China e-Wallet Payment Group Limited — Proxy Solicitation & Information Statement 2016

Aug 21, 2016

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker, a licensed dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in RCG Holdings Limited (the ‘‘Company’’), you should at once hand this circular with the enclosed form of proxy to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser or transferee.

This circular is for information only and does not constitute an invitation or offer to acquire, purchase or subscribe for any securities of the Company.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, 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 circular.

==> picture [45 x 33] intentionally omitted <==

RCG Holdings Limited 宏霸數碼集團（控股）有限公司*

(a company incorporated in Bermuda with limited liability)

(Stock Code: 802)

• (1) PLACING OF CONVERTIBLE BONDS UNDER SPECIFIC MANDATE;

• (2) PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL;

AND

• (3) NOTICE OF SPECIAL GENERAL MEETING

Financial adviser to the Company

==> picture [59 x 32] intentionally omitted <==

A letter from the Board is set out on pages 4 to 32 of this circular.

A notice convening the SGM to be held at 11:00 a.m. on Wednesday, 7 September 2016 at No. 16-3, Jalan PJU 5/4, Dataran Sunway, Kota Damansara, 47810 Petaling Jaya, Selangor, Malaysia is set out on pages SGM-1 to SGM-3 of this circular. Whether or not you intend to attend the SGM, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar in Hong Kong, Union Registrars Limited at Suites 3301-04, 33/F, Two Chinachem Exchange Square, 338 King’s Road, North Point, Hong Kong as soon as possible but in any event not less than 48 hours before the time scheduled for the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending or voting in person at the SGM or any adjourned meeting thereof should you so wish.

22 August 2016

• For identification purpose only

CONTENTS

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
NOTICE OF SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	SGM-1

– i –

DEFINITIONS

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

• ‘‘associate(s)’’

has the meaning ascribed thereto under the Listing Rules

• ‘‘Board’’

the board of Directors

• ‘‘Bondholder(s)’’ holder(s) of the Convertible Bonds

• ‘‘Business Day(s)’’

• a day (other than Saturday or Sunday) on which licensed banks in Hong Kong are open for business throughout their normal business hours

• ‘‘Company’’

• RCG Holdings Limited (stock code: 802), a company incorporated in Bermuda with limited liability, with its Shares listed on the Main Board of the Stock Exchange

• ‘‘Completion’’

• completion of each tranche of the Placing shall take place not later than 5:00 p.m. on the fourth Business Days next following the date of notification in writing from the Company to the Placing Agent that all conditions precedent as set out in the Placing Agreement have been fulfilled (or such other time and date as may be agreed between the Company and the Placing Agent)

• ‘‘Completion Date’’

• the date of Completion

• ‘‘connected person(s)’’

• the meaning ascribed thereto in the Listing Rules

• ‘‘Convertible Bonds’’

• the 2.5% interest convertible bonds due in the Maturity Date in an aggregate principal amount of HK$320,000,000 to be issued by the Company pursuant to the Placing Agreement and to be created by the Instrument constituting such bonds, or any part of the principal amount

• ‘‘Conversion Price’’

• HK$0.25 per Conversion Share, subject to adjustments, pursuant to the terms and conditions of the Convertible Bonds

• ‘‘Conversion Shares’’

• the new Shares to be allotted and issued by the Company upon exercise of the conversion rights attaching to the Convertible Bonds

– 1 –

DEFINITIONS

• ‘‘Director(s)’’

• director(s) (including the non-executive and independent non-executive director) of the Company

• ‘‘Group’’ the Company and its subsidiaries

• ‘‘HK$’’ Hong Kong dollars, the lawful currency of Hong Kong

• ‘‘Hong Kong’’

• Hong Kong Special Administrative Region of the PRC

• ‘‘Increase in Authorised Share Capital’’

• proposed increase authorised share capital of the Company to HK$2,000,000,000 divided into 50,000,000,000 Shares

• ‘‘Independent Third Party(ies)’’

• independent third party(ies) who is/are not connected person(s) of the Company and is/are independent of and not connected with the Company and director, chief executive and substantial shareholder of the Company or any of its subsidiaries or their respective associates

• ‘‘Instrument(s)’’ the instrument(s) to be executed by the Company by way of a deed constituting the Convertible Bonds to be issued upon completion of the Placing

• ‘‘Latest Practicable Date’’

• 18 August 2016, being the latest practicable date before the printing of this circular for the purpose of ascertaining certain information contained herein

• ‘‘Listing Committee’’

• the listing committee of the Stock Exchange

• ‘‘Listing Rules’’ the Rules Governing the Listing of Securities on the Stock Exchange

• ‘‘Long Stop Date’’

• 4:00 p.m. (Hong Kong time) on 14 October 2016, or such other time and date as the parties of the Placing Agreement may agree in writing

• ‘‘Maturity Date’’ the date falling 36 months from the date of issue of the Convertible Bonds

• ‘‘Placee(s)’’

institutional, professional and/or individual investor(s) procured by the Placing Agent to subscribe for any of the Convertible Bonds pursuant to the Placing Agreement

– 2 –

DEFINITIONS

• ‘‘Placing’’

the placing of the Convertible Bonds, on a best effort basis, of up to an aggregate principal amount of HK$320,000,000

• ‘‘Placing Agent’’

China Prospect Securities Limited (formerly known as ‘‘SEEC Media Securities Limited’’), a licensed corporation to carry on businesses in Type 1 (dealing in securities), regulated activity under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

• ‘‘Placing Agreement’’

the conditional placing agreement dated 1 March 2016 (as supplemented on 29 July 2016) and entered into between the Company and the Placing Agent in relation to the Placing

‘‘SGM’’ the special general meeting of the Company to be convened and held at 11:00 a.m. on Wednesday, 7 September 2016 at No. 16-3, Jalan PJU 5/4, Dataran Sunway, Kota Damansara, 47810 Petaling Jaya, Selangor, Malaysia, or any adjournment thereof, for the Shareholders to consider and, if thought fit, approving, inter alia, the Placing Agreement and all the transactions contemplated thereunder, including the issue of the Convertible Bonds and the allotment and issue of Conversion Shares under the Specific Mandate, and the Increase in Authorised Share Capital

• ‘‘Share(s)’’ ordinary share(s) of HK$0.04 each in the share capital of the Company

• ‘‘Shareholder(s)’’ the holder(s) of the Share(s)

• ‘‘Specific Mandate’’

• the specific mandate to be sought from Shareholders at the SGM to approve, inter alia, the issue of the Convertible Bonds and the allotment of the Conversion Shares

• ‘‘Stock Exchange’’

• The Stock Exchange of Hong Kong Limited

• ‘‘Takeovers Code’’

• The Hong Kong Code on Takeovers and Mergers

• ‘‘%’’

• per cent

– 3 –

LETTER FROM THE BOARD

==> picture [45 x 33] intentionally omitted <==

RCG Holdings Limited 宏霸數碼集團（控股）有限公司*

(a company incorporated in Bermuda with limited liability)

(Stock Code: 802)

Executive Directors: Registered office: Li Jinglong Clarendon House Zhang Ligong 2 Church Street Wang Zhongling Hamilton HM11 Bermuda Independent Non-executive Directors: Liu Wen Principal place of business Kwan King Wah in Hong Kong: Room 626-629 Corporation Park 11 On Lai Street Siu Lek Yuen Sha Tin, New Territories Hong Kong

Principal place of business outside Hong Kong: Lot 1, Jalan Teknologi 3/5 Taman Sains Selangor 1 Kota Damansara Petaling Jaya, Selangor Malaysia

22 August 2016

To the Shareholders

Dear Sir or Madam,

(1) PLACING OF CONVERTIBLE BONDS UNDER SPECIFIC MANDATE;

(2) PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL; AND

(3) NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

Reference is made to the announcements of the Company dated 1 March 2016 and 29 July 2016 in relation to the Placing and the Increase in Authorised Share Capital.

