Joy Spreader Group Inc. - Proxy Solicitation & Information Statement 2014

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 a licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in AGTech Holdings Limited , you should at once hand this circular and the accompanying form of proxy to the purchaser or transferee, or to the bank, licenced securities dealer or other agent through whom the sale or transfer was effected, for transmission to the purchaser or transferee.

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.

This circular appears for information only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of AGTech Holdings Limited.

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**AGTech Holdings Limited 亞博科技控股有限公司[*]**

(Incorporated in Bermuda with limited liability)

(Stock Code: 8279)

(1) MAJOR TRANSACTION IN RELATION TO

ACQUISITION OF THE ENTIRE EQUITY INTEREST IN SCORE VALUE LIMITED INVOLVING THE ISSUE OF CONSIDERATION SHARES AND POSSIBLE GRANTING OF BONUS OPTIONS AND ISSUE OF BONUS OPTION SHARES UNDER SPECIFIC MANDATE (2) PROPOSED ADOPTION OF THE NEW SHARE OPTION SCHEME AND

(3) NOTICE OF SPECIAL GENERAL MEETING

A notice convening the SGM (as defined herein) to be held at 11:00 a.m. on Tuesday, 23 December 2014 at the conference room of HLB Hodgson Impey Cheng Limited at 31/F., Gloucester Tower, The Landmark, 11 Pedder Street, Central, Hong Kong is set out on pages SGM-1 to SGM-3 of this circular. Whether or not shareholders of the Company are able to attend the SGM, they are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and deposit it with the Company’s Hong Kong branch share registrar, Tricor Abacus Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, as soon as possible and in any event not less than 48 hours before the time appointed for holding the SGM. Completion and return of the form of proxy will not preclude shareholders of the Company from attending and voting in person at the SGM (or any adjournment thereof) should they so desire.

This circular will remain at www.hkgem.com on the “Latest Company Announcements” page of the GEM website for at least 7 days from the date of its posting and will be published on the website of the Company at http://www.agtech.com.

8 December 2014

* For identification purpose only

CHARACTERISTICS OF GEM

GEM has been positioned as a market designed to accommodate companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors.

Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board and no assurance is given that there will be a liquid market in the securities traded on GEM.

– i –

CONTENTS

			Page
Definitions . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			6
Appendix I	–	Financial information of the Group . . . . . . . . . . . . . . . . . . . . .	I-1
Appendix II	–	Financial information of the Target Group . . . . . . . . . . . . . . . .	II-1
Appendix III	–	Financial information of Shenzhen Subsidiary . . . . . . . . . . . . .	III-1
Appendix IV	–	Financial information of Beijing Subsidiary . . . . . . . . . . . . . . .	IV-1
Appendix V	–	Unaudited pro forma financial information
		of the Enlarged Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	V-1
Appendix VI	–	Summary of the principal terms of
		New Share Option Scheme . . . . . . . . . . . . . . . . . . . . . . . . . . .	VI-1
Appendix VII	–	General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VII-1
Notice of Special General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			SGM-1

– ii –

DEFINITIONS

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

“2004 Share Option Scheme”
the share option scheme adopted by the Company on 18 November 2004 which has expired on 17 November 2014;
“Acquisition”
the proposed acquisition of the Sale Shares by the Purchaser from the Vendors pursuant to the Agreement;
“Adoption Date”
the date on which the New Share Option Scheme is adopted by ordinary resolution of the Company at the SGM;
“Agreement” the conditional sale and purchase agreement dated 17 November 2014 entered into among the Purchaser, the Company, the Vendors and the Target in relation to the Acquisition;
“Auditors” the auditors of the Company for the time being;
“Beijing Subsidiary”
北京名影科漫科技有限公司 (Beijing MTC Creative Mind Tech Co., Ltd.*), a direct wholly-owned subsidiary of PRC Company;
“Board” the board of Directors;
“Bonus Options”
the options to be granted by the Company to the Vendors upon fulfilment of certain milestone conditions under the Agreement, entitling the Vendors to subscribe for up to 166,666,666 Bonus Option Shares at a subscription price of HK$1.8 per Bonus Option Share within a two-year exercise period from the date of their grant;
“Bonus Option Shares”
the new Shares to be issued upon exercise of the Bonus Options;
“Business Day(s)”
any day(s) except Saturday, Sunday or holiday by law in the PRC;
“BVI”

the British Virgin Islands;

“Commencement Date”

in respect of any particular Option, the date on which the Option is granted in accordance with the terms of the New Share Option Scheme;

“Company”

AGTech Holdings Limited, a company incorporated in Bermuda with limited liability and the issued Shares of which are listed on GEM (stock code: 8279);

For identification purpose only

– 1 –

DEFINITIONS

“Completion”

completion of the Acquisition in accordance with the terms and conditions of the Agreement;

“Completion Date”

the date on which Completion takes place;

“connected persons”
has the meaning ascribed to it under the GEM Listing Rules;
“Consideration”
the aggregate consideration for the Acquisition, including the Initial Consideration and the Deferred Consideration;
“Consideration Shares”
the new Shares to be issued by the Company at the Issue Price to settle part of the Consideration for the Sale Shares;
“Deferred Consideration”
the deferred consideration of up to HK$300.0 million (subject to downward adjustments) to be paid by the Purchaser or the Company to the Vendors, as more particularly described in the paragraph headed “The Consideration” in the letter from the Board contained in this circular;
“Director(s)” the director(s) of the Company;
“Employee”
any employee of the Group, at the time when the Option is granted to such person;
“Enlarged Group”
the Group as enlarged by the Acquisition upon Completion;
“GEM”
the Growth Enterprise Market operated by the Stock Exchange;
“GEM Listing Committee”
the listing sub-committee of the board of directors of the Stock Exchange with responsibility for GEM;
“GEM Listing Rules”

the Rules Governing the Listing of Securities on GEM;

“Grantee”
any Participant who has been offered and has accepted an Offer in accordance with the terms of the New Share Option Scheme, or (where the context so permits) any person who is entitled to any such Option in consequence of the death of the original Grantee;
“Group”
the Company and its Subsidiaries;
“HK business day”
any day (excluding Saturday and Sunday) on which banks in Hong Kong are generally open for business;

– 2 –

DEFINITIONS

“HK Company”
Sincere Honor Holdings Limited, a company incorporated in Hong Kong and a direct wholly-owned subsidiary of the Target;
“Hong Kong” Hong Kong Special Administrative Region of the PRC;
“Initial Consideration”
the initial consideration of HK$189.5 million to be paid by the Purchaser or the Company to the Vendors, as more particularly described in the paragraph headed “The Consideration” in the letter from the Board contained in this circular;
“Issue Price” the issue price of HK$1.48 per Consideration Share;
“Latest Practicable Date”
5 December 2014, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein;
“Lottery Game” a lottery game for use on mobile smart phones and to be supplied by Beijing Subsidiary to the relevant lottery authority of the PRC (subject to the final approval of the relevant government authority of the PRC);
“Macau”
the Macau Special Administrative Region of the PRC;
“New Share Option Scheme”
the share option scheme proposed to be adopted by the Company and to be approved by the Shareholders at the SGM, a summary of the principal terms of which is set out in Appendix VI to this circular;
“Offer”
the offer of the grant of an Option made pursuant to the New Share Option Scheme;
“Offer Date”
the date on which an Offer is made to a Participant;
“Option(s)”
an option granted pursuant to the New Share Option Scheme pursuant to which a Participant is granted a right to subscribe for Shares;
“Option Period”
in respect of any particular Option, a period to be determined and notified by the Board to each Grantee, which period may commence on a day on or after the Commencement Date but shall end in any event not later than ten years after the Commencement Date;

– 3 –

DEFINITIONS

“Participant” any Director, Employee, consultants, suppliers or customers of the Group or other person who, in the sole discretion of the Board, has contributed or will contribute or can contribute to the Group (the assessment criteria of which include one or more of the following factors: (i) such person’s contribution to the development and performance of the Group; (ii) the quality of work performed by such person for the Group; (iii) the initiative and commitment of such person in performing his or her duties; and (iv) the length of service or contribution of such person to the Group);
“PRC” or “China” the People’s Republic of China which, for the purposes of this circular, excludes Hong Kong, Macau and Taiwan;
“PRC Company” 深圳市精祥科技有限公司 (Shenzhen Sincere Honor Technology Company Limited*), a company established in the PRC and a direct wholly-owned subsidiary of HK Company;
“Purchaser” Silvercreek Technology Holdings Limited, a company incorporated in the BVI and a wholly-owned subsidiary of the Company;
“Sale Shares” 50,000 issued shares of the Target with par value of US$1.00 each, representing the entire equity interest in the Target;
“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong);
“SGM”
the special general meeting of the Company to be held at 11:00 a.m. on Tuesday, 23 December 2014 at the conference room of HLB Hodgson Impey Cheng Limited at 31/F., Gloucester Tower, The Landmark, 11 Pedder Street, Central, Hong Kong for the Shareholders to consider and, if thought fit, approve the Agreement and the transactions contemplated thereunder and the adoption of the New Share Option Scheme;
“SGM Notice”
the notice convening the SGM set out on pages SGM-1 to SGM-3 of this circular;
“Share(s)”
ordinary share(s) of HK$0.002 each in the issued share capital of the Company;
“Share Registrar”

Tricor Abacus Limited, or the Hong Kong branch share registrar of the Company from time to time;

For identification purpose only

– 4 –

DEFINITIONS

“Shareholder(s)”

holder(s) of the Share(s);

“Shenzhen Subsidiary”
深圳中林瑞德科技有限公司 (Shenzhen Zoom Read Tech Co., Ltd.*), a direct wholly-owned subsidiary of PRC Company;
“Stock Exchange” The Stock Exchange of Hong Kong Limited;
“Subscription Price”
the price per Share at which a Grantee may subscribe for Shares on the exercise of an Option granted pursuant to the New Share Option Scheme;
“Subsidiary(ies)” a company/companies which is/are for the time being and from time to time a subsidiary/subsidiaries (within the meaning of Rule 1.01 of the GEM Listing Rules) of the Company, whether incorporated in Hong Kong or elsewhere;
“Target” Score Value Limited, a company incorporated in the BVI with limited liability, the entire equity interest of which is owned as to 54.6% by Vendor A and 45.4% by Vendor B;
“Target Group” the Target and its subsidiaries;
“Vendor A”
Immense Wisdom Limited, a company incorporated in the BVI with limited liability and holds a 54.6% equity interest in the Target;
“Vendor B” King Achieve Limited, a company incorporated in the BVI with limited liability and holds a 45.4% equity interest in the Target;
“Vendors” Vendor A and Vendor B;
“HK$” Hong Kong dollar(s), the lawful currency of Hong Kong;
“RMB” Renminbi, the lawful currency of the PRC;
“US$” United States dollars, the lawful currency of the United States of America; and
“%” per cent.

For illustration purposes only, amounts denominated in Renminbi in this circular have been translated into Hong Kong dollars at an exchange rate of RMB1 = HK$1.26.

For identification purpose only

– 5 –

LETTER FROM THE BOARD

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**AGTech Holdings Limited 亞博科技控股有限公司[*]**

(incorporated in Bermuda with limited liability)

(Stock Code: 8279)

Executive Directors: Mr. Sun Ho (Chairman & CEO) Mr. Robert Geoffrey Ryan Mr. Bai Jinmin Mr. Liang Yu

Registered Office: Clarendon House 2 Church Street Hamilton HM11 Bermuda

Non-Executive Director: Mr. Ho King Fung, Eric

Independent Non-Executive Directors: Ms. Monica Maria Nunes Mr. Wang Ronghua Mr. Hua Fengmao

Head Office and Principal Place of Business in Hong Kong: Unit 3912, 39th Floor, Tower Two Times Square Causeway Bay Hong Kong

8 December 2014

To the Shareholders

Dear Sir or Madam,

(1) MAJOR TRANSACTION IN RELATION TO ACQUISITION OF THE ENTIRE EQUITY INTEREST IN SCORE VALUE LIMITED INVOLVING THE ISSUE OF CONSIDERATION SHARES AND POSSIBLE GRANTING OF BONUS OPTIONS AND ISSUE OF BONUS OPTION SHARES UNDER SPECIFIC MANDATE AND

(2) PROPOSED ADOPTION OF THE NEW SHARE OPTION SCHEME

INTRODUCTION

On 17 November 2014, the Board announced that after trading hours of the Stock Exchange on 17 November 2014, the Company, the Purchaser, the Vendors and the Target entered into the Agreement, pursuant to which the Purchaser has conditionally agreed to acquire and the Vendors have conditionally agreed to sell the Sale Shares (representing the entire issued share capital of the Target) for a maximum consideration of HK$489.5 million (subject to downward adjustments). The maximum Consideration is to be satisfied as to HK$239.5 million in cash and as to HK$250.0 million by way of the allotment and issue of a maximum of 168,918,918 Consideration Shares at the Issue Price of HK$1.48 per Share. Subject to the Target Group meeting certain operational

For identification purpose only

– 6 –

LETTER FROM THE BOARD

targets as set out in the Agreement, the Company shall also grant the Bonus Options to the Vendors which entitle the Vendors to subscribe for a maximum of 166,666,666 Bonus Option Shares at a subscription price of HK$1.8 per Bonus Option Share.

The Acquisition constitutes a major transaction of the Company pursuant to the GEM Listing Rules and is therefore subject to the approval of the Shareholders. The Company will also seek from the Shareholders a specific mandate to allot and issue the Consideration Shares and the Bonus Option Shares in accordance with the terms of the Agreement. As no Shareholder has a material interest in the Acquisition which is different from other Shareholders, no Shareholder is required to abstain from voting on the relevant resolution(s) to be proposed at the SGM in relation to the Agreement and the transactions contemplated thereunder.

The purpose of this circular is to provide you with, among other things, (i) details of the Agreement; (ii) financial and other information of the Group; (iii) financial information of the Target Group; (iv) unaudited pro forma financial information of the Enlarged Group; (v) information regarding the adoption of the New Share Option Scheme; and (vi) the notice of SGM.

THE AGREEMENT

Date

17 November 2014

Parties

(i) The Company;
(ii) Silvercreek Technology Holdings Limited, being the Purchaser;
(iii) Immense Wisdom Limited, being Vendor A;
(iv) King Achieve Limited, being Vendor B; and
(v) Score Value Limited, being the Target.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, the Target, each of the Vendors and their respective ultimate beneficial owner(s) are third parties independent of and not connected with the Company and its connected persons (as defined under the GEM Listing Rules). The principal business of each of the Vendors is investment holding.

Assets to be acquired

The assets to be acquired are the Sale Shares, which represent the entire equity interest in the Target. The Target Group is principally engaged in the research and development, quality assurance and sale of handheld lottery sale equipment, provision of aftersales maintenance of such devices, and design of lottery games and system development in the PRC. As at the Latest

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LETTER FROM THE BOARD

Practicable Date, the Target is owned as to 54.6% by Vendor A and 45.4% by Vendor B. Please refer to the section headed “Information on the Target Group” below for further details of the Target Group.

The Consideration

The maximum aggregate Consideration (subject to downward adjustments) for the Sale Shares of HK$489.5 million consists of the Initial Consideration of HK$189.5 million and the Deferred Consideration of HK$300 million, which shall be satisfied as to HK$239.5 million in cash and HK$250 million by way of allotment and issue of the Consideration Shares. The Consideration was determined after arm’s length negotiations among the parties to the Agreement after taking into account (i) the historical financial performance of the lottery equipment supply business of the Target Group; (ii) the Profit Guarantees (as defined hereinafter) provided by the Vendors for each of the three financial years ending 31 December 2015, 2016 and 2017 as described in the paragraph headed “Deferred Consideration” below; (iii) the downward adjustments mechanism to the Consideration to protect the Group’s interests as set out in the paragraph headed “Adjustments to the Consideration” below; (iv) the prospects of the Target Group for future supply of the system and content for the Lottery Game for use on mobile smart phones to the relevant lottery authority of the PRC (subject to the final approval of the relevant government authority of the PRC); (v) the strategic fit and potential synergies that may be created between the Group and the Target Group from the Acquisition; and (vi) the premium of the Issue Price over the net asset value per Share.

The Company intends to finance the cash portion of the Consideration with its internal cash resources, and, if necessary, with bank borrowings and/or fund raising exercises. As at 30 September 2014, the cash and bank balances of the Group amounted to approximately HK$262 million in total, which exceeds the cash portion of the Initial Consideration totalling HK$139.5 million, whereas the cash portion of the Deferred Consideration totalling HK$100 million shall not be payable to the Vendors until fulfilment of certain pre-conditions at a later stage.

Initial Consideration

The Initial Consideration of HK$189.5 million will be payable by the Purchaser or the Company to the Vendors pro rata to their respective shareholding percentages in the Target as follows:

(i) as to HK$37 million in cash on Completion Date;
(ii) as to HK$50 million in cash on or before 15 January 2015;
(iii) as to HK$50 million by the Company allotting and issuing 33,783,783 Consideration Shares on or before 15 January 2015. From the date of the allotment and issuance of 33,783,783 Consideration Shares, 16,891,891 Consideration Shares shall be subject to a three (3) months lock-up period while the remaining 16,891,892 Consideration Shares shall be subject to a six (6) months lock-up period. These Consideration Shares will be held in safe custody by the Company and released to the Vendors upon expiry of the aforesaid lock-up periods respectively; and
(iv) as to HK$52.5 million in cash on or before 30 June 2015.

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LETTER FROM THE BOARD

Deferred Consideration

The Deferred Consideration in a maximum amount of HK$300 million shall be payable by the Purchaser or the Company to the Vendors pro rata to their respective shareholding percentage in the Target as follows:

(i) as to HK$50 million (the “ First Deferred Consideration ”) by the Company allotting and issuing 33,783,783 Consideration Shares within fifteen (15) Business Days after the granting of the approval of the Lottery Game by the relevant government authority of the PRC (the “ Approval ”) (on the condition that the Approval should have been granted on or before the first (1st) anniversary date of the Agreement). These Consideration Shares shall not be subject to any lock-up;
(ii) as to HK$50 million (the “ Second Deferred Consideration ”) in cash within fifteen (15) Business Days after the granting of the Approval;
(iii) as to HK$100 million (the “ Third Deferred Consideration ”) by the Company allotting and issuing 67,567,568 Consideration Shares within thirty (30) Business Days after the official commencement date of sales of the Lottery Game through mobile smart phone channel in the first trial province in the PRC in accordance with the Approval. These Consideration Shares shall be subject to a six (6) months lock-up period from the date of their allotment and issuance, and will be held in safe custody by the Company and released to the Vendors upon expiry of such lock-up period;
(iv) in the event that the net profit after taxation of Shenzhen Subsidiary for the financial year ending 31 December 2015 is not less than RMB20 million (equivalent to approximately HK$25.2 million) (the “ 2015 Profit Guarantee ”), the Purchaser or the Company shall pay to the Vendors a further amount of HK$30 million which shall be satisfied as to HK$15 million in cash and as to HK$15 million by the Company allotting and issuing 10,135,135 Consideration Shares to the Vendors within fifteen (15) Business Days after the issue of the audit report of Shenzhen Subsidiary for the year ending 31 December 2015;
(v) in the event that the aggregate net profit after taxation of Shenzhen Subsidiary for the two financial years ending 31 December 2015 and 2016 is not less than RMB40 million (equivalent to approximately HK$50.4 million) (the “ 2016 Profit Guarantee ”), the Purchaser or the Company shall pay to the Vendors a further amount of HK$30 million which shall be satisfied as to HK$15 million in cash and as to HK$15 million by the Company allotting and issuing 10,135,135 Consideration Shares to the Vendors within fifteen (15) Business Days after the issue of the audit report of Shenzhen Subsidiary for the year ending 31 December 2016; and
(vi) in the event that the aggregate net profit after taxation of Shenzhen Subsidiary for the three financial years ending 31 December 2015, 2016 and 2017 is not less than RMB60 million (equivalent to approximately HK$75.6 million) (the “ 2017 Profit Guarantee ”, together with the 2015 Profit Guarantee and the 2016 Profit Guarantee, the “ Profit Guarantees ”), the Purchaser or the Company shall pay to the Vendors a further amount of HK$40 million which shall be satisfied as to HK$20 million in cash

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LETTER FROM THE BOARD

and as to HK$20 million by the Company allotting and issuing 13,513,514 Consideration Shares to the Vendors within fifteen (15) Business Days after the issue of the audit report of Shenzhen Subsidiary for the year ending 31 December 2017.

The Consideration Shares issuable under paragraphs (iv), (v) and (vi) above will not be subject to any lock-up.

Adjustments to the Consideration

Under the Agreement, the Consideration shall be adjusted downwards under the following circumstances:

(i) if the Approval is not granted by the relevant government authority of the PRC by the first (1st) anniversary date of the Agreement (or such other date that may be agreed among the parties to the Agreement):
(a) the Vendors are required to refund HK$50 million in cash to the Purchaser or the Company within thirty (30) Business Days after the first (1st) anniversary date of the Agreement (or such other date that may be agreed among the parties to the Agreement); and
(b) the Purchaser or the Company shall no longer be required to satisfy the First Deferred Consideration, the Second Deferred Consideration and the Third Deferred Consideration; and
(ii) if any of the Profit Guarantees is not met, the Consideration Shares and the cash portion of the Consideration relating to that particular Profit Guarantee will not be payable to the Vendors.

The Consideration Shares

The Issue Price of HK$1.48 per Consideration Share represents:

(i) a premium of approximately 34.5% over the closing price of HK$1.10 per Share as quoted on the Stock Exchange on the Latest Practicable Date;
(ii) a premium of approximately 29.8% over the closing price of HK$1.14 per Share as quoted on the Stock Exchange on 17 November 2014, being the date of the Agreement;
(iii) a premium of approximately 28.2% over the average of the closing prices of the Shares as quoted on the Stock Exchange for the last five consecutive full trading days up to and including the date of the Agreement of HK$1.154 per Share;
(iv) a premium of approximately 29.8% over the average of the closing prices of the Shares as quoted on the Stock Exchange for the last ten consecutive full trading days up to and including the date of the Agreement of HK$1.14 per Share; and

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LETTER FROM THE BOARD

(v) a premium of approximately 434.3% over the unaudited net assets value per Share of approximately HK$0.277 as at 30 June 2014 (based on the Company’s latest published unaudited consolidated net assets value attributable to the Shareholders of HK$1,215,443,866 as at 30 June 2014 and the 4,391,554,364 Shares in issue as at that date).

The maximum number of 168,918,918 Consideration Shares issuable under the Agreement represent approximately 3.8% of the issued share capital of the Company as at the Latest Practicable Date; approximately 3.7% of the issued share capital of the Company as enlarged by the issue of the Consideration Shares; and approximately 3.5% of the issued share capital of the Company as enlarged by the issue of the Consideration Shares and the Bonus Option Shares (details of which are set out in the paragraph headed “Bonus Options” below).

The Consideration Shares shall at all times rank pari passu among themselves and with the Shares in issue as at the date of issue of the Consideration Shares. The Consideration Shares will be issued pursuant to the specific mandate to be sought from the Shareholders at the SGM. The Company had made application to the Stock Exchange for the listing of and permission to deal in the Consideration Shares.

Bonus Options

Within two (2) years from the date of the Agreement and provided that the Approval has been granted, as performance incentives to the Vendors, the Company shall grant to the Vendors the Bonus Options, entitling them to subscribe for up to 166,666,666 Bonus Option Shares, subject to the fulfilment of the following milestone conditions:

(i) in the event that the Target Group has launched the sales of the Lottery Game through mobile smart phone channel in five (5) provinces or more in the PRC, the Company shall grant to the Vendors the Bonus Options entitling them to subscribe for up to 55,555,555 Bonus Option Shares at the subscription price of HK$1.8 per Bonus Option Share within an exercise period of two (2) years from the date of such grant; and
(ii) in the event that the Target Group has launched the sales of the Lottery Game through mobile smart phone channel in ten (10) provinces or more (inclusive of those provinces mentioned in (i) above) in the PRC, the Company shall grant to the Vendors the Bonus Options entitling them to subscribe for up to 111,111,111 Bonus Option Shares at the subscription price of HK$1.8 per Bonus Option Share within an exercise period of two (2) years from the date of such grant.

Assuming all the milestone conditions set out above are fulfilled, the Bonus Options shall entitle the Vendors to subscribe for up to 166,666,666 Bonus Option Shares, representing approximately 3.8% of the issued share capital of the Company as at the Latest Practicable Date; and approximately 3.5% of the issued share capital of the Company as enlarged by the issue of the Consideration Shares and the Bonus Option Shares in full.

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LETTER FROM THE BOARD

The subscription price of HK$1.8 per Bonus Option Share represents:

(i) a premium of approximately 63.6% over the closing price of HK$1.10 per Share as quoted on the Stock Exchange on the Latest Practicable Date;
(ii) a premium of approximately 57.9% over the closing price of HK$1.14 per Share as quoted on the Stock Exchange on 17 November 2014, being the date of the Agreement;
(iii) a premium of approximately 56.0% over the average of the closing prices of the Shares as quoted on the Stock Exchange for the last five consecutive full trading days up to and including the date of the Agreement of HK$1.154 per Share;
(vi) a premium of approximately 57.9% over the average of the closing prices of the Shares as quoted on the Stock Exchange for the last ten consecutive full trading days up to and including the date of the Agreement of HK$1.14 per Share; and
(v) a premium of approximately 549.8% over the unaudited net assets value per Share of approximately HK$0.277 as at 30 June 2014 (based on the Company’s latest published unaudited consolidated net assets value attributable to the Shareholders of HK$1,215,443,866 as at 30 June 2014 and the 4,391,554,364 Shares in issue as at that date).

Other terms of the Bonus Options are as follows:

(i) the Bonus Options will not be listed on the Stock Exchange or any other stock exchanges;
(ii) the Bonus Options may be exercised in whole or in part by the Vendors serving prior written exercise notice (the “ Exercise Notice ”) to the Company within the exercise period;
(iii) the subscription price shall be payable in cash (by way of cheque or banker’s draft) by the Vendors upon serving of the Exercise Notice to the Company;
(iv) each exercise of the Bonus Options shall be for the subscription of a minimum of 500,000 Bonus Option Shares;
(v) any unexercised portion of the Bonus Options shall lapse and cease to have any force and effect immediately following the expiry of the exercise period, and both the Vendors and the Company shall have no claim against each other as a result of such lapse of the Bonus Options;
(vi) the Bonus Options are not transferable to any party by the Vendors;
(vii) the Bonus Options shall not entitle their holders to vote at any Shareholders’ meetings of the Company;

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LETTER FROM THE BOARD

(viii) within five (5) Business Days following receipt by the Company of the Exercise Notice from the Vendors, the Company shall instruct the branch share registrar of the Company to allot and issue the relevant Bonus Option Shares to the Vendors as a result of their exercise in whole or in part of the Bonus Options. However, the actual date of delivery of the relevant Share certificate(s) shall be subject to the internal procedure of the branch share registrar from time to time; and
(ix) in the event of a capitalisation issue, rights issue, open offer, reduction of capital, sub-division or consolidation of Shares in the Company whilst any portion of the Bonus Options remains exercisable, adjustments shall be made to the aggregate number of Bonus Option Shares issuable under any outstanding portion of the Bonus Options, and/or to the subscription price per Bonus Option Share, as the independent financial adviser of the Company or the auditors of the Company (as the case may be) shall certify in writing to the Board that the adjustments will give the Vendors the same proportion of the equity capital of the Company as that to which the Vendors were previously entitled and that the adjustments will not increase the aggregate intrinsic value of such outstanding portion of the Bonus Options. Any such adjustments will be made on the basis that the aggregate subscription price payable on the full exercise of the outstanding portion of the Bonus Options is to remain the same as it was before such event. No such adjustments will be made the effect of which would be to enable an Bonus Option Share to be issued at less than its nominal value or which would change the proportion of the issued share capital of the Company for which the Vendors are entitled to subscribe pursuant to the Bonus Options held by them before such adjustments. For the avoidance of doubt, the issue of securities by the Company as consideration in a transaction or the placing of new securities by the Company is not to be regarded as a circumstance requiring any adjustments to the aggregate number of Bonus Option Shares issuable under any outstanding portion of the Bonus Options and/or to the subscription price per Bonus Option Share.

The Company will make an announcement if the Bonus Options are exercised in whole or in part by the Vendors during the exercise period or if there is any adjustment to the number of Bonus Option Shares issuable and/or to the subscription price per Bonus Option Share under the terms of the Bonus Options.

The Bonus Option Shares will be issued pursuant to the specific mandate to be sought from the Shareholders at the SGM, and shall rank pari passu among themselves and in all respects with the Shares then in issue. The Company had made an application to the Stock Exchange for the listing of and permission to deal in the Bonus Option Shares.

In the event that the Bonus Options are exercised in full by the Vendors, the Company shall receive aggregate subscription monies from the Vendors of HK$300 million which shall be used by the Group as its general working capital, and/or for investments undertaken or to be made by the Group should suitable investment opportunities arise.

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LETTER FROM THE BOARD

Conditions precedent

Completion of the Agreement is conditional upon the fulfilment or waiver (as the case may be) of the following conditions:

(i) the Purchaser having conducted financial, legal, business and other due diligence on the Target Group and no matters have come to the attention of the Purchaser which would materially affect the normal operation or future income of the Target Group;
(ii) the Company having obtained all necessary consents and approvals from the relevant authorities (including but not limited to the Stock Exchange) and the Shareholders in relation to the Agreement and the transactions contemplated thereunder (including but not limited to the issue of the Consideration Shares and the Bonus Options to the Vendors);
(iii) the Company having obtained the approval from the Listing Committee of the Stock Exchange for the listing of and permission to deal in the Consideration Shares and the Bonus Option Shares;
(iv) the registered capital of each of the member companies of the Target Group having been fully paid up and the contributed capital not having been repatriated illegally;
(v) the financial statements of each of the member companies of the Target Group made up to the date immediately before the Completion Date having been confirmed by the Vendors and the Purchaser, and the cash balances in Shenzhen Subsidiary’s bank accounts as at the Completion Date shall be not less than RMB42,000,000 (equivalent to approximately HK$52,920,000);
(vi) all outstanding account receivables disclosed in the Agreement having been either fully settled or transferred to parties nominated by the Vendors by way of a debt restructuring exercise undertaken by Shenzhen Subsidiary;
(vii) the Target Group having provided to the Purchaser all employment contract, confidentiality agreement and non-competition agreement signed by the Head of Technical Department, confirming that he will continue his employment with the Target Group for not less than two (2) years following Completion;
(viii) there being no promulgation, announcement, publication or enforcement of any law, judgment, decree or injunction by any government authorities before Completion which could (a) restrict or prohibit the signing of the Agreement or Completion; or (b) adversely affect, in any material aspects, the Purchaser in exercising its right or power entirely pursuant to its equity interests in the Target or as stipulated under the Agreement;
(ix) there having been no material adverse change to the business, financial position or trading status of each of the member companies of the Target Group;

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LETTER FROM THE BOARD

(x) there being no pending or potential litigation, arbitration or other legal proceedings from any third parties (including any government authorities) which would otherwise prohibit or restrict the consummation of the transaction contemplated under the Agreement;
(xi) the Head of Technical Department of the Target Group not tendering his resignation or serving any notice of proposed resignation (whether in writing or verbally), nor having any intention to resign since the signing of the Agreement; and
(xii) there being no breach of warranties given in the Agreement by the Vendors from the signing of the Agreement until the Completion Date, and the Vendors and each of the member companies in the Target Group not having breached any of their obligations stipulated under the Agreement.

Other than conditions (v) and (vi) above which can be waived by mutual agreement between the Purchaser and the Vendors, all other conditions can only be waived by the Purchaser. The Purchaser has no intention to waive conditions (ii), (iii) and (viii) above.

As at the Latest Practicable Date, condition referred to in (iii) above has been fulfilled.

In the event that all of the above conditions are not fulfilled or waived (as the case may be) on or before 31 December 2014, the Purchaser or the Vendors shall have the right to terminate the Agreement by giving written notice to the other parties to the Agreement, and no party to the Agreement shall have any claim against or liability to the other parties upon termination of the Agreement.

Completion

Completion shall take place within five (5) Business Days (or such other date as mutually agreed by the parties to the Agreement in writings) after fulfilment or waiver (as the case may be) of the above conditions.

Upon Completion, the Target shall become a wholly-owned subsidiary of the Company and the financial statements of the Target Group shall be consolidated into the Group after Completion.

EFFECT ON THE SHAREHOLDING STRUCTURE OF THE COMPANY

Set out below are the shareholding structures of the Company (i) as at the Latest Practicable Date; (ii) upon the issue of the maximum number of Consideration Shares but before exercise of the Bonus Options; and (iii) upon the issue of the maximum number of Consideration Shares and after the exercise of the Bonus Options in full, assuming there is no other change in the shareholding structure of the Company since the Latest Practicable Date:

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LETTER FROM THE BOARD

As at the Latest Practicable Date Number of Shares Approximate %	As at the Latest Practicable Date Number of Shares Approximate %	Upon the issue of the maximum number of Consideration Shares but before the exercise of Bonus Options Number of Shares Approximate %	Upon the issue of the maximum number of Consideration Shares but before the exercise of Bonus Options Number of Shares Approximate %	Upon the issue of the maximum number of Consideration Shares and after the exercise of Bonus Options in full Number of Shares Approximate % 2,006,250,000 42.09 27,078,000 0.57 2,033,328,000 42.66 44,876,600 0.94 10,316,000 0.22 55,192,600 1.16 11,070,000 0.23 8,038,250 0.17 375,000 0.01 2,775,000 0.06 2,605,000 0.05 14,650,000 0.31 39,513,250 0.83 2,128,033,850 44.65 183,229,730 3.84 152,355,854 3.20 335,585,584 7.04 2,303,065,264 48.31 *2,638,650,848* *55.35* 4,766,684,698 100.00
2,006,250,000 27,078,000	45.28 0.61	2,006,250,000 27,078,000	43.61 0.59	2,006,250,000 27,078,000
2,033,328,000	45.89	2,033,328,000	44.20	2,033,328,000
44,876,600 10,316,000	1.01 0.23	44,876,600 10,316,000	0.98 0.22	44,876,600 10,316,000
55,192,600	1.24	55,192,600	1.20	55,192,600
11,070,000 8,038,250 375,000 2,775,000 2,605,000 14,650,000	0.25 0.18 0.01 0.06 0.06 0.33	11,070,000 8,038,250 375,000 2,775,000 2,605,000 14,650,000	0.24 0.17 0.01 0.06 0.06 0.32	11,070,000 8,038,250 375,000 2,775,000 2,605,000 14,650,000
39,513,250 2,128,033,850	0.89 48.02	39,513,250 2,128,033,850	0.86 46.26	39,513,250 2,128,033,850
– –	0.00 0.00	92,229,730 76,689,188	2.00 1.67	183,229,730 152,355,854
– 2,303,065,264 *2,303,065,264* 4,431,099,114	0.00 51.98 *51.98* 100.00	168,918,918 2,303,065,264 *2,471,984,182* 4,600,018,032	3.67 50.07 *53.74* 100.00	335,585,584 2,303,065,264 *2,638,650,848* 4,766,684,698

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LETTER FROM THE BOARD

Notes:

MAXPROFIT GLOBAL INC is beneficially and wholly owned by Mr. Sun, an executive Director and Chairman & chief executive officer (“CEO”) of the Company.
Fine Bridge International Limited is beneficially and wholly owned by HB Resources Investment Limited, which is in turn beneficially and wholly owned by Mr. Bai, an executive Director.
These are executive Directors.
These are independent non-executive Directors.
These include directors of subsidiaries of the Company.

INFORMATION ON THE TARGET GROUP

Set out below is the information relating to the business, shareholding structure and financial information of the Target Group based on the information provided by the Vendors.

The Target Group

The Target is owned as to 54.6% by Vendor A and 45.4% by Vendor B. The Target is an investment holding company incorporated in the BVI on 25 March 2010 and its principal assets are the entire issued share capital in HK Company, which in turn holds the entire equity interests in PRC Company. Both HK Company and PRC Company are investment holding companies. PRC Company acquired Shenzhen Subsidiary on 27 December 2013 and Beijing Subsidiary on 4 July 2014 respectively and currently holds the entire equity interests in Shenzhen Subsidiary and Beijing Subsidiary.

Shenzhen Subsidiary is principally engaged in the research and development, quality assurance and sale of handheld lottery sales equipment, as well as the provision of aftersales maintenance services of such devices. Over the years, Shenzhen Subsidiary has supplied its products to over 20 provinces, municipalities and autonomous regions in the PRC.

Beijing Subsidiary is principally engaged in the design of lottery games and system development in the PRC. Beijing Subsidiary is currently developing, and seeking to supply to the relevant lottery authority in the PRC, the system and content of a Lottery Game for use on mobile smart phones in the PRC. The application for the approval of the launch of the Lottery Game is currently underway.

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LETTER FROM THE BOARD

Shareholding structure of the Target Group

(i) As at the Latest Practicable Date:

==> picture [182 x 203] intentionally omitted <==

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

Vendor A Vendor B
54.6% 45.4%
Target
100%
HK Company
100%
PRC Company
100% 100%
Shenzhen Subsidiary Beijing Subsidiary
----- End of picture text -----

(ii) Upon Completion:

==> picture [182 x 231] intentionally omitted <==

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

Company
100%
Purchaser
100%
Target
100%
HK Company
100%
PRC Company
100% 100%
Shenzhen Subsidiary Beijing Subsidiary
----- End of picture text -----

Financial information of the Target Group

Except for investment holding, the Target, HK Company and PRC Company had no business operations for each of the two years ended 31 December 2012 and 2013. Shenzhen Subsidiary and Beijing Subsidiary, the two principal operating subsidiaries of the Target, were acquired by PRC Company on 27 December 2013 and 4 July 2014 respectively. For illustrative purpose, set out below is the audited financial information of each of Shenzhen Subsidiary and Beijing Subsidiary

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LETTER FROM THE BOARD

for each of the two years ended 31 December 2012 and 2013 prepared in accordance with Hong Kong Financial Reporting Standards:

Shenzhen Subsidiary

			For the	year ended	For the	year ended
			31 December 2013		31 December 2012
				Equivalent to		Equivalent to
				approximately		approximately
			RMB’000	HK$’000	RMB’000	HK$’000
Net	profit/(loss)	before tax	15,847	19,967	(34,037)	(42,887)
Net	profit/(loss)	after tax	12,714	16,020	(36,079)	(45,460)

Beijing Subsidiary

			For the	year ended	For the	year ended
			31 December 2013		31 December 2012
				Equivalent to		_Equivalent _	to
				approximately		approximately
			RMB’000	HK$’000	RMB’000	HK$’000
Net	profit/(loss)	before tax	(339)	(427)	65		82
Net	profit/(loss)	after tax	(342)	(431)	48		60

The audited consolidated net asset value of the Target Group (which has consolidated the accounts of Shenzhen Subsidiary acquired on 27 December 2013) as at 30 June 2014 amounted to approximately RMB21.4 million (equivalent to approximately HK$27.0 million). The audited net asset value of Beijing Subsidiary (which was acquired by the Target on 4 July 2014) as at 30 June 2014 was approximately RMB6.4 million (equivalent to approximately HK$8.1 million).

