Joy Spreader Group Inc. - Proxy Solicitation & Information Statement 2016

THIS SUPPLEMENTAL CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this Supplemental 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 Supplemental 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 Supplemental 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 Supplemental Circular.

This Supplemental 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)

SUPPLEMENTAL CIRCULAR TO THE CIRCULAR TO SHAREHOLDERS DATED 25 MAY 2016 RELATING TO THE PROPOSED SUBSCRIPTION OF SUBSCRIPTION SHARES AND CONVERTIBLE BONDS AND APPLICATION FOR WHITEWASH WAIVER SPECIAL DEAL AND CONNECTED TRANSACTION IN RELATION TO SETTLEMENT OF PRC TAX LIABILITY NOTICE OF ADJOURNED SPECIAL GENERAL MEETING AND NOTICE OF NEW SPECIAL GENERAL MEETING

Independent Financial Adviser to the Independent Board Committee and the CT Independent Board Committee

SOMERLEY CAPITAL LIMITED

This Supplemental Circular should be read in conjunction with the circular of the Company dated 25 May 2016. Shareholders may access the First Circular by browsing the websites of the Company (http://www.agtech.com) or the Stock Exchange (http://www.hkexnews.hk). Shareholders who have difficulty in gaining access to the First Circular on the aforesaid websites may also request for the First Circular in printed form by sending a request in writing to the Company’s Hong Kong branch share registrar, Tricor Abacus Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

A letter from the Board is set out on pages 4 to 18 of this Supplemental Circular.

A letter from the Independent Board Committee containing its recommendation in respect of the Special Deal to the Independent Shareholders is set out on pages 19 to 20 of this Supplemental Circular.

A letter from the CT Independent Board Committee containing its recommendation in respect of the Release of Connected Employees’ Tax Liability to the Independent Shareholders is set out on pages 21 to 22 of this Supplemental Circular.

A letter from Somerley Capital Limited, the Independent Financial Adviser, containing its advice to the Independent Board Committee, the CT Independent Board Committee and the Independent Shareholders is set out on pages 23 to 33 of this Supplemental Circular.

A notice convening the Adjourned SGM (as defined herein) to be held at 10:00 a.m. on Saturday, 30 July 2016 at VIP Lounge, 28 Floor, Crowne Plaza, 8 Leighton Road, Causeway Bay, Hong Kong is set out on page ASGM-1 of this Supplemental Circular.

A notice convening the New SGM (as defined herein) to be held at 10:30 a.m. on Saturday, 30 July 2016 at VIP Lounge, 28 Floor, Crowne Plaza, 8 Leighton Road, Causeway Bay, Hong Kong is set out on pages NSGM-1 to NSGM-5 of this Supplemental Circular.

Whether or not shareholders of the Company are able to attend the Adjourned SGM and/or the New 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 Adjourned SGM and/or the New SGM. Completion and return of the form of proxy will not preclude shareholders of the Company from attending and voting in person at the Adjourned SGM and/or the New SGM (or any adjournment thereof) should they so desire.

This Supplemental 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.

14 July 2016

* 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.

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	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
Letter from the CT Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . .	21
Letter from the Independent Financial Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . .	23
Appendix – General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	34
Notice of Adjourned Special General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ASGM-1
Notice of New Special General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	NSGM-1

– ii –

DEFINITIONS

Unless otherwise defined, capitalised terms used in this Supplemental Circular shall have the same meaning as those defined in the First Circular. In this Supplemental Circular, the following terms shall have the following meaning:

“Adjourned SGM”
the special general meeting of the Company to be held at 10:00 a.m. on Saturday, 30 July 2016 at VIP Lounge, 28 Floor, Crowne Plaza, 8 Leighton Road, Causeway Bay, Hong Kong for the Shareholders for the purpose of adjourning indefinitely the special general meeting convened on 10 June 2016 which was adjourned to a time, date and place to be further notified
“Adjourned SGM Notice”
the notice convening the Adjourned SGM set out on page ASGM-1 of this Supplemental Circular
“Adjusted Initial Conversion Price”
has the meaning given to it under the section headed “Adjustment to the Initial Conversion Price” in the Letter from the Board
“Concerned Directors”
Mr. Bai and Mr. Liang, both being executive Directors
“Concerned Subsidiary Directors”
Ms. Wang Liying and Mr. Yang Xinwei, all being directors of subsidiaries of the Company (other than insignificant subsidiaries within the meaning of the GEM Listing Rules)
“Connected Employees”
the Concerned Directors and the Concerned Subsidiary Directors
“Continuing Employees”
27 of the Relevant Employees that continue to be employed by the Group as at the New Latest Practicable Date
“CT Independent Board Committee”
an independent board committee of the Board (comprising all the independent non-executive Directors, namely Ms. Monica Maria Nunes, Mr. Feng Qing and Dr. Gao Jack Qunyao) to advise the Independent Shareholders in respect of the Release of Connected Employees’ Tax Liability and as to voting
“Employee-Shareholders”
Relevant Employees who are Shareholders
“First Circular”
the circular of the Company dated 25 May 2016 in respect of, among other things, the Subscription, the Whitewash Waiver, the Authorised Share Capital Increase and the appointment of the Subscriber’s nominees as Directors to the Board
“Grossed-up Tax”
has the meaning given to it under the section headed “The Proposed Settlement” in the Letter from the Board

– 1 –

DEFINITIONS

“IIT” individual income tax

“IIT Relevant Period” the period from 1 January 2011 to 17 December 2015
“Independent Board Committee”

an independent board committee of the Board (comprising all the non-executive Directors, namely Mr. Ho King Fung, Eric, Ms. Monica Maria Nunes, Mr. Feng Qing and Dr. Gao Jack Qunyao) to advise the Independent Shareholders as to the fairness and reasonableness of the Subscription, the Whitewash Waiver and the Special Deal and as to voting

“Independent Financial Adviser”
Somerley Capital Limited, a corporation licensed to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO, and the independent financial adviser to the Independent Board Committee, the CT Independent Board Committee and the Independent Shareholders in respect of the Subscription, the Whitewash Waiver, the Special Deal and the Release of Connected Employees’ Tax Liability
“Independent Shareholders”

Shareholders other than (i) the Subscriber, its associates or parties acting in concert with it; (ii) Mr. Sun, the Employee-Shareholders (including Mr. Bai and Mr. Liang) and their respective associates; and (iii) any other Shareholders who are involved or interested in, the Subscription, the Whitewash Waiver, the Special Deal and/or the Release of Connected Employees’ Tax Liability

“New Latest Practicable Date”

12 July 2016, being the latest practicable date prior to the printing of this Supplemental Circular for the purpose of ascertaining certain information contained in this Supplemental Circular

“New SGM”

the special general meeting of the Company to be held at 10:30 a.m. on Saturday, 30 July 2016 at VIP Lounge, 28 Floor, Crowne Plaza, 8 Leighton Road, Causeway Bay, Hong Kong for the Shareholders or the Independent Shareholders (as the case may be) to consider and, if thought fit, pass the resolutions to approve, among other things (i) the execution, delivery and performance of the Subscription Agreement; (ii) the allotment and issue of the Subscription Shares and the Convertible Bonds in accordance with the Subscription Agreement; (iii) the specific mandate under which the Subscription Shares and, upon conversion of the Convertible Bonds, the Conversion Shares will be issued; (iv) the Whitewash Waiver; (v) the Special Deal; (vi) the Release of Connected Employees’ Tax Liability; (vii) the Authorised Share Capital Increase; and (viii) the appointment of the Subscriber’s nominees as Directors to the Board

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DEFINITIONS

“New SGM Notice”
the notice convening the New SGM set out on pages NSGM-1 to NSGM-5 of this Supplemental Circular
“PRC Employees”
the employees of the Company’s PRC subsidiaries who are subject to PRC IIT
“Previous Employees”
10 of the Relevant Employees that are no longer employees of the Group as at the New Latest Practicable Date
“Proposed Settlement”
has the meaning given to it under the section headed “The Proposed Settlement” in the Letter from the Board
“Release of Connected Employees’ Tax Liability”
the release of the personal liability of the Connected Employees under the applicable PRC tax laws in respect of their relevant Under-withheld IIT
“Release of Tax Liability”
the release of the personal liability of the Employee-Shareholders under the applicable PRC tax laws in respect of the Under-withheld IIT
“Relevant Employees”
a total of 37 PRC Employees who were issued an aggregate of 118,678,603 Shares by the Company upon the exercise by such employees of their Share Options
“Share Option(s)”
share option(s) granted by the Company under the Share Option Schemes
“Share Option Income”
has the meaning given to it in the section headed “Background of the Special Deal and the Release of Connected Employees’ Tax Liability” of the Letter from the Board
“Special Deal” the Release of Tax Liability, which constitutes a special deal under Rule 25 of the Takeovers Code
“Supplemental Circular”
this supplemental circular of the Company dated 14 July 2016
“Tax Adviser”
Deloitte Touche Tohmatsu Certified Public Accountants LLP Beijing Branch, the Company’s PRC tax adviser appointed in January 2016 of the issue related to the PRC Under-withheld IIT
“Under-withheld IIT”
IIT which the Company has failed to withhold in respect of the Share Options exercised by the Relevant Employees during the IIT Relevant Period

For illustration purposes only, amounts denominated in Renminbi in this Supplemental Circular have been translated into Hong Kong dollars at an exchange rate of RMB1 = HK$1.168.

– 3 –

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. Bai Jinmin Mr. Liang Yu Mr. Cheng Guoming

Registered office: Clarendon House 2 Church Street Hamilton HM 11 Bermuda

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

Independent Non-Executive Directors: Ms. Monica Maria Nunes Mr. Feng Qing Dr. Gao Jack Qunyao

Head office and principal place of business: Unit 3912, 39th Floor, Tower Two Times Square Causeway Bay Hong Kong

14 July 2016

To the Shareholders

Dear Sir or Madam,

SUPPLEMENTAL CIRCULAR TO THE CIRCULAR TO SHAREHOLDERS DATED 25 MAY 2016 RELATING TO THE PROPOSED SUBSCRIPTION OF SUBSCRIPTION SHARES AND CONVERTIBLE BONDS AND APPLICATION FOR WHITEWASH WAIVER SPECIAL DEAL AND CONNECTED TRANSACTION IN RELATION TO SETTLEMENT OF PRC TAX LIABILITY NOTICE OF ADJOURNED SPECIAL GENERAL MEETING AND NOTICE OF NEW SPECIAL GENERAL MEETING

INTRODUCTION

The Company refers to (i) the circular of the Company dated 25 May 2016 in respect of, amongst other matters, the Subscription, the Whitewash Waiver, the Authorised Share Capital Increase and the appointment of the Subscriber’s nominees as Directors to the Board (i.e. the First

For identification purpose only

– 4 –

LETTER FROM THE BOARD

Circular); (ii) the announcements of the Company dated 8 June 2016 and 10 June 2016 in relation to the adjournment of the SGM; and (iii) the announcement of the Company dated 4 July 2016 regarding the Special Deal and the Release of Connected Employees’ Tax Liability.

This Supplemental Circular should be read in conjunction with the First Circular, which contains, among other things, details of the Subscription, the Whitewash Waiver and the Authorised Share Capital Increase. Shareholders may access the First Circular by browsing the websites of the Company (http://www.agtech.com) or the Stock Exchange (http://www.hkexnews.hk). Shareholders who have difficulty in gaining access to the First Circular on the aforesaid websites may also request for the First Circular in printed form by sending a request in writing to the Company’s Hong Kong branch share registrar, Tricor Abacus Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

The purpose of this Supplemental Circular is to supplement the First Circular and to provide the Shareholders (i) details of the Special Deal and the Release of Connected Employees’ Tax Liability; (ii) a letter of advice on the Special Deal and the Release of Connected Employees’ Tax Liability from the Independent Financial Adviser to the Independent Board Committee, the CT Independent Board Committee and the Independent Shareholders; (iii) a letter of advice on the Special Deal from the Independent Board Committee to the Independent Shareholders; (iv) a letter of advice on the Release of Connected Employees’ Tax Liability from the CT Independent Board Committee to the Independent Shareholders; (v) a notice of the Adjourned SGM; and (vi) a notice of the New SGM.

BACKGROUND OF THE SPECIAL DEAL AND THE RELEASE OF CONNECTED EMPLOYEES’ TAX LIABILITY

It has come to the attention of the Company and the Subscriber that the Group had, in the past, failed to withhold PRC IIT that is payable under relevant PRC tax laws in respect of the exercise of Share Options.

The Tax Adviser has advised that the income derived from the exercise of share options by a PRC employee is considered to form part of the employee benefits that are subject to the IIT as employment income, and the tax liability arises when the PRC employee exercises his/her share options. The IIT payable is calculated based on the income derived from the share options, the formula of which is: (market price of a share on the date of exercise - exercise price of the share option) x the number of share options exercised (the “ Share Option Income ”). The PRC subsidiary of a foreign company which is the actual employer of the PRC employee is required under the relevant PRC tax laws to withhold the IIT when the PRC employee exercises his/her share options. Therefore, as the actual employer of the PRC Employees, the PRC subsidiaries of the Company are required under the relevant PRC tax laws to withhold the IIT when the PRC Employees exercise their Share Options.

The Group has been granting share options to its employees (including the PRC Employees) under the Share Option Schemes since 2006. However, the Company was not aware that Share Option Income would be considered to form part of the employee benefits that are subject to the IIT as employment income and thus it had not withheld the IIT payable by the PRC Employees upon their exercise of share options. Since becoming aware of this matter, the Company has adopted a policy with effect from 18 December 2015 to ensure that the IIT is properly collected by the Group from the PRC Employees in order to ensure compliance with the relevant PRC tax laws in relation to the Share Options exercised by the PRC Employees. Under the new policy, the PRC Employees have to pay any IIT payable upon the exercise of Share Options. However, given the Group’s prior practice, such policy does not apply retrospectively to any Share Options that had been exercised before the implementation of such policy.

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LETTER FROM THE BOARD

Under PRC tax laws, PRC tax authorities may pursue unpaid IIT within a period of five years from the date on which the relevant tax liability has arisen, and, in the case of being viewed as “tax evasion”, the time for tax claim would be unlimited. As at the New Latest Practicable Date, the Company is neither aware of, nor informed by, and has not received any notices from, the PRC tax authorities pursuing the Group for the unpaid IIT.