• For identification purpose only

– 4 –

LETTER FROM THE BOARD

The purpose of this circular is to provide the Shareholders, among other things, further details of (i) the Placing; (ii) the Specific Mandate; (iii) the Increase in Authorised Share Capital and (iv) the notice of the SGM.

1. THE PLACING AGREEMENT

Date

1 March 2016 (after trading hours) (as supplemented on 29 July 2016)

Parties

Issuer: The Company Placing Agent: China Prospect Securities Limited (formerly known as ‘‘SEEC Media Securities Limited’’)

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

Subject matter of the Placing Agreement

The Placing Agent has conditionally agreed to procure not less than six Placees who are Independent Third Parties for the subscription of, in up to two tranches, for up to HK$320,000,000 of the Convertible Bonds on a best effort basis.

The Company considers that the Convertible Bonds issued by two tranches can allow the Placing Agent to have the flexibility to complete the Placing by stages rather than as one tranche placed in full at the Completion Date. The Company expects the placing of the first tranche of the Convertible Bonds will be completed within one to two weeks after the SGM and the placing of the second tranche of the Convertible Bonds will be completed within three weeks after the completion of the placing of the first tranche of the Convertible Bonds. As such, the Company can receive the proceeds of the Placing from the Placing Agent earlier by stages upon completion of the placing of each tranche rather than one lump sum as a whole at the Completion Date and the Group can finance the development of the Business Opportunities (as defined below) earlier.

Placee(s)

The Placing Agent will place the Convertible Bonds to not less than six Placees who are and whose ultimate beneficial owners are expected to be Independent Third Parties, independent to each other and not acting in concert (as defined in the Takeovers Code) with any connected persons of the Company. As at the Latest Practicable Date, the Placing Agent has not identified any Placees.

– 5 –

LETTER FROM THE BOARD

The Placing Agent has undertaken to the Company that none of the Placees will become a substantial Shareholder as a result of the placing of the Convertible Bonds subscribed by him on fully converted basis as at the Completion Date.

Placing period

The period commencing immediately after the date of the SGM and expiring at 5:00 p.m. on the thirtieth Business Day from the date of the SGM approving the Placing (or such later time and date as the parties may agree in writing).

Placing commission

The Company shall pay to the Placing Agent a fee equal to 1.5% of the gross consideration for the Placing representing by the aggregate principal amount of the Convertible Bonds successfully placed by the Placing Agent. Such placing commission was arrived at after arm’s length negotiations between the Company and the Placing Agent with reference to the prevailing market rate.

Conditions of the Placing

The Placing is conditional upon the fulfillment of the following conditions:

• (i) the Listing Committee of the Stock Exchange agreeing to grant a listing of and permission to deal in the Conversion Shares which fall to be issued upon conversion of the Convertible Bonds (either unconditionally or subject to conditions which are acceptable to the Company and the Placing Agent);

• (ii) no representation, warranty or undertaking under the Placing Agreement having been breached in any material aspect by the Company or is otherwise rendered inaccurate, untrue or misleading in any material respect, in each case on or prior to the Completion Date;

• (iii) the passing of resolution(s) by the Shareholders to approve the Placing Agreement and the transactions contemplated thereunder, including the grant of the Specific Mandate for the issue of the Convertible Bonds, at the SGM; and

• (iv) where necessary, the Increase in Authorised Share Capital to accommodate the allotment and issue of any Conversion Shares having been approved in the SGM.

In the event of the above conditions not having been fulfilled by the Long Stop Date, the Placing Agreement shall thereupon lapse and become null and void and all rights, obligations and liabilities of the parties thereunder in relation to the Placing shall cease and determine and none of the parties shall have any claim against the other in respect of the Placing, save for any liability arising out of any antecedent breaches of the Placing Agreement.

– 6 –

LETTER FROM THE BOARD

Termination

• (A) Notwithstanding anything contained in the Placing Agreement, if at any time on or prior to 5:00 p.m. on the Completion Date:

• (i) there shall have been, since the date of the Placing Agreement, such as change in national or international financial, political or economic conditions or taxation or exchange controls as would, in the opinion of the Placing Agent, be likely to prejudice materially the consummation of the Placing; or

• (ii) any material breach of any of the representations and warranties set out in the Placing Agreement comes to the knowledge of the Placing Agent or any event occurs or any matter arises on or after the date thereof and prior to the Completion Date which if it had occurred or arisen before the date thereof would have rendered any of such representations and warranties untrue or incorrect in any material respect of there has been a material breach by the Company of any other provisions of the Placing Agreement; or

• (iii) any moratorium, suspension or material restriction on trading in shares or securities generally on the Stock Exchange due to exceptional financial circumstances,

  • then and in any such case, the Placing Agent may after consultation with the Company (to the extent that the same is reasonably practicable) terminate the Placing Agreement without liability to the Company (subject to the paragraph (B) below) by giving notice in writing to the Company, provided that such notice is received prior to 5:00 p.m. on the Completion Date.

• (B) In the event the Placing Agent terminates the Placing Agreement pursuant to the paragraph (A) above, all obligations of each of the parties under the Placing Agreement shall cease and determine and no party shall have any claim against the other party in respect of any matter arising out of or in connection with the Placing Agreement except for any antecedent breach of any obligation under the Placing Agreement and liabilities under the Placing Agreement.