As stated in the accountants’ report of Shenzhen Subsidiary in Appendix III to this circular, 湖南迅邦置業有限公司 (Hunan Xunbun Properties Co., Ltd) (“ Hunan Xunbun ”), a former associate of Shenzhen Subsidiary, has not prepared any financial information in accordance with Hong Kong Financial Reporting Standards for each of the two years ended 31 December 2011 and 2012. The independent reporting accountants, HLB Hodgson Impey Cheng Limited (“ HLB* ”), Certified Public Accountants, Hong Kong, were unable to obtain sufficient appropriate audit evidence to satisfy themselves by alternative procedures to account for the share of results for each of the years ended 31 December 2011 and 2012 and net assets less impairment loss of Hunan Xunbun as at 31 December 2011 as they did not have sufficient access to the financial information, books and records, and the management of Hunan Xunbun following the disposal by Shenzhen Subsidiary of its entire 20% equity interest in Hunan Xunbun on 4 December 2012. This, together with the fact that the required summarised financial information of Hunan Xunbun was not disclosed in accordance with Hong Kong Accounting Standard 28, caused them to qualify their audit opinion on the financial information of Shenzhen Subsidiary for the years ended 31 December 2011 and 2012. Please refer to section headed “Accountants’ report of Shenzhen

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LETTER FROM THE BOARD

Subsidiary” in Appendix III to this circular for more information. As the investment in Hunan Xunbun was not part of the core business of Shenzhen Subsidiary and Hunan Xunbun is no longer an associate of Shenzhen Subsidiary since 4 December 2012, the Directors consider that the aforesaid qualified audit opinion will not have any material adverse impact on the future business and operations of Shenzhen Subsidiary and will not have any impact on the future financial statements of the Enlarged Group (as illustrated in the unqualified audit opinion issued by HLB on the financial information of Shenzhen Subsidiary and the Target Group for the year ended 31 December 2013 and the six months ended 30 June 2014).

REASONS FOR THE ACQUISITION

The Group is principally engaged in (i) the provision of gaming technologies (game software, systems, hardware and terminals); (ii) the provision of lottery management and marketing consultancy services; and (iii) online and mobile lottery distribution. The Group is one of the leading integrated gaming companies in China’s lottery market and is a member of the World Lottery Association (WLA) and the Asia Pacific Lottery Association (APLA).

The Group is committed to applying international management concepts and advanced technologies to the lottery industry in various areas such as lottery systems, lottery hardware, lottery games, internet and mobile phone distribution and systems, wireless network and streaming media, thereby providing China’s lottery authorities and millions of lottery players in China with professional, integrated lottery services. The Directors consider that the Acquisition is in line with the Group’s long-term objectives of maintaining a leading position as a lottery technology group in China and providing innovative and competitive legal lottery games to help the government of China to crack down illegal gambling.

After the Acquisition, the Enlarged Group’s online and mobile lottery distribution business will have the opportunity to supply the system and content of the Lottery Game to be played on mobile smart phones in China (subject to approval from the relevant government authority of the PRC), while the hardware division of the Enlarged Group’s gaming technologies business will become a supplier of handheld lottery sales equipment in the PRC, thus significantly diversifying the Group’s product range. If Beijing Subsidiary is successful in obtaining the approval of the relevant government authority for the launch of the Lottery Game, it is expected to be a major growth driver for the Enlarged Group in the future, complementing existing approved lottery games (i.e. the “Lucky Racing” and “e-Ball” lottery games) launched by the Group. In the hardware division, Shenzhen Subsidiary’s handheld lottery sales equipment business will complement the Group’s existing market leading sports lottery terminal business, creating a widespread lottery hardware supply and maintenance network across the PRC and further enhancing the Group’s competitiveness.

The Directors are of the view that the terms of the Agreement are fair and reasonable and the Acquisition is in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE BOARD

FINANCIAL EFFECTS OF THE ACQUISITION

Upon Completion, the Target shall become a wholly-owned subsidiary of the Company and the Target Group’s accounts will be consolidated into the accounts of the Group.

Set out in Appendix V to this circular is certain unaudited pro forma financial information of the Enlarged Group which illustrates the effect of Completion on the assets and liabilities of the Group, assuming that Completion had taken place, all the Deferred Consideration paid and Bonus Options issued on 30 June 2014.

Net assets

As set out in the unaudited pro forma financial information of the Enlarged Group in Appendix V to this circular, the total assets of the Enlarged Group as at 30 June 2014 would increase from approximately HK$1,285 million to approximately HK$1,847 million as a result of the Acquisition, whereas the total liabilities of the Enlarged Group as at 30 June 2014 will increase from approximately HK$67 million to approximately HK$486 million as a result of the Acquisition. Accordingly, the net assets of the Enlarged Group attributable to the Shareholders as at 30 June 2014 will increase from approximately HK$1,215 million to approximately HK$1,359 million as a result of the Acquisition.

Earnings

While Profit Guarantees of an average of RMB20 million (equivalent to approximately HK$25.2 million) per year are provided by the Vendors for each of the three financial years ending 31 December 2015, 2016 and 2017 as described in the paragraph headed “Deferred Consideration” above, there is no assurance that such Profit Guarantees can be met to generate a positive effect on the future earnings of the Enlarged Group. Nevertheless, in the event that any of the Profit Guarantees cannot be met for any of the aforesaid three financial years, an amount equivalent to the consideration payable in cash in respect of any such Profit Guarantee previously provided for by the Group will be reversed and recognised in profit or loss for the Enlarged Group. Similarly, in the event that no Approval can be obtained or sales of the Lottery Game cannot be eventually launched in any province of the PRC, the amounts equivalent to the consideration payable in cash in respect of any such pre-conditions of Deferred Consideration previously provided for by the Group will be reversed and recognised in profit or loss for the Enlarged Group.

Shareholders should note that the earnings contribution from the Target Group after Completion will depend on the future performance of the Target Group and the actual effect of the Acquisition on the assets and liabilities of the Enlarged Group will depend on the financial position of the Target Group as at the Completion Date, all of which could not be ascertained as at the Latest Practicable Date.

PROPOSED ADOPTION OF THE NEW SHARE OPTION SCHEME

The Company adopted the 2004 Share Option Scheme on 18 November 2004 for a term of 10 years from its adoption date and the 2004 Share Option Scheme has expired on 17 November 2014. As at the Latest Practicable Date, the number of Shares in respect of which options had been granted and remained outstanding under the 2004 Share Option Scheme was 747,554,176 Shares.

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LETTER FROM THE BOARD

Notwithstanding the expiration of the 2004 Share Option Scheme, the provisions of the 2004 Share Option Scheme remain in force in all other respects of the outstanding options granted thereunder. The Company currently does not have any subsisting share option scheme as at the Latest Practicable Date.

In view of the expiration of the 2004 Share Option Scheme, in order to provide incentives or rewards to Participants for their contribution and/or future contributions to the Group and/or to enable the Group to recruit and retain high-calibre employees and attract human resources that are valuable to the Group, the Board proposes to convene the SGM for the Shareholders to consider and, if thought fit, pass an ordinary resolution to adopt the New Share Option Scheme. The provisions of the New Share Option Scheme will comply with the requirements of Chapter 23 of the GEM Listing Rules.

The New Share Option Scheme does not specify a minimum period for which an Option must be held nor a performance target which must be achieved before an Option can be exercised. However, the rules of the New Share Option Scheme provide that the Board may determine, at its sole discretion, such term(s) on the grant of an Option, which term(s) may vary on a case by case basis. Subject to the provisions of the GEM Listing Rules and the rules of the New Share Option Scheme, the Subscription Price shall be a price determined by the Board at its absolute discretion. Under the rules of the New Share Option Scheme, the Board has a discretion to set a minimum period for which an Option has to be held before the exercise of the subscription rights attaching thereto, coupled with the power of the Board to impose any performance target as it considers appropriate before any Option can be exercised. The Directors consider that such discretion will give the Board flexibility to use the minimum period and/or performance target to motivate the Participants to use their best endeavours in assisting the growth and development of the Group. The Directors consider that the aforesaid criteria and rules will serve to preserve the value of the Company and encourage the Participants to acquire proprietary interests in the Company.

The Directors consider that it is not appropriate to state the value of all Options that can be granted under the New Share Option Scheme as if they had been granted on the Latest Practicable Date as a number of variables which are crucial for the calculation of the Options’ value have not been determined. Such variables include the subscription price, exercise period, any performance targets set, interest rate, expected volatility and other relevant variables which are not available as no Options have been granted as at the Latest Practicable Date. The Directors believe that any calculation of the value of the Options as at the Latest Practicable Date based on a great number of speculative assumptions would not be meaningful and would be misleading to the Shareholders.

The New Share Option Scheme will take effect subject to (i) the passing of an ordinary resolution by the Shareholders necessary to approve and adopt the New Share Option Scheme, and to authorise the Board to grant Options to subscribe for Shares thereunder and to allot, issue and deal with Shares pursuant to the exercise of any Options granted under the New Share Option Scheme, and (ii) the GEM Listing Committee of the Stock Exchange granting approval of the listing of and permission to deal in any Shares to be issued pursuant to the exercise of Options under the New Share Option Scheme. If any of the above condition is not satisfied on or before the date following 30 calendar days after the Adoption Date, the New Share Option Scheme shall determine immediately and no person shall be entitled to any rights or benefits or be under any obligations under or in respect of the New Share Option Scheme.

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LETTER FROM THE BOARD

The summary of the principal terms of the New Share Option Scheme is set out in Appendix VI to this circular. A copy of the New Share Option Scheme is available for inspection at the principal place of business of the Company in Hong Kong at Unit 3912, 39th Floor, Tower Two, Times Square, Causeway Bay, Hong Kong during normal business hours from the date hereof up to and including the date of the SGM.

The total number of Shares which may be issued upon exercise of all Options to be granted under the New Share Option Scheme and any other share option schemes of the Company must not in aggregate exceed 10% of the total number of Shares in issue as at the date of approval of the New Share Option Scheme by the Shareholders of the SGM (the “Scheme Mandate Limit”) unless the Company obtains an approval by the Shareholders at its general meeting to refresh the Scheme Mandate Limit. Further, the maximum number of the Shares which may be issued upon exercise of all outstanding Options granted and yet to be exercised under the New Share Option Scheme and options which may be granted and yet to be exercised under any other share option schemes of the Company shall not exceed 30% of the total numbers of Shares in issue from time to time. Based on the issued share capital of 4,431,099,114 Shares as at the Latest Practicable Date and assuming no further Shares will be issued or repurchased by the Company between the period from the Latest Practicable Date to the date of the SGM, the Scheme Mandate Limit will be 443,109,911 Shares.

None of the Directors is a trustee of the New Share Option Scheme nor has any direct or indirect interest in the trustees.

Application will be made to the GEM Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Shares which may fall to be issued and allotted pursuant to the exercise of any Options that may be granted under the New Share Option Scheme up to the limit equal to 10% of the total number of Shares in issue as at the date of SGM.

THE SGM

The SGM will be convened and held at 11:00 a.m. on Tuesday, 23 December 2014 at the conference room of HLB Hodgson Impey Cheng Limited at 31/F., Gloucester Tower, The Landmark, 11 Pedder Street, Central, Hong Kong for the Shareholders to consider and, if thought fit, approve the Agreement and the transactions contemplated thereunder and the adoption of the New Share Option Scheme.

The SGM Notice is set out on pages SGM-1 to SGM-3 of this circular. A form of proxy for use at the SGM is enclosed. 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 deposit it with the Share Registrar, Tricor Abacus Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, as soon as possible and in any event not less than 48 hours before the time appointed for holding the SGM. The return of a form of proxy will not preclude you from attending and voting in person at the SGM (or any adjournment thereof) should you so desire. The voting in respect of the proposed resolutions contained in the SGM Notice will be conducted by way of a poll at the SGM prescribed under the GEM Listing Rules. An announcement on the poll results will be made by the Company after the SGM.

– 23 –

LETTER FROM THE BOARD

RECOMMENDATION

To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, no Shareholder is required to abstain from voting on the resolutions to be proposed at the SGM. The Directors consider that the resolutions proposed at the SGM in relation to the Agreement and the transactions contemplated thereunder and the adoption of the New Share Option Scheme are in the best interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend all Shareholders to vote in favour of the resolutions to be proposed at the SGM.

GENERAL

Your attention is drawn to the additional information set out in the appendices to this circular and the SGM Notice.

Yours faithfully, By order of the Board AGTech Holdings Limited Sun Ho Chairman & CEO

– 24 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY FOR EACH OF THE THREE YEARS ENDED 31 DECEMBER 2011, 2012 AND 2013

The audited consolidated financial statements of the Company for each of the three years ended 31 December 2011, 2012 and 2013, together with the accompanying notes thereto, are disclosed in the annual reports of the Company for the years ended 31 December 2011, 2012 and 2013 respectively. The same information is published on the websites of the Stock Exchange at www.hkgem.com and the Company at www.agtech.com.

(i) annual report of the Company for the year ended 31 December 2011 published on 29 March 2012 (pages 64–147). Please also see below hyperlink:
http://gem.ednews.hk/listedco/listconews/GEM/2012/0329/GLN20120329516.pdf;
(ii) annual report of the Company for the year ended 31 December 2012 published on 28 March 2013 (pages 74–166). Please also see below hyperlink: http://gem.ednews.hk/listedco/listconews/GEM/2013/0328/GLN20130328097.pdf; and
(iii) annual report of the Company for the year ended 31 December 2013 published on 28 March 2014 (pages 80–156). Please also see below hyperlink: http://gem.ednews.hk/listedco/listconews/GEM/2014/0328/GLN20140328229.pdf.

2. INDEBTEDNESS

Borrowings

As at 31 October 2014, the Enlarged Group had borrowings of approximately HK$6.5 million outstanding, including approximately HK$6.3 million advance from a subcontractor of Shenzhen Subsidiary and approximately HK$0.2 million advance from a director of the Target. Both advances are unsecured, interest-free and repayable on demand.

Contingent liabilities

As at 31 October 2014, the Enlarged Group had no significant contingent liabilities.

Capital and other commitments

As at 31 October 2014, the Enlarged Group had capital commitments in respect of property, plant and equipment and a joint-venture amounting to approximately HK$5.5 million which had been authorised and contracted but not provided for.

In addition, as at 31 October 2014, the Enlarged Group had operating lease commitments amounting to approximately HK$33.7 million.

– I-1 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Disclaimers

Save as disclosed above, as at the close of business on 31 October 2014, the Enlarged Group did not have any bank overdrafts or loans, or other similar indebtedness, mortgages, charges, hire purchase commitments, or guarantees or other material contingent liabilities.

The Directors have confirmed that, save as disclosed above, there has not been any other material changes in the indebtedness, commitments or contingent liabilities of the Enlarged Group since the latest practicable date.

3. MATERIAL ADVERSE CHANGE

The Directors are not aware, as at the Latest Practicable Date, of any material adverse change in the financial or trading position of the Group since 31 December 2013, the date to which the latest published audited financial statements of the Company were made up.

4. WORKING CAPITAL

The Directors, after due and careful consideration, are of the opinion that, taking into account of the internal resources available to the Enlarged Group, the Enlarged Group would have sufficient working capital for at least 12 months from the date of this circular.

5. FINANCIAL AND TRADING PROSPECT OF THE ENLARGED GROUP

The Acquisition furthers the Company’s long-term objectives of maintaining as one of the leading lottery technology groups in China and providing innovative and competitive legal lottery games to help the Chinese government to crack down on illegal gambling.

The Enlarged Group will be principally engaged in (i) the provision of gaming technologies (game software, systems, hardware and terminals); (ii) the provision of lottery management and marketing consultancy services; (iii) online and mobile lottery distribution; and (iv) the research and development, quality assurance and sale of handheld lottery sale equipment, provision of aftersales maintenance of such devices, and design of lottery games and system development in the PRC.

As disclosed in the Company’s third quarterly results announcement for the nine months ended 30 September 2014 (the “ Nine-Month Period ”), total revenue of the Group had picked up in the third quarter of 2014 and reached approximately HK$122.6 million for the Nine-Month Period (2013: approximately HK$119.6 million) due in part to the strong performance from its hardware division, Beijing AGTech GOT Technology Co., Ltd. (“ GOT ”), in the third quarter and the continuing contribution of the Group’s “e-Ball Lottery” game launched in Jiangsu province, the PRC.

During the fourth quarter of 2014, GOT has won additional competitive tenders to supply Henan, Jiangsu and Yunnan Sports Lottery Administration Centres with the latest sports lottery terminals. With its excellent product capability and professional services, GOT has succeeded in winning several provincial/ municipal sports lottery terminal tenders in 2014, and therefore further reinforcing its leading position in the Chinese sports lottery terminal market. Apart from the PRC

– I-2 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

market, GOT has also supplied its terminals outside of China (e.g. South Africa) and plans to grow this international business in the future. Currently, the Group is in active discussions with a number of other potential international customers and/or distributors of GOT terminals and has machines on trial in markets such as the United Kingdom, Italy, Austria and Canada.

During 2014, the Group continued to supply its new virtual sports lottery game “e-Ball Lottery” to the launch province of Jiangsu. At the same time, the Group’s first launched game, “Lucky Racing”, has continued to be operated successfully in the province of Hunan, and the Group endeavours to roll the game out to more provinces across the PRC.

In light of the high level of internet and smart phone penetration in China, the regulation expected to be released by the PRC government and lottery administration authorities in relation to online and mobile distribution of approved lottery products is expected to generate additional opportunities for the Group. The Group intends to directly participate in this development via the provision of internet/mobile systems and as a distributor, subject to the PRC government approval.

The lottery management and marketing consultancy services currently provided by the Group primarily comprise long term contracts with provincial sports lottery authorities in the PRC for services such as marketing and promotion, consultancy and management. In light of the Group’s valuable experience, solid background, trusting cooperative relationships built up with various provincial lottery administration and distribution authorities through the existing lottery management business, together with new lottery technologies or terminals to be introduced and new developments in the new internet or mobile channel business, it is possible that new opportunities in the lottery management business will emerge. The Group is currently exploring new business opportunities with relevant lottery authorities in China in this area.

In light of the above, the Directors consider that the Acquisition is in line with the Group’s long-term objectives of maintaining a leading position as a lottery technology group in China and providing innovative and competitive legal lottery games to help the government of China to crack down illegal gambling.

After the Acquisition, the Enlarged Group’s online and mobile lottery distribution business will have the opportunity to supply the system and content of a new Lottery Game to be played on mobile smart phones in China (subject to approval from the relevant government authority of the PRC), while the hardware division of the Enlarged Group’s gaming technologies business will become a supplier of handheld lottery sales equipment in the PRC, thus significantly diversifying the Group’s product range. If Beijing Subsidiary is successful in obtaining the approval of the relevant government authority for the launch of the Lottery Game on mobile smart phones, this new game is expected to be a major growth driver for the Enlarged Group in the future, complementing the Group’s existing approved and already launched lottery games (i.e. the “Lucky Racing” and “e-Ball” lottery games). In the hardware division, Shenzhen Subsidiary’s handheld lottery sales equipment business will complement the Group’s existing market leading sports lottery terminal business, creating a widespread lottery hardware supply and maintenance network across the PRC and further enhancing the Group’s competitiveness. Looking ahead, the Enlarged Group will continue to explore new business opportunities and forge more strategic business alliances, with a view to increasing its sales and profitability and ultimately to maximising returns for Shareholders.

– I-3 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

ACCOUNTANTS’ REPORT OF THE TARGET GROUP

The following is the text of a report, prepared for the sole purpose of inclusion in this circular, received from the independent reporting accountants, HLB Hodgson Impey Cheng Limited, Certified Public Accountants, Hong Kong.

==> picture [224 x 49] intentionally omitted <==

31/F, Gloucester Tower The Landmark 11 Pedder Street Central Hong Kong

8 December 2014

The Board of Directors AGTech Holdings Limited

Dear Sirs,

We set out below our report on the financial information (the “Financial Information”) regarding Score Value Limited (the “Target”) and its subsidiaries (hereinafter collectively referred to as the “Target Group”) for each of the three years ended 31 December 2013 and for the six months ended 30 June 2014 (the “Relevant Periods”) for inclusion in the circular issued by AGTech Holdings Limited (the “Company”) dated 8 December 2014 (the “Circular”) in connection with, among others, the proposed acquisition of the entire issued share capital of the Target by Silvercreek Technology Holdings Limited, which is a wholly-owned subsidiary of the Company (the “Acquisition”).

The Target was incorporated in the British Virgin Islands (the “BVI”) on 25 March 2010 with limited liability. The Target is principally engaged in investment holding. The address of the registered office and principal place of business of the Target is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, BVI.

– II-1 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

As at the date of this report, the Target has direct and indirect interests in the following subsidiaries:

			Proportion of
			ownership
	Place and date of	Issued and fully paid	interest held
	incorporation/	share capital/	by the
Name of company*	establishment	registered capital	Company	Principal activities
Sincere Honor Holdings	Limited liability company	HK$10,000	100%	Investment holding
Limited (“HK	incorporated on 18		(direct)
Company”)	March 2009, Hong
	Kong
深圳市精祥科技	Limited liability company	Registered capital of	100%	Investment holding
有限公司(Shenzhen	(solely invested by	RMB100,000	(indirect)
Sincere Honor	corporation in Taiwan,
Technology Company	Hong Kong or Macau)
Limited*) (“PRC	established on 22
Company”)	September 2013, the
	People’s Republic of
	China (the “PRC”)
深圳中林瑞德科技有限	Limited liability company	Registered capital of	100%	Research and
公司(Shenzhen	(solely invested by	RMB5,000,000	(indirect)	development, quality
Zoom Read Tech Co.,	corporation) established			assurance and sale of
Ltd.*) (“Shenzhen	on 3 June 2008, the			handheld lottery
Subsidiary”)	PRC			sales equipment, and
				the provision of
				aftersales
				maintenance services
北京名影科漫科技有限	Limited liability company	Registered capital of	100%	Provision of the design
公司(Beijing MTC	(solely invested by	RMB10,000,000	(indirect)	of lottery games and
Creative Mind Tech	corporation) established			system development
Co., Ltd.*) (“Beijing	on 23 October 2009,			services in the PRC
Subsidiary”)	the PRC

English translation name is for identification purpose only

Except for HK Company which has adopted 30 June as its financial year end date, all companies comprising the Target Group have adopted 31 December as their financial year end date.

No audited statutory financial statements have been prepared for the Target since its date of incorporation as it was incorporated in a country where there is no statutory audit requirement. No audited financial statements have been prepared for PRC Company since its date of establishment as it is newly established.

– II-2 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

The statutory financial statements of HK Company for the years ended 30 June 2011, 2012 and 2013 were prepared in accordance with the Small and Medium-sized Entity Financial Reporting Standard (“SME-FRS”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) and were audited by Baililai Certified Public Accountants, Certified Public Accountants registered in Hong Kong.

The statutory financial statements of Shenzhen Subsidiary for the years ended 31 December 2011, 2012 and 2013 were prepared in accordance with the relevant accounting principles and financial regulations applicable to enterprises established in the PRC and were audited by 中聯會計師事務所有限公司深圳分所 (Zhonglian Certified Public Accountants Co., Ltd. Shenzhen Office*), Certified Public Accountants registered in the PRC.

The statutory financial statements of Beijing Subsidiary for the years ended 31 December 2011, 2012 and 2013 were prepared in accordance with the relevant accounting principles and financial regulations applicable to enterprises established in the PRC and were audited by 北京永勤會計師事務所有限公司 (Beijing Yongqin Certified Public Accountants Co., Ltd.*), Certified Public Accountants registered in the PRC.

For the purpose of this report, the sole director of the Target has prepared the consolidated financial statements of the Target Group for the Relevant Periods (the “Underlying Financial Statements”) using accounting policies which are in accordance with Hong Kong Financial Reporting Standards (“HKFRS”) issued by the HKICPA. We have undertaken an independent audit on the Underlying Financial Statements in accordance with Hong Kong Standards on Auditing (“HKSA”) issued by the HKICPA.

For the purpose of this report, we have examined the Underlying Financial Statements and have carried out such additional procedures as are necessary in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” as recommended by the HKICPA.

The Financial Information of Target Group for the Relevant Periods set out in this report has been prepared from the Underlying Financial Statements on the basis set out in Note 3 of Section A below. No adjustments were considered necessary to the Underlying Financial Statements in preparing our report for inclusion in the Circular.

The Underlying Financial Statements are the responsibility of the sole director of the Target who approved their issue. The directors of the Company are responsible for the contents of the Circular in which this report is included. It is our responsibility to compile the Financial Information set out in this report from the Underlying Financial Statements, to form an independent opinion on the Financial Information and to report our opinion to you.

In our opinion, the Financial Information gives, for the purpose of this report, a true and fair view of the state of affairs of the Target Group as at 31 December 2011, 2012, 2013 and 30 June 2014 and of the Target Group’s results and cash flows for the Relevant Periods.

The corresponding consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows of the Target Group for the six months ended 30 June 2013 together with the notes thereon (the “June 2013 Financial Information”) have been extracted from the Target Group’s unaudited financial

– II-3 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

information for the same period, which was prepared by the sole director of the Target solely for the purpose of this report. We have reviewed the June 2013 Financial Information in accordance with the Hong Kong Standard on Review Engagement 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the HKICPA. Our review of the June 2013 Financial Information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with HKSA and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on the June 2013 Financial Information. Based on our review, nothing has come to our attention that causes us to believe that the June 2013 Financial Information is not prepared, in all material respects, in accordance with the accounting policies consistent with those used in the preparation of the Financial Information which conform with HKFRS.

The English names of all entities established in the PRC are translated for identification purpose only.

– II-4 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

A. FINANCIAL INFORMATION

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Notes Revenue 7 Cost of sales Gross profit Investment and other income 8 Selling and administrative expenses Loss from business operations Gain from a bargain purchase 25 Net foreign exchange gain (Loss)/profit before tax Income tax expense 9 (Loss)/profit for the year/period 10 Other comprehensive income for the year/period, net of income tax Items that may be reclassified subsequently to profit or loss: Translation differences on translating foreign operations Total comprehensive income for the year/period (Loss)/profit attributable to owners of the Target Total comprehensive income attributable to owners of the Target	Year ended 31 December 2011 2012 2013 RMB RMB RMB – – – – – – – – – 4 4 4 (5,604) (7,436) (28,065) (5,600) (7,432) (28,061) – – 28,933,549 – – 49 (5,600) (7,432) 28,905,537 – – (992,644) (5,600) (7,432) 27,912,893 (10,968) (1,773) (9,639) (16,568) (9,205) 27,903,254 (5,600) (7,432) 27,912,893 (16,568) (9,205) 27,903,254	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) – 30,277,649 – (24,082,035) – 6,195,614 2 431,397 (11,725) (12,819,496) (11,723) (6,192,485) – – – 721 (11,723) (6,191,764) – (607,243) (11,723) (6,799,007) (6,034) 1,240 (17,757) (6,797,767) (11,723) (6,799,007) (17,757) (6,797,767)	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) – 30,277,649 – (24,082,035) – 6,195,614 2 431,397 (11,725) (12,819,496) (11,723) (6,192,485) – – – 721 (11,723) (6,191,764) – (607,243) (11,723) (6,799,007) (6,034) 1,240 (17,757) (6,797,767) (11,723) (6,799,007) (17,757) (6,797,767)
			6,195,614 431,397 (12,819,496)
			(6,192,485) – 721
			(6,191,764) (607,243)
			(6,799,007)
			1,240
			(6,797,767)
			(6,799,007)

			(6,797,767)

– II-5 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Notes Non-current assets Property, plant and equipment 14 Current assets Inventories 15 Other receivables, deposits and prepayments 16 Structured deposits 17 Amount due from a related party 18 Bank balances and cash 19 Current liabilities Trade payables 20 Accruals and other payables 21 Amount due to a director 22 Current tax liabilities Net current assets Total assets less current liabilities Non-current liabilities Deferred tax liabilities 23 Net assets Capital and reserves Equity attributable to owners of the Target Share capital 24 Reserves Total equity	At 31 December 2011 2012 2013 RMB RMB RMB – – 950,491 – – 22,872,828 – – 2,917,882 – – 8,000,000 – – 40,000 444,463 441,260 17,032,064 444,463 441,260 50,862,774 – – 5,827,444 2,992 3,011 14,262,684 138,752 144,735 151,257 – – 2,381,102 141,744 147,746 22,622,487 302,719 293,514 28,240,287 302,719 293,514 29,190,778 – – 992,644 302,719 293,514 28,198,134 340,818 340,818 340,818 (38,099) (47,304) 27,857,316 302,719 293,514 28,198,134	At 30 June 2014 RMB 1,410,931
		11,693,992 12,798,752 – 2,490,000 14,130,045
		41,112,789
		6,706,677 12,812,946 157,379 1,413,456
		21,090,458
		20,022,331
		21,433,262
		32,895
		21,400,367

		340,818 21,059,549
		21,400,367

– II-6 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Attributable to ow	Attributable to ow	ners of the Target Exchange reserve Accumulated (losses)/ profits RMB RMB (12,389) (9,142) – (5,600) (10,968) – (10,968) (5,600) (23,357) (14,742) – (7,432) (1,773) – (1,773) (7,432) (25,130) (22,174) – 27,912,893 (9,639) – (9,639) 27,912,893 – – (34,769) 27,890,719 – (6,799,007) 1,240 – 1,240 (6,799,007) (33,529) 21,091,712	Total RMB 319,287
Paid-in capital RMB 340,818 – – – 340,818 – – – 340,818 – – – – 340,818 – – – 340,818	Capital reserve RMB (Note) – – – – – – – – – – – – 1,366 1,366 – – – 1,366	Exchange reserve RMB (12,389) – (10,968) (10,968) (23,357) – (1,773) (1,773) (25,130) – (9,639) (9,639) – (34,769) – 1,240 1,240 (33,529)
			(5,600) (10,968)
			(16,568)
			302,719
			(7,432) (1,773)
			(9,205)
			293,514
			27,912,893 (9,639)
			27,903,254
			1,366
			28,198,134
			(6,799,007) 1,240
			(6,797,767)
			21,400,367

– II-7 –

APPENDIX II

FINANCIAL INFORMATION OF THE TARGET GROUP

Attributable to ow	Attributable to ow	ners of the Target Exchange reserve Accumulated (losses) RMB RMB (25,130) (22,174) – (11,723) (6,034) – (6,034) (11,723) (31,164) (33,897)	Total RMB 293,514
Paid-in capital RMB 340,818 – – – 340,818	Capital reserve RMB (Note) – – – – –	Exchange reserve RMB (25,130) – (6,034) (6,034) (31,164)
			(11,723) (6,034)
			(17,757)
			275,757

Note

Exchange differences relating to the translation of the capital contributions by the equity owner from foreign currency to RMB are recognised directly in other comprehensive income and accumulated in the capital reserve.

– II-8 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

CONSOLIDATED STATEMENTS OF CASH FLOWS

Cash flows from operating activities (Loss)/profit before tax Adjustments for: Investment and other income Gain from a bargain purchase Depreciation of property, plant and equipment Impairment losses recognised on other receivables Write-down of inventories Movements in working capital Decrease in inventories Decrease/(increase) in other receivables, deposits and prepayments Increase in amount due from a related party (Decrease)/Increase in trade payables Increase/(decrease) in accruals and other payables (Decrease)/increase in amount due to a director Cash (used in)/generated by operations PRC Enterprise Income Tax paid Net cash (used in)/generated by operating activities	Year ended 31 December 2011 2012 2013 RMB RMB RMB (5,600) (7,432) 28,905,537 (4) (4) (4) – – (28,933,549) – – – – – – – – – (5,604) (7,436) (28,016) – – – – – 4,290 – – – – – – 451 19 5,010,892 (145) 5,983 6,522 (5,298) (1,434) 4,993,688 – – – (5,298) (1,434) 4,993,688	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) (11,723) (6,191,764) (2) (431,397) – – – 74,560 – 10,000,000 – 129,345 (11,725) 3,580,744 – 11,049,491 – (19,661,570) – (2,450,000) – 879,233 (62) (1,449,738) 7,993 6,122 (3,794) (8,045,718) – (2,534,638) (3,794) (10,580,356)

– II-9 –

APPENDIX II

FINANCIAL INFORMATION OF THE TARGET GROUP

Cash flows from investing activities Interest received Net cash inflow on acquisition of a subsidiary (Note 25) Proceeds from redemption of structured deposits Payments for property, plant and equipment Net cash generated by investing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of year/period Effects of Exchange rate changes on the balance of cash held in foreign currencies Cash and cash equivalents at the end of year/period Analysis of the balances of cash and cash equivalents: Bank balances and cash	Year ended 31 December 2011 2012 2013 RMB RMB RMB 4 4 4 – – 11,605,385 – – – – – – 4 4 11,605,389 (5,294) (1,430) 16,599,077 460,725 444,463 441,260 (10,968) (1,773) (8,273) 444,463 441,260 17,032,064 444,463 441,260 17,032,064	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) 2 212,097 – – – 8,000,000 – (535,000) 2 7,677,097 (3,792) (2,903,259) 441,260 17,032,064 (6,034) 1,240 431,434 14,130,045 431,434 14,130,045

– II-10 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

NOTES TO THE FINANCIAL INFORMATION

1. GENERAL INFORMATION OF TARGET GROUP

The Target was incorporated in the BVI on 25 March 2010 as a limited liability company. The address of its registered office and principal place of business is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, BVI. At the date of this report, in the opinion of the sole director of the Target, Immense Wisdom Limited, a company incorporated in the BVI, is the immediate and ultimate holding company.

The Target is principally engaged in investment holding. The Target Group is principally engaged in the research and development, quality assurance and sale of handheld lottery sales equipment and the provision of aftersales maintenance services in the PRC.

Items included in the financial statements of each of the Target Group’s subsidiaries are measured using the currency of the primary economic environment in which the respective entity operates (the “functional currency”). The functional currency of the Target Group’s operating subsidiaries is Renminbi (“RMB”). Accordingly the Financial Information is presented in RMB, which is different from the functional currency of the Company. The choice of presentation currency is to better reflect the currency that mainly determines economic effects of transactions, events and conditions of the Target Group.

2. APPLICATION OF HKFRS

For the purposes of preparing and presenting Financial Information for the Relevant Periods, the Target Group has adopted all relevant HKFRS, HKAS, amendments and interpretations issued by HKICPA which are effective for annual period beginning on 1 January 2014 consistently throughout the Relevant Periods.

New and revised HKFRS issued but not effective

At the date of this report, the HKICPA has issued the following new and revised standards, amendments and interpretations that are not yet effective in the Relevant Periods, which the Target Group has not early applied.

Amendments to HKFRS	Annual Improvements 2010-2012 Cycle1
Amendments to HKFRS	Annual Improvements 2011-2013 Cycle2
Amendments to HKFRS 9 and	Mandatory Effective Date of HKFRS 9 and Transitional
HKFRS 7	Disclosures5
Amendments to HKFRS 11	Accounting for Acquisitions of Interests in Joint Operations3
HKFRS 9 (2014)	Financial Instruments5
HKFRS 14	Regulatory Deferral Accounts3
HKFRS 15	Revenue from Contracts with Customers4
Amendments to HKAS 16 and	Clarification of Acceptable Methods of Depreciation and
HKAS 38	Amortisation3
Amendments to HKAS 19	Defined Benefit Plans: Employee Contributions2
Amendments to HKFRS 10 and	Sale or Contribution of Assets between an Investor and its
HKAS 28	Associate or Joint Venture3

1 Effective for grant date, acquisition date or annual periods beginning on or after 1 July 2014 as appropriate, with earlier application permitted.

2 Effective for annual periods beginning on or after 1 July 2014, with earlier application permitted.

3 Effective for annual periods beginning on or after 1 January 2016, with earlier application permitted.

4 Effective for annual periods beginning on or after 1 January 2017, with earlier application permitted.

5 Effective for annual periods beginning on or after 1 January 2018, with earlier application permitted.

The director of the Target anticipates the application of these new and revised HKFRS will have no material impact on the Financial Information.

– II-11 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

3. SIGNIFICANT ACCOUNTING POLICIES

Statement of compliance

The Financial Information has been prepared in accordance with the HKFRS (which include all applicable HKAS, amendments and interpretations) issued by the HKICPA. In addition, the Financial Information includes applicable disclosures required by the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited.

Basis of preparation

The Financial Information have been prepared on the historical cost basis except for certain financial instruments that are measured at fair values at the end of each of the Relevant Periods, as explained in the accounting policies below.

Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, Target Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in the Financial Information is determined on such a basis, except for share-based payment transactions that are within the scope of HKFRS 2, leasing transactions that are within the scope of HKAS 17, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in HKAS 2 or value in use in HKAS 36.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.

The principal accounting policies are set out below.

Basis of preparation

The Financial Information incorporate the financial statements of the Target and entities controlled by the Target and its subsidiaries. Control is achieved when the Target:

has power over the investee;
is exposed, or has rights, to variable returns from its involvement with the investee; and
has the ability to use its power to affect its returns.

The Target Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

– II-12 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

When the Target Group has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Target Group considers all relevant facts and circumstances in assessing whether or not the Target Group’s voting rights in an investee are sufficient to give it power, including:

the size of the Target Group’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;
potential voting rights held by the Target Group, other vote holders or other parties;
rights arising from other contractual arrangements; and
any additional facts and circumstances that indicate the Target Group has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.

Consolidation of a subsidiary begins when the Target Group obtains control over the subsidiary and ceases when the Target Group loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Target Group gains control until the date when the Target Group ceases to control the subsidiary.

Profit or loss and each item of other comprehensive income are attributed to the owners of the Target and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Target and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Target Group’s accounting policies.

All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Target Group are eliminated in full on consolidation.

Changes in the Target Group’s ownership interests in existing subsidiaries

Changes in the Target Group’s ownership interests in existing subsidiaries that do not result in the Target Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Target Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Target.

When the Target Group loses control of a subsidiary, a gain or loss is recognised in profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. All amounts previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if the Target Group had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit or loss or transferred to another category of equity as specified/permitted by applicable HKFRS). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under HKAS 39.

Business combinations

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Target Group, liabilities incurred by the Target Group to the former owners of the acquiree and the equity interests issued by the Target Group in exchange for control of the acquiree. Acquisition-related costs are generally recognised in profit or loss as incurred.

– II-13 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except that:

deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with HKAS 12 Income Taxes and HKAS 19 Employee Benefits respectively;
liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Target Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with HKFRS 2 Share-based Payment at the acquisition date; and
assets (or disposal groups) that are classified as held for sale in accordance with HKFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that standard.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the recognised amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at their fair value or, when applicable, on the basis specified in another HKFRS.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Target Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), and additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognised at that date.

Goodwill

Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business (see the accounting policy above) less accumulated impairment losses, if any.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances.

Revenue from the supply of lottery sales equipment is recognised when the lottery sales equipment are supplied to the customers.

Revenue from research and development and aftersales maintenance services is recognised when the services are rendered, the revenue can be reliably estimated and it is probable that the revenue will be received.

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to Target Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

– II-14 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Target Group as lessee

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the year/period in which they are incurred.

Foreign currencies

In preparing the Financial Information of each individual group entity, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of the Relevant Periods, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for:

exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings;
exchange differences on transactions entered into in order to hedge certain foreign currency risks; and
exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on repayment of the monetary items.

