Joy Spreader Group Inc. - Proxy Solicitation & Information Statement 2021

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) VERY SUBSTANTIAL ACQUISITION;

(2) POSSIBLE CONTINUING CONNECTED TRANSACTIONS;

AND

(3) 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 8 to 34 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 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-19 of this circular.

A notice convening the SGM to be held at 11:00 a.m. on Thursday, November 18, 2021 at Holiday Inn Express Hong Kong Causeway Bay, Meeting Room I & II, 7/F, 33 Sharp Street East, Causeway Bay, Hong Kong is set out on pages SGM-1 to SGM-2 of this circular. Whether or not Shareholders 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 54, 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 the form of proxy will not preclude Shareholders from attending and voting in person at the SGM (or any adjournment thereof) should they so desire.

This circular will remain at http://www.hkgem.com on the “Latest Listed Company Information” 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

October 29, 2021

CHARACTERISTICS OF GEM

GEM has been positioned as a market designed to accommodate small and mid-sized 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.

Given that the companies listed on GEM are generally small and mid-sized companies, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board of the Stock Exchange and no assurance is given that there will be a liquid market in the securities traded on GEM.

	Page
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Precautionary measures for the SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Letter from the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IBC-1
Letter from the Independent Financial Adviser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IFA-1
Appendix I – Financial information of the Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
Appendix II – Financial information of the Target Group. . . . . . . . . . . . . . . . . . . . . . . II-1
Appendix III – Unaudited pro forma financial information of the Enlarged Group. . . III-1
Appendix IV – Valuation report of the Target Group. . . . . . . . . . . . . . . . . . . . . . . . . . . IV-1
Appendix V – General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-1
Notice of SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	SGM-1

DEFINITIONS

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

“Acquisition” the proposed acquisition of the Sale Shares by the Purchasers from the Sellers pursuant to the terms and conditions of the Agreement
“Agreement” the conditional sale and purchase agreement dated September 10, 2021 entered into among the Company, the Purchasers, the Sellers and the Target Group in relation to the Acquisition
“AGTech Investment” AGTech MPass Investment Limited, a company incorporated under the laws of the British Virgin Islands and an indirect wholly-owned subsidiary of the Company
“AGTech Services” AGTech MPass Services Limited, a company incorporated under the laws of the British Virgin Islands and an indirect wholly-owned subsidiary of the Company
“Alibaba Group” Alibaba Holding and its subsidiaries
“Alibaba Holding” Alibaba Group Holding Limited, a company incorporated in the Cayman Islands, with its American depository shares (each representing eight ordinary shares) listed on the New York Stock Exchange (Stock Symbol: BABA) and its ordinary shares listed on the Main Board of the Stock Exchange (Stock Code: 9988)
“Ali Fortune” Ali Fortune Investment Holding Limited, a company incorporated under the laws of the British Virgin Islands and the controlling shareholder of the Company
“Alipay” 支付寶(中國)網絡技術有限公司 (Alipay.com Co., Ltd.*), a company established in the PRC and a direct wholly-owned subsidiary of Ant Holdco
“Alipay Entities” Alipay, Alipay Singapore and Ant Bank
“Alipay Singapore” Alipay Singapore Holding Pte. Ltd., a company incorporated in Singapore and an indirect wholly-owned subsidiary of Ant Holdco
“AMCM” Autoridade Monetária de Macau (the Monetary Authority of Macao)

DEFINITIONS

“Announcement” the announcement of the Company dated September 10, 2021 in relation to the Agreement, the Framework Agreement and the respective transactions contemplated thereunder “Annual Caps” the maximum amounts of annual service fees payable by Macau Pass to the Alipay Entities in respect of the transactions contemplated under the Framework Agreement “Ant Bank” Ant Bank (Macao) Limited, a joint venture company incorporated under the laws of Macau which is held as to 66.7% by two indirect wholly-owned subsidiaries of Ant Holdco and as to 33.3% by a 30%-indirectly owned associated company of the Company

“Ant Group” Ant Holdco and its subsidiaries “Ant Holdco” 螞蟻科技集團股份有限公司 (Ant Group Co., Ltd.) (formerly known as 浙江螞蟻小微金融服務集團股份有限公司 (Ant Small and Micro Financial Services Group Co., Ltd.)), a company organized under the laws of the PRC
“associate(s)” has the meaning ascribed to it in the GEM Listing Rules “Board” the board of Directors “Business Day(s)” a day(s) other than a Saturday or Sunday, on which banks are open in Hong Kong, Macau, the PRC and the British Virgin Islands to the general public for business
“Capital Adequacy Ratio the capital adequacy ratio of Macau Pass of not less than 12% or Requirement” any other lower rate (which shall in no circumstances be lower than 8%) subject to further verbal guidance by AMCM during the process of change of control application to be made before Closing, as determined in accordance with the principles set out in the Agreement