– 7 –

LETTER FROM THE BOARD

2. PRINCIPAL TERMS OF THE CONVERTIBLE BONDS

The following summaries certain of the principal terms of the Convertible Bonds:

Issuer : The Company. Principal amount : Up to HK$320,000,000, comprising maximum of two (2) tranches with a minimum amount of each tranche being HK$150,000,000 of the Convertible Bonds. Interest : 2.5% per annum on the outstanding principal amount thereof. Interest will be calculated on a 365 days basis and is payable by the Company in arrears on (a) the anniversary in each subsequent year of the date of issue of the Convertible Bonds until redeemed or matured; and (b) on the date of redemption or maturity. Maturity date : 36 months from the date of issue of the Convertible Bonds. Conversion restriction : The conversion rights attaching to a Convertible Bond cannot be exercised (and accordingly the Company will not issue Conversion Shares) in any of the following events:

• (i) in exercising the conversion rights attaching to the Convertible Bonds, the Bondholder shall not (i) trigger any mandatory offer obligation under Rule 26 of the Takeovers Code on the part of the Bondholder which exercised the conversion rights, represents more than 30% (or such other percentage as stated in Rule 26 of the Takeovers Code in effect from time to time) of the then issued ordinary share capital of the Company or otherwise pursuant to other provisions of the Takeovers Code; or (ii) reduce the public float of the Shares to less than 25% (or any given percentage as required by the Listing Rules) of the issued Shares; or

– 8 –

LETTER FROM THE BOARD

• (ii) if the Conversion Shares are to be issued to a connected person of the Company in which case the exercise of the relevant conversion rights will be subject to the approval of the Shareholders in a general meeting and compliance with the relevant requirements of the Listing Rules.

• Conversion Shares : Assuming the conversion rights attached to the Convertible Bonds are exercised in full at the initial Conversion Price of HK$0.25 per Conversion Share, a maximum of 1,280,000,000 Conversion Shares will be allotted and issued, representing approximately 84.0% of the entire issued share capital of the Company as at the Latest Practicable Date and approximately 45.7% of the entire issued share capital of the Company as enlarged by the issue of the Conversion Shares.

• Conversion period : The Bondholders will be able to convert the outstanding principal amount of the Convertible Bonds in whole or in part into Shares at any time following the relevant date of issue until the Maturity Date.

• Conversion Price : HK$0.25 per Conversion Share, subject to customary adjustments in certain events as disclosed in the ‘‘Anti-dilution adjustments’’ below. The Conversion Price represents:

• (i) a discount of approximately 19.4% to the closing price of HK$0.31 per Share as quoted on the Stock Exchange on the date of the Placing Agreement;

• (ii) a discount of approximately 19.1% to the average closing price of HK$0.309 per Share as quoted on the Stock Exchange for the last five (5) consecutive trading days immediately prior to the date of the Placing Agreement;

– 9 –

LETTER FROM THE BOARD

• (iii) a discount of approximately 52.8% to the closing price of HK$0.53 per Share as quoted on the Stock Exchange on 29 July 2016, being the date of the supplemental agreement to the Placing Agreement; and

• (iv) a discount of approximately 43.2% over the closing price of HK$0.44 per Share as quoted on the Stock Exchange on the Latest Practicable Date.

The initial Conversion Price was determined after arm’s length negotiations between the Company and the Placing Agent with reference to the market price of the Shares under the prevailing market conditions and historical market price of the Shares.

For the 6-months period prior to 1 March 2016 (the ‘‘Period’’), being the date of the Placing Agreement, the average closing share price was approximately HK$0.297. As such, the Conversion Price of HK$0.25 represents a discount of approximately 15.8% to the average closing price of Shares during the Period. During the Period, closing price of Shares were relatively stable.

In view of (i) the volatile movement of the share prices since the publication of the announcement in relation to the Placing, the share prices were traded in the range of HK$0.32 to HK$0.78; and (ii) after attaining a peak of HK$0.78 on 20 April 2016, share prices demonstrated a downward trend and dropped significantly from the highest price of HK$0.78 to HK$0.44 as at the Latest Practicable Date, representing a drop of approximately 43.6%, the Company considers that the average share price since the publication of the announcement in relation to the Placing will not be a good reference for determining the Conversion Price.

Therefore, the average closing price of Shares during the Period serves as a fair and reasonable reference in determining the Conversion Price.

– 10 –

LETTER FROM THE BOARD

Apart from the historical share prices, the Company and the Placing Agent also considered the liquidity of the Shares in determining the Conversion Price. According to historical data, the trading volume of the Shares was relatively thin during the Period, with an average daily trading volume of approximately 5,046,000 Shares, representing less than 1% of the Company’s total issued share capital as at the Latest Practicable Date. The relatively low liquidity of the Shares may indicate that the Company is less favourable as compared to those listed companies with high trading liquidity.

The Directors consider that it is commercially reasonable for the Company to offer a deep discount on the Conversion Price to the prevailing market price of the Shares as an incentive to attract the Placees to subscribe for the Convertible Bonds under the Placing since the Placees will bear higher risks given the fact that (i) the liquidity of the Shares is relatively low; (ii) the great fluctuation of the share prices since the publication of the announcement in relation to the Placing; and (iii) the recent downward trend of the share prices. Since the Placing is on a best effort basis, conducting the Placing with a smaller discount would make the Placing less attractive to the Placees to subscribe for the Convertible Bonds and the Company may not raise sufficient funds to finance the development of the Business Opportunities (as defined below) as planned.

In view of the above, the Company considers that the Conversion Price is fair and reasonable and in the interests of the Company and Shareholders as a whole.

Maturity redemption : At 100% of the principal amount of the Convertible Bonds on the Maturity Date.

Anti-dilution adjustments : The Conversion Price will be subject to adjustments upon the occurrence of the following events:

– 11 –

LETTER FROM THE BOARD

(i) if and whenever the Company’s nominal value of the Shares shall be altered as a result of consolidation or subdivision, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately prior to such alternation by the following fraction:

A B

where:

A is the nominal amount of one Share immediately after such alternation; and

B is the nominal amount of one Share immediately before such alternation.

Such adjustment shall become effective on the date the alternation takes effect;

(ii) if and whenever the Company shall issue any Shares credited as fully paid to the Shareholders by way of capitalisation of profits or reserves, other than Shares issued in lieu of the whole or any part of a cash dividend, being a dividend which the Shareholders concerned would or could otherwise have received in cash, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately prior to such issue by the following fraction:

A B

where:

A is the aggregate nominal amount of the issued Shares immediately before such issue; and

B is the aggregate nominal amount of the issued Shares immediately after such issue.

Such adjustment shall become effective on the date of issue of such Shares;

– 12 –

LETTER FROM THE BOARD

(iii) if and whenever the Company shall pay or make any capital distribution to the Shareholders (except where the Conversion Price falls to be adjusted under paragraph (ii) above, or falls within (ii) above but no adjustment falls to be made), the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately prior to such capital distribution by the following fraction:

A – B

A

where:

A is the average closing price for the Shares for the five consecutive trading days immediately preceding the date on which the capital distribution is publicly announced; and

B is the fair market value on the date of such announcement, as determined in good faith by an approved financial adviser, of the portion of the capital distribution attributable to one Share.

Such adjustment shall become effective on the date that such capital distribution is actually made;

– 13 –

LETTER FROM THE BOARD

(iv) if and whenever the Company shall issue Shares to all or substantially all Shareholders as a class by way of rights, or issue or grant to all or substantially all Shareholders as a class by way of any options, warrants or other rights to subscribe for or purchase any Shares, in each case at less than 90 per cent of the average closing price for the Shares for the five consecutive trading days immediately preceding the date of the announcement of the terms of the issue or grant, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately prior to such issue or grant by the following fraction:

A + B A + C

where:

A is the number of Shares in issue immediately before such announcement;

B is the number of Shares which the aggregate amount (if any) payable for the Shares issued by way of rights or for the options or warrants or other rights to subscribe for or purchase any Shares issued by way of rights and for the total number of Shares comprised therein would purchase at such average closing price for the Shares for the five consecutive trading days immediately preceding the date of the announcement; and

C is the aggregate number of Shares issued or, as the case may be, comprised in the grant.

