Joy Spreader Group Inc. - Proxy Solicitation & Information Statement 2017

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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

(Incorporated in Bermuda with limited liability)

(Stock Code: 8279)

(1) REVISION OF CAPS FOR EXISTING CONTINUING CONNECTED TRANSACTIONS WITH ALIBABA GROUP (2) CONTINUING CONNECTED TRANSACTIONS CONTEMPLATED UNDER THE PROCUREMENT FRAMEWORK AGREEMENT WITH ALIBABA GROUP (3) RE-ELECTION OF A NON-EXECUTIVE DIRECTOR AND

(4) NOTICE OF SPECIAL GENERAL MEETING

Independent Financial Adviser to

the Independent Board Committee and the Independent Shareholders

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A letter from the Board is set out on pages 6 to 22 of this circular.

A letter from the Independent Board Committee containing its recommendation to the Independent Shareholders is set out on pages IBC-1 to IBC-2 of this circular.

A letter from Somerley Capital Limited, the Independent Financial Adviser, containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages IFA-1 to IFA-15 of this circular.

A notice convening the SGM to be held at 11:00 a.m. on Wednesday, 20 December 2017 at Units 2302-2305, 23/F., Tower One, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong is set out on pages SGM-1 to SGM-3 of this circular. Whether or not shareholders of the Company are able to attend the SGM, they are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and deposit it with the Company’s Hong Kong branch share registrar, Tricor Abacus Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, as soon as possible and in any event not less than 48 hours before the time appointed for holding the SGM. Completion and return of the form of proxy will not preclude shareholders of the Company from attending and voting in person at the SGM (or any adjournment thereof) should they so desire.

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

For identification purpose only

4 December 2017

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.

	Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
LETTER FROM THE INDEPENDENT BOARD COMMITTEE. . . . . . . . . . . . . . . . . . . . . . IBC-1
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER. . . . . . . . . . . . . . . . . . . . . . IFA-1
APPENDIX – GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
NOTICE OF SPECIAL GENERAL MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	SGM-1

DEFINITIONS

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

“Alibaba Group” a group of companies comprising Alibaba Holding and its subsidiaries “Alibaba Holding” Alibaba Group Holding Limited, a company incorporated in the Cayman Islands and its American depositary shares are listed on the New York Stock Exchange “Alibaba Merchants” Merchants which are (among others) subsidiaries of or companies controlled by Alibaba Holding “Ali Fortune” Ali Fortune Investment Holding Limited, a company incorporated under the laws of the British Virgin Islands “Announcement” the announcement of the Company dated 29 August 2017

“associate(s)”, “connected each has the meaning ascribed to it under the GEM Listing Rules person(s)”, “controlling shareholder(s)” and “subsidiary(ies)”

“Board” the board of Directors

“Channel Transactions” the Group’s utilisation of certain channels and networks of Alibaba Group for sales and distribution of the Lottery Products and Other Services on a revenue-sharing basis and purchase of technology services from Alibaba Group under the Framework Agreement

“Circular” the circular of the Company dated 20 February 2017 “Company” AGTech Holdings Limited, a company incorporated in Bermuda with limited liability, the shares of which are listed on the GEM
“Director(s)” the director(s) of the Company “Effective Date” the date on which all conditions precedent under the Procurement Framework Agreement, details of which are set out in the paragraph headed “THE PROCUREMENT FRAMEWORK AGREEMENT – Conditions Precedent” in this circular, having been satisfied

“Framework Agreement” the business cooperation agreement entered into between the Company and Alibaba Holding on 25 January 2017, details of which are set out in the announcement of the Company dated 25 January 2017 and the Circular

DEFINITIONS

“GEM” the Growth Enterprise Market of the Stock Exchange
“GEM Listing Rules” the Rules Governing the Listing of Securities on GEM
“Gross Income Model”
has the meaning ascribed to it in the paragraph headed “REVISION OF THE CAPS – Details of Income Model” in the “Letter from the Board” in this circular
“Group” the Company and each of its subsidiaries from time to time
“Hong Kong” the Hong Kong Special Administrative Region of the PRC
“HK$”
Hong Kong dollars, the lawful currency of Hong Kong
“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 as to the fairness and reasonableness of (i) the Revised Channel Caps, and (ii) the Procurement Framework Agreement and the transactions contemplated thereunder (including the Procurement Caps) 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 and the Independent Shareholders in respect of (i) the Revised Channel Caps; and (ii) the Procurement Framework Agreement and the transactions contemplated thereunder (including the Procurement Caps)
“Independent Shareholders”
Shareholders other than Alibaba Holding, Tmall and their respective associates
“Independent Third Party(ies)”
party(ies) who, and whose ultimate beneficial owners, are third party(ies) independent of the Company and connected persons of the Company
“Latest Practicable Date”
1 December 2017, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein
“Lottery Issuance Agencies”
the China Welfare Lottery Issuance and Administration Center, the China Sports Lottery Administration Center and lottery sales offices established by the civil affairs departments and sports administration departments of the PRC government at the provincial level

DEFINITIONS

“Lottery Products” lottery products that the Group has developed or is authorised to operate
“Marketing Fee” marketing fee payable by the Group to the Merchants, representing the difference between the original price and the discounted price of the Products purchased by the Online Users
“Merchants” merchants who cooperate with the Group to supply the Products to the Online Users, including both Alibaba Merchants and Merchants which are Independent Third Parties
“Net Income Model” has the meaning ascribed to it in the paragraph headed “REVISION OF THE CAPS – Details of Income Model” in the “Letter from the Board” in this circular
“Online Users” individual users on the Online Channels
“Online Channels” certain online platforms of Alibaba Group utilised and operated by the Group for conducting the transactions in relation to the Other Services pursuant to the Framework Agreement and the Procurement Framework Agreement
“Original Channel Caps” the original maximum amounts in respect of the Channel Transactions under the Framework Agreement for each period/year (as the case may be)
“Other Services” online activities which are not subject to the applicable PRC lottery laws and regulations, including advertising, information subscription and other content on the online platform(s) of Alibaba Group
“Points” has the meaning ascribed to it in the paragraph headed “REVISION OF THE CAPS – Details of the sales and distribution of Lottery Products and Other Services – Sales and distribution of Other Services” in the “Letter from the Board” in this circular
“PRC” the People’s Republic of China, and for the purpose of this circular, excluding Hong Kong, the Macao Special Administrative Region of the PRC and Taiwan
“Procurement Caps” the maximum amount in respect of the Marketing Fee payable under the Procurement Framework Agreement for each period/year (as the case may be)

DEFINITIONS

“Procurement Framework the business cooperation agreement entered into between the Agreement” Company and Tmall on 29 August 2017 in relation to the proposed transactions between the Group and Alibaba Merchants, details of which are set out in the paragraph headed “THE PROCUREMENT FRAMEWORK AGREEMENT – Major Terms” in this circular “Products” consumer products supplied by the Merchants, which will be offered to the Online Users at a discounted price, or cash coupons that can be consumed by Online Users to purchase products supplied by the Merchants, which will be offered to the Online Users at a discounted price to the face value of such cash coupons “Revised Channel Caps” the proposed revised maximum amounts in respect of the Channel Transactions under the Framework Agreement for each period/year (as the case may be) “RMB” Renminbi, the lawful currency of the PRC “SFO” The Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) “SGM” the special general meeting of the Company to be held to consider and, if thought fit, approve (i) the Revised Channel Caps, (ii) the Procurement Framework Agreement and the transactions contemplated thereunder (including the Procurement Caps), and (iii) the re-election of a non-executive Director “SGM Notice” the notice convening the SGM as set out on pages SGM-1 to SGM-3 of this circular “Share(s)” ordinary shares with a par value of HK$0.002 each in the capital of the Company “Shareholder(s)” holder(s) of the Share(s) “Stock Exchange” The Stock Exchange of Hong Kong Limited “Tao Bao” an e-commerce marketplace operated by Alibaba Group “Tao Bi Zhong” has the meaning ascribed to it in the paragraph headed “REVISION OF THE CAPS – Details of the sales and distribution of Lottery Products and Other Services – Sales and distribution of Other Services” in the “Letter from the Board” in this circular “Tmall” Zhejiang Tmall Technology Company Limited* (浙江天貓技術有限公司), a company established in the PRC with limited liability, and a wholly-owned subsidiary of Alibaba Holding

DEFINITIONS

“%”

per cent

For identification purposes only

For the purposes of illustration only, any amount denominated in RMB in this circular is translated into HK$ at the rate of RMB0.85014 = HK$1. Such translation should not be construed as a representation that the amounts in question have been, could have been or could be, converted at any particular rate at all.

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. Zhou Haijing (Chief Financial Officer)

Non-executive Directors:

Mr. Zhang Qin Mr. Yang Guang Mr. Ji Gang Mr. Zou Liang

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

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

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

4 December 2017

To the Shareholders and, for information only,

the holder of the convertible bonds of the Company

Dear Sir or Madam,

(1) REVISION OF CAPS FOR EXISTING CONTINUING CONNECTED TRANSACTIONS WITH ALIBABA GROUP

(2) CONTINUING CONNECTED TRANSACTIONS CONTEMPLATED UNDER THE PROCUREMENT FRAMEWORK AGREEMENT WITH ALIBABA GROUP (3) RE-ELECTION OF A NON-EXECUTIVE DIRECTOR AND

(4) NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

Reference is made to the announcement of the Company dated 25 January 2017, the Circular and the Announcement. On 25 January 2017, the Company and Alibaba Holding entered into the Framework Agreement, pursuant to which the Group shall (i) utilise certain channels and networks of Alibaba Group for sales and distribution of the Lottery Products and Other Services on a revenue-sharing basis; and (ii)

For identification purpose only

LETTER FROM THE BOARD

purchase technology services from Alibaba Group (i.e. the Channel Transactions), subject to the Original Channel Caps for a term commencing from 8 March 2017 (i.e. the effective date of the Framework Agreement) and ending on 31 December 2019. On 29 August 2017, the Group proposed to increase the Original Channel Caps to the Revised Channel Caps to cater for the development of the Channel Transactions, subject to approval by the Independent Shareholders at the SGM, and on 29 August 2017, the Company and Tmall has entered into the Procurement Framework Agreement subject to the Procurement Caps for a term commencing from the Effective Date and ending on 31 December 2019.

The purpose of this circular is to provide you with, among other things, (i) further particulars of the Revised Channel Caps, (ii) further particulars of the Procurement Framework Agreement and the transactions contemplated thereunder (including the Procurement Caps), (iii) the recommendations of the Independent Board Committee, (iv) a letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, (v) information regarding the proposal to re-elect a newly appointed non-executive Director in accordance with the bye-laws of the Company, and (vi) a notice convening the SGM.

REVISION OF CAPS

Background

As the Channel Transactions (in particular the sale and distribution of Other Services) have been running more smoothly and developing more sustainably over the recent few months, the Group proposes to increase the Original Channel Caps to the Revised Channel Caps to cater for the development of the Channel Transactions, subject to approval by the Independent Shareholders at the SGM.

As disclosed in the Circular, potential transaction amount for (among others) the sale and distribution of Other Services have not been separately set out in the basis of determination of the Original Channel Caps, as it was then expected that such potential transaction amount would be relatively insubstantial given the sale and distribution of Other Services would be a newly launched initiative for the Group. It was also disclosed in the Circular that in case of any expected increase in such potential transaction amount due to business expansion, the Group will comply with the relevant GEM Listing Rules as and when appropriate, including compliance with the announcement, circular and Independent Shareholders’ approval requirements under the GEM Listing Rules for the revision of the Original Channel Caps if necessary.

From the period commencing from 8 March 2017 and ended on 31 July 2017, the Group has seen a fast and consistent growth in the transaction amount with Alibaba Group for the sale and distribution of the Other Services (i.e. the transaction amount shared with Alibaba Group as expenses payable to the Alibaba Group or as revenue receivable from the Alibaba Group under the Original Channel Caps). Such amount recorded in July 2017 has increased by over 250% as compared with the amount recorded in March 2017.

Such growth is mainly due to the positive market feedback on the provision of Other Services resulting in the increase in the revenue generating from the provision of Other Services. In view of such fast and consistent growth of transaction amount for the sale and distribution of the Other Services, the Board expects that the Original Channel Caps will not be sufficient and proposes to increase the Original Channel Caps to the Revised Channel Caps.

LETTER FROM THE BOARD

From the period commencing from 8 March 2017 and ended on 31 July 2017, the historical transaction amount under the Original Channel Caps is approximately RMB15,417,000 (equivalent to approximately HK$18,134,660).