During the IIT Relevant Period (i.e. the period from 1 January 2011 (being approximately five years preceding the New Latest Practicable Date) to 17 December 2015 (being the date immediately before the new policy mentioned above took effect)), the Company had issued a total of 118,678,603 Shares to 37 Relevant Employees upon exercise by them of the Share Options. As at the New Latest Practicable Date, out of these 37 Relevant Employees, 10 of them have left the employment of the Group (i.e. the Previous Employees), and the remaining 27 of them continue to be employed by the Group (i.e. the Continuing Employees). Among the 27 Continuing Employees, two of them (namely, Mr. Bai Jinmin and Mr. Liang Yu) are currently executive directors of the Company (i.e. the Concerned Directors) and two of them (namely, Ms. Wang Liying and Mr. Yang Xinwei) are currently or were, during the past 12 months preceding the New Latest Practicable Date, directors of a subsidiary of the Company (other than an insignificant subsidiary within the meaning of the GEM Listing Rules) (i.e. the Concerned Subsidiary Directors). Save as disclosed, none of the Relevant Employees is currently or was, during the last 12 months preceding the New Latest Practicable Date, a director of the Company or its subsidiaries (other than an insignificant subsidiary within the meaning of the GEM Listing Rules) as at the New Latest Practicable Date. Upon Completion, each of Mr. Bai and Mr. Liang (together with Mr. Cheng who is not one of the Relevant Employees), all being existing executive Directors, shall resign from his directorship but will continue to be employed by the Group as a member of the Company’s senior management, details of which are set out on page 22 of the First Circular.

The table below sets out the total number of Shares granted by the Company to the Previous Employees and the Continuing Employees pursuant to their exercise of Share Options during the IIT Relevant Period, and the amount of IIT which the Group has failed to withhold in respect of the Share Options exercised during the IIT Relevant Period (i.e. the Under-withheld IIT) as estimated by the Tax Adviser:

Previous Employees Continuing Employees Total:	Number of Shares issued as a result of exercise of Share Options 28,520,103 90,158,500 118,678,603	Under-withheld IIT Approximately RMB4.4 million (equivalent to approximately HK$5.1 million) Approximately RMB23.3 million (equivalent to approximately HK$27.2 million)
		Approximately RMB27.7 million (equivalent to approximately HK$32.4 million)

The Under-withheld IIT relating to Share Options exercised by the Concerned Directors and the Concerned Subsidiary Directors is estimated to amount to approximately RMB19.0 million (equivalent to approximately HK$22.2 million) and approximately RMB2.3 million (equivalent to approximately HK$2.7 million), respectively.

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LETTER FROM THE BOARD

Having made enquiries with the Relevant Employees, the Company understands that, as at the New Latest Practicable Date:

(a) 22 of the Continuing Employees (including the Concerned Subsidiary Directors but other than the Concerned Directors) collectively hold 31,306,500 Shares (representing approximately 0.64% of the issued share capital of the Company);
(b) the Concerned Directors collectively hold 100,244,850 Shares (representing approximately 2.03% of the issued share capital of the Company);
(c) six of the Previous Employees collectively hold 29,235,750 Shares (representing approximately 0.593% of the issued share capital of the Company); and
(d) the remaining seven Relevant Employees (including four Previous Employees and three Continuing Employees) do not hold any Shares.

THE PROPOSED SETTLEMENT

The Group is considering to agree upon a plan with the relevant PRC tax authorities for the settlement of the Under-withheld IIT, where such Under-withheld IIT will be borne and settled by the Group on a grossed-up basis (the “ Grossed-up Tax ”) (which means the Share Option Income received by the PRC Employees will be regarded as net income and the settlement by the employer of the IIT constitutes an employment benefit which, in itself, is a taxable employment benefit subject to IIT), together with interest and penalty, if any (the “ Proposed Settlement ”).

As a result of the Proposed Settlement, the Relevant Employees will be released from their respective personal liability under PRC tax laws for the Under-withheld IIT (the estimated total amount of which is approximately RMB27.7 million (equivalent to approximately HK$32.4 million)).

Had the Group withheld IIT upon the exercise of Share Options by the Relevant Employees during the IIT Relevant Period, the amount of PRC IIT payable to the relevant PRC tax authorities would have been RMB27.7 million as currently estimated. However, since the Group has failed to withhold PRC IIT that was payable under relevant PRC tax laws in respect of the exercise of Share Options, and the Group is currently considering to bear and settle the unpaid IIT, the amount of PRC IIT payable by the Group would be determined on a grossed-up basis (i.e. the Grossed-up Tax).

As advised by the Tax Adviser, it is estimated that the Grossed-up Tax will be approximately RMB49.1 million (equivalent to approximately HK$57.3 million). Under applicable PRC tax laws, the Group may be subject to administrative penalties as a result of its failure to withhold IIT that should be withheld. Under the Proposed Settlement, the Group may also be liable for late payment interest calculated on the Grossed-up Tax. Please refer to the section headed “Information on the Grossed-up Tax, interest and penalty” below for further details. The Company will use its best endeavours to reduce the administrative penalty and interest payable to the relevant PRC tax authorities. Notwithstanding the foregoing, the amount of “benefit” given to the Relevant Employees would remain to be RMB27.7 million as currently estimated, being the aggregate PRC IIT payable if the Relevant Employees were to settle the Under-withheld IIT.

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LETTER FROM THE BOARD

However, since the Proposed Settlement is subject to the further negotiation and agreement with the relevant PRC tax authorities, the above figures are only estimations made by the Tax Adviser based on the information currently available and the applicable PRC tax laws and regulations, and therefore remain subject to change.

REASONS AND BENEFITS OF THE PROPOSED SETTLEMENT

Reduction of the Company’s tax and related financial liability exposure

As advised by the Company’s legal adviser as to PRC laws, the withholding entity (i.e. the relevant employer) may be subject to an administrative penalty at a rate ranging from 50% to 300% of the Under-withheld IIT as a result of its failure to withhold IIT that should have been withheld. In addition to the pecuniary penalty, the withholding entity is required by law to comply with its tax withholding and settlement obligations on a going forward basis. Although the employee as taxpayer is responsible for the IIT underpayment, as advised by the Tax Adviser, in practice, the relevant PRC tax authorities normally pursue the defaulting employer for IIT underpayments and interest (calculated at a rate of 0.05% per day), instead of the defaulting employees, due to (i) the practical difficulty for the tax authorities to pursue individuals and (ii) the reason that administrative penalties that the Group may be subject to as a result of its failure to withhold and settle the Under-withheld IIT cannot be considered to have been incurred by the employees.

Since the amount of the administrative penalty arising from a failure to withhold IIT can be greater than the IIT underpayment and the relevant PRC tax authorities have the discretion to determine the rate of the administrative penalty, as advised by the Tax Adviser, it is a common practice for the withholding entities to actively cooperate with the relevant PRC tax authorities to settle, and where it is difficult for the withholding entities to seek reimbursement from the employees for the IIT underpayment, bear all the IIT underpayment in a timely manner in order to be assessed a lower rate of penalty. In case of voluntary disclosure, as advised by the Tax Adviser, the relevant PRC tax authorities may, subject to their discretion, reduce or waive the administrative penalty.

As the Company is considering to negotiate a settlement with the relevant PRC tax authorities and to reduce the penalty and interest payable, the Company considers that any further delay to rectify this non-compliance may affect the extent of reduction of interest and penalty payable. In addition, if the Group does not settle the liability, interest will continue to accrue. Therefore, it is the interests of the Group to bear and settle the Under-withheld IIT on a grossed-up basis (i.e. the Grossed-up Tax) the soonest possible in order to limit its potential tax and related financial exposure. After full payment of the Grossed-up Tax, the relevant PRC tax authorities would possibly reduce the administrative penalty payable by the withholding entity so that the administrative penalty may no longer be a large amount.

Therefore, the Proposed Settlement is an arrangement with the relevant PRC tax authorities to reduce the tax and related financial liability exposure of the Group.

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LETTER FROM THE BOARD

Practical difficulty to seek recourse from the Relevant Employees

Under the PRC IIT regime, an employer (i.e. a withholding entity) has the primary responsibility to withhold any IIT payable in respect of employees’ salary and benefits. As advised by the Company’s PRC legal adviser, in the absence of an agreement with the employees, an employer (as the withholding agent) is not entitled to seek reimbursement or compensation from the employees upon its payment of any unpaid tax amount. PRC tax authorities are the only relevant authorities to demand settlement of unpaid tax under PRC tax laws, and such demand is seen as an administrative action under applicable laws. The employers are not entitled under relevant PRC tax laws, nor do they have any contractual right, to demand repayment of unpaid tax amount from employees.

Although the Share Option Schemes provide that the Company shall not be responsible for any tax to which a grantee may become subject as a result of his/her participation in the Share Option Schemes, the Group had not implemented any procedures to ensure compliance by the Group’s PRC subsidiaries with its own withholding obligations under PRC tax laws, and none of the Group’s subsidiaries provided guidance to its employees to inform them that their Share Option Income derived under the Share Option Schemes constitute employment benefits that are subject to PRC IIT. According to PRC salary payment regulations and/or conventions, employers are required to expressly state the amount of IIT withheld and the actual salary released to employees. Therefore, employees have a reasonable belief that all their salaries received are paid on an “after tax” basis, and any subsequent request for tax after their receipt of the salaries is unlikely to be accepted by such employees.

Adverse impact on staff morale and stability of the Group

The Group also considers that the seeking of reimbursement from the employees would have an adverse impact on staff morale, which will affect the stability of the Group and thus not be in the interests of the Company and its shareholders as a whole.

INFORMATION ON THE GROSSED-UP TAX, INTEREST AND PENALTY

The table below sets out a breakdown of the Grossed-up Tax, accrued interest and penalty to be borne and settled by the Company as estimated by the Tax Adviser and the calculation basis:

Amount (as estimated Calculation basis by the Tax Adviser) (A) Grossed-up Tax On the basis that the Share Approximately RMB49.1 million Option Income is the net (equivalent to approximately income of the Relevant HK$57.3 million) Employees

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LETTER FROM THE BOARD

				Amount (as estimated
			Calculation basis	by the Tax Adviser)
(B)	Accrued	interest	At a rate of 0.05% per day on	Approximately RMB15.2 million
			the Grossed-up Tax,	(equivalent to approximately
			commencing on the date of	HK$17.7 million)
			which tax payment is
			overdue(1)
(C)	Penalty		Ranging from 50% to 300% of	Approximately up to RMB147.4
			the Grossed-up Tax	million (equivalent to approximately
				HK$172.2 million)
			Total (A + B + C):	Approximately RMB49.1 million
				(equivalent to approximately
				HK$57.3 million)(2) to
				RMB211.7 million (equivalent to
				approximately HK$247.2 million)

Notes:

Calculated on the assumption that interest is accrued up to 30 June 2016.
Assuming that the relevant PRC tax authorities have waived all the interest and penalty payable.

The Company will use its best endeavours to reduce the administrative penalty and interest payable to the relevant PRC tax authorities.

PROPOSED SETTLEMENT IS A MATTER OF THE COMPANY ONLY

The Company wishes to emphasise that the reason for implementing the Proposed Settlement is to rectify its historical non-compliance, which the Company would have pursued and implemented regardless of the Subscription, and the Subscriber is not providing any benefit to the Relevant Employees (or the Group) in connection with the Proposed Settlement. The Subscriber is only involved in the Proposed Settlement in so far as the Subscription Agreement contains customary pre-closing covenants governing the Group’s conduct between signing of the Subscription Agreement and Completion which, among other things, require the Company to agree upon a plan with the relevant PRC tax authorities to the reasonable satisfaction of the Subscriber regarding the settlement of the IIT underpayment and its associated interest and penalties.

LISTING RULES IMPLICATIONS

The Connected Employees are connected persons of the Company by virtue of being a director of the Company and/or its subsidiaries (other than an insignificant subsidiary within the meaning of the GEM Listing Rules) currently or during the past 12 months preceding the New Latest Practicable Date. Accordingly, as the Release of Connected Employees’ Tax Liability constitutes a benefit to the Connected Employees, it constitutes a non-exempt connected transaction for the Company pursuant to Rule 20.21 of the GEM Listing Rules. Accordingly, the Release of Connected Employees’ Tax Liability is subject to reporting, announcement and independent shareholders’ approval requirements under Chapter 20 of the GEM Listing Rules. The Company will therefore seek the approval from Independent Shareholders for the Release of Connected Employees’ Tax Liability at the New SGM.

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LETTER FROM THE BOARD

TAKEOVERS CODE IMPLICATIONS

So far as the Company is aware after making all reasonable enquiries with the Continuing Employees, 24 of the Continuing Employees (inclusive of the Concerned Directors and the Concerned Subsidiary Directors) and six of the Previous Employees are Shareholders as at the New Latest Practicable Date. As the Proposed Settlement will result in the release of the personal liability of the Employee-Shareholders under the applicable PRC tax laws in respect of the Under-withheld IIT, thereby conferring a benefit on the Employee-Shareholders, the Release of Tax Liability constitutes a special deal of the Company under Rule 25 of the Takeovers Code. An application has been made by the Company for the consent of the Executive to the Special Deal. The Special Deal requires (i) the consent of the Executive; (ii) the opinion of the Independent Financial Adviser that the terms of the Special Deal are fair and reasonable; and (iii) the approval of the Independent Shareholders by way of poll at the New SGM.

INDEPENDENT BOARD COMMITTEE, CT INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

The Independent Board Committee comprising Mr. Ho King Fung, Eric, Ms. Monica Maria Nunes, Mr. Feng Qing and Dr. Gao Jack Qunyao, being all the non-executive Directors, has been established to give recommendations to the Independent Shareholders in respect of the Subscription, the Whitewash Waiver and the Special Deal. None of the members of the Independent Board Committee is involved or interested in the Subscription, the Whitewash Waiver or the Special Deal.

The CT Independent Board Committee comprising Ms. Monica Maria Nunes, Mr. Feng Qing and Dr. Gao Jack Qunyao, being all the independent non-executive Directors, has been established to give recommendations to the Independent Shareholders in respect of the Release of Connected Employees’ Tax Liability. None of the members of the CT Independent Board Committee is involved or interested in the Release of Connected Employees’ Tax Liability.

Somerley Capital Limited (a corporation licensed to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO) has been appointed as the Independent Financial Adviser to advise the Independent Board Committee, the CT Independent Board Committee and the Independent Shareholders in respect of the Special Deal and the Release of Connected Employees’ Tax Liability.

ADJUSTMENT TO THE INITIAL CONVERSION PRICE

During the period commencing from the date of the Subscription Agreement up to the New Latest Practicable Date, 212,879,224 Shares, 12,193,961 Shares and 10,135,135 Shares have been issued pursuant to the exercise of the Rainwood Options in full, the Consultant Options in part and the issue of Consideration Shares pursuant to the Score Value Transaction, respectively. For further details, please refer to the announcements of the Company dated 16 March 2016, 23 March 2016, 10 May 2016 and 26 May 2016. Accordingly, assuming that no Shares or options to subscribe for any Shares shall be issued or granted under the Score Value Transaction, and no further Shares shall be issued under the Consultant Options prior to Completion, the initial Conversion Price of HK$0.3478 will be adjusted to HK$0.2996 per Share (the “ Adjusted Initial Conversion Price ”), and the maximum number of Shares that will be issued upon full conversion of the Convertible Bonds at the Adjusted Initial Conversion Price is 2,378,165,212 Shares.