For the purposes of presenting the Financial Information, the assets and liabilities of the Target Group’s foreign operations are translated into the presentation currency of the Target Group (i.e. RMB) using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity under the heading of exchange reserve (attributed to non-controlling interests as appropriate).

On the disposal of a foreign operation (i.e. a disposal of the Target Group’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation of which the retained interest becomes a financial asset), all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Target are reclassified to profit or loss.

In addition, in relation to a partial disposal of a subsidiary that includes a foreign operation that does not result in the Target Group losing control over the subsidiary, the proportionate share of accumulated exchange differences are re-attributed to non-controlling interests and are not recognised in profit or loss.

Goodwill and fair value adjustments to identifiable assets acquired and liabilities assumed through acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences arising are recognised in other comprehensive income.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

– II-15 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Retirement benefit costs

Payments to state-managed retirement benefit schemes are recognised as an expense when employees have rendered services entitling them to the contributions.

Taxation

Income tax expense represents the sum of tax currently payable and deferred tax.

Current tax

The tax currently payable is based on taxable profit for the year/period. Taxable profit differs from “(loss)/profit before tax” as reported in the consolidated statements of profit or loss and other comprehensive income because of items of income or expense that are taxable or deductible in other years/periods and items that are never taxable or deductible. The Target Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the Relevant Periods.

Deferred tax

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the Financial Information and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, except where Target Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each of the Relevant Periods and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the assets to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the Relevant Periods.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which Target Group expects, at the end of the Relevant Periods, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax for the year/period

Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively.

Property, plant and equipment

Property, plant and equipment are stated in the consolidated statements of financial position at cost, less subsequent accumulated depreciation and subsequent accumulated impairment losses, if any.

– II-16 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Depreciation is recognised so as to write off the cost of assets less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation methods are reviewed at the end of each of the Relevant Periods, with the effect of any changes in estimate accounted for on a prospective basis.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

Intangible assets

Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful lives and amortisation methods are reviewed at the end of each of the Relevant Periods, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses.

Internally-generated intangible assets - research and development expenditure

Expenditure on research activities is recognised as an expense in the year/period in which it is incurred.

Derecognition of intangible assets

An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains and losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised.

Impairment of tangible assets

At the end of each of the Relevant Periods, the Target Group reviews the carrying amounts of its tangible with finite useful lives to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Target Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or the cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost of inventories is calculated using the weighted average method. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

Provisions

Provisions are recognised when the Target Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Target Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

– II-17 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the Relevant Periods, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material).

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

Financial instruments

Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets

The Target Group’s financial assets are classified into financial assets at fair value through profit or loss (“FVTPL”) and loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Income is recognised on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL.

Financial assets at FVTPL

Financial assets are classified as at FVTPL when the financial asset is either held for trading or it is designated as at FVTPL.

A financial asset is classified as held for trading if:

it has been acquired principally for the purpose of selling it in the near term; or
on initial recognition it is part of a portfolio of identified financial instruments that Target Group manages together and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.

– II-18 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial recognition if:

such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with Target Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
it forms part of a contract containing one or more embedded derivatives, and HKAS 39 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL.

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the consolidated statements of profit or loss and other comprehensive income. Fair value is determined in the manner described in Note 6 to the Financial Information.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables (including trade receivables, other receivables and deposits, amount due from a related party and bank balances and cash) are measured at amortised cost using the effective interest method, less any impairment.

Interest income is recognised by applying the effective interest rate, except for short-term receivables where the recognition of interest would be immaterial.

Impairment of financial assets

The Target Group’s financial assets are assessed for indicators of impairment at the end of reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Target Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

For financial assets measured at amortised cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

– II-19 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Financial liabilities and equity instruments

Classification as debt or equity

Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Target Group are recognised at the proceeds received, net of direct issue costs.

Other financial liabilities

Other financial liabilities (including trade payables, accruals and other payables and amount due to a director) are subsequently measured at amortised cost using the effective interest method.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or, where appropriate, a shorter period to the net carrying amount on initial recognition.

Interest expense is recognised on an effective interest basis.

Derecognition

The Target Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Target Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Target Group continues to recognise the asset to the extent of its continuing involvement and recognises an associated liability. If the Target Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Target Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.

On derecognition of a financial asset other than in its entirety, the Target Group allocates the previous carrying amount of the financial asset between the part it continues to recognise, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in other comprehensive income is recognised in profit or loss. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts.

The Target Group derecognises financial liabilities when, and only when, the Target Group’s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

– II-20 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Related parties

A party is considered to be related to the Target Group if:

(i) the party is a person or a close member of that person’s family and that person,
(a) has controls or joint control over the Target Group;
(b) has significant influence over the Target Group; or
(c) is a member of the key management personnel of the Target Group or of a parent of the Target Group;
or
(ii) the party is an entity where any of the following conditions applies:
(a) the entity and the Target Group are members of the same group;
(b) one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the other entity);
(c) the entity and the Target Group are joint ventures of the same third party;
(d) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
(e) the entity is a post-employment benefit plan for the benefit of employees of either the Target Group or an entity related to the Target Group;
(f) the entity is controlled or jointly controlled by a person identified in (i); and
(g) a person identified in (i)(a) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

Cash and cash equivalents

For the purpose of the consolidated statements of cash flows, cash and cash equivalents comprise cash on hand and demand deposits, and short term highly liquid investments that are readily convertible into known amounts of cash, are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, which are repayable on demand and form an integral part of Target Group’s cash management.

For the purpose of the consolidated statements of financial position, cash and cash equivalents comprise cash on hand and at banks, including term deposits, and assets similar in nature to cash, which are not restricted as to use.

4. KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Target Group’s accounting policies, which are described in Note 3, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and underlying assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year/period in which the estimates are revised if the revisions affect only that year/period, or in the year/period of the revisions and future periods if the revisions affect both current and future periods.

– II-21 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Critical judgement in applying accounting estimates

The following is the critical judgement, apart from those involving estimations (see below), that management has made in the process of applying in the Target Group’s accounting policies and that has the most significant effect on the amounts recognised in the Financial Information.

Withholding taxes arising from the distributions of dividends

The Target Group’s determination as to whether to accrue for withholding taxes from the distribution of dividends from subsidiaries in the PRC according to the relevant tax jurisdictions is subject to judgement on the timing of the payment of the dividend, where the Target Group considers that if it is probable that the profits of the subsidiaries in the PRC will not be distributed in the foreseeable future, then no withholding taxes are provided.

Key sources of estimation uncertainty

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the Relevant Periods that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period.

Depreciation of property, plant and equipment

Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives, after taking into account their estimated residual value. The Target Group assesses annually the residual value and the useful lives of the property, plant and equipment. If the expectation differs from the original estimate, such difference will impact the depreciation and the amortisation charge in the period in which such estimate is changed.

Estimated impairment of trade and other receivables

The Target Group estimates the provisions for impairment of trade and other receivables by assessing their recoverability based on credit history and prevailing marking conditions. This requires the use of estimates and judgements. Provisions are applied to trade and other receivables where events or changes in circumstances indicate that the balances may not be collectible. Where the expectation is different from the original estimate, such difference will affect the carrying amount of trade and other receivables and thus the impairment loss in the period in which such estimate is changed. The Target Group reassesses the provisions at the end of each of the Relevant Periods.

Estimated write-down of inventories

Net realisable value of inventories is the estimated selling price in the ordinary course of business, less estimated costs of completion and selling expenses. These estimates are based on the current market condition and the historical experience of selling products of similar nature. It could change significantly as a result of changes in customer taste and competitor actions in response to changes to economic conditions.

5. CAPITAL RISK MANAGEMENT

The Target Group manages its capital with a view to maximising the return to shareholders through the optimisation of the debt and equity balance. The Target Group’s overall strategy remains unchanged throughout the Relevant Periods.

The capital structure of the Target Group consists of net debt, which includes borrowings net of cash and cash equivalents and equity attributable to owners of the Target Group, comprising paid-in capital and reserves.

The director of the Target reviews the capital structure on a continuous basis taking into account the cost of capital and the risks associated with each class of capital. The Target Group will balance its overall capital structure through the new share issues as well as issue of new debts.

The Target Group is not subject to any externally imposed capital requirements.

– II-22 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

6. FINANCIAL INSTRUMENTS

(a) Categories of financial instruments

Financial assets Financial assets at FVTPL Loans and receivables (including cash and cash equivalents Financial liabilities Amortised cost	At 31 December 2011 2012 RMB RMB – – 444,463 441,260 141,744 147,746	2013 RMB 8,000,000 19,964,083 11,330,989	At 30 June 2014 RMB – 29,293,105

			12,085,921

(b) Financial risk management objectives and policies

The Target Group’s major financial instruments include trade receivables, other receivables and deposits, structured deposits, amount due from a related party, bank balances and cash, trade payables, accruals and other payables and amount due to a director.

Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments and the policies on how to mitigate the effects of these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

There has been no change to the types of the Target Group’s exposure in respect of financial instruments or the manner in which it manages and measures the risks throughout the Relevant Periods.

Interest rate risk

The Target Group’s bank balances have exposure to cash flow interest rate risk due to the fluctuation of the prevailing market interest rate on bank balances. The Target Group is also exposed to fair value interest rate risk related primarily to its fixed deposits held at banks with original maturity over three months. The director of the Target considers the Target Group’s exposure of fair value interest rate risk on fixed deposits is not significant as the interest bearing fixed deposits are within short maturity period.

The director of the Target considers the Target Group’s exposure of the cash flow interest rate risk on its bank balances is insignificant. Therefore, no sensitivity analysis is presented.

Credit risk

At the end of the Relevant Periods, the Target Group’s maximum exposure to credit risk which will cause a financial loss to the Target Group due to failure to discharge an obligation by the counterparties provided by the Target Group is arising from the carrying amount of the respective recognised financial assets as stated in the consolidated statements of financial position.

In order to minimise the credit risk, the management of the Target Group reviews the recoverable amount of each individual trade and other receivables at the end of the Relevant Periods to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the management considers that the credit risk of the Target Group is significantly reduced.

The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies or with good reputation.

– II-23 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

There is significant centration of credit risk on loan receivables from few debtors accounted for Nil, Nil, 78% and 92% of the carrying amounts of other receivables, deposits and prepayments as at 31 December 2011, 2012 and 2013 and 30 June 2014, respectively. In order to minimise the credit risk, the management continuously monitor the level of exposure by frequent review of the credit evaluation of the financial condition and credit quality of its customers to ensure that prompt actions will be taken to lower exposure.

Liquidity risk

In the management of the liquidity risk, the Target Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Target Group’s operations and mitigate the effects of fluctuations in cash flows.

Liquidity tables

The following table details the Target Group’s remaining contractual maturity for its non-derivative financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Target Group can be required to pay, and includes both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from current interest rate at the end of each of the Relevant Periods.

Weighted average interest rate % At 31 December 2011 Non-derivative financial liabilities Accruals and other payables N/A Amount due to a director N/A At 31 December 2012 Non-derivative financial liabilities Accruals and other payables N/A Amount due to a director N/A At 31 December 2013 Non-derivative financial liabilities Trade payables N/A Accruals and other payables N/A Amount due to a director N/A At 30 June 2014 Non-derivative financial liabilities Trade payables N/A Accruals and other payables N/A Amount due to a director N/A	On demand or within 1 year Total undiscounted cash flows RMB RMB 2,992 2,992 138,752 138,752 141,744 141,744 3,011 3,011 144,735 144,735 147,746 147,746 5,827,444 5,827,444 5,352,288 5,352,288 151,257 151,257 11,330,989 11,330,989 6,706,677 6,706,677 5,221,865 5,221,865 157,379 157,379 12,085,921 12,085,921	Carrying amounts RMB 2,992 138,752
		141,744

		3,011 144,735
		147,746

		5,827,444 5,352,288 151,257
		11,330,989

		6,706,677 5,221,865 157,379
		12,085,921

– II-24 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

(c) Fair value measurements

As at 31 December 2013, some of the Target Group’s financial assets are measured at fair value. The following table gives information about how the fair values of these financial assets are determined (in particular, the valuation technique(s) and inputs used).

		Fair	Valuation technique(s)	Relationship of
Financial	Fair value as at	value	and	unobservable inputs to
assets	31 December 2013	hierarchy	key input(s)	fair value
Structured	Bank deposits in PRC	Level 3	Discounted cash flows	The higher the expected
deposits	with non-closely			yield, the higher the
	related embedded		Key unobservable inputs:	fair value
	derivative:		expected yields of
	RMB8,000,000		money market	The higher the discount
			instruments and debt	rate, the lower the fair
			instruments invested by	value
			banks and a discount
			rate that reflects credit
			risk of the bank (Note)

Note: The director considers that the impact of the fluctuation in expected yields of the money market instruments and debt instruments to the fair value of the structured deposits was insignificant as the deposits have short maturities, and therefore no sensitivity analysis is presented.

No gains or losses are recognised in profit or loss relating to the change in fair value of structured deposits classified as Level 3 for the Relevant Periods as the amount involved is insignificant, and therefore no reconciliation of Level 3 fair value measurements is presented.

7. REVENUE AND SEGMENT INFORMATION

Following the acquisition of Shenzhen Subsidiary during the year ended 31 December 2013, the Target Group has been operating in one operating and reportable segment, being research and development, quality assurance and sale of handheld lottery sales equipment, and the provision of aftersales maintenance services in the PRC. The sole director of the Target, being the chief operating decision maker, regularly review revenue analysis by nature and the Target Group for the Relevant Periods to make decisions about resources allocation and performance assessment. No segment information is presented other than entity-wide disclosures as no other discrete financial information is available for the assessment of performance and resources of the Target Group’s business activities.

The following table summarises the categories of the Target Group’s revenue during the Relevant Periods:

Sale of handheld lottery sales equipment Research and development and aftersales maintenance services	Year ended 31 December 2011 2012 2013 RMB RMB RMB – – – – – – – – –	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) – 26,017,168 – 4,260,481 – 30,277,649	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) – 26,017,168 – 4,260,481 – 30,277,649
			30,277,649

No geographical information is presented as substantially all of the Target Group’s operations, external customers and non-current assets are located in the PRC.

– II-25 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Information about major customer

Revenue from customer of corresponding years/periods contributing over 10% of total revenue of the Target Group is as follows:

					Six months ended	Six months ended
	Year	ended	31 December		30 June
	2011		2012	2013	2013	2014
	RMB		RMB	RMB	RMB	RMB
					(Unaudited)
Customer A	–		–	–	–	30,277,649

8. INVESTMENT AND OTHER INCOME

Interest income on: Bank deposits Other loans and receivables INCOME TAX EXPENSE Current tax: PRC Enterprise Income Tax Deferred tax: (Note 23) Current year charge/(credit) Total income tax recognised in profit or loss	Year ended 31 December 2011 2012 2013 RMB RMB RMB 4 4 4 – – – 4 4 4 Year ended 31 December 2011 2012 2013 RMB RMB RMB – – – – – 992,644 – – 992,644	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) 2 209,097 – 222,300 2 431,397 Six months ended 30 June 2013 2014 RMB RMB (Unaudited) – 1,566,992 – (959,749) – 607,243	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) 2 209,097 – 222,300 2 431,397 Six months ended 30 June 2013 2014 RMB RMB (Unaudited) – 1,566,992 – (959,749) – 607,243
			607,243

9. INCOME TAX EXPENSE

No provision for Hong Kong Profits Tax has been made as the Target Group had no assessable profits arising in Hong Kong during the Relevant Periods.

Provision for the PRC Enterprise Income Tax for the Relevant Periods was made based on the estimated assessable profits calculated in accordance with the relevant applicable income tax laws and regulations in the PRC.

– II-26 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Under the Law of the PRC on Enterprise Income Tax (the “EIT Law”) and Implementation Regulations of the EIT Law, the tax rate of the PRC subsidiaries was 25% for the year ended 31 December 2011. On 10 September 2012, Shenzhen Subsidiary obtained “High Technology Enterprise” status that entitles it a preferential tax rate of 15% for the three years ending 31 December 2014 according to the EIT Law. Shenzhen Subsidiary was therefore subject to 15% tax rate since year 2012. Shenzhen Subsidiary will be subject to obtaining the renewal for preferential tax rate of 15% and would be taxed at 25% starting from year 2015 if such renewal is not granted.

The income tax expense for the Relevant Periods can be reconciled to the (loss)/profit before tax per the consolidated statements of profit or loss and other comprehensive income as follows:

(Loss)/profit before tax Tax at the PRC Enterprise Income Tax rate of 25% (note) Tax effect of expenses not deductible for tax purpose Tax effect of income not taxable for tax purpose Tax effect of tax losses not recognised Effect of different tax rates of group entities operating in jurisdictions other than PRC Income tax on concessionary tax rate Income tax expense for the Relevant Periods	Year ended 31 December 2011 2012 2013 RMB RMB RMB (5,600) (7,432) 28,905,537 (1,400) (1,858) 7,226,384 – – – (1) (1) (6,240,744) 925 1,227 5,074 476 632 1,930 – – – – – 992,644	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) (11,723) (6,191,764) (2,930) (1,547,941) – 4,189,596 – (992,644) 1,935 1,166 995 215 – (1,043,149) – 607,243	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) (11,723) (6,191,764) (2,930) (1,547,941) – 4,189,596 – (992,644) 1,935 1,166 995 215 – (1,043,149) – 607,243

			(1,547,941) 4,189,596 (992,644) 1,166 215 (1,043,149)
			607,243

Note: The PRC Enterprise Income Tax rate is used as it is the domestic tax rate in the jurisdiction where the operation of the Target Group is substantially based.

– II-27 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

10. (LOSS)/PROFIT FOR THE RELEVANT PERIODS

(Loss)/profit for the Relevant Periods has been arrived at after charging:

Auditors’ remuneration Cost of inventories recognised as an expense Write-down of inventories (recognised in cost of sales) Depreciation of property, plant and equipment Operating lease rentals in respect of rented premises Impairment losses recognised on other receivables Research and development costs Employee benefits expense, including director’s remunerations (Note 11): Salaries and other benefits Retirement benefits scheme contributions	Year ended 31 December 2011 2012 2013 RMB RMB RMB – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) – – – 23,564,857 – 129,345 – 74,560 – 316,999 – 10,000,000 – 925,155 – 822,256 – 80,865 – 903,121	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) – – – 23,564,857 – 129,345 – 74,560 – 316,999 – 10,000,000 – 925,155 – 822,256 – 80,865 – 903,121

			822,256 80,865
			903,121

11. DIRECTOR’S EMOLUMENTS

Mr. Zhang Xiangyu, the sole director of the Target throughout the Relevant Periods, did not receive nor waive any fees or emoluments in respect of his services to the Target Group during the Relevant Periods.

12. FIVE HIGHEST PAID INDIVIDUAL’S EMOLUMENTS

Of the five individuals with the highest emoluments in the Target Group, none was a director of the Target throughout the Relevant Periods and the six months ended 30 June 2013 (unaudited). The emoluments of the remaining five highest paid individuals throughout the Relevant Periods and the six months ended 30 June 2013 (unaudited) were as follows:

Salaries and other benefits Retirement benefits scheme contributions	Year ended 31 December 2011 2012 2013 RMB RMB RMB – – – – – – – – –	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) – 399,500 – 22,079 – 421,579	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) – 399,500 – 22,079 – 421,579
			421,579

– II-28 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Their emoluments were all within HK$1,000,000.

During the Relevant Periods, no emolument was paid by the Target Group to the sole director or any of the five individuals with the highest emoluments in the Target Group as an inducement to join or upon joining the Target Group or as compensation for loss of office.

13. LOSS/EARNINGS PER SHARE

No loss/earnings per share information is presented as its inclusion, for the purpose of this report, is not considered meaningful.

14. PROPERTY, PLANT AND EQUIPMENT

COST Balance at 1 January 2011, 31 December 2011 and 31 December 2012 Acquisitions through acquisition of a subsidiary (Note 25) Balance at 31 December 2013 Additions Balance at 30 June 2014 ACCUMULATED DEPRECIATION Balance at 1 January 2011, 31 December 2011, 31 December 2012 and 31 December 2013 Depreciation expense Balance at 30 June 2014 CARRYING AMOUNTS Balance at 31 December 2011 Balance at 31 December 2012 Balance at 31 December 2013 Balance at 30 June 2014	Plant and machinery RMB – 283,977 283,977 535,000 818,977 – – – – – 283,977 818,977	Motor vehicles RMB – 365,128 365,128 – 365,128 – 55,670 55,670 – – 365,128 309,458	Electronic equipment RMB – 243,753 243,753 – 243,753 – 1,231 1,231 – – 243,753 242,522	Other equipment RMB – 57,633 57,633 – 57,633 – 17,659 17,659 – – 57,633 39,974	Total RMB – 950,491
					950,491 535,000
					1,485,491

					– 74,560
					74,560

					–

					–

					950,491

					1,410,931

– II-29 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

The above items of property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives and after taking into account of their estimated residual values, at the following rates per annum:

Plant and machinery	20%
Motor vehicles	20%
Electronic equipment	20%
Other equipment	20%

15. INVENTORIES

Raw materials Finished goods	At 31 December 2011 2012 RMB RMB – – – – – –	2013 RMB 1,900,469 20,972,359 22,872,828	At 30 June 2014 RMB 10,517,856 1,176,136
			11,693,992

The Target Group recorded write-down of inventories in the amount of RMB129,345 for the six month period ended 30 June 2014 and such amounts had been included in cost of sales.

16. OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS

Prepayments Rental and utility deposits Consideration receivable in relation to disposal of an associate (Note 17) Other receivables Loan and interest receivables Impairment loss recognised	At 31 December 2011 2012 RMB RMB – – – – – – – – – – – – – – – –	2013 RMB 25,863 153,522 – 463,497 642,882 2,275,000 – 2,917,882	At 30 June 2014 RMB 125,692 150,522 – 758,238
			1,034,452 21,764,300 (10,000,000)
			12,798,752

During the years ended 31 December 2011, 2012 and 2013 and the six months ended 30 June 2014, the Target Group recognised impairment loss in respect of loan receivables amounting to Nil, Nil, Nil and RMB10,000,000, respectively. The impaired loan and receivables are due from independent third parties experiencing financial difficulties that were delinquency of payments.

At 30 June 2014, certain of loan receivables amounting to RMB19,300,000 are secured by pledged securities or personal guarantees by independent third parties which bear interest at 6% per annum. The other loan receivables are unsecured and interest-free.

– II-30 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

17. STRUCTURED DEPOSITS

The structured deposits as at 31 December 2013 consist of deposits of RMB8,000,000 denominated in RMB and were issued by banks in the PRC. The structured deposits carry interest at expected interest rate that range from 2% to 4% per annum, which is linked to the performance of the underlying money market instruments and debt instruments, and have no fixed term of maturity. The structured deposits are designated at fair value through profit or loss on initial recognition as they contain non-closely related embedded derivative. The director of the Target considers the fair values of the structured deposits, approximate their carrying values.

All the structured deposits were redeemed in March 2014. Fair value changes for those deposits were not recognised for the year ended 31 December 2013 as the effect is insignificant.

18. AMOUNT DUE FROM A RELATED PARTY

At 31 December At 30 June 2011 2012 2013 2014 RMB RMB RMB RMB Ms. Xu Qun – – 40,000 2,490,000	Maximum balance outstanding
	At 31 December At 30 June 2011 2012 2013 2014 RMB RMB RMB RMB – – 500,000 2,490,000

Ms. Xu Qun is a director of Shenzhen Subsidiary, a wholly-owned subsidiary of the Target. The amount due was unsecured, interest-free and repayable on demand.

19. BANK BALANCES AND CASH

Cash held at banks earn interest at floating rates based on daily bank deposit rates. As at the end of each of the Relevant Periods, substantially all of the Target Group’s cash and bank balances were denominated in RMB which is not a freely convertible currency in the international market. The government of the PRC has implemented foreign exchange control and the remittance of these funds out of the PRC is subject to exchange restrictions imposed by the government of the PRC.

20. TRADE PAYABLES

The following is an analysis of trade payables by age based on the invoice date:

0 to 30 days 31 to 60 days 91 to 120 days 121 to 365 days Over 365 days	At 31 December 2011 2012 RMB RMB – – – – – – – – – – – –	2013 RMB – – 42,949 5,121,697 662,798 5,827,444	At 30 June 2014 RMB – 595,577 265,115 5,201,151 644,834
			6,706,677

The average credit period ranged from 7 to 90 days during the Relevant Periods.

– II-31 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

21. ACCRUALS AND OTHER PAYABLES

Advances from customers Payroll and welfare payables Other tax payables and tax surcharges Loan payable Other payables and accrued charges	At 31 December 2011 2012 RMB RMB – – – – – – – – 2,992 3,011 2,992 3,011	2013 RMB 7,911,877 275,835 998,519 5,000,000 76,453 14,262,684	At 30 June 2014 RMB 6,950,385 152,389 640,696 5,000,000 69,476
			12,812,946

The above loan and other payables are unsecured, interest free and repayable on demand.

22. AMOUNT DUE TO A DIRECTOR

The amount due is unsecured, non-interest-bearing and repayable on demand.

23. DEFERRED TAXATION

The following are the major deferred tax liabilities recognised and movements thereon during the Relevant Periods:

Balance at 1 January 2011, 31 December 2011 and 31 December 2012 Charge to profit or loss Balance at 31 December 2013 and 1 January 2014 (Credit)/charge to profit or loss Balance at 30 June 2014	Fair value adjustment RMB – 992,644 992,644 (992,644) –	Taxable temporary differences RMB – – – 32,895 32,895	Total RMB – 992,644
			992,644 (959,749)
			32,895

Under the EIT Law of the PRC, withholding tax is imposed on dividends declared in respect of profits earned by the PRC subsidiaries from 1 January 2008 onwards. Deferred taxation has not been provided for in the Financial Information in respect of temporary differences attributable to the profits earned by the PRC subsidiaries amounting to Nil, Nil, approximately RMB19,811,000 and RMB18,639,000 as the Target Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.

24. SHARE CAPITAL

Share capital in the consolidated statements of financial position at the end of each of the Relevant Periods represents the issued and fully paid 50,000 ordinary shares of US$1 each of the Target.

– II-32 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

25. ACQUISITION OF A SUBSIDIARY

On 16 December 2013, the Target Group entered into a sale and purchase agreement with certain independent third parties, pursuant to which the Target Group acquired 100% equity interest of Shenzhen Subsidiary, a limited liability company (solely invested by corporation in Taiwan, Hong Kong or Macau) established in the PRC, for an aggregate cash consideration of RMB5,000,000. Shenzhen Subsidiary is principally engaged in the research and development, quality assurance and sale of handheld lottery sales equipment, and the provision of aftersales maintenance services in the PRC.

Acquisition-related costs amounting to RMB4,140 have been excluded from the consideration transferred and have been recognised as an expense in the year ended 31 December 2013, within the “selling and administrative expenses” line item in the consolidated statement of profit or loss and other comprehensive income.

Consideration transferred

	RMB
Cash	5,000,000

Assets acquired and liabilities recognised at the date of acquisition are as follows:

Non-current assets Property, plant and equipment Current assets Inventories Other receivables, deposits and prepayments Structured deposits Amount due from a related party Bank balances and cash Current liabilities Trade payables Accruals and other payables Current tax liabilities Net assets Gain from a bargain purchase arising on acquisition: Consideration transferred Less: net assets acquired Gain from a bargain purchase Net cash inflow arising on acquisition: Consideration paid in cash Less: cash and cash equivalents acquired	RMB 950,491 22,872,828 2,922,172 8,000,000 40,000 16,605,385 (5,827,444) (9,248,781) (2,381,102)
	33,933,549

	5,000,000 (33,933,549)
	(28,933,549)

	(5,000,000) 16,605,385
	11,605,385

– II-33 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Gain from a bargain purchase of RMB28,933,549 was recognised upon completion of the acquisition of Shenzhen Subsidiary. The gain from a bargain purchase on acquisition was mainly attributable to group restructuring.

Shenzhen Subsidiary did not contribute significantly to the revenue or results of the Target Group for the year ended 31 December 2013 since the date of acquisition as it was completed near the end of year ended 31 December 2013. Had the acquisition been effected at 1 January 2013, the revenue of the Target Group would have been RMB61,554,846, and the profit for the year would have been RMB11,697,111. The director of the Target considers these ‘pro forma’ information is for illustrative purposes only and is not necessarily an indication of results of operations of the Target Group that actually would have been achieved had the acquisition been completed on 1 January 2013, nor is it intended to be a projection of future results.

26. RETIREMENT BENEFIT SCHEMES

The employees of the Target Group are members of state-managed retirement benefits scheme operated by the PRC government. The Target Group is required to contribute a specific percentage of the total monthly basic salaries to the retirement benefits scheme. The only obligation of the Target Group with respect to the retirement benefits schemes is to make the required contributions under the schemes.

27. OPERATING LEASE COMMITMENTS

The Target Group as lessee

At the end of the Relevant Periods, the Target Group had commitments for future minimum lease payments under non-cancellable operating leases which approximately fall due as follows:

Within one year In the second to fifth years inclusive	At 31 December 2011 2012 RMB RMB – – – – – –	2013 RMB 628,759 261,983 890,742	At 30 June 2014 RMB 660,196 –
			660,196

Operating lease payments represent rentals payable by the Target Group in respect of rented premises. Leases are negotiated for terms of one to two years and rentals are fixed over the lease periods. The Target Group does not have an option to purchase the leased asset at the expiry of the lease period.

28. RELATED PARTY TRANSACTIONS

Other than the balances with related parties as disclosed elsewhere in the Financial Information, the Target Group did not enter into any other significant related party transactions during the Relevant Periods.

Compensation to key management personnel

The sole director (who is the key management personnel of the Target) did not receive or will receive any fees or emoluments in respect of his services during the Relevant Periods.

B. EVENTS AFTER THE RELEVANT PERIODS

On 4 July 2014, the Target Group completed the acquisition of 100% equity interest of Beijing Subsidiary, a limited liability company (solely invested by corporation in Taiwan, Hong Kong or Macau) established in the PRC, for an aggregate cash consideration of RMB10,000,000. Beijing Subsidiary is principally engaged in the provision of the design of lottery games and system development services in the PRC.

– II-34 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Consideration transferred

	RMB
Cash	10,000,000

Assets acquired and liabilities recognised at the date of acquisition are as follows:

Non-current assets Property, plant and equipment Current assets Other receivables, deposits and prepayments Bank balances and cash Current liabilities Accruals and other payables Net assets Goodwill arising on acquisition: Consideration transferred Less: net assets acquired Goodwill arising on acquisition	RMB 488,538 4,732,875 1,627,817 (496,731)
	6,352,499

	10,000,000 (6,352,499)
	3,647,501

C. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of the Target or any of its subsidiaries have been prepared in respect of any period subsequent to 30 June 2014.

Yours faithfully,

HLB Hodgson Impey Cheng Limited

Certified Public Accountants

Hui Chun Keung, David Practising Certificate Number: P05447 Hong Kong

– II-35 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET GROUP

1. Business review for the year ended 31 December 2011

1.1 Operating results

For the year ended 31 December 2011, the Target Group consisted of the Target and HK Company. The Target Group did not have any operation and did not generate any revenue. The Target Group recorded a net loss after tax of approximately RMB6,000 (equivalent to approximately HK$8,000).

1.2 Liquidity and financial resources

As at 31 December 2011, the Target Group’s current assets amounted to approximately RMB0.4 million (equivalent to approximately HK$0.5 million), comprising only bank balances and cash.

As at 31 December 2011, the Target Group’s current liabilities amounted to approximately RMB0.1 million, which mainly included an amount due to its director of approximately RMB0.1 million (equivalent to approximately HK$0.1 million) which was unsecured, non-interest-bearing and repayable on demand.

The gearing ratio (calculated as all debts divided by total assets) of the Target Group as at 31 December 2011 was approximately 0.3.

1.3 Capital structure and foreign exchange risk

As at 31 December 2011, the Target Group financed its capital requirements through its shareholder’s equity of approximately RMB0.3 million (equivalent to approximately HK$0.4 million) and an amount due to its director of approximately RMB0.1 million (equivalent to approximately HK$0.1 million).

The Target Group had neither foreign currency hedging activities nor any financial instruments for hedging purposes during the year ended 31 December 2011.

1.4 Contingent liabilities and capital commitment

As at 31 December 2011, the Target Group did not have any material contingent liabilities and capital commitment.

1.5 Significant investments, material acquisitions and disposal

There were no significant investments, material acquisitions and disposals during the year ended 31 December 2011.

– II-36 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

1.6 Employee and remuneration policies

As at 31 December 2011, the Target Group had one director and no other employees. Total staff costs for the year ended 31 December 2011 was nil, as the sole director did not receive any emoluments for his services during the year.

1.7 Charge on assets

As at 31 December 2011, no asset was pledged by the Target Group.

1.8 Future plans for material investments and acquisition of capital assets

There was no specific plan for material investments and acquisition of capital assets as at 31 December 2011.

2. Business review for the year ended 31 December 2012

2.1 Operating results

For the year ended 31 December 2012, the Target Group consisted of the Target and HK Company. The Target Group did not have any operation and did not generate any revenue (2011: nil). The Target Group recorded a net loss after tax of approximately RMB7,000 (equivalent to approximately HK$9,000) (2011: RMB6,000).

2.2 Liquidity and financial resources

As at 31 December 2012, the Target Group’s current assets amounted to approximately RMB0.4 million (equivalent to approximately HK$0.5 million), comprising only bank balances and cash.

As at 31 December 2012, the Target Group’s current liabilities amounted to approximately RMB0.1 million, which mainly included an amount due to its director of approximately RMB0.1 million (equivalent to approximately HK$0.1 million) which was unsecured, non-interest-bearing and repayable on demand.

The gearing ratio (calculated as all debts divided by total assets) of the Target Group as at 31 December 2012 was approximately 0.3 (2011: 0.3).

2.3 Capital structure and foreign exchange risk

As at 31 December 2012, the Target Group financed its capital requirements through its shareholder’s equity of approximately RMB0.3 million (equivalent to approximately HK$0.4 million) and an amount due to a director of approximately RMB0.1 million (equivalent to approximately HK$0.1 million).

The Target Group had neither foreign currency hedging activities nor any financial instruments for hedging purposes during the year ended 31 December 2012.

– II-37 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

2.4 Contingent liabilities and capital commitment

As at 31 December 2012, the Target Group did not have any material contingent liabilities and capital commitment.

2.5 Significant investments, material acquisitions and disposal

There were no significant investments, material acquisitions and disposals during the year ended 31 December 2012.

2.6 Employee and remuneration policies

As at 31 December 2012, the Target Group had one director and no other employees (2011: one director). Total staff costs for the year ended 31 December 2012 was nil (2011: nil), as the sole director did not receive any emoluments for his services during the year.

2.7 Charge on assets

As at 31 December 2012, no asset was pledged by the Target Group.

2.8 Future plans for material investments and acquisition of capital assets

There was no specific plan for material investments and acquisition of capital assets as at 31 December 2012.

3. Business review for the year ended 31 December 2013

3.1 Operating results

For the year ended 31 December 2013, the Target Group consisted of the Target, HK Company, PRC Company and Shenzhen Subsidiary. Shenzhen Subsidiary is principally engaged in the research and development, quality assurance and sale of handheld lottery sales equipment, as well as the provision of aftersales maintenance services of such devices.

The Target Group did not generate revenue for the year ended 31 December 2013 as Shenzhen Subsidiary did not generate any sales for the period from 27 December 2013 to 31 December 2013. The Target Group recorded a net profit after tax of approximately RMB27.9 million (equivalent to approximately HK$35.1 million) (2012: loss after tax of RMB7,000) which was mainly attributable to the gain from a bargain purchase from the acquisition of Shenzhen Subsidiary by PRC Company of approximately RMB28.9 million (equivalent to approximately HK$36.7 million).

– II-38 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

3.2 Liquidity and financial resources

As at 31 December 2013, the Target Group’s current assets amounted to approximately RMB50.9 million (equivalent to approximately HK$64.1 million), with cash and cash equivalent of approximately RMB17.0 million (equivalent to approximately HK$21.4 million) and structured deposits of RMB8.0 million (equivalent to approximately HK$10.1 million).

As at 31 December 2013, the Target Group’s current liabilities amounted to approximately RMB22.6 million (equivalent to approximately HK$28.5 million), which mainly included an amount due to a director of approximately RMB0.2 million (equivalent to approximately HK$0.3 million), advance from customers of approximately RMB7.9 million (equivalent to approximately HK$10.0 million) and loan payable of RMB5.0 million (equivalent to approximately HK$6.3 million) which were all unsecured, non-interest-bearing and repayable on demand.

The gearing ratio (calculated as all debts divided by total assets) of the Target Group as at 31 December 2013 was approximately 0.1 (2012: 0.3).

3.3 Capital structure and foreign exchange risk

As at 31 December 2013, the Target Group financed its capital requirements through its shareholder’s equity of approximately RMB28.2 million (equivalent to approximately HK$35.5 million), loan payable of RMB5.0 million (equivalent to approximately HK$6.3 million) and amount due to a director of approximately RMB0.2 million (equivalent to approximately HK$0.3 million).

The Target Group had neither foreign currency hedging activities nor any financial instruments for hedging purposes during the year ended 31 December 2013.

3.4 Contingent liabilities and capital commitment

As at 31 December 2013, the Target Group did not have any material contingent liabilities and capital commitment.

3.5 Significant investments, material acquisitions and disposal

On 16 December 2013, PRC Company (as purchaser) entered into an equity transfer agreement (股權轉讓協議書) with vendors, pursuant to which the Target Group acquired 100% equity interest of Shenzhen Subsidiary for an aggregate cash consideration of RMB5.0 million (equivalent to approximately HK$6.3 million). Shenzhen Subsidiary was principally engaged in the research and development, quality assurance and sale of handheld lottery sales equipment, as well as the provision of aftersales maintenance services of such devices. The acquisition of Shenzhen Subsidiary by PRC Company was completed on 27 December 2013.

– II-39 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Save for the above, there were no significant investments, material acquisitions and disposals during the year ended 31 December 2013.

3.6 Employee and remuneration policies

As at 31 December 2013, the Target Group had one director and no other employees (2012: one director). Total staff costs for the year ended 31 December 2013 was nil (2012: nil), as the sole director did not receive any emoluments for his services during the year.

3.7 Charge on assets

As at 31 December 2013, no asset was pledged by the Target Group.

3.8 Future plans for material investments and acquisition of capital assets

There was no specific plan for material investments and acquisition of capital assets as at 31 December 2013.

4. Business review for the six months ended 30 June 2014

4.1 Operating results

For the six months ended 30 June 2014, the Target Group consisted of the Target, HK Company, PRC Company and Shenzhen Subsidiary. Shenzhen Subsidiary, the principal operating subsidiary of the Target, was principally engaged in the research and development, quality assurance and sale of handheld lottery sales equipment, as well as the provision of aftersales maintenance services of such devices.

The Target Group generated revenue of approximately RMB30.3 million (equivalent to approximately HK$38.2 million) during the six months ended 30 June 2014 (for the six months ended 30 June 2013: nil) and gross profit of approximately 20.5% (for the six months ended 30 June 2013: nil) during the six months ended 30 June 2014. The increase in revenue of the Target Group for the six months ended 30 June 2014 was mainly attributable to the results contributed by Shenzhen Subsidiary which was acquired by the Target Group on 27 December 2013.