“Closing” completion of the Acquisition in accordance with the terms and conditions of the Agreement “Closing Conditions” the conditions precedent to Closing “Closing Date” the date on which Closing takes place “Company” AGTech Holdings Limited, a company incorporated in Bermuda with limited liability, the issued Shares of which are listed on GEM of the Stock Exchange (Stock Code: 8279)

DEFINITIONS

“connected person(s)” has the meaning ascribed to it in the GEM Listing Rules “Consideration” the consideration payable by the Purchasers to the Sellers for the Sale Shares pursuant to the Agreement “controlling shareholder(s)” has the meaning ascribed to it in the GEM Listing Rules “Director(s)” director(s) of the Company

“Effective Date” the date on which all conditions precedent under the Framework Agreement having been satisfied “Enlarged Group” the Group as enlarged by the Target Group upon Closing

“Existing Target Shareholder” Mr. Liu Hei Wan
“Existing Target Shareholder Group”

the Existing Target Shareholder, his two children, their respective spouse, and/or any entity controlled by them

“Framework Agreement” the conditional business cooperation framework agreement dated September 10, 2021 entered into between the Company and the Alipay Entities in respect of the acquiring service business cooperation between Macau Pass and the Alipay Entities

“GEM Listing Rules” the Rules Governing the Listing of Securities on GEM

“Group”

the Company and its subsidiaries

“Hong Kong” the Hong Kong Special Administrative Region of the PRC

“Independent Board Committee” an independent committee of the Board (comprising the independent non-executive Directors, namely Mr. Feng Qing and Dr. Gao Jack Qunyao) established to advise the Independent Shareholders in respect of the Framework Agreement and the transactions contemplated thereunder (including the Annual Caps)

“Independent Financial Adviser”

Opus Capital Limited, a corporation licensed under the SFO to conduct Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO, being the independent financial adviser appointed to advise the Independent Board Committee and the Independent Shareholders in respect of the Framework Agreement and the transactions contemplated thereunder (including the Annual Caps)

DEFINITIONS

“Independent Shareholders” Shareholders other than Ali Fortune and its associates and other Shareholders (including the Directors, namely Mr. Sun Ho, Ms. Hu Taoye and Ms. Monica Maria Nunes) who have a material interest or is deemed or may be perceived to have a material interest in the Framework Agreement and the transactions contemplated thereunder (including the Annual Caps) and shall be required to abstain from voting on the relevant resolutions to be proposed at the SGM for approving the Framework Agreement and the transactions contemplated thereunder (including the Annual Caps)
“Latest Period” the 12-month period ending on the last day of the month immediately prior to the Closing Date
“Latest Practicable Date” October 25, 2021, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained in this circular
“Long Stop Date” March 31, 2022 or such other date as agreed by the parties to the Agreement in writing
“Macau”
the Macao Special Administrative Region of the PRC
“Macau Pass” Macau Pass S.A., a company incorporated under the laws of Macau and a 99%-owned subsidiary of the Target as at the Latest Practicable Date
“Operating Cash” the net cash and cash equivalent of Macau Pass in an amount equal to selected current assets minus selected current liabilities as specified in the Agreement. “Selected current assets” include other receivables, deposits and prepayments, trade receivables, cash at bank and in hand, bank deposits with original maturities of three months or less, and inventories; and “selected current liabilities” include floats balance due to card or account holders, card deposits due to cardholders, trade payables, other payables, and net amounts due from/to shareholders
“PRC” the People’s Republic of China which, for the purpose of this circular, refers to Mainland China only
“PRC Company” 珠海橫琴中澳通電子支付技術有限公司 (Zhuhai Hengqin Zhongaotong Electronic Payment Technology Co., Ltd.*), a company established under the laws of the PRC and a wholly-owned subsidiary of the Target as at the Latest Practicable Date

DEFINITIONS

“Purchasers”	together, AGTech Investment and AGTech Services
“Relevant Time”	0:00 a.m. (Macau time) on the Closing Date
“Sale Shares”	collectively, (i) three (3) issued shares with nominal value of
	MOP198,000, MOP1,000 and MOP1,000 in the capital of the
	Target respectively; and (ii) 3,000 issued shares with nominal
	value of MOP100 each in the capital of Macau Pass, representing
	all the issued shares in the capital of the Target and 1% equity
	interest in Macau Pass collectively held by the Sellers (with the
	Target holding a 99% equity interest in Macau Pass)
“Sellers”	together, the Existing Target Shareholder, Mr. Liu Cheuk Yin,
	Mr. Lao Kin Keong and Mr. Vong Chak Kin
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong)
“SGM”	the special general meeting of the Company to be convened and
	held at 11:00 a.m. on Thursday, November 18, 2021 at Holiday
	Inn Express Hong Kong Causeway Bay, Meeting Room I & II, 7/
	F, 33 Sharp Street East, Causeway Bay, Hong Kong to consider
	and, if thought fit, approve the resolutions contained in the notice
	convening the SGM, which are set out on pages SGM-1 to SGM-
	2, or any adjournment thereof
“Share(s)”	ordinary share(s) of HK$0.002 each in the share capital of the
	Company
“Shareholder(s)”	holder(s) of the issued Share(s)
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Target”	Macau Pass Holding Ltd., a company incorporated under the laws
	of Macau
“Target Group”	the Target and its subsidiaries (i.e. Macau Pass and the PRC
	Company)