Caps

The Original Channel Caps and Revised Channel Caps pursuant to the Framework Agreement commencing from 8 March 2017 and ending on 31 December 2017 and the two years ending 31 December 2018 and 2019 are as follows:

	For the period
	commencing from
	8 March 2017
	and ending on	For the year ending	For the year ending
	31 December 2017	31 December 2018	31 December 2019
Original Channel Caps	RMB41,500,000	RMB63,500,000	RMB69,850,000
	(equivalent to	(equivalent to	(equivalent to
	approximately	approximately	approximately
	HK$47,109,305)	HK$72,082,912)	HK$79,291,204)
Revised Channel Caps	RMB106,021,000	RMB251,093,000	RMB360,951,000
	(equivalent to	(equivalent to	(equivalent to
	approximately	approximately	approximately
	HK$124,710,048)	HK$295,354,883)	HK$424,578,305)
For illustration purposes only, the breakdown of the		Original Channel Caps are as follows:
	For the period
	commencing from
	8 March 2017
	and ending on	For the year ending	For the year ending
	31 December 2017	31 December 2018	31 December 2019
Sale and distribution of	RMB26,300,000	RMB35,400,000	RMB38,940,000
Lottery Products	(equivalent to	(equivalent to	(equivalent to
	approximately	approximately	approximately
	HK$29,854,812)	HK$40,184,805)	HK$44,203,285)
Other services	RMB5,200,000	RMB7,100,000	RMB7,810,000
	(equivalent to	(equivalent to	(equivalent to
	approximately	approximately	approximately
	HK$5,902,853)	HK$8,059,664)	HK$8,865,631)

LETTER FROM THE BOARD

	For the period
	commencing from
	8 March 2017
	and ending on	For the year ending	For the year ending
	31 December 2017	31 December 2018	31 December 2019
Technology services	RMB10,000,000	RMB21,000,000	RMB23,100,000
	(equivalent to	(equivalent to	(equivalent to
	approximately	approximately	approximately
	HK$11,351,640)	HK$23,838,443)	HK$26,222,288)
Total (i.e. the Original	RMB41,500,000	RMB63,500,000	RMB69,850,000
Channel Caps)	(equivalent to	(equivalent to	(equivalent to
	approximately	approximately	approximately
	HK$47,109,305)	HK$72,082,912)	HK$79,291,204)

Note: For the avoidance of doubt, the above breakdown of the Original Channel Caps are disclosed for illustration purposes only, and the Group had sought for Independent Shareholders’ approval on the total Original Channel Caps for the period commencing from 8 March 2017 and ending on 31 December 2017 and the two years ending 31 December 2018 and 2019 but not the above individual breakdown of such Original Channel Caps.

For illustration purposes only, the breakdown of the Revised Channel Caps are as follows:

For the period
commencing from 8 March 2017 and ending on For the year ending For the year ending
31 December 2017 31 December 2018 31 December 2019
Sale and distribution of RMB4,613,000 RMB7,483,000 RMB11,927,000 Lottery Products (equivalent to (equivalent to (equivalent to approximately approximately approximately
HK$5,426,165) HK$8,802,080) HK$14,029,454)
Other services RMB96,502,000 RMB222,610,000 RMB325,924,000 (equivalent to (equivalent to (equivalent to approximately approximately approximately
HK$113,513,069) HK$261,850,989) HK$383,376,856)
Technology services RMB4,906,000 RMB21,000,000 RMB23,100,000 (equivalent to (equivalent to (equivalent to approximately approximately approximately
HK$5,770,814) HK$24,701,814) HK$27,171,995)
Total (i.e. the Revised RMB106,021,000 RMB251,093,000 RMB360,951,000 Channel Caps) (equivalent to (equivalent to (equivalent to approximately approximately approximately
HK$124,710,048) HK$295,354,883) HK$424,578,305)

LETTER FROM THE BOARD

Note: For the avoidance of doubt, the above breakdown of the Revised Channel Caps are disclosed for illustration purposes only, and the Group shall seek for Independent Shareholders’ approval on the total Revised Channel Caps for the period commencing from 8 March 2017 and ending on 31 December 2017 and the two years ending 31 December 2018 and 2019 but not the above individual breakdown of such Revised Channel Caps.

The Revised Channel Caps are calculated mainly with reference to the estimated income for the sale and distribution of the Lottery Products and Other Services, which is determined based on projected revenue and costs in respect of the sales and distribution of Lottery Products and Other Services taking into account the historical amount and growth rate during the period commencing from 8 March 2017 and ended on 31 July 2017, as well as the expected future growth rate and the Group’s business plan.

The Revised Channel Caps shall take effect upon the approval by the Independent Shareholders at the SGM. In the event that the Revised Channel Caps do not become effective, the Original Channel Caps will remain in full force and binding on the Group and Alibaba Group.

Historical amounts

For illustrative purposes only, the historical amounts for each of the sale and distribution of Lottery Products and Other Services, and purchase of technology services for the period commencing from 8 March 2017 and ending on 31 July 2017 are as follows:

For the period commencing from 8 March 2017 and ending on 31 July 2017 RMB177,000 Sale and distribution of Lottery Products (equivalent to approximately HK$208,201) RMB14,123,000 Other services (equivalent to approximately HK$16,612,558) RMB1,117,000 Technology services (equivalent to approximately HK$1,313,901)

The total historical amount for the sale and distribution of Lottery Products, Other Services and technology services for the period commencing from 8 March 2017 and ending on the Latest Practicable Date has not exceeded the Original Channel Cap for the period commencing from 8 March 2017 and ending on 31 December 2017.

Details of the sales and distribution of Lottery Products and Other Services

Sales and distribution of Lottery Products

The sales and distribution of Lottery Products refer to the Group’s sales and distribution of lottery products in physical form that are developed by, or authorised to operate, by the Group, through the network of Alibaba Group.

LETTER FROM THE BOARD

As a licensed distributor of Lottery Products, the Group enters into contract with the competent Lottery Issuance Agencies in the PRC for sales and distribution of the Lottery Products. The Group shall distribute its physical Lottery Products through Alibaba Group’s network, including physical stores managed, co-managed or controlled by Alibaba Group which are located at both the urban, as well as rural and village areas of the PRC and retail points of sales or merchants registered with the platforms of Alibaba Group. The Group then receives commission income for the sales of the Lottery Products from the competent Lottery Issuance Agencies.

Sales and distribution of Other Services

Lottery Products in online form are currently disallowed under the applicable laws and regulations. Therefore, the Group cannot carry out any online lottery business on the Online Channels. In view of this, the Group intended to conduct other business activities (which do not fall under the ambit of Lottery Products in online form under the applicable PRC laws and regulations) on the Online Channels to first strengthen the Group’s online presence and its online customer-base on the Online Channels. As such, the sales and distribution of Other Services refer to the Group’s operation of online activities which are not subject to the applicable PRC lottery laws and regulations, including advertising, information subscription and other content on the online platform(s) of Alibaba Group. Currently, it is conducted through the Tao Bi Zhong platform (“ Tao Bi Zhong ”).

Tao Bi Zhong is the Online Channel related to the Alibaba Group and is presently operated by the Group. Tao Bi Zhong can be accessed by Online Users either through the links on the mobile app and website of Tao Bao or by an independent mobile app.

The Tao Bi Zhong platform comprises of three functions – (a) shopping, (b) games and entertainment centre, and (c) Online Users’ rewards centre.

The Merchants can sell coupons on the Tao Bi Zhong platform to the Online Users for marketing purposes. When the Online Users purchase the coupons, marketing service fees are charged to the Merchants by the Group for managing the Tao Bi Zhong platform and providing other support services for coupon sales on such platform.

To encourage the Online Users to purchase coupons on the platform and then facilitate the promotion of the Merchant’s products/services, the Group also provides a reward program to the Online Users. Reward points (the “ Points ”) are granted by the Group to the Online Users for free as incentives when they buy the Merchants’ coupons or carry out certain other activities. Points can be utilized by the Online Users in mainly two ways – (a) playing games in the games and entertainment centre; and (b) purchasing the Merchants’ products/services at a discounted price in the Online Users’ rewards centre. For further details of the purchase of products/services at discounted price in the Online Users’ rewards centre offered by Merchants which are (among others) subsidiaries of or companies controlled by Alibaba Holding (i.e. Alibaba Merchants), please refer to the paragraph “THE PROCUREMENT FRAMEWORK AGREEMENT” in this “Letter from the Board”.

LETTER FROM THE BOARD

Details of Income Model

If the Group is the receiving party of the Commission Income/Other Services income from the Lottery Issuance Agencies/third parties, the Group will pay 50% of the Commission Income/Other services income (after deduction of taxes and expenses) to Alibaba Group. This will be recognised as a cost or an expense of the Group. Such amount of cost or expense paid by the Group to Alibaba Group is subject to the Original Channel Caps/Revised Channel Caps. This business model is referred to as the “ Gross Income Model ” in this circular.

If Alibaba Group is the receiving party of the Commission Income/Other Services income from the Lottery Issuance Agencies/third parties, Alibaba Group will pay 50% of the Commission Income/Other Services income (after deduction of taxes and expenses) to the Group. This will be recognised as a revenue to the Group. Such amount of revenue paid by Alibaba Group to the Group is subject to the Original Channel Caps/Revised Channel Caps. This business model is referred to as the “ Net Income Model ” in this circular.

For the avoidance of doubt, the full amount of cost/expense and/or amount of revenue (but not the amount after netting off such cost/expense and revenue) is subject to the Original Channel Caps/Revised Channel Caps.

Income model of sales and distribution of Lottery Products

Currently, the sales and distribution of Lottery Products are operated using the Gross Income Model. The Group is (i) the contracting party with the Lottery Issuance Agencies, and (ii) the receiving party of the gross commission income from the Lottery Issuance Agencies. The Group pays 50% of the commission income received from the Lottery Issuance Agencies (after deduction of direct expenses) to Alibaba Group.

Potentially and in the future, if certain competent Lottery Issuance Agencies, after considering the applicable laws, provincial and local lottery regulations and policies, prefer to enter into contract regarding the Lottery Products with Alibaba Group, the Net Income Model shall be adopted. Alibaba Group will be (i) the contracting party with the Lottery Issuance Agencies, and (ii) the receiving party of the gross commission income from the Lottery Issuance Agencies. Alibaba Group will pay 50% of the commission income received from the Lottery Issuance Agencies (after deduction of direct expenses) to the Group.

Income model of sales and distribution of Other Services

Currently, the sales and distribution of Other Services operated on Tao Bi Zhong is operated through the Gross Income Model, as the Group is the operating party of all core and substantial functions of Tao Bi Zhong and the Group is recognised by and familiar with the Merchants/Online Users on Tao Bi Zhong. Therefore, the Group is (i) the contracting/account registration party for the Merchants/Online Users on Tao Bi Zhong, and (ii) the receiving party of the gross income on Tao Bi Zhong. The Group shall pay 50% of the income received (after deduction of direct expenses) to Alibaba Group.

LETTER FROM THE BOARD

The Board confirms that the Company’s auditors have no comment on the accounting treatments under each of the Gross Income Model and Net Income Model.

Pricing Basis and Payment Terms

Please refer to the circular of the Company dated 20 February 2017 regarding the payment terms and the basis of determination of (i) the revenue-sharing model for the sale and distribution of Lottery Products and Other Services, and (ii) the service fees for the purchase of technology services from Alibaba Group under the Framework Agreement.

THE PROCUREMENT FRAMEWORK AGREEMENT

On 29 August 2017, the Company and Tmall have entered into the Procurement Framework Agreement subject to the Procurement Caps for a term commencing from the Effective Date and ending on 31 December 2019 with respect to certain procurement transactions between the Group and Alibaba Merchants.

Date

29 August 2017

Parties

The Company
Tmall

Term

Subject to the satisfaction of the conditions precedent under the Procurement Framework Agreement as in the paragraph headed “Conditions Precedent” below, the term of the Procurement Framework Agreement shall commence from the Effective Date and end on 31 December 2019.

Conditions Precedent

The Procurement Framework Agreement is subject to the following conditions:

(a) the Company having obtained the approval of the Board and the Independent Shareholders at the SGM by way of poll in relation to the Procurement Framework Agreement and the transactions contemplated thereunder in accordance with the GEM Listing Rules and the Company’s bye-laws; and

LETTER FROM THE BOARD

(b) the Company and Tmall having complied with all requirements as may be imposed by the relevant regulatory authorities (including the Stock Exchange) in relation to the Procurement Framework Agreement and the transactions contemplated thereunder, if any, and having obtained all approvals and permits necessary for the performance of their respective obligations under the Procurement Framework Agreement and the transactions contemplated thereunder in accordance with all applicable legal and regulatory requirements (including the GEM Listing Rules).