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LETTER FROM THE BOARD

EFFECT OF THE SUBSCRIPTION ON THE SHAREHOLDING STRUCTURE OF THE COMPANY

The following table illustrates the shareholding structure of the Company:

(i) as at the New Latest Practicable Date;
(ii) immediately upon Completion, assuming that the Convertible Bonds are not converted at all and there is no other change in the issued share capital of the Company other than the issue of the Subscription Shares at Completion;
(iii) immediately upon Completion, assuming that (a) the Convertible Bonds are partially converted at the Adjusted Initial Conversion Price of HK$0.2996 so that the Subscriber holds more than 50% of the issued share capital of the Company while the Shares held by the public continue to represent 26.00% of the issued share capital of the Company; and (b) there is no other change in the issued share capital of the Company;
(iv) immediately upon Completion, assuming that the Convertible Bonds are converted in full at the Adjusted Initial Conversion Price of HK$0.2996 per Conversion Share and there is no other change in the issued share capital of the Company;
(v) immediately upon Completion, assuming that the Convertible Bonds are converted in full at the adjusted Conversion Price (as if all the outstanding Consultant Options had been exercised) and there is no other change in the issued share capital of the Company; and
(vi) immediately upon Completion, assuming that (a) the Convertible Bonds are converted in full at the adjusted Conversion Price; (b) an additional 291,666,666 Shares have been issued by the Company to Immense Wisdom and King Achieve in accordance with the terms of the Score Value Transaction (and the Shares and options for the Shares to be granted thereunder); (c) an additional 595,541,603 Shares have been issued by the Company pursuant to the outstanding share options granted under the Share Option Schemes (including the Consultant Options) as at the New Latest Practicable Date; and (d) there is no other change in the issued share capital of the Company.

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LETTER FROM THE BOARD

Name of Shareholder Mr. Sun Mr. Bai Jinmin Mr. Liang Yu Mr. Ho King Fung, Eric Ms. Monica Maria Nunes Mr. Cheng Guoming Dr. Gao Jack Qunyao Mr. Feng Qing Directors of the Company’s Subsidiaries (other than the Directors) Subscriber and parties acting in concert with it Public shareholders Total	(i) At the New Latest Practicable Date No. of Shares Approx % 2,033,328,000(1) 41.229 76,574,600 1.553 23,670,250 0.480 21,287,922 0.432 875,000 0.018 – 0.000 – 0.000 – 0.000 66,849,250 1.356 – 0.000 2,709,117,887 54.932 4,931,702,909 100.000	(i) At the New Latest Practicable Date No. of Shares Approx % 2,033,328,000(1) 41.229 76,574,600 1.553 23,670,250 0.480 21,287,922 0.432 875,000 0.018 – 0.000 – 0.000 – 0.000 66,849,250 1.356 – 0.000 2,709,117,887 54.932 4,931,702,909 100.000	(ii) Assuming no conversion of the Convertible Bonds (iii) Assuming partial conversion of the Convertible Bonds at the Adjusted Initial Conversion price of HK$0.2996 as currently anticipated No. of Shares Approx % No. of Shares Approx % 2,033,328,000(1) 20.857 2,033,328,000(1) 19.514 76,574,600 0.785 76,574,600 0.735 23,670,250 0.243 23,670,250 0.227 21,287,922 0.218 21,287,922 0.204 875,000 0.009 875,000 0.008 – 0.000 – – – 0.000 – – – 0.000 – – 66,849,250 0.686 66,849,250 0.642 4,817,399,245 49.414(2) 5,487,981,272 52.670 2,709,117,887 27.788 2,709,117,887 26.000 9,749,102,154 100.000 10,419,684,181 100.000	(ii) Assuming no conversion of the Convertible Bonds (iii) Assuming partial conversion of the Convertible Bonds at the Adjusted Initial Conversion price of HK$0.2996 as currently anticipated No. of Shares Approx % No. of Shares Approx % 2,033,328,000(1) 20.857 2,033,328,000(1) 19.514 76,574,600 0.785 76,574,600 0.735 23,670,250 0.243 23,670,250 0.227 21,287,922 0.218 21,287,922 0.204 875,000 0.009 875,000 0.008 – 0.000 – – – 0.000 – – – 0.000 – – 66,849,250 0.686 66,849,250 0.642 4,817,399,245 49.414(2) 5,487,981,272 52.670 2,709,117,887 27.788 2,709,117,887 26.000 9,749,102,154 100.000 10,419,684,181 100.000	(ii) Assuming no conversion of the Convertible Bonds (iii) Assuming partial conversion of the Convertible Bonds at the Adjusted Initial Conversion price of HK$0.2996 as currently anticipated No. of Shares Approx % No. of Shares Approx % 2,033,328,000(1) 20.857 2,033,328,000(1) 19.514 76,574,600 0.785 76,574,600 0.735 23,670,250 0.243 23,670,250 0.227 21,287,922 0.218 21,287,922 0.204 875,000 0.009 875,000 0.008 – 0.000 – – – 0.000 – – – 0.000 – – 66,849,250 0.686 66,849,250 0.642 4,817,399,245 49.414(2) 5,487,981,272 52.670 2,709,117,887 27.788 2,709,117,887 26.000 9,749,102,154 100.000 10,419,684,181 100.000	(ii) Assuming no conversion of the Convertible Bonds (iii) Assuming partial conversion of the Convertible Bonds at the Adjusted Initial Conversion price of HK$0.2996 as currently anticipated No. of Shares Approx % No. of Shares Approx % 2,033,328,000(1) 20.857 2,033,328,000(1) 19.514 76,574,600 0.785 76,574,600 0.735 23,670,250 0.243 23,670,250 0.227 21,287,922 0.218 21,287,922 0.204 875,000 0.009 875,000 0.008 – 0.000 – – – 0.000 – – – 0.000 – – 66,849,250 0.686 66,849,250 0.642 4,817,399,245 49.414(2) 5,487,981,272 52.670 2,709,117,887 27.788 2,709,117,887 26.000 9,749,102,154 100.000 10,419,684,181 100.000	(iv) Assuming full conversion of the Convertible Bonds at the Adjusted Initial Conversion Price of HK$0.2996 (v) Assuming full conversion of the Convertible Bonds at the adjusted Conversion Price (as if all the outstanding Consultant Options had been exercised) (vi) Assuming full conversion of the Convertible Bonds and issue of other Shares issuable under certain agreements and options No. of Shares Approx % No. of Shares Approx % No. of Shares Approx % 2,033,328,000(1) 16.767 2,033,328,000(1) 16.050 2,033,328,000(1) 14.561 76,574,600 0.631 76,574,600 0.604 84,449,600(5) 0.605 23,670,250 0.195 23,670,250 0.187 32,295,250(5) 0.231 21,287,922 0.176 21,287,922 0.168 42,575,844(5) 0.305 875,000 0.007 875,000 0.007 2,000,000(5) 0.014 – 0.000 – 0.000 44,944,800(5) 0.322 – 0.000 – 0.000 1,500,000(5) 0.011 – 0.000 – 0.000 1,500,000(5) 0.011 66,849,250 0.551 66,849,250 0.528 117,417,929(6) 0.841 7,195,564,457 59.334 7,737,343,635 61.072 8,145,620,972(7) 58.330 2,709,117,887 22.339(4) 2,709,117,887 21.384(4) 3,458,899,755(8) 24.769(4) 12,127,267,366 100.000 12,669,046,544 100.000 13,964,532,150 100.000	(iv) Assuming full conversion of the Convertible Bonds at the Adjusted Initial Conversion Price of HK$0.2996 (v) Assuming full conversion of the Convertible Bonds at the adjusted Conversion Price (as if all the outstanding Consultant Options had been exercised) (vi) Assuming full conversion of the Convertible Bonds and issue of other Shares issuable under certain agreements and options No. of Shares Approx % No. of Shares Approx % No. of Shares Approx % 2,033,328,000(1) 16.767 2,033,328,000(1) 16.050 2,033,328,000(1) 14.561 76,574,600 0.631 76,574,600 0.604 84,449,600(5) 0.605 23,670,250 0.195 23,670,250 0.187 32,295,250(5) 0.231 21,287,922 0.176 21,287,922 0.168 42,575,844(5) 0.305 875,000 0.007 875,000 0.007 2,000,000(5) 0.014 – 0.000 – 0.000 44,944,800(5) 0.322 – 0.000 – 0.000 1,500,000(5) 0.011 – 0.000 – 0.000 1,500,000(5) 0.011 66,849,250 0.551 66,849,250 0.528 117,417,929(6) 0.841 7,195,564,457 59.334 7,737,343,635 61.072 8,145,620,972(7) 58.330 2,709,117,887 22.339(4) 2,709,117,887 21.384(4) 3,458,899,755(8) 24.769(4) 12,127,267,366 100.000 12,669,046,544 100.000 13,964,532,150 100.000	(iv) Assuming full conversion of the Convertible Bonds at the Adjusted Initial Conversion Price of HK$0.2996 (v) Assuming full conversion of the Convertible Bonds at the adjusted Conversion Price (as if all the outstanding Consultant Options had been exercised) (vi) Assuming full conversion of the Convertible Bonds and issue of other Shares issuable under certain agreements and options No. of Shares Approx % No. of Shares Approx % No. of Shares Approx % 2,033,328,000(1) 16.767 2,033,328,000(1) 16.050 2,033,328,000(1) 14.561 76,574,600 0.631 76,574,600 0.604 84,449,600(5) 0.605 23,670,250 0.195 23,670,250 0.187 32,295,250(5) 0.231 21,287,922 0.176 21,287,922 0.168 42,575,844(5) 0.305 875,000 0.007 875,000 0.007 2,000,000(5) 0.014 – 0.000 – 0.000 44,944,800(5) 0.322 – 0.000 – 0.000 1,500,000(5) 0.011 – 0.000 – 0.000 1,500,000(5) 0.011 66,849,250 0.551 66,849,250 0.528 117,417,929(6) 0.841 7,195,564,457 59.334 7,737,343,635 61.072 8,145,620,972(7) 58.330 2,709,117,887 22.339(4) 2,709,117,887 21.384(4) 3,458,899,755(8) 24.769(4) 12,127,267,366 100.000 12,669,046,544 100.000 13,964,532,150 100.000	(iv) Assuming full conversion of the Convertible Bonds at the Adjusted Initial Conversion Price of HK$0.2996 (v) Assuming full conversion of the Convertible Bonds at the adjusted Conversion Price (as if all the outstanding Consultant Options had been exercised) (vi) Assuming full conversion of the Convertible Bonds and issue of other Shares issuable under certain agreements and options No. of Shares Approx % No. of Shares Approx % No. of Shares Approx % 2,033,328,000(1) 16.767 2,033,328,000(1) 16.050 2,033,328,000(1) 14.561 76,574,600 0.631 76,574,600 0.604 84,449,600(5) 0.605 23,670,250 0.195 23,670,250 0.187 32,295,250(5) 0.231 21,287,922 0.176 21,287,922 0.168 42,575,844(5) 0.305 875,000 0.007 875,000 0.007 2,000,000(5) 0.014 – 0.000 – 0.000 44,944,800(5) 0.322 – 0.000 – 0.000 1,500,000(5) 0.011 – 0.000 – 0.000 1,500,000(5) 0.011 66,849,250 0.551 66,849,250 0.528 117,417,929(6) 0.841 7,195,564,457 59.334 7,737,343,635 61.072 8,145,620,972(7) 58.330 2,709,117,887 22.339(4) 2,709,117,887 21.384(4) 3,458,899,755(8) 24.769(4) 12,127,267,366 100.000 12,669,046,544 100.000 13,964,532,150 100.000	(iv) Assuming full conversion of the Convertible Bonds at the Adjusted Initial Conversion Price of HK$0.2996 (v) Assuming full conversion of the Convertible Bonds at the adjusted Conversion Price (as if all the outstanding Consultant Options had been exercised) (vi) Assuming full conversion of the Convertible Bonds and issue of other Shares issuable under certain agreements and options No. of Shares Approx % No. of Shares Approx % No. of Shares Approx % 2,033,328,000(1) 16.767 2,033,328,000(1) 16.050 2,033,328,000(1) 14.561 76,574,600 0.631 76,574,600 0.604 84,449,600(5) 0.605 23,670,250 0.195 23,670,250 0.187 32,295,250(5) 0.231 21,287,922 0.176 21,287,922 0.168 42,575,844(5) 0.305 875,000 0.007 875,000 0.007 2,000,000(5) 0.014 – 0.000 – 0.000 44,944,800(5) 0.322 – 0.000 – 0.000 1,500,000(5) 0.011 – 0.000 – 0.000 1,500,000(5) 0.011 66,849,250 0.551 66,849,250 0.528 117,417,929(6) 0.841 7,195,564,457 59.334 7,737,343,635 61.072 8,145,620,972(7) 58.330 2,709,117,887 22.339(4) 2,709,117,887 21.384(4) 3,458,899,755(8) 24.769(4) 12,127,267,366 100.000 12,669,046,544 100.000 13,964,532,150 100.000
	4,931,702,909	100.000	9,749,102,154	100.000	10,419,684,181	100.000	12,127,267,366	100.000	12,669,046,544	100.000	13,964,532,150

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LETTER FROM THE BOARD

Notes:

These Shares comprise 27,078,000 Shares beneficially owned by Mr. Sun and 2,006,250,000 Shares owned by Mr. Sun through his controlled corporation, Maxprofit.
Only in this scenario where the Convertible Bonds are not converted, Mr. Sun would, upon Completion, hold or control more than 20% of the voting rights of the Company, and Mr. Sun and the Subscriber would therefore be deemed to be acting in concert under class (1) of the definition of “acting in concert” under the Takeovers Code following Completion. Accordingly, in such scenario, the Subscriber together with parties acting or presumed to be acting in concert with it would hold an aggregate of 6,850,727,245 Shares, representing approximately 70.27% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares. However, it is expected that the Subscriber will, immediately upon issue of the Subscription Shares at Completion, convert parts of the Convertible Bonds so that the Subscriber and Mr. Sun, as from immediately following Completion, hold 52.67% and 19.51% of the voting rights of the Company respectively. Accordingly, following Completion, Mr. Sun and the Subscriber will not be deemed to be parties acting in concert. As at the New Latest Practicable Date, Mr. Sun is not acting in concert nor presumed to be acting in concert with the Subscriber.
The increase of an aggregate of 670,582,027 Shares in the number of Shares held by the Subscriber comprises the 670,582,027 Conversion Shares that are intended to be issued to the Subscriber immediately upon Completion. Details of the partial conversion are set out in the section headed “Subscription Agreement — The Subscription Shares and the Conversion Shares” in the Letter from the Board” of the First Circular.
Under the terms of the Convertible Bonds, the Subscriber shall have the right to convert all or part of its Convertible Bonds into Shares provided that, following such conversion, (i) at least 25% of the Company’s total number of issued Shares are held by the public (as defined under the GEM Listing Rules); and (ii) the Company is otherwise in compliance with the public float requirements under Rule 11.23(7) of the GEM Listing Rules. Accordingly, the Subscriber will not be entitled to convert the Convertible Bonds in full and hence will not acquire the maximum voting rights as illustrated in this scenario, as the Company would otherwise fail to comply with the public float requirements under the GEM Listing Rules.
The increase in the number of Shares held by such Director represents the total number of Shares to be issued by the Company to such Director upon the exercise of existing share options granted to him/her under the Share Option Schemes.
The increase of an aggregate of 50,568,679 Shares in the number of Shares held by such directors represents the total number of Shares to be issued by the Company to directors of the Company’s Subsidiaries (other than the Directors) pursuant to existing share options granted to them under the Share Option Schemes.
As set out in the section headed “Subscription Agreement — Principal Terms of the Convertible Bonds” in the Letter from the Board of the First Circular, the Conversion Price shall be adjusted if the Company further issues Shares or grants options to subscribe for any Shares under the Score Value Transaction, or issues Shares under the Consultant Options. The increase of an aggregate of 950,056,515 Shares as compared with scenario (iv) where the Convertible Bonds were converted in full at the Adjusted Initial Conversion Price of HK$0.2996 represents the additional number of Shares to be issued by the Company to the Subscriber upon full conversion of the Convertible Bonds at the adjusted Conversion Price.
The increase of an aggregate of 749,781,868 Shares in the number of Shares held by the public shareholders of the Company comprises (a) the additional 291,666,666 Shares to be issued by the Company to Immense Wisdom and King Achieve in accordance with the terms of the Score Value Transaction (and the Shares and options for the Shares to be granted thereunder); (b) the 381,663,202 Shares to be issued by the Company pursuant to the Consultant Options (excluding the 5,375,000 Shares to be issued to a consultant who is a director of the Company’s Subsidiary); and (c) the 76,452,000 Shares to be issued by the Company pursuant to options granted to employees (other than the Directors or directors of the Company’s Subsidiaries).

