12 10

16

2010 2011 2012 - 2012.1-9 2013.1-9

Gross, EBITDA and Net Margins (%)

Gross Profit EBITDA Net Income

16.0 19.8 24.5

(18.0) (16.2) (14.7)

0.1

7.6

17.3

2010 2011 2012

Cash Flow (US$ millions)

Operating Cash Flow Investing Cash Flow Financing Cash Flow

…Coupled with Profitability Improvement

And Robust Cash Flow

26.8 46.7

66.4 46.1

79.6 16.4

13.3

8.8

6.0

4.7

8.4

10.7

13.3

9.8

12.4

11.5

8.9 63.1

79.6 88.5

-

61.9

96.7

2010 2011 2012 - 2012.1-9 2013.1-9

Total Revenue (US$ millions)

Total Market research and analysis

Seminars and other services Trade catalogues and yellow page directories

Substantial Return to Shareholders

0.8

14.4

18.3

2010 2011 2012

Return on Equity (%)

24

Growth of Online Revenue with Strong Visibility

Strong financial performance demonstrating excellence in both

growth and profitability (Cont’d)

Revenue Mix Shift (%)

HC has successfully transformed to a B2B eCommerce business and achieved strong growth

26.8

46.7

66.4

46.1

79.6

31.6

46.9

54.4

na na

2010 2011 2012 - 2012.1-9 2013.1-9

(US$ millions)

Online services revenue

Deferred revenue

43%

59%

75% 74% 82%

26%

17%

10% 10% 5%

13%

13%

15% 16% 13% 18%

11%

2010 2011 2012 - 2012.1-9 2013.1-9

Market research and analysis

Seminars and other services

Trade catalogues and yellow page directories

Online services

25

Solid management team and sound shareholding structure

Solid management team with extensive industry knowledge Strategic value from major shareholders

GUO Jiang, CEO

17+ years at HC

MBA from Guanghua Business

School of Peking University

Bachelor degree in computer

engineering

CAI Weihua, Vice President

17+ years at HC

EMBA from Guanghua

Business School of Peking

University

Graduated from Renmin

University of China

YANG Ning, Vice President

Joined in 2006 with 14+ year

B2B industry experience

Worked for Alibaba Group from

1999 to 2005

EMBA from CEIBS and

Bachelor degree in Engineering

GUO Gang, Acting CTO

Joined in 2004 with 11+ years

in cyber software technology

Committee member of AEML

of Zhongguancun(*)

Master degree in software

engineering from Beijing Univ.

of Posts & Telecommunictions

LEE Wee Ong (Alex), CFO

CFO and Chief Strategy Officer

since 2000

6 years at Colonial First State

Investments Group and

Hambros Australia

Bachelor degree in accounting

from Northern University of

Malaysia Currently the single largest shareholder with 20.96%

stake of HC after acquired ~4.3% stake from IDG.

The largest integrated IT services provider in China, spun

off from the parent group of Lenovo in 2000

Its extensive IT products distribution network and logistics

will complement with HC’s B2B business

GENG Yi, Chief Human

Resources Officer

18+ years at HC

Previously worked as the Chief

Sales Officer at HC

MBA and Bachelor degree from

University of International

Business Economics

(*) Association of eCommerce and Modern Logistics

Our Strategies

27

Our Strategies

Vertical Increase our market share by expanding vertical coverage and customer

base

Continue to focus on domestic trade and improve the B2B eCommerce

platform by providing full eCommerce services and trading services

Leverage our unique advantage to actively explore O2O business

initiatives

Actively pursue new strategic partnerships under a client-centric

approach

Domestic

Trade

Media

&

Trade

Services

28

Industry Evolution, Opportunities and HC Initiatives

Current B2B eCommerce Model Problems / Opportunities HC’s Initiatives

Internet marketing business model

(product display / advertising),

focused on information flow

Media-like revenue sources,

concentrated on subscription /

advertising fees

Homogenization of services provided

by B2B players

One-sided fees charged only from

suppliers

B2B players have to maintain the

balance between subscribed

suppliers and available buyers, who

are mainly sourced through online

search engines at cost

Website + regional sales team

organizational structure

Potential customers rely on historical

data (fee yield / conversion rate)