Major Terms

Pursuant to the Procurement Framework Agreement, the Group will enter into the following arrangements with Alibaba Merchants:

(a) the Group will offer a variety of Products supplied by Alibaba Merchants to the Online Users at the Online Users’ rewards centre at Tao Bi Zhong (among others). The Online Users will utilize their Points by giving instructions to the Group to purchase the Products of their choice. The Online Users will also transmit the discounted price of the Products to the Online Channels;
(b) the Group will then place orders with the relevant Alibaba Merchants for the Products, and transfer the discounted price received from the Online Users, together with the Marketing Fee (being the difference between the original price and the discounted price of the Products), to Alibaba Merchants; and
(c) Alibaba Merchants will then directly deliver the Products to the Online Users.

Pricing Basis and Payment Terms

The Marketing Fee shall be the difference between the original price and the discounted price of the Products. The original price (together with the sales rebate and discounts (if any)) of the Products will be determined by Alibaba Merchants which are same as the price (together with the sales rebate and discounts (if any)) offered to all independent customers or other online users. The discounted price and rate of the same Products offered to the Online Users supplied by all Merchants (whether Alibaba Merchants or Merchants which are Independent Third Parties), which will be determined by the Group, are the same.

The Group shall make payment on a per-transaction basis, payment on a monthly or quarterly basis, or prepayment where payment due will be deducted from the total sum prepaid on a per-transaction basis in respect of the Marketing Fee to Alibaba Merchants, subject to the specific agreement entered into between the members of the Group and Alibaba Merchants. Standard credit terms offered by Alibaba Merchants to Independent Third Parties will be offered by Alibaba Merchants to the members of the Group.

LETTER FROM THE BOARD

As the above pricing policies between the Group and the Alibaba Group are same as those offered (i) by Alibaba Group to independent customers or other online users (in respect of the original price of the Products), and (ii) by the Group to all Online Users on the same Products supplied by Merchants which are Independent Third Parties (in respect of the discounted price and rate), the Directors consider that these fee terms are normal commercial terms and are terms no less favourable than terms available to Independent Third Parties, and hence would not be prejudicial to the interest of the Company and its Shareholders as a whole.

Specific Agreements

The Group and Alibaba Merchants may from time to time enter into specific agreements which set out the detailed terms of transactions in accordance with the terms under the Procurement Framework Agreement. The terms of the specific agreements will be negotiated on an arm’s length basis between the parties. In the event the transaction amount exceeds the relevant Procurement Caps which results in the Group being unable to perform any of the obligations under the Procurement Framework Agreement, the parties agree that this shall not constitute a breach of any provision under the Procurement Framework Agreement and the Group will suspend its obligations under the Procurement Framework Agreement until it complies with the GEM Listing Rules to obtain a new cap amount.

Procurement Caps and Basis of Determination of the Procurement Caps

The Procurement Caps for the period commencing from the Effective Date and ending on 31 December 2017 and the two years ending 31 December 2018 and 2019 are as follows:

	For the period
	commencing from
	the Effective Date
	and ending on	For the year ending	For the year ending
	31 December 2017	31 December 2018	31 December 2019
Procurement Caps	RMB52,343,000	RMB389,811,000	RMB570,722,000
	(equivalent to	(equivalent to	(equivalent to
	approximately	approximately	approximately
	HK$61,569,859)	HK$458,525,655)	HK$671,327,076)

The Procurement Caps are calculated mainly with reference to the projected amount of Marketing Fee which is estimated taking into account factors including (i) the historical figures of the value of the Products purchased by the Online Users and the proportion of such Products offered by Alibaba Merchants during the period commencing from March 2017 ended on 31 July 2017; (ii) the estimated growth in the value of the Products to be purchased by Online Users; and (iii) the Group’s projected marketing initiatives and campaigns to promote and boost Online Users’ activities on the Online Channels.

The Marketing Fee paid by the Group to the Alibaba Group for the period from March 2017 to the Latest Practicable Date has not exceeded the announcement threshold for connected transactions under Chapter 20 of GEM Listing Rules.

LETTER FROM THE BOARD

INFORMATION ON ALIBABA GROUP AND THE GROUP

Alibaba Holding is a company incorporated in the Cayman Islands and its American depositary shares are listed on the New York Stock Exchange.

Alibaba Group’s mission is to make it easy to do business anywhere. It is the largest retail commerce company in the world in terms of gross merchandise volume (“GMV”) in the twelve months ended 31 March 2017. Founded in 1999, Alibaba Group provides the fundamental technology infrastructure and marketing reach to help merchants, brands and other business that provide products, services and digital content to leverage the power of the internet to engage with their users and customers. Alibaba Group’s businesses are comprised of core commerce, cloud computing, digital media and entertainment and innovation initiatives and others.

Tmall caters to consumers looking for branded products and a premium shopping experience. A large number of international and Chinese brands and retailers have established storefronts on the business-to-customer (B2C) platform operated by Tmall. Tmall operates the largest B2C platform in China in terms of GMV in 2016. It is positioned as a trusted platform for consumers to buy both homegrown and international branded products as well as products not available in traditional retail outlets.

The Group is an integrated technology and services provider, principally engaged in the lottery and mobile game and entertainment industry. The Group is a member of the Alibaba Group, and as at the date of this circular, the Group has a team of over 300 employees.

REASONS FOR AND BENEFITS OF THE REVISION OF THE CHANNEL CAPS

From the period commencing from 8 March 2017 and ended on 31 July 2017, the Group has seen a fast and consistent growth in the transaction amount for the sale and distribution of the Other Services. In addition, as the expansion in the sales and distribution of the Other Services will continue, the Company estimates that the projected gross sales amount in respect of the sales and distribution of Other Services from August 2017 to December 2017 will show a high growth. After the expected fast growth in 2017 and given the scaling up of the business operations, the Company expects that the growth in the gross sales amount arising from the sales and distribution of Other Services will continue to increase with stable growth throughout 2018 and 2019. The Company has estimated the projected income in respect of the Other Services based on, among other things, (a) the historical growth in the gross sales amount arising from the sales and distribution of Other Services (especially growth in July 2017 due to the launch of new promotions and marketing activities to attract more Online Users); (b) the Company’s plan to further develop the sales and distribution of Other Services; (c) potential new marketing initiatives to be carried out on the Online Channels by the Group; (d) expectation of moderate growth after expansion in business; and (e) the need to cater for future growth in business of the Group.

For Lottery Products, as set out in the circular of the Company dated 20 February 2017, when determining the Original Channel Caps, the projected income in respect of the sales and distribution of Lottery Products was mainly derived based on the then existing number of physical stores and the projected growth rate, and the expected commission income derived from Lottery Products through merchants or vendors registered with the platforms of Alibaba Group. Based on the latest information available to the Company, the initial market response of the sales and distribution of Lottery Products has

LETTER FROM THE BOARD

been lower than expected and hence the income in respect of the sales and distribution of Lottery Products has been lower than expected. The Group will, however, continue to develop its business in the sales and distribution of Lottery Products in the coming years. The Company has estimated the projected income in respect of the sales and distribution of Lottery Products based on, among other things, (i) the historical transaction amounts for sales and distribution of Lottery Products from March 2017 to July 2017; (ii) the Group’s business development plan; and (iii) the expected commission rate for sales and distribution of Lottery Products.

Regarding the provision of technology services by Alibaba Group, the Company has bargained for a better charging rate on the technology services provided by Alibaba Group from March 2017 to July 2017 as an initiative for the Group to develop its cooperation with Alibaba Group. As a result, the actual purchase amount paid to Alibaba Group for the period commencing from March 2017 to July 2017 is lower than expected. When estimating the projected purchase amount in respect of such technology services, the Company has taken into account mainly (i) the expected rate of usage and demand for the Technology Services, which is estimated based on the current business need and future business plan of the Group (including the development of the sales and distribution of Other Services); and (ii) the applicable rates of such technology services.

Taking into consideration all the factors above, the Board expects that the Original Channel Caps will not be sufficient and proposes to increase the Original Channel Caps to the Revised Channel Caps.

REASONS FOR AND BENEFITS OF THE ENTERING INTO OF THE PROCUREMENT FRAMEWORK AGREEMENT

As encouraged by the positive feedback from the market and in order to establish a stronger brand and goodwill, the Group decides to deploy more resources to further develop the sales and distribution of the Other Services under the Framework Agreement. This includes arranging marketing activities to promote Online Users’ activities on the Online Channels.

As part of the marketing activities, the Group will cooperate with certain Merchants and source popular Products for the Online Users. These Products, at the Online Users’ choice, can be purchased by the Online Users at a discounted price as a reward for their online activities on the Online Channels. The Group will pay the Merchants the Marketing Fee, representing the difference between the original price and the discounted price of the Products purchased by the Online Users. As some of the Merchants are (among others) subsidiaries of or companies controlled by Alibaba Holding, the transactions with these Alibaba Merchants will constitute new continuing connected transactions for the Group.

The transactions contemplated under the Procurement Framework Agreement will allow the Group to provide incentive and reward to the Online Users to increase their activities on the Online Channels, which will in turn increase the traffic volume of the Online Channels and further develop the Other Services under the Framework Agreement and benefit the whole business of the Group.

As Mr. Zhang Qin and Mr. Yang Guang are employees of Alibaba Holding or its subsidiaries, each of these Directors is deemed or may be perceived to have a material interest in (i) the Revised Channel Caps, and (ii) the Procurement Framework Agreement and the transactions contemplated thereunder (including the Procurement Caps). Accordingly, they abstained from voting on the resolutions passed by the Board in relation thereto. Save as the aforesaid Directors, none of the other Directors had a material

LETTER FROM THE BOARD

interest in (i) the Revised Channel Caps, and (ii) the Procurement Framework Agreement and the transactions contemplated thereunder (including the Procurement Caps), and therefore none of them abstained from voting on the resolutions passed by the Board in relation thereto.

The Directors (other than the independent non-executive Directors whose opinion have been set out in this circular together with the advice of the Independent Financial Adviser, and except for Mr. Zhang Qin and Mr. Yang Guang who had abstained from voting on the resolutions passed by the Board in relation to (i) the Revised Channel Caps, and (ii) the Procurement Framework Agreement and the transactions contemplated thereunder (including the Procurement Caps) due the reasons stated above) consider that (1) the continuing connected transactions contemplated under the Procurement Framework Agreement are in the ordinary and usual course of business of the Group; (2) the terms of the Procurement Framework Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; (3) the entering into of the Procurement Framework Agreement is in the interests of the Company and the Shareholders as a whole; and (4) the Revised Channel Caps and the Procurements Caps are fair and reasonable so far as the Independent Shareholders are concerned.

Notwithstanding the transactions contemplated under the Framework Agreement (with the Revised Channel Caps) and the Procurement Framework Agreement, the Company believes that the risks of reliance on the Alibaba Group is not significant on the following grounds:

1. Dominant role of the Group

All core and substantial operations of the Online Channels, including business model development, games and technical development, customer/player management and sales and marketing are developed, operated and managed entirely by the Group, independent of Alibaba Group. In light of the above, the Group’s ability to generate revenue is dependent on the Group’s competence and business strength, rather than reliance on Alibaba Group.

2. Access to online traffic volume is merely a gateway in the internet-business industry

Essentially, what Alibaba Group offers in the business cooperation is an access to online traffic volume. Given such industry specific circumstances, the Group’s use of such gateway provided by Alibaba Group should not in any aspect be viewed as a reliance on Alibaba Group.

3. Online traffic (and other physical channels) can be substituted

For Lottery Products, substitute channels are readily available in the market. Any networks comprising physical stores or retail points of sales can take the similar roles as Alibaba Group for the sales and distribution of Lottery Products.

For Other Services, substitute online partners are also readily available in the market. Hence, any online platform with e-commerce function and certain volume of merchants and users can take the similar roles as Alibaba Group for sales and distribution of the Other Services, as long as they offer comparable volume of online traffic in the PRC.

LETTER FROM THE BOARD

Nevertheless, given the leading position of Alibaba Group in attracting online traffic in the PRC, it is natural and in the best interest of the Group and its shareholders to cooperate with Alibaba Group.

4. Independent business operation and management

The Group engages in principal business activities which are entirely independent of Alibaba Group. The Company will continue developing its capabilities in all of its existing business segments and continue to be an integrated lottery technology and services provider. In addition, the Company is also actively building its online presence and customer-base by leveraging its technical know-how and operating experience in lottery games and products to develop other games and entertainment content, including various types of creative, non-lottery social games. Such business strategy is unrelated to Alibaba Group.