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LETTER FROM THE BOARD

THE ADJOURNED SGM

The Adjourned SGM will be convened and held at 10:00 a.m. on Saturday, 30 July 2016 at VIP Lounge, 28 Floor, Crowne Plaza, 8 Leighton Road, Causeway Bay, Hong Kong for the Shareholders for the purpose of adjourning indefinitely the Adjourned SGM. All Shareholders will be able to vote on this resolution to be put forward by the Chairman of the Adjourned SGM.

The Adjourned SGM Notice is set out on page ASGM-1 of this Supplemental Circular. A form of proxy for use at the Adjourned SGM is enclosed. Whether or not you intend to attend the Adjourned 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 Adjourned SGM. The return of a form of proxy will not preclude you from attending and voting in person at the Adjourned SGM (or any adjournment thereof) should you so desire. The voting in respect of the proposed resolutions contained in the Adjourned SGM Notice will be conducted by way of a poll at the Adjourned SGM prescribed under the GEM Listing Rules. An announcement on the poll results will be made by the Company after the Adjourned SGM.

All Shareholders will be able to vote on the resolution to be proposed at the Adjourned SGM.

THE NEW SGM

Following the closure of the Adjourned SGM, the New SGM will be convened and held at 10:30 a.m. on Saturday, 30 July 2016 at VIP Lounge, 28 Floor, Crowne Plaza, 8 Leighton Road, Causeway Bay, Hong Kong for the Shareholders or the Independent Shareholders (as the case may be) to consider and, if thought fit, pass the resolutions to approve, among other things: (i) the execution, delivery and performance of the Subscription Agreement; (ii) the allotment and issue of the Subscription Shares and the Convertible Bonds in accordance with the Subscription Agreement; (iii) the specific mandate under which the Subscription Shares and, upon conversion of the Convertible Bonds, the Conversion Shares will be issued; (iv) the Whitewash Waiver; (v) the Special Deal; (vi) the Release of the Connected Employees’ Tax Liability; (vii) the Authorised Share Capital Increase; and (viii) the appointment of the Subscriber’s nominees as Directors to the Board.

All Shareholders will be able to vote on the Authorised Share Capital Increase and the appointment of the Subscriber’s nominees as Directors to the Board.

Parties including (i) the Subscriber and its associates or parties acting in concert with it; (ii) Mr. Sun, the Employee-Shareholders (including Mr. Bai and Mr. Liang) and their respective associates; and (iii) any other Shareholders who are involved or interested in the Subscription, the Whitewash Waiver, the Special Deal and/or the Release of Connected Employees’ Tax Liability are required to abstain from voting for the resolutions in respect of the Subscription, the Whitewash Waiver, the Special Deal and the Release of Connected Employees’ Tax Liability at the New SGM.

The Subscriber and parties acting in concert with it do not currently hold any Shares and accordingly will not vote on any of the resolutions at the New SGM.

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LETTER FROM THE BOARD

As at the New Latest Practicable Date, Mr. Sun and Maxprofit are interested in an aggregate of 2,033,328,000 Shares (representing approximately 41.23% of the issued share capital of the Company). As Mr. Sun and Maxprofit are parties to the Subscription Agreement, each of them and their respective associates will abstain from voting on the relevant ordinary resolutions to be proposed at the New SGM to approve the Subscription, the Whitewash Waiver, the Special Deal and the Release of Connected Employees’ Tax Liability.

As at the New Latest Practicable Date, Mr. Bai and Mr. Liang are interested in 76,574,600 Shares (representing approximately 1.55% of the issued share capital of the Company) and 23,670,250 Shares (representing approximately 0.48% of the issued share capital of the Company), respectively. As Mr. Bai and Mr. Liang are involved in the negotiation of the Subscription and are interested in the Special Deal and the Release of Connected Employees’ Tax Liability, each of them and their respective associates, will abstain from voting on the relevant ordinary resolutions to be proposed at the New SGM to approve the Subscription, the Whitewash Waiver, the Special Deal and the Release of Connected Employees’ Tax Liability.

As Mr. Cheng (who is involved in the negotiation of the Subscription) and his associates do not currently hold any Shares, none of them will be entitled to vote on any of the resolutions at the New SGM. If Mr. Cheng exercises any of his outstanding 44,944,800 Share Options prior to the date of the New SGM, he will abstain from voting on the relevant ordinary resolutions to be proposed at the New SGM to approve the Subscription, the Whitewash Waiver, the Special Deal and the Release of Connected Employees’ Tax Liability.

As at the New Latest Practicable Date, the Relevant Employees (other than Mr. Bai and Mr. Liang) are collectively interested in 60,542,250 Shares (representing 1.23% of the issued share capital of the Company). As the Relevant Employees are interested in the Release of Connected Employees’ Tax Liability and/or the Special Deal, the Relevant Employees will abstain from voting on the relevant ordinary resolutions to be proposed at the New SGM to approve the Subscription, the Whitewash Waiver, the Special Deal and the Release of Connected Employees’ Tax Liability. As at the New Latest Practicable Date, the Company has obtained irrevocable undertakings from each of the Relevant Employees to the effect that none of them nor their respective associates will vote in respect of the resolutions approving the Subscription, the Whitewash Waiver, the Special Deal and the Release of Connected Employees’ Tax Liability at the New SGM.

As at the New Latest Practicable Date, Mr. Ho King Fung, Eric (a non-executive Director) and Ms. Monica Maria Nunes (an independent non-executive Director), are interested in 21,287,922 Shares (representing 0.432% of the total issued share capital of the Company) and 875,000 Shares (representing 0.018% of the total issued share capital of the Company), respectively. Since neither Mr. Ho King Fung, Eric nor Ms. Monica Maria Nunes is involved or interested in, the Subscription, the Board takes the view that neither of them has a material interest in the Subscription. Accordingly, they and their respective associates are not required to abstain from voting at the New SGM to approve the Subscription.

The New SGM Notice is set out on pages NSGM-1 to NSGM-5 of this Supplemental Circular. A form of proxy for use at the New SGM is enclosed. Whether or not you intend to attend the New 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

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LETTER FROM THE BOARD

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 New SGM. The return of a form of proxy will not preclude you from attending and voting in person at the New SGM (or any adjournment thereof) should you so desire. The voting in respect of the proposed resolutions contained in the New SGM Notice will be conducted by way of a poll at the New SGM prescribed under the GEM Listing Rules. An announcement on the poll results will be made by the Company after the New SGM.

As each of Mr. Bai and Mr. Liang has an interest in the Special Deal and the Release of Connected Employees’ Tax Liability, they have abstained from voting on the Board resolutions approving the same.

RECOMMENDATION

Your attention is drawn to (i) the letter from the Independent Board Committee which contains the recommendation of the Independent Board Committee to the Independent Shareholders regarding the resolutions to approve the Subscription, the Whitewash Waiver and the Special Deal; (ii) the letter from the CT Independent Board Committee which contains the recommendation of the CT Independent Board Committee to the Independent Shareholders regarding the resolution to approve the Release of Connected Employees’ Tax Liability; and (iii) the letter from the Independent Financial Adviser which contains its advice to the Independent Board Committee, the CT Independent Board Committee and the Independent Shareholders regarding the Special Deal and the Release of Connected Employees’ Tax Liability.

The Board (including members of the Independent Board Committee and the CT Independent Board Committee after taking the advice of the Independent Financial Adviser) considers that the Special Deal and the Release of Connected Employees’ Tax Liability are in the interests of the Company and the Shareholders as a whole, and recommends that the Shareholders vote in favour of the resolutions relating thereto at the New SGM.

GENERAL

First Circular

Your attention is drawn to the First Circular, which contains, among other things, (i) further details of the Subscription, the Whitewash Waiver and the Authorised Share Capital Increase; and (ii) the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the Subscription and the Whitewash Waiver.

Shareholders may access to the First Circular by browsing the websites of the Company (http://www.agtech.com) or the Stock Exchange (http://www.hkexnews.hk). Shareholders who have difficulty in gaining access to the First Circular on the aforesaid websites may also request for the First Circular in printed form by sending a request in writing to the Company’s Hong Kong branch share registrar, Tricor Abacus Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

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LETTER FROM THE BOARD

Other

Your attention is drawn to the additional information set out in the appendix to this Supplemental Circular, the Adjourned SGM Notice and the New SGM Notice.

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

Chairman & CEO

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the text of a letter of advice from the Independent Board Committee setting out its recommendation to the Independent Shareholders for the purpose of inclusion in this Supplemental Circular.

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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)

14 July 2016

To the Independent Shareholders

Dear Sir or Madam

PROPOSED SUBSCRIPTION OF SUBSCRIPTION SHARES AND CONVERTIBLE BONDS APPLICATION FOR WHITEWASH WAIVER SPECIAL DEAL AND CONNECTED TRANSACTION IN RELATION TO SETTLEMENT OF PRC TAX LIABILITY

We refer to the circular of the Company dated 25 May 2016 (the “ First Circular ”) and the supplemental circular of the Company dated 14 July 2016 (the “ Supplemental Circular ”) of which this letter forms part. Capitalised terms used herein have the same meanings as those defined in the First Circular and the Supplemental Circular unless otherwise specified.

We have been appointed to form the Independent Board Committee to advise the Independent Shareholders in connection with the Subscription, the Whitewash Waiver and the Special Deal, details of which are set out in the letter from the Board in the First Circular and the Supplemental Circular. Somerley Capital Limited has been appointed to advise the Independent Board Committee and the Independent Shareholders in this regard.

* For identification purpose only

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

We wish to draw your attention to the letter from the Independent Financial Adviser set out on pages IFA-1 to IFA-60 of the First Circular and pages 23 to 33 of the Supplemental Circular which contain, among other things, its advice and recommendations regarding the Subscription, the Whitewash Waiver, the Special Deal and the Release of Connected Employees’ Tax Liability and the principal factors and reasons taken into consideration by it in arriving at its advice.

We also wish to draw to your attention to (i) the “Letter from the Board” on pages 4 to 18 of this Supplemental Circular, and (ii) the First Circular, in particular, the “Letter from the Board” set out on pages 10 to 58 of the First Circular, our letter of advice on pages IBC-1 to IBC-2 of the First Circular containing our recommendation to the Independent Shareholders to vote in favour of the resolutions to approve the Subscription and the Whitewash Waiver and the transactions contemplated thereunder.

Having considered the advice given by the Independent Financial Adviser and the principal factors and reasons taken into consideration by it in arriving at its advice, we are of the opinion that the Subscription, the Whitewash Waiver, the Special Deal and the transactions contemplated thereunder are in the interests of the Company and the Shareholders as a whole as far as the Independent Shareholders are concerned.

Accordingly, we recommend the Independent Shareholders to vote in favour of the resolutions to be proposed at the New SGM to approve, among other things, the Subscription, the Whitewash Waiver and the Special Deal.

Yours faithfully Independent Board Committee

Mr. Ho King Fung, Eric Ms. Monica Maria Nunes Non-executive Director Independent non-executive Director

Mr. Feng Qing Dr. Gao Jack Qunyao Independent non-executive Director Independent non-executive Director

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LETTER FROM THE CT INDEPENDENT BOARD COMMITTEE

The following is the text of a letter of advice from the CT Independent Board Committee setting out its recommendation to the Independent Shareholders for the purpose of inclusion in this Supplemental Circular.

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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)

14 July 2016

To the Independent Shareholders

Dear Sir or Madam

PROPOSED SUBSCRIPTION OF SUBSCRIPTION SHARES AND CONVERTIBLE BONDS APPLICATION FOR WHITEWASH WAIVER SPECIAL DEAL AND CONNECTED TRANSACTION IN RELATION TO SETTLEMENT OF PRC TAX LIABILITY

We have been appointed to form the CT Independent Board Committee to advise the Independent Shareholders in connection with the Release of Connected Employees’ Tax Liability, details of which are set out in the letter from the Board in the Supplemental Circular. Somerley Capital Limited has been appointed to advise the CT Independent Board Committee and the Independent Shareholders in this regard.

For identification purpose only

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LETTER FROM THE CT INDEPENDENT BOARD COMMITTEE

Having considered the advice given by the Independent Financial Adviser and the principal factors and reasons taken into consideration by it in arriving at its advice, we are of the opinion that (i) the Release of Connected Employees’ Tax Liability is fair and reasonable and in the interests of the Company and the Shareholders as a whole; and (ii) the Release of Connected Employees’ Tax Liability is on normal commercial terms, although not in the ordinary and usual course of business of the Group.

Accordingly, we recommend the Independent Shareholders to vote in favour of the resolutions to be proposed at the New SGM to approve the Release of Connected Employees’ Tax Liability.

Yours faithfully Independent Board Committee

Ms. Monica Maria Nunes Mr. Feng Qing Independent non-executive Independent non-executive Director Director

Dr. Gao Jack Qunyao Independent non-executive Director

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the letter of advice from Somerley Capital Limited to the Independent Board Committee, the CT Independent Board Committee and the Independent Shareholders, which has been prepared for the purpose of inclusion in this circular.