The Target Group recorded a net loss after tax of approximately RMB6.8 million (equivalent to approximately HK$8.6 million) (for the six months ended 30 June 2013: net loss after tax of approximately RMB12,000) which was mainly attributable to its selling and administrative expenses of approximately RMB12.8 million (equivalent to approximately HK$16.1 million) (for the six months ended 30 June 2013: RMB12,000).

4.2 Liquidity and financial resources

As at 30 June 2014, the Target Group’s current assets amounted to approximately RMB41.1 million (equivalent to approximately HK$51.8 million) with bank balances and cash of approximately RMB14.1 million (equivalent to approximately HK$17.8 million).

– II-40 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

As at 30 June 2014, the Target Group’s current liabilities amounted to approximately RMB21.1 million (equivalent to approximately HK$26.6 million), which mainly included advance from customers of approximately RMB7.0 million (equivalent to approximately HK$8.8 million) and loan payable of RMB5.0 million (equivalent to approximately HK$6.3 million) which were both unsecured, non-interest-bearing and repayable on demand.

The gearing ratio (calculated as all debts divided by total assets) of the Target Group as at 30 June 2014 was approximately 0.1 (for the year ended 31 December 2013: 0.1).

4.3 Capital structure and foreign exchange risk

As at 30 June 2014, the Target Group financed its capital requirements through its shareholder’s equity of approximately RMB21.4 million (equivalent to approximately HK$27.0 million), loan payable of RMB5.0 million (equivalent to approximately HK$6.3 million) and amount due to a director of approximately RMB0.2 million (equivalent to approximately HK$0.3 million).

The Target Group had neither foreign currency hedging activities nor any financial instruments for hedging purposes during the six months ended 30 June 2014.

4.4 Contingent liabilities and capital commitment

As at 30 June 2014, the Target Group did not have any material contingent liabilities and capital commitment.

4.5 Significant investments, material acquisitions and disposal

Save as disclosed in the paragraph headed “4.8 Future plans for material investments and acquisition of capital assets” below, there were no significant investments, material acquisitions and disposals during the six months ended 30 June 2014.

4.6 Employee and remuneration policies

As at 30 June 2014, the Target Group had 21 employees (for the six months ended 30 June 2013: 21). Total staff costs for the six months ended 30 June 2014 was approximately RMB0.9 million (equivalent to approximately HK$1.1 million) (for the six months ended 30 June 2013: nil). Remuneration packages for employees principally comprised salaries and wages. Besides, the employees of the Target Group are members of state-managed retirement benefits scheme operated by the PRC government. The Target Group is required to contribute a specific percentage of the total monthly basic salaries to the retirement benefits scheme. The only obligation of the Target Group with respect to the retirement benefits scheme is to make the required contributions under the scheme.

4.7 Charge on assets

As at 30 June 2014, no asset was pledged by the Target Group.

– II-41 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

4.8 Future plans for material investments and acquisition of capital assets

On 25 June 2014, PRC Company (as purchaser) and each of the vendors entered into a paid-in capital transfer agreement (出資轉讓協議書) pursuant to which the Target Group agreed to purchase 100% equity interest of Beijing Subsidiary for an aggregate cash consideration of RMB10.0 million (equivalent to approximately HK$12.6 million). Beijing Subsidiary is principally engaged in the design of lottery games and system development in the PRC. The acquisition was subsequently completed on 4 July 2014.

Save as disclosed above, there was no specific plan for material investments and acquisition of capital assets as at 30 June 2014.

– II-42 –

FINANCIAL INFORMATION OF SHENZHEN SUBSIDIARY

APPENDIX III

ACCOUNTANTS’ REPORT OF SHENZHEN SUBSIDIARY

==> picture [224 x 49] intentionally omitted <==

31/F, Gloucester Tower The Landmark 11 Pedder Street Central Hong Kong

8 December 2014

The Board of Directors AGTech Holdings Limited

Dear Sirs,

We set out below our report on the financial information (the “Financial Information”) regarding 深圳中林瑞德科技有限公司 (Shenzhen Zoom Read Tech Co., Ltd.*) (“Shenzhen Subsidiary”) for each of the three years ended 31 December 2013 and for the six months ended 30 June 2014 (the “Relevant Periods”) for inclusion in the circular issued by AGTech Holdings Limited (the “Company”) dated 8 December 2014 (the “Circular”) in connection with, among others, the proposed acquisition of the entire issued share capital of Score Value Limited (the “Target”), the intermediate holding company of Shenzhen Subsidiary, by Silvercreek Technology Holdings Limited which is a wholly-owned subsidiary of the Company (the “Acquisition”).

Shenzhen Subsidiary was established in the People’s Republic of China (the “PRC”) on 3 June 2008 as limited liability company (solely invested by corporation). The registered office of Shenzhen Subsidiary is Suite 401, Building No. 7 Yuehai Road, Nan Shan Qu, Shenzhen, Guangdong, the PRC*.

Shenzhen Subsidiary has adopted 31 December as its financial year end date.

The statutory financial statements of Shenzhen Subsidiary for the years ended 31 December 2011, 2012 and 2013 were prepared in accordance with the relevant accounting principles and financial regulations applicable to enterprises established in the PRC and were audited by 中聯會計師事務所有限公司深圳分所 (Zhonglian Certified Public Accountants Co., Ltd. Shenzhen Office*), certified public accountants registered in the PRC.

For the purpose of this report, the directors of Shenzhen Subsidiary have prepared the financial statements of Shenzhen Subsidiary for the Relevant Periods (the “Underlying Financial Statements”) using accounting policies which are in accordance with Hong Kong Financial Reporting Standards (“HKFRS”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”). We have undertaken an independent audit on the Underlying Financial Statements in accordance with Hong Kong Standards on Auditing (“HKSA”) issued by the HKICPA.

– III-1 –

FINANCIAL INFORMATION OF SHENZHEN SUBSIDIARY

APPENDIX III

The Financial Information of the Shenzhen Subsidiary for the Relevant Periods set out in this report has been prepared from the Underlying Financial Statements on the basis set out in Note 3 of Section A below. No adjustments were considered necessary to the Underlying Financial Statements in preparing our report for inclusion in the Circular.

The Underlying Financial Statements are the responsibility of the directors of Shenzhen Subsidiary who approved their issue. The directors of Company are responsible for the contents of the Circular in which this report is included. It is our responsibility to compile the Financial Information set out in this report from the Underlying Financial Statements, to form an independent opinion on the Financial Information and to report our opinion to you.

As set out in Note 16 of Section A to the Financial Information, 湖南迅邦置業有限公司 (Hunan Xunbun Properties Co., Ltd*) (“Hunan Xunbun”), an associate of Shenzhen Subsidiary, has not prepared any financial information in accordance with HKFRS for each of the two years ended 31 December 2011 and 2012. For the years ended 31 December 2011 and 2012, Shenzhen Subsidiary was accordingly not in a position to (i) equity account for its share of results of Hunan Xunbun for the years ended 31 December 2011 and 2012 and share of net assets of Hunan Xunbun as at 31 December 2011 and at the date of its disposal; (ii) assess whether any impairment of its interest in Hunan Xunbun was necessary as at 31 December 2011; and (iii) disclose the summarised financial information of Hunan Xunbun for each of the two years ended 31 December 2011 and 2012. Consequently, Shenzhen Subsidiary was unable to fulfil the requirements of Hong Kong Accounting Standard (“HKAS”) 28 (2011) “Investments in Associates and Joint Ventures” and HKFRS 12 “Disclosure of Interests in Other Entities” issued by the HKICPA, which require the application of the equity method for accounting for investment in an associate and an impairment assessment thereof, as well as the relevant disclosures in respect of the associate for each of the years ended 31 December 2011 and 2012. We were unable to obtain sufficient appropriate audit evidence to satisfy ourselves by alternative procedures to account for the share of results for each of the years ended 31 December 2011 and 2012 and net assets less impairment loss of Hunan Xunbun as at 31 December 2011 as we did not have sufficient access to the financial information, books and records, and the management of Hunan Xunbun. This, together with the fact that the required summarised financial information of Hunan Xunbun was not disclosed in accordance with HKAS 28, caused us to qualify our audit opinion on the Financial Information for the years ended 31 December 2011 and 2012. It is not practical for us to quantify the effects of the departures from these requirements on the Financial Information for the years ended 31 December 2011 and 2012.

In our opinion, except for the possible effects of the matter described in the above paragraph, the Financial Information gives, for the purpose of this report, a true and fair view of the state of affairs of Shenzhen Subsidiary as at 31 December 2011, 2012, 2013 and 30 June 2014 and of its results and cash flows for the Relevant Periods.

– III-2 –

FINANCIAL INFORMATION OF SHENZHEN SUBSIDIARY

APPENDIX III

The corresponding statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows of Shenzhen Subsidiary for the six months ended 30 June 2013 together with the notes thereon (the “June 2013 Financial Information”) have been extracted from the Shenzhen Subsidiary’s unaudited financial information for the same period, which was prepared by the directors of Shenzhen Subsidiary solely for the purpose of this report. We have reviewed the June 2013 Financial Information in accordance with the Hong Kong Standard on Review Engagement 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the HKICPA. Our review of the June 2013 Financial Information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with HKSA and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on the June 2013 Financial Information. Based on our review, nothing has come to our attention that causes us to believe that the June 2013 Financial Information is not prepared, in all material respects, in accordance with the accounting policies consistent with those used in the preparation of the Financial Information which conform with HKFRS.

English translation names are for identification purpose only.

– III-3 –

FINANCIAL INFORMATION OF SHENZHEN SUBSIDIARY

APPENDIX III

A. FINANCIAL INFORMATION

STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Notes Revenue 7 Cost of sales Gross profit Investment and other income 8 Other gains and losses 9 Selling and administrative expenses Profit/(loss) before tax Income tax expense 10 Profit/(loss) for the year/period 11 Other comprehensive income for the year/period, net of income tax Total comprehensive income for the year/period Profit/(loss) and total comprehensive income attributable to owners of Shenzhen Subsidiary	Year ended 31 December 2011 2012 2013 RMB RMB RMB 53,399,095 71,840,806 61,554,846 (28,721,677) (44,125,188) (34,294,359) 24,677,418 27,715,618 27,260,487 3,911,589 2,528,530 234,075 – (3,000,000) – (9,310,174) (61,281,559) (11,647,535) 19,278,833 (34,037,411) 15,847,027 (4,826,347) (2,041,390) (3,133,400) 14,452,486 (36,078,801) 12,713,627 – – – 14,452,486 (36,078,801) 12,713,627 14,452,486 (36,078,801) 12,713,627	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) 17,218,471 30,277,649 (8,648,019) (17,464,409) 8,570,452 12,813,240 207,031 431,210 – – (1,816,505) (12,813,061) 6,960,978 431,389 (1,050,283) (1,599,887) 5,910,695 (1,168,498) – – 5,910,695 (1,168,498) 5,910,695 (1,168,498)	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) 17,218,471 30,277,649 (8,648,019) (17,464,409) 8,570,452 12,813,240 207,031 431,210 – – (1,816,505) (12,813,061) 6,960,978 431,389 (1,050,283) (1,599,887) 5,910,695 (1,168,498) – – 5,910,695 (1,168,498) 5,910,695 (1,168,498)
			12,813,240 431,210 – (12,813,061)
			431,389 (1,599,887)
			(1,168,498)
			–
			(1,168,498)

			(1,168,498)

– III-4 –

FINANCIAL INFORMATION OF SHENZHEN SUBSIDIARY

APPENDIX III

STATEMENTS OF FINANCIAL POSITION

Notes Non-current assets Property, plant and equipment 15 Investment in an associate 16 Other receivables 19 Current assets Inventories 17 Trade receivables 18 Other receivables, deposits and prepayments 19 Structured deposits 20 Amount due from a director 21 Amount due from the immediate holding company 22 Bank balances and cash 23 Current liabilities Trade payables 24 Accruals and other payables 25 Current tax liabilities Net current assets Total assets less current liabilities Non-current liabilities Deferred tax liabilities 26 Net assets Capital and reserves Equity attributable to owners of Shenzhen Subsidiary Paid-in capital 27 Reserves Total equity	At 31 December 2011 2012 2013 RMB RMB RMB 687,551 1,084,321 950,491 10,000,000 – – – 1,000,000 – 10,687,551 2,084,321 950,491 37,989,502 32,717,207 16,255,202 9,340,000 – – 56,567,296 14,614,537 2,917,882 – – 8,000,000 – – 40,000 – – 4,290 13,182,867 30,969,950 16,605,385 117,079,665 78,301,694 43,822,759 6,350,072 13,003,154 5,827,444 68,235,062 50,185,666 9,248,781 1,600,985 2,594,899 2,381,102 76,186,119 65,783,719 17,457,327 40,893,546 12,517,975 26,365,432 51,581,097 14,602,296 27,315,923 900,000 – – 50,681,097 14,602,296 27,315,923 5,000,000 5,000,000 5,000,000 45,681,097 9,602,296 22,315,923 50,681,097 14,602,296 27,315,923	At 30 June 2014 RMB 1,410,931 – –
		1,410,931
		11,693,992 – 12,798,752 – 2,490,000 – 13,709,798
		40,692,542
		6,706,677 7,803,020 1,413,456
		15,923,153
		24,769,389
		26,180,320
		32,895
		26,147,425

		5,000,000 21,147,425
		26,147,425

– III-5 –

FINANCIAL INFORMATION OF SHENZHEN SUBSIDIARY

APPENDIX III

STATEMENTS OF CHANGES IN EQUITY

Attributable to owners of Shenzhen Subsidiary Paid-in capital Statutory reserve Accumulated profits/ (losses) RMB RMB RMB (Note) 5,000,000 2,500,000 28,728,611 – – 14,452,486 – – – – – 14,452,486 5,000,000 2,500,000 43,181,097 – – (36,078,801) – – – – – (36,078,801) 5,000,000 2,500,000 7,102,296 – – 12,713,627 – – – – – 12,713,627 5,000,000 2,500,000 19,815,923 – – (1,168,498) – – – – – (1,168,498) 5,000,000 2,500,000 18,647,425 5,000,000 2,500,000 7,102,296 – – 5,910,695 – – – – – 5,910,695 5,000,000 2,500,000 13,012,991	Attributable to owners of Shenzhen Subsidiary Paid-in capital Statutory reserve Accumulated profits/ (losses) RMB RMB RMB (Note) 5,000,000 2,500,000 28,728,611 – – 14,452,486 – – – – – 14,452,486 5,000,000 2,500,000 43,181,097 – – (36,078,801) – – – – – (36,078,801) 5,000,000 2,500,000 7,102,296 – – 12,713,627 – – – – – 12,713,627 5,000,000 2,500,000 19,815,923 – – (1,168,498) – – – – – (1,168,498) 5,000,000 2,500,000 18,647,425 5,000,000 2,500,000 7,102,296 – – 5,910,695 – – – – – 5,910,695 5,000,000 2,500,000 13,012,991	Total RMB 36,228,611
Paid-in capital RMB 5,000,000 – – – 5,000,000 – – – 5,000,000 – – – 5,000,000 – – – 5,000,000 5,000,000 – – – 5,000,000	Statutory reserve RMB (Note) 2,500,000 – – – 2,500,000 – – – 2,500,000 – – – 2,500,000 – – – 2,500,000 2,500,000 – – – 2,500,000
		14,452,486 –
		14,452,486
		50,681,097
		(36,078,801) –
		(36,078,801)
		14,602,296
		12,713,627 –
		12,713,627
		27,315,923
		(1,168,498) –
		(1,168,498)
		26,147,425

		14,602,296
		5,910,695 –
		5,910,695
		20,512,991

Note:

In accordance with the statutory requirements in the PRC, Shenzhen Subsidiary is required to transfer a certain percentage of its annual net income from accumulated profits to statutory reserve. The statutory reserve is not distributable.

– III-6 –

FINANCIAL INFORMATION OF SHENZHEN SUBSIDIARY

APPENDIX III

STATEMENTS OF CASH FLOWS

Cash flows from operating activities Profit/(loss) before tax Adjustments for: Investment and other income Depreciation of property, plant and equipment Loss on disposal of an associate Net losses on disposal of property, plant and equipment Impairment losses recognised on other receivables Write-down of inventories Movements in working capital (Increase)/decrease in inventories (Increase)/decrease in trade receivables (Increase)/decrease in other receivables, deposits and prepayments Increase in amount due from a director (Increase)/decrease in amount due from the immediate holding company (Decrease)/increase in trade payables Increase/(decrease) in accruals and other payables Cash (used in)/generated from operations PRC Enterprise Income Tax paid Net cash (used in)/generated by operating activities	Year ended 31 December 2011 2012 2013 RMB RMB RMB 19,278,833 (34,037,411) 15,847,027 (3,911,589) (2,528,530) (234,075) 1,385,146 91,449 136,243 – 3,000,000 – 7,921 – 7,673 – 56,000,000 5,000,000 – – – 16,760,311 22,525,508 20,756,868 (12,524,511) 5,272,295 16,462,005 (2,572,091) 9,340,000 – (43,406,798) (5,647,241) 696,655 – – (40,000) – – (4,290) (1,760,090) 6,653,082 (7,175,710) 38,591,355 (18,049,396) (40,936,885) (4,911,824) 20,094,248 (10,241,357) (5,035,332) (1,947,476) (3,347,197) (9,947,156) 18,146,772 (13,588,554)	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) 6,960,978 431,389 (207,031) (431,210) 69,145 74,560 – – 7,673 – – 10,000,000 – 129,345 6,830,765 10,204,084 (808,670) 4,431,865 – – 5,329,014 (19,661,570) (72,000) (2,450,000) – 4,290 (4,551,900) 879,233 (25,139,709) (1,445,761) (18,412,500) (8,037,859) (2,751,643) (2,534,638) (21,164,143) (10,572,497)

– III-7 –

FINANCIAL INFORMATION OF SHENZHEN SUBSIDIARY

APPENDIX III

Cash flows from
investing activities
Interest received
Investments in structured
deposits
Investment in an
associate
Proceeds from
redemption of
structured deposits
Proceeds from disposal
of an associate
Payments for property,
plant and equipment
Net cash generated
by/(used in) investing
activities
Net increase/(decrease)
in cash and cash
equivalents
Cash and cash
equivalents at the
beginning of
year/period
Cash and cash
equivalents at the end
of year/period
Analysis of the balances
of cash and cash
equivalents:
Bank balances and cash

Year ended 31 December
Six months ended
30 June
2011
2012
2013
2013
2014
RMB
RMB
RMB
RMB
RMB
(Unaudited)
311,589
128,530
234,075
207,031
211,910
–
–
(8,000,000)
–
–
(10,000,000)
–
–
–
–
26,000,000
–
–
–
8,000,000
–
–
7,000,000
–
–
(1,377,883)
(488,219)
(10,086)
–
(535,000)
14,933,706
(359,689)
(776,011)
207,031
7,676,910
4,986,550
17,787,083 (14,364,565)(20,957,112) (2,895,587)
8,196,317
13,182,867
30,969,950
30,969,950
16,605,385
13,182,867
30,969,950
16,605,385
10,012,838
13,709,798
13,182,867
30,969,950
16,605,385
10,012,838
13,709,798

– III-8 –

FINANCIAL INFORMATION OF SHENZHEN SUBSIDIARY

APPENDIX III

NOTES TO THE FINANCIAL INFORMATION

1. GENERAL INFORMATION OF SHENZHEN SUBSIDIARY

Shenzhen Subsidiary was a limited liability company (solely invested by corporation) established on 3 June 2008 in the PRC. At the date of this report, in the opinion of the directors of Shenzhen Subsidiary, 深圳市精祥科技有限公司 (Shenzhen Sincere Honor Technology Company Limited) (“PRC Company”), a limited liability company (solely invested by corporation in Taiwan, Hong Kong or Macau) established in the PRC, is the immediate holding company; Immense Wisdom Limited, a company incorporated in the British Virgin Islands, is the ultimate holding company. The address of its registered office and principal place of business is Suite 401, Building No. 7 Yuehai Road, Nan Shan Qu, Shenzhen, Guangdong, the PRC.

Shenzhen Subsidiary is principally engaged in the research and development, quality assurance and sale of handheld lottery sales equipment, and the provision of aftersales maintenance services in the PRC.

The Financial Information is presented in Renminbi (“RMB”), which is the same as the function currency of Shenzhen Subsidiary.

English translation name is for identification purpose only.

2. APPLICATION OF HKFRS

For the purposes of preparing and presenting Financial Information for the Relevant Periods, the Shenzhen Subsidiary has adopted all relevant HKFRS, HKAS, amendments and interpretations issued by HKICPA which are effective for annual period beginning on 1 January 2014 consistently throughout the Relevant Periods.

New and revised HKFRS issued but not effective

Amendments to HKFRS Annual Improvements 2010-2012 Cycle[1] Amendments to HKFRS Annual Improvements 2011-2013 Cycle[2] Amendments to HKFRS 9 and Mandatory Effective Date of HKFRS 9 and Transitional HKFRS 7 Disclosures[5] Amendments to HKFRS 11 Accounting for Acquisitions of Interests in Joint Operations[3] HKFRS 9 (2014) Financial Instruments[5] HKFRS 14 Regulatory Deferral Accounts[3] HKFRS 15 Revenue from Contracts with Customers[4] Amendments to HKAS 16 and Clarification of Acceptable Methods of Depreciation and HKAS 38 Amortisation[3] Amendments to HKAS 19 Defined Benefit Plans: Employee Contributions[2] Amendments to HKFRS 10 and Sale or Contribution of Assets between an Investor and its HKAS 28 Associate or Joint Venture[3]

1 Effective for grant date, acquisition date or annual periods beginning on or after 1 July 2014 as appropriate, with earlier application permitted.
2 Effective for annual periods beginning on or after 1 July 2014, with earlier application permitted. 3 Effective for annual periods beginning on or after 1 January 2016, with earlier application permitted.
4 Effective for annual periods beginning on or after 1 January 2017, with earlier application permitted.
5 Effective for annual periods beginning on or after 1 January 2018, with earlier application permitted.

The directors of Shenzhen Subsidiary anticipate the application of these new and revised HKFRS will have no material impact on the Financial Information.

– III-9 –

FINANCIAL INFORMATION OF SHENZHEN SUBSIDIARY

APPENDIX III

3. SIGNIFICANT ACCOUNTING POLICIES

Statement of compliance

The Financial Information has been prepared in accordance with the HKFRS (which include all applicable HKAS, amendments and interpretations) issued by the HKICPA except that, as explained in Note 16, Shenzhen Subsidiary is unable to fulfil the requirements of HKAS 28 (2011) “Investments in Associates and Joint Ventures” and HKFRS 12 “Disclosure of Interests in Other Entities” for its investment in an associate. In addition, the Financial Information includes applicable disclosures required by the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited.

Basis of preparation

Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, Shenzhen Subsidiary takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in the Financial Information is determined on such a basis, except for share-based payment transactions that are within the scope of HKFRS 2, leasing transactions that are within the scope of HKAS 17, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in HKAS 2 or value in use in HKAS 36.

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.

The principal accounting policies are set out below.

Investment in an associate

An associate is an entity over which Shenzhen Subsidiary has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those polices.

– III-10 –

FINANCIAL INFORMATION OF SHENZHEN SUBSIDIARY

APPENDIX III

The results and assets and liabilities of the associate are incorporated in the Financial Information using the equity method of accounting, except when the investment, or a portion thereof, is classified as held for sale, in which case it is accounted for in accordance with HKFRS 5. Under the equity method, an investment in an associate is initially recognised in the statements of financial position at cost and adjusted thereafter to recognise the Shenzhen Subsidiary’s share of the profit or loss and other comprehensive income of the associate. When the Shenzhen Subsidiary’s share of losses of an associate exceeds the Shenzhen Subsidiary’s interest in that associate (which includes any long-term interests that, in substance, form part of Shenzhen Subsidiary’s net investment in the associate), Shenzhen Subsidiary discontinues recognising its share of further losses. Additional losses are recognised only to the extent that Shenzhen Subsidiary has incurred legal or constructive obligations or made payments on behalf of the associate.

An investment in an associate is accounted for using the equity method from the date on which the investee becomes an associate. On acquisition of the investment in an associate, any excess of the cost of the investment over the Shenzhen Subsidiary’s share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Shenzhen Subsidiary’s share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which the investment is acquired.

The requirements of HKAS 39 are applied to determine whether it is necessary to recognise any impairment loss with respect to Shenzhen Subsidiary’s investment in an associate. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with HKAS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with HKAS 36 to the extent that the recoverable amount of the investment subsequently increases.

When Shenzhen Subsidiary reduces its ownership interest in an associate but Shenzhen Subsidiary continues to use the equity method, Shenzhen Subsidiary reclassifies to profit or loss the proportion of the gain or loss that had previously been recognised in other comprehensive income relating to that reduction in ownership interest if that gain or loss would be reclassified to profit or loss on the disposal of the related assets or liabilities.

When a group entity transacts with an associate of Shenzhen Subsidiary (such as a sale or contribution of assets), profits and losses resulting from the transactions with the associate are recognised in the Financial Information only to the extent of interests in the associate that are not related to Shenzhen Subsidiary.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances.

Revenue from the supply of the handheld lottery sales equipment is recognised when the handheld lottery sales equipment is supplied to the customer.

Revenue from research and development and aftersales maintenance and other services is recognised when the services are rendered, the revenue can be reliably estimated and it is probable that the revenue will be received.

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to Shenzhen Subsidiary and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

– III-11 –

FINANCIAL INFORMATION OF SHENZHEN SUBSIDIARY

APPENDIX III

Leasing

Shenzhen Subsidiary as lessee

Foreign currencies

In preparing the Financial Information of the entity, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of the Relevant Periods, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for:

exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings;
exchange differences on transactions entered into in order to hedge certain foreign currency risks; and
exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on repayment of the monetary items.

Borrowing costs

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Retirement benefit costs

Payments to state-managed retirement benefit schemes are recognised as an expense when employees have rendered services entitling them to the contributions.

Taxation

Income tax expense represents the sum of tax currently payable and deferred tax.

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Current tax

The tax currently payable is based on taxable profit for the year/period. Taxable profit differs from “profit/(loss) before tax” as reported in the statements of profit or loss and other comprehensive income because of items of income or expense that are taxable or deductible in other years/periods and items that are never taxable or deductible. Shenzhen Subsidiary’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the Relevant Periods.

Deferred tax

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in associates, except where Shenzhen Subsidiary is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which Shenzhen Subsidiary expects, at the end of the Relevant Periods, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax for the year/period

Property, plant and equipment

Property, plant and equipment are stated in the statements of financial position at cost, less subsequent accumulated depreciation and subsequent accumulated impairment losses, if any.

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Intangible assets

Intangible assets acquired separately

Internally-generated intangible assets - research and development expenditure

Expenditure on research activities is recognised as an expense in the year/period in which it is incurred.

Derecognition of intangible assets

Impairment of tangible assets

At the end of each of the Relevant Periods, Shenzhen Subsidiary reviews the carrying amounts of its tangible assets with finite useful lives to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, Shenzhen Subsidiary estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less costs of sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

Inventories

Provisions

Provisions are recognised when Shenzhen Subsidiary has a present obligation (legal or constructive) as a result of a past event, it is probable that Shenzhen Subsidiary will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

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Financial instruments

Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions of the instrument.

Financial assets

Shenzhen Subsidiary’s financial assets are classified into financial assets at fair value through profit or loss (“FVTPL”) and loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Effective interest method

Income is recognised on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL.

Financial assets at FVTPL

Financial assets are classified as at FVTPL when the financial asset is either held for trading or it is designated as at FVTPL.

A financial asset is classified as held for trading if:

it has been acquired principally for the purpose of selling it in the near term; or
on initial recognition it is part of a portfolio of identified financial instruments that Shenzhen Subsidiary manages together and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.

A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial recognition if:

such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with Shenzhen Subsidiary’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

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APPENDIX III

it forms part of a contract containing one or more embedded derivatives, and HKAS 39 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL.

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the statements of profit or loss and other comprehensive income. Fair value is determined in the manner described in Note 6 to the Financial Information.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables (including trade receivables, other receivables and deposits, amount due from a director, amount due from the immediate holding company and bank balances and cash) are measured at amortised cost using the effective interest method, less any impairment.

Interest income is recognised by applying the effective interest rate, except for short-term receivables where the recognition of interest would be immaterial.

Impairment of financial assets

Shenzhen Subsidiary’s financial assets are assessed for indicators of impairment at the end of each of the Relevant Periods. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include Shenzhen Subsidiary’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables.

Financial liabilities and equity instruments

Classification as debt or equity

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Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by Shenzhen Subsidiary are recognised at the proceeds received, net of direct issue costs.

Other financial liabilities

Other financial liabilities (including trade payables and accruals and other payables) are subsequently measured at amortised cost using the effective interest method.

Effective interest method

Interest expense is recognised on an effective interest basis.

Derecognition

Shenzhen Subsidiary derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If Shenzhen Subsidiary neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, Shenzhen Subsidiary continues to recognise the asset to the extent of its continuing involvement and recognises an associated liability. If Shenzhen Subsidiary retains substantially all the risks and rewards of ownership of a transferred financial asset, Shenzhen Subsidiary continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

On derecognition of a financial asset other than in its entirety, Shenzhen Subsidiary allocates the previous carrying amount of the financial asset between the part it continues to recognise, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in other comprehensive income is recognised in profit or loss. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts.

Shenzhen Subsidiary derecognises financial liabilities when, and only when, Shenzhen Subsidiary’s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Related parties

A party is considered to be related to Shenzhen Subsidiary if:

(i) the party is a person or a close member of that person’s family and that person,
(a) has controls or joint control over Shenzhen Subsidiary;
(b) has significant influence over Shenzhen Subsidiary; or
(c) is a member of the key management personnel of Shenzhen Subsidiary or of a parent of Shenzhen Subsidiary;

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APPENDIX III

(ii) the party is an entity where any of the following conditions applies:
(a) the entity and Shenzhen Subsidiary are members of the same group;
(b) one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the other entity);
(c) the entity and Shenzhen Subsidiary are joint ventures of the same third party;
(d) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
(e) the entity is a post-employment benefit plan for the benefit of employees of either Shenzhen Subsidiary or an entity related to Shenzhen Subsidiary;
(f) the entity is controlled or jointly controlled by a person identified in (i); and
(g) a person identified in (i)(a) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

Cash and cash equivalents

For the purpose of the statements of cash flows, cash and cash equivalents comprise cash on hand and demand deposits, and short term highly liquid investments that are readily convertible into known amounts of cash, are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, which are repayable on demand and form an integral part of Shenzhen Subsidiary’s cash management.

For the purpose of the statements of financial position, cash and cash equivalents comprise cash on hand and at banks, including term deposits, and assets similar in nature to cash, which are not restricted as to use.

4. KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Shenzhen Subsidiary’s accounting policies, which are described in Note 3, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and underlying assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

Depreciation of property, plant and equipment

Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives, after taking into account their estimated residual value. Shenzhen Subsidiary assesses annually the residual value and the useful lives of the property, plant and equipment. If the expectation differs from the original estimate, such difference will impact the depreciation and the amortisation charge in the period in which such estimate is changed.

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Estimated impairment of trade and other receivables

Shenzhen Subsidiary estimates the provisions for impairment of trade and other receivables by assessing their recoverability based on credit history and prevailing marking conditions. This requires the use of estimates and judgements. Provisions are applied to trade and other receivables where events or changes in circumstances indicate that the balances may not be collectible. Where the expectation is different from the original estimate, such difference will affect the carrying amount of trade and other receivables and thus the impairment loss in the period in which such estimate is changed. Shenzhen Subsidiary reassesses the provisions at the end of each of the Relevant Periods.

Estimated write-down of inventories

5. CAPITAL RISK MANAGEMENT

Shenzhen Subsidiary manages its capital with a view to maximising the return to shareholders through the optimisation of the debt and equity balance. Shenzhen Subsidiary’s overall strategy remains unchanged throughout the Relevant Periods.

The capital structure of the Shenzhen Subsidiary consists of net debt, which includes borrowings net of cash and cash equivalents and equity attributable to owners of Shenzhen Subsidiary, comprising paid-in capital and reserves.

The directors of Shenzhen Subsidiary review the capital structure on a continuous basis taking into account the cost of capital and the risks associated with each class of capital. Shenzhen Subsidiary will balance its overall capital structure through the new share issues as well as issue of new debts.

Shenzhen Subsidiary is not subject to any externally imposed capital requirements.

6. FINANCIAL INSTRUMENTS

(a) Categories of financial instruments

Financial assets Financial assets at FVTPL Loans and receivables (including cash and cash equivalents) Financial liabilities Amortised cost	At 31 December 2011 2012 RMB RMB – – 77,466,215 46,578,228 33,685,729 23,443,832	2013 RMB 8,000,000 19,541,694 6,165,829	At 30 June 2014 RMB – 28,872,858

			6,918,616

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APPENDIX III

(b) Financial risk management objectives and policies

Shenzhen Subsidiary’s major financial instruments include trade receivables, other receivables and deposits, structured deposits, amount due from a director, amount due from the immediate holding company, bank balances and cash, trade payables and accruals and other payables.

There has been no change to the types of Shenzhen Subsidiary’s exposure in respect of financial instruments or the manner in which it manages and measures the risks throughout the Relevant Periods.

Interest rate risk

Shenzhen Subsidiary’s bank balances have exposure to cash flow interest rate risk due to the fluctuation of the prevailing market interest rate on bank balances. Shenzhen Subsidiary is also exposed to fair value interest rate risk related primarily to its fixed deposits held at banks with original maturity over three months. The directors of Shenzhen Subsidiary consider the Shenzhen Subsidiary’s exposure of fair value interest rate risk on fixed deposits is not significant as the interest bearing fixed deposits are within short maturity period.

The directors of Shenzhen Subsidiary consider Shenzhen Subsidiary’s exposure of the cash flow interest rate risk on its bank balances is insignificant. Therefore, no sensitivity analysis is presented.

Credit risk

At the end of the Relevant Periods, Shenzhen Subsidiary’s maximum exposure to credit risk which will cause a financial loss to Shenzhen Subsidiary due to failure to discharge an obligation by the counterparties provided by Shenzhen Subsidiary is arising from the carrying amount of the respective recognised financial assets as stated in the statements of financial position.

In order to minimise the credit risk, the management of the Shenzhen Subsidiary reviews the recoverable amount of each individual trade and other receivables at the end of the Relevant Periods to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the management considers that the credit risk of Shenzhen Subsidiary is significantly reduced.

The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies or with good reputation.

There is significant centration of credit risk on loan receivables from few debtors accounted for 97%, 57%, 78% and 92% of the carrying amounts of other receivables, deposits and prepayments as at 31 December 2011, 2012 and 2013 and 30 June 2014, respectively. In order to minimise the credit risk, the management continuously monitor the level of exposure by frequent review of the credit evaluation of the financial condition and credit quality of its customers to ensure that prompt actions will be taken to lower exposure.

Liquidity risk

In the management of the liquidity risk, Shenzhen Subsidiary monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Shenzhen Subsidiary’s operations and mitigate the effects of fluctuations in cash flows.

– III-20 –

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Liquidity tables

The following table details Shenzhen Subsidiary’s remaining contractual maturity for its non-derivative financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Shenzhen Subsidiary can be required to pay, and includes both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from current interest rate at the end of each of the Relevant Periods.

Weighted average interest rate % At 31 December 2011 Non-derivative financial liabilities Trade payables N/A Accruals and other payables N/A At 31 December 2012 Non-derivative financial liabilities Trade payables N/A Accruals and other payables N/A At 31 December 2013 Non-derivative financial liabilities Trade payables N/A Accruals and other payables N/A At 30 June 2014 Non-derivative financial liabilities Trade payables N/A Accruals and other payables N/A	On demand or within 1 year Total undiscounted cash flows RMB RMB 6,350,072 6,350,072 27,335,657 27,335,657 33,685,729 33,685,729 13,003,154 13,003,154 10,440,678 10,440,678 23,443,832 23,443,832 5,827,444 5,827,444 338,385 338,385 6,165,829 6,165,829 6,706,677 6,706,677 211,939 211,939 6,918,616 6,918,616	Carrying amounts RMB 6,350,072 27,335,657
		33,685,729

		13,003,154 10,440,678
		23,443,832

		5,827,444 338,385
		6,165,829

		6,706,677 211,939
		6,918,616

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FINANCIAL INFORMATION OF SHENZHEN SUBSIDIARY

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(c) Fair value measurements

As at 31 December 2013, some of Shenzhen Subsidiary’s financial assets are measured at fair value. The following table gives information about how the fair values of these financial assets are determined (in particular, the valuation technique(s) and inputs used).

Fair Relationship of Financial Fair value as at 31 value Valuation technique(s) unobservable inputs to assets December 2013 hierarchy and key input(s) fair value Structured Bank deposits in PRC Level 3 Discounted cash flows The higher the expected deposits with non-closely yield, the higher the related embedded Key unobservable inputs: fair value derivative: expected yields of RMB8,000,000 money market The higher the discount instruments and debt rate, the lower the fair instruments invested by value banks and a discount rate that reflects credit risk of the bank (Note)

Note: The directors consider that the impact of the fluctuation in expected yields of the money market instruments and debt instruments to the fair value of the structured deposits was insignificant as the deposits have short maturities, and therefore no sensitivity analysis is presented.

7. REVENUE AND SEGMENT INFORMATION

Shenzhen Subsidiary has been operating in one operating and reportable segment, being research and development, quality assurance and sale of handheld lottery sales equipment, and the provision of aftersales maintenance services in the PRC. The board of directors of Shenzhen Subsidiary, being the chief operating decision maker, regularly review revenue analysis by nature and the Shenzhen Subsidiary for the Relevant Periods to make decisions about resources allocation and performance assessment. No segment information is presented other than entity-wide disclosures as no other discrete financial information is available for the assessment of performance and resources of Shenzhen Subsidiary’s business activities.

– III-22 –

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APPENDIX III

The following table summarises the categories of Shenzhen Subsidiary’s revenue during the Relevant Periods:

Sale of handheld lottery sales equipment Research and development and aftersales maintenance services	Year ended 31 December 2011 2012 2013 RMB RMB RMB 49,628,236 65,913,783 52,611,919 3,770,859 5,927,023 8,942,927 53,399,095 71,840,806 61,554,846	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) 13,246,025 26,017,168 3,972,446 4,260,481 17,218,471 30,277,649	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) 13,246,025 26,017,168 3,972,446 4,260,481 17,218,471 30,277,649
			30,277,649

No geographical information is presented as substantially all of Shenzhen Subsidiary’s operations, external customers and non-current assets are located in the PRC.