The Group is financially independent of Alibaba Group. The Group currently finance its own operations and function independently without reliance on any material guarantee, loans or financial assistance from its controlling shareholders.

The Group also has management independent of Alibaba Group. The business and operations of the Group have been continued to be managed by substantially the same management team prior to the completion of the Subscription and the majority of the management team are not nominated by Alibaba Group.

5. Mutual and complementary relationship

The roles of the Group and of Alibaba Group are mutually complementary and beneficial to each other because (a) on the one hand, the Group can take advantage of the online traffic volume provided by Alibaba Group to develop its business, and (b) on the other hand, the Group is the licensed distributor of Lottery Products and the party that has the exclusive right to develop the offline and online lottery business of Alibaba Group. So Alibaba Group will heavily rely on the Group to develop the Online Channels to prepare for the future operation of online lottery business when it is allowed under the PRC applicable laws and regulations, which will broaden the breadth of online services that Alibaba Group can offer to its online users as integrated internet service providers.

GEM LISTING RULES IMPLICATIONS

Ali Fortune, the controlling shareholder of the Company, is indirectly held as to 60% by Alibaba Holding. Tmall is a wholly-owned subsidiary of Alibaba Holding. Accordingly, each of Alibaba Holding and Tmall is an associate of Ali Fortune and hence a connected person of the Company. The transactions contemplated under each of the Framework Agreement and the Procurement Framework Agreement constitute continuing connected transactions under Chapter 20 of the GEM Listing Rules.

Since one or more of the applicable percentage ratios as defined in the GEM Listing Rules in respect of the Revised Channel Caps exceed 5%, the Revised Channel Caps are subject to the annual review, reporting, announcement and independent shareholders’ approval requirements under Chapter 20 of the GEM Listing Rules.

LETTER FROM THE BOARD

Since one or more of the applicable percentage ratios as defined in the GEM Listing Rules in respect of the highest Procurement Caps exceed 5%, the Procurement Framework Agreement and the transactions contemplated thereunder (including the Procurement Caps) are subject to the annual review, reporting, announcement and independent shareholders’ approval requirements under Chapter 20 of the GEM Listing Rules.

As at the Latest Practicable Date, Ali Fortune, together with its associates, held 6,102,723,993 Shares, representing approximately 54.26% of the issued share capital of the Company. Ali Fortune will, together with its associates, abstain from voting on the resolution to be proposed at the SGM to approve (i) the Revised Channel Caps, and (ii) the Procurement Framework Agreement and the transactions contemplated thereunder (including the Procurement Caps). Save for the aforesaid and to the best knowledge, information and belief of the Company, as at the Latest Practicable Date, no other Shareholder has a material interest in (i) the Revised Channel Caps, and (ii) the Procurement Framework Agreement and the transactions contemplated thereunder (including the Procurement Caps) and therefore no other Shareholder is required to abstain from voting on the proposed resolution(s) approving (i) the Revised Channel Caps, and (ii) the Procurement Framework Agreement and the transactions contemplated thereunder (including the Procurement Caps) at the SGM.

INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

The 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 formed to advise the Independent Shareholders in respect of (i) the Revised Channel Caps, and (ii) the Procurement Framework Agreement and the transactions contemplated thereunder (including the Procurement Caps). The Independent Financial Adviser has been appointed to advise the Independent Board Committee and the Independent Shareholders in this connection.

RE-ELECTION OF A NON-EXECUTIVE DIRECTOR

In accordance with bye-law 86(2) of the Company, Mr. Zou Liang (“ Mr. Zou ”), who was newly appointed by the Board as a non-executive Director with effect from 10 November 2017, shall hold office only until the next following general meeting of the Company (namely, the SGM) and shall then be eligible for re-election at that meeting. Accordingly, Mr. Zou, being eligible, shall offer himself for re-election at the SGM.

Set out below are the brief biographical details relating to Mr. Zou:

Mr. Zou, aged 44, obtained a bachelor’s degree in economics technology from Hunan University in the PRC, a master’s degree in Administration Management from Zhongnan University of Economics and Law in the PRC and also an Executive Master of Business Administration degree from China Europe International Business School. Mr. Zou joined Ant Small and Micro Financial Services Group Co., Ltd. (浙江螞蟻小微金融服務集團股份有限公司) (“ Ant Financial ”, together with its subsidiaries, “ Ant Financial Group* ”) in 2015 and is currently the senior director of the Payment Business Group-Business Solution & Open Platform division of Ant Financial Group. Prior to joining Ant Financial Group, Mr. Zou was a general manager at Hunan Yuanchen Investment Group (湖南遠晨投資集團) from February 2010 to March 2015.

LETTER FROM THE BOARD

Both Mr. Zou and Mr. Ji Gang, a non-executive Director, are employees of Ant Financial Group. Save as disclosed above, as at the Latest Practicable Date, Mr. Zou (i) has not previously held and is not holding any other position with the Company or any of its subsidiaries; (ii) has not held any other directorships in any listed companies in the last three years or any other major appointments and professional qualifications; and (iii) did not have any relationship with any Directors, senior management, substantial Shareholders or controlling Shareholders, nor any interests in the Shares within the meaning of Part XV of the SFO.

Save as disclosed above, there is no other matter in relation to the re-election of Mr. Zou that needs to be brought to the attention of the Shareholders nor is there any information that is required to be disclosed pursuant to any of the requirements under Rules 17.50(2)(h) to (v) of the GEM Listing Rules.

Mr. Zou has entered into a letter of appointment with the Company for a fixed term of one year commencing on 10 November 2017, unless terminated by the parties pursuant to the letter of appointment. Mr. Zou will hold office until the first general meeting of the Company after his appointment, where he shall retire in accordance with the bye-laws of the Company and also be eligible for re-election at that meeting. Thereafter, he shall be subject to retirement by rotation and re-election at the Company’s general meetings pursuant to the bye-laws of the Company. Mr. Zou’s appointment will also be subject to the applicable requirements of the GEM Listing Rules. Mr. Zou is not entitled to receive any remuneration from the Company in respect of his position as a non-executive Director.

THE SGM

The SGM will be convened and held at 11:00 a.m. on Wednesday, 20 December 2017 at Units 2302-2305, 23/F., Tower One, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong for the Shareholders to consider and, if thought fit, pass the resolutions to approve (i) the Revised Channel Caps, (ii) the Procurement Framework Agreement and the transactions contemplated thereunder (including the Procurement Caps), and (iii) the re-election of Mr. Zou as non-executive Director.

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

RECOMMENDATION

Your attention is drawn to 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 (i) the Revised Channel Caps, and (ii) the Procurement Framework Agreement and the transactions contemplated thereunder (including the Procurement Caps), and the letter of advice from

LETTER FROM THE BOARD

the Independent Financial Adviser which contains its advice to the Independent Board Committee and the Independent Shareholders regarding (i) the Revised Channel Caps, and (ii) the Procurement Framework Agreement and the transactions contemplated thereunder (including the Procurement Caps).

The Directors (including the independent non-executive Directors whose opinion has been set out in this circular after reviewing the advice of the Independent Financial Adviser) consider that (1) the continuing connected transactions contemplated under the Procurement Framework Agreement are in the ordinary and usual course of business of the Group; (2) the terms of the Procurement Framework Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; (3) the entering into of the Procurement Framework Agreement is in the interests of the Company and the Shareholders as a whole; and (4) the Revised Channel Caps and the Procurements Caps are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, the Directors (including the independent non-executive Directors) recommend that the Independent Shareholders to vote in favour of the resolutions relating thereto at the SGM.

The Directors consider that the resolution proposed in relation to the re-election of the newly appointed non-executive Director in this circular is in the best interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend that all Shareholders vote in favour of such resolution to be proposed at the SGM.

ADDITIONAL INFORMATION

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

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

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 circular.

==> picture [102 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)

4 December 2017

To the Independent Shareholders

Dear Sir or Madam,

(1) REVISION OF CAPS FOR EXISTING CONTINUING CONNECTED TRANSACTIONS WITH ALIBABA GROUP AND

(2) CONTINUING CONNECTED TRANSACTIONS CONTEMPLATED UNDER THE PROCUREMENT FRAMEWORK AGREEMENT WITH ALIBABA GROUP

We refer to the circular dated 4 December 2017 of the Company of which this letter forms part.

Capitalised terms used in this circular shall have the same meanings in this letter unless the context otherwise requires.

We have been appointed to form the Independent Board Committee to advise you in connection with (i) the Revised Channel Caps, and (ii) the Procurement Framework Agreement and the transactions contemplated thereunder (including the Procurement Caps), details of which are set out in the letter from the Board in this circular.

We wish to draw your attention to the letter from the Board, as set out on pages 6 to 22 of this circular, and the letter of advice from the Independent Financial Adviser, as set out on pages IFA-1 to IFA-15 of this circular. Having considered (i) the Revised Channel Caps, and (ii) the Procurement Framework Agreement and the transactions contemplated thereunder (including the Procurement Caps) and the advice given by the Independent Financial Adviser and the principal factors and reasons taken into consideration by the Independent Financial Adviser in arriving at their advice, we are of the opinion that (1) the continuing connected transactions contemplated under the Procurement Framework Agreement are in the ordinary and usual course of business of the Group; (2) the terms of the

For identification purpose only

IBC-1

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Procurement Framework Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; (3) the entering into of the Procurement Framework Agreement is in the interests of the Company and the Shareholders as a whole; and (4) the Revised Channel Caps and the Procurements Caps are fair and reasonable so 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 SGM to approve (i) the Revised Channel Caps, and (ii) the Procurement Framework Agreement and the transactions contemplated thereunder (including the Procurement Caps).

Yours faithfully, Independent Board Committee

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

Dr. Gao Jack Qunyao Independent non-executive Director

IBC-2

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the letter of advice from the Independent Financial Adviser, Somerley Capital Limited, to the 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

4 December 2017

To: the Independent Board Committee and
the Independent Shareholders

Dear Sirs,

REVISION OF CAPS FOR EXISTING CONTINUING CONNECTED TRANSACTIONS WITH ALIBABA GROUP

AND

CONTINUING CONNECTED TRANSACTIONS CONTEMPLATED UNDER THE PROCUREMENT FRAMEWORK AGREEMENT WITH ALIBABA GROUP

We refer to our appointment to advise the Independent Board Committee and the Independent Shareholders on (1) the Revised Channel Caps; and (2) the Procurement Framework Agreement and the transactions contemplated thereunder (including the Procurement Caps). Details of the Revised Channel Caps, the Procurement Framework Agreement and the Procurement Caps are set out in the “Letter from the Board” contained in the circular of the Company to the Shareholders dated 4 December 2017 (the “ Circular ”), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as those defined in the Circular.

The Framework Agreement was entered into between the Company and Alibaba Holding on 25 January 2017, and the Original Channel Caps were approved by the independent shareholders of the Company at the special general meeting on 8 March 2017. Due to the factors set out in the sub-section headed “Background to and reasons for the revision of the Original Channel Caps” of this letter below, the executive Directors expect that the Original Channel Caps will not be sufficient and propose to increase the Original Channel Caps to the Revised Channel Caps.

As part of the Group’s business plan (as further discussed in the sub-section headed “Background to and reasons for the Procurement Framework Agreement” of this letter below), the Company has entered into the Procurement Framework Agreement with Tmall, a wholly-owned subsidiary of Alibaba Holding, for a term commencing from the Effective Date and ending on 31 December 2019 with respect to the procurement of Products by the Group from Alibaba Merchants.

IFA-1

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As at the Latest Practicable Date, Ali Fortune, the controlling shareholder of the Company, is indirectly held as to 60% by Alibaba Holding. Tmall is a wholly-owned subsidiary of Alibaba Holding. Accordingly, each of Alibaba Holding and Tmall is an associate of Ali Fortune and hence a connected person of the Company under the GEM Listing Rules. The transactions contemplated under each of the Framework Agreement and the Procurement Framework Agreement constitute continuing connected transactions of the Company under the GEM Listing Rules. Since one or more of the applicable percentage ratios as defined in the GEM Listing Rules in respect of the Revised Channel Caps and the highest Procurement Caps exceed 5% respectively, (1) the Revised Channel Caps; and (2) the Procurement Framework Agreement and the transactions contemplated thereunder (including the Procurement Caps) are subject to the annual review, reporting, announcement and independent shareholders’ approval requirements under the GEM Listing Rules.