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SOMERLEY CAPITAL LIMITED

20th Floor China Building 29 Queen’s Road Central Hong Kong

14 July 2016

To: the Independent Board Committee, the CT Independent Board Committee and the Independent Shareholders

Dear Sirs,

(I) PROPOSED SUBSCRIPTION OF SUBSCRIPTION SHARES AND CONVERTIBLE BONDS; (II) APPLICATION FOR WHITEWASH WAIVER; AND (III) SPECIAL DEAL AND CONNECTED TRANSACTION IN RELATION TO SETTLEMENT OF PRC TAX LIABILITY

INTRODUCTION

We refer to our appointment to advise (i) the Independent Board Committee and the Independent Shareholders in connection with the Subscription, the Whitewash Waiver and the Special Deal; and (ii) the CT Independent Board Committee and the Independent Shareholders in connection with the Release of Connected Employees’ Tax Liability. Details of the Special Deal and the Release of Connected Employees’ Tax Liability are set out in the Supplemental Circular dated 14 July 2016, of which this letter forms part. Details of the Subscription and the Whitewash Waiver are set out in the First Circular. Unless otherwise defined, capitalised terms used in this letter shall have the same meanings as those defined in the Supplemental Circular and the First Circular.

On 8 June 2016 and 10 June 2016, announcements dated 7 and 10 June 2016 respectively were published by the Company in relation to the adjournment of the SGM due to certain matters involving the Company and its management and certain employees which may have implications under the Takeovers Code. On 5 July 2016, a further announcement dated 4 July 2016 was published by the Company setting out information regarding the Company’s intention to agree upon a plan with the relevant PRC tax authorities for the settlement of the Under-withheld IIT, where such Under-withheld IIT will be borne and settled by the Company on a grossed-up basis (i.e. the Grossed-up Tax). This means that the Share Option Income received by the PRC Employees will be regarded as net income and the settlement by the employer of the IIT constitutes an employment benefit which, in itself, is a taxable employment benefit subject to IIT, together with any interest and penalty, if any (i.e. the Proposed Settlement).

As a result of the Proposed Settlement, the Relevant Employees will be released from their respective personal liability under the PRC tax laws for the Under-withheld IIT (the estimated total

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

amount of which is approximately RMB27.7 million, equivalent to approximately HK$32.3 million). As the Proposed Settlement will result in the Release of Tax Liability, thereby conferring a benefit on the Employee-Shareholders, the Release of Tax Liability constitutes the Special Deal.

Two of the Continuing Employees (namely, Mr. Bai Jinmin and Mr. Liang Yu) are currently executive directors of the Company, and two of the Relevant Employees (Ms. Wang Liying and Mr. Yang Xinwei) are currently or were, during the past 12 months preceding the New Latest Practicable Date, directors of a subsidiary of the Company (other than an insignificant subsidiary within the meaning of the GEM Listing Rules).

The Connected Employees are connected persons of the Company by virtue of being directors of the Company or its subsidiary. Accordingly, the Release of Connected Employees’ Tax Liability constitutes a benefit to the Connected Employees and a non-exempt connected transaction for the Company pursuant to Rule 20.21 of the GEM Listing Rules and is subject to the reporting, announcement and independent shareholders’ approval requirements under Chapter 20 of the GEM Listing Rules.

The Subscriber, its associates or parties acting in concert with it, Mr. Sun, the Employee-Shareholders and their respective associates and any other Shareholders who are involved or interested in the Subscription, the Whitewash Waiver, the Special Deal and/or the Release of Connected Employees’ Tax Liability are required to abstain from voting for the resolutions in respect of the Subscription, the Whitewash Waiver, the Special Deal and the Release of Connected Employees’ Tax Liability at the New SGM.

In the last two years, except for the independent financial adviser engagement in relation to the Subscription and the Whitewash Waiver, details of which have been set out in the First Circular, there has been no other engagement between the Group and Somerley Capital Limited. The Independent Board Committee comprising all of the non-executive Directors, namely Mr. Ho King Fung, Eric, Ms. Monica Maria Nunes, Mr. Feng Qing and Dr. Gao Jack Qunyao, has been established to advise the Independent Shareholders on (i) whether the Subscription, the Whitewash Waiver and the Special Deal are fair and reasonable and are in the interests of the Company and the Shareholders as a whole; and (ii) the voting action that should be taken by the Independent Shareholders at the New SGM. The CT Independent Board Committee comprising all of the independent non-executive Directors, namely Ms. Monica Maria Nunes, Mr. Feng Qing and Dr. Gao Jack Qunyao, has been established to advise the Independent Shareholders on whether the Release of Connected Employees’ Tax Liability is fair and reasonable, is on normal commercial terms and in the ordinary and usual course of business of the Group and is in the interests of the Company and the Shareholders as a whole. The Independent Board Committee and the CT Independent Board Committee have approved our appointment as the Independent Financial Adviser to advise the Independent Board Committee, the CT Independent Board Committee and the Independent Shareholders in these regards, in addition to our existing role as the independent financial adviser regarding the Subscription and the Whitewash Waiver.

We are not associated or connected with the Company, its controlling shareholder, the Subscriber, the Relevant Employees or any party acting, or presumed to be acting, in concert with any of them and accordingly we are considered eligible to give independent advice to the Independent Board Committee, the CT Independent Board Committee and the Independent Shareholders on the Special Deal and the Release of Connected Employees’ Tax Liability. Apart

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

from normal professional fees paid or payable to us in connection with our appointment as the independent financial adviser, no arrangement exists whereby we will receive any fees or benefits from the Company, the Subscriber, the Relevant Employees or any of their respective substantial shareholders or any party acting, or presumed to be acting, in concert with any of them.

As at the New Latest Practicable Date, Somerley Capital Limited does not have any relationships or interests with the Company that could reasonably be regarded as relevant to the independence of Somerley Capital Limited. Accordingly, we do not consider the past and existing engagements give rise to any conflict for Somerley Capital Limited acting as the independent financial adviser in respect of the Special Deal and the Release of Connected Employees’ Tax Liability.

In formulating our opinion, we have reviewed, among other things, the opinion from the Company’s PRC legal adviser and the information set out in the Supplemental Circular. We have relied on the information and facts supplied by the Company, and the opinions expressed by the Directors, and have assumed that the information and facts provided and opinions expressed to us are true, accurate and complete in all material aspects as at the New Latest Practicable Date. We have also sought and received confirmation from the Directors that no material facts have been omitted from the information supplied and opinions expressed to us. We consider that the information we have received is sufficient for us to reach our opinion and give the advice and recommendation set out in this letter. We have no reason to believe that any material information has been omitted or withheld, or to doubt the truth or accuracy of the information provided. We have, however, not conducted any independent investigation into the business and affairs of the Group, the Subscriber, the Relevant Employees or any of their respective associates or any party acting, or presumed to be acting, in concert with any of them, nor have we carried out any independent verification of the information supplied. We have also assumed that all representations contained or referred to in the Supplemental Circular were true at the time they were made and at the date of the Supplemental Circular and will continue to be true up to the time of the New SGM. We will inform the Independent Shareholders as soon as reasonably practicable if we become aware of any material change to such representations.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion and recommendation, we have taken into account the following principal factors and reasons:

1. Background of the Proposed Settlement

The grant of Share Options has been a regular practice for the Group, which has been granting Share Options to its employees (including the PRC Employees) under the Share Option Schemes since 2006. However, the Company was not aware that the Share Option Income would be considered to form part of the employee benefits that are subject to the IIT as employment income, and thus it had not withheld the IIT payable by the PRC Employees upon their exercise of the Share Options. This problem has come to the attention of the Company and the Subscriber as part of the due diligence process relating to the Subscription Agreement.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Tax Adviser has advised that the income derived from the exercise of share options by a PRC employee is considered to form part of the employee benefits that are subject to IIT as employment income, and the tax liability arises when such PRC employee exercises his/her share options. The PRC subsidiary of a foreign company which is the actual employer of the PRC employee is required under the relevant PRC tax laws to withhold the IIT when the PRC employee exercises his/her share options. Therefore, as the actual employers of the PRC Employees, the PRC subsidiaries of the Company (the “ PRC Subsidiaries ”) are required under the relevant PRC tax laws to withhold the IIT when the PRC Employees exercise their Share Options.

Since becoming aware of this issue, the Company has adopted a policy, with effect from 18 December 2015, to ensure that the IIT is properly collected by the Group from the PRC Employees in order to ensure compliance with the relevant PRC tax laws in relation to the Share Options exercised by the PRC Employees. Under the new policy, the PRC Employees have to pay any IIT payable upon the exercise of the Share Options. However, given the Group’s prior practice, such policy does not apply retrospectively to any Share Options that had been exercised before the implementation of such policy. As at the New Latest Practicable Date, the Company is neither aware of, nor has been informed by or received any notices from, the PRC tax authorities pursuing the Group for the unpaid IIT.

During the IIT Relevant Period, the Company had issued a total of 118,678,603 Shares to 37 Relevant Employees upon exercise of the Share Options. As at the New Latest Practicable Date, of these 37 Relevant Employees, 10 (i.e. the Previous Employees) have left the employment of the Group, and the remaining 27 Relevant Employees continue to be employed by the Group (i.e. the Continuing Employees). The amount of the Under-withheld IIT as estimated by the Tax Adviser is set out below:

Previous Employees Continuing Employees Total:	Number of Shares issued as a result of exercise of Share Options 28,520,103 90,158,500 118,678,603	Under-withheld IIT Approximately RMB4.4 million (equivalent to approximately HK$5.1 million) Approximately RMB23.3 million (equivalent to approximately HK$27.2 million)
		Approximately RMB27.7 million (equivalent to approximately HK$32.3 million)

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

2. Reasons for and benefits of the Proposed Settlement

Reduction of the Company’s tax and related financial liability exposure

As advised by the Company’s PRC legal adviser, the withholding entity (i.e. the relevant employer) may be subject to an administrative penalty at a rate ranging from 50% to 300% of the Under-withheld IIT as a result of its failure to withhold IIT that should have been withheld. In addition to the pecuniary penalty, the withholding entity is required by law to comply with its tax withholding and settlement obligations on a going forward basis. Although the employee as taxpayer is responsible for the IIT underpayment, as advised by the Tax Adviser, in practice, the relevant PRC tax authorities normally pursue the defaulting employer for IIT underpayment and interest (calculated at a rate of 0.05% per day), instead of the defaulting employee, due to (i) the practical difficulty for the tax authorities to pursue individual; and (ii) the administrative penalty that the Group may be subject to as a result of its failure to withhold and settle the Under-withheld IIT cannot be considered to have been incurred by the employee.

Since the amount of the administrative penalty arising from a failure to withhold IIT can be greater than the IIT underpayment and the relevant PRC tax authorities have the discretion to determine the rate of the administrative penalty, as advised by the Tax Adviser, it is a common practice for the withholding entities to actively cooperate with the relevant PRC tax authorities to settle, and where it is difficult for the withholding entities to seek reimbursement from the employees for the IIT underpayment, to bear all the IIT underpayment in a timely manner in order to be assessed at a lower rate of penalty. In the case of voluntary disclosure, as advised by the Tax Adviser, the relevant PRC tax authorities may, subject to their discretion, reduce or waive the administrative penalty. Therefore, it is in the interests of the Group to settle the Grossed-up Tax as soon as possible in order to limit its potential tax and related financial exposure.

Legal position

As advised by the Company’s PRC legal adviser, the PRC tax authorities are the only relevant authorities empowered to demand settlement of unpaid tax under PRC tax laws, and such demand is seen as an administrative action under applicable laws. The Company and its subsidiaries (as the employers) are not entitled under relevant PRC tax laws, nor do they have any contractual right, to demand repayment of unpaid tax from the Relevant Employees. In effect, under the PRC IIT regime, an employer, i.e. a withholding entity, has the primary responsibility to pay the relevant IIT to the tax authorities and to recover it by withholding the amount of IIT payable from the employee’s salary and benefits. Despite this legal position, it would be open to the Company to request compensation from the Relevant Employees. However, as explained below, there are substantial difficulties in this course of action.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Practical difficulty to seek recourse from the Relevant Employees

Although the Share Option Schemes provide that the Company shall not be responsible for any tax to which a grantee may become subject to as a result of his/her participation in the Share Option Schemes, the Group did not implement procedures to ensure compliance by the PRC Subsidiaries with their withholding obligation under PRC tax laws, and none of the Group’s subsidiaries provided guidance to their employees to inform them that their Share Option Income derived under the Share Option Schemes constitutes employment benefits that are subject to PRC IIT. As stated in the PRC legal opinion, according to the PRC salary payment regulations and/or conventions, employers are required to expressly state the amount of IIT withheld and the actual salaries released to employees. Therefore, employees would have a reasonable belief that their salaries are received on “after tax” basis. Any subsequent request for tax after their receipt of the salaries is unlikely to be acceptable to such employees.

Adverse impact on staff morale and stability of the Group

The Group considers that seeking reimbursement from the employees at this stage would be regarded by them as a material deviation from their initial understanding of their remuneration packages and would therefore have an adverse impact on staff morale. This would affect the stability of the Group and thus would not be in the interests of the Company and its shareholders as a whole.

3. Principal terms of the Proposed Settlement

In view of the foregoing, the Group is considering to negotiate a plan with the relevant PRC tax authorities for the settlement of the Under-withheld IIT, where such Under-withheld IIT will be borne and settled by the Group by payment of the Grossed-up Tax, together with interest and penalty, if any. As a result of the Proposed Settlement, the Relevant Employees will be released from their respective personal liability under PRC tax laws for the Under-withheld IIT (the estimated total amount of which is approximately RMB27.7 million, equivalent to approximately HK$32.3 million).

It is noted that the Under-withheld IIT relating to Share Options exercised by the Concerned Directors is estimated to amount to approximately RMB19.0 million (equivalent to approximately HK$22.2 million), representing a significant portion (approximately 68.6%) of the total Under-withheld IIT. Given the Group will settle the unpaid IIT for the Relevant Employees on the same basis, we are of the view that the Proposed Settlement does not confer any preferential treatment to the Concerned Directors relative to the Relevant Employees.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Subject to the pending discussions between the Company and the relevant PRC tax authorities and as advised by the Tax Adviser, it is estimated that the Grossed-up Tax will be approximately RMB49.1 million (equivalent to approximately HK$57.3 million). Under applicable PRC tax laws, the Group may be subject to administrative penalty as a result of its failure to withhold IIT that should be withheld. Under the Proposed Settlement, the Group may also be liable for late payment interest calculated on the Grossed-up Tax. The table below sets out a breakdown of the Grossed-up Tax, accrued interest and penalty to be borne and settled by the Company as estimated by the Tax Adviser, and each of their calculation basis:

Amount (as estimated by the Tax Calculation basis Adviser)

Grossed-up Tax (A)

On the basis that the Approximately RMB49.1 million Share Option Income is (equivalent to approximately the net income of the HK$57.3 million) Relevant Employees

Accrued interest (B)

At a rate of 0.05% per Approximately RMB15.2 million day on the Grossed-up (equivalent to approximately Tax, commencing on HK$17.7 million) the date of which tax payment is overdue (Note 1)
Penalty (C) Ranging from 50% to Approximately up to RMB147.4 300% of the million (equivalent to Grossed-up Tax approximately HK$172.2 million)
Total: (A+B+C) Approximately RMB49.1 million
- Approximately RMB49.1 million (Note 2) (equivalent to approximately HK$57.3 million) to RMB211.7 million (equivalent to approximately HK$247.2 million)

Notes:

Calculated on the assumption that interest was accrued up to 30 June 2016.
Assuming that the relevant PRC tax authorities waive all the interest and penalty payable.