Information about major customer

Revenue from customer of corresponding years/periods contributing over 10% of total revenue of Shenzhen Subsidiary is as follows:

Year ended 31 December 2011 2012 2013 RMB RMB RMB Customer A 53,373,815 71,837,087 61,530,326 8. INVESTMENT AND OTHER INCOME	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) 17,205,514 30,277,649	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) 17,205,514 30,277,649

Interest income on: Bank deposits Other loans receivables	Year ended 31 December 2011 2012 2013 RMB RMB RMB 311,589 128,530 228,075 3,600,000 2,400,000 6,000 3,911,589 2,528,530 234,075	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) 204,031 208,910 3,000 222,300 207,031 431,210	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) 204,031 208,910 3,000 222,300 207,031 431,210
			431,210

9. OTHER GAINS AND LOSSES

									Six months ended	Six months ended
						Year	ended 31 December		30 June
						2011	2012	2013	2013	2014
						RMB	RMB	RMB	RMB	RMB
									(Unaudited)
Loss	on	disposal	of	an	associate	–	3,000,000	–	–	–

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10. INCOME TAX EXPENSE

Current tax: PRC Enterprise Income Tax Deferred tax: (Note 26) Current year charge/(credit) Total income tax recognised in profit or loss	Year ended 31 December 2011 2012 2013 RMB RMB RMB 3,926,347 2,941,390 3,133,400 900,000 (900,000) – 4,826,347 2,041,390 3,133,400	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) 1,050,283 1,566,992 – 32,895 1,050,283 1,599,887	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) 1,050,283 1,566,992 – 32,895 1,050,283 1,599,887
			1,599,887

Under the Law of the PRC on Enterprise Income Tax (the “EIT Law”) and Implementation Regulations of the EIT Law, the tax rate of Shenzhen Subsidiary was 25% for the year ended 31 December 2011. On 10 September 2012, Shenzhen Subsidiary obtained “High Technology Enterprise” status that entitles it a preferential tax rate of 15% for the three years ending 31 December 2014 according to the EIT Law. Shenzhen Subsidiary was therefore subject to 15% tax rate since year 2012. Shenzhen Subsidiary will be subject to obtaining the renewal for preferential tax rate of 15% and would be taxed at 25% starting from year 2015 if such renewal is not granted.

The income tax expense for the Relevant Periods can be reconciled to the profit/(loss) before tax per the statements of profit or loss and other comprehensive income as follows:

Profit/(loss) before tax Tax at the PRC Enterprise Income Tax rate of 25% Tax effect of expenses not deductible for tax purpose Tax effect of taxable temporary differences Income tax on concessionary tax rate Income tax expense for the Relevant Periods	Year ended 31 December 2011 2012 2013 RMB RMB RMB 19,278,833 (34,037,411) 15,847,027 4,819,708 (8,509,353) 3,961,757 6,639 14,011,670 1,260,576 – (900,000) – – (2,560,927) (2,088,933) 4,826,347 2,041,390 3,133,400	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) 6,960,978 431,389 1,740,245 107,847 6,136 2,535,179 – – (696,098) (1,043,139) 1,050,283 1,599,887	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) 6,960,978 431,389 1,740,245 107,847 6,136 2,535,179 – – (696,098) (1,043,139) 1,050,283 1,599,887

			107,847 2,535,179 – (1,043,139)
			1,599,887

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APPENDIX III

11. PROFIT FOR THE RELEVANT PERIODS

Profit for the Relevant Periods has been arrived at after charging:

Auditors’ remuneration Cost of inventories recognised as an expense Write-down of inventories (recognised in cost of sales) Depreciation of property, plant and equipment Net losses on disposals of property, plant and equipment Operating lease rentals in respect of rented premises Impairment losses recognised on other receivables Research and development costs Employee benefits expense, including directors’ remunerations (Note 12): Salaries and other benefits Retirement benefits scheme contributions	Year ended 31 December 2011 2012 2013 RMB RMB RMB 5,000 5,000 4,000 28,260,437 42,976,910 33,588,240 – – – 1,385,146 91,449 136,243 7,921 – 7,673 366,540 348,068 576,475 – 56,000,000 5,000,000 5,295,049 1,505,107 2,589,426 1,673,242 1,873,056 1,994,680 114,892 148,891 178,003 1,788,134 2,021,947 2,172,683	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) 4,000 – 8,526,964 16,947,231 – 129,345 76,818 74,560 7,673 – 202,182 316,999 – 10,000,000 50,544 925,155 952,075 822,256 90,357 80,865 1,042,432 903,121	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) 4,000 – 8,526,964 16,947,231 – 129,345 76,818 74,560 7,673 – 202,182 316,999 – 10,000,000 50,544 925,155 952,075 822,256 90,357 80,865 1,042,432 903,121

			822,256 80,865
			903,121

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APPENDIX III

12. DIRECTORS’ EMOLUMENTS

Details of the emoluments paid and payable to each of the directors of Shenzhen Subsidiary for the Relevant Periods were as follows:

For the year ended 31 December 2011 Mr. Li Ming For the year ended 31 December 2012 Mr. Li Ming Mr. Zhang Liangwei (note) Ms. Xu Qun (note) For the year ended 31 December 2013 Mr. Li Ming Mr. Zhang Liangwei (note) Ms. Xu Qun (note) For the six months ended 30 June 2014 Mr. Li Ming Mr. Zhang Liangwei (note) Ms. Xu Qun (note) For the six months ended 30 June 2013 (Unaudited) Mr. Li Ming Mr. Zhang Liangwei (note) Ms. Xu Qun (note)	Fees RMB – – – – – – – – – – – – – – – – –	Salaries and other benefits Contributions to retirement benefits schemes RMB RMB 84,900 – 88,400 – 81,800 – 222,800 – 393,000 – 88,400 – 90,800 – 248,400 – 427,600 – 40,800 – 42,900 – 125,700 – 209,400 – 40,800 – 42,900 – 104,100 – 187,800 –	Total emoluments RMB 84,900

			88,400 81,800 222,800
			393,000

			88,400 90,800 248,400
			427,600

			40,800 42,900 125,700
			209,400

			40,800 42,900 104,100
			187,800

Note: Appointed on 16 August 2012

None of the directors of Shenzhen Subsidiary waived any emoluments during the Relevant Periods.

– III-26 –

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APPENDIX III

13. FIVE HIGHEST PAID INDIVIDUALS’ EMOLUMENTS

Of the five individuals with the highest emoluments in Shenzhen Subsidiary, one, two, one, one and one were directors of Shenzhen Subsidiary for the years ended 31 December 2011, 2012 and 2013 and the six months ended 30 June 2013 (unaudited) and 2014 respectively. Details of whose emoluments are included in the disclosures above. The emoluments of the remaining four, three, four, four and four highest paid individuals for the years ended 31 December 2011, 2012 and 2013 and the six months ended 30 June 2013 (unaudited) and 2014 respectively were as follows:

Salaries and other benefits Retirement benefits scheme contributions	Year ended 31 December 2011 2012 2013 RMB RMB RMB 625,500 488,300 640,900 18,629 26,534 44,524 644,129 514,834 685,424	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) 295,400 326,400 22,079 23,700 317,479 350,100	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) 295,400 326,400 22,079 23,700 317,479 350,100
			350,100

Their emoluments were all within HK$1,000,000.

During the Relevant Periods, no emolument was paid by Shenzhen Subsidiary to any of the directors or any of the five individuals with the highest emoluments in the Shenzhen Subsidiary as an inducement to join or upon joining the Shenzhen Subsidiary or as compensation for loss of office.

14. EARNINGS PER SHARE

No earnings per share information is presented as its inclusion, for the purpose of this report, is not considered meaningful.

– III-27 –

FINANCIAL INFORMATION OF SHENZHEN SUBSIDIARY

APPENDIX III

15. PROPERTY, PLANT AND EQUIPMENT

COST Balance at 1 January 2011 Additions Disposals Balance at 31 December 2011 Additions Balance at 31 December 2012 Additions Disposals Balance at 31 December 2013 Additions Balance at 30 June 2014 ACCUMULATED DEPRECIATION Balance at 1 January 2011 Depreciation expense Eliminated on disposals of assets Balance at 31 December 2011 Depreciation expense Balance at 31 December 2012 Depreciation expense Eliminated on disposals of assets Balance at 31 December 2013 Depreciation expense Balance at 30 June 2014 CARRYING AMOUNTS Balance at 31 December 2011 Balance at 31 December 2012 Balance at 31 December 2013 Balance at 30 June 2014	Plant and machinery RMB 3,261,512 806,154 – 4,067,666 – 4,067,666 – – 4,067,666 535,000 4,602,666 2,838,538 945,151 – 3,783,689 – 3,783,689 – – 3,783,689 – 3,783,689 283,977 283,977 283,977 818,977	Motor vehicles RMB 212,070 – – 212,070 406,487 618,557 – – 618,557 – 618,557 41,354 38,173 – 79,527 62,562 142,089 111,340 – 253,429 55,670 309,099 132,543 476,468 365,128 309,458	Computer equipment RMB 16,374 552,479 – 568,853 78,632 647,485 2,821 – 650,306 – 650,306 3,439 376,395 – 379,834 24,257 404,091 2,462 – 406,553 1,231 407,784 189,019 243,394 243,753 242,522	Furniture, fixtures and equipment RMB 132,709 19,250 (11,738) 140,221 3,100 143,321 7,265 (18,490) 132,096 – 132,096 36,599 25,427 (3,817) 58,209 4,630 62,839 22,441 (10,817) 74,463 17,659 92,122 82,012 80,382 57,633 39,974	Total RMB 3,622,665 1,377,883 (11,738)
					4,988,810 488,219
					5,477,029 10,086 (18,490)
					5,468,625 535,000
					6,003,625

					2,919,930 1,385,146 (3,817)
					4,301,259 91,449
					4,392,708 136,243 (10,817)
					4,518,134 74,560
					4,592,694

					687,551

					1,084,321

					950,491

					1,410,931

– III-28 –

FINANCIAL INFORMATION OF SHENZHEN SUBSIDIARY

APPENDIX III

Plant and machinery	20%
Motor vehicles	20%
Computer equipment	20%
Furniture, fixtures and equipment	20%

16. INVESTMENT IN AN ASSOCIATE

					December		June
				2011	2012	2013	2014
				RMB	RMB	RMB	RMB
Unlisted	investment,	at	cost	10,000,000	–	–	–

As at the end of each of the Relevant Periods, Shenzhen Subsidiary had interests in the following associate:

Name of entity Registered capital Place of establishment/ operation Hunan Xunbun RMB50,000,000 PRC	Attributable interest to Shenzhen Subsidiary At 31 December At 30 June Principal activities 2011 2012 2013 2014 20% – – – Research and development of electronic products

On 20 May 2011, Shenzhen Subsidiary acquired 20% equity interest of Hunan Xunbun, a limited company established in the PRC, from an independent third party for a cash consideration of RMB10,000,000. On 4 December 2012, Shenzhen Subsidiary disposed of its 20% equity interest of Hunan Xunbun to an independent third party in exchange for a cash consideration RMB7,000,000.

Hunan Xunbun has not prepared any financial information in accordance with HKFRS for each of the two years ended 31 December 2011 and 2012. Accordingly for the preparation of the Financial Information for the years ended 31 December 2011 and 2012, Shenzhen Subsidiary was accordingly not in a position to (i) equity account for its share of results of Hunan Xunbun for the years ended 31 December 2011 and 2012 and share of net assets of Hunan Xunbun as at 31 December 2011 and at the date of its disposal; (ii) assess whether any impairment of its interest in Hunan Xunbun was necessary as at 31 December 2011; and (iii) disclose the summarised financial information of Hunan Xunbun for each of the two years ended 31 December 2011 and 2012.

17. INVENTORIES

Raw materials Finished goods	At 31 December 2011 2012 RMB RMB 1,557,009 17,699,973 36,432,493 15,017,234 37,989,502 32,717,207	2013 RMB 1,900,469 14,354,733 16,255,202	At 30 June 2014 RMB 10,517,856 1,176,136
			11,693,992

Shenzhen Subsidiary recorded write-down of inventories in the amount of RMB129,345 for the six month period ended 30 June 2014 and such amounts had been included in cost of sales.

– III-29 –

FINANCIAL INFORMATION OF SHENZHEN SUBSIDIARY

APPENDIX III

18. TRADE RECEIVABLES

			December		June
		2011	2012	2013	2014
		RMB	RMB	RMB	RMB
Trade	receivables	9,340,000	–	–	–

The average credit period was 60 days during the year ended 31 December 2011, while starting from the year 2012, trade receivables were normally received in advance. No interest is charged on overdue trade receivables. The following is an analysis of trade receivables by age, presented based on the terms of the related the invoice date, which approximate the respective revenue recognition dates:

					December		June
				2011	2012	2013	2014
				RMB	RMB	RMB	RMB
0	to	30	days	9,340,000	–	–	–

Before accepting any new customer, Shenzhen Subsidiary assesses the potential customer’s credit quality and defines credit limits by customer. As at 31 December 2011, 100% of the trade receivables with high credit quality (based on historical settlement record) are neither past due nor impaired. All of the trade receivables balance was due from the Shenzhen Subsidiary’s largest customer.

19. OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS

Prepayments Rental and utility deposits Consideration receivable in relation to disposal of an associate (Note 17) Other receivables Loan and interest receivables Impairment loss recognised Less: loan receivables classified as non-current assets	At 31 December 2011 2012 RMB RMB 1,623,948 6,259 92,526 92,526 – 7,000,000 250,822 215,752 1,967,296 7,314,537 54,600,000 64,300,000 – (56,000,000) 56,567,296 15,614,537 – (1,000,000) 56,567,296 14,614,537	2013 RMB 25,863 153,522 – 463,497 642,882 63,275,000 (61,000,000) 2,917,882 – 2,917,882	At 30 June 2014 RMB 125,692 150,522 – 758,238
			1,034,452 82,764,300 (71,000,000)
			12,798,752 –
			12,798,752

During the years ended 31 December 2011, 2012 and 2013 and the six months ended 30 June 2014, Shenzhen Subsidiary recognised impairment loss in respect of loan and interest receivables amounting to Nil, RMB56,000,000, RMB5,000,000 and RMB10,000,000, respectively. The impaired loan and interest receivables are due from independent third parties experiencing financial difficulties that were delinquency of payments.

As at 31 December 2011 and 2012, an unsecured loan receivable amounting to RMB50,000,000 and RMB50,000,000 bears interest at 12% per annum, respectively. At 30 June 2014, certain of loan receivables amounting to RMB19,300,000 are secured by pledged securities or personal guarantees by independent third parties which bear interest at 6% per annum. The other loan receivables are unsecured and interest-free.

– III-30 –

FINANCIAL INFORMATION OF SHENZHEN SUBSIDIARY

APPENDIX III

20. STRUCTURED DEPOSITS

The structured deposits as at 31 December 2013 consist of deposits of RMB8,000,000 denominated in RMB and were issued by banks in the PRC. The structured deposits carry interest at expected interest rate that range from 2% to 4% per annum, which is linked to the performance of the underlying money market instruments and debt instruments, and have no fixed term of maturity. The structured deposits are designated at fair value through profit or loss on initial recognition as they contain non-closely related embedded derivative. The directors consider the fair values of the structured deposits, approximate their carrying values.

All the structured deposits were redeemed in March 2014. Fair value changes for those deposits were not recognised for the year ended 31 December 2013 as the effect is insignificant.

21. AMOUNT DUE FROM A DIRECTOR

At 31 December At 30 June 2011 2012 2013 2014 RMB RMB RMB RMB Ms. Xu Qun – – 40,000 2,490,000	Maximum balance outstanding
	At 31 December At 30 June 2011 2012 2013 2014 RMB RMB RMB RMB – – 500,000 2,490,000

The amount due was unsecured, interest-free and repayable on demand.

22. AMOUNT DUE FROM THE IMMEDIATE HOLDING COMPANY

The amount due was unsecured, interest-free and repayable on demand.

23. BANK BALANCES AND CASH

Cash held at banks earn interest at floating rates based on daily bank deposit rates. As at the end of each of the Relevant Periods, substantially all of Shenzhen Subsidiary’s cash and bank balances were denominated in RMB which are not a freely convertible currency in the international market. The government of the PRC has implemented foreign exchange control and the remittance of these funds out of the PRC is subject to exchange restrictions imposed by the government of the PRC.

24. TRADE PAYABLES

The following is an analysis of trade payables by age based on the invoice date:

0 to 30 days 31 to 60 days 91 to 120 days 121 to 365 days Over 365 days	At 31 December 2011 2012 RMB RMB 709,243 12,277,693 – 280 123,376 128 5,473,443 724,213 44,010 840 6,350,072 13,003,154	2013 RMB – – 42,949 5,121,697 662,798 5,827,444	At 30 June 2014 RMB – 595,577 265,115 5,201,151 644,834
			6,706,677

The average credit period ranged from 7 to 90 days during the Relevant Periods.

– III-31 –

FINANCIAL INFORMATION OF SHENZHEN SUBSIDIARY

APPENDIX III

25. ACCRUALS AND OTHER PAYABLES

Advances from customers Payroll and welfare payables Other tax payables and tax surcharges Loan payable Other payables and accrued charges	At 31 December 2011 2012 RMB RMB 40,381,005 39,496,165 297,107 319,759 518,400 248,823 27,000,000 10,000,000 38,550 120,919 68,235,062 50,185,666	2013 RMB 7,911,877 275,835 998,519 – 62,550 9,248,781	At 30 June 2014 RMB 6,950,385 152,389 640,696 – 59,550
			7,803,020

The above loan and other payables are unsecured, interest free and repayable on demand.

26. DEFERRED TAXATION

The following are the major deferred tax liabilities recognised and movements thereon during the Relevant Periods:

Balance at 1 January 2011 Charge to profit or loss Balance at 31 December 2011 Effect of change in tax rate Credit to profit or loss Balance at 31 December 2012 and 31 December 2013 Charge to profit or loss Balance at 30 June 2014	Taxable temporary differences RMB – 900,000
	900,000 (600,000) (300,000)
	– 32,895
	32,895

27. PAID-IN CAPITAL

Paid-in capital in the statements of financial position at the end of each of the Relevant Periods represents the fully paid registered capital of RMB5,000,000 of Shenzhen Subsidiary.

28. RETIREMENT BENEFIT SCHEMES

The employees of Shenzhen Subsidiary are members of state-managed retirement benefits scheme operated by the PRC government. Shenzhen Subsidiary is required to contribute a specific percentage of the total monthly basic salaries to the retirement benefits scheme. The only obligation of Shenzhen Subsidiary with respect to the retirement benefits schemes is to make the required contributions under the schemes.

– III-32 –

FINANCIAL INFORMATION OF SHENZHEN SUBSIDIARY

APPENDIX III

29. OPERATING LEASE COMMITMENTS

Shenzhen Subsidiary as lessee

At the end of the Relevant Periods, Shenzhen Subsidiary had commitments for future minimum lease payments under non-cancellable operating leases which approximately fall due as follows:

Within one year In the second to fifth years inclusive	At 31 December 2011 2012 RMB RMB 348,068 239,656 239,656 – 587,724 239,656	2013 RMB 628,759 261,983 890,742	At 30 June 2014 RMB 660,196 –
			660,196

Operating lease payments represent rentals payable by Shenzhen Subsidiary in respect of rented premises. Leases are negotiated for terms of one to two years and rentals are fixed over the lease periods. Shenzhen Subsidiary does not have an option to purchase the leased asset at the expiry of the lease period.

30. RELATED PARTY TRANSACTIONS

Other than the balances with related parties as disclosed elsewhere in the Financial Information, during the Relevant Periods, Shenzhen Subsidiary entered into the following significant transactions with related parties:

Compensation of key management personnel

The remuneration of the directors of Shenzhen Subsidiary (who are the key management personnel of Shenzhen Subsidiary) during the Relevant Periods was as follows:

					Six months ended 30	Six months ended 30
		Year	ended 31 December		June
		2011	2012	2013	2013	2014
		RMB	RMB	RMB	RMB	RMB
					(Unaudited)
Short-term	benefits	88,400	393,000	427,600	187,800	209,400

B. EVENTS AFTER THE REPORTING PERIOD

Save as disclosed elsewhere in the Financial Information, no other significant event took place subsequent to 30 June 2014.

C. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of Shenzhen Subsidiary have been prepared in respect of any period subsequent to 30 June 2014.

Yours faithfully,

HLB Hodgson Impey Cheng Limited Certified Public Accountants

Hui Chun Keung, David Practising Certificate Number: P05447 Hong Kong

– III-33 –

FINANCIAL INFORMATION OF SHENZHEN SUBSIDIARY

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF SHENZHEN SUBSIDIARY

1. Business review for the year ended 31 December 2011

1.1 Operating results

For the year ended 31 December 2011, Shenzhen Subsidiary was principally engaged in one operating and reportable segment, being research and development, quality assurance and sale of handheld lottery sales equipment, as well as the provision of aftersales maintenance services of such devices.

Shenzhen Subsidiary generated revenue of approximately RMB53.4 million (equivalent to approximately HK$67.3 million) and gross profit of approximately RMB24.7 million (equivalent to approximately HK$31.1 million) mainly from the sale of handheld lottery sales equipment.

The net profit after tax of Shenzhen Subsidiary was approximately RMB14.5 million (equivalent to approximately HK$18.3 million) for the year ended 31 December 2011.

1.2 Liquidity and financial resources

As at 31 December 2011, Shenzhen Subsidiary recorded net current assets of approximately RMB40.9 million (equivalent to approximately HK$51.5 million), comprising current assets of approximately RMB117.1 million (equivalent to approximately HK$147.5 million), and current liabilities of approximately RMB76.2 million (equivalent to approximately HK$96.0 million). Bank balances and cash amounted to approximately RMB13.2 million (equivalent to approximately HK$16.6 million).

The gearing ratio (calculated as all debts divided by total assets) of Shenzhen Subsidiary as at 31 December 2011 was 0.2.

1.3 Capital structure and foreign exchange risk

For the year ended 31 December 2011, Shenzhen Subsidiary managed its capital with a view to maximising the return to shareholders through the optimisation of the debt and equity balance.

The capital structure of the Shenzhen Subsidiary consists of loan payable of RMB27.0 million (equivalent to approximately HK$34.0 million) and shareholders’ equity of approximately RMB50.7 million (equivalent to approximately HK$63.9 million). The loan payable was advance from a subcontractor of Shenzhen Subsidiary and the amount was unsecured, interest-free and repayable on demand. The loan was fully repaid during the year ended 31 December 2013.

Shenzhen Subsidiary had neither foreign currency hedging activities nor any financial instruments for hedging purposes during the year ended 31 December 2011.

– III-34 –

FINANCIAL INFORMATION OF SHENZHEN SUBSIDIARY

APPENDIX III

1.4 Contingent liabilities and capital commitment

As at 31 December 2011, Shenzhen Subsidiary did not have any material contingent liabilities and capital commitment.

1.5 Significant investments, material acquisitions and disposal

On 20 May 2011, Shenzhen Subsidiary acquired 20% equity interest of Hunan Xunbun, a limited company established in the PRC, from an independent third party for a cash consideration of RMB10.0 million (equivalent to approximately HK$12.6 million). Such investment was classified as investment in an associate in the balance sheet of Shenzhen Subsidiary. Hunan Xunbun was principally engaged in research and development of electronic products.

1.6 Employee and remuneration policies

As at 31 December 2011, Shenzhen Subsidiary had 24 employees. Total staff costs for the year ended 31 December 2011 was approximately RMB1.8 million (equivalent to approximately HK$2.3 million). Remuneration packages for employees principally comprised salaries and wages. The employees of Shenzhen Subsidiary were members of state-managed retirement benefits scheme operated by the PRC government. Shenzhen Subsidiary was required to contribute a specific percentage of the total monthly basic salaries to the retirement benefits scheme. The only obligation of Shenzhen Subsidiary with respect to the retirement benefits scheme was to make the required contributions under the scheme.

1.7 Charge on assets

As at 31 December 2011, no asset was pledged by Shenzhen Subsidiary.

1.8 Future plans for material investments and acquisition of capital assets

There was no specific plan for material investments and acquisition of capital assets as at 31 December 2011.

2. Business review for the year ended 31 December 2012

2.1 Operating results

For the year ended 31 December 2012, Shenzhen Subsidiary was principally engaged in one operating and reportable segment, being research and development, quality assurance and sale of handheld lottery sales equipment, as well as the provision of aftersales maintenance services of such devices.

Shenzhen Subsidiary generated revenue of approximately RMB71.8 million (equivalent to approximately HK$90.5 million) (2011: RMB53.4 million) and gross profit of approximately RMB27.7 million (equivalent to approximately HK$34.9 million) (2011: RMB24.7 million) mainly from the sale of handheld lottery sales equipment. The increase in revenue was mainly attributable to increased demand of provincial lottery authorities in the PRC for the products of Shenzhen Subsidiary.

– III-35 –

FINANCIAL INFORMATION OF SHENZHEN SUBSIDIARY

APPENDIX III

Despite the increase in revenue, Shenzhen Subsidiary recorded net loss after tax of approximately RMB36.1 million (equivalent to approximately HK$45.5 million) (2011: net profit after tax of RMB14.5 million) for the year ended 31 December 2012, primarily due to (a) a loss on disposal of an associate, Hunan Xunbun, of RMB3.0 million (equivalent to approximately HK$3.8 million) (as described in the paragraph headed “2.5 Significant investments, material acquisitions and disposal” below), and (b) an impairment loss in respect of the one-off and fully impaired loan and interest receivables totalling RMB56.0 million (equivalent to approximately HK$70.6 million). The impaired loan was unsecured, beared interest at 12% per annum with maturity date of 26 November 2014. The loan and interest receivables were due from an independent third party at an aim to earn interest income. As such independent third party was experiencing financial difficulties with delinquent payments, the loan was fully impaired.

2.2 Liquidity and financial resources

As at 31 December 2012, Shenzhen Subsidiary recorded net current assets of approximately RMB12.5 million (equivalent to approximately HK$15.8 million), comprising current assets of approximately RMB78.3 million (equivalent to approximately HK$98.7 million), and current liabilities of approximately RMB65.8 million (equivalent to approximately HK$82.9 million). Bank balances and cash amounted to approximately RMB31.0 million (equivalent to approximately HK$39.1 million).

The gearing ratio (calculated as all debts divided by total assets) of Shenzhen Subsidiary as at 31 December 2012 was 0.1 (2011: 0.2).

2.3 Capital structure and foreign exchange risk

For the year ended 31 December 2012, Shenzhen Subsidiary managed its capital with a view to maximising the return to shareholders through the optimisation of the debt and equity balance.

The capital structure of the Shenzhen Subsidiary consists of loan payable of RMB10.0 million (equivalent to HK$12.6 million) and its shareholders’ equity of approximately RMB14.6 million (equivalent to approximately HK$18.4 million). The loan payable was advance from a subcontractor of Shenzhen Subsidiary and the amount was unsecured, interest-free and repayable on demand. The loan was fully repaid during the year ended 31 December 2013.

Shenzhen Subsidiary had neither foreign currency hedging activities nor any financial instruments for hedging purposes during the year ended 31 December 2012.

2.4 Contingent liabilities and capital commitment

As at 31 December 2012, Shenzhen Subsidiary did not have any material contingent liabilities and capital commitment.

2.5 Significant investments, material acquisitions and disposal

On 4 December 2012, Shenzhen Subsidiary disposed of its 20% equity interest in an associate, Hunan Xunbun for a cash consideration of RMB7.0 million (equivalent to approximately HK$8.8 million), recognizing a loss of RMB3.0 million (equivalent to approximately HK$3.8 million).

– III-36 –

FINANCIAL INFORMATION OF SHENZHEN SUBSIDIARY

APPENDIX III

2.6 Employee and remuneration policies

As at 31 December 2012, Shenzhen Subsidiary had 22 employees (2011: 24). Total staff costs for the year ended 31 December 2012 was approximately RMB2.0 million (equivalent to approximately HK$2.5 million) (2011: RMB1.8 million). Remuneration packages for employees principally comprised salaries and wages. The employees of Shenzhen Subsidiary were members of state-managed retirement benefits scheme operated by the PRC government. Shenzhen Subsidiary was required to contribute a specific percentage of the total monthly basic salaries to the retirement benefits scheme. The only obligation of Shenzhen Subsidiary with respect to the retirement benefits scheme was to make the required contributions under the scheme.

2.7 Charge on assets

As at 31 December 2012, no asset was pledged by Shenzhen Subsidiary.

2.8 Future plans for material investments and acquisition of capital assets

There was no specific plan for material investments and acquisition of capital assets as at 31 December 2012.

3. Business review for the year ended 31 December 2013

3.1 Operating results

For the year ended 31 December 2013, Shenzhen Subsidiary was principally engaged in one operating and reportable segment, being research and development, quality assurance and sale of handheld lottery sales equipment, as well as the provision of aftersales maintenance services of such devices.

Shenzhen Subsidiary generated revenue of approximately RMB61.6 million (equivalent to approximately HK$77.6 million) (2012: RMB71.8 million) and gross profit of approximately RMB27.3 million (equivalent to approximately HK$34.4 million) (2012: RMB27.7 million) mainly from the sale of handheld lottery sales equipment. The decrease in revenue was mainly attributable to the fact that unexpectedly high demand for Shenzhen Subsidiary’s products took place in the previous year and sales returned to a relatively stable level for the year ended 31 December 2013.

Despite the drop in revenue, Shenzhen Subsidiary managed to turnaround and achieve net profit after tax of approximately RMB12.7 million (equivalent to approximately HK$16.0 million) (2012: net loss after tax of RMB36.1 million) for the year ended 31 December 2013, primarily due to the fact that impairment loss incurred in respect of the one-off and fully impaired loan receivables only amounted to RMB5.0 million (equivalent to approximately HK$6.3 million) for the year ended 31 December 2013. The impaired loan was unsecured, interest-free with maturity date of 18 October 2014. The loan was due from a subcontractor of Target Group to assist their financing need. As the subcontractor was experiencing financial difficulties with delinquent payments, the loan was fully impaired.

– III-37 –

FINANCIAL INFORMATION OF SHENZHEN SUBSIDIARY

APPENDIX III

3.2 Liquidity and financial resources

As at 31 December 2013, Shenzhen Subsidiary recorded net current assets of approximately RMB26.4 million (equivalent to approximately HK$33.3 million), comprising current assets of approximately RMB43.8 million (equivalent to approximately HK$55.2 million), and current liabilities of approximately RMB17.5 million (equivalent to approximately HK$22.1 million). Bank balances and cash amounted to approximately RMB16.6 million (equivalent to approximately HK$20.9 million), and structured deposits amounted to RMB8.0 million (equivalent to approximately HK$10.1 million).

As Shenzhen Subsidiary had no borrowings, the gearing ratio of Shenzhen Subsidiary as at 31 December 2013 was nil (2012: 0.1).

3.3 Capital structure and foreign exchange risk

A loan payable of RMB10.0 million (equivalent to approximately HK$12.6 million) was fully repaid during the year ended 31 December 2013, after which Shenzhen Subsidiary operated on a debt-free capital structure.

The capital structure of the Shenzhen Subsidiary consists of its shareholders’ equity of approximately RMB27.3 million (equivalent to approximately HK$34.4 million).

Shenzhen Subsidiary had neither foreign currency hedging activities nor any financial instruments for hedging purposes during the year ended 31 December 2013.

3.4 Contingent liabilities and capital commitment

As at 31 December 2013, Shenzhen Subsidiary did not have any material contingent liabilities and capital commitment.

3.5 Significant investments, material acquisitions and disposal

There were no significant investments, material acquisitions and disposals during the year ended 31 December 2013.

3.6 Employee and remuneration policies

As at 31 December 2013, Shenzhen Subsidiary had 21 employees (2012: 22). Total staff costs for the year ended 31 December 2013 was approximately RMB2.2 million (equivalent to approximately HK$2.8 million) (2012: RMB2.0 million). Remuneration packages for employees principally comprised salaries and wages. The employees of Shenzhen Subsidiary were members of state-managed retirement benefits scheme operated by the PRC government. Shenzhen Subsidiary was required to contribute a specific percentage of the total monthly basic salaries to the retirement benefits scheme. The only obligation of Shenzhen Subsidiary with respect to the retirement benefits scheme was to make the required contributions under the scheme.

– III-38 –

FINANCIAL INFORMATION OF SHENZHEN SUBSIDIARY

APPENDIX III

3.7 Charge on assets

As at 31 December 2013, no asset was pledged by Shenzhen Subsidiary.

3.8 Future plans for material investments and acquisition of capital assets

There was no specific plan for material investments and acquisition of capital assets as at 31 December 2013.

4. Business review for the six months ended 30 June 2014

4.1 Operating results

For the six months ended 30 June 2014, Shenzhen Subsidiary was principally engaged in one operating and reportable segment, being research and development, quality assurance and sale of handheld lottery sales equipment, as well as the provision of aftersales maintenance services of such devices.

Shenzhen Subsidiary generated revenue of approximately RMB30.3 million (equivalent to approximately HK$38.2 million) (for the six months ended 30 June 2013: RMB17.2 million) and gross profit of approximately RMB12.8 million (equivalent to approximately HK$16.1 million) (for the six months ended 30 June 2013: RMB8.6 million) mainly from the sale of handheld lottery sales equipment. The increase in revenue was mainly attributable to the fact that larger purchase orders were placed by customer of Shenzhen Subsidiary for delivery during the six months ended 30 June 2014.

Despite the increase in revenue, Shenzhen Subsidiary recorded net loss after tax of approximately RMB1.2 million (equivalent to approximately HK$1.5 million) for the six months ended 30 June 2014 (for the six months ended 30 June 2013: net profit after tax of RMB5.9 million), primarily due to an impairment loss in respect of the one-off and fully impaired overdued loan receivable of RMB10.0 million (equivalent to HK$12.6 million). The impaired loan was secured by pledged securities, interest-free with maturity date of 3 September 2014. The loan was advanced to an independent third party acquainted with a former shareholder of Beijing Subsidiary to assist their financing need. As the independent third party was experiencing financial difficulties with delinquent payments, the loan was fully impaired.

4.2 Liquidity and financial resources

As at 30 June 2014, Shenzhen Subsidiary recorded net current assets of approximately RMB24.8 million (equivalent to approximately HK$31.2 million), comprising current assets of approximately RMB40.7 million (equivalent to approximately HK$51.3 million), and current liabilities of approximately RMB15.9 million (equivalent to approximately HK$20.0 million). Bank balances and cash amounted to approximately RMB13.7 million (equivalent to approximately HK$17.3 million).

– III-39 –

FINANCIAL INFORMATION OF SHENZHEN SUBSIDIARY

APPENDIX III

As Shenzhen Subsidiary had no borrowings, the gearing ratio of Shenzhen Subsidiary as at 30 June 2014 was nil (2013: nil).

4.3 Capital structure and foreign exchange risk

Shenzhen Subsidiary operated on a debt-free capital structure during the six months ended 30 June 2014.

The capital structure of the Shenzhen Subsidiary consists of its shareholders’ equity of approximately RMB26.1 million (equivalent to approximately HK$32.9 million).

Shenzhen Subsidiary had neither foreign currency hedging activities nor any financial instruments for hedging purposes during the six months ended 30 June 2014.

4.4 Contingent liabilities and capital commitment

As at 30 June 2014, Shenzhen Subsidiary did not have any material contingent liabilities and capital commitment.

4.5 Significant investments, material acquisitions and disposal

There were no significant investments, material acquisitions and disposals during the six months ended 30 June 2014.

4.6 Employee and remuneration policies

As at 30 June 2014, Shenzhen Subsidiary had 21 employees (2013: 21). Total staff costs for the six months ended 30 June 2014 was approximately RMB0.9 million (equivalent to approximately HK$1.1 million) (for the six months ended 30 June 2013: RMB1.0 million). Remuneration packages for employees principally comprised salaries and wages. Besides, the employees of Shenzhen Subsidiary were members of state-managed retirement benefits scheme operated by the PRC government. Shenzhen Subsidiary was required to contribute a specific percentage of the total monthly basic salaries to the retirement benefits scheme. The only obligation of Shenzhen Subsidiary with respect to the retirement benefits scheme was to make the required contributions under the scheme.

4.7 Charge on assets

As at 30 June 2014, no asset was pledged by Shenzhen Subsidiary.

4.8 Future plans for material investments and acquisition of capital assets

There was no specific plan for material investments and acquisition of capital assets as at 30 June 2014.

– III-40 –

FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

ACCOUNTANTS’ REPORT OF BEIJING SUBSIDIARY

==> picture [224 x 49] intentionally omitted <==

31/F, Gloucester Tower The Landmark 11 Pedder Street Central Hong Kong

8 December 2014

The Board of Directors AGTech Holdings Limited

Dear Sirs,

We set out below our report on the financial information (the “Financial Information”) regarding 北京名影科漫科技有限公司 (Beijing MTC Creative Mind Tech Co., Ltd.*) (“Beijing Subsidiary”) for each of the three years ended 31 December 2013 and for the six months ended 30 June 2014 (the “Relevant Periods”) for inclusion in the circular issued by AGTech Holdings Limited (the “Company”) dated 8 December 2014 (the “Circular”) in connection with, among others, the proposed acquisition of the entire issued share capital of Score Value Limited (the “Target”), the intermediate holding company of Beijing Subsidiary, by Silvercreek Technology Holdings Limited which is a wholly-owned subsidiary of the Company (the “Acquisition”).

Beijing Subsidiary was established in the People’s Republic of China (the “PRC”) on 23 October 2009 as limited liability company (solely invested by corporation). The registered office of Beijing Subsidiary is Suite 1610, Building A, No. 2 Zhong Guan Cun Road, Haidian District, Beijing, the PRC*.

Beijing Subsidiary has adopted 31 December as its financial year end date.

The statutory financial statements of Beijing Subsidiary for the years ended 31 December 2011, 2012 and 2013 were prepared in accordance with the relevant accounting principles and financial regulations applicable to enterprises established in the PRC and were audited by 北京永勤會計師事務所有限公司 (Beijing Yongqin Certified Public Accountants Co., Ltd.*), certified public accountants registered in the PRC.

For the purpose of this report, the directors of Beijing Subsidiary have prepared the financial statements of Beijing Subsidiary for the Relevant Periods (the “Underlying Financial Statements”) using accounting policies which are in accordance with Hong Kong Financial Reporting Standards (“HKFRS”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”). We have undertaken an independent audit on the Underlying Financial Statements in accordance with Hong Kong Standards on Auditing (“HKSA”) issued by the HKICPA.

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FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

The Financial Information of the Beijing Subsidiary for the Relevant Periods set out in this report has been prepared from the Underlying Financial Statements on the basis set out in Note 3 of Section A below. No adjustments were considered necessary to the Underlying Financial Statements in preparing our report for inclusion in the Circular.

The Underlying Financial Statements are the responsibility of the directors of Beijing Subsidiary who approved their issue. The directors of the Company are responsible for the contents of the Circular in which this report is included. It is our responsibility to compile the Financial Information set out in this report from the Underlying Financial Statements, to form an independent opinion on the Financial Information and to report our opinion to you.

In our opinion, the Financial Information gives, for the purpose of this report, a true and fair view of the state of affairs of Beijing Subsidiary as at 31 December 2011, 2012, 2013 and 30 June 2014 and of its results and cash flows for the Relevant Periods.