The Independent Board Committee, comprising all three independent non-executive Directors, namely Ms. Monica Maria Nunes, Mr. Feng Qing and Dr. Gao Jack Qunyao, has been established to consider and make a recommendation to the Independent Shareholders on whether (1) the continuing connected transactions contemplated under the Procurement Framework Agreement are in the ordinary and usual course of business of the Group; (2) the terms of the Procurement Framework Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; (3) the entering into of the Procurement Framework Agreement is in the interests of the Company and the Shareholders as a whole; and (4) the Revised Channel Caps and the Procurement Caps are fair and reasonable so far as the Independent Shareholders are concerned. We, Somerley Capital Limited, have been appointed to advise the Independent Board Committee and the Independent Shareholders in this regard.

During the past two years, Somerley Capital Limited has acted as the independent financial adviser to the independent board committee and independent shareholders of the Company in relation to (1) subscription of subscription shares and convertible bonds and application for whitewash wavier as detailed in the Company’s circular dated 25 May 2016; (2) special deal and connected transaction in relation to settlement of PRC tax liability as detailed in the Company’s supplemental circular dated 14 July 2016; and (3) continuing connected transactions as detailed in the Company’s circular dated 20 February 2017 (the “ February 2017 Circular ”). The aforesaid past engagements were limited to providing independent advisory services to the independent board committee and independent shareholders of the Company pursuant to the Code on Takeovers and Mergers published by the Securities and Futures Commission of Hong Kong (the “ SFC ”) and the Listing Rules, for which Somerley Capital Limited received normal professional fees. As the past engagements were limited to providing independent advice, as at the Latest Practicable Date, there have been no relationships or interests existing between (a) Somerley Capital Limited and (b) the Group and Alibaba Group (including Tmall) that could reasonably be regarded as a hindrance to our independence as defined under Rule 17.96 of the GEM Listing Rules to act as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of (1) the Revised Channel Caps; and (2) the Procurement Framework Agreement and the transactions contemplated thereunder (including the Procurement Caps) as detailed in the Circular.

IFA-2

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In formulating our opinion, we have relied on the information and facts supplied, and the opinions expressed, by the executive Directors and management of the Company and have assumed that the information and facts provided and opinions expressed to us are true, accurate and complete in all material aspects at the time they were made and up to the date of the SGM. We have also sought and received confirmation from the executive Directors that no material facts have been omitted from the information supplied and opinions expressed to us. We have relied on such information and consider that the information we have received is sufficient for us to reach our advice and recommendation as set out in this letter and to justify our reliance on such information. We have no reason to believe that any material information has been withheld, nor 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 and Alibaba Group (including Tmall), nor have we carried out any independent verification of the information supplied.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In considering whether (1) the continuing connected transactions contemplated under the Procurement Framework Agreement are in the ordinary and usual course of business of the Group; (2) the terms of the Procurement Framework Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; (3) the entering into of the Procurement Framework Agreement is in the interests of the Company and the Shareholders as a whole; and (4) the Revised Channel Caps and the Procurements Caps are fair and reasonable so far as the Independent Shareholders are concerned, we have taken into account the principal factors and reasons set out below:

A. REVISION OF CAPS

1. Background to and reasons for the revision of the Original Channel Caps

As set out in the February 2017 Circular, on 25 January 2017, the Company and Alibaba Holding entered into the Framework Agreement, pursuant to which the Group shall (i) utilise certain channels and networks of Alibaba Group for sales and distribution of the Lottery Products and Other Services on a 50:50 revenue-sharing basis; and (ii) purchase technology services from Alibaba Group, subject to the Original Channel Caps for a term commencing from 8 March 2017 and ending on 31 December 2019. The Original Channel Caps were principally derived from (1) the then projected income in respect of the sales and distribution of Lottery Products and Other Services, and (2) the then projected purchase amount in respect of technology services. Further details of the Framework Agreement and the Original Channel Caps are set out in the February 2017 Circular. Other Services refer to the Group’s operation of online activities which are not subject to the applicable PRC lottery laws and regulations, including advertising, information subscription and other content on the online platform(s) of Alibaba Group.

Currently, Other Services are conducted through the Tao Bi Zhong platform which is the Online Channel related to Alibaba Group and is presently operated by the Group. As set out in the section headed “Revision of caps” in the “Letter from the Board” contained in the Circular, the Merchants can sell coupons on the Tao Bi Zhong platform to the Online Users for marketing purposes. When the Online Users purchase the coupons, marketing service fees are charged to the Merchants by the Group for managing the Tao Bi Zhong platform and providing other support

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services for coupon sales on such platform. To encourage the Online Users to purchase coupons on the platform and then facilitate the promotion of the Merchant’s products/services, the Group also provides a reward program to the Online Users. Reward points are granted by the Group to the Online Users for free as incentives when they buy the Merchants’ coupons or carry out certain other activities. Reward points can be utilised by the Online Users in mainly two ways – (a) playing games in the games and entertainment centre; and (b) purchasing the Merchants’ products/ services at a discounted price in the Online Users’ rewards centre. Further details of the purchase of products/services at discounted price in the Online Users’ rewards centre offered by Merchants which are (among others) subsidiaries of or companies controlled by Alibaba Holding (i.e. Alibaba Merchants) are set out in the section headed “The Procurement Framework Agreement” in the

“Letter from the Board” contained in the Circular.

Given the sales and distribution of Other Services was a newly launched initiative for the Group at the time when the Original Channel Caps were determined, the Company expected that the Original Channel Caps in relation to the sales and distribution of Other Services would be relatively insubstantial. However, from the period commencing from March to July 2017, the Group has seen a fast growth in the gross sales amount and the relevant income (the “ Income ”, representing the gross sales amount minus the expenditures in relation to the sales and distribution of Other Services, after sharing with Alibaba Group on a 50:50 basis) generated from the sales and distribution of Other Services due to positive feedback from the market. The gross sales amount represents the marketing service fees charged to the Merchants, and the expenditures (i.e. the Marketing Fee) represent the difference between the original price and discounted price of the products/services offered by the Merchants and purchased by the Online Users on the Tao Bi Zhong platform. As advised by the management of the Company and as noted from calculations prepared by the Company, the gross sales amount arising from the sales and distribution of Other Services increased by approximately 99.6% in July 2017 as compared to March 2017, and the relevant Income recorded in July 2017 is approximately 3.8 times as compared with the amount recorded in March 2017. The executive Directors consider that, by continuing to expand the scale of the sales and distribution of Other Services, the Group will be able to build up its customer base and enhance its market position to generate more Income. It is therefore expected that the Original Channel Caps will not be sufficient for the future growth of the sales and distribution of Other Services as well as other marketing initiatives which may be carried out by the Group. Consequently, it is proposed that the Original Channel Caps be increased to the Revised Channel Caps. We concur with the executive Directors that it is in the commercial interest of the Company to seek approval from the Independent Shareholders for the Revised Channel Caps to cater for the Group’s expansion of the sales and distribution of Other Services and any other potential marketing initiatives.

2. The Revised Channel Caps

The transactions contemplated under the Framework Agreement will be subject to the Revised Channel Caps for a term commencing from 8 March 2017 and ending on 31 December 2017, and the two years ending 31 December 2018 and 2019, under which the value of such transactions will not exceed the applicable annual amounts stated in the “Letter from the Board” contained in the Circular.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In assessing the reasonableness of the Revised Channel Caps, we have discussed with the management of the Company the basis and underlying assumptions used for setting the relevant Revised Channel Caps.

The Revised Channel Caps are comprised of (1) the projected income in respect of the sales and distribution of Lottery Products and Other Services received/paid by the Group on a 50:50 revenue-sharing basis; and (2) the projected amount to be paid by the Group in respect of technology services provided by Alibaba Group.

As advised by the management of the Company, the Revised Channel Caps are principally derived with reference to (1) the historical transaction amount under the Original Channel Caps from March to July 2017; (2) the projected Income in respect of the sales and distribution of Other Services (including advertising, information subscription and other content on the online platform(s) of Alibaba Group) from August 2017 to December 2019; (3) the projected income in respect of the sales and distribution of Lottery Products through the physical stores managed, co-managed or controlled by Alibaba Group and merchants or vendors registered with the platforms of Alibaba Group from August 2017 to December 2019; and (4) the projected purchase amount in respect of technology services from August 2017 to December 2019.

The historical transaction amount from March to July 2017

As set out in the “Letter from the Board” contained in the Circular and noted from the breakdown provided by the management of the Company, during the period from March to July 2017, the historical transaction amount under the Framework Agreement was approximately RMB15,417,000 (equivalent to approximately HK$18,134,660), of which the Income derived from the sales and distribution of Other Services accounted for approximately 91.6% of the total amount. The Income generated from the sales and distribution of Other Services in July 2017 is approximately 3.8 times of that in March 2017. As set out in the sub-section headed “Background to and reasons for the revision of the Original Channel Caps” of this letter above, the sales and distribution of Other Services has received a very positive response since its launch in March 2017. In view of the positive market feedback on the sales and distribution of Other Services resulting in an increase in the relevant Income with respect to Other Services in the past few months, the management of the Company has decided to deploy further resources and continue the development of Other Services. On the other hand, as the initial market response of the sales and distribution of Lottery Products has been lower than expected, the income in respect of the sales and distribution of Lottery Products through the physical stores managed, co-managed or controlled by Alibaba Group from March to July 2017 was lower than the estimated amount when the Original Channel Caps were determined. The historical amounts for each of the sales and distribution of Other Services and Lottery Products, and purchase of technology services for the period commencing from 8 March 2017 and ending on 31 July 2017 are set out in the section headed “Revision of caps” in the “Letter from the Board” contained in the Circular.

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The projected Income in respect of the sales and distribution of Other Services

When determining the projected Income in respect of the sales and distribution of Other Services, the Company’s management has mainly made reference to (1) the projected gross sales amount arising from the sales and distribution of Other Services; (2) the projected expenditures to be incurred for the sales and distribution of Other Services; and (3) the pre-determined 50:50 revenue-sharing basis as set out in the Framework Agreement. The projected Income represents the projected gross sales amount minus the projected expenditures in relation to the sales and distribution of Other Services after sharing with Alibaba Group on a 50:50 basis.

As discussed above, the Income in respect of the sales and distribution of Other Services in July 2017 is approximately 3.8 times of that in March 2017. We have obtained from the Company a breakdown of the above Income and noted that the gross sales amount arising from the sales and distribution of Other Services increased by approximately 99.6% from March to July 2017. In particular, the actual gross sales amount in July 2017 increased by approximately 61.6% comparing to the previous month.

As the expansion in the sales and distribution of Other Services is expected to continue, the management of the Company estimates that the projected gross sales amount in respect of the sales and distribution of Other Services from August to December 2017 will show a high growth. After the expected fast growth in 2017 and given the scaling up of the business operations, the Company’s management expects that the growth in the gross sales amount arising from the sales and distribution of Other Services will continue to increase with stable periodic growth throughout 2018 and 2019. As advised by the Company’s management, the Group will continuously design and develop various innovative and attractive services to its customers, as well as explore new marketing initiatives in respect of Other Services to be carried out on the Online Channels, which will in turn increase both the number of Online Users and gross sales amount. Taking into account (a) the historical growth in the gross sales amount arising from the sales and distribution of Other Services (especially growth in July 2017 due to the launch of new promotions and marketing activities to attract more Online Users); (b) the Company’s plan to further develop the sales and distribution of Other Services; (c) potential new marketing initiatives to be carried out on the Online Channels by the Group; (d) expectation of moderate growth after expansion in business; and (e) the need to cater for future growth in business of the Group, we are of the view that the basis for estimating the projected gross sales amount arising from the sales and distribution of Other Services as described above is reasonable.

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As advised by the Company’s management, the projected expenditures of the sales and distribution of Other Services from August 2017 to December 2019 are estimated based on the averaged historical monthly expenditures to gross sales amount ratio for the period commencing from March to July 2017. The Company’s management has applied the 50:50 revenue-sharing ratio pursuant to the Framework Agreement when estimating the projected Income arising from the sales and distribution of Other Services based on the projected gross sales amount and expenditures as mentioned above. We have reviewed the calculations provided by the Company in relation to the projected gross sales amount, expenditures and Income of the sales and distribution of Other Services and noted that it is consistent with the description above.