when making subscription decisions

Most players are focused on sector

verticals that are already crowded,

such like fast-moving consumer

goods

Flows of funds and logistics are

outside the B2B eCommerce cycle

Fees charged by B2B players are not

performance-based, making it harder

to differentiate B2B players

Traditional B2B eCommerce

providers offer limited comfort to

buyers for large orders

The credit worthiness of suppliers are

not reflected on website

China’s SME businesses face a

series of challenges in doing

business, especially financing

A number of traditional sectors are

yet covered by major B2B players,

consolidation may takes place in

crowded sectors

“Total B2B eCommerce solutions“

- Offers transaction matching services

and charge commissions based on

transaction value

- The new online transaction platform

will be launched in Q4 2013 and made

available to all the subscribers for free

in the next 3 years

- Allows supplier customers to “Pay for

Performance”

Online+Offline

- HC’s offline initiatives will

fundamentally enhance the credit

profile of quality suppliers and draw

demand from new buyers

- New projects in Guangdong to become

the regional hub in the home appliance

sector

Offers financing services to SMEs by

working with major banks in China, i.e.

China Minsheng Bank

Potential acquisition of quality vertical

players that are complementary to

HC’s existing coverage

29

HC Initiatives: HC-Minsheng Credit Card

Company / transaction Info

HC Customers

Share of fees

Facts Description

Amount RMB50,000~500,000

Term 3 Years

Interest Installment: 0.75%~0.95% per installment

Revolver: 14%~16.4% p.a. (daily Interest)

Cash

Withdraw 90% of credit facility amount

Zero cash withdraw fee

Security Collateral free

The widely-available HC-Minsheng credit card will help HC

customers to obtain financing support

Financing will also be available to the online transactions made

through HC360.com’s online transaction platform and generate

incremental fee income

Compared to alternative financing providers such as small loan

lenders who are usually restricted in certain regions, HC’s financing

offering covers 69 cities across the country by leveraging the

existing branch network of Minsheng Bank

HC is well positioned to work with banks for SME financing

initiatives due to its long-standing relationship and experience

working with the SME clients

Cities covered by HC-Minsheng Credit Card

How it works Why it matters to HC and its customers

(*) Mai-Mai-Tong

30

HC Initiatives: Online + Offline Model

The “pure” online B2B eCommerce model is insufficient to satisfy

the needs of buyers and sellers given the characteristics of B2B

business and the current B2B conventions / environment in China

As a 20-year old player with intensive experience in both online and

offline spaces, HC is uniquely positioned to initiate the online +

offline model and lead the next wave in B2B business

The initiative will also strengthen HC’s leadership in multiple sector

verticals and generate substantial commission-based revenues

How it works Why it matters to HC and its customers

Top concerns of B2B users

Buyers need more comfort for

products with higher complexity

and customization

Physical product exhibition at

offline marketplace + online

product catalogue

Online + Offline Solutions

Buyers and sellers prefer

physical meeting for large and

important orders

Face-to-face communication /

product presentation at offline

marketplace + IM / phone calls

Buyers and sellers are yet

accustomed to pure online

transactions involving payment

Online transaction platform

supplemented by offline

physical cashier service

Shunde, Foshan City,

Guangdong Province

The earth breaking ceremony of China JiaDian City project was

held in April 2013

The project is constructed in an area of 43 thousand square

meters and is located in Shunde, Foshan of Guangdong province

The project will host China’s largest marketplace for home

appliances, serving the large parts and product manufacturer

base concentrated within the pearl river delta region

HC has been serving the SMEs in the region for 11+ years and is

now the B2B leader for home appliances

Financial Overview

32

Financial Overview – Income Statement

(RMB’000) 2012 2011 2013

Jan-Sep

2012

Jan-Sep

Total Revenue 548,568 493,732 599,802 383,640

Total Revenue - Excluding Discontinued Operations 548,568 438,356 599,802 383,640