The corresponding statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows of Beijing Subsidiary for the six months ended 30 June 2013 together with the notes thereon (the “June 2013 Financial Information”) have been extracted from the Beijing Subsidiary’s unaudited financial information for the same period, which was prepared by the directors of Beijing Subsidiary solely for the purpose of this report. We have reviewed the June 2013 Financial Information in accordance with the Hong Kong Standard on Review Engagement 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the HKICPA. Our review of the June 2013 Financial Information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with HKSA and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on the June 2013 Financial Information. Based on our review, nothing has come to our attention that causes us to believe that the June 2013 Financial Information is not prepared, in all material respects, in accordance with the accounting policies consistent with those used in the preparation of the Financial Information which conform with HKFRS.

English translation names are for identification purpose only.

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FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

A. FINANCIAL INFORMATION

STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Notes Revenue 7 Cost of sales Gross profit Investment and other income 8 Other losses 9 Selling and administrative expenses Profit/(loss) before tax Income tax expense 10 Profit/(loss) for the year/period 11 Other comprehensive income for the year/period, net of income tax Total comprehensive income for the year/period Profit/(loss) and total comprehensive income attributable to owners of Beijing Subsidiary	Year ended 31 December 2011 2012 2013 RMB RMB RMB 4,140,000 1,640,000 1,716,019 (2,567,500) (342,524) (523,286) 1,572,500 1,297,476 1,192,733 2,193 1,175 1,064 – – (200,000) (1,410,775) (1,233,508) (1,332,981) 163,918 65,143 (339,184) (31,316) (16,673) (3,018) 132,602 48,470 (342,202) – – – 132,602 48,470 (342,202) 132,602 48,470 (342,202)	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) 526,699 – (126,120) – 400,579 – 240 7,963 (200,000) – (531,610) (3,426,097) (330,791) (3,418,134) – – (330,791) (3,418,134) – – (330,791) (3,418,134) (330,791) (3,418,134)	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) 526,699 – (126,120) – 400,579 – 240 7,963 (200,000) – (531,610) (3,426,097) (330,791) (3,418,134) – – (330,791) (3,418,134) – – (330,791) (3,418,134) (330,791) (3,418,134)
			– 7,963 – (3,426,097)
			(3,418,134) –
			(3,418,134)
			–
			(3,418,134)

			(3,418,134)

– IV-3 –

FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

STATEMENTS OF FINANCIAL POSITION

Notes Non-current assets Property, plant and equipment 15 Current assets Trade receivables 16 Other receivables, deposits and prepayments 17 Amount due from the immediate holding company 18 Bank balances and cash 19 Current liabilities Accruals and other payables 20 Current tax liabilities Net current assets Net assets Capital and reserves Equity attributable to owners of Beijing Subsidiary Paid-in capital 21 Accumulated profits/(losses) Total equity	At 31 December 2011 2012 2013 RMB RMB RMB 42,456 291,170 203,138 100,000 455,000 – 816,095 295,687 770,519 10,000 – – 237,299 199,128 593,930 1,163,394 949,815 1,364,449 110,169 111,477 793,936 31,316 16,673 3,018 141,485 128,150 796,954 1,021,909 821,665 567,495 1,064,365 1,112,835 770,633 1,000,000 1,000,000 1,000,000 64,365 112,835 (229,367) 1,064,365 1,112,835 770,633	At 30 June 2014 RMB 488,538 – 4,732,875 – 1,627,817 6,360,692 496,731 – 496,731 5,863,961 6,352,499 10,000,000 (3,647,501) 6,352,499

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FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

STATEMENTS OF CHANGES IN EQUITY

Balance at 1 January 2011 Profit for the year Other comprehensive income for the year Total comprehensive income for the year Balance at 31 December 2011 and 1 January 2012 Profit for the year Other comprehensive income for the year Total comprehensive income for the year Balance at 31 December 2012 and 1 January 2013 Loss for the year Other comprehensive income for the year Total comprehensive income for the year Balance at 31 December 2013 and 1 January 2014 Loss for the period Other comprehensive income for the period Total comprehensive income for the period Additional paid-in capital Balance at 30 June 2014 (Unaudited) Balance at 1 January 2013 Loss for the period Other comprehensive income for the period Total comprehensive income for the period Balance at 30 June 2013	Attributable to owners of Beijing Subsidiary Paid-in capital Accumulated (losses)/ profits RMB RMB 1,000,000 (68,237) – 132,602 – – – 132,602 1,000,000 64,365 – 48,470 – – – 48,470 1,000,000 112,835 – (342,202) – – – (342,202) 1,000,000 (229,367) – (3,418,134) – – – (3,418,134) 9,000,000 – 10,000,000 (3,647,501) 1,000,000 112,835 – (330,791) – – – (330,791) 1,000,000 (217,956)	Total RMB 931,763 132,602 – 132,602 1,064,365 48,470 – 48,470 1,112,835 (342,202) – (342,202) 770,633 (3,418,134) – (3,418,134) 9,000,000 6,352,499 1,112,835 (330,791) – (330,791) 782,044
	Paid-in capital RMB 1,000,000 – – – 1,000,000 – – – 1,000,000 – – – 1,000,000 – – – 9,000,000 10,000,000 1,000,000 – – – 1,000,000

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FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

STATEMENTS OF CASH FLOWS

Cash flows from operating activities Profit/(loss) before tax Adjustments for: Bank interest income Depreciation of property, plant and equipment Uncollectible amounts of other receivables written off Movements in working capital (Increase)/decrease in trade receivables (Increase)/decrease in other receivables, deposits and prepayments (Increase)/decrease in amount due from the immediate holding company (Decrease)/increase in accruals and other payables Cash (used in)/generated from operations PRC Enterprise Income Tax paid Net cash (used in)/generated by operating activities	Year ended 31 December 2011 2012 2013 RMB RMB RMB 163,918 65,143 (339,184) (2,193) (1,175) (1,064) 42,852 90,541 111,344 – – 200,000 204,577 154,509 (28,904) (100,000) (355,000) 455,000 (24,174) 520,408 (674,832) (10,000) 10,000 – (453,566) 1,308 682,459 (383,163) 331,225 433,723 (7,432) (31,316) (16,673) (390,595) 299,909 417,050	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) (330,791) (3,418,134) (240) (7,963) 55,151 82,466 200,000 – (75,880) (3,343,631) 205,000 – 74,273 (3,962,356) – – (26,546) (297,205) 176,847 (7,603,192) (16,673) (3,018) 160,174 (7,606,210)

– IV-6 –

FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

Cash flows from investing activities Interest received Payments for property, plant and equipment Net cash (used in)/generated by investing activities Cash flows from financing activities Proceeds from additional paid-in capital Net cash generated by financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of year/period Cash and cash equivalents at the end of year/period Analysis of the balances of cash and cash equivalents: Bank balances and cash	Year ended 31 December 2011 2012 2013 RMB RMB RMB 2,193 1,175 1,064 (9,070) (339,255) (23,312) (6,877) (338,080) (22,248) – – – – – – (397,472) (38,171) 394,802 634,771 237,299 199,128 237,299 199,128 593,930 237,299 199,128 593,930	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) 240 7,963 – (367,866) 240 (359,903) – 9,000,000 – 9,000,000 160,414 1,033,887 199,128 593,930 359,542 1,627,817 359,542 1,627,817

– IV-7 –

FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

NOTES TO THE FINANCIAL INFORMATION

1. GENERAL INFORMATION OF BEIJING SUBSIDIARY

Beijing Subsidiary was a limited liability company (solely invested by corporation) established on 23 October 2009 in the PRC. At the date of this report, in the opinion of the directors of Beijing Subsidiary, 深圳市精祥科技有限公司 (Shenzhen Sincere Honor Technology Company Limited) (“PRC Company”), a limited liability company (solely invested by corporation in Taiwan, Hong Kong or Macau) established in the PRC, is the immediate holding company; Immense Wisdom Limited, a company incorporated in the British Virgin Islands, is the ultimate holding company. The address of its registered office and principal place of business is Suite 1610, 13th Floor, Building A, No. 2 Zhong Guan Cun Road, Haidian District, Beijing, the PRC.

Beijing Subsidiary is principally engaged in the provision of design of lottery games and system development services in the PRC.

The Financial Information is presented in Renminbi (“RMB”), which is the same as the function currency of Beijing Subsidiary.

* English translation name is for identification purpose only.

2. APPLICATION OF HKFRS

For the purposes of preparing and presenting Financial Information for the Relevant Periods, the Beijing Subsidiary has adopted all relevant HKFRS, HKAS, amendments and interpretations issued by the HKICPA which are effective for annual period beginning on 1 January 2014 consistently throughout the Relevant Periods.

New and revised HKFRS issued but not effective

1 Effective for grant date, acquisition date or annual periods beginning on or after 1 July 2014 as appropriate, with earlier application permitted.

2 Effective for annual periods beginning on or after 1 July 2014, with earlier application permitted.

3 Effective for annual periods beginning on or after 1 January 2016, with earlier application permitted.

4 Effective for annual periods beginning on or after 1 January 2017, with earlier application permitted.
5 Effective for annual periods beginning on or after 1 January 2018, with earlier application permitted.

The directors of Beijing Subsidiary anticipate the application of these new and revised HKFRS will have no material impact on the Financial Information.

– IV-8 –

FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

3. SIGNIFICANT ACCOUNTING POLICIES

Statement of compliance

Basis of preparation

The Financial Information has been prepared on the historical cost basis except for financial instruments that are measured at fair values.

Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, Beijing Subsidiary takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in the Financial Information is determined on such a basis, except for share-based payment transactions that are within the scope of HKFRS 2, leasing transactions that are within the scope of HKAS 17, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in HKAS 2 or value in use in HKAS 36.

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.

The principal accounting policies are set out below.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances.

Revenue from the provision of research and development of information technologies system services is recognised when the services are rendered, the revenue can be reliably estimated and it is probable that the revenue will be received.

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to Beijing Subsidiary and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

– IV-9 –

FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

Leasing

Beijing Subsidiary as lessee

Foreign currencies

Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for:

exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings;
exchange differences on transactions entered into in order to hedge certain foreign currency risks; and
exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on repayment of the monetary items.

Borrowing costs

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Retirement benefit costs

Payments to state-managed retirement benefit schemes are recognised as an expense when employees have rendered services entitling them to the contributions.

Taxation

Income tax expense represents the sum of tax currently payable and deferred tax.

– IV-10 –

FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

Current tax

The tax currently payable is based on taxable profit for the year/period. Taxable profit differs from “profit/(loss) before tax” as reported in the statements of profit or loss and other comprehensive income because of items of income or expense that are taxable or deductible in other years/periods and items that are never taxable or deductible. Beijing Subsidiary’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the Relevant Periods.

Deferred tax

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which Beijing Subsidiary expects, at the end of the Relevant Periods, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax for the year/period

Property, plant and equipment

Property, plant and equipment are stated in the statements of financial position at cost, less subsequent accumulated depreciation and subsequent accumulated impairment losses, if any.

– IV-11 –

FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

Intangible assets

Intangible assets acquired separately

Internally-generated intangible assets - research and development expenditure

Expenditure on research activities is recognised as an expense in the year/period in which it is incurred.

Derecognition of intangible assets

Impairment of tangible assets

At the end of each of the Relevant Periods, Beijing Subsidiary reviews the carrying amounts of its tangible assets with finite useful lives to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, Beijing Subsidiary estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Provisions

Provisions are recognised when Beijing Subsidiary has a present obligation (legal or constructive) as a result of a past event, it is probable that Beijing Subsidiary will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

– IV-12 –

FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

Financial instruments

Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions of the instrument.

Financial assets

Beijing Subsidiary’s financial assets are classified into loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Effective interest method

Income is recognised on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables (including trade receivables, other receivables and deposits, amount due from the immediate holding company and bank balances and cash) are measured at amortised cost using the effective interest method, less any impairment.

Interest income is recognised by applying the effective interest rate, except for short-term receivables where the recognition of interest would be immaterial.

Impairment of financial assets

Beijing Subsidiary’s financial assets are assessed for indicators of impairment at the end of each of the Relevant Periods. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include Beijing Subsidiary’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables.

– IV-13 –

FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

Financial liabilities and equity instruments

Classification as debt or equity

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by Beijing Subsidiary are recognised at the proceeds received, net of direct issue costs.

Other financial liabilities

Other financial liabilities (including accruals and other payables) are subsequently measured at amortised cost using the effective interest method.

Effective interest method

Interest expense is recognised on an effective interest basis.

Derecognition

Beijing Subsidiary derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If Beijing Subsidiary neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, Beijing Subsidiary continues to recognise the asset to the extent of its continuing involvement and recognises an associated liability. If Beijing Subsidiary retains substantially all the risks and rewards of ownership of a transferred financial asset, Beijing Subsidiary continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

– IV-14 –

FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

On derecognition of a financial asset other than in its entirety, Beijing Subsidiary allocates the previous carrying amount of the financial asset between the part it continues to recognise, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in other comprehensive income is recognised in profit or loss. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts.

Beijing Subsidiary derecognises financial liabilities when, and only when, Beijing Subsidiary’s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Related parties

A party is considered to be related to Beijing Subsidiary if:

(i) the party is a person or a close member of that person’s family and that person,
(a) has controls or joint control over Beijing Subsidiary;
(b) has significant influence over Beijing Subsidiary; or
(c) is a member of the key management personnel of Beijing Subsidiary or of a parent of Beijing Subsidiary;

(ii) the party is an entity where any of the following conditions applies:
(a) the entity and Beijing Subsidiary are members of the same group;
(b) one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the other entity);
(c) the entity and Beijing Subsidiary are joint ventures of the same third party;
(d) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
(e) the entity is a post-employment benefit plan for the benefit of employees of either Beijing Subsidiary or an entity related to Beijing Subsidiary;
(f) the entity is controlled or jointly controlled by a person identified in (i); and
(g) a person identified in (i)(a) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

Cash and cash equivalents

– IV-15 –

FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

4. KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Beijing Subsidiary’s accounting policies, which are described in Note 3, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and underlying assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

Depreciation of property, plant and equipment

Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives, after taking into account their estimated residual value. Beijing Subsidiary assesses annually the residual value and the useful lives of the property, plant and equipment. If the expectation differs from the original estimate, such difference will impact the depreciation and the amortisation charge in the period in which such estimate is changed.

Estimated impairment of trade and other receivables

Beijing Subsidiary estimates the provisions for impairment of trade and other receivables by assessing their recoverability based on credit history and prevailing marking conditions. This requires the use of estimates and judgements. Provisions are applied to trade and other receivables where events or changes in circumstances indicate that the balances may not be collectible. Where the expectation is different from the original estimate, such difference will affect the carrying amount of trade and other receivables and thus the impairment loss in the period in which such estimate is changed. Beijing Subsidiary reassesses the provisions at the end of each of the Relevant Periods.

5. CAPITAL RISK MANAGEMENT

Beijing Subsidiary manages its capital with a view to maximising the return to shareholders through the optimisation of the debt and equity balance. Beijing Subsidiary’s overall strategy remains unchanged throughout the Relevant Periods.

The capital structure of the Beijing Subsidiary consists of net debt, which includes borrowings net of cash and cash equivalents and equity attributable to owners of Beijing Subsidiary, comprising paid-in capital and accumulated profits/losses.

The directors of Beijing Subsidiary review the capital structure on a continuous basis taking into account the cost of capital and the risks associated with each class of capital. Beijing Subsidiary will balance its overall capital structure through the new share issues as well as issue of new debts.

Beijing Subsidiary is not subject to any externally imposed capital requirements.

– IV-16 –

FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

6. FINANCIAL INSTRUMENTS

(a) Categories of financial instruments

Financial assets Loans and receivables (including cash and cash equivalents) Financial liabilities Amortised cost	At 31 December 2011 2012 RMB RMB 1,029,769 898,990 69,558 81,385	2013 RMB 1,364,449 788,708	At 30 June 2014 RMB 6,235,693

			472,348

(b) Financial risk management objectives and policies

Beijing Subsidiary’s major financial instruments include trade receivables, other receivables and deposits, amount due from the immediate holding company, bank balances and cash and accruals and other payables.

There has been no change to the types of Beijing Subsidiary’s exposure in respect of financial instruments or the manner in which it manages and measures the risks throughout the Relevant Periods.

Interest rate risk

Beijing Subsidiary’s bank balances have exposure to cash flow interest rate risk due to the fluctuation of the prevailing market interest rate on bank balances. Beijing Subsidiary is also exposed to fair value interest rate risk related primarily to its fixed deposits held at banks with original maturity over three months. The directors of Beijing Subsidiary consider the Beijing Subsidiary’s exposure of fair value interest rate risk on fixed deposits is not significant as the interest bearing fixed deposits are within short maturity period.

The directors of Beijing Subsidiary consider Beijing Subsidiary’s exposure of the cash flow interest rate risk on its bank balances is insignificant. Therefore, no sensitivity analysis is presented.

Credit risk

At the end of the Relevant Periods, Beijing Subsidiary’s maximum exposure to credit risk which will cause a financial loss to Beijing Subsidiary due to failure to discharge an obligation by the counterparties provided by Beijing Subsidiary is arising from the carrying amount of the respective recognised financial assets as stated in the statements of financial position.

In order to minimise the credit risk, the management of the Beijing Subsidiary reviews the recoverable amount of each individual trade and other receivables at the end of the Relevant Periods to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the management considers that the credit risk of Beijing Subsidiary is significantly reduced.

– IV-17 –

FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies or with good reputation.

There is significant centration of credit risk on loan receivables from one debtor accounted for 74%, 68%, 64% and 96% of the carrying amounts of other receivables, deposits and prepayments as at 31 December 2011, 2012 and 2013 and 30 June 2014, respectively. In order to minimise the credit risk, the management continuously monitors the level of exposure by frequent review of the credit evaluation of the financial condition and credit quality of its customers to ensure that prompt actions will be taken to lower exposure. Beijing Subsidiary does not hold any collateral or other credit enhancements to cover its credit risks associated with these financial assets.

Liquidity risk

In the management of the liquidity risk, Beijing Subsidiary monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Beijing Subsidiary’s operations and mitigate the effects of fluctuations in cash flows.

Liquidity tables

The following table details Beijing Subsidiary’s remaining contractual maturity for its non-derivative financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Beijing Subsidiary can be required to pay, and includes both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from current interest rate at the end of each of the Relevant Periods.

Weighted average interest rate % At 31 December 2011 Non-derivative financial liabilities Accruals and other payables N/A At 31 December 2012 Non-derivative financial liabilities Accruals and other payables N/A At 31 December 2013 Non-derivative financial liabilities Accruals and other payables N/A At 30 June 2014 Non-derivative financial liabilities Accruals and other payables N/A	On demand or within 1 year Total undiscounted cash flows RMB RMB 69,558 69,558 81,385 81,385 788,708 788,708 472,348 472,348	Carrying amounts RMB 69,558

		81,385

		788,708

		472,348

(c) Fair value measurements

At the end of each of the Relevant Periods, the Group did not have any financial assets and liabilities that were measured at the fair value measurements hierarchy.

– IV-18 –

FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

7. REVENUE AND SEGMENT INFORMATION

Beijing Subsidiary has been operating in one operating and reportable segments, being the provision of the design of lottery games and system development in the PRC. The board of directors of Beijing Subsidiary, being the chief operating decision maker, regularly review revenue analysis by nature and the Beijing Subsidiary for the Relevant Periods to make decisions about resources allocation and performance assessment. No segment information is presented other than entity-wide disclosures as no other discrete financial information is available for the assessment of performance and resources of Beijing Subsidiary’s business activities.

The following table summarises the categories of Beijing Subsidiary’s revenue during the Relevant Periods:

					Six months ended	Six months ended
		Year	ended 31 December		30 June
		2011	2012	2013	2013	2014
		RMB	RMB	RMB	RMB	RMB
					(Unaudited)
Provision	of the design of lottery games and
system	development	4,140,000	1,640,000	1,716,019	526,699		–

No geographical information is presented as substantially all of Beijing Subsidiary’s operations, external customers and non-current assets are located in the PRC.

Information about major customer

Revenue from customer of corresponding years/periods contributing over 10% of total revenue of Beijing Subsidiary is as follows:

					Six months ended	Six months ended
		Year	ended 31 December		30 June
		2011	2012	2013	2013	2014
		RMB	RMB	RMB	RMB	RMB
					(Unaudited)
Customer	A	4,140,000	1,610,000	1,466,019	276,699		–
Customer	B	N/A1	N/A1	250,000	250,000		–

1 The corresponding customer did not contribute over 10% or more to the Beijing Subsidiary’s revenue in the respective year/period.

8. INVESTMENT AND OTHER INCOME

									Six months ended	Six months ended
					Year	ended	31 December		30 June
					2011		2012	2013	2013	2014
					RMB		RMB	RMB	RMB	RMB
									(Unaudited)
Interest	income	on	bank	deposits	2,193		1,175	1,064	240	7,963

– IV-19 –

FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

9. OTHER GAINS AND LOSSES

										Six months ended	Six months ended
						Year	ended	31 December		30 June
						2011		2012	2013	2013	2014
						RMB		RMB	RMB	RMB	RMB
										(Unaudited)
Impairment	loss	recognised	on	other	receivables	–		–	200,000	200,000		–

10. INCOME TAX EXPENSE

							Six months ended	Six months ended
			Year	ended	31 December		30 June
			2011		2012	2013	2013	2014
			RMB		RMB	RMB	RMB	RMB
							(Unaudited)
Current	tax:
PRC	Enterprise	Income Tax	31,316		16,673	3,018	–		–

Under the Law of the PRC on Enterprise Income Tax (the “EIT Law”) and Implementation Regulations of the EIT Law, the tax rate of Beijing Subsidiary was 25% for the Relevant Periods.

The income tax expense for the Relevant Periods can be reconciled to the profit/(loss) before tax per the statements of profit or loss and other comprehensive income as follows:

Profit/(loss) before tax Tax at the PRC Enterprise Income Tax rate of 25% Tax effect of expenses not deductible for tax purpose Tax effect of tax losses not recognised Utilisation of tax losses previously not recognised Income tax on concessionary tax rate Others Income tax expense for the Relevant Periods	Year ended 31 December 2011 2012 2013 RMB RMB RMB 163,918 65,143 (339,184) 40,980 16,286 (84,796) 11,664 387 54,840 – – – (21,328) – – – – (4,526) – – 37,500 31,316 16,673 3,018	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) (330,791) (3,418,134) (82,698) (854,534) 51,544 – 31,154 892,034 – – – – – (37,500) – –	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) (330,791) (3,418,134) (82,698) (854,534) 51,544 – 31,154 892,034 – – – – – (37,500) – –

			(854,534) – 892,034 – – (37,500)
			–

– IV-20 –

FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

As at 31 December 2011, 2012, 2013 and 30 June 2013 and 2014, Beijing Subsidiary has estimated unused tax losses of approximately RMB211,000, RMB277,000, RMB307,000, RMB268,000 and RMB3,876,000 respectively available for offsetting against future profits of the companies in which the losses arose for which will expire within 5 years. No deferred tax asset has been recognised in respect of these estimated unused tax losses due to unpredictability of future profit streams.

11. PROFIT/(LOSS) FOR THE RELEVANT PERIODS

Profit/(loss) for the Relevant Periods has been arrived at after charging:

Auditors’ remuneration Depreciation of property, plant and equipment Operating lease rentals in respect of rented premises Impairment losses recognised on other receivables Research and development costs* Employee benefits expense, including directors’ remunerations (Note 12): Salaries and other benefits Retirement benefits scheme contributions	Year ended 31 December 2011 2012 2013 RMB RMB RMB – – – 42,852 90,541 111,344 282,381 345,900 288,825 – – 200,000 389,703 450,210 376,868 415,959 460,366 397,088 45,675 66,743 68,502 461,634 527,109 465,590	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) – 8,500 55,151 82,466 138,825 275,001 200,000 – 189,212 706,951 193,617 596,059 36,041 53,562 229,658 649,621	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) – 8,500 55,151 82,466 138,825 275,001 200,000 – 189,212 706,951 193,617 596,059 36,041 53,562 229,658 649,621

			596,059 53,562
			649,621

Research and development costs included approximately RMB390,000, RMB450,000, RMB377,000, RMB189,000 and RMB374,000 respectively relating to staff costs for the years ended 31 December 2011, 2012, 2013 and for the six months ended 30 June 2013 and 2014 to which the amounts were also included in the employee benefits expense as disclosed in the above.

– IV-21 –

FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

12. DIRECTORS’ EMOLUMENTS

Details of the emoluments paid and payable to each of the directors of Beijing Subsidiary for the Relevant Periods were as follows:

For the year ended 31 December 2011 Mr. Han Shiping (note i) For the year ended 31 December 2012 For the year ended 31 December 2013 Mr. Han Shiping (note i) For the six months ended 30 June 2014 Mr. Han Shiping (note i) Mr. Wang Ningchun (note ii) For the six months ended 30 June 2013 (Unaudited) Mr. Han Shiping (note i)	Fees RMB – – – – – – –	Salaries and other benefits Contributions to retirement benefits schemes RMB RMB – – – – – – – – 246,000 – 246,000 – – –	Total emoluments RMB –

			–

			–

			– 246,000
			246,000

			–

Notes:

(i) Resigned on 8 January 2014.

(ii) Appointed on 9 January 2014.

None of the directors of Beijing Subsidiary waived any emoluments during the Relevant Periods.

– IV-22 –

FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

13. FIVE HIGHEST PAID INDIVIDUALS’ EMOLUMENTS

Of the five individuals with the highest emoluments in Beijing Subsidiary, nil, nil, nil, nil and one were directors of Beijing Subsidiary for the years ended 31 December 2011, 2012 and 2013 and the six months ended 30 June 2013 (unaudited) and 2014 respectively. Details of whose emolument are included in the disclosures above. The emoluments of the remaining four[*] , five, five, five and four highest paid individuals for the years ended 31 December 2011, 2012 and 2013 and the six months ended 30 June 2013 (unaudited) and 2014 respectively were as follows:

Salaries and other benefits Retirement benefits scheme contributions	Year ended 31 December 2011 2012 2013 RMB RMB RMB 415,959 452,926 395,894 45,675 66,743 68,502 461,634 519,669 464,396	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) 195,359 441,149 36,071 22,206 231,430 463,355	Six months ended 30 June 2013 2014 RMB RMB (Unaudited) 195,359 441,149 36,071 22,206 231,430 463,355
			463,355

There was only four staff being employed in the year ended 31 December 2011.

Their emoluments were all within HK$1,000,000.

During the Relevant Periods, no emolument was paid by Beijing Subsidiary to any of the directors or any of the five individuals with the highest emoluments in the Beijing Subsidiary as an inducement to join or upon joining the Beijing Subsidiary or as compensation for loss of office.

14. EARNINGS PER SHARE

No earnings per share information is presented as its inclusion, for the purpose of this report, is not considered meaningful.

– IV-23 –

FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

15. PROPERTY, PLANT AND EQUIPMENT

COST Balance at 1 January 2011 Additions Balance at 31 December 2011 Additions Balance at 31 December 2012 Additions Balance at 31 December 2013 Additions Balance at 30 June 2014 ACCUMULATED DEPRECIATION Balance at 1 January 2011 Depreciation expense Balance at 31 December 2011 Depreciation expense Balance at 31 December 2012 Depreciation expense Balance at 31 December 2013 Depreciation expense Balance at 30 June 2014 CARRYING AMOUNTS Balance at 31 December 2011 Balance at 31 December 2012 Balance at 31 December 2013 Balance at 30 June 2014	Computer equipment RMB 64,107 9,070 73,177 339,255 412,432 16,113 428,545 179,296 607,841 13,083 28,539 41,622 81,218 122,840 111,344 234,184 69,978 304,162 31,555 289,592 194,361 303,679	Furniture, fixtures and equipment RMB 31,574 – 31,574 – 31,574 7,199 38,773 188,570 227,343 6,360 14,313 20,673 9,323 29,996 – 29,996 12,488 42,484 10,901 1,578 8,777 184,859	Total RMB 95,681 9,070
			104,751 339,255
			444,006 23,312
			467,318 367,866
			835,184

			19,443 42,852
			62,295 90,541
			152,836 111,344
			264,180 82,466
			346,646

			42,456

			291,170

			203,138

			488,538

Computer equipment 33[1] ∕3% - 50% Furniture, fixtures and equipment 20% - 50%

– IV-24 –

FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

16. TRADE RECEIVABLES

								At
			At	31	December		30	June
		2011			2012	2013		2014
		RMB			RMB	RMB		RMB
Trade	receivables	100,000			455,000	–		–

The credit terms granted to customers are varied and are generally the result of negotiations between individual customers and Beijing Subsidiary. No interest is charged on overdue trade receivables. The following is an analysis of trade receivables by age, presented based on the terms of the related the invoice date, which approximate the respective revenue recognition dates:

										At
					At	31	December		30	June
				2011			2012	2013		2014
				RMB			RMB	RMB		RMB
0	to	30	days	100,000			455,000	–		–

Before accepting any new customer, Beijing Subsidiary assesses the potential customer’s credit quality and defines credit limits by customer. As at 31 December 2011 and 2012, 100% of the trade receivables with high credit quality (based on historical settlement record) are neither past due nor impaired. All of the trade receivables balance was due from the Beijing Subsidiary’s largest customer.

17. OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS

Prepayments Rental and utility deposits Loan receivables Deposit and other receivables	At 31 December 2011 2012 RMB RMB 133,625 50,825 44,000 44,000 600,000 200,000 38,470 862 816,095 295,687	2013 RMB – – 490,000 280,519 770,519	At 30 June 2014 RMB 124,999 – 4,550,000 57,876
			4,732,875

None of the above assets is either past due or impaired. The financial assets included in the above balances relate to receivables on which there was no recent history of default. The above loan receivables are unsecured and interest-free.

18. AMOUNT DUE FROM THE IMMEDIATE HOLDING COMPANY

The amount due was unsecured, interest-free and repayable on demand.

19. BANK BALANCES AND CASH

Cash held at banks earn interest at floating rates based on daily bank deposit rates. As at the end of each of the Relevant Periods, substantially all of Beijing Subsidiary’s cash and bank balances were denominated in RMB which are not a freely convertible currency in the international market. The government of the PRC has implemented foreign exchange control and the remittance of these funds out of the PRC is subject to exchange restrictions imposed by the government of the PRC.

– IV-25 –

FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

20. ACCRUALS AND OTHER PAYABLES

Advances from customers Payroll and welfare payables Other tax payables and tax surcharges Loan payable Other payables and accrued charges	At 31 December 2011 2012 RMB RMB 9,000 – 58,448 73,819 31,611 30,092 – – 11,110 7,566 110,169 111,477	2013 RMB – 51,726 5,228 400,000 336,982 793,936	At 30 June 2014 RMB – 139,962 24,383 – 332,386
			496,731

The above loan and other payables are unsecured, interest free and repayable on demand.

21. PAID-IN CAPITAL

Paid-in capital in the statements of financial position at the end of each of the Relevant Periods represents the fully paid registered capital of Beijing Subsidiary amounted to RMB1,000,000, RMB1,000,000, RMB1,000,000 and RMB10,000,000 respectively.

22. RETIREMENT BENEFIT SCHEMES

The employees of Beijing Subsidiary are members of state-managed retirement benefits scheme operated by the PRC government. Beijing Subsidiary is required to contribute a specific percentage of the total monthly basic salaries to the retirement benefits scheme. The only obligation of Beijing Subsidiary with respect to the retirement benefits schemes is to make the required contributions under the schemes.

23. OPERATING LEASE COMMITMENTS

Beijing Subsidiary as lessee

At the end of the Relevant Periods, Beijing Subsidiary had commitments for future minimum lease payments under non-cancellable operating leases which approximately fall due as follows:

Within one year In the second to fifth years inclusive	At 31 December 2011 2012 RMB RMB 342,000 185,054 185,054 – 527,054 185,054	2013 RMB 300,000 – 300,000	At 30 June 2014 RMB 650,004 824,411
			1,474,415

Operating lease payments represent rentals payable by Beijing Subsidiary in respect of rented premises. Leases are negotiated for terms of one to two years and rentals are fixed over the lease periods. Beijing Subsidiary does not have an option to purchase the leased asset at the expiry of the lease period.

– IV-26 –

FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

24. RELATED PARTY TRANSACTIONS

Other than the balances with related parties as disclosed elsewhere in the Financial Information, during the Relevant Periods, Beijing Subsidiary entered into the following significant transactions with related parties:

Compensation of key management personnel

The remuneration of the directors of Beijing Subsidiary (who are the key management personnel of Beijing Subsidiary) during the Relevant Periods was as follows:

==> picture [370 x 72] intentionally omitted <==

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

Six months ended
Year ended 31 December 30 June
2011 2012 2013 2013 2014
RMB RMB RMB RMB RMB
(Unaudited)
Short-term benefits – – – – 246,000
----- End of picture text -----

B. EVENTS AFTER THE REPORTING PERIOD

Save as disclosed elsewhere in the Financial Information, no other significant event took place subsequent to 30 June 2014.

C. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of Beijing Subsidiary have been prepared in respect of any period subsequent to 30 June 2014.

Yours faithfully, HLB Hodgson Impey Cheng Limited Certified Public Accountants

Hui Chun Keung, David Practising Certificate Number: P05447 Hong Kong

– IV-27 –

FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

MANAGEMENT DISCUSSION AND ANALYSIS OF BEIJING SUBSIDIARY

1. Business review for the year ended 31 December 2011

1.1 Operating results

For the year ended 31 December 2011, Beijing Subsidiary was principally engaged in the design of lottery games and system development in the PRC.

Beijing Subsidiary generated revenue of approximately RMB4.1 million (equivalent to approximately HK$5.2 million) and gross profit of approximately RMB1.6 million (equivalent to approximately HK$2.0 million).

The net profit after tax of Beijing Subsidiary was approximately RMB0.1 million (equivalent to approximately HK$0.1 million) for the year ended 31 December 2011.

1.2 Liquidity and financial resources

As at 31 December 2011, Beijing Subsidiary’s current assets amounted to approximately RMB1.2 million (equivalent to approximately HK$1.5 million), with bank balances and cash of approximately RMB0.2 million (equivalent to approximately HK$0.3 million).

As at 31 December 2011, Beijing Subsidiary’s current liabilities amounted to approximately RMB0.1 million (equivalent to approximately HK$0.1 million).

As Beijing Subsidiary had no borrowings, the gearing ratio of Beijing Subsidiary as at 31 December 2011 was nil.

1.3 Capital structure and foreign exchange risk

Beijing Subsidiary operated on a debt-free capital structure during the year ended 31 December 2011.

The capital structure of Beijing Subsidiary consisted of its shareholders’ equity of RMB1.0 million (equivalent to approximately HK$1.3 million).

Beijing Subsidiary had neither foreign currency hedging activities nor any financial instruments for hedging purposes during the year ended 31 December 2011.

1.4 Contingent liabilities and capital commitment

As at 31 December 2011, Beijing Subsidiary did not have any material contingent liabilities and capital commitment.

1.5 Significant investments, material acquisitions and disposal

There were no significant investments, material acquisitions and disposals during the year ended 31 December 2011.

– IV-28 –

FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

1.6 Employee and remuneration policies

As at 31 December 2011, Beijing Subsidiary had four employees. Total staff costs for the year ended 31 December 2011 was approximately RMB0.5 million (equivalent to approximately HK$0.6 million). Remuneration packages for employees principally comprised salaries and wages. The employees of Beijing Subsidiary were members of state-managed retirement benefits scheme operated by the PRC government. Beijing Subsidiary was required to contribute a specific percentage of the total monthly basic salaries to the retirement benefits scheme. The only obligation of Beijing Subsidiary with respect to the retirement benefits scheme was to make the required contributions under the scheme.

1.7 Charge on assets

As at 31 December 2011, no asset was pledged by Beijing Subsidiary.

1.8 Future plans for material investments and acquisition of capital assets

There was no specific plan for material investments and acquisition of capital assets as at 31 December 2011.

2. Business review for the year ended 31 December 2012

2.1 Operating results

For the year ended 31 December 2012 Beijing Subsidiary was principally engaged in the design of lottery games and system development in the PRC.

Beijing Subsidiary generated revenue of approximately RMB1.6 million (equivalent to approximately HK$2.0 million) (2011: RMB4.1 million) and gross profit of approximately RMB1.3 million (equivalent to approximately HK$1.6 million) (2011: RMB1.6 million).

The net profit after tax of Beijing Subsidiary was approximately RMB48,000 (equivalent to approximately HK$60,000) (2011: RMB0.1 million) for the year ended 31 December 2012.

2.2 Liquidity and financial resources

As at 31 December 2012, Beijing Subsidiary’s current assets amounted to approximately RMB0.9 million (equivalent to approximately HK$1.1 million) (2011: RMB1.2 million), with bank balances and cash of approximately RMB0.2 million (equivalent to approximately HK$0.3 million) (2011: RMB0.2 million).

As at 31 December 2012, Beijing Subsidiary’s current liabilities amounted to approximately RMB0.1 million (equivalent to approximately HK$0.1 million) (2011: RMB0.1 million).

– IV-29 –

FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

As Beijing Subsidiary had no borrowings, the gearing ratio of Beijing Subsidiary as at 31 December 2012 was nil (2011: nil).

2.3 Capital structure and foreign exchange risk

Beijing Subsidiary operated on a debt-free capital structure during the year ended 31 December 2012.

The capital structure of the Beijing Subsidiary consisted of its shareholders’ equity of RMB1.1 million (equivalent to approximately HK$1.4 million) (2011: RMB1.0 million).

Beijing Subsidiary had neither foreign currency hedging activities nor any financial instruments for hedging purposes during the year ended 31 December 2012.

2.4 Contingent liabilities and capital commitment

As at 31 December 2012, Beijing Subsidiary did not have any material contingent liabilities and capital commitment.

2.5 Significant investments, material acquisitions and disposal

There were no significant investments, material acquisitions and disposals during the year ended 31 December 2012.

2.6 Employee and remuneration policies

As at 31 December 2012, Beijing Subsidiary had four employees (2011: 4). Total staff costs for the year ended 31 December 2012 was approximately RMB0.5 million (equivalent to approximately HK$0.6 million) (2011: RMB0.5 million). Remuneration packages for employees principally comprised salaries and wages. The employees of Beijing Subsidiary were members of state-managed retirement benefits scheme operated by the PRC government. Beijing Subsidiary was required to contribute a specific percentage of the total monthly basic salaries to the retirement benefits scheme. The only obligation of Beijing Subsidiary with respect to the retirement benefits scheme was to make the required contributions under the scheme.

2.7 Charge on assets

As at 31 December 2012, no asset was pledged by Beijing Subsidiary.

2.8 Future plans for material investments and acquisition of capital assets

There was no specific plan for material investments and acquisition of capital assets as at 31 December 2012.

– IV-30 –

FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

3. Business review for the year ended 31 December 2013

3.1 Operating results

For the year ended 31 December 2013 Beijing Subsidiary was principally engaged in design of lottery games and system development in the PRC.

Beijing Subsidiary generated revenue of approximately RMB1.7 million (equivalent to approximately HK$2.1 million) (2012: RMB1.6 million) and gross profit of approximately RMB1.2 million (equivalent to approximately HK$1.5 million) (2012: RMB1.3 million).

The net loss after tax of Beijing Subsidiary was approximately RMB0.3 million (equivalent to approximately HK$0.4 million) (2012: net profit after tax RMB48,000) for the year ended 31 December 2013.