DEFINITIONS

“Valuer” or “AVISTA”	AVISTA Valuation Advisory Limited, an independent valuer
	engaged by the Company to assess the fair value of 100% equity
	interest of the Target Group as at April 30, 2021
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“MOP”	Macau patacas, the lawful currency of Macau
“%”	per cent

for identification purpose only

In this circular, amounts in MOP are translated into HK$ on the basis of HK$1 = MOP1.03. The conversion rate is for illustration purpose only and should not be taken as a representation that MOP could actually be converted into HK$ at such rate or at all.

PRECAUTIONARY MEASURES FOR THE SGM

In view of the ongoing COVID-19 pandemic, the Company will implement necessary preventive measures at the SGM to protect the attending Shareholders and other attendees from the risk of infection, including the following:

(i) All attendees are required to fill in and sign a health declaration form before entering into the SGM venue. Any person, irrespective of nationality, who has travelled outside Hong Kong within the 14-day period prior to the SGM and/or is subject to any Hong Kong government prescribed quarantine immediately before the date of the SGM, will be denied entry into the SGM venue.
(ii) Compulsory body temperature checks will be conducted for every attending Shareholder, proxy or other attendees at the entrance of the SGM venue. Any person with a body temperature of over 37 degrees Celsius or who has flu-like symptoms or is otherwise unwell or is subject to the mandatory quarantine order imposed by the Government of Hong Kong may be denied entry into or be required to leave the SGM venue.
(iii) All attendees must sanitize his/her hands before entering into the SGM venue.
(iv) All attendees will be required to wear surgical face masks before they are permitted to enter into the SGM venue and during the SGM at all times, and to maintain a safe distance between seats. Please note that no surgical face mask will be provided at the SGM and all attendees should wear their own surgical face masks.
(v) Appropriate seating arrangement at the SGM venue will be made to be in line with the guidance promulgated by the Government of Hong Kong. As a result, there will be limited capacity for the Shareholders to attend the SGM.
(vi) No corporate gifts and no drinks and refreshments will be served.

Any person who does not comply with the precautionary measures may be denied entry into or be required to leave the SGM venue. Due to the constantly evolving COVID-19 pandemic situation in Hong Kong, the Company may be required to change the SGM arrangements at short notice. The Shareholders should constantly check the Company’s website at http://www.agtech.com or the Stock Exchange’s website at http://www.hkexnews.hk for any future announcement(s) and update(s) on the SGM arrangements.

The Company reminds all Shareholders that physical attendance in person at the SGM is not necessary for the purpose of exercising voting rights. As an alternative, the Shareholders may appoint the chairman of the SGM as their proxy to vote on the relevant resolutions at the SGM instead of attending the SGM in person by using the form of proxy enclosed.

The form of proxy is attached to this circular for the Shareholders. Alternatively, the form of proxy can be downloaded from the “Circulars” section of the Company’s website (http://www.agtech.com). If you are not a registered Shareholder (i.e. if your Shares are held via banks, brokers, custodians or the Hong Kong Securities Clearing Company Limited), you should consult directly with your banks or brokers or custodians (as the case may be) to assist you in the appointment of proxy.

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) Ms. Hu Taoye

Non-executive Directors:

Mr. Yang Guang Mr. Li Faguang 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

October 29, 2021

To the Shareholders

Dear Sir or Madam,

(1) VERY SUBSTANTIAL ACQUISITION; AND

(2) POSSIBLE CONTINUING CONNECTED TRANSACTIONS

(I) INTRODUCTION

Reference is made to the Announcement in which it was disclosed that (i) on September 10, 2021, the Company, AGTech Investment, AGTech Services (both indirect wholly-owned subsidiaries of the Company), the Sellers and the Target Group entered into the Agreement, pursuant to which the Sellers have conditionally agreed to sell, and AGTech Investment and AGTech Services have conditionally agreed to acquire, the Sale Shares (representing the entire equity interest in the Target and 1% equity interest in Macau Pass); and (ii) on September 10, 2021, the Company entered into the Framework Agreement with the Alipay Entities to set out the terms and conditions of the future business cooperation (in respect of Macau Pass’ acquiring services) between Macau Pass and the Alipay Entities subject to and with effect from Closing.