Growth (%) 25.1% 38.0% 56.3% 24.8%

Cost of revenue (68,684) (67,140) (51,775) (50,289)

Gross profit 479,884 371,216 548,027 333,351

Margin (%) 87.5% 75.2% 91.4% 86.9%

SG&A (416,056) (338,,401) (434,756) (296,536)

Operating profit 67,135 38,295 115,131 38,165

Margin (%) 12.2% 7.8% 19.2% 9.9%

Net Income – Excluding Discontinued Operations 65,422 32,806 97,221 37,316

Margin (%) 11.9% 7.5% 16.2% 9.7%

33

Financial Overview – Balance Sheet

(RMB’000) 2013.6 2012 2011

Assets

Non-current assets 641,495 284,105 247,919

PP&E 209,152 207,915 178,353

Other non-current assets 432,343 76,190 69,566

Current assets 605,920 571,094 374,977

Cash and cash equivalents 343,990 422,552 254,982

Direct selling costs 112,316 85,102 69,477

Other current assets 149,614 63,440 50,518

Total assets 1,247,415 855,199 622,896

Equity

Share capital 59,562 58,167 56,884

Other reserves 244,959 275,769 270,485

Retained earnings / (accumulated

losses)

64,162 11,848 (54,876)

Non-controlling interests 96,266 96,908 14

Total Equity 464,949 442,692 272,507

(RMB’000) 2013.6 2012 2011

Liabilities

Non-current liabilities 259,739 12,751 8,904

Deferred income tax liabilities 15,459 10,260 8,904

Receipt in advance 206,300 - -

Other non-current liabilities 37,980 2,491 -

Current liabilities 522,727 399,756 341,485

Deferred revenue 402,885 337,417 290,820

Other current liabilities 119,842 62,339 50,665

Total liabilities 782,466 412,507 350,389

34

Financial Overview – Cash Flow Statement

(RMB’000) 2013. 1-6 2012 2011

Cash flows from operating activities

Cash generated from operations 161,631 146,325 119,986

Net of interest received and income tax paid (10,858) 5,364 2,984

Net cash generated from operating activities 150,774 151,689 122,970

Cash flows from investing activities

Purchase of PP&E (14,287) (46,887) (66,093)

Proceeds from disposal of PP&E 11 59 224

Acquisition of additional interests in subsidiaries, including transaction costs - (13,148) -

Proceeds from disposal of a subsidiary, net of cash and cash equivalents disposed - - 12,184

Payment for household appliances center (175,813)

Other cash used in investing activities (81,708) (31,467) (47,004)

Net cash used in investing activities (271,797) (91,443) (100,689)

Cash flows from financing activities

Issuance of new shares or loans 93,242 - 66,948

Purchase of shares under share award scheme (65,339) (10,447) (22,234)

Capital contribution from non-controlling shareholders 110,220 150

Exercise of share options 16,625 9,355 2,101

Repayment of finance lease obligations (466) (1,821) -

Net cash generated from financing activities 44,062 107,287 46,965

Appendix

36

Shareholder Overview

Major Shareholders # of Shares Held % Held

Guo Jiang / Geng Yi (*) 88,549,771 13.47%

Guo Fansheng 57,749,015 8.79%

Digital China Holdings Limited 137,758,107 20.96%

Kent C. McCarthy 85,511,000 13.01%

Top 4 Shareholders 369,567,893 56.23%

(*) Includes 13,917,000 and 16,434,000 underlying shares derived form awarded shares and share options respectively.

Source: Hong Kong Stock Exchange, As of 31st. Oct 2013

37

Investor Contact

Contact: Mr. LU Qingguo

Tel： +86-10-6229-8867

Fax： +86-10-6229-8808

Email： ir@hc360.com

Investor Relationship