3.2 Liquidity and financial resources

As at 31 December 2013, Beijing Subsidiary’s current assets amounted to approximately RMB1.4 million (equivalent to approximately HK$1.8 million), with bank balances and cash of approximately RMB0.6 million (equivalent to approximately HK$0.8 million).

As at 31 December 2013, Beijing Subsidiary’s current liabilities amounted to approximately RMB0.8 million (equivalent to approximately HK$1.0 million), including loan payable of approximately RMB0.4 million (equivalent to approximately HK$0.5 million) which was unsecured, interest free and repayable on demand.

The gearing ratio (calculated as all debts divided by total assets) of Beijing Subsidiary as at 31 December 2013 was 0.26 (2012: nil).

3.3 Capital structure and foreign exchange risk

Beijing Subsidiary managed its capital with a view to maximising the return to shareholders through the optimisation of the debt and equity balance.

The capital structure of the Beijing Subsidiary consisted of loan payable of RMB0.4 million (equivalent to approximately HK$0.5 million) (2012: nil) and its shareholders’ equity of RMB0.8 million (equivalent to approximately HK$1.0 million) (2012: RMB1.0 million).

Beijing Subsidiary had neither foreign currency hedging activities nor any financial instruments for hedging purposes during the year ended 31 December 2013.

– IV-31 –

FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

3.4 Contingent liabilities and capital commitment

As at 31 December 2013, Beijing Subsidiary did not have any material contingent liabilities and capital commitment.

3.5 Significant investments, material acquisitions and disposal

There were no significant investments, material acquisitions and disposals during the year ended 31 December 2013.

3.6 Employee and remuneration policies

As at 31 December 2013, Beijing Subsidiary had 4 employees (2012: 5). Total staff costs for the year ended 31 December 2013 was approximately RMB0.5 million (equivalent to approximately HK$0.6 million) (2012: RMB0.5 million). Remuneration packages for employees principally comprised salaries and wages. The employees of Beijing Subsidiary were members of state-managed retirement benefits scheme operated by the PRC government. Beijing Subsidiary was required to contribute a specific percentage of the total monthly basic salaries to the retirement benefits scheme. The only obligation of Beijing Subsidiary with respect to the retirement benefits scheme was to make the required contributions under the scheme.

3.7 Charge on assets

As at 31 December 2013, no asset was pledged by Beijing Subsidiary.

3.8 Future plans for material investments and acquisition of capital assets

There was no specific plan for material investments and acquisition of capital assets as at 31 December 2013.

4. Business review for the six months ended 30 June 2014

4.1 Operating results

For the six months ended 30 June 2014, Beijing Subsidiary was principally engaged in the design of lottery games and system development in the PRC.

Beijing Subsidiary was developing, and seeking to supply to the relevant lottery authority in the PRC, the system and content of a Lottery Game for use on mobile smart phones in the PRC during the six months ended 30 June 2014. Beijing Subsidiary has not yet obtained the approval for the launch of the Lottery Game from the relevant government authority and therefore did not generate any revenue for the six months ended 30 June 2014 (for the six months ended 30 June 2013: RMB0.5 million).

– IV-32 –

FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

The net loss after tax of Beijing Subsidiary of approximately RMB3.4 million (equivalent to approximately HK$4.3 million) (for the six months ended 30 June 2013: RMB0.3 million) which was mainly attributable to selling and administrative expenses of approximately RMB3.4 million (equivalent to approximately HK$4.3 million) (for the six months ended 30 June 2013: RMB0.5 million). The increase in selling and administrative expenses during the six months ended 30 June 2014 was mainly due to increase in staff costs and subcontracting charges on research and development as Beijing Subsidiary was developing, and seeking to supply to the relevant lottery authority in the PRC, the system and content of a Lottery Game for use on mobile smart phones in the PRC.

4.2 Liquidity and financial resources

As at 30 June 2014, Beijing Subsidiary’s current assets amounted to approximately RMB6.4 million (equivalent to approximately HK$8.1 million), with bank balances and cash of approximately RMB1.6 million (equivalent to approximately HK$2.0 million).

As at 30 June 2014, Beijing Subsidiary’s current liabilities amounted to approximately RMB0.5 million (equivalent to approximately HK$0.6 million).

As Beijing Subsidiary had no borrowings, the gearing ratio of Beijing Subsidiary as at 30 June 2014 was nil (2013: 0.26).

4.3 Capital structure and foreign exchange risk

Beijing Subsidiary operated on a debt-free capital structure during the six months ended 30 June 2014.

The capital structure of the Beijing Subsidiary consisted of equity attributable to owners of Beijing Subsidiary of approximately RMB6.4 million (equivalent to approximately HK$8.0 million).

Beijing Subsidiary had neither foreign currency hedging activities nor any financial instruments for hedging purposes during the six months ended 30 June 2014.

4.4 Contingent liabilities and capital commitment

As at 30 June 2014, Beijing Subsidiary did not have any material contingent liabilities and capital commitment.

4.5 Significant investments, material acquisitions and disposal

There were no significant investments, material acquisitions and disposals during the six months ended 30 June 2014.

– IV-33 –

FINANCIAL INFORMATION OF BEIJING SUBSIDIARY

APPENDIX IV

4.6 Employee and remuneration policies

As at 30 June 2014, Beijing Subsidiary had 11 employees (2013: 4). Total staff costs for the six months ended 30 June 2014 was approximately RMB0.6 million (equivalent to approximately HK$0.8 million) (for the six months ended 30 June 2013: RMB0.2 million). Remuneration packages for employees principally comprised salaries and wages. The employees of Beijing Subsidiary were members of state-managed retirement benefits scheme operated by the PRC government. Beijing Subsidiary was required to contribute a specific percentage of the total monthly basic salaries to the retirement benefits scheme. The only obligation of Beijing Subsidiary with respect to the retirement benefits scheme was to make the required contributions under the scheme.

4.7 Charge on assets

As at 30 June 2014, no asset was pledged by Beijing Subsidiary.

4.8 Future plans for material investments and acquisition of capital assets

Beijing Subsidiary was developing, and seeking to supply to the relevant lottery authority in the PRC, the system and content of a Lottery Game for use on mobile smart phones in the PRC. The application for the approval of the launch of the Lottery Game was underway. If Beijing Subsidiary is successful in obtaining the approval of the relevant government authority for the launch of the Lottery Game on mobile smart phones, Beijing Subsidiary will strive to broaden the geographic coverage of the Lottery Game to more provinces in the PRC. Nevertheless, as at the Latest Practicable Date, it is uncertain as to whether the approval of the launch of the Lottery Game can be obtained, and whether Beijing Subsidiary will be required to make any material investments or acquisition of capital assets in the future in accordance with such approval (if any).

– IV-34 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX V

A. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Capitalised terms used herein shall have the same meanings as those defined in this Circular, unless the context requires otherwise.

The accompanying unaudited pro forma consolidated statement of financial position of the Enlarged Group (the “Unaudited Pro Forma Financial Information”) has been prepared by the directors (the “Directors”) of AGTech Holdings Limited (the “Company”) to illustrate the effect of the acquisition of the entire equity interest in Score Value Limited (the “Target”), the intermediate holding Company of 深圳中林瑞德科技有限公司 (Shenzhen Zoom Read Tech Co., Ltd) (“Shenzhen Subsidiary”) and 北京名影科漫科技有限公司 (Beijing MTC Creative Mind Tech Co., Ltd) (“Beijing Subsidiary”) (the “Acquisition”).

The Unaudited Pro Forma Financial Information has been prepared as if the Acquisition had been completed on 30 June 2014 and is based on (i) the unaudited condensed consolidated statement of financial position of the Group as at 30 June 2014 as extracted from the interim report of the Group for the six months ended 30 June 2014; (ii) the audited consolidated statement of financial position of the Target Group as at 30 June 2014 as set out in Appendix II to this Circular; and (iii) the audited statement of financial position of Beijing Subsidiary as at 30 June 2014 as set out in Appendix IV to this circular after making pro forma adjustments that are (a) directly attributable to the Acquisition and not relating to future events or decisions; and (b) factually supportable.

This Unaudited Pro Forma Financial Information has been prepared by the Directors for illustrative purposes only and is based on a number of assumptions, estimates, uncertainties and current available information. Because of its hypothetical nature, the Unaudited Pro Forma Financial Information may not give a true picture of the financial position of the Enlarged Group that would have been attained had the completion actually occurred on the dates indicated therein, where applicable, or any future dates.

English translation names are for identification purpose only.

– V-1 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX V

The Group as at 30 June 2014 HK$ (Unaudited) (Note 1) 53,143,079 790,855,088 2,455,251 647,075 23,569,391 1,788,348 4,138,801	The Target Group as at 30 June 2014 RMB (Audited) (Note 2) 1,410,931 – – – – – –	The Target Group as at 30 June 2014 HK$ (Audited) (Note 2) 1,777,773 – – – – – –	Beijing Subsidiary as at 30 June 2014 RMB (Audited) (Note 3) 488,538 – – – – – –	Pro forma Enlarged Group HK$ (Unaudited) 55,536,410 1,329,212,741 2,455,251 647,075 23,569,391 1,788,348 4,138,801
876,597,033	1,410,931	1,777,773	488,538	1,417,348,017
50,317,034 60,220,562 58,802,450 – 5,855 239,113,485	11,693,992 – 12,798,752 2,490,000 – 14,130,045	14,734,430 – 16,126,428 3,137,400 – 17,803,857	– – 4,732,875 – – 1,627,817	65,051,464 60,220,562 84,029,701 – 5,855 220,117,391
408,459,386	41,112,789	51,802,115	6,360,692	429,424,973
5,413,231 22,041,724 650,000 – 196,994 – – –	6,706,677 12,812,946 – 157,379 1,413,456 – – –	8,450,413 16,144,312 – 198,298 1,780,955 – – –	– 496,731 – – – – – –	13,863,644 39,010,215 650,000 – 1,977,949 95,194,405 45,451,257 96,621,622
28,301,949	21,090,458	26,573,978	496,731	292,769,092

– V-2 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX V

The Group as at 30 June 2014 HK$ (Unaudited) (Note 1) 380,157,437	The Target Group as at 30 June 2014 RMB (Audited) (Note 2) 20,022,331	The Target Group as at 30 June 2014 HK$ (Audited) (Note 2) 25,228,137	Beijing Subsidiary as at 30 June 2014 RMB (Audited) (Note 3) 5,863,961
1,256,754,470	21,433,262	27,005,910	6,352,499
34,444,646 4,194,139 – –	– 32,895 – –	– 41,448 – –	– – – –
38,638,785	32,895	41,448	–
1,218,115,685	21,400,367	26,964,462	6,352,499

8,783,109 – – – 1,206,660,757	340,818 – – – 21,059,549	429,430 – – – 26,535,032
1,215,443,866 2,671,819	21,400,367 –	26,964,462 –	6,352,499 –
1,218,115,685	21,400,367	26,964,462	6,352,499

– V-3 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX V

Notes to the Unaudited Pro Forma Financial Information:

The balances have been extracted from the unaudited condensed consolidated statement of financial position of the Group as at 30 June 2014 as set out in the interim report of the Company for the six months ended 30 June 2014.
The balances have been extracted from the audited consolidated statement of financial position of the Target and its subsidiaries (the “Target Group”) as at 30 June 2014 as set out in Appendix II to this Circular. The amounts presented in the audited consolidated statement of financial position of the Target Group as at 30 June 2014 are converted into Hong Kong dollars at an exchange rate of RMB1 to HK$1.26. No representation is made that Renminbi (“RMB”) amounts have been, could have been or could be translated to Hong Kong dollar amounts, or vice versa, at that rate or at any other rates or at all.
The balances have been extracted from the audited statement of financial position of Beijing Subsidiary as at 30 June 2014 as set out in Appendix IV to this Circular.

The amounts presented in the audited statement of financial position of Beijing Subsidiary as at 30 June 2014 are converted into Hong Kong dollars at an exchange rate of RMB1 to HK$1.26. No representation is made that RMB amounts have been, could have been or could be translated to Hong Kong dollar amounts, or vice versa, at that rate or at any other rates or at all.

The adjustments represent consideration payable by the Group with respect to the Acquisition. Pursuant to the acquisition agreement (the “Agreement”) dated 17 November 2014, the maximum Consideration payable for the Acquisition is HK$489,500,000 which will be satisfied by:
(i) a maximum of HK$250,000,000 by allotment and issue of the Consideration Shares at the issue price of HK$1.48 per Consideration Share; and
(ii) a maximum of HK$239,500,000 in cash.

The above consideration includes initial consideration of HK$189,500,000 (“Initial Consideration”) and contingent consideration up to a maximum of HK$300,000,000 (“Deferred Consideration”), comprising:

Initial Consideration

(i) as to HK$37,000,000 in cash on completion date;
(ii) as to HK$50,000,000 in cash on or before 15 January 2015;
(iii) as to HK$50,000,000 by the Company allotting and issuing 33,783,783 Consideration Shares on or before 15 January 2015; and
(iv) as to HK$52,500,000 in cash on or before 30 June 2015.

Deferred Consideration (to be paid in the following sequence)

(i) as to HK$50,000,000 (the “First Deferred Consideration”) by the Company allotting and issuing 33,783,783 Consideration Shares within fifteen Business Days after the granting of the approval of the Lottery Game by the relevant government authority of the PRC (the “Approval”) (on the condition that the Approval should have been granted on or before the first anniversary date of the Agreement);
(ii) as to HK$50,000,000 (the “Second Deferred Consideration”) in cash within fifteen Business Days after the granting of the Approval;

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX V

(iii) as to HK$100,000,000 (the “Third Deferred Consideration”) by the Company allotting and issuing 67,567,568 Consideration Shares within thirty Business Days after the official commencement date of sales of the Lottery Game through mobile smart phone channel in the first trial province in the PRC in accordance with the Approval;
(iv) in the event that the net profit after taxation of Shenzhen Subsidiary for the financial year ending 31 December 2015 is not less than RMB20,000,000 (equivalent to approximately HK$25,200,000) (the “2015 Profit Guarantee”), the Group shall pay to the Vendors a further amount of HK$30,000,000 which shall be satisfied as to HK$15,000,000 in cash and as to HK$15,000,000 by the Company allotting and issuing 10,135,135 Consideration Shares to the Vendors within fifteen Business Days after the issue of the audit report of Shenzhen Subsidiary for the year ending 31 December 2015;
(v) in the event that the aggregate net profit after taxation of Shenzhen Subsidiary for the two financial years ending 31 December 2015 and 2016 is not less than RMB40,000,000 (equivalent to approximately HK$50,400,000) (the “2016 Profit Guarantee”), the Group shall pay to the Vendors a further amount of HK$30,000,000 which shall be satisfied as to HK$15,000,000 in cash and as to HK$15,000,000 by the Company allotting and issuing 10,135,135 Consideration Shares to the Vendors within fifteen Business Days after the issue of the audit report of Shenzhen Subsidiary for the year ending 31 December 2016; and
(vi) in the event that the aggregate net profit after taxation of Shenzhen Subsidiary for the three financial years ending 31 December 2015, 2016 and 2017 is not less than RMB60,000,000 (equivalent to approximately HK$75,600,000) (the “2017 Profit Guarantee”, together with the 2015 Profit Guarantee and the 2016 Profit Guarantee, the “Profit Guarantees”), the Group shall pay to the Vendors a further amount of HK$40,000,000 which shall be satisfied as to HK$20,000,000 in cash and as to HK$20,000,000 by the Company allotting and issuing 13,513,514 Consideration Shares to the Vendors within fifteen Business Days after the issue of the audit report of Shenzhen Subsidiary for the year ending 31 December 2017.

Adjustments to the consideration

Pursuant to the Agreement, the consideration shall be adjusted downwards under the following circumstances:

(i) if the Approval is not granted by the relevant government authority of the PRC by the first anniversary date of the Agreement (or such other date that may be agreed among the parties to the Agreement):
(a) the Vendors are required to refund HK$50,000,000 in cash to the Group within thirty Business Days after the first anniversary date of the Agreement (or such other date that may be agreed among the parties to the Agreement); and
(b) the Group shall no longer be required to satisfy the First Deferred Consideration, the Second Deferred Consideration and the Third Deferred Consideration; and
(ii) if any of the Profit Guarantees is not met, the Consideration Shares and the cash portion of the consideration relating to that particular Profit Guarantee will not be payable to the Vendors.

Bonus options

Within two years from the date of the Agreement and provided that the Approval has been granted, the Company shall grant to the Vendors the bonus options, entitling them to subscribe for up to 166,666,666 bonus option shares (the “Bonus Options”), subject to the fulfilment of the following milestone conditions:

(i) in the event that the Target Group has launched the sales of the Lottery Game through mobile smart phone channel in five provinces or more in the PRC, the Company shall grant to the Vendors the Bonus Options entitling them to subscribe for up to 55,555,555 Bonus Option Shares at the subscription price of HK$1.80 per Bonus Option Share within an exercise period of two years from the date of such grant; and

– V-5 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX V

(ii) in the event that the Target Group has launched the sales of the Lottery Game through mobile smart phone channel in ten provinces or more (inclusive of those provinces mentioned in (i) above) in the PRC, the Company shall grant to the Vendors the Bonus Options entitling them to subscribe for up to 111,111,111 Bonus Option Shares at the subscription price of HK$1.80 per Bonus Option Share within an exercise period of two years from the date of such grant.

For the purpose of preparation of the Unaudited Pro Forma Financial Information, the Directors have assumed that the conditions as set out in the First Deferred Consideration, the Second Deferred Consideration, the Third Deferred Consideration and the Profit Guarantees will be attained. The Directors have also assumed that the Bonus Options to subscribe for 166,666,666 Bonus Option Shares will be granted to the Vendors.

In accordance with Hong Kong Financial Reporting Standard 3 (Revised) “Business Combination” (the “HKFRS 3”), any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement, which considers the facts and circumstances that existed as of that date or, if known, during the measurement period.

Contingent consideration is recognised to reflect its fair value at date of completion based on information obtained about facts and circumstances that existed as of that date or, if known, during the measurement period, as provided for under HKFRS 3. The fair values of the Second Deferred Consideration, the Third Deferred Consideration, the consideration payables in cash in respect of the Profit Guarantees and the Bonus Options are expected to be recognised entirely as financial liabilities of the Group at Completion. Subsequent changes to the fair values of the Second Deferred Consideration, the Third Deferred Consideration, the consideration payables in cash in respect of the Profit Guarantees and the Bonus Options will be recognised in profit or loss. The fair values of the First Deferred Consideration and the Consideration Shares issuable in respect of the Profit Guarantees would be recognised entirely as equity under Hong Kong Accounting Standard 32 “Financial Instruments: Presentation”.

An analysis of the total estimated cost of the Acquisition assuming the Acquisition had taken place on 30 June 2014 is set out as follows:

Consideration: Initial Consideration to be recognised – Cash on completion date – Consideration payable in cash after Completion Date (Note (a)) – 33,783,783 Consideration Shares to be issued (valued at the published closing price of HK$1.43 per Share as quoted on the Stock Exchange on 30 June 2014)	Face value HK$ 37,000,000 102,500,000 50,000,000 189,500,000	Fair value as at 30 June 2014 HK$ 37,000,000 95,194,405 48,310,810
		180,505,215

– V-6 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX V

Deferred Consideration to be recognised – 33,783,783 Consideration Shares issuable in respect of the First Deferred Consideration (valued at the published closing price of HK$1.43 per Share as quoted on the Stock Exchange on 30 June 2014) – Consideration payable in cash in respect of the Second Deferred Consideration (Note (a)) – 67,567,568 Consideration Shares issuable in respect of the Third Deferred Consideration (valued at the published closing price of HK$1.43 per Share as quoted on the Stock Exchange on 30 June 2014) – 33,783,784 Consideration Shares issuable in respect of the Profit Guarantees (valued at the published closing price of HK$1.43 per Share as quoted on the Stock Exchange on 30 June 2014) – Consideration payable in cash in respect of the Profit Guarantees (Note (a)) Bonus Options (Note (b)) Total consideration:	Face value HK$ 50,000,000 50,000,000 100,000,000 50,000,000 50,000,000 300,000,000 N/A	Fair value as at 30 June 2014 HK$ 48,310,810 45,451,257 96,621,622 48,310,811 37,593,549
		276,288,049

		116,533,000

		573,326,264

Notes:

(a) For the purpose of this Unaudited Pro Forma Financial Information, the fair values of the aggregate consideration payables in cash of the Initial Consideration, the Second Deferred Consideration and the Profit Guarantees as at 30 June 2014 are estimated to be HK$178,239,211 by an independent qualified valuer (the “Independent Valuer”). On Completion, the fair values of the consideration payables in cash of the Initial Consideration, the Second Deferred Consideration and the Profit Guarantees will have to be reassessed and subject to change since the actual fair values on completion date would be different from the estimated fair values used in the preparation of the Unaudited Pro Forma Financial Information presented above.

The valuation of the consideration payables in cash has been undertaken by discounting the contractual cash flows over the contractual term of the consideration payables at the discount rates ranging from 9.990% to 10.916%, that were appropriate to the riskiness of the consideration payables in cash, with reference to the prevailing market rates.

– V-7 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX V

(b) For the purpose of this Unaudited Pro Forma Financial Information, the fair value of the Bonus Options as at 30 June 2014 is estimated to be approximately HK$116,533,000 by the Independent Valuer. On Completion, the fair value of the Bonus Options will have to be reassessed and subject to change since the actual fair value on completion date would be different from its estimated fair value used in the preparation of the Unaudited Pro Forma Financial Information presented above.

The valuation of the Bonus Options has been undertaken by using the binominal model, of which significant inputs are as follows:

Closing share price at date of grant	HK$1.43
Exercise price	HK$1.80
Expected volatility	72.686%
Expected life of Bonus Options	4 years
Risk-free interest rate	1.112%
Dividend yield	Nil

The adjustment relates to the recognition of goodwill of approximately HK$538,357,653, being the excess amount of the consideration over the Group’s share of the fair value of the identifiable assets and liabilities of the Target Group and Beijing Subsidiary.

The Group has applied the acquisition method in accordance with HKFRS 3 to account for the Acquisition and the calculation of goodwill is as follows:

Fair value of consideration (see Note 4) Less: Fair value of identifiable assets and liabilities of the Target Group Less: Fair value of identifiable assets and liabilities of Beijing Subsidiary Goodwill	HK$ 573,326,264 (26,964,462) (8,004,149)
	538,357,653

Since this Unaudited Pro Forma Financial Information is prepared solely for illustrative purposes, the Directors assumed that the fair value of the identifiable assets and liabilities to be the carrying amounts of the assets and liabilities of the Target Group and Beijing Subsidiary as at 30 June 2014, and accordingly, the possible changes to the fair value of assets and liabilities of the Target Group and Beijing Subsidiary being attributable to the Group is not reflected in this Unaudited Pro Forma Financial Information.

Since the fair values of the consideration (including any adjustment resulting from the contingent consideration) and the identifiable assets and liabilities of the Target Group and Beijing Subsidiary at the completion date would be different from the estimated fair values used in the preparation of the Unaudited Pro Forma Financial Information presented above, the final amount of goodwill to be recognised in connection with the Acquisition may be materially different from the amount presented herein.

The Directors have assessed whether there is any impairment on goodwill as at 30 June 2014 in accordance with Hong Kong Accounting Standard 36 “Impairment of Assets” (“HKAS 36”) which is consistent with the accounting policy of the Group and concluded that there is no impairment in respect of the goodwill as at 30 June 2014.

The Directors confirmed that they will apply consistent accounting policies, principal assumptions and valuation method to assess impairment of goodwill in subsequent reporting periods in accordance with the requirement of HKAS 36.

The adjustment represents the reclassification of HK$3,137,400 from amount due from a former related party of the Target Group to other receivables, deposits and prepayments.

The adjustment represents the reclassification of HK$198,298 from amount due to a former director of the Target Group to accruals and other payables.

– V-8 –

APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The adjustment represents payment of the estimated transaction cost attributable to the Acquisition of approximately HK$1,851,000.
Save as set out above, the Unaudited Pro Forma Financial Information does not take into account any trading results or other transactions of the Group, the Target Group and Beijing Subsidiary subsequent to 30 June 2014.
For the purpose of preparing the Unaudited Pro Forma Financial Information, translation of amounts in RMB into HK$ has been made at the exchange rate of RMB1 = HK$1.26. No representation is made that RMB amounts have been, could have been or could be translated to Hong Kong dollar amounts, or vice versa, at that rate or at any other rates or at all.

– V-9 –

APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

B. REPORT ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following is the text of a report received from the reporting accountants of the Company, HLB Hodgson Impey Cheng Limited, Certified Public Accountants, Hong Kong, prepared for the purpose of incorporation in this circular.

==> picture [224 x 48] intentionally omitted <==

31/F, Gloucester Tower The Landmark 11 Pedder Street Central Hong Kong

8 December 2014

INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE COMPILATION OF PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

TO THE DIRECTORS OF AGTECH HOLDINGS LIMITED

We have completed our assurance engagement to report on the compilation of pro forma financial information of AGTech Holdings Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) by the directors of the Company (the “Directors”) for illustrative purposes only. The pro forma financial information consists of the unaudited pro forma consolidated statement of financial position of the Enlarged Group (the “Unaudited Pro Forma Financial Information”) and related notes as set out in Section A entitled “Unaudited Pro Forma Financial Information of the Enlarged Group” in Appendix V to the circular issued by the Company dated 8 December 2014 (the “Circular”). The applicable criteria on the basis of which the Directors have compiled the Unaudited Pro Forma Financial Information are described in Section A of Appendix V to the Circular.

The Unaudited Pro Forma Financial Information has been compiled by the Directors to illustrate the impact of the proposed acquisition of the entire equity interest in Score Value Limited (the “Target”), a company incorporated in the British Virgin Islands, on the Group’s financial position as at 30 June 2014 as if the transaction had taken place as at 30 June 2014. As part of this process, information about the Group’s financial position has been extracted by the Directors from the Group’s unaudited condensed consolidated financial statements for the six months ended 30 June 2014, on which an interim report has been published.

– V-10 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX V

Directors’ Responsibility for the Unaudited Pro Forma Financial Information

The Directors are responsible for compiling the Unaudited Pro Forma Financial Information in accordance with paragraph 7.31 of the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the “GEM Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” (“AG7”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

Reporting Accountants’ Responsibilities

Our responsibility is to express an opinion, as required by paragraph 7.31(7) of the GEM Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3420 “Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus” issued by the HKICPA. This standard requires that the reporting accountants comply with ethical requirements and plan and perform procedures to obtain reasonable assurance about whether the Directors have compiled the Unaudited Pro Forma Financial Information in accordance with paragraph 7.31 of the GEM Listing Rules and with reference to AG7 issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the Unaudited Pro Forma Financial Information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the Unaudited Pro Forma Financial Information.

The purpose of Unaudited Pro Forma Financial Information included in the Circular is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the Group as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the event or transaction at 30 June 2014 would have been as presented.

A reasonable assurance engagement to report on whether the Unaudited Pro Forma Financial Information has been properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the Directors in the compilation of the Unaudited Pro Forma Financial Information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:

the related pro forma adjustments give appropriate effect of those criteria; and
the Unaudited Pro Forma Financial Information reflects the proper application of those adjustments to the unadjusted financial information.

The procedures selected depend on the reporting accountants’ judgement, having regard to the reporting accountants’ understanding of the nature of the Group, the event or transaction in respect of which the Unaudited Pro Forma Financial Information has been compiled, and other relevant engagement circumstances.

– V-11 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX V

The engagement also involves evaluating the overall presentation of the Unaudited Pro Forma Financial Information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion:

(a) the Unaudited Pro Forma Financial Information has been properly compiled on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 7.31(1) of the GEM Listing Rules.

Yours faithfully,

HLB Hodgson Impey Cheng Limited Certified Public Accountants

Hui Chun Keung, David

Practising Certificate Number: P05447 Hong Kong

– V-12 –

SUMMARY OF THE PRINCIPAL TERMS OF NEW SHARE OPTION SCHEME

APPENDIX VI

This Appendix summaries the principal terms of the New Share Option Scheme but does not form part of, nor is it intended to be, part of the New Share Option Scheme nor should it be taken as effecting the interpretation of the rules of the New Share Option Scheme:-

1. Purpose of the New Share Option Scheme

The purpose of the New Share Option Scheme is to provide incentives or rewards to Participants thereunder for their contribution and/or future contributions to the Group and/or to enable the Group to recruit and retain high-calibre employees and attract human resources that are valuable to the Group.

2. Grant of Options

2.1 On and subject to the terms of the New Share Option Scheme, the Board shall be entitled at any time within ten years commencing on the Adoption Date to make an Offer to any Participant as the Board may in its absolute discretion select, and subject to such conditions (including but not limited to terms and conditions in relation to vesting, exercise or otherwise) as the Board may think fit provided that such conditions shall not be inconsistent with any other terms and conditions of the New Share Option Scheme, to subscribe for such number of Shares as the Board may determine at the Subscription Price.
2.2 An Offer shall be made to a Participant by letter in such form as the Board may from time to time determine requiring the Participant to undertake to hold the Option on the terms on which it is to be granted and to be bound by the provisions of the New Share Option Scheme and shall remain open for acceptance by the Participant to whom an Offer is made for a period of not more than 28 calendar days from the Offer Date provided that no such Offer shall be open for acceptance after the tenth anniversary of the Adoption Date or after the New Share Option Scheme has been terminated in accordance with the provisions thereof or after the Participant (being an Employee) to whom the offer is made has ceased to be an Employee or after such other date as determined by the Board.
2.3 An Offer shall be deemed to have been accepted and the Option to which the Offer relates shall, unless otherwise provided therein, be deemed to have been granted and to have taken effect (with retrospective effect from the Offer Date) when the duplicate letter comprising acceptance of the Offer duly signed by the Grantee with the number of Shares in respect of which the Offer is accepted clearly stated therein, together with a remittance in favour of the Company of HK$1.00 by way of consideration for the grant thereof, is received by the Company. Such remittance shall in no circumstances be refundable. The date of grant is the Offer Date provided that the Offer is accepted on or before the last day of acceptance of the Offer which shall be not more than 28 calendar days from the Offer Date.

– VI-1 –

SUMMARY OF THE PRINCIPAL TERMS OF NEW SHARE OPTION SCHEME

APPENDIX VI

2.4 Any Offer may be accepted for less than the number of Shares in respect of which it is offered provided that it is accepted in respect of such number of Shares as represents a board lot for the time being for the purpose of trading on GEM or an integral multiple thereof. To the extent that the Offer is not accepted before the last day of acceptance in the manner indicated in the paragraph 2.3, it will be deemed to have been irrevocably declined and lapse automatically.

3. Maximum number of Shares

3.1 Notwithstanding paragraphs 3.2 and 3.3, the overall limit on the number of Shares which may be issued upon exercise of all Options granted and yet to be exercised under the New Share Option Scheme and other share option schemes must not exceed 30% of the Shares in issue from time to time. No option may be granted under any share option schemes of the Company (or the Subsidiary) if this will result in the limit being exceeded.
3.2 The Shares which are the subject of Options and options under any other share option schemes that may be granted immediately after the Adoption Date must not exceed 10% of the Shares in issue on the Adoption Date (the “Scheme Mandate Limit”) unless further approval of the Shareholders has been obtained pursuant to paragraphs 3.3 and 3.4. Options lapsed in accordance with the terms of the New Share Option Scheme will not be counted for the purpose of calculating the Scheme Mandate Limit.
3.3 The Company may refresh the Scheme Mandate Limit at any time subject to prior Shareholders’ approval. However, the Scheme Mandate Limit as refreshed must not exceed 10% of the Shares in issue as at the date of the aforesaid Shareholders’ approval. Options previously granted under the New Share Option Scheme, and other share option schemes (including those outstanding, cancelled, lapsed in accordance with the New Share Option Scheme and other share option schemes or exercised options) will not be counted for the purpose of calculating the Scheme Mandate Limit as refreshed. A circular must be sent to Shareholders in connection with the meeting at which their approval will be sought.
3.4 The Company may also seek separate Shareholders’ approval for granting Options beyond the Scheme Mandate Limit to Participants specifically identified by the Company before the aforesaid Shareholders’ meeting where such approval is sought. A circular must be sent to Shareholders containing a generic description of the identified Participants, the number and terms of the Options to be granted, the purpose of granting Options to the identified Participants, and how these Options serve such purpose.

– VI-2 –

SUMMARY OF THE PRINCIPAL TERMS OF NEW SHARE OPTION SCHEME

APPENDIX VI

3.5 The total number of Shares issued and to be issued upon exercise of the Options granted and to be granted to each Participant or Grantee (as the case may be), including both exercised and outstanding Options, in any 12-month period up to and including the date of grant must not exceed 1% of the Shares in issue at the date of grant (the “Individual Limit”). Any further grant of Options in excess of the Individual Limit must be subject to Shareholders’ approval with such Participant or Grantee (as the case may be) and his close associates (or his associates if the Participant or Grantee is a connected person) (as such terms are defined in the GEM Listing Rules) abstaining from voting. A circular must be sent to the Shareholders disclosing the identity of the Participant or Grantee (as the case may be), the number and terms of the Options granted and to be granted (including Options previously granted). The number and terms (including the Subscription Price) of Options to be granted to such Participant or Grantee, as the case may be, must be fixed before Shareholders’ approval is sought and the date of Board meeting for proposing such further grant should be taken as the date of grant for the purpose of calculating the Subscription Price.

4. Terms of exercise of Option

4.1 The New Share Option Scheme does not specify a minimum period for which an Option must be held nor a performance target which must be achieved before an Option can be exercised. The Board may impose restrictions on the exercise of an Option during the Option Period including if appropriate:-
(i) a minimum period for which an Option must be held before it can be exercised by the Grantee; or
(ii) performance targets which must be achieved before the Options can be exercised.

5. Subscription Price

5.1 The Subscription Price in respect of any particular Option shall be a price determined by the Board at its absolute discretion at the time of the grant of the relevant Option (and shall be stated in the letter containing the offer of the grant of the Option) and notified to a Participant and in any case shall be no less than the highest of (i) the closing price of the Shares as stated in the Stock Exchange’s daily quotation sheets on the Offer Date, which must be a HK business day; (ii) the average closing price of the Shares as stated in the Stock Exchange’s daily quotation sheets for the five HK business days immediately preceding the Offer Date; and (iii) the nominal value of a Share on the date of grant of the Option.

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APPENDIX VI

6. Exercise of Options

6.1 Subject as hereinafter provided or as provided in the offer for the grant of the Option (if any), the Option may be exercised by the Grantee (or, as the case may be, his legal personal representatives) at any time during the Option Period but may not be exercised after the expiry of ten years from the Commencement Date provided that:-
6.1.1 in the event of the Grantee who is an Employee ceasing to be an Employee for any reason other than on his death or the termination of his employment on one or more of the grounds specified in paragraph 8(v), the Grantee may exercise the Option at any time on or before the date of cessation in accordance with the provisions of paragraph 6.4 up to the Grantee’s entitlement at the date of such cessation (to the extent the Option has become exercisable and not already been exercised) which date shall be the last actual working day with the Company or the relevant Subsidiary whether salary is paid in lieu of notice or not or the last date of appointment as the director of the Company or the relevant Subsidiary (as the case may be) (provided that the retirement of any director of the Group pursuant to the bye-laws or articles of association (as the case may be) of the Company or the relevant Subsidiary at an annual general meeting of such member of the Group who is re-elected at the same annual general meeting shall not be regarded as ceasing employment for the purpose of this paragraph);
6.1.2 in the event the Grantee dies (provided that, in the case the Grantee is an Employee, none of the events which would be a ground for termination of his/her employment under paragraph 8(v) arises prior to his/her death), the legal personal representative(s) of the Grantee shall be entitled within a period of 12 months from the date of death of the Grantee to exercise the Option up to the entitlement of such Grantee as at the date of death (to the extent the Option has become exercisable and not already been exercised);
6.1.3 if a general offer by way of takeover (otherwise than by a scheme of arrangement) is made to all the holders of Shares (or all such holders other than the offeror and/or any person controlled by the offeror and/or any person acting in association or concert with the offeror) and such offer becomes or is declared unconditional prior to the expiry date of the relevant Option, the Grantee (or, where appropriate, his legal personal representatives) shall be entitled to exercise the Option in full (to the extent the Option has not already been exercised even though the Option Period has not come into effect during the occurrence of the general offer) at any time within one month after the date on which the offer becomes or is declared unconditional;
6.1.4 if a general offer by way of scheme of arrangement is made to all the holders of Shares with the New Share Option Scheme having been approved by the necessary number of holders of Shares at the requisite meetings, the Grantee (or his legal personal representatives) may thereafter (but before such time as

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SUMMARY OF THE PRINCIPAL TERMS OF NEW SHARE OPTION SCHEME

APPENDIX VI

shall be notified by the Company) exercise the Option (to the extent the Option has not already been exercised) to its full extent or to the extent specified in such notice;

6.1.5 in the event a notice is given by the Company to its Shareholders to convene a Shareholders’ meeting for the purpose of considering and, if thought fit, approving a resolution to voluntarily wind-up the Company, the Company shall on the same date as or soon after it dispatches such notice to each Shareholder give notice thereof to all Grantees (together with notice of the existence of the provisions of this paragraph) and each Grantee (or his legal personal representatives) may by notice in writing to the Company (such notice to be received by the Company not later than four HK business days prior to the proposed Shareholders’ meeting), accompanied by a remittance for the full amount of the aggregate Subscription Price for the Shares in respect of which the notice is given, exercise the Option (to the extent the Option has become exercisable and not already been exercised) either to its full extent or to the extent specified in such notice and the Company shall as soon as possible and in any event no later than the day immediately prior to the date of the proposed Shareholders’ meeting referred to above, allot and issue such number of Shares to the Grantee (or his legal personal representatives) which falls to be issued on such exercise credited as fully paid;
6.1.6 other than a scheme of arrangement contemplated in paragraph 6.1.4 above, in the event of a compromise or arrangement between the Company and its members or creditors being proposed in connection with the New Share Option Scheme for the reconstruction or amalgamation of the Company, the Company shall give notice thereof to all Grantees on the same day as it gives notice of the meeting to its members or creditors to consider such a scheme or arrangement and the Grantee (or his legal personal representatives) may by notice in writing to the Company (such notice to be received by the Company not later than four HK business days prior to the proposed meeting), accompanied by the remittance for the Subscription Price in respect of the relevant Option, exercise the Option (to the extent the Option has become exercisable and not already been exercised) either to its full extent or to the extent specified in such notice, and the Company shall as soon as possible and in any event no later than the day immediately prior to the date of the proposed meeting referred to above, allot and issue such number of Shares to the Grantee (or his legal personal representatives) which falls to be issued on such exercise credited as fully paid and register the Grantee (or his legal personal representatives) as holder thereof; and
6.1.7 if an application is made to the court (otherwise than where the Company is being voluntarily wound up) in connection with a proposed compromise or arrangement between the Company and its creditors (or any class of them) or between the Company and its members (or any class of them), the Grantee may by notice in writing to the Company within 21 calendar days after the date of such application, exercise the Option in full (to the extent which has become exercisable and not already exercised) or to the extent specified in such notice.