The projected income in respect of the sales and distribution of Lottery Products

As set out in the February 2017 Circular, when determining the Original Channel Caps, the projected income in respect of the sales and distribution of Lottery Products was mainly derived based on the then existing number of physical stores and the projected growth rate, and the expected commission income derived from the sales and distribution of Lottery Products through merchants or vendors registered with the platforms of Alibaba Group. According to the Company’s management, the income in respect of the sales and distribution of Lottery Products has been lower than expected due to change in market condition. The Group will, however, continue to develop its business in the sales and distribution of Lottery Products in the coming years. The Company’s management has estimated the projected income in respect of the sales and distribution of Lottery Products based on, among other things, (i) the historical transaction amounts for sales and distribution of Lottery Products from March to July 2017; (ii) the Group’s business development plan; and (iii) the expected commission rate for sales and distribution of Lottery Products. We have discussed with the management of the Company and understand that the Company has been selling “theme tickets” (one type of Lottery Products) through the distribution channels of a joint venture established with an independent third party. As part of its business development plan, the Group has also been discussing with Alibaba Group for the cooperation to sell similar theme tickets through the network of Alibaba Group. The Company’s management has made reference to the scale of theme tickets sales carried out through such joint venture’s distribution channels when determining the Revised Channel Caps for the sales and distribution of Lottery Products. The Company’s management also expects that the commission rate of sales of similar theme tickets through the network of Alibaba Group will be in line with the rate for theme tickets distributed by such joint venture. We have reviewed the cooperation agreements entered into between such joint venture and a Lottery Issuance Agency regarding the sales and distribution of theme tickets through the network of such joint venture and noted that the expected commission rate adopted in estimating the Revised Channel Caps is consistent with the commission rate as stated in the above-mentioned cooperation agreements.

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The projected purchase amount in respect of technology services

Regarding the provision of technology services by Alibaba Group, we are advised by the management of the Company that the Company has bargained for a better charging rate on the technology services provided by Alibaba Group from March to July 2017 as an initiative for the Group to develop its cooperation with Alibaba Group. As a result, the actual purchase amount paid to Alibaba Group for the period commencing from March to July 2017 is lower than expected. When estimating the projected purchase amount in respect of the technology services, the Company’s management has taken into account mainly (i) the expected rate of usage and demand for the technology services, which is estimated based on the current business need and future business plan of the Group (including the development of the sales and distribution of Other Services); and (ii) the estimated applicable rates of technology services.

Taking into account the aforesaid factors, the Revised Channel Caps for the transactions contemplated under the Framework Agreement are set as follows (with the breakdown of the Revised Channel Caps as set out for illustrative purposes only):

	For the period	For the year ending	For the year ending
	commencing from	31 December 2018	31 December 2019
	8 March 2017 and
	ending on
	31 December 2017
Sales and distribution	RMB4,613,000	RMB7,483,000	RMB11,927,000
of Lottery Products	(equivalent to	(equivalent to	(equivalent to
	approximately	approximately	approximately
	HK$5,426,165)	HK$8,802,080)	HK$14,029,454)
Sales and distribution	RMB96,502,000	RMB222,610,000	RMB325,924,000
of Other Services	(equivalent to	(equivalent to	(equivalent to
	approximately	approximately	approximately
	HK$113,513,069)	HK$261,850,989)	HK$383,376,856)
Purchase of	RMB4,906,000	RMB21,000,000	RMB23,100,000
technology	(equivalent to	(equivalent to	(equivalent to
services	approximately	approximately	approximately
	HK$5,770,814)	HK$24,701,814)	HK$27,171,995)
Total (i.e. the Revised	RMB106,021,000	RMB251,093,000	RMB360,951,000
Channel Caps)	(equivalent to	(equivalent to	(equivalent to
	approximately	approximately	approximately
	HK$124,710,048)	HK$295,354,883)	HK$424,578,305)

Having considered the basis on which the Revised Channel Caps are determined as described above, we are of the view that the Revised Channel Caps are fair and reasonable.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

B. THE PROCUREMENT FRAMEWORK AGREEMENT

1. Background to and reasons for the Procurement Framework Agreement

The Group is an integrated technology and services provider, principally engaged in the lottery and mobile game and entertainment industry. The Group is a member of Alibaba Group, and is the exclusive lottery platform of Alibaba Group and Ant Small and Micro Financial Services Group Co., Ltd. and its subsidiaries (“ Ant Financial Group ”). As stated in the Company’s 2017 third quarterly report and advised by the management of the Company, in view of the potential approval and authorisation of online distribution of regulated lottery products in the PRC, the Group is actively building its online presence and customer-base by offering games and entertainment content through Alibaba Group and Ant Financial Group’s vast portfolio of networks and channels. As advised by the executive Directors, this provides the Group an advantage if there is a re-opening of the online distribution market of Lottery Products.

As set out in the section headed “Reasons for and benefits of the entering into of the Procurement Framework Agreement” in the “Letter from the Board” contained in the Circular, encouraged by the positive feedback from the market and in order to establish a stronger brand and goodwill, the Group decides to deploy more resources to further develop the sales and distribution of Other Services under the Framework Agreement. The executive Directors are of the view that the Group will be able to enhance its relationship with the Merchants by carrying out more marketing activities to promote Online Users’ activities on the Online Channels, which will allow the Group to have a better planning for its development strategy of its business in the future. As part of the marketing activities, the Group will offer a variety of Products supplied by certain Merchants to the Online Users at the Online Users’ rewards centre on the Tao Bi Zhong platform. These Products, at the Online Users’ choice, can be purchased by the Online Users at a discounted price as a reward for their online activities on the Online Channels. The Group will pay the Merchants the Marketing Fee, representing the difference between the original price and the discounted price of the Products purchased by the Online Users. As some of the Merchants are (among others) subsidiaries of or companies controlled by Alibaba Holding, the transactions with these Alibaba Merchants will constitute new continuing connected transactions for the Group.

In this connection, the Company and Tmall have entered into the Procurement Framework Agreement on 29 August 2017 for a term commencing from the Effective Date and ending on 31 December 2019 to govern the procurement transactions between the Group and Alibaba Merchants. As advised by the executive Directors, the entering into of the Procurement Framework Agreement will allow the Group to continue its marketing activities, which will in turn (i) provide incentive and reward to the Online Users to increase their activities on the Online Channels; (ii) increase the traffic volume of the Online Channels; and (iii) further develop the Other Services under the Framework Agreement and benefit the overall business of the Group.

Based on the above and given that the continuing connected transactions contemplated under the Procurement Framework Agreement will be conducted on normal commercial terms (as more particularly discussed in the sub-section headed “Principal terms of the Procurement Framework Agreement” in this letter below), we concur with the Company that the entering into of the Procurement Framework Agreement will benefit the traffic volume of the Online Channels and facilitate the future business development of the Group, and is in line with the Group’s strategy to build its online presence and customer-base actively as stated in the Company’s 2017 third quarterly report.

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2. Principal terms of the Procurement Framework Agreement

Details of the Procurement Framework Agreement are set out in the “Letter from the Board” contained in the Circular. Set out below is a summary of the principal terms of the Procurement Framework Agreement.

(i) Subject matter of the Procurement Framework Agreement

The Procurement Framework Agreement was entered into on 29 August 2017 between the Company and Tmall, whereby the Company has conditionally agreed to enter into the following arrangements with Alibaba Merchants:

(a) The Group will offer a variety of Products supplied by Alibaba Merchants to the Online Users at the Online Users’ rewards centre on the Tao Bi Zhong platform (among others). The Online Users will give instructions to the Group to purchase the Products of their choice. The Online Users will also transmit the discounted price of the Products to the Online Channels;
(b) The Group will then place orders with the relevant Alibaba Merchants for the Products, and transfer the discounted price received from the Online Users, together with the Marketing Fee (being the difference between the original price and the discounted price of the Products), to Alibaba Merchants; and
(c) Alibaba Merchants will then directly deliver the Products to the Online Users.

(ii) Duration

Subject to the satisfaction of the conditions precedent under the Procurement Framework Agreement as set out in the “Letter from the Board” contained in the Circular, the term of the Procurement Framework Agreement shall commence from the Effective Date and end on 31 December 2019.

(iii) Pricing policy

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As advised by the management of the Company, when Online Users give instructions to the Group to purchase Products offered by Alibaba Merchants of their choice via the Online Channels, the Group’s operation system would place real-time orders with the relevant Alibaba Merchants at the same price independent customers or other online users could obtain for the same Products at the same time. Any change in the price of Products offered by Alibaba Merchants to either the Group or independent customers or other online users will take place simultaneously. Besides, the same discounted price and rate will be offered to the Online Users for the same Products, whether supplied by Alibaba Merchants or Merchants which are Independent Third Parties.

(iv) Payment terms

The Group shall make payment in respect of the Marketing Fee to Alibaba Merchants under the following payment terms including: (a) prepayment in advance (where the Marketing Fee for the Products will be deducted from the prepaid amount on a per-transaction basis); (b) instant payment on a per-transaction basis; (c) monthly payment; or (d) quarterly payment, subject to the specific agreement entered into between the members of the Group and Alibaba Merchants. Standard credit terms offered by Alibaba Merchants to Independent Third Parties will be offered by Alibaba Merchants to the members of the Group.

3. Internal control measures regarding the transactions contemplated under the Procurement Framework Agreement

The Group has established an internal control system in respect of the transactions contemplated under the Procurement Framework Agreement. These internal control measures cover three main areas, namely the selection of Alibaba Merchants, ascertaining the pricing and commercial terms in the agreement with Alibaba Merchants and continuous monitoring in the transactions contemplated under the Procurement Framework Agreement.

As set out in the internal control policies and procedures for the transactions contemplated under the Procurement Framework Agreement provided by the Company’s management, when assessing the possibilities of partnering with an Alibaba Merchant, the designated operation staff of the Group would obtain quotation from at least two additional Merchants which are Independent Third Parties for the same Products, or similar Products if identical Products are not readily available on the market, to compare the major terms (including pricing and payment terms) offered by the Merchants. An overall assessment of the Merchants will be conducted on areas including, among others, quality of Products, reviews on the Products by online users and pricing and payment terms. For all agreements entered into between the Group and Alibaba Merchants, the term would state that the pricing terms of the Products offered by Alibaba Merchants to the Group will be the same as those offered to Independent Third Parties. Sample check will be conducted by the Group’s internal audit department on irregular basis on transactions contemplated under the Procurement Framework Agreement (including the pricing and payment terms).

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Taking into account (1) the internal control measures to govern and monitor the transactions contemplated under the Procurement Framework Agreement (including obtaining and comparing quotations) as described above; and (2) the transactions contemplated under the Procurement Framework Agreement will be conducted in accordance with the pricing policy as set out in the sub-section headed “Principal terms of the Procurement Framework Agreement” of this letter above, we consider that the interests of the Independent Shareholders will be safeguarded.

4. The Procurement Caps

The transactions contemplated under the Procurement Framework Agreement will be subject to the Procurement Caps, whereby for the term commencing from the Effective Date and ending on 31 December 2017, and the two years ending 31 December 2018 and 2019, the values of the transactions contemplated under the Procurement Framework Agreement will not exceed the applicable annual amounts stated in the “Letter from the Board” contained in the Circular.

In assessing the reasonableness of the Procurement Caps, we have discussed with the management of the Company the basis and underlying assumptions for the purpose of setting the relevant Procurement Caps.

As mentioned in the sub-section headed “Principal terms of the Procurement Framework Agreement” in this letter above, the Group will pay the Merchants the difference between the original price and the discounted price of the Products (i.e. the Marketing Fee) purchased by the Online Users at the Online User’s rewards centre on the Tao Bi Zhong platform. Marketing Fee payable to Alibaba Merchants will be governed under the Procurement Framework Agreement and the Procurement Caps representing the maximum amount in respect of the Marketing Fee payable by the Group to Alibaba Merchants under the Procurement Framework Agreement from the Effective Date to 31 December 2019.

When determining the Procurement Caps, the Company’s management has taken into account the estimated total Marketing Fee payable to all Merchants which is estimated with reference to factors including (a) the historical figures of the value of the Products purchased by the Online Users; (b) the estimated growth in the value of the Products to be purchased by Online Users; and (c) the Group’s projected marketing initiatives and campaigns to promote and boost Online Users’ activities on the Online Channels. The management of the Company expects that the cooperation with Merchants (including Alibaba Merchants) will offer the Online Users a wide variety of popular Products and provide incentive to the Online Users to increase their activities on the Online Channels. The management of the Company expects this will increase the overall attractiveness of the Online Channels, and in turn boost the online traffic on the Online Channels. Based on the above reasons and with reference to the historical amount from March to July 2017, the management of the Company estimates that the total Marketing Fee will show a high growth for the coming months in 2017 during the initial stage of development and a stable periodic growth throughout 2018 and 2019 as their customer base continues to grow over time. As advised by the management of the Company, the Marketing Fee is estimated by applying the averaged historical monthly expenditures to gross sales amount ratio of the sales and distribution of Other Services, and we have reviewed the relevant calculations provided by the Company and noted that it is consistent with the description above. Besides, we reviewed a breakdown of the historical figures

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of the gross sales amount arising from the sales and distribution of Other Services and total Marketing Fee for the period from March to July 2017 and noted that the gross sales amount increased by approximately 99.6% from March to July 2017. The gross sales amount and the total Marketing Fee in July 2017 increased by approximately 61.6% and 72.3% respectively comparing to the figures in June 2017. In view of the historical growth in the gross sales amount arising from the sales and distribution of Other Services and the total Marketing Fee (especially growth in July 2017 due to launch of new promotions and marketing activities to attract more Online Users) and the expectation that the online traffic on the Online Channels will be boosted, we are of the view that the basis for estimating total Marketing Fee payable to all Merchants as described above is reasonable. As advised by the Company’s management, the estimated Marketing Fee payable to Alibaba Merchants is estimated with reference to the averaged historical ratio of amounts of Products supplied by Alibaba Merchants from March to July 2017. We have reviewed the calculations provided by the Company in relation to the estimated Marketing Fee payable to Alibaba Merchants and noted that it is consistent with the description above.