Such adjustment shall become effective on the date of issue of such Shares or issue or grant of such options, warrants or other rights (as the case may be);

– 14 –

LETTER FROM THE BOARD

(v) if and whenever the Company shall issue wholly for cash any Shares which is less than at less than 90 per cent of the average closing price for the Shares for the five consecutive trading days immediately preceding the date of the announcement of the terms of the issue, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately prior to such issue by the following fraction:

A + B A + C

where:

A is the number of Shares in issue immediately before the date of such announcement;

B is the number of Shares which the aggregate amount payable for the Shares allotted pursuant to such issue would purchase at average closing price for the Shares for the five consecutive trading days immediately preceding the date of the announcement (exclusive of expenses); and

C is the aggregate number of Shares allotted and issued pursuant to such issue.

Such adjustment shall become effective on the date of issue of such Shares;

– 15 –

LETTER FROM THE BOARD

(vi) If and whenever the Company shall issue Shares for the acquisition of asset at a total effective consideration (being the fair value of assets to be acquired) per Share which is less than 90 per cent. of the market price at the date of announcement of the terms of such issue, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately prior to such issue by the following fraction:

A + B A + C

where:

A is the number of Shares in issue immediately before the date of such announcement;

B is the number of Shares which the total effective consideration (being the fair value of assets to be acquired) would purchase at average closing price for the Shares for the five consecutive trading days immediately preceding the date of the announcement; and

C is the number of Shares allotted and issued pursuant to such issue.

Such adjustment shall become effective on the date of issue of such Shares;

– 16 –

LETTER FROM THE BOARD

(vii) If and whenever the Company shall issue Shares for the acquisition of asset at a total effective consideration (being the fair value of assets to be acquired) per Share which is less than 90 per cent. of the average closing price for the Shares for the five consecutive trading days immediately preceding the date of the announcement of such acquisition, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately prior to such issue by the following fraction:

A + B C

where:

A is the number of Shares in issue immediately before the date of such acquisition;

B is the number of Shares which the total effective consideration (being the fair value of assets to be acquired) would purchase at average closing price for the Shares for the five consecutive trading days immediately preceding the date of the announcement; and

C is the number of Shares in issue upon completion of such acquisition.

Such adjustment shall become effective on the date of issue of such Shares;

– 17 –

LETTER FROM THE BOARD

(viii) if and whenever the Company shall issue any securities convertible into or exchangeable for or carrying rights of subscription for new Shares at the Total Effective Consideration (as define below) per new Share is less than 90 per cent. of the average closing price for the Shares for the five consecutive trading days immediately preceding the date of the announcement, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately prior to such issue by the following fraction:

==> picture [44 x 22] intentionally omitted <==

where:

A is the number of Shares in issue immediately before the date of issue of such securities;

B is the number of Shares which the Total Effective Consideration (as defined below) receivable for such securities would purchase at average closing price for the Shares for the five consecutive trading days immediately preceding the date of the announcement (exclusive of any disbursements incurred in connection therewith); and

C is the maximum number of new Shares to be issued upon full conversion or exchange of, or the exercise in full of the subscription rights conferred by, such securities at their relative initial conversion or exchange rate or subscription price.

Such adjustment shall become effective on the date of issue of such securities; and

– 18 –

LETTER FROM THE BOARD

(ix) if and whenever the rights of the conversion, exchange or subscription rights of any issue of securities mentioned in paragraph (viii) are altered so that the said Total Effective Consideration (as define below) is less than 90 per cent. of such average closing price, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately prior to such issue by the following fraction:

A + B A + C

where:

A is the number of Shares in issue immediately before the date of such modification;

B is the number of Shares which the Total Effective Consideration (as defined below) receivable for such securities at the modified conversion or exchange rate or subscription price would purchase at such market price; and

C is the maximum number of new Shares to be issued upon full conversion or exchange of, or the exercise in full of the subscription rights conferred by, such securities at their relative modified conversion or exchange rate or subscription price.

Such adjustment shall become effective on the date of such modification.

– 19 –

LETTER FROM THE BOARD

The ‘‘Total Effective Consideration’’ receivable for the relevant securities shall be deemed to be the aggregate consideration receivable by the Company for the issue thereof plus the additional minimum consideration (if any) to be received by the Company upon the full conversion or exchange thereof or the exercise in full of the subscription rights attaching thereto, and the ‘‘Total Effective Consideration per Share’’ initially receivable for such securities shall be such aggregate consideration divided by the number of Shares to be issued upon (and assuming) such conversion or exchange at the initial conversion or exchange rate or the exercise of such subscription rights at the initial subscription price, in each case without any deduction for any commissions, discounts or expenses paid, allowed or incurred in connection with the issue.

Early redemption : The Company may redeem all or any Convertible Bonds at any time before the Maturity Date at the rate of 103% of the principal amount of the redeemed Convertible Bonds. The Bondholders may not early redeem the Convertible Bonds in any event. Transferability : The Convertible Bonds may be transferred to any person (including a connected person of the Company, subject to Shareholders’ approval) with the consent of the Company. Voting : The Bondholders will not be entitled to receive notice of, attend or vote at any general meetings of the Company by reason only of them being a Bondholder. Listing : No application will be made for the listing of the Convertible Bonds on the Stock Exchange or any other stock exchange.

– 20 –

LETTER FROM THE BOARD

Application will be made by the Company to the Stock Exchange for the listing of, and permission to deal in, the Conversion Shares to be issued upon the exercise of the conversion rights attaching to the Convertible Bonds.

Ranking of Conversion : The Conversion Shares will rank pari passu in all Shares respects with all other Shares on the date the name of the Bondholder is entered in the register of members of the Company as a holder of the Conversion Shares.

Completion of the Placing

Completion of each tranche of the Placing shall take place not later than 5:00 p.m. on the fourth Business Days next following the date of notification in writing from the Company to the Placing Agent that all conditions precedent as set out in the Placing Agreement have been fulfilled (or such other time and date as may be agreed between the Company and the Placing Agent).

EFFECTS ON SHAREHOLDING STRUCTURE OF THE COMPANY

The table below sets out the shareholding structure of the Company (i) as at the Latest Practicable Date; and (ii) immediately upon full conversion of the Convertible Bonds at the initial Conversion Price.