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APPENDIX VI

6.2 Shares to be allotted and issued upon the exercise of Options will be subject to all the provisions of the bye-laws of the Company for the time being in force and will rank pari passu in all respects with the fully paid Shares in issue on the date of allotment and accordingly will entitle the holders of the Shares to be allotted and issued to participate in all dividends or other distributions paid or made on or after the date of allotment other than any dividend or other distribution previously declared or recommended or resolved to be paid or made with respect to a record date which shall be before the date of allotment.
6.3 An Option shall be personal to the respective Grantee and shall not be capable of assignment and no Grantee shall in any way sell, transfer, charge, mortgage, encumber or create any interest in favour of any other person over or in relation to any Option. Any breach of the foregoing shall entitle the Company to cancel any outstanding Option or part thereof granted to such Grantee.
6.4 An Option may be exercised in whole or in part in the manner as set out in paragraph 6.1 by the Grantee (or, as the case may be, his legal personal representatives) giving notice in writing to the Company stating that the Option is thereby exercised and the number of Shares in respect of which it is exercised. Each such notice must be accompanied by a remittance for the aggregate amount of the Subscription Price multiplied by the number of Shares in respect of which the Option is exercised under the notice given. Within 28 calendar days after receipt of the notice and the remittance and, where appropriate, receipt of the independent financial advisors or (as the case may be) the Auditors’ written confirmation pursuant to paragraph 9, the Company shall allot, and shall instruct the Share Registrar to issue, the relevant Shares to the Grantee (or his legal personal representatives) credited as fully paid and issue to the Grantee (or his legal personal representatives) a share certificate in respect of the Shares so allotted.

7. Conditions and Period of the Scheme

7.1 The New Share Option Scheme will take effect subject to (i) the passing of an ordinary resolution by the Shareholders necessary to approve and adopt the New Share Option Scheme, and to authorise the Board to grant Options to subscribe for Shares thereunder and to allot, issue and deal with Shares pursuant to the exercise of any Options granted under the New Share Option Scheme, and (ii) the GEM Listing Committee of the Stock Exchange granting approval of the listing of and permission to deal in any Shares to be issued pursuant to the exercise of Options under the New Share Option Scheme. If any of the above condition is not satisfied on or before the date following 30 calendar days after the Adoption Date, the New Share Option Scheme shall determine immediately and no person shall be entitled to any rights or benefits or be under any obligations under or in respect of the New Share Option Scheme.

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SUMMARY OF THE PRINCIPAL TERMS OF NEW SHARE OPTION SCHEME

APPENDIX VI

7.2 Subject to paragraphs 7.1 and 11, the New Share Option Scheme shall be valid and effective for a period of ten years commencing on the Adoption Date. Options complying with the provisions of Chapter 23 of the GEM Listing Rules which are granted during the life of the New Share Option Scheme and remain unexpired immediately prior to the end of the ten-year period shall continue to be exercisable in accordance with their terms of issue after the end of the ten-year period.

8. Lapse of Option

An Option shall lapse automatically (to the extent not already exercised) on the earliest of:-
(i) the expiry of the Option Period;
(ii) the expiry of the periods referred to in paragraphs 6.1.1, 6.1.2, 6.1.3, 6.1.5 or 6.1.6;
(iii) subject to the compromise or arrangement becoming effective, the expiry of the period referred to in 6.1.7 above;
(iv) subject to the scheme of arrangement becoming effective, the expiry of the period referred to in paragraph 6.1.4;
(v) the date on which a Grantee who is an Employee ceases to be an employee of the Group by reason of the termination of his employment on any one or more of the grounds that he or she has been guilty of serious misconduct, or appears either to be unable to pay or to have no reasonable prospect of being able to pay debts or has become insolvent or has made any arrangement or composition with his creditors generally, or has been convicted of any criminal offence involving his integrity or honesty or (if so determined by the Board) on any other ground on which an employer would be entitled to terminate his employment at common law or pursuant to any applicable laws or under the Grantee’s service contract with the Group. A resolution of the board of directors (or a duly authorised committee thereof) of the Group to the effect that employment of a Grantee has or has not been terminated on one or more of the grounds specified in this paragraph shall be conclusive and binding on the Grantee;
(vi) the date of the commencement of the winding-up of the Company;
(vii) the date on which the Grantee commits a breach of paragraph 6.3; and
(viii) the occurrence of such event or expiry of such period as may have been specifically provided for in the Offer (if any), unless otherwise resolved to the contrary by the Board.

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SUMMARY OF THE PRINCIPAL TERMS OF NEW SHARE OPTION SCHEME

APPENDIX VI

9. Reorganisation of Capital Structure

In the event of a capitalisation issue, rights issue, sub-division or consolidation of Shares or reduction of capital whilst any Option remains exercisable, such corresponding adjustments (if any) shall be made to:-

(i) the aggregate number of Shares subject to outstanding Options so far as unexercised; and/or
(ii) the Subscription Price of each outstanding Option; and/or
(iii) in the event of a sub-division and consolidation of the share capital of the Company and to the extent required, the maximum number of Shares referred to in paragraphs 3 and 14;

provided that any adjustment shall be made on the basis that the proportion of the issued share capital of the Company to which a Grantee is entitled after such adjustment shall remain the same as that to which he was entitled before such adjustment and that no such adjustment shall be made the effect of which would be to enable any Share to be issued at less than its nominal value and in case of any adjustments other than any made on a capitalisation issue, a written confirmation from an independent financial adviser or the Auditors is required to confirm that the adjustment(s) satisfy the relevant requirements under the GEM Listing Rules. Any such alterations will be made on the basis that the aggregate Subscription Price payable on the full exercise of any Option is to remain as nearly as possible the same (and in any event not greater than) as it was before such event. The issue of securities as consideration in a transaction to which the Company is a party may not be regarded as a circumstance requiring adjustment.

10. Cancellation of Options

Any cancellation of Options granted but not exercised must be approved by the Board provided that where the Company cancels Options granted but not exercised in accordance with this paragraph and issues new ones to the same option holder, the issue of such new options may only be made under the New Share Option Scheme with available unissued Options (excluding the cancelled Options) within the Scheme Mandate Limit (as defined below) (as refreshed from time to time).

11. Termination

The Company may by ordinary resolution in general meeting or the Board may at any time terminate the operation of the New Share Option Scheme and in such event no further Options will be offered or granted but in all other respects the provisions of the New Share Option Scheme shall remain in full force and effect. Options complying with the provisions of Chapter 23 of the GEM Listing Rules which are granted during the life of the New Share Option Scheme and remain unexpired immediately prior to the end of the ten-year period shall continue to be valid and exercisable in accordance with their terms of grant after the termination of the operation of the New Share Option Scheme.

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SUMMARY OF THE PRINCIPAL TERMS OF NEW SHARE OPTION SCHEME

APPENDIX VI

12. Alternation of the New Share Option Scheme

The New Share Option Scheme may be altered in any respect by a resolution of the Board except that alterations of the provisions of the New Share Option Scheme relating to (i) matters set out in Rule 23.03 of the GEM Listing Rules to the advantage of the Participants; (ii) any change to the authority of the Board in relation to any alteration to the terms of the New Share Option Scheme; (iii) the terms and conditions of the New Share Option Scheme which are of a material nature; or (iv) any change to the terms of Options granted (except where such alterations take effect automatically under the existing terms of the New Share Option Scheme) shall not be made except with the prior sanction of a resolution by the shareholders of the Company, provided that any amendment or alteration to the terms and conditions of the New Share Option Scheme shall comply with Chapter 23 of the GEM Listing Rules.

13. Administration of the New Share Option Scheme

The New Share Option Scheme shall be subject to the administration of the Board and the decision of the Board shall be final and binding on all parties. Subject to the compliance of the relevant requirements under the GEM Listing Rules, the Board shall have the right (i) to interpret and construe the provisions of the New Share Option Scheme, (ii) to determine the persons who will be awarded Options under the New Share Option Scheme, and the number and subscription price of Options awarded thereto, (iii) to make such appropriate and equitable adjustments to the terms of Options granted under the New Share Option Scheme as it deems necessary, and (iv) to make such other decisions or determinations as it shall deem appropriate in the administration of the New Share Option Scheme.

14. Grant of Options to Connected Persons

14.1 The grant of Options to a Director, the chief executive of the Company or substantial Shareholder or any of their respective associates (as such terms are defined in the GEM Listing Rules) under the New Share Option Scheme requires the approval of independent non-executive Directors (excluding any independent non-executive Director who is the prospective Grantee of the Options). Where any grant of Options to a substantial Shareholder (as defined in the GEM Listing Rules) or an independent non-executive Director, or any of their respective associates, will result in the Shares issued and to be issued upon exercise of all Options already granted and to be granted (including Options exercised, cancelled and outstanding) to such person in the 12-month period up to and including the date of such grant: (a) representing in aggregate over 0.1% of the Shares in issue; and (b) having an aggregate value, based on the closing price of the Shares at the date of each grant, in excess of HK$5 million, such further grant of Options must be subject to Shareholders’ prior approval taken on a poll. The Company must send a circular to the Shareholders. The prospective Grantee, and his associates and all core connected persons (as such terms are defined in the GEM Listing Rules) of the Company must abstain from voting in favour at such general meeting except that any such connected person (as defined in the GEM Listing Rules) of the Company may vote against the resolution provided that his intention to do so has been stated in the circular;

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APPENDIX VI

14.2 Shareholders’ approval as described above is also required for any change in the terms of Options granted to a Participant who is a substantial Shareholder or an independent non-executive Director, or any of their respective associates (as defined in the GEM Listing Rules);
14.3 The abovementioned circular must contain the following:
(a) details of the number and terms (including the Subscription Price) of the Options to be granted to each Participant, which must be fixed before the date of the Shareholders’ approval and the date of the board meeting for proposing such further grant is to be taken as the date of grant for the purpose of calculating the Subscription Price;
(b) a recommendation from the independent non-executive Directors (excluding any independent non-executive Director who is the Grantee) as to voting;
(c) information relating to any Directors who are trustees of the New Share Option Scheme or have a direct or indirect interest in the trustees; and
(d) any other information as required under the GEM Listing Rules.
14.4 The requirements for the granting of Options to a Director or chief executive of the Company set out in above paragraphs do not apply where the Participant is only a proposed Director or chief executive of the Company.

15. Restriction on Grant of Options

No Option may be granted by the Company after inside information (as defined in the GEM Listing Rules) has come to its knowledge until it has announced the information. In particular, no Option shall be granted during the period commencing one month immediately preceding the earlier of:-

(i) the date of the board meeting (as such date is first notified to the Stock Exchange in accordance with the GEM Listing Rules) for the approval of the Company’s results for any year, half-year or quarter-year period or any other interim period (whether or not required under the GEM Listing Rules); and
(ii) the deadline for the Company to announce its results for any year, half-year or quarter-year period under the GEM Listing Rules or any other interim period (whether or not required under the GEM Listing Rules) and ending on the date of the results announcement.

16. The New Share Option Scheme and all Options granted thereunder shall be governed by and construed in accordance with the laws of Hong Kong.

– VI-10 –

GENERAL INFORMATION

APPENDIX VII

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief: (i) the information contained in this circular is accurate and complete in all material respects and not misleading; (ii) there are no other matters the omission of which would make any statement in this circular misleading; and (iii) all opinions expressed in this circular have been arrived at after due and careful consideration and are founded on bases and assumptions that are fair and reasonable.

2. SHARE CAPITAL

Assuming there is no change to the number of Shares in issue from the Latest Practicable Date to the Completion Date, the authorised and issued share capital of the Company (a) as at the Latest Practicable Date; and (b) after Completion and upon the allotment and issue of the maximum number of Consideration Shares and Bonus Option Shares were/will be as follows:

(a) As at the Latest Practicable Date

Authorised: HK$ 10,000,000,000 Shares 20,000,000.00 Issued and fully paid: 4,431,099,114 Shares 8,862,198.23

(b) After Completion and upon the allotment and issue of the maximum number of Consideration Shares and Bonus Option Shares upon exercise of the Bonus Options in full

Authorised: HK$ 10,000,000,000 Shares 20,000,000.00 Issued and fully paid: 4,431,099,114 Existing Shares 8,862,198.23 168,918,918 Maximum number of Consideration Shares 337,837.84 to be allotted and issued 166,666,666 Bonus Options Shares upon the exercise of 333,333.33 the Bonus Options in full 4,766,684,698 9,533,369.40

– VII-1 –

GENERAL INFORMATION

APPENDIX VII

3. DISCLOSURE OF INTERESTS

(a) Interests of the Directors or chief executive of the Company

As at the Latest Practicable Date, the interests and short positions of the Directors or chief executive of the Company in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), which (a) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO), or (b) were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or (c) were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) adopted by the Company, to be notified to the Company and the Stock Exchange, were as follows:

(i) Interests in the Shares and underlying Shares under equity derivatives (as defined in Part XV of the SFO)

Interests in the Shares:

		Number of Shares		Approximate
	Personal	Corporate		percentage
Name of Director	interest	interest	Total	held
Mr. Sun Ho	27,078,000	2,006,250,000	2,033,328,000	45.89%
(“Mr. Sun”)		(Note 1)
Mr. Bai Jinmin	10,316,000	44,876,600	55,192,600	1.25%
(“Mr. Bai”)		(Note 2)
Mr. Liang Yu	8,038,250	–	8,038,250	0.18%
Mr. Robert Geoffrey	11,070,000	–	11,070,000	0.25%
Ryan
Mr. Wang Ronghua	2,775,000	–	2,775,000	0.06%
Mr. Hua Fengmao	2,605,000	–	2,605,000	0.06%
Ms. Monica Maria	375,000	–	375,000	0.01%
Nunes

Notes:

These 2,006,250,000 Shares were held in the name of MAXPROFIT GLOBAL INC. As MAXPROFIT GLOBAL INC is beneficially and wholly-owned by Mr. Sun, an executive Director and chairman of the Company, Mr. Sun was deemed to be interested in such Shares.
These 44,876,600 Shares were held in the name of Fine Bridge International Limited. Fine Bridge International Limited is beneficially and wholly-owned by HB Resources Investment Limited, which in turn is beneficially and wholly-owned by Mr. Bai, an executive Director. Accordingly, HB Resources Investment Limited and Mr. Bai were deemed to be interested in such Shares.

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GENERAL INFORMATION

APPENDIX VII

(ii) Interests in the share options of the Company

Long position in the underlying Shares in respect of the share options of the Company (which were regarded as unlisted physically settled equity derivatives):

				As at the
		Exercise		Latest	Approximate
		price per		Practicable	percentage
Name of Director	Date of grant	Share	Exercisable period	Date	held
		(HK$)	(Note)
Mr. Robert Geoffrey	21 December 2011	0.2900	21 December 2012 –	10,632,000	0.24%
Ryan			20 December 2016
	17 August 2012	0.1006	17 August 2013 –	2,625,000	0.06%
			16 August 2017
	9 January 2013	0.4250	9 January 2014 –	6,000,000	0.14%
			8 January 2018
	21 January 2014	1.3100	21 January 2015 –	5,000,000	0.11%
			20 January 2019
Mr. Bai Jinmin	21 December 2011	0.2900	21 December 2012 –	10,632,000	0.24%
			20 December 2016
	17 August 2012	0.1006	17 August 2013 –	2,625,000	0.06%
			16 August 2017
	9 January 2013	0.4250	9 January 2014 –	6,000,000	0.14%
			8 January 2018
	21 January 2014	1.3100	21 January 2015 –	10,000,000	0.23%
			20 January 2019
Mr. Liang Yu	21 December 2011	0.2900	21 December 2012 –	10,632,000	0.24%
			20 December 2016
	17 August 2012	0.1006	17 August 2013 –	2,625,000	0.06%
			16 August 2017
	9 January 2013	0.4250	9 January 2014 –	6,000,000	0.14%
			8 January 2018
	21 January 2014	1.3100	21 January 2015 –	5,000,000	0.11%
			20 January 2019
Mr. Ho King Fung, Eric	23 May 2013	0.4890	23 May 2014 –	42,575,844	0.96%
			22 May 2018
Mr. Wang Ronghua	21 December 2011	0.2900	21 December 2012 –	1,500,000	0.03%
			20 December 2016
	9 January 2013	0.4250	9 January 2014 –	1,000,000	0.02%
			8 January 2018
	21 January 2014	1.3100	21 January 2015 –	500,000	0.01%
			20 January 2019
Mr. Hua Fengmao	21 December 2011	0.2900	21 December 2012 –	1,000,000	0.02%
			20 December 2016
	9 January 2013	0.4250	9 January 2014 –	750,000	0.02%
			8 January 2018
	21 January 2014	1.3100	21 January 2015 –	500,000	0.01%
			20 January 2019
Ms. Monica Maria Nunes	20 June 2013	0.4740	20 June 2014 –	1,500,000	0.03%
			19 June 2018
	21 January 2014	1.3100	21 January 2015 –	500,000	0.01%
			20 January 2019

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GENERAL INFORMATION

APPENDIX VII

Note: A portion of the option representing 25% of the total underlying Shares entitled under such option shall be vested in the grantee of the option in each of the 4 years during the exercisable period. If the grantee does not exercise such portion of the option within one year after it has been vested in him/her, such portion of the option will lapse.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interests or short positions in the Shares, underlying Shares (in respect of share options of the Company which were regarded as unlisted physically settled equity derivatives) and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), which (a) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (b) were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or (c) were required, pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules relating to securities transactions by Directors, to be notified to the Company and the Stock Exchange.

(b) Interests of the substantial Shareholders

As at the Latest Practicable Date, so far as was known to the Directors or chief executive of the Company based on the register maintained by the Company pursuant to Part XV of the SFO, the following persons (other than a Director or chief executive of the Company) had, or were deemed or taken to have interests or short positions in the shares and underlying shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or, were directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other members of the Enlarged Group or had any option in respect of such capital:

(i) Interests in the Shares:

			Approximate
			percentage of
			issued share
		Number of	capital of the
Name of Shareholder	Capacity	Shares held	Company
MAXPROFIT GLOBAL INC	Beneficial owner	2,006,250,000	45.28%
		(Note 1)
Rainwood Resources Limited	Beneficial owner	311,852,000	7.04%
Mr. Cheung Lup Kwan, Vitor	Interest of	311,852,000	7.04%
	controlled	(Note 2)
	corporation

– VII-4 –

GENERAL INFORMATION

APPENDIX VII

Notes:

As disclosed above, Mr. Sun was deemed to be interested in these 2,006,250,000 Shares by virtue of his interest in MAXPROFIT GLOBAL INC.
These 311,852,000 Shares were held in the name of Rainwood Resources Limited, which is beneficially and wholly-owned by Mr. Cheung Lup Kwan, Vitor. Accordingly, Mr. Cheung was deemed to be interested in such Shares.
(ii) Long position in the underlying Shares in respect of the share option granted under general mandate by the Company (which was regarded as an unlisted physically settled equity derivative):

			Approximate
			percentage of
		Number of	issued share
		underlying	capital of the
Name of Shareholder	Capacity	Shares entitled	Company
Rainwood Resources Limited	Beneficial owner	212,879,224	4.80%
Mr. Cheung Lup Kwan, Vitor	Interest of	212,879,224	4.80%
	controlled	(Note)
	corporation

Note: On 21 May 2013, Rainwood Resources Limited was granted a share option under general mandate by the Company, entitling it to subscribe for up to a maximum of 212,879,224 Shares at an exercise price of HK$0.40 per Share (subject to adjustments) exercisable for a period of three years, which option was vested in the grantee on the date of grant. As disclosed above, Mr. Cheung Lup Kwan, Vitor was deemed to be interested in this share option by virtue of his interest in Rainwood Resources Limited.

As at the Latest Practicable Date, the Target is owned as to 54.6% by Vendor A and 45.4% by Vendor B.

Save as disclosed above, as at the Latest Practicable Date, so far as was known to the Directors or chief executive of the Company based on the register maintained by the Company pursuant to Part XV of the SFO, no other persons (not being a Director or chief executive of the Company) had, or deemed to have, any interests or short positions in the shares or underlying shares which were required to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, nor were there any persons, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other members of the Enlarged Group or held any option in respect of such capital.

(c) Competing interests

As at the Latest Practicable Date, none of the Directors, controlling Shareholder or their respective associates was interested in any business which competes or is likely to compete, either directly or indirectly, with the businesses of the Enlarged Group.

– VII-5 –

GENERAL INFORMATION

APPENDIX VII

(d) Other interests

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which have, since 31 December 2013 (being the date to which the latest published audited accounts of the Company were made up), been (i) acquired or disposed of by; or (ii) leased to; or (iii) proposed to be acquired or disposed of by; or (iv) proposed to be leased to, any member of the Enlarged Group.

None of the Directors was materially interested in any contract or arrangement subsisting at the Latest Practicable Date which is significant in relation to the business of the Enlarged Group.

4. MATERIAL CONTRACTS

The following are contracts (not being contracts entered into in the ordinary course of business) entered into by the Enlarged Group within the two years immediately preceding the Latest Practicable Date and which are or may be material:

(a) a placing agreement dated 3 May 2013 (supplemented by a supplemental agreement dated 6 May 2013) entered into between the Company and the placing agent, Convoy Investment Services Limited, regarding a placing of 406,521,739 Shares at the placing price of HK$0.345 each under general mandate (the “Placing”) to not less than six independent individual, corporate, professional and/or institutional investors. The Placing was completed on 21 May 2013;
(b) an option agreement dated 3 May 2013 entered into between the Company and Rainwood Resources Limited regarding the grant of an option (“Option”) under general mandate by the Company to Rainwood Resources Limited, entitling it to subscribe for up to 212,879,224 Shares at an exercise price of HK$0.40 per Share (subject to adjustments) over an exercisable period of three years. The grant of the Option was completed on 21 May 2013;
(c) a shareholding transfer agreement dated 16 December 2013 entered into between PRC Company and the vendors (namely, 長沙普信投資諮詢有限公司 (Changsha Puxin Investment Consultancy Co., Ltd.) and 深圳鼎益信科技有限公司 (Shenzhen Dingyixin Technology Co., Ltd)) regarding the acquisition by PRC Company from such vendors of the entire equity interests in Shenzhen Subsidiary for an aggregate cash consideration of RMB5,000,000 (equivalent to approximately HK$6,300,000). Such acquisition was completed on 27 December 2013;
(d) a paid-in capital transfer agreement entered into on 25 June 2014 by PRC Company with each of the vendors (namely, 北京戈德思科科技有限公司 (Beijing Gedesike Technology Co., Ltd) and 北京盛仕嘉德文化交流有限公司 (Beijing Shengshijiade Cultural Exchange Co., Ltd)) regarding the acquisition by PRC Company from such vendors of the entire equity interests in Beijing Subsidiary for an aggregate cash consideration of RMB10,000,000 (equivalent to approximately HK$12,600,000). Such acquisition was completed on 4 July 2014;

For identification purpose only

– VII-6 –

GENERAL INFORMATION

APPENDIX VII

(e) the memorandum of understanding dated 15 July 2014 entered into among the Purchaser, the Company, the Vendors and the Target with respect to the possible acquisition by the Purchaser of the entire equity interests in the Target (“Possible Acquisition”);
(f) a supplemental memorandum of understanding dated 13 October 2014 entered into among the Purchaser, the Company, the Vendors and the Target regarding the extension of the exclusivity period with respect to the Possible Acquisition to 14 December 2014; and
(g) the Agreement.

5. CLAIMS AND LITIGATION

As at the Latest Practicable Date, the Directors were not aware of any claims or litigation of material importance pending or threatened against any member of the Enlarged Group.

6. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contracts with any member of the Enlarged Group which does not expire or is not determinable by the Enlarged Group within one year without payment of compensation (other than statutory compensation).

7. EXPERT AND CONSENT

The following is the qualification of the expert who has given opinion or advice contained in this circular:

Name Qualification HLB Hodgson Impey Cheng Limited Certified public accountants

HLB Hodgson Impey Cheng Limited has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter and references to its name in the form and context in which they respectively appear.

As at the Latest Practicable Date, HLB Hodgson Impey Cheng Limited had no shareholding, directly or indirectly, in any member of the Enlarged Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Enlarged Group.

– VII-7 –

GENERAL INFORMATION

APPENDIX VII

As at the Latest Practicable Date, HLB Hodgson Impey Cheng Limited had no direct or indirect interests in any assets which had been, since 31 December 2013 (being the date to which the latest published audited accounts of the Company were made up), (i) acquired or disposed of by; or (ii) leased to; or (iii) proposed to be acquired or disposed of by; or (iv) proposed to be leased to, any member of the Enlarged Group.

8. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the Company’s head office and principal place of business in Hong Kong at Unit 3912, 39th Floor, Tower Two, Times Square, Causeway Bay, Hong Kong, from the date of this circular up to and including the date of the SGM:

(i) the memorandum of association and bye-laws of the Company;
(ii) the material contracts referred to in the paragraph headed “Material contracts” in this appendix;
(iii) the published annual reports of the Company for each of the two financial years ended 31 December 2013;
(iv) the accountants’ report on the Target Group as set out in Appendix II to this circular;
(v) the accountants’ reports on Shenzhen Subsidiary as set out in Appendix III to this circular;
(vi) the accountants’ report on Beijing Subsidiary as set out in Appendix IV to this circular;
(vii) the accountants’ report on the unaudited pro forma financial information of the Enlarged Group, the text of which is set out in Appendix V to this circular;
(viii) the letter of consent referred to in the paragraph headed “Expert and consent” in this appendix;
(ix) a copy of each circular issued pursuant to the requirements set out in Chapters 19 and/or 20 of the GEM Listing Rules which has been issued by the Company since 31 December 2013 (being the date of the latest published audited accounts);
(x) this circular; and
(xi) the New Share Option Scheme.

– VII-8 –

GENERAL INFORMATION

APPENDIX VII

9. MISCELLANEOUS

(i) The Company has established an audit committee with written terms of reference in compliance with the GEM Listing Rules. The audit committee of the Company comprises three independent non-executive Directors, namely, Ms. Monica Maria Nunes, Mr. Wang Ronghua and Mr. Hua Fengmao. The primary duties of the audit committee are to review and supervise the financial reporting process and internal control systems of the Group, consider the appointment or reappointment of auditors and provide advice and comments on the Group’s draft annual, interim and quarterly results and reports to the Board.

The profile of audit committee members is as follows:

Ms. Monica Maria Nunes (“Ms. Nunes”)

Ms. Nunes, aged 46, has been appointed as independent non-executive Director as well as chairperson of each of the audit, remuneration and nomination committees of the Company. She was first appointed as an executive director of Vodatel Networks Holdings Limited (“Vodatel”), the shares of which are listed on GEM (stock code: 8033), on 13th December 1999. She is the finance director and the Compliance Officer of Vodatel. Ms. Nunes graduated from the University of Calgary, Canada with a bachelor degree in commerce. She has over twenty years of accounting and banking experience. She holds a Certified Management Accountant Designation of Certified Management Accountants of Alberta, Canada. She is an associate of the Chartered Institute of Management Accountants and is entitled to use the description Chartered Management Accountant. She is also entitled to hold and use the designation of Chartered Global Management Accountant.

Mr. Wang Ronghua (“Mr. Wang”)

Mr. Wang, aged 69, is the First Advisory Officer of Beijing Budding Flower International Cultural Promotions Co., Ltd.. He has been appointed as independent non-executive Director as well as member of each of the audit, remuneration and nomination committees of the Company since 19 July 2006.

Mr. Wang graduated from the Beijing Institute of Foreign Trade. Prior to the appointment as independent non-executive Director, Mr. Wang held various positions in the PRC government. Mr. Wang was the general manager of Beijing Personnel Service Corporation for Diplomatic Missions, the general manager of China Jiaoyuan Corporation for International Economic and Technical Cooperation, the first deputy director general of Beijing Service Bureau for Diplomatic Missions and an ambassador of the PRC to the Republic of Iceland. Thereafter, Mr. Wang joined Shanghai Institute of International Finance as vice president and was the chief operating officer of Shanghai Sinoman Industrial (Group) Ltd.

– VII-9 –

GENERAL INFORMATION

APPENDIX VII

Mr. Hua Fengmao (“Mr. Hua”)

Mr. Hua, aged 46, is the Managing Director of BOCOM International Holdings Company Limited. He has been appointed as independent non-executive Director as well as member of each of the audit, remuneration and nomination committees of the Company since 19 July 2006.

Mr. Hua obtained a bachelor degree and a master degree in English Language & Literature from the Shanghai International Studies University, Shanghai, the PRC. Mr. Hua obtained a master degree in Business Administration from the International University of Japan, Niigata, Japan. Prior to joining BOCOM International Holdings Company Limited, Mr. Hua held various positions in various investment banks. Mr. Hua was the founding partner and managing director of China Finance Strategies Limited, the managing director of investment banking of CLSA Equity Capital Markets Limited, the general manager of Cazenove Asia Limited, manager of ICEA Capital Limited and associate investment banking officer of Bank of America NT&SA.

(ii) The compliance officer of the Company is Mr. Sun. He holds a bachelor degree in Economics from the University of Sydney in Australia and a master degree in Corporate Finance from the Hong Kong Polytechnic University. Mr. Sun is a member of CPA Australia and the Hong Kong Institute of Certified Public Accountants.
(iii) The company secretary of the Company is Mr. Lai Yick Fung, who is an associate member of the Hong Kong Institute of Certified Public Accountants, the Hong Kong Institute of Company Secretaries and the Institute of Chartered Secretaries and Administrators.
(iv) The registered office of the Company is at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.
(v) The head office and principal place of business of the Company in Hong Kong is situated at Unit 3912, 39th Floor, Tower Two, Times Square, Causeway Bay, Hong Kong.
(vi) The branch share registrar and transfer office of the Company in Hong Kong is Tricor Abacus Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(vii) The English text of this circular shall prevail over the corresponding Chinese text.

– VII-10 –

NOTICE OF SPECIAL GENERAL MEETING

==> picture [101 x 32] intentionally omitted <==

**AGTech Holdings Limited 亞博科技控股有限公司[*]**

(incorporated in Bermuda with limited liability)

(Stock Code: 8279)

NOTICE IS HEREBY GIVEN THAT a special general meeting (“SGM”) of AGTech Holdings Limited (the “Company”) will be held at 11:00 a.m. on Tuesday, 23 December 2014 at the conference room of HLB Hodgson Impey Cheng Limited at 31/F., Gloucester Tower, The Landmark, 11 Pedder Street, Central, Hong Kong for the purpose of considering and, if thought fit, passing with or without amendment, the following resolutions of the Company as ordinary resolutions:

ORDINARY RESOLUTIONS

“ THAT :

(1) (a) the agreement dated 17 November 2014 entered into between the Company, Silvercreek Technology Holdings Limited (being a wholly-owned subsidiary of the Company, as purchaser (the “Purchaser”)), Immense Wisdom Limited (“IWL”), King Achieve Limited (“KAL”) (with IWL and KAL together as vendors (the “Vendors”)) and Score Value Limited (“SVL”) in relation to the acquisition by the Purchaser of a 100% equity interest in SVL (the “Sale and Purchase Agreement”), and the transactions contemplated thereunder, be and are hereby confirmed, approved and ratified;
(b) subject to and conditional upon the granting of the approval by the GEM Listing Committee (as defined in the circular of the Company dated 8 December 2014 (the “Circular”)) of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) for the listing of and permission to deal in the Consideration Shares (as defined in the Circular), a copy of which, marked “A” and signed by the chairman of the meeting for identification purpose, has been tabled at the meeting) and the Bonus Option Shares (as defined in the Circular), the allotment and issue of the Consideration Shares and the grant of the Bonus Options (as defined in the Circular) by the Company to the Vendors be and are hereby approved, and the directors of the Company be and are hereby authorised to allot and issue the Consideration Shares and the Bonus Option Shares to the Vendors; and

For identification purpose only

– SGM-1 –

NOTICE OF SPECIAL GENERAL MEETING

(c) any one director of the Company be and is hereby authorised, for and on behalf of the Company, to sign, execute, perfect, deliver and exercise all documents, and to affix the seal of the Company thereon where required in accordance with the bye-laws of the Company, and do all such acts, matters and things which he deems necessary, desirable or expedient to carry out and give effect to any or all transactions contemplated, and the exercise or enforcement of rights, under the Sale and Purchase Agreement or documents contemplated thereunder, and to make and agree such variations to the Sale and Purchase Agreement or documents contemplated thereunder as he may deem necessary, desirable or appropriate and in the interests of the Company.
(2) subject to and conditional upon the GEM Listing Committee of the Stock Exchange granting approval of the listing of, and permission to deal in, the ordinary shares of the Company (the “Shares”) which may fall to be allotted and issued pursuant to the exercise of any options which may be granted under the new share option scheme of the Company (the “New Share Option Scheme”), the rules of which are contained in the document marked “B” produced to the meeting and for the purposes of identification signed by the chairman of the meeting, the New Share Option Scheme be and is hereby approved and adopted to be the share option scheme of the Company and that the directors of the Company be and are hereby authorised to do all such acts and to enter into all such transactions, arrangements and agreements as may be necessary or expedient in order to give full effect to the New Share Option Scheme including but without limitation:
(a) to administer the New Share Option Scheme;
(b) to modify and/or amend the New Share Option Scheme from time to time provided that such modification and/or amendment is effected in accordance with the provisions of the New Share Option Scheme relating to modification and/or amendment and the requirements of the Rules Governing the Listing of Securities on the Growth Enterprise Market of the Stock Exchange (as amended from time to time);
(c) at their absolute discretion to grant options to subscribe for Shares and to issue and allot from time to time such number of Shares in the capital of the Company as may be required to be issued pursuant to the exercise of the options which may fall to be granted under the New Share Option Scheme; and

– SGM-2 –

NOTICE OF SPECIAL GENERAL MEETING

(d) to take all such steps as may be necessary, desirable or expedient to carry into effect the New Share Option Scheme from the close of business of the day on which this resolution is passed.”

By order of the board of directors of the Company AGTech Holdings Limited Sun Ho Chairman & CEO

The Hong Kong Special Administrative Region of the People’s Republic of China, 8 December 2014

Registered office:

Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Head office and principal place of business:

Unit 3912, 39th Floor, Tower Two

Times Square Causeway Bay Hong Kong

As at the date of this notice, the board of directors of the Company comprises (i) Mr. Sun Ho, Mr. Robert Geoffrey Ryan, Mr. Bai Jinmin and Mr. Liang Yu as executive directors of the Company; (ii) Mr. Ho King Fung, Eric as non-executive director of the Company; and (iii) Ms. Monica Maria Nunes, Mr. Wang Ronghua and Mr. Hua Fengmao as independent non-executive directors of the Company.

Notes:

1 Any member entitled to attend and vote at the SGM is entitled to appoint one or more proxies to attend and vote in his/her stead in accordance with the bye-laws of the Company. A proxy need not be a member of the Company.
2 Where there are joint registered holders of any Share, any one of such persons may vote at the meeting, either personally or by proxy, in respect of such Share as if he were solely entitled thereto; but if more than one of such joint holders shall be present at the meeting personally or by proxy, that one of the holders so present whose name stands first on the register of members of the Company in respect of such Share shall alone be entitled to vote in respect thereof.
3 The form of proxy and the power of attorney or other authority, if any, under which it is signed or a certified copy of such power of attorney or authority must be deposited at the Company’s Hong Kong branch share registrar, Tricor Abacus Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not less than 48 hours before the time for holding the SGM, and in default the form of proxy shall not be treated as valid. The completion and return of the form of proxy shall not preclude members from attending and voting in person at the SGM (or any adjournment thereof) should they so desire.

– SGM-3 –

AI assistant

Joy Spreader Group Inc. — Proxy Solicitation & Information Statement 2014

51106_rns_2014-12-07_d093b1b7-3fc9-4718-a3c5-bd517f939c68.pdf

AGTech Holdings Limited 亞博科技控股有限公司[*]

(1) MAJOR TRANSACTION IN RELATION TO

ACQUISITION OF THE ENTIRE EQUITY INTEREST IN SCORE VALUE LIMITED INVOLVING THE ISSUE OF CONSIDERATION SHARES AND POSSIBLE GRANTING OF BONUS OPTIONS AND ISSUE OF BONUS OPTION SHARES UNDER SPECIFIC MANDATE (2) PROPOSED ADOPTION OF THE NEW SHARE OPTION SCHEME AND

(3) NOTICE OF SPECIAL GENERAL MEETING

“Company”

DEFINITIONS

AGTech Holdings Limited 亞博科技控股有限公司[*]

(Stock Code: 8279)

To the Shareholders

(1) MAJOR TRANSACTION IN RELATION TO ACQUISITION OF THE ENTIRE EQUITY INTEREST IN SCORE VALUE LIMITED INVOLVING THE ISSUE OF CONSIDERATION SHARES AND POSSIBLE GRANTING OF BONUS OPTIONS AND ISSUE OF BONUS OPTION SHARES UNDER SPECIFIC MANDATE AND

(2) PROPOSED ADOPTION OF THE NEW SHARE OPTION SCHEME

INTRODUCTION

THE AGREEMENT

Date

Parties

Assets to be acquired

The Consideration

Initial Consideration

Deferred Consideration

Adjustments to the Consideration

The Consideration Shares

LETTER FROM THE BOARD

Bonus Options

Conditions precedent

Completion

EFFECT ON THE SHAREHOLDING STRUCTURE OF THE COMPANY

LETTER FROM THE BOARD

INFORMATION ON THE TARGET GROUP

The Target Group

Shareholding structure of the Target Group

Financial information of the Target Group

Shenzhen Subsidiary

Beijing Subsidiary

REASONS FOR THE ACQUISITION

FINANCIAL EFFECTS OF THE ACQUISITION

Net assets

Earnings

PROPOSED ADOPTION OF THE NEW SHARE OPTION SCHEME

LETTER FROM THE BOARD

LETTER FROM THE BOARD

THE SGM

RECOMMENDATION

GENERAL

1. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY FOR EACH OF THE THREE YEARS ENDED 31 DECEMBER 2011, 2012 AND 2013

2. INDEBTEDNESS

Borrowings

Contingent liabilities

Capital and other commitments

Disclaimers

3. MATERIAL ADVERSE CHANGE

4. WORKING CAPITAL

5. FINANCIAL AND TRADING PROSPECT OF THE ENLARGED GROUP

ACCOUNTANTS’ REPORT OF THE TARGET GROUP

The Board of Directors AGTech Holdings Limited

Dear Sirs,

A. FINANCIAL INFORMATION

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

APPENDIX II

FINANCIAL INFORMATION OF THE TARGET GROUP

Note

CONSOLIDATED STATEMENTS OF CASH FLOWS

FINANCIAL INFORMATION OF THE TARGET GROUP

NOTES TO THE FINANCIAL INFORMATION

1. GENERAL INFORMATION OF TARGET GROUP

2. APPLICATION OF HKFRS

New and revised HKFRS issued but not effective

3. SIGNIFICANT ACCOUNTING POLICIES

Statement of compliance

Basis of preparation

Basis of preparation

Changes in the Target Group’s ownership interests in existing subsidiaries

Business combinations

Goodwill

Revenue recognition

Leasing

Joy Spreader Group Inc. Proxy Solicitation & Information Statement 2014

**AGTech Holdings Limited 亞博科技控股有限公司[*]**

**AGTech Holdings Limited 亞博科技控股有限公司[*]**