Taking into account the aforesaid factors, the Procurement Caps for the transactions contemplated under the Procurement Framework Agreement are set as follows:

For the period For the year ending For the year ending commencing from the 31 December 2018 31 December 2019 Effective Date and ending on 31 December 2017 Procurement Caps RMB52,343,000 RMB389,811,000 RMB570,722,000 (equivalent to (equivalent to (equivalent to approximately approximately approximately HK$61,569,859) HK$458,525,655) HK$671,327,076)

Having considered the basis on which the Procurement Caps are determined as described above, we are of the view that the Procurement Caps are fair and reasonable.

5. Conditions of the continuing connected transactions contemplated under the Procurement Framework Agreement

In compliance with the GEM Listing Rules, the transactions contemplated under the Procurement Framework Agreement are subject to a number of conditions which include, among other things:

(i) the Procurement Caps for the transactions contemplated under the Procurement Framework Agreement for each of the period commencing from the Effective Date and ending on 31 December 2017, and the financial years ending 31 December 2018 and 2019 will not be exceeded;

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(ii) the independent non-executive Directors must, in accordance with the GEM Listing Rules, review annually the transactions contemplated under the Procurement Framework Agreement and confirm in the Company’s annual report whether the transactions contemplated under the Procurement Framework Agreement have been entered into (a) in the ordinary and usual course of business of the Group; (b) on normal commercial terms or better; and (c) according to the agreements governing them on terms that are fair and reasonable and in the interests of the Shareholders as a whole;
(iii) the auditors of the Company must, in accordance with the GEM Listing Rules, report on the transactions contemplated under the Procurement Framework Agreement annually and they must confirm in a letter to the Board (a copy of which letter will be provided to the Stock Exchange at least ten business days prior to the bulk printing of the annual report of the Company) whether anything has come to their attention that causes them to believe that transactions contemplated under the Procurement Framework Agreement: (a) have not been approved by the Board; (b) were not, in all material respects, in accordance with the pricing policies of the Group if the transactions involve the provision of goods or services by the Group; (c) were not entered into, in all material respects, in accordance with the relevant agreement(s) governing the transactions contemplated under the Procurement Framework Agreement; and (d) have exceeded the Procurement Caps;
(iv) the Company must promptly notify the Stock Exchange and publish an announcement if the independent non-executive Directors and/or the auditors cannot confirm the matters as required;
(v) the Company must allow, and ensure that Tmall allows, the auditors of the Company sufficient access to their records of the transactions contemplated under the Procurement Framework Agreement for the purpose of the auditors’ reporting on the transactions contemplated under the Procurement Framework Agreement. The Board must state in the annual report whether the auditors of the Company have confirmed the matters set out in Rule 20.54 of the GEM Listing Rules; and
(vi) the Company must comply with the applicable provisions of the GEM Listing Rules governing continuing connected transactions in the event that the total amount of the transactions contemplated under the Procurement Framework Agreement exceeds the Procurement Caps, or that there is any material amendment to the terms of the Procurement Framework Agreement.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In light of the conditions imposed on transactions contemplated under the Procurement Framework Agreement, in particular, (1) the limit of the value of the transactions contemplated under the Procurement Framework Agreement by way of the relevant Procurement Caps; (2) the on-going review by the independent non-executive Directors and auditors of the Company regarding the terms of the Procurement Framework Agreement; and (3) the on-going review by the auditors of the Company confirming the Procurement Caps not being exceeded, we are of the view that appropriate measures will be in place to govern the conduct of the transactions contemplated under the Procurement Framework Agreement and safeguard the interests of the Independent Shareholders.

OPINION

Having taken into account the above principal factors, we consider that (1) the continuing connected transactions contemplated under the Procurement Framework Agreement are in the ordinary and usual course of business of the Group; (2) the terms of the Procurement Framework Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; (3) the entering into of the Procurement Framework Agreement is in the interests of the Company and the Shareholders as a whole; and (4) the Revised Channel Caps and the Procurements Caps are fair and reasonable so far as the Independent Shareholders are concerned.

Accordingly, we advise the Independent Board Committee to recommend, and we ourselves recommend, the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the SGM to approve the Revised Channel Caps and the Procurement Framework Agreement (including the Procurement Caps).

Yours faithfully, for and on behalf of SOMERLEY CAPITAL LIMITED Stephanie Chow Director

Ms. Stephanie Chow is a licensed person registered with the SFC 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. She has over nine years’ experience in the corporate finance industry.

For illustration purposes, RMB is converted into HK$ at RMB0.85014 = HK$1 in this letter. Such translation should not be construed as a representation that the amounts in question have been, could have been or could be, converted at any particular rate at all.

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GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DISCLOSURE OF DIRECTORS’ INTERESTS

As at the Latest Practicable Date, the interests and short positions of the Directors or chief executive of the Company in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), which (a) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO), or (b) were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or (c) were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the “ Model Code ”) adopted by the Company, to be notified to the Company and the Stock Exchange, were as follows:

(i) Long positions in the Shares

Number of Shares

				Approximate
	Personal	Corporate		percentage
Name of Director	interest	interest	Total	held (Note 1)
Mr. Sun Ho	33,078,000	2,006,250,000	2,039,328,000	18.13%
	(Note 2)	(Note 3)
Mr. Zhou Haijing	12,200,000	–	12,200,000	0.11%
	(Note 4)
Ms. Monica Maria Nunes	1,375,000	–	1,375,000	0.01%
Mr. Feng Qing	375,000	–	375,000	negligible
Dr. Gao Jack Qunyao	375,000	–	375,000	negligible

Notes:

Based on a total of 11,246,659,760 Shares in issue as at the Latest Practicable Date.
It represents 27,078,000 Shares and 6,000,000 restricted share units (granted under the share award scheme of the Company) beneficially held by Mr. Sun Ho.

A-1

GENERAL INFORMATION

APPENDIX

These 2,006,250,000 Shares were held in the name of MAXPROFIT GLOBAL INC. As MAXPROFIT GLOBAL INC is beneficially and wholly-owned by Mr. Sun Ho, the chairman, executive Director & chief executive officer of the Company, Mr. Sun was deemed to be interested in such Shares.
It represents 2,300,000 Shares vested under the share award scheme of the Company and 9,900,000 restricted share units (granted under the share award scheme of the Company) beneficially held by Mr. Zhou Haijing.
(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	Exercisable	underlying	percentage
Name of Director	Date of grant	Share	period(Note 2)	Shares	held(Note 1)
		(HK$)
Ms. Monica Maria Nunes	20 June 2013	0.474	20 June 2014 –	375,000	0.003%
			19 June 2018
	21 January 2014	1.310	21 January 2015 –	250,000	0.002%
			20 January 2019
Mr. Feng Qing	1 June 2015	0.858	1 June 2016 –	1,125,000	0.010%
			31 May 2020
Dr. Gao Jack Qunyao	1 June 2015	0.858	1 June 2016 –	1,125,000	0.010%
			31 May 2020

Notes:

Based on a total of 11,246,659,760 Shares in issue as at the Latest Practicable Date.
A portion of the option representing 25% of the total underlying Shares entitled under such option when it was initially granted 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.

A-2

GENERAL INFORMATION

APPENDIX

(iii) Long positions in shares and underlying shares of Alibaba Holding, an associated corporation of the Company within the meaning of Part XV of the SFO

		Number of	Percentage of
		shares/	issued shares
		underlying	of Alibaba
Name of Director	Nature of interests	shares held	Holding
Mr. Zhou Haijing	Beneficial and equity	29,050_(Note 1)_	0.001%
	derivative interests
Mr. Zhang Qin	Beneficial and equity	50,861_(Note 2)_	0.002%
	derivative interests
Mr. Yang Guang	Beneficial and equity	37,185_(Note 3)_	0.001%
	derivative interests
Mr. Ji Gang	Beneficial and equity	63,186_(Note 4)_	0.003%
	derivative interests
Mr. Zou Liang	Beneficial and equity	3,700_(Note 5)_	negligible
	derivative interests

Notes:

It represents 22,625 ordinary shares and 6,425 restricted share units beneficially held by Mr. Zhou Haijing.
It represents 23,611 ordinary shares and 27,250 restricted share units beneficially held by Mr. Zhang Qin.
It represents 13,185 ordinary shares and 24,000 restricted share units beneficially held by Mr. Yang Guang.
It represents 22,486 ordinary shares and 40,700 restricted share units beneficially held by Mr. Ji Gang.
It represents 625 ordinary shares and 3,075 restricted share units beneficially held by Mr. Zou Liang.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interests or short positions in the Shares, underlying Shares (in respect of share options of the Company which were regarded as unlisted physically settled equity derivatives) and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), which (a) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (b) were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or (c) were required, pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules relating to securities transactions by Directors, to be notified to the Company and the Stock Exchange.

A-3

GENERAL INFORMATION

APPENDIX

3. SUBSTANTIAL SHAREHOLDERS’ INTERESTS IN SHARE, UNDERLYING SHARE AND DEBENTURES

As at the Latest Practicable Date, so far as was known to the Directors or chief executive of the Company, the following persons (not being Directors or chief executive of the Company) had, or were deemed to have, interests or short positions in the Shares, underlying Shares and debentures of the Company 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 5% or more of the issued voting shares of any other member of the Group or held any option in respect of such shares and recorded in the register kept by the Company pursuant to section 336 of the SFO:

Long position in the Shares

					Approximate
			Number of		percentage of
			underlying	Total	issued share
		Number of	Shares	(number of	capital of the
Name of Shareholder	Capacity	Shares held	entitled	Shares)	Company(Note 1)
Ali Fortune Investment Holding	Beneficial owner	6,102,723,993	1,299,144,620	7,401,868,613	65.81%
Limited_(Notes 2 and 8)_
Alibaba Investment Limited_(Note 2)_	Interest of controlled	6,102,723,993	1,299,144,620	7,401,868,613	65.81%
	corporation			(Note 9)
API Holdings Limited_(Note 2)_	Interest of controlled	6,102,723,993	1,299,144,620	7,401,868,613	65.81%
	corporation			(Note 9)
Alibaba Group Holding	Interest of controlled	6,102,723,993	1,299,144,620	7,401,868,613	65.81%
Limited_(Note 3)_	corporation			(Note 9)
API (Hong Kong) Investment	Interest of controlled	6,102,723,993	1,299,144,620	7,401,868,613	65.81%
Limited_(Note 4)_	corporation			(Note 9)
Shanghai Yunju Venture	Interest of controlled	6,102,723,993	1,299,144,620	7,401,868,613	65.81%
Capital Investment Co., Ltd.	corporation			(Note 9)
(formerly known as Shanghai
Yunju Investment Management
Co., Ltd.)(Note 5)

A-4

GENERAL INFORMATION

APPENDIX

					Approximate
			Number of		percentage of
			underlying	Total	issued share
		Number of	Shares	(number of	capital of the
Name of Shareholder	Capacity	Shares held	entitled	Shares)	Company(Note 1)
Ant Small and Micro Financial	Interest of controlled	6,102,723,993	1,299,144,620	7,401,868,613	65.81%
Services Group Co., Ltd.(Note 6)	corporation			(Note 9)
Hangzhou Yunbo Investment	Interest of controlled	6,102,723,993	1,299,144,620	7,401,868,613	65.81%
Consultancy Co., Ltd.(Note 7)	corporation			(Note 9)
Mr. Ma Yun_(Note 7)_	Interest of controlled	6,102,723,993	1,299,144,620	7,401,868,613	65.81%
	corporation			(Note 9)
MAXPROFIT GLOBAL INC_(Note 10)_	Beneficial owner	2,006,250,000	−	2,006,250,000	17.84%

Notes:

Based on a total of 11,246,659,760 Shares in issue as at the Latest Practicable Date.
Alibaba Investment Limited (“ AIL ”) and API Holdings Limited (“ API Holdings ”) hold 60% and 40% of the issued share capital of Ali Fortune Investment Holding Limited (“ Ali Fortune ”), respectively.
Alibaba Group Holding Limited (“ Alibaba Holding ”) holds 100% of the issued share capital of AIL. Mr. Zhang Qin and Mr. Yang Guang, each a non-executive Director, are the employees of Alibaba Holding.
API (Hong Kong) Investment Limited holds 100% of the issued share capital of API Holdings.
Shanghai Yunju Venture Capital Investment Co., Ltd. (formerly known as Shanghai Yunju Investment Management Co., Ltd.) (“ Shanghai Yunju ”) holds 100% of the issued share capital of API (Hong Kong) Investment Limited.
Ant Small and Micro Financial Services Group Co., Ltd. (“ Ant Financial ”) holds 100% of the equity interests in Shanghai Yunju. Hangzhou Junhan Equity Investment Partnership (Limited Partnership) (“ Junhan ”) and Hangzhou Junao Equity Investment Partnership (Limited Partnership) (“ Junao ”) hold approximately 42.28% and 34.15% of the equity interests in Ant Financial, respectively. Mr. Ji Gang and Mr. Zou Liang, each a non-executive Director, are the employees of Ant Financial.
Hangzhou Yunbo Investment Consultancy Co., Ltd. (“ Yunbo ”) is the general partner of both Junhan and Junao, and is wholly-owned by Mr. Ma Yun.
Ali Fortune holds outstanding convertible bonds of the Company in the aggregate principal amount of HK$332,328,165 and the maximum number of conversion shares that would be issued upon full conversion of such outstanding convertible bonds at the then adjusted conversion price of HK$0.2558 per conversion share as at the Latest Practicable Date was 1,299,144,620.
Each of AIL, Alibaba Group Holding Limited, API Holdings, API (Hong Kong) Investment Limited, Shanghai Yunju, Ant Financial, Junhan, Junao, Yunbo, and Mr. Ma Yun are taken to be interested in an aggregate of 7,321,060,969 Shares by virtue of Part XV of the SFO.
As disclosed in the section headed “DISCLOSURE OF DIRECTORS’ INTERESTS” above, Mr. Sun Ho was deemed to be interested in these 2,006,250,000 Shares by virtue of his interest in MAXPROFIT GLOBAL INC. Mr. Sun Ho is also a director of MAXPROFIT GLOBAL INC.

A-5

GENERAL INFORMATION

APPENDIX

Save as disclosed above, as at the Latest Practicable Date, the Directors or chief executive of the Company were not aware of any other persons (not being a Director or chief executive of the Company) who had, or was deemed to have, interests or short positions in the Shares, underlying Shares and debentures of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or was directly or indirectly interested in 5% or more of the issued voting shares of any other member of the Group or held any option in respect of such shares and recorded in the register kept by the Company pursuant to section 336 of the SFO.

4. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had a service contract or a proposed service contract with any member of the Group which is not expiring or determinable by the employer within one year without the payment of compensation (other than statutory compensation).

5. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2016, being the date to which the latest published audited accounts of the Company were made up.

6. COMPETING BUSINESS

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

7. DIRECTORS’ INTERESTS IN THE GROUP’S ASSETS OR CONTRACTS OR ARRANGEMENTS SIGNIFICANT TO THE GROUP

As at the Latest Practicable Date, none of the Directors had any interest, either direct or indirect, in any assets which have been, since 31 December 2016 (the date to which the latest published audited accounts of the Group were made up), acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

As at the Latest Practicable Date, none of the Directors had material interest in any subsisting contract or arrangement which is significant in relation to the business of the Group.

A-6

GENERAL INFORMATION

APPENDIX

8. QUALIFICATIONS AND CONSENT OF EXPERT

The following is the qualification of the expert who has given opinion or advice contained in this circular:

Name

Qualification

Somerley Capital Limited A licensed corporation to carry out Type 1 (dealing in (“ Somerley ”) securities) and Type 6 (advising on corporate finance) regulated activities under the SFO

As at the Latest Practicable Date, Somerley did not have: (a) any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group; and (b) any interest, either direct or indirect, in any assets acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2016 (the date to which the latest published audited accounts of the Group were made up).

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

9. 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 circular up to and including 18 December 2017 (except Saturdays, Sundays and public holidays) and will be available for inspection at the SGM.

(a) the Framework Agreement; and
(b) the Procurement Framework Agreement.

A-7

NOTICE OF SPECIAL GENERAL MEETING

==> picture [102 x 32] intentionally omitted <==

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

(Incorporated in Bermuda with limited liability)

(Stock Code: 8279)

NOTICE IS HEREBY GIVEN that a special general meeting (the “ SGM ”) of AGTech Holdings Limited (the “ Company ”) will be held at 11:00 a.m. on Wednesday, 20 December 2017 at Units 23022305, 23/F., Tower One, Times Square, 1 Matheson Street, 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 :
(A) the Revised Channel Caps (as defined in the circular of the Company dated 4 December 2017 of which this notice forms part (the “ Circular ”)) for the period commencing from 8 March 2017 and ending on 31 December 2017 and for the two years ending 31 December 2018 and 2019 be and are hereby approved; and
(B) any one director of the Company (the “ Director ”) (or any two Directors or one Director and the secretary of the Company, in the case of execution of documents under seal) be and is hereby authorised for and on behalf of the Company to execute all such other documents, instruments and agreements and to do all such acts or things deemed by him/her to be incidental to, ancillary to or in connection with the matters to give effect to the Revised Channel Caps and the transactions contemplated thereunder and the implementation thereof.”
“ THAT :
(A) (i) the Procurement Framework Agreement (as defined in the Circular) (a copy of which is tabled at the meeting and marked “A” and initialled by the chairman of the meeting for identification purpose) and the transactions contemplated thereunder and the implementation thereof be and are hereby approved, confirmed and ratified;
For identification purpose only

SGM-1

NOTICE OF SPECIAL GENERAL MEETING

  - (ii) the Procurement Caps (as defined in the Circular) for the period commencing from the Effective Date (as defined in the Circular) and ending on 31 December 2017 and for the two years ending 31 December 2018 and 2019 be and are hereby approved; and

(B) any one Director (or any two Directors or one Director and the secretary of the Company, in the case of execution of documents under seal) be and is hereby authorised for and on behalf of the Company to execute all such other documents, instruments and agreements and to do all such acts or things deemed by him/her to be incidental to, ancillary to or in connection with the matters contemplated in the Procurement Framework Agreement and the transactions contemplated thereunder and the implementation thereof including the affixing of seal thereon.”
“ THAT :
(A) the re-election of Mr. Zou Liang as non-executive Director be and is hereby approved; and
(B) the board of Directors be and is hereby authorised to fix his remuneration (if any)”.

By order of the board of Directors AGTech Holdings Limited Sun Ho Chairman & CEO

The Hong Kong Special Administrative Region of

the People’s Republic of China, 4 December 2017

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 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 any meeting, either personally or by proxy, in respect of such share as if he were solely entitled thereto; but if more than one of such joint holders shall be present at the meeting personally or by proxy, that one of the holders so present whose name stands first on the register of members of the Company in respect of such share shall alone be entitled to vote in respect thereof.
The form of proxy and the power of attorney or other authority, if any, under which it is signed or a certified copy of such power of attorney or authority must be deposited at the Company’s Hong Kong branch share registrar, Tricor Abacus Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not less than 48 hours before the time for holding the SGM, and in default the form of proxy shall not be treated as valid. The completion and return of the form of proxy shall not preclude members from attending and voting in person at the SGM (or any adjournment thereof) should they so desire.

SGM-2

NOTICE OF SPECIAL GENERAL MEETING

The register of members of the Company will be closed from Friday, 15 December 2017 to Wednesday, 20 December 2017 (both dates inclusive). In order to qualify for attending and voting at the SGM, all transfer forms accompanied by the relevant share certificates must be lodged with the Company’s Hong Kong branch share registrar, Tricor Abacus Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong for registration by 4:30 p.m. on Thursday, 14 December 2017.

As at the date of this notice, the board of Directors comprises (i) Mr. Sun Ho and Mr. Zhou Haijing as executive Directors; (ii) Mr. Zhang Qin, Mr. Yang Guang, Mr. Ji Gang and Mr. Zou Liang as non-executive Directors; and (iii) Ms. Monica Maria Nunes, Mr. Feng Qing and Dr. Gao Jack Qunyao as independent non-executive Directors.

SGM-3

AI assistant

Joy Spreader Group Inc. — Proxy Solicitation & Information Statement 2017

51106_rns_2017-12-01_b9a124d6-f638-4752-942f-a142e40c2e9c.pdf

AGTech Holdings Limited 亞博科技控股有限公司[*]

(1) REVISION OF CAPS FOR EXISTING CONTINUING CONNECTED TRANSACTIONS WITH ALIBABA GROUP (2) CONTINUING CONNECTED TRANSACTIONS CONTEMPLATED UNDER THE PROCUREMENT FRAMEWORK AGREEMENT WITH ALIBABA GROUP (3) RE-ELECTION OF A NON-EXECUTIVE DIRECTOR AND

(4) NOTICE OF SPECIAL GENERAL MEETING

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

AGTech Holdings Limited 亞博科技控股有限公司[*]

(1) REVISION OF CAPS FOR EXISTING CONTINUING CONNECTED TRANSACTIONS WITH ALIBABA GROUP

(2) CONTINUING CONNECTED TRANSACTIONS CONTEMPLATED UNDER THE PROCUREMENT FRAMEWORK AGREEMENT WITH ALIBABA GROUP (3) RE-ELECTION OF A NON-EXECUTIVE DIRECTOR AND

(4) NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

LETTER FROM THE BOARD

REVISION OF CAPS

Background

Caps

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Historical amounts

Details of the sales and distribution of Lottery Products and Other Services

LETTER FROM THE BOARD

Sales and distribution of Other Services

Details of Income Model

Income model of sales and distribution of Lottery Products

Income model of sales and distribution of Other Services

Pricing Basis and Payment Terms

THE PROCUREMENT FRAMEWORK AGREEMENT

Date

Parties

Term

Conditions Precedent

LETTER FROM THE BOARD

Major Terms

Pricing Basis and Payment Terms

LETTER FROM THE BOARD

Specific Agreements

Procurement Caps and Basis of Determination of the Procurement Caps

INFORMATION ON ALIBABA GROUP AND THE GROUP

REASONS FOR AND BENEFITS OF THE REVISION OF THE CHANNEL CAPS

REASONS FOR AND BENEFITS OF THE ENTERING INTO OF THE PROCUREMENT FRAMEWORK AGREEMENT

1. Dominant role of the Group

2. Access to online traffic volume is merely a gateway in the internet-business industry

3. Online traffic (and other physical channels) can be substituted

4. Independent business operation and management

5. Mutual and complementary relationship

GEM LISTING RULES IMPLICATIONS

INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

RE-ELECTION OF A NON-EXECUTIVE DIRECTOR

LETTER FROM THE BOARD

THE SGM

RECOMMENDATION

ADDITIONAL INFORMATION

AGTech Holdings Limited 亞博科技控股有限公司[*]

(1) REVISION OF CAPS FOR EXISTING CONTINUING CONNECTED TRANSACTIONS WITH ALIBABA GROUP AND

(2) CONTINUING CONNECTED TRANSACTIONS CONTEMPLATED UNDER THE PROCUREMENT FRAMEWORK AGREEMENT WITH ALIBABA GROUP

Yours faithfully, Independent Board Committee

SOMERLEY CAPITAL LIMITED

REVISION OF CAPS FOR EXISTING CONTINUING CONNECTED TRANSACTIONS WITH ALIBABA GROUP

AND

CONTINUING CONNECTED TRANSACTIONS CONTEMPLATED UNDER THE PROCUREMENT FRAMEWORK AGREEMENT WITH ALIBABA GROUP

PRINCIPAL FACTORS AND REASONS CONSIDERED

A. REVISION OF CAPS

1. Background to and reasons for the revision of the Original Channel Caps

2. The Revised Channel Caps

The historical transaction amount from March to July 2017

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

B. THE PROCUREMENT FRAMEWORK AGREEMENT

1. Background to and reasons for the Procurement Framework Agreement

2. Principal terms of the Procurement Framework Agreement

(i) Subject matter of the Procurement Framework Agreement

(ii) Duration

(iii) Pricing policy

(iv) Payment terms

3. Internal control measures regarding the transactions contemplated under the Procurement Framework Agreement

4. The Procurement Caps

5. Conditions of the continuing connected transactions contemplated under the Procurement Framework Agreement

Joy Spreader Group Inc. Proxy Solicitation & Information Statement 2017

**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[*]**