The figures in the Proposed Settlement are subject to further negotiation and agreement with the relevant PRC tax authorities. The above figures are estimates drawn up by the Tax Adviser based on the information currently available and the applicable PRC tax laws and regulations, and therefore remain subject to change. The Company will use its best endeavours to reduce the administrative penalty and interest payable to the relevant PRC tax authorities. Notwithstanding the foregoing, the amount of “benefit” given to the Relevant

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Employees would remain RMB27.7 million as currently estimated, being the aggregate PRC IIT payable if the Relevant Employees were to settle the Under-withheld IIT.

4. Assessment of the Proposed Settlement

(a) Risk of the Subscription being not completed

The tax liability was identified during the due diligence process undertaken by the Subscriber. As disclosed in the announcement of the Company dated 4 July 2016, the ordinary resolutions to be put forward by the Company at the New SGM seeking shareholders’ approval of, among other things, the Subscription Agreement and the Whitewash Waiver will be made conditional upon the passing of the resolutions approving the Special Deal and the Release of Connected Employees’ Tax Liability by the Independent Shareholders. Accordingly, the completion of the Subscription is subject to the passing of the resolutions approving the Special Deal and the Release of Connected Employees’ Tax Liability.

As disclosed in the First Circular, the Subscription is a valuable opportunity for the Group to bring in a solid strategic corporate investor owned by Alibaba Group and Ant Financial Group. Pursuant to the Business Cooperation Framework Agreement to be entered into between Taobao Software, Alipay and the Company at completion of the Subscription, the Group shall be (i) the exclusive business platform of Alibaba Group and Ant Financial Group to apply for and hold business qualifications and licences for the operations of lottery business; and (ii) authorised by Taobao Software and Alipay to operate lottery channels on their platforms. Given that the Business Cooperation Framework Agreement will bring significant benefits to the Group’s business and that the Subscription will provide substantial funding to the Group for further developing other business segments of the Group, we consider the Subscription is in the interests of the Company and the Shareholders (including the Independent Shareholders). The amount of the Grossed-up Tax represents approximately 2.4% of the gross proceeds of the Subscription of approximately HK$2,388 million, which we consider not a material percentage. Overall, we consider it would be beneficial to the Company and its shareholders to approve the Special Deal and the Release of Connected Employees’ Tax Liability in order to secure the Subscription Agreement and the Whitewash Waiver in view of the funding available from the Subscription and the opportunity of bringing in a solid strategic corporate investor.

In summary, the Subscription and its benefits would not be available to the Group and the Shareholders if the Special Deal and the Release of Connected Employees’ Tax Liability are not approved by the Independent Shareholders.

(b) The Company’s responsibility to withhold IIT

The Company’s responsibility to comply with the PRC tax laws

Based on the PRC legal opinion, under applicable PRC tax laws and regulations, the responsibility to withhold and to settle tax upon the exercise of Share Options by the PRC Employees rests with the relevant PRC Subsidiaries.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Although the IIT is the personal liability of the Relevant Employees, the failure to withhold the IIT payable under relevant PRC tax laws in respect of the exercise of Share Options granted was the PRC Subsidiaries’ liability. As discussed in the sub-section headed “2. Reasons for and benefits of the Proposed Settlement — Practical difficulty to seek recourse from the Relevant Employees” above, employees would reasonably expect that salaries received by them were on “after tax” basis.

As advised by the Company’s PRC legal adviser, pursuant to the applicable laws in the PRC, the tax authorities of the PRC do not have the power to request withholding entities, i.e. the PRC Subsidiaries, to make payment of the taxes on behalf of the taxpayers, i.e. the Relevant Employees. It is a practice for tax authorities in the PRC to issue notices to the PRC Subsidiaries requesting them to re-comply with their obligation to withhold or collect the tax, rather than requesting them to pay the IIT. However, in practice, the PRC tax authorities normally pursue the defaulting employer for IIT underpayment and interest (calculated at a rate of 0.05% per day), instead of the defaulting employees. The relevant PRC tax authorities, after full payment of the Grossed-up Tax, may be willing to reduce the administrative penalty payable by the withholding entity.

As mentioned above, the accrued interest and penalty arising from the Under-withheld IIT is due to the failure of the Company to withhold IIT at the time the Share Options were exercised. As a result, it is, in practice, the Company’s responsibility to bear the accrued interest and penalty. When the Relevant Employees became obliged to pay the IIT, the PRC Subsidiaries should have fulfilled their obligation to withhold and to settle IIT in accordance with the provision of tax laws. As the Company is considering to negotiate a settlement with the relevant PRC tax authorities so as to reduce the penalty and interest payable, it is considered that any further delay in rectifying this non-compliance may affect the extent of the interest and penalty payable, and such interest and penalty payable will continue to accrue. In light of the fact that the penalty payable by the PRC Subsidiaries would likely be reduced after full payment of the Grossed-up Tax, it is in the interests of the Company and the Shareholders to settle the Grossed-up Tax as soon as practicable.

Difficulty in seeking reimbursement or compensation from the Relevant Employees

As discussed in the sub-section headed “2. Reasons for and benefits of the Proposed Settlement — Practical difficulty to seek recourse from the Relevant Employees” above, employees had a reasonable belief that their salaries were paid on “after tax” basis. Any subsequent demand for tax after receipt of their salaries is unlikely to be acceptable to such employees.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

While the Company may seek reimbursement from the Relevant Employees given that IIT was payable by such employees, the Company lacks specific legal or contractual grounds for doing so. As advised by the Company’s PRC legal adviser, in the absence of an agreement with the employees, the withholding entity is not entitled to seek reimbursement or compensation from the employees if it fails to withhold IIT and subsequently pays the unpaid tax and therefore has no direct source to recover IIT automatically. We understand from the Company that there were no contractual agreements signed between the Relevant Employees and the PRC Subsidiaries or the Company on the reimbursement of the Under-withheld IIT.

On the other hand, there is no relevant provision in the PRC laws prohibiting the Company from seeking reimbursement or compensation from the Relevant Employees by civil actions. However, in view of the lack of specific legal or contractual grounds, it is uncertain whether the Company could succeed in claiming reimbursement from the Relevant Employees. Considering the potential damage to key employee relationships and the lack of specific legal or contractual grounds, we consider it is reasonable for the Company not to seek compensation for elements of the Proposed Settlement from the Relevant Employees.

(c) Adverse impact on staff morale and stability of the Group

With reference to the PRC legal opinion, under applicable PRC regulations, employers are required to expressly state the amount of tax withheld and the actual salary released to employees. Therefore, employees have a reasonable belief that their salaries are paid on “after tax” basis, and they are unlikely to accept any subsequent demand for tax. As at 31 December 2015, the Group had 232 out of 239 employees in the PRC. Seeking recourse from the 27 Continuing Employees is likely to be seen as a reduction of benefits to which they were entitled from Share Options and would damage materially the staff morale of PRC Employees, leading to instability in the management of the Group. The business of the Group is highly specialised and depends on employees’ intimate knowledge of the gaming sector. Damage to staff morale is likely therefore to have a negative impact on the operations of the Group and put at risk the opportunities provided from the Subscription and the Business Cooperation Framework Agreement.

CONFIRMATION OF OUR ADVICE ON THE SUBSCRIPTION AND THE WHITEWASH WAIVER

Reference is made to the First Circular dated 25 May 2016 and the voluntary announcement published by the Company on 7 June 2016 in relation to the market share of China sports lottery terminal supply of the Group during 2016 (the “ Voluntary Announcement ”). We have reviewed and considered the Voluntary Announcement and have confirmed that our opinion and recommendation in respect of the Subscription and the Whitewash Waiver as contained in the First Circular remain unchanged.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

OPINION AND RECOMMENDATION

Taking into account the fact that (i) the completion of the Subscription Agreement and the Business Cooperation Framework Agreement, which bring the benefits to the Group described above, are subject to the passing of the resolutions approving the Special Deal and the Release of Connected Employees’ Tax Liability; (ii) the accrued interest and penalty arising from the Under-withheld IIT is due to the failure of the Company to withhold IIT at the time the Share Options were exercised by the Relevant Employees and the penalty payable by the PRC Subsidiaries is likely to be minimised by prompt payment of the Grossed-up Tax; (iii) there is no specific legal or contractual basis on the Company’s part to claim reimbursement from the Relevant Employees; and (iv) seeking recourse from the 27 Continuing Employees is uncertain to be successful and would damage the relationship of the Company with key employees, we are of the opinion that (i) the Special Deal and the Release of Connected Employees’ Tax Liability are fair and reasonable and in the interests of the Company and the Shareholders as a whole; and (ii) the Release of Connected Employees’ Tax Liability is on normal commercial terms, although not in the ordinary and usual course of business of the Group.

As set out in our letter of advice included in the First Circular, having taken into account the principal factors and reasons therein, we are of the opinion that (i) the terms of the Subscription Agreement and the Whitewash Waiver are fair and reasonable so far as the Independent Shareholders are concerned; and (ii) the entering into of the Subscription Agreement is in the interests of the Company and the Shareholders.

Accordingly, we advise the Independent Board Committee and the CT Independent Board Committee to recommend, and we ourselves recommend, the Independent Shareholders to vote in favour of the ordinary resolutions to approve the Subscription, the Whitewash Waiver, the Special Deal and the Release of Connected Employees’ Tax Liability to be proposed at the New SGM.

Yours faithfully, for and on behalf of SOMERLEY CAPITAL LIMITED David Ching Director

Mr. David Ching is a licensed person registered with the Securities and Futures Commission and a responsible officer of Somerley Capital Limited, which is licensed under the SFO to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities. He has over ten years of experience in the corporate finance industry.

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GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This Supplemental 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 the information contained in this Supplemental Circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement in this Supplemental Circular misleading.

This Supplemental Circular includes particulars given in compliance with the Takeovers Code for the purpose of giving information with regard to the Group. The Directors jointly and severally accept full responsibility for the accuracy of the information contained in this Supplemental Circular and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this Supplemental Circular have been arrived at after due and careful consideration and there are no other facts not contained in this Supplemental Circular the omission of which would make any statement in this Supplemental Circular misleading.

2. SHARE CAPITAL AND SHARE OPTIONS

(a) Share capital

Assuming there are no other changes to the number of Shares in issue from the New Latest Practicable Date to the Completion Date, the authorised and issued share capital of the Company (a) as at the New Latest Practicable Date; (b) upon Completion; and (c) after Completion assuming that the Convertible Bonds are converted in full at the Adjusted Initial Conversion Price of HK$0.2996 per Conversion Share were/will be as follows:

(i) As at the New Latest Practicable Date Authorised:

10,000,000,000 Shares HK$20,000,000

Issued, fully paid or credited as fully paid:

4,931,702,909 Shares HK$9,863,405.818

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GENERAL INFORMATION

APPENDIX

(ii) Upon Completion

Authorised:

20,000,000,000 Shares HK$40,000,000

Issued, fully paid or credited as fully paid:

4,931,702,909 Shares as at the New Latest Practicable Date 4,817,399,245 Shares to be allotted and issued upon Completion 9,749,102,154	HK$9,863,405.818 HK$9,634,798.490
	HK$19,498,204.308

(iii) After Completion, assuming that the Convertible Bonds are converted in full at the Adjusted Initial Conversion Price of HK$0.2996 per Conversion Share

Authorised:

20,000,000,000 Shares Issued and fully paid or credited as fully paid: 4,931,702,909 Shares as at the New Latest Practicable Date 4,817,399,245 Shares to be allotted and issued upon Completion 2,378,165,212 Shares to be allotted and issued assuming that the Convertible Bonds are converted in full at the Adjusted Initial Conversion Price of HK$0.2996 per Conversion Share 12,127,267,366	HK$40,000,000

	HK$9,863,405.818 HK$9,634,798.490 HK$4,756,330.424
	HK$24,254,534.732

All the Shares in issue rank pari passu with each other in all respects, including the rights as to return of capital, dividend and voting. The Subscription Shares and the Conversion Shares, when issued and fully paid, will rank equally in all respects among themselves and with all the Shares in issue at their respective dates of allotment and issue, including the right to any dividends or distributions made or declared on or after their respective dates of allotment and issue.

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GENERAL INFORMATION

APPENDIX

The Shares are listed on and traded on the GEM of the Stock Exchange. No Shares are listed on or dealt in, nor is any listing of or permission to deal in the Shares being, or proposed to be, sought on any other stock exchange.

There has been no alteration to the issued share capital of the Company since 31 December 2015, being the date on which the latest audited financial statements of the Group were made up, and up to the New Latest Practicable Date, save as disclosed below:

(i) the allotment and issue of an aggregate of 212,879,224 new Shares to Rainwood Resources Limited pursuant to the exercise of the Rainwood Options;
(ii) the allotment and issue of 10,135,135 new Shares to Immense Wisdom and King Achieve pursuant to the Score Value Transaction; and
(iii) the allotment and issue of 102,169,922 new Shares upon exercise of options granted by the Company under the Share Option Schemes.