* for identification purpose only

LETTER FROM THE BOARD

The purpose of this circular is to provide you with, among other things, (i) information on the Agreement and the transactions contemplated thereunder; (ii) information on the Framework Agreement and the transactions contemplated thereunder (including the Annual Caps); (iii) the recommendations from the Independent Board Committee to the Independent Shareholders in respect of the Framework Agreement and the transactions contemplated thereunder (including the Annual Caps); (iv) the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the Framework Agreement and the transactions contemplated thereunder (including the Annual Caps); (v) the financial information of the Group, the Target Group and the Enlarged Group; (vi) the valuation report on the Target Group; and (vii) the notice convening the SGM.

At the SGM, resolutions will be proposed to approve the Agreement and the transactions contemplated thereunder and the Framework Agreement and the transactions contemplated thereunder (including the Annual Caps).

(II) THE ACQUISITION

On September 10, 2021, the Company, AGTech Investment, AGTech Services (both indirect wholly-owned subsidiaries of the Company), the Sellers and the Target Group entered into the Agreement, pursuant to which the Sellers have conditionally agreed to sell, and AGTech Investment and AGTech Services have conditionally agreed to acquire, the Sale Shares (representing the entire equity interest in the Target and 1% equity interest in Macau Pass).

The principal terms of the Agreement are set out below.

THE AGREEMENT

Date

September 10, 2021

Parties

(i) the Purchasers, being AGTech Investment and AGTech Services (both indirect wholly-owned subsidiaries of the Company);
(ii) the Sellers, being Mr. Liu Hei Wan, Mr. Liu Cheuk Yin, Mr. Lao Kin Keong and Mr. Vong Chak Kin;
(iii) the Company, being the Purchasers’ guarantor under the Agreement;
(iv) the Target, being Macau Pass Holding Ltd.; and
(v) Macau Pass and the PRC Company, being a 99%-owned subsidiary and a wholly-owned subsidiary of the Target respectively.

LETTER FROM THE BOARD

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, the Target Group and the Sellers are third parties independent of and not connected with the Company and its connected persons.

Subject matter

Pursuant to the Agreement, each of the Sellers has conditionally agreed to sell the Sale Shares as set out below free from all encumbrances and with all rights attached to the Sale Shares including the right to receive all dividends and other distributions declared, made or paid on or after Closing, and each of AGTech Investment and AGTech Services has conditionally agreed to purchase the Sale Shares for such portion of Consideration each as set out below (subject to downward adjustments) with effect from Closing.

Seller
Sale Shares
Purchaser
purchasing the
respective Sale
Shares
The Existing Target
Shareholder
1 share in the Target with
nominal value of MOP198,000,
representing 99% equity interest
in the Target
AGTech
Investment
Mr. Liu Cheuk Yin
1 share in the Target with
nominal value of MOP1,000,
representing 0.5% equity interest
in the Target
AGTech Services
Mr. Lao Kin Keong
1 share in the Target with
nominal value of MOP1,000,
representing 0.5% equity interest
in the Target; and
AGTech Services
1,500 shares in Macau Pass with
nominal value of MOP100 each,
representing 0.5% equity interest
in Macau Pass
AGTech
Investment
Mr. Vong Chak Kin
1,500 shares in Macau Pass with
nominal value of MOP100 each,
representing 0.5% equity interest
in Macau Pass
AGTech Services
Total:

Consideration
(HK$)
762,517,800
3,851,100
3,851,100
3,890,000
3,890,000
778,000,000

LETTER FROM THE BOARD

Consideration

The maximum Consideration for the Sale Shares is HK$778,000,000 (subject to downward adjustments), being the maximum aggregate amount of the Initial Consideration and the Deferred Consideration (as defined below), which shall be paid in cash in the following manner:

(i) the Purchasers shall pay HK$700,200,000 (the “ Initial Consideration ”) to the Sellers at Closing; and
(ii) subject to the downward adjustment mechanism set out in the paragraph headed “Adjustments to the Deferred Consideration” and the fulfillment of the payment conditions set out in the paragraph headed “Conditions precedent to payment of the Deferred Consideration” below, an amount equal to HK$77,800,000 (the “ Deferred Consideration ”) (or the balance thereof after the adjustment(s), if any) shall be paid to the Sellers on the date falling on the first anniversary after the Closing Date (or the next Business Day if such anniversary falls on a non-Business Day) (the “ Second Payment Date ”).

For the avoidance of doubt, no interest will be accrued on the Deferred Consideration. The Group intends to fund the Consideration by its internal cash resources.