Shareholders Public Shareholders Placees Other public Shareholders	As at the Latest Practicable Date No. of Shares Approximate % – – 1,523,729,744 100.00 1,523,729,744 100.00	Immediately upon full conversion of the Convertible Bonds at the initial Conversion Price No. of Shares Approximate % 1,280,000,000 45.65 1,523,729,744 54.35 2,803,729,744 100.00	Immediately upon full conversion of the Convertible Bonds at the initial Conversion Price No. of Shares Approximate % 1,280,000,000 45.65 1,523,729,744 54.35 2,803,729,744 100.00
			100.00

– 21 –

LETTER FROM THE BOARD

REASONS FOR THE PLACING AND USE OF PROCEEDS

The Group is principally engaged in the developing, sourcing and selling biometric and radio frequency identification (the ‘‘RFID’’) products and solutions services in the Asia Pacific region. The Group’s business is divided generally into four categories, namely (i) ‘‘Trading of Security of RFID and Biometrics Products’’; (ii) ‘‘Solutions, Projects and Services’’; (iii) ‘‘Internet and Mobile Applications & Related Accessories’’; and (iv) ‘‘Commodities Trading’’.

The gross proceeds to be raised from the Placing are estimated to be approximately HK$320,000,000 (assuming full subscription of the Convertible Bonds). The net proceeds from the Placing are estimated to be approximately HK$314,200,000 (assuming full subscription of the Convertible Bonds).

The Company intends to apply net proceeds from the Placing for facilitating the business opportunities (the ‘‘Business Opportunities’’) contemplated under a corporation agreement dated 1 March 2016 (the ‘‘Cooperation Agreement’’) entered into between a well-known payment platform company, China UnionPay Co., Ltd.（中國銀聯股份有限公司）(‘‘China UnionPay’’), and a subsidiary of the Company. Pursuant to the Cooperation Agreement, the Company shall promote merchants to use the value-added payment platform, ‘‘銀聯錢包’’, (the ‘‘UnionPay Wallet’’) provided by China UnionPay to settle purchase payments. In return, the Company would share a transaction fee from China UnionPay.

In order to attract the customers to make a payment by using UnionPay Wallet, the Company will utilise part of the net proceeds of the Placing of approximately HK$260.0 million from the Placing for giving out incentives (i.e. electronic coupons or discount) to draw traffic to the participating merchants and the UnionPay Wallet. The remaining balance of approximately HK$54.2 million from the net proceeds of the Placing will be utilised for the general working capital of the Group. In view of the rapid growth of the mobile commerce and the increasing smartphone penetration rate in the PRC, the Company believes that demand for using mobile application (instead of physical debit/credit cards) to settle payment transactions will be increasing which in turn will increase the transaction value generated by the UnionPay Wallet. As such, the Directors consider that the Company will benefit from the promising prospect of mobile payment in the PRC through facilitating the Business Opportunities.

– 22 –

LETTER FROM THE BOARD

Business model in relation to the Business Opportunities

As the rapid increase of the mobile commerce and the use of smartphone becoming popular, it becomes a main trend in the PRC for consumers to use mobile applications (instead of physical debit/credit card) as a wallet for settlement.

Pursuant to the Cooperation Agreement, the Company will promote UnionPay Wallet as one of the payment method. The major promotional method is by giving out incentives (i.e. electronic coupons (the ‘‘E-Coupons’’) or discount) to draw traffic to i) the participating merchants and ii) the UnionPay Wallet in order to attract the customers to make a payment by using UnionPay Wallet.

The Company will receive the following as revenues:

• (i) China UnionPay will charge a transaction fee of approximately 1% on the merchant (the ‘‘UnionPay Transaction Fee’’) for each successful payment. The Company would then share a portion of the UnionPay Transaction Fee from China UnionPay pursuant to the Cooperation Agreement (the ‘‘Transaction Income’’).

• (ii) As the Group giving out incentives (i.e. E-coupon or discount) to attract the customer to spend at the merchants, the sales of the merchants would increase significantly. Thus in return, the merchants will share and rebate a portion of the promotion cost borne by the Group for giving out the incentives and the Group will recognize the rebate from the merchants as rebate income (the ‘‘Rebate Income’’).

• (iii) The Company would also develop application (the ‘‘Merchant App’’) for each of the merchants to reach their mobile customers and would generate application development income and maintenance income from the merchants (the ‘‘Apps Income’’).

Business plan in relation to the Business Opportunities

The Company has derived a marketing plan (together with China UnionPay) to give incentives to customers who use UnionPay Wallet at participating merchants.

In selecting participating merchants, the Company’s marketing team will consider the following criteria:

• (i) number of shops of the merchants;

• (ii) annual sales revenue of the merchants; and

– 23 –

LETTER FROM THE BOARD

• (iii) the brand image of the merchants, the matrix and the spending pattern of their potential customers.

After selecting the participating merchants, the Group would provide E-coupons or give direct discount to UnionPay Wallet users for payment. More customers using the UnionPay Wallet means more Transaction Income the Company would receive.

Roles and responsibilities of the Group

As an agent of the UnionPay Wallet, the Group is responsible for:

• (i) procuring new merchants to adopt the UnionPay Wallet for payment and settlement;

• (ii) developing Merchant App, customer relationship management and tailor-made program for the merchants;

• (iii) providing maintenance services to the point-of-sale terminal (the ‘‘POS’’); and

• (iv) providing advices and marketing services such as advertising and incentives to the merchants to launch promotion campaign to boost their businesses.

Roles and responsibilities of China UnionPay

According to the latest information released by China UnionPay, the total number of UnionPay cards issued worldwide exceeded 5 billion with total transaction amount of approximately RMB 53.9 trillion in 2015. China UnionPay is responsible for (i) operating the UnionPay Wallet; (ii) installing new POS with Near Field Communication (‘‘NFC’’) enabled function; (iii) providing marketing advices to the Company on procuring merchants; and (iv) providing interbank clearing and settlement system.

Business opportunities of the Group

China UnionPay, the largest payment and clearing network in the PRC, is the contractual partner of the Cooperation Agreement. Referring to the latest information released by China UnionPay, the China UnionPay card acceptance network has recently extended to more than 150 countries and regions, with over 34 million merchants (the ‘‘UnionPay Merchants’’). China UnionPay has recently speeded up the process of installation of new POS to promote its mobile payment platform. The Group expects such huge number of UnionPay Merchants would be the potential merchants of the Group’s business.

– 24 –

LETTER FROM THE BOARD

How the Group’s expertise would satisfy the need of the development of the business model

The Group has been developing radio frequency identification (RFID) products since 2008. As the standards and protocols of the NFC format is based on the RFID technology, the Group can use its RFID knowhow to rapidly develop and customize NFC based POS to fit in different regional use.

Since 2011, the Group commenced the business of internet and mobile applications which specialized in providing programming, advertising solutions and entertainment applications in mobile platform with branch office in Hong Kong, Shenzhen and Shanghai. The programming teams of the Group have extensive experience on developing mobile application for well-known companies in Hong Kong and therefore the Group could rapidly develop and launch the Merchant Apps for merchants to promote UnionPay Wallet users to spend at their shops.

In addition, the Company’s marketing team has successfully procured a famous brand to be the participating merchants in April 2016 and has signed up over 2,000 shops in three months. The Group considers these are an evidence to prove that the Group has the expertise and is capable to develop such business model.