(b) Share options

As at the New Latest Practicable Date, the Company had:

(i) outstanding options granted under the Share Option Schemes entitling the holders to subscribe for an aggregate of 595,541,603 Shares, the details of which are set out below:

				Number of
				Shares which
				may fall to be
Holder(s) of		Exercise		issued upon
outstanding share		price per		full exercise
options	Date of grant	Share	Exercise period	of the Options
Director
Mr. Bai Jinmin	17 August 2012	0.1006	17 August 2013–	875,000
			16 August 2017
	9 January 2013	0.4250	9 January 2014–	2,000,000
			8 January 2018
	21 January 2014	1.3100	21 January 2015–	5,000,000
			20 January 2019
Mr. Liang Yu	17 August 2012	0.1006	17 August 2013–	875,000
			16 August 2017
	9 January 2013	0.4250	9 January 2014–	4,000,000
			8 January 2018
	21 January 2014	1.3100	21 January 2015–	3,750,000
			20 January 2019

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GENERAL INFORMATION

APPENDIX

Holder(s) of outstanding share options Date of grant Exercise price per Share Exercise period Mr. Cheng Guoming 1 June 2015 0.8580 1 June 2016– 31 May 2020 Dr. Gao Jack Qunyao 1 June 2015 0.8580 1 June 2016– 31 May 2020 Mr. Feng Qing 1 June 2015 0.8580 1 June 2016– 31 May 2020 Mr. Ho King Fung, Eric 23 May 2013 0.4890 23 May 2014– 22 May 2018 Ms. Monica Maria Nunes 20 June 2013 0.4740 20 June 2014– 19 June 2018 21 January 2014 1.3100 21 January 2015– 20 January 2019 Sub-total (A): Other employees 21 December 2011 0.2900 21 December 2012– 20 December 2016 17 August 2012 0.1006 17 August 2013– 16 August 2017 9 January 2013 0.4250 9 January 2014– 8 January 2018 2 January 2014 1.1900 2 January 2015– 1 January 2019 21 January 2014 1.3100 21 January 2015– 20 January 2019 20 January 2015 0.9200 20 January 2016– 19 January 2020 1 June 2015 0.8580 1 June 2016– 31 May 2020 7 July 2015 1.1020 7 July 2016– 6 July 2020 Sub-total (B):	Number of Shares which may fall to be issued upon full exercise of the Options 44,944,800 1,500,000 1,500,000 21,287,922 750,000 375,000
	86,857,722

	1,000,000 2,185,000 12,512,500 32,616,179 18,250,000 16,237,500 25,000,000 19,219,500
	127,020,679

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GENERAL INFORMATION

APPENDIX

Holder(s) of outstanding share options Date of grant Exercise price per Share Exercise period Others 21 December 2011 0.2900 21 December 2012– 20 December 2016 17 August 2012 0.1006 17 August 2013– 16 August 2017 9 January 2013 0.4250 9 January 2014– 8 January 2018 23 May 2013 0.4890 23 May 2014– 22 May 2018 21 January 2014 1.3100 21 January 2015– 20 January 2019 20 January 2015 0.9200 20 January 2016– 19 January 2020 7 July 2015 1.1020 7 July 2016– 6 July 2020 Sub-total (C): TOTAL: (A) + (B) + (C)	Number of Shares which may fall to be issued upon full exercise of the Options 375,000 10,032,500 19,250,000 21,287,922 27,125,000 22,500,000 281,092,780
	381,663,202

	595,541,603

(ii) outstanding options which were granted to Immense Wisdom and King Achieve to subscribe for up to 166,666,666 Shares at a subscription price of HK$1.8 per Share and such options are contingent upon certain performance targets.

Save as disclosed in the section headed “Share Capital and Share Options” in this appendix, as at the New Latest Practicable Date, the Company had no other relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in issue.

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GENERAL INFORMATION

APPENDIX

3. CHANGES TO INFORMATION DISCLOSED IN THE FIRST CIRCULAR

(a) There has been no change or addition to material contracts of the Company disclosed in the paragraph headed “7. Material Contracts” as set out on page III-12 in Appendix III to the First Circular from the date of the First Circular up to the New Latest Practicable Date.
(b) As at the New Latest Practicable Date, all of the items as disclosed in the paragraph headed “12. Additional Disclosure of Interests and Dealings in Securities” as set out on pages III-14 to III-16 in Appendix III to the First Circular remained unchanged save for the following:
(i) all of the Relevant Employees have irrevocably committed themselves to abstain from voting in respect of the resolutions to be proposed at the New SGM to approve the Subscription, the Whitewash Waiver, the Special Deal and the Release of Connected Employees’ Tax Liability; and
(ii) each of Mr. Sun, Mr. Bai, Mr. Liang (all being executive Directors), Mr. Ho King Fung, Eric (a non-executive Director) and Ms. Monica Maria Nunes (an independent non-executive Director), beneficially held 2,033,328,000 Shares, 76,574,600 Shares, 23,670,250 Shares, 21,287,922 Shares and 875,000 Shares, respectively. Mr. Sun, being a party to the Subscription Agreement, and Mr. Bai and Mr. Liang, who are involved in the Subscription and interested in the Special Deal and the Release of Connected Employees’ Tax Liability, and each of their respective associates, will abstain from voting on the relevant ordinary resolutions to be proposed at the New SGM to approve the Subscription, the Whitewash Waiver, the Special Deal and the Release of Connected Employees’ Tax Liability. As Mr. Cheng (who is involved in the Subscription) and his associates do not currently hold any Shares, none of them will vote on any of the resolutions at the New SGM. However, if Mr. Cheng exercises any of his outstanding 44,944,800 share options prior to the date of the New SGM, he will abstain from voting on the relevant ordinary resolutions to be proposed at the New SGM to approve the Subscription, the Whitewash Waiver, the Special Deal and the Release of Connected Employees’ Tax Liability. As at the New Latest Practicable Date, each of Mr. Ho King Fung, Eric and Ms. Monica Maria Nunes (whom are not involved or interested in, the Subscription, the Whitewash Waiver, the Special Deal and the Release of Connected Employees’ Tax Liability) intends to vote in favour of the Subscription, the Whitewash Waiver, the Special Deal and the Release of Connected Employees’ Tax Liability.
(c) There has been no change to emoluments of Directors, nor to the information disclosed under the paragraph headed “6. Service Contracts” as set out on pages III-11 to III-12 in Appendix III to the First Circular from the date of the First Circular up to the New Latest Practicable Date.

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GENERAL INFORMATION

APPENDIX

(d) As at the New Latest Practicable Date, save for the Special Deal and the Release of Connected Employees’ Tax Liability, there is no special arrangement or change to any arrangement in connection with the Subscription and the Whitewash Waiver as disclosed under the paragraph headed “12. Additional disclosure of interests and dealings in securities” as set out on pages III-14 to III-16 in Appendix III to the First Circular.
(e) There has been no change as to the ultimate owner of the Shares to be acquired by the Subscriber under the Subscription Agreement from the date of the First Circular up to the New Latest Practicable Date.
(f) Save as disclosed in this appendix, there has been no change as to the arrangements in relation to dealings as disclosed under the paragraph headed “12. Additional disclosure of interests and dealings in securities” as set out on pages III-14 to III-16 in Appendix III to the First Circular from the date of the First Circular up to the New Latest Practicable Date.
(g) There has been no change to the information disclosed under the paragraph headed “10. No Material Litigation” as set out on page III-13 and the paragraph headed “14. General” as set out on pages III-16 to III-17 in Appendix III to the First Circular from the date of the First Circular up to the New Latest Practicable Date.
(h) Beijing AGTech GOT Technology Co., Ltd., an indirect wholly-owned subsidiary of the Company, has successfully won tenders to supply in aggregate 8,800 of its latest Sports Lottery terminals to nine provinces in the PRC so far in 2016, accounting for over 60% of the total market share in the PRC, details of which are set out in the Company’s announcement dated 7 June 2016.
(i) On 3 June 2016, the Executive has granted the Whitewash Waiver in respect of the allotment and issue of (i) the Subscription Shares and (ii) the Conversion Shares, subject to (I) the issue of such securities being approved by the Independent Shareholders by way of poll at the New SGM; and (II) there being no acquisition or disposal of voting rights of the Company by the Subscriber and parties acting in concert with it between the date of the Announcement and the Completion without prior consent of the Executive.

Save as disclosed above, there has been no material changes to the information contained in the First Circular from the date of the First Circular up to the New Latest Practicable Date.

4. NO MATERIAL ADVERSE CHANGE

Save as disclosed in the Company’s first quarterly report for the three months ended 31 March 2016, the Directors confirm that as at the New Latest Practicable Date, the Directors are not aware of any material adverse change in the financial or trading positions of the Group since 31 December 2015, being the date to which the latest published audited accounts of the Group were made up.

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GENERAL INFORMATION

APPENDIX

5. DIRECTORS’ INTERESTS

As at the New 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 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, were as follows:

(i) Long positions in the Shares

			Total	Approximate
	Personal	Corporate	number of	percentage
Name of Director	interest	interest	Shares	held
Mr. Sun	27,078,000	2,006,250,000(1)	2,033,328,000	41.230%
Mr. Bai	31,698,000	44,876,600(2)	76,574,600	1.553%
Mr. Liang	23,670,250	–	23,670,250	0.480%
Mr. Ho King Fung, Eric	21,287,922	–	21,287,922	0.432%
Ms. Monica Maria Nunes	875,000	–	875,000	0.018%

Notes:

These 2,006,250,000 Shares were held in the name of Maxprofit. As Maxprofit 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

(ii) Long positions in the underlying Shares in respect of the share options of the Company (which were regarded as unlisted physically settled equity derivatives)

		Exercise		Number of	Approximate
		price per		underlying	percentage
Name of Director	Date of Grant	Share	Exercisable period	Shares	held
		(HK$)	(Note)
Mr. Bai	17 August 2012	0.1006	17 August 2013–	875,000	0.018%
			16 August 2017
	9 January 2013	0.4250	9 January 2014–	2,000,000	0.041%
			8 January 2018
	21 January 2014	1.3100	21 January 2015–	5,000,000	0.101%
			20 January 2019
Mr. Liang	17 August 2012	0.1006	17 August 2013–	875,000	0.018%
			16 August 2017
	9 January 2013	0.4250	9 January 2014–	4,000,000	0.081%
			8 January 2018
	21 January 2014	1.3100	21 January 2015–	3,750,000	0.076%
			20 January 2019
Mr. Cheng	1 June 2015	0.8580	1 June 2016–	44,944,800	0.911%
			31 May 2020
Mr. Ho King Fung,	23 May 2013	0.4890	23 May 2014–	21,287,922	0.432%
Eric			22 May 2018
Ms. Monica Maria	20 June 2013	0.4740	20 June 2014–	750,000	0.015%
Nunes			19 June 2018
	21 January 2014	1.3100	21 January 2015–	375,000	0.008%
			20 January 2019
Mr. Feng Qing	1 June 2015	0.8580	1 June 2016–	1,500,000	0.030%
			31 May 2020
Dr. Gao Jack Qunyao	1 June 2015	0.8580	1 June 2016–	1,500,000	0.030%
			31 May 2020

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 year 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.

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GENERAL INFORMATION

APPENDIX

Save as disclosed above, as at the New 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.

Save for the following exercise of share options by the Directors, none of the Directors dealt for value in any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company during the period commencing six months prior to the date of the Announcement up to and including the New Latest Practicable Date:

(i) Mr. Bai Jinmin

	Number of	Exercise
	Shares	price	Option money
Date of exercise	involved	per Share	paid/received
		(HK$)	(HK$)
11 September 2015	5,316,000	0.2900	1,541,640
11 September 2015	875,000	0.1006	88,025
7 January 2016	5,316,000	0.2900	1,541,640
7 January 2016	1,800,000	1.3100	2,358,000
8 January 2016	700,000	1.3100	917,000
11 January 2016	2,000,000	0.4250	850,000
21 January 2016	2,500,000	1.3100	3,275,000
Mr. Liang Yu
	Number of	Exercise
	Shares	price	Option money
Date of exercise	involved	per Share	paid/received
		(HK$)	(HK$)
28 October 2015	875,000	0.1006	88,025
26 November 2015	5,316,000	0.2900	1,541,640
26 November 2015	2,000,000	0.4250	850,000
24 December 2015	5,316,000	0.2900	1,541,640
11 January 2016	1,250,000	1.3100	1,637,500

(ii) Mr. Liang Yu

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GENERAL INFORMATION

APPENDIX

(iii) Ms. Monica Maria Nunes

	Number of	Exercise
	Shares	price	Option money
Date of exercise	involved	per Share	paid/received
		(HK$)	(HK$)
18 January 2016	375,000	0.4740	177,750
18 January 2016	125,000	1.3100	163,750

(iv) Mr. Ho King Fung, Eric

	Number of	Exercise
	Shares	price	Option money
Date of exercise	involved	per Share	paid/received
		(HK$)	(HK$)
21 May 2016	10,643,961	0.489	5,204,896.93

6. SUBSTANTIAL SHAREHOLDERS’ INTERESTS

As at the New 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:

Long position in the Shares

			Approximate
			percentage of
			issued share
Name of		Number of	capital of the
Shareholder	Capacity	Shares held	Company
Maxprofit	Beneficial owner	2,006,250,000_(Note 1)_	40.68%
Rainwood Resources	Beneficial owner	475,067,224	9.63%
Limited
Mr. Cheung Lup	Interest of controlled	475,067,224_(Note 2)_	9.63%
Kwan, Vitor	corporation

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GENERAL INFORMATION

APPENDIX

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.
These 475,067,224 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.

7. DIRECTORS’ INTERESTS IN CONTRACTS AND ASSETS

None of the Directors had any interest, either direct or indirect, in any assets which had been, since 31 December 2015 (being the date to which the latest published audited accounts were made up) and up to the New Latest Practicable Date, acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group. As at the New Latest Practicable Date, none of the Directors was materially interested, directly or indirectly, in any contract or arrangement entered into by any member of the Group subsisting at the New Latest Practicable Date which was significant in relation to the business of the Group.

8. DIRECTORS’ SERVICE CONTRACTS

As at the New Latest Practicable Date, no Directors had any existing or proposed service contracts with the Company or any of its subsidiaries which is not determinable within one year without payment of compensation other than statutory compensation.

9. COMPETING BUSINESS

As at the New Latest Practicable Date, none of the Directors, controlling Shareholder or their respective close associates was interested in any business which competes or is likely to compete, either directly or indirectly, with the business of the Group.

10. QUALIFICATIONS AND CONSENT OF EXPERT

The following is the qualification of the expert who has given opinion or advice (including tax calculation) contained in this Supplementary Circular:

Name	Qualification
Somerley Capital Limited	A corporation licensed to carry out Type 1 (dealing in
(“Somerley”)	securities) and Type 6 (advising on corporate finance)
	regulated activities under the SFO
Deloitte Touche Tohmatsu	Branch of a special general partnership under Partnership
Certified Public	Law of China licensed to provide PRC tax related
Accountants LLP Beijing	consulting services
Branch (“Deloitte”)

As at the New Latest Practicable Date, each of Somerley and Deloitte did not have: (a) any shareholding in any member of the Group or the right (whether legally enforceable or not) to

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GENERAL INFORMATION

APPENDIX

subscribe for or to nominate persons to subscribe for securities in any member of the Group; and (b) any interest, either direct or indirect, in any assets which have been acquired or disposed of by or leased to or are proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2015, being the date to which the latest published audited financial statements of the Group were made up.

Each of Somerley and Deloitte has given and has not withdrawn its written consent to the issue of this Supplemental Circular with the inclusion of its advice and/or references to its name in the form and context in which they respectively appear.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection at Unit 3912, 39th Floor, Tower Two, Times Square, Causeway Bay, Hong Kong during normal business hours on any business day from the date of this Supplemental Circular up to and including the date of New SGM. Copy of the following documents will also be available for inspection on the website of the SFC at http://www.sfc.hk and the website of the Company at http://www.agtech.com from the date of this Supplemental Circular up to and including the date of the New SGM:

(a) the letter from the Board, the text of which is set out on pages 4 to 18 of this Supplemental Circular;
(b) the letter from the Independent Board Committee, the text of which is set out on pages 14 to 20 of this Supplemental Circular;
(c) the letter from the CT Independent Board Committee, the text of which is set out on pages 21 to 22 of this Supplemental Circular;
(d) the letter from the Independent Financial Adviser, the text of which is set out on pages 23 to 33 of this Supplemental Circular; and
(e) the letters of consent referred to in the paragraph headed “Qualifications and consent of expert” in this appendix.