The Consideration was arrived at after arm’s length negotiations among the Purchasers and the Sellers having taken into account, among other things, (i) the market leader position of Macau Pass as a payment service provider in Macau; (ii) the control premium for this rare opportunity to acquire the entire equity interests in the Target Group; (iii) the historical profitability of the Target Group, particularly the unaudited earnings before interest, tax, depreciation and amortization expenses (“ EBITDA ”) of approximately MOP86.5 million (equivalent to approximately HK$84.0 million) for the trailing 12-month period ended April 30, 2021 (being the cut-off date of the latest unaudited management accounts of the Target Group obtained by the Purchasers during due diligence review of the Target Group for the purpose of the parties’ negotiations of the terms of the Acquisition (the “ April Cut-off Date ”)), which has been used to derive the valuation of the Target Group as discussed below; (iv) the anticipated improvement in the Target Group’s business performance following resumption of tourists activities in Macau; (v) the various expected synergies between the Target Group and the Group as discussed in more detail in the paragraph headed “Reasons for and benefits of the Acquisition” below; (vi) the preliminary valuation of the entire equity interests of the Target Group of not less than HK$778,000,000 as at the April Cut-off Date; (vii) the possible payment by Macau Pass of its surplus cash (the “ Surplus Cash ”) as bonus to the existing directors of Macau Pass on the Closing Date (the “ Bonus Payments ”) as long as the Closing Condition (iii) set out in the paragraph headed “Closing Conditions” below (i.e. the minimum Operating Cash requirement of MOP5 million, the Capital Adequacy Ratio Requirement and the Target Group having no outstanding financial indebtedness (other than those expressly permitted by the Purchasers) as at the Relevant Time) shall remain satisfied immediately after the Bonus Payments; and (viii) the downward adjustment mechanism as set out in the paragraph headed “Adjustments to the Deferred Consideration” below to safeguard the interests of the Group.

LETTER FROM THE BOARD

The final valuation of the entire entity interests of the Target Group as at the April Cut-off Date was MOP923,353,000 (equivalent to approximately HK$896,459,000) (the “ Valuation ”), details of which are set out in the valuation report in Appendix IV to this circular. The Valuation was assessed by the Valuer by adopting the comparable companies method under the market approach. Under such method, the Valuer firstly assessed the value of 100% enterprise value of the Target Group based on the EBITDA of the Target Group for the trailing 12-month period ended the April Cut-off Date and the enterprise value-to-EBITDA (“ EV/EBITDA ”) multiples (after adjustments for control premium and lack of marketability discount) of an exhaustive list of comparable companies identified by the Valuer based on the following principal selection criteria:

(i) being engaged in principal business similar to that of the Target Group, i.e. provision of electronic payment services, particularly acting as payment services providers and enabling merchants to accept electronic payments by a variety of payment methods such as debit card, credit card and/or digital wallet;
(ii) being listed in major exchange markets;
(iii) being profit-making in the trailing 12-month period ended the April Cut-off Date; and
(iv) financial information being available to the public.

For the purpose of calculating the EBITDA of the Target Group and the comparable companies, foreign exchange gain or loss has been excluded as it is considered as a non-operating item not related to the performance of the underlying business operations of the companies under valuation. The Valuer considers such exclusion is generally accepted in market practice. The unaudited foreign exchange gain recognized by the Target Group, which has been excluded from the calculation of the EBITDA of the Target Group for the trailing 12-month period ended the April Cut-off Date, amounted to approximately MOP3.0 million (equivalent to approximately HK$2.9 million).

The Valuer considers EV/EBITDA multiple, which eliminates the differences in capital structure, taxation and depreciation and amortization methods across different comparable companies, to be an appropriate indicator of the fair value of the Target Group and is generally accepted in valuation of companies in the industry of the Target Group.

After determining the value of 100% enterprise value of the Target Group as set out above, the Valuer then assessed the value of 100% equity interest in the Target Group by (i) adding cash and cash equivalents of the Target Group to and (ii) deducting outstanding interest-bearing debt (if any) and lease liabilities from the aforesaid enterprise value. For this purpose, the Bonus Payments which are estimated to amount to HK$42.6 million as at April 30, 2021 for illustration purpose are also deducted from the enterprise value, as the possible Bonus Payments would reduce the cash and cash equivalents of the Target Group. The Bonus Payments are not considered as operating items related to the performance of the underlying business operations of the Target Group, and are not expected to have a continuing effect on the consolidated statement of profit or loss and consolidated statement of cash flows of the Target Group after Closing or the determination of the EBITDA and enterprise value of the Target Group.

LETTER FROM THE BOARD

Having considered the above, the Directors concur with the valuation methodology and multiple adopted and the comparable companies selected by the Valuer and are of the view that the Valuation (which has taken into account the Bonus Payments) and the terms of the Agreement (including the Consideration) are fair and reasonable.