Practices of existing market players in the PRC

‘‘Giving out of E-Coupon’’ as an incentive to attract customers is a common practice on the similar business in the PRC as (i) it can have the effect of expanding or increasing the market share rapidly and (ii) draw customers’ attention and induce the customers to the merchants which results in additional impulse purchases. Two of the PRC’s taxi-hailing mobile applications, being Alibaba-controlled Kuaidi Dache ‘‘快的打車’’ and Tencent-invested Didi Dache ‘‘滴滴打車’’ (collectively the ‘‘Taxi Apps’’), have adopted the ‘‘Giving out of E-coupon’’ as marketing campaign to capture the market share in the PRC. In order to attract more users, the two Taxi Apps were pouring out a total of approximately RMB2 billion in 2014 in the form of free electronic coupons into subsidising taxi drivers and passengers. With the above marketing campaign, the two Taxi Apps became the two of the PRC’s leading taxi-hailing apps in 2015.

Other business partners of China UnionPay

The Cooperation Agreement does not preclude China UnionPay from entering into agreements with other entities with terms and conditions similar to those set out in the Cooperation Agreement. As such, UnionPay may enter into similar cooperation agreements with other partners (the ‘‘Other Partners’’). However, in view of scale of the Other Partners are relatively small which only focus on small district in the PRC, the Group considers that it is not financially feasible for the Other Partners to launch similar marketing campaign to capture the market shares and compete with the Group.

– 25 –

LETTER FROM THE BOARD

Commercial feasibility of the business model

Based on the development plan of the Group, the first two years are considered as development stage of the business which mainly aims to increase market shares of UnionPay Wallet. In view of the promising prospect of mobile payment market in the PRC, the number of merchants and transaction amount through UnionPay Wallet are expected to increase steadily. Therefore, the Board considers the Group would be able to earn justifiable profit in relation to the fund invested in this business in the long run.

Current development of the business model

Up to the Latest Practicable Date, the Group has expanded its sales team in Shanghai since March 2016 to procure more merchants to adopt the UnionPay Wallet as a payment method and the Group has signed up over 2,500 shops in the PRC.

Total funding needs of the business model

Based on the development plan of the Group, the Company estimates the total funding need for development of the business model under the Business Opportunities will be approximately HK$589.6 million, out of which approximately HK$275.4 million will be financed by the net proceeds from the open offer as announced by the Company on 24 April 2015 (the ‘‘Open Offer’’) and the remaining balance of approximately HK$314.2 million will be financed by the net proceeds from the Placing. As at the Latest Practicable Date, approximately HK$135 million has been used as earnest money to five merchants (the ‘‘Five Merchants’’). The earnest money will be refunded from the merchants to the Company for any unutilised amount of the E-Coupons upon the end of the specific period as agreed between the Company and the merchants. The period for each of the agreements signed between the Five Merchants and the Company is six months. In order to adopt the UnionPay Wallet as a payment gateway, the POS system of merchants was required to be upgraded by China UnionPay. The Company expects that China UnionPay will complete the upgrade of the POS system of the merchants by the end of September 2016 and the earnest money will be utilised as incentives to the customers of the merchants accordingly. Since there is a delay for the launch of the promotion by giving out E-Coupons, the Company would enter into supplemental agreements with the Five Merchants to extend the term of relevant agreements by a period comparable to the corresponding period of delay in the completion of upgrade of the POS system in order for the merchants to utilise the earnest money.

– 26 –

LETTER FROM THE BOARD

Breakdown of the total funding needs

The breakdown of the intended use of the proceeds from the Open Offer and the Placing will be as follows:

E-Coupons Development cost of system and acquisition of hardware and software Marketing and promotion expenses General working capital for the Business Opportunities	Utilized amount of net proceeds from the Open Offer HK$ million 135.0 – 0.6 – 135.6	Unutilized amount of net proceeds from the Open Offer HK$ million 70.4 38.0 31.4 – 139.8	Net proceeds from the Placing HK$ million 260.0 – – 54.2 314.2	Total HK$ million 465.4 38.0 32.0 54.2
				589.6

Based on the above funding needs in connection with the Cooperation Agreement, the (i) privilege expense; (ii) system development expense; and (iii) marketing and promotion expense would be the major funding needs for the development of the Business Opportunities.

For privilege expense, the Board expects to offer privilege by way of E-coupons to each shop in order to attract those merchants to use the services. Pursuant to the Cooperation Agreement, the Group has to procure not less than 5,000 shops. As at the Latest Practicable Date, the Company has procured merchants which operates over 2,500 shops in the PRC. The Five Merchants mainly comprise of shopping malls or chain stores engaged in (i) catering and beverage and (ii) retailing. The Company will continue to procure sizable merchants with chain stores or shopping malls in the PRC which will enable the Company to procure large number of shops in a short period of time and achieve the target under the Cooperation Agreement. With reference to the development plan of the Group and the signed contracts with the merchants, the Board expects the Group can achieve the target to procure not less than 5,000 shops in the first year. In estimating the amount to be applied for privilege expense, reference is made to the (i) number of merchants and their respective number of shops and outlets, (ii) existing and targeted number of potential customers of each shop and outlet for a merchant, (iii) the expected scale of marketing campaign of each merchant; and (iv) the business scale of the merchants.

– 27 –

LETTER FROM THE BOARD

In view of the development stage and with reference to the practice of other similar companies, the estimated marketing and promotion expenses for facilitating the Business Opportunities will be approximately HK$32.0 million to promote the merchants associated with the UnionPay Wallet in different social media platforms and websites to provide the merchants’ target customers with updated brand and product information and increase the merchants’ public awareness.

According to the quotations from the suppliers and the service providers as well as the expertise and experience of the Group, the Board expects that the total development cost of system and acquisition of hardware and software will be approximately HK$38.0 million.

Based on the business plan of the Company, approximately HK$430 million would be needed for the next 12 months for the development and operations of the Business Opportunities, out of which, (i) approximately HK$400 million would be used as privilege expense and administrative expenses with HK$100 million per quarter. Over 90% of the estimated funding will be used for privilege expense and aggregate amount to be used for administrative expense will be less than HK$30 million; (ii) approximately HK$12 million would be used for development of the system; and (iii) approximately HK$18 million would be used as marketing expense to promote the merchants associated with the UnionPay Wallet.

The Company considers that the net proceeds from the Open Offer and the Placing can satisfy the Company’s expected funding needs under the Business Opportunities for the next 12 months. As such, the Company is not contemplating or does not have any immediate plan to conduct further fund raising activities in relation to the Cooperation Agreement and its existing businesses.

Benefits from the Business Opportunities to the existing businesses of the Group

The Business Opportunities in connection to the cooperation with China UnionPay would:

• (i) provide opportunities to expand the Company’s existing business (RFID related business and mobile application business) in a shorter period of time through the established customer base of China UnionPay;

• (ii) create synergies effect, such as utilizing the existing resources of Company’s RFID technologies and internet and mobile application experience; and

• (iii) enhance the Company’s business image through the reliable settlement platform, i.e. the UnionPay Wallet.