12. GENERAL

The English text of this Supplemental Circular shall prevail over the corresponding Chinese translation in the case of inconsistency.

– 46 –

NOTICE OF ADJOURNED 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 an adjourned special general meeting (the “ Adjourned SGM ”) of AGTech Holdings Limited (the “ Company ”) will be held at 10:00 a.m. on Saturday, 30 July 2016 at VIP Lounge, 28 Floor, Crowne Plaza, 8 Leighton Road, Causeway Bay, Hong Kong for the purpose of adjourning indefinitely the Adjourned SGM.

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, 14 July 2016

Registered office: Head office and principal place of business: Clarendon House Unit 3912, 39th Floor, Tower Two 2 Church Street Times Square Hamilton HM 11 Causeway Bay Bermuda Hong Kong

Notes:

Any member entitled to attend and vote at the Adjourned 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.
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/she 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.
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 Adjourned 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 Adjourned SGM (or any adjournment thereof) should they so desire.

As at the date of this notice, the Board comprises (i) Mr. Sun Ho, Mr. Bai Jinmin, Mr. Liang Yu and Mr. Cheng Guoming as executive Directors; (ii) Mr. Ho King Fung, Eric as non-executive Director; and (iii) Ms. Monica Maria Nunes, Mr. Feng Qing and Dr. Gao Jack Qunyao as independent non-executive Directors.

For identification purpose only

– ASGM-1 –

NOTICE OF NEW SPECIAL GENERAL MEETING

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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)

NOTICE IS HEREBY GIVEN THAT a special general meeting (the “ New SGM ”) of AGTech Holdings Limited (the “ Company ”) will be held at 10:30 a.m. on Saturday, 30 July 2016 at VIP Lounge, 28 Floor, Crowne Plaza, 8 Leighton Road, Causeway Bay, 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 , subject to and conditional on the passing of ordinary resolutions nos. 2, 3, 4 and 5:
(a) the entering into of the conditional subscription agreement (the “ Subscription Agreement ”, a copy of which is tabled at the meeting and marked “A” and initialed by the chairman of the meeting for the purpose of identification) entered into among Ali Fortune Investment Holding Limited (the “ Subscriber ”), the Company, Mr. Sun Ho and Maxprofit Global Inc dated 4 March 2016 in relation to the subscription by the Subscriber of (i) an aggregate of 4,817,399,245 shares in the Company of HK$0.002 each (the “ Subscription Shares ”) at the subscription price of HK$0.3478 per Subscription Share and (ii) convertible bonds (the “ Convertible Bonds ”) to be issued by the Company in the aggregate principal amount of HK$712,582,483, which entitle the bondholders to subscribe for up to 2,048,918,721 shares in the Company of HK$0.002 each at the initial conversion price of HK$0.3478 per Share (subject to adjustment in accordance with the Subscription Agreement) and the transactions contemplated thereunder be and are hereby confirmed, approved and ratified;
(b) conditional upon the listing committee of The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) granting the listing of, and permission to deal in the Subscription Shares and the new shares of the Company to be issued upon conversion of the Convertible Bonds (the “ Conversion Shares ”), a mandate be and is hereby granted to the directors (the “ Directors ”) of the Company (or a duly authorised committee thereof) to allot and issue the Subscription Shares and the Conversion Shares (the “ Specific Mandate ”) in accordance with the terms of the Subscription Agreement. The Specific

* For identification purpose only

– NSGM-1 –

NOTICE OF NEW SPECIAL GENERAL MEETING

Mandate is in addition to, and shall not prejudice nor revoke any general or specific mandate(s) which has/have been granted or may from time to time be granted to the Directors by the shareholders of the Company prior to the passing of this resolution;

(c) the directors of the Company (the “ Directors ”) (or a duly authorised committee thereof) be and are hereby authorised to do all such further acts and things and to sign and execute all such other or further documents and to take all such steps which, in the opinion of the Directors (or a duly authorised committee thereof), may be necessary, appropriate, desirable or expedient to implement and/or give effect to the terms of, or the transactions contemplated by, the Subscription Agreement and the issue of the Subscription Shares, the Convertible Bonds and the Conversion Shares and to agree to such variation, amendments or waiver of matters relating thereto as are, in the opinion of the Directors (or a duly authorised committee thereof), in the interests of the Company.”
“ THAT , subject to (a) the passing of ordinary resolutions nos. 1, 3, 4 and 5, and (b) the Executive Director (or any delegate of the Executive Director) of the Corporate Finance Division of the Securities and Futures Commission granting to the Subscriber and parties acting in concert with it the waiver (the “ Whitewash Waiver ”) pursuant to Note 1 to the Notes on dispensations from Rule 26 of the Hong Kong Code on Takeovers and Mergers from any obligation on the part of the Subscriber and parties acting in concert with it to make a mandatory general offer for all the securities of the Company not already owned or agreed to be acquired by the Subscriber and parties acting in concert with it which would otherwise arise as a result of (i) the Subscriber subscribing for the Subscription Shares and the Convertible Bonds under the Subscription Agreement; and (ii) the Subscriber obtaining the Conversion Shares, the terms of the Whitewash Waiver be and is hereby approved, and that any one or more of the Directors be and is hereby authorised to do all such acts and things and execute all such documents as he/she considers necessary, desirable or expedient for the purpose of, or in connection with, the implementation of and giving effect to any of the matters relating to, or incidental to, the Whitewash Waiver.”
“ THAT , subject to the passing of ordinary resolutions nos. 1, 2, 4 and 5 and the consent of the Executive Director (or any delegate of the Executive Director) of the Corporate Finance Division of the Securities and Futures Commission pursuant to Rule 25 of the Hong Kong Code on Takeovers and Mergers and any conditions that may be imposed thereon:
(a) the release of the personal liability of the Employee-Shareholders (as defined in the supplemental circular dated 14 July 2016 of the Company) under the applicable tax laws of the People’s Republic of China (“ PRC ”) in respect of any under-withheld individual income tax (“ IIT ”) as a result of the settlement of any under-withheld IIT in respect of income derived from the exercise of share options granted under the Company’s share option schemes by the Employee-Shareholders during the period from 1 January 2011 to 17

– NSGM-2 –

NOTICE OF NEW SPECIAL GENERAL MEETING

December 2015 on a grossed-up basis by the Company (together with interest and penalty, if any) (the “ Release of Tax Liability ”) be and is hereby approved; and

(b) the Directors be and are hereby authorised for and on behalf of the Company to execute all such documents and to do all such acts and things as they consider desirable, necessary or expedient in connection with or incidental to the Release of Tax Liability.”
“ THAT :
(a) subject to the passing of resolutions nos. 1, 2, 3 and 5, the release of the personal liability of the Connected Employees (as defined in the supplemental circular dated 14 July 2016 of the Company) under the applicable tax laws of the PRC in respect of any under-withheld IIT as a result of the settlement of any under-withheld IIT in respect of income derived from the exercise of share options granted under the Company’s share option schemes by the Connected Employees during the period from 1 January 2011 to 17 December 2015 on a grossed-up basis by the Company (together with interest and penalty, if any) (the “ Release of Connected Employees’ Tax Liability ”) be and is hereby approved; and
(b) the Directors be and are hereby authorised for and on behalf of the Company to execute all such documents and to do all such acts and things as they consider desirable, necessary or expedient in connection with or incidental to the Release of Connected Employees’ Tax Liability;”
“ THAT , subject to the passing of resolutions nos. 1, 2, 3 and 4, the authorised share capital of the Company be increased from HK$20,000,000 divided into 10,000,000,000 shares of par value HK$0.002 each to HK$40,000,000 divided into 20,000,000,000 shares of par value HK$0.002 each by the creation of an additional 10,000,000,000 shares of par value HK$0.002 each (the “ Authorised Share Capital Increase ”) and the Directors be and are hereby authorised for and on behalf of the Company to execute all such documents and to do all such acts and things as they consider desirable, necessary or expedient in connection with and to give effect to the Authorised Share Capital Increase.”
“ THAT , subject to and conditional on the passing of ordinary resolutions no. 1, 2, 3, 4 and 5, the appointment of Mr. Zhou Haijing to serve as an executive director of the Company with effect from the Completion Date (as defined in the circular of the Company dated 25 May 2016 (the “ Circular ”)) be and is hereby approved, and the board of Directors be and is hereby authorised to fix his remuneration.”

– NSGM-3 –

NOTICE OF NEW SPECIAL GENERAL MEETING

“ THAT , subject to and conditional on the passing of ordinary resolutions no. 1, 2, 3, 4 and 5, the appointment of Mr. Zhang Qin to serve as a non-executive director of the Company with effect from the Completion Date (as defined in the Circular) be and is hereby approved, and the board of Directors be and is hereby authorised to fix his remuneration.”
“ THAT , subject to and conditional on the passing of ordinary resolutions no. 1, 2, 3, 4 and 5, the appointment of Mr. Yang Guang to serve as a non-executive director of the Company with effect from the Completion Date (as defined in the Circular) be and is hereby approved, and the board of Directors be and is hereby authorised to fix his remuneration.”
“ THAT , subject to and conditional on the passing of ordinary resolutions no. 1, 2, 3, 4 and 5, the appointment of Mr. Ji Gang to serve as a non-executive director of the Company with effect from the Completion Date (as defined in the Circular) be and is hereby approved, and the board of Directors be and is hereby authorised to fix his remuneration.”
“ THAT , subject to and conditional on the passing of ordinary resolutions no. 1, 2, 3, 4 and 5, the appointment of Mr. Zhang Wei to serve as a non-executive director of the Company with effect from the Completion Date (as defined in the Circular) be and is hereby approved, and the board of Directors be and is hereby authorised to fix his remuneration.”

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, 14 July 2016

Registered office: Head office and principal place of business: Clarendon House Unit 3912, 39th Floor, Tower Two 2 Church Street Times Square Hamilton HM 11 Causeway Bay Bermuda Hong Kong

Notes:

Any member entitled to attend and vote at the New 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.

– NSGM-4 –

NOTICE OF NEW SPECIAL GENERAL MEETING

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/she 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.
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 New 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 New SGM (or any adjournment thereof) should they so desire.

– NSGM-5 –

AI assistant

Joy Spreader Group Inc. — Proxy Solicitation & Information Statement 2016

51106_rns_2016-07-14_7594ba82-74cc-4423-a07f-7dc10e8b83fa.pdf

AGTech Holdings Limited 亞博科技控股有限公司[*]

SOMERLEY CAPITAL LIMITED

CONTENTS

AGTech Holdings Limited 亞博科技控股有限公司[*]

(Stock Code: 8279)

INTRODUCTION

BACKGROUND OF THE SPECIAL DEAL AND THE RELEASE OF CONNECTED EMPLOYEES’ TAX LIABILITY

THE PROPOSED SETTLEMENT

REASONS AND BENEFITS OF THE PROPOSED SETTLEMENT

Reduction of the Company’s tax and related financial liability exposure

Practical difficulty to seek recourse from the Relevant Employees

Adverse impact on staff morale and stability of the Group

INFORMATION ON THE GROSSED-UP TAX, INTEREST AND PENALTY

PROPOSED SETTLEMENT IS A MATTER OF THE COMPANY ONLY

LISTING RULES IMPLICATIONS

TAKEOVERS CODE IMPLICATIONS

INDEPENDENT BOARD COMMITTEE, CT INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

ADJUSTMENT TO THE INITIAL CONVERSION PRICE

EFFECT OF THE SUBSCRIPTION ON THE SHAREHOLDING STRUCTURE OF THE COMPANY

LETTER FROM THE BOARD

THE ADJOURNED SGM

THE NEW SGM

LETTER FROM THE BOARD

LETTER FROM THE BOARD

RECOMMENDATION

GENERAL

First Circular

LETTER FROM THE BOARD

Other

AGTech Holdings Limited 亞博科技控股有限公司[*]

PROPOSED SUBSCRIPTION OF SUBSCRIPTION SHARES AND CONVERTIBLE BONDS APPLICATION FOR WHITEWASH WAIVER SPECIAL DEAL AND CONNECTED TRANSACTION IN RELATION TO SETTLEMENT OF PRC TAX LIABILITY

Yours faithfully Independent Board Committee

AGTech Holdings Limited 亞博科技控股有限公司[*]

(Stock Code: 8279)

PROPOSED SUBSCRIPTION OF SUBSCRIPTION SHARES AND CONVERTIBLE BONDS APPLICATION FOR WHITEWASH WAIVER SPECIAL DEAL AND CONNECTED TRANSACTION IN RELATION TO SETTLEMENT OF PRC TAX LIABILITY

Yours faithfully Independent Board Committee

SOMERLEY CAPITAL LIMITED

(I) PROPOSED SUBSCRIPTION OF SUBSCRIPTION SHARES AND CONVERTIBLE BONDS; (II) APPLICATION FOR WHITEWASH WAIVER; AND (III) SPECIAL DEAL AND CONNECTED TRANSACTION IN RELATION TO SETTLEMENT OF PRC TAX LIABILITY

INTRODUCTION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background of the Proposed Settlement

2. Reasons for and benefits of the Proposed Settlement

Reduction of the Company’s tax and related financial liability exposure

Legal position

Practical difficulty to seek recourse from the Relevant Employees

Adverse impact on staff morale and stability of the Group

3. Principal terms of the Proposed Settlement

Accrued interest (B)

4. Assessment of the Proposed Settlement

(a) Risk of the Subscription being not completed

(b) The Company’s responsibility to withhold IIT

The Company’s responsibility to comply with the PRC tax laws

(c) Adverse impact on staff morale and stability of the Group

CONFIRMATION OF OUR ADVICE ON THE SUBSCRIPTION AND THE WHITEWASH WAIVER

OPINION AND RECOMMENDATION

1. RESPONSIBILITY STATEMENT

2. SHARE CAPITAL AND SHARE OPTIONS

(a) Share capital

(b) Share options

3. CHANGES TO INFORMATION DISCLOSED IN THE FIRST CIRCULAR

4. NO MATERIAL ADVERSE CHANGE

5. DIRECTORS’ INTERESTS

(i) Long positions in the Shares

(i) Mr. Bai Jinmin

(iii) Ms. Monica Maria Nunes

6. SUBSTANTIAL SHAREHOLDERS’ INTERESTS

Long position in the Shares

7. DIRECTORS’ INTERESTS IN CONTRACTS AND ASSETS

8. DIRECTORS’ SERVICE CONTRACTS

9. COMPETING BUSINESS

10. QUALIFICATIONS AND CONSENT OF EXPERT

11. DOCUMENTS AVAILABLE FOR INSPECTION

12. GENERAL

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[*] (incorporated in Bermuda with limited liability)

ORDINARY RESOLUTIONS

AGTech Holdings Limited Sun Ho Chairman & CEO

Joy Spreader Group Inc. Proxy Solicitation & Information Statement 2016

**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[*]**

**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[*]**

**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[*]** (incorporated in Bermuda with limited liability)