Adjustments to the Deferred Consideration

The Deferred Consideration payable is subject to the downward adjustments described below:

(i) there shall be deducted from the Deferred Consideration the amount (if any) of any outstanding financial indebtedness of the Target Group as at the Relevant Time that are not expressly permitted by the Purchasers; and
(ii) there shall be deducted from the Deferred Consideration the amount (if any) of any shortfall by which (i) the amount of the Operating Cash of Macau Pass does not satisfy the minimum Operating Cash requirement of MOP5 million, or (ii) the capital adequacy level of Macau Pass does not satisfy the Capital Adequacy Ratio Requirement, as at the Relevant Time.

For the avoidance of doubt, in the event that the Deferred Consideration falls short of the amount of deduction(s) as described above in this paragraph, the Existing Target Shareholder shall pay to the Purchasers the amount of such shortfall.

For illustrative purpose only, based on the latest available unaudited management accounts of the Target Group for the nine months ended September 30, 2021, (i) the Purchasers were not aware of any outstanding financial indebtedness of the Target Group that were not expressly permitted by the Purchasers as at September 30, 2021; and (ii) the amount of the Operating Cash of Macau Pass satisfied the minimum Operating Cash requirement of MOP5 million and the capital adequacy level of Macau Pass satisfied the Capital Adequacy Ratio Requirement as at September 30, 2021. For the avoidance of doubt, the Purchasers will assess the actual figures as at the Relevant Time pursuant to the terms of the Agreement when determining whether the Closing Condition set out in (iii) below has been fulfilled and/ or any downward adjustments to the Deferred Consideration should be made following Closing.

LETTER FROM THE BOARD

Closing Conditions

Closing is conditional upon the following Closing Conditions being satisfied (or, at the absolute discretion of the Purchasers, waived by the Purchasers) on or before the Long Stop Date:

(i) the obtaining of all relevant regulatory consents, approvals, clearances and authorizations of any relevant governmental authorities in Hong Kong, Macau or elsewhere as are necessary by the Purchasers and the Company for the implementation of the Agreement (including, without limitation, shareholders’ approval of the Purchasers and of the Company on, among other things, the transactions contemplated under the Agreement and other related documents);
(ii) the Target Group receiving all relevant regulatory consents and approvals as are necessary in connection with the proposed change in shareholding of the Target Group (including, without limitation, Macau Pass having actually received the written approval of AMCM for implementation of the Acquisition and the proposed change in shareholding or control of Macau Pass);
(iii) the minimum Operating Cash requirement of MOP5 million and the Capital Adequacy Ratio Requirement having been satisfied and the Target Group having no outstanding financial indebtedness (other than those expressly permitted by the Purchasers) as at the Relevant Time;
(iv) as at Closing, none of the representations, warranties and undertakings given by the Existing Target Shareholder under the Agreement is untrue, inaccurate or misleading in any material respects;
(v) the Sellers having complied with their respective covenants, undertakings and obligations under the Agreement;
(vi) no decision, order or judgment having been issued or made by any government authority in Hong Kong, Macau or the PRC at any time prior to Closing that has the effect of making unlawful or otherwise prohibiting or restricting the transfer of the Sale Shares to the Purchasers; and
(vii) no material adverse change on the Target Group until Closing, save as otherwise contemplated or permitted under the Agreement or any other related documents.

LETTER FROM THE BOARD

The Purchasers may, to such extent as they think fit and are legally entitled to do so, at any time jointly waive in writing any of the Closing Conditions set out in (iii) to (v) and (vii) above on such terms as they may decide.

As at the Latest Practicable Date, none of the Closing Condition had been satisfied.

If any of the Closing Conditions set out in (iii) to (v) and (vii) (which have not previously been waived by the Purchasers) have not been satisfied on or before 3:00 p.m. on the Long Stop Date, then the Purchasers may on that date, at their option (but without prejudice to any other right or remedy they may have), by notice to the Sellers:

(i) waive the Closing Conditions which have not been satisfied;
(ii) postpone the Long Stop Date to such other date as agreed between the Sellers and the Purchasers in writing; or
(iii) terminate the Agreement, upon which the rights and obligations of the parties to the Agreement shall cease immediately save for any antecedent breaches of the terms thereof and the provisions of announcement and disclosure restrictions under the Agreement.

If any of the Closing Conditions set out in (i), (ii) and (vi) have not been satisfied on or before 3:00 p.m. on the Long Stop Date, then the Sellers and the Purchasers may:

(i) within three (3) Business Days after the Long Stop Date, agree to postpone the Long Stop Date to such other date as agreed between the Sellers and the Purchasers in writing; or
(ii) if the Sellers and the Purchasers fail to agree on the matters as referred to in sub-paragraph (i) above within three (3) Business Days after the Long Stop Date, then the Agreement shall be terminated in the manner set out in the sub-paragraph (iii) above in the preceding paragraph.