As such, the Company considers the experience gained from the strategic cooperation in the PRC would enable the Group to (i) extend the geographical coverage of its business in the future and (ii) accelerate the growth of number of merchants of the Group’s business in the long run.

– 28 –

LETTER FROM THE BOARD

Development plan in relation to the existing businesses of the Group

The Group will continue to carry on its existing businesses, i.e. ‘‘Mobile Application and Website Development Service’’ and ‘‘Online Advertising Service’’ and will continue to pursue development for the aforesaid businesses through various means, among others, through development of the Business Opportunities. Under the Business Opportunities, the Group will utilize its marketing experience and resource of the ‘‘Online Advertising Service’’ to derive the marketing plan for the merchants by giving incentives (such as E-Coupons or discounts) to customers who use the UnionPay Wallet for payment. In addition, the Group will utilise its existing technical knowledge and programmers to develop mobile application for the merchants (i.e. the Merchant App) to promote their businesses and reach the potential customers through the Merchant App. In view of the above, the Company considers that the scope of services under the Business Opportunities are essentially the same as the existing businesses of the Group and there would not be a change in the fundamental businesses of the Group. In addition, the Group will extend its scope of services to the PRC through the development of the Business Opportunities.

The Directors are of the view that the Placing represents a good opportunity for the Company to raise additional funds and it will provide: (i) the Company with immediate funding to support the implementation of the Group’s development plan to facilitate the Cooperation Agreement; (ii) the Company with immediate funding without resulting in immediate dilution effect on the shareholding of the existing Shareholders; and (iii) an opportunity for the Company, if the conversion rights attached to the Convertible Bonds are exercised, to enlarge and strengthen its capital base and also broaden its Shareholders base by the introduction of new investors.

The Directors have considered other fund raising alternative such as bank borrowing and rights issue or open offer. However, since bank borrowings may incur a higher interest rate as compared to the 2.5% coupon rate of the Convertible Bonds and the lengthy execution time of the rights issue or open offer as compared to the imminent need of the Company to pursue Business Opportunities, the Directors considers that the Placing is an appropriate means under current situation of the Group.

The Directors consider that the terms of the Placing Agreement and the terms of the Convertible Bonds (together with the Conversion Price) are fair and reasonable and in the interests of the Company and Shareholders as a whole.

– 29 –

LETTER FROM THE BOARD

FUND RAISING ACTIVITIES OF THE COMPANY IN THE PAST TWELVE MONTHS

The following table summarises the fund raising activities by the Company in the past twelve months immediately prior to the Latest Practicable Date:

		Net proceeds raised
Date of announcement	Event	(approximately)	Intended use of proceeds	Actual use of proceeds
24 April 2015 (completed	Open offer	Approximately	(i) approximately 90% of net	(i) approximately HK$135
on 25 August 2015)		HK$306 million	proceeds for financing the	million had been used and
			possible subscription and	placed to merchants as
			funding requirements for	earnest money in connection
			business development of	with E-Coupons to be
			Azooca Incorporation upon	provided by the Group to
			completion of the possible	attract the end customer of
			subscription (the ‘‘Possible	the merchants to use the
			Subscription’’) and other	UnionPay Wallet for payment
			possible investment	(Note 2) and approximately
			opportunities which may	HK$0.6 million had been
			arise from time to time (as	used as administrative
			disclosed in the	expenses for the expansion of
			announcement of the	sales teams in Shanghai;
			Company dated 1 March
			2016, the Board resolved to	(ii) approximately HK$139.8
			change the proposed use of	million will be utilized to
			the net proceeds from the	facilitate the development of
			open offer by allocating the	the Business Opportunities
			net proceeds originally	(for details, please refer to
			intended for the Possible	the above paragraph headed
			Subscription to facilitate the	‘‘Breakdown of the total
			business opportunities under	funding needs’’); and
			the Cooperation Agreement)
			(Note 1); and	(iii) approximately HK$21.1
				million had been used as
			(ii) approximately 10% of the net	general working capital of
			proceeds as general working	existing business of the
			capital of existing businesses	Group;
			of the Group.
				(iv) the remaining of
				approximately HK$9.5
				million will be utilised for
				the general working capital
				of the Group.

Save as disclosed above, the Company has not conducted any other equity fund raising activities in the past twelve months immediately preceding the Latest Practicable Date.

Notes:

1. After completion of the Open Offer in late August 2015 which has strengthened the cash position of the Group, the Company made attempt to further its discussion with Azooca regarding the Potential Subscription. However, Azooca failed to provide the crucial financial and business information to the Company for carrying out the due diligence. As such, the Company terminated the negotiation with Azooca for the Potential Subscription on 1 March 2016.

– 30 –

LETTER FROM THE BOARD

1. The earnest money will be refunded from the merchants to the Company for any unuilised amount of the E- Coupons upon the end of the specific period as agreed between the Company and the merchants. The Company will continue to solicit more merchants to adopt the UnionPay Wallet and any unutilised E- Coupons refunded from the old merchants will be used as refundable deposits for the new merchants.

PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL

As at the Latest Practicable Date, the authorised share capital of the Company is HK$90,000,000 divided into 2,250,000,000 Shares in which 1,523,729,744 Shares are in issue. In order to accommodate future expansion and growth of the Group, the Board considers that the proposed Increase in Authorised Share Capital will provide the Company with flexibility for fund raising by allotting and issuing new Shares in the future as and when appropriate for future investment opportunities and other corporate purposes.

Also, the Board considers that additional administrative cost (including the professional fee payable to the financial adviser and Bermuda lawyer and the printing cost of the circular) will be incurred for the administrative work for the future increase in authorised share capital of the Company. Therefore, the Board considers that the increase in authorized share capital from 2,250,000,000 Shares to 50,000,000,000 Shares can provide the Company with flexibility and can reduce future administrative cost to be incurred for future proposal of increase in authorized share capital.

Therefore, the Board proposes to increase the authorised share capital of the Company to HK$2,000,000,000 divided into 50,000,000,000 Shares by the creation of an additional 47,750,000,000 Shares, which shall rank pari passu in all respects with the existing Shares.

Immediately after completion of the Increase in Authorised Share Capital and assuming no new Shares are issued or no Shares are repurchased from the Latest Practicable Date up to the SGM, the authorised share capital of the Company will be HK$2,000,000,000 divided into 50,000,000,000 Shares, with 1,523,729,744 Shares in issue and 48,476,270,256 Shares remaining unissued.

The proposed Increase in Authorised Share Capital is subject to the approval of the Shareholders by way of an ordinary resolution at the SGM.