Conditions precedent to payment of the Deferred Consideration

The Purchasers’ obligation to pay the Deferred Consideration to the Sellers is conditional upon the following conditions being satisfied (or, at the absolute discretion of the Purchasers, waived by the Purchasers) on or before the Second Payment Date:

(i) delivery by the Existing Target Shareholder to the Purchasers of an original signed certificate of the Existing Target Shareholder confirming that the conditions precedent to payment of the Deferred Consideration have been satisfied (or waived by the Purchasers) not later than ten (10) Business Days before the Second Payment Date;

LETTER FROM THE BOARD

(ii) the total revenue of Macau Pass for the Latest Period is not lower than that for the 12-month period immediately prior to the Latest Period by over 1%. For the avoidance of doubt, total revenue of Macau Pass for the purpose of this clause means the total revenue generated by Macau Pass from (a) transaction fee from payment card services, (b) transaction fee from e-wallet services, (c) commission income from acquiring services for other payment platforms, (d) sales and leasing of card reader and scanner payment terminals and payment equipment, and (e) sales of payment cards and provision of card handling services;
(iii) the average monthly active users of the e-wallet services of Macau Pass for the Latest Period is not lower than that for the 12-month period immediately prior to the Latest Period by over 1%;
(iv) none of the members of the Existing Target Shareholder Group has done anything that may lead to a suspension or revocation of the licenses and permits necessary for the current businesses of the Target Group;
(v) for a period of one (1) year after the Closing Date, the Existing Target Shareholder Group will be retained by the Target Group as their advisers on a complimentary basis, whose main responsibilities will be:
(a) within a period of six (6) months after Closing, introduce to the Purchasers’ management team the key clients of the Target Group and assist to maintain the business relationship between the key clients and the Target Group;
(b) advise the Target Group on matters relating to the material licenses and permits necessary for the current businesses of the Target Group upon request of the Purchasers and to the extent that the Existing Target Shareholder Group has any actual knowledge of such matters, with the aim of keeping such material licenses and permits valid and subsisting, provided that the Existing Target Shareholder Group has no obligation to ensure or guarantee about the validity and subsistence of such licenses and permits;
(c) advise the Target Group on any potential regulatory changes and requirements that would impact the businesses and licenses of the Target Group, to the extent that the Existing Target Shareholder Group has any actual knowledge of such regulatory changes and/or requirements; and
(d) provide supports and resources upon reasonable request of the Purchasers to the Target Group to facilitate a smooth transition of the Target Group’s operations to the management team of the Purchasers after Closing, such that the businesses of the Target Group may be operated in a manner materially consistent with past practices before Closing.

LETTER FROM THE BOARD

Closing

Closing will take place on a date as the Sellers and the Purchasers may agree in writing, the earliest date of which will be on or after the fifteenth (15th) Business Day following satisfaction or waiver (where applicable) of all Closing Conditions and such date being immediately preceded by three (3) consecutive Business Days.

If the respective Closing obligations of the parties to the Agreement are not complied with on the Closing Date, the Purchasers may by notice to the Sellers (in the event that the Sellers are unable or unwilling to comply with their obligations under the Agreement) or the Sellers may by notice to the Purchasers (in the event that the Purchasers are unable or unwilling to comply with their obligations under the Agreement):

(i) postpone Closing to a date (being a Business Day) falling not more than 10 Business Days after the Long Stop Date;
(ii) proceed to Closing as far as practicable (without limiting its rights under the Agreement); or
(iii) terminate the Agreement, upon which the rights and obligations of the parties to the Agreement shall cease immediately save for any antecedent breaches of the terms thereof and the provisions of announcement and disclosure restrictions under the Agreement.

Non-competition undertaking by the Existing Target Shareholder

Pursuant to the Agreement, the Existing Target Shareholder undertakes to the Purchasers that the Existing Target Shareholder Group will not, without the written consent of the Purchasers, whether directly or indirectly and either alone or in conjunction with, or on behalf of, any other person, and whether as principal, shareholder, director, employee, agent, consultant, partner or otherwise:

(i) for a period of three (3) years immediately following the Closing Date, engage in, have significant strategic influence over, or own or hold any majority shareholding in any business or person that provides services in Macau that are substantially the same as any of the principal business activities of the Target Group in Macau as at the date of the Agreement, or that directly or indirectly compete against such business of the Target Group; and
(ii) for a period of two (2) years immediately following the Closing Date, either on its own account or in conjunction with or on behalf of any person, firm or company, employ or solicit or endeavor to entice away any key executives from the Target Group, whether or not such key executives would commit a breach of contract by reason of leaving service or office.