SGM

The SGM will be convened and held at 11:00 a.m. on Wednesday, 7 September 2016 at No. 16-3, Jalan PJU 5/4, Dataran Sunway, Kota Damansara, 47810 Petaling Jaya, Selangor, Malaysia for the purpose of considering and, if thought fit, approving, inter alia, the Placing Agreement and all the transactions contemplated thereunder, including the issue of the Convertible Bonds and the allotment and issue of Conversion Shares under the Specific Mandate, and the Increase in Authorised Share Capital. In compliance with the Listing Rules, the resolutions will be voted on by way of poll at the SGM. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, no Shareholders are required to abstain from voting on the resolutions to be proposed at the SGM.

– 31 –

LETTER FROM THE BOARD

The notice convening the SGM is set out on pages SGM-1 to SGM-3 of this circular. A form of proxy for use at the SGM is enclosed with this circular. Whether or not you are able to attend the SGM, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon to the office of the Company’s branch share registrar in Hong Kong, Union Registrars Limited at Suites 3301-04, 33/F, Two Chinachem Exchange Square, 338 King’s Road, North Point, Hong Kong as soon as possible but in an event not less than 48 hours before the time scheduled for the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending or voting in person at the SGM or any adjournments thereof should you so desire.

RECOMMENDATION

The Board (including the independent non-executive Directors) is of the opinion that the terms of the Placing Agreement and all the transactions contemplated thereunder, including the issue of the Convertible Bonds and the allotment and issue of Conversion Shares under the Specific Mandate, and the Increase in Authorised Share Capital are fair and reasonable and are in the interest of the Company and the Shareholders as a whole. Accordingly, the Board recommends that the Shareholders to vote in favour of such resolutions at the SGM.

Completion of the Placing is subject to the satisfaction of the conditions precedent set out in the Placing Agreement. As the Placing may or may not proceed, Shareholders and potential investors are advised to exercise caution when dealing in the Shares.

RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in this circular 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 circular misleading.

Yours faithfully, By order of the Board RCG Holdings Limited Li Jinglong Executive Director

Hong Kong, 22 August 2016

– 32 –

NOTICE OF SGM

==> picture [45 x 33] intentionally omitted <==

RCG Holdings Limited 宏霸數碼集團（控股）有限公司* (a company incorporated in Bermuda with limited liability)

(Stock Code: 802)

NOTICE IS HEREBY GIVEN that a special general meeting (the ‘‘SGM’’) of RCG Holdings Limited (the ‘‘Company’’) will be held at 11:00 a.m. on Wednesday, 7 September 2016 at No. 16-3, Jalan PJU 5/4, Dataran Sunway, Kota Damansara, 47810 Petaling Jaya, Selangor, Malaysia for the purpose of considering and, if thought fit, passing the following resolutions as ordinary resolutions:

ORDINARY RESOLUTIONS

1. ‘‘THAT

2. (a) the conditional placing agreement dated 1 March 2016 (as supplemented on 29 July 2016) (the ‘‘Placing Agreement’’) entered into between the Company and China Prospect Securities Limited (formerly known as ‘‘SEEC Media Securities Limited’’) (the ‘‘Placing Agent’’) pursuant to which the Placing Agent agreed to procure not less than six (6) placees to subscribe for, in up to two tranches, for up to HK$320,000,000 of the convertible bonds on a best effort basis entitling the holders thereof to convert the principal amount thereof into ordinary shares of the Company (the ‘‘Conversion Shares’’) at the initial conversion price of HK$0.25 (subject to adjustment) per Conversion Share, a copy of the Placing Agreement has been produced at the SGM and marked ‘‘A’’ and initialled by the chairman of the SGM for the purpose of identification and all the transactions contemplated thereunder be and are hereby approved, confirmed and ratified;

3. (b) subject to the fulfillment and/or waiver of the conditions set out in the Placing Agreement, the directors of the Company (the ‘‘Directors’’) be and are hereby authorised to issue the Convertible Bonds in accordance with the terms and conditions of the Placing Agreement;

4. (c) subject to the Listing Committee of The Stock Exchange of Hong Kong Limited granting the listing of, and permission to deal in, the Conversion Shares to be allotted and issued, the Directors be and are hereby granted a specific mandate to exercise the powers of the Company to allot and issue the Conversion Shares; and

• For identification purpose only

– SGM-1 –

NOTICE OF SGM

• (d) any Director be and is hereby authorised to exercise all powers of the Company and take all steps as might in his opinion be desirable, necessary or expedient to give effect to or in connection with the Placing Agreement including without limitation to:

  • (i) the execution, amendment, supplement, delivery, submission and/or implementation of any further documents or agreements in relation to the Placing Agreement, the issue of the Convertible Bonds and the allotment and issue of the Conversion Shares; and

  • (ii) the taking of all necessary actions to implement the transactions contemplated under the Placing Agreement.’’

• ‘‘THAT

• (a) the authorised share capital of the Company be increased from HK$90,000,000 divided into 2,250,000,000 ordinary shares of HK$0.04 each (‘‘Share(s)’’) to HK$2,000,000,000 divided into 50,000,000,000 Shares by the creation of an additional 47,750,000,000 new Shares (the ‘‘Increase in Authorised Share Capital’’); and

• (b) any one or more of the directors of the Company be and is/are hereby authorised to do all such acts and things and execute all such documents which he/she/they consider necessary, desirable or expedient for the purpose of, or in connection with, the implementation of and giving effect to the Increase in Authorised Share Capital.’’

By order of the Board RCG Holdings Limited Li Jinglong Executive Director

Hong Kong, 22 August 2016

Notes:

1. Any shareholder entitled to attend and vote at the special general meeting shall be entitled to appoint another person as his/her proxy to attend and vote instead of him/her. A shareholder who is the holder of two or more shares may appoint more than one proxy to represent him/her and vote on his/her behalf. A proxy need not to be a shareholder of the Company.

2. In order to be valid, a form of proxy together with the power of attorney or other authority (if any) under which it is signed or a notarially certified copy thereof, must be deposited at the Company’s branch share registrar in Hong Kong, Union Registrars Limited at Suites 3301-04, 33/F, Two Chinachem Exchange Square, 338 King’s Road, North Point, Hong Kong not less than 48 hours before the time appointed for the special general meeting (or any adjournment thereof).

– SGM-2 –

NOTICE OF SGM

1. Completion and delivery of a form of proxy shall not preclude a shareholder from attending and voting in person at the special general meeting and in such event, the instrument appoint a proxy shall be deemed to be revoked.

2. Where there are joint holders of any shares, any one of such joint holder may vote, either in person or by proxy in respect of such shares as if he/she was solely entitled hereto; but if more than one of such joint holders be present at the special general meeting, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the register of members of the Company.

3. A form of proxy for use at the special general meeting is attached herewith.

4. Any voting at the special general meeting shall be taken by poll.

5. The form of proxy shall be in writing under the hand of the appointer or his attorney duly authorized in writing or, if the appointer is a corporation, either under its seal or under the hand of an officer, attorney or other person authorized to sign the same.

As at the date of this notice, the board of directors of the Company comprises three executive directors, namely Li Jinglong, Zhang Ligong and Wang Zhongling; and two independent non-executive Directors, namely Liu Wen and Kwan King Wah.

– SGM-3 –