LETTER FROM THE BOARD

INFORMATION ON THE TARGET GROUP

Group structure

The diagram below depicts the group structure of the Target Group as at the Latest Practicable Date:

==> picture [458 x 261] intentionally omitted <==

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

The Existing Target
Mr. Liu Cheuk Yin Mr. Lao Kin Keong
Shareholder
99.0% 0.5% 0.5%
The Target Mr. Vong Chak KinMr.
0.5%
(Incorporated in Macau)
0.5%
100% 99.0%
The PRC Company Macau Pass
(Established in the PRC) (Incorporated in Macau)
----- End of picture text -----

LETTER FROM THE BOARD

The diagram below depicts the group structure of the Target Group immediately after Closing:

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

The Company
100%
AGTech MPass Limited
100% 100%
AGTech Investment AGTech Services
99.0% 1.0%
0.5% 0.5%
The Target
(Incorporated in Macau)
99.0%
100%
The PRC Company Macau Pass
(Established in the PRC) (Incorporated in Macau)
----- End of picture text -----

Business

The Target is an investment holding company with two operating subsidiaries, namely Macau Pass and the PRC Company. Macau Pass is the principal operating company of the Target Group while the PRC Company primarily acts as the technology and product development center to support the business development of Macau Pass.

Macau Pass is a leading payment service provider in Macau and is an “other credit institution” licensed under AMCM. It was incorporated in 2005 with initial focus on operating physical payment card services via “Macau Pass Cards” (the “ MP Card(s) ”) in Macau, which was later gradually expanded into other payment related businesses such as e-wallet and acquiring services.

LETTER FROM THE BOARD

Macau Pass currently operates four principal lines of business:

(i) Physical payment card services and ancillary services: MP Card is the most common contactless smart card for payments in Macau. Launched in 2007, MP Card was initially used for bus fare payments in Macau. Its usage has since then been expanded into payments for other public transports, car parks, government services, retail consumptions, and food and beverage services. It can also be customized to include functions as door access card, staff badge or membership card. There are currently more than three million MP Cards in issue. Macau Pass receives commission income from merchants for processing transactions with payments made via MP Cards. Macau Pass also generates revenue from ancillary card services such as sales and management of physical MP Cards;
(ii) e-wallet services: Macau Pass provides e-wallet services via a mobile app called “MPay”, which was launched in Macau in 2018. It is currently one of the leading e-wallets in Macau which supports online and offline payments covering different payment scenarios such as person-to-person transfer, telecommunication and utility bill payment, online ticketing, payment of car parking fees and payment of bus fares using QR code. MPay is also allowed by the People’s Bank of China for cross-border use in the PRC. Macau Pass receives commission income (based on a percentage of the transaction value) from merchants for processing transactions with payments made via MPay;
(iii) Acquiring services: Macau Pass is a leading e-wallet acquirer in Macau. It supplies integrated payment terminals (see (iv) below) and provides acquiring services to merchants which enable merchants to accept different payment methods of other payment service providers, including but not limited to the “Alipay” e-wallet, the “AlipayHK” e-wallet and Ant Bank’s “Alipay (Macao)” e-wallet operated by the Alipay Entities and/or their affiliate(s), WeChat Pay and other e-wallets launched by certain other banks in Macau (collectively, the “ Other Payment Service Providers ”). This acquiring service benefits the merchants as it provides flexibility to customers of the merchants who may choose their preferred payment platforms at checkout. The application of such integrated payment system is also extended to self-service kiosks or vending machines of merchants. In consideration of Macau Pass providing such acquiring services, Macau Pass receives commission income (based on a percentage of the transaction value) from merchants for processing payment of the transactions and pays a portion of such commission (based on a percentage lower than the commission rate of the transaction value) as service fees (the “ Service Fees ”) to the Other Payment Service Providers. In case of payments involving cross-border transactions and depending on respective arrangements between Macau Pass and the Other Payment Service Providers, Macau Pass may also receive service income (based on a percentage of the transaction value) from certain Other Payment Service Providers for foreign exchange conversion; and
(iv) Sale and leasing of payment terminals and equipment: Macau Pass also sells and leases card reader and scanner payment terminals, multi-functional payment terminals and payment equipment for vending machines to buses and/or merchants which accept the MP Cards, MPay or use Macau Pass’ acquiring services. The Target Group sources these payment terminals and equipment from independent suppliers.

LETTER FROM THE BOARD

License and approval

As advised by the legal advisers of the Company as to Macau law, Macau Pass has obtained the license required for operating as an “other credit institution” under AMCM for carrying out its principal businesses. The license has no expiration date and the change in control of the Target Group resulting from the Acquisition will not render the license invalid. Nevertheless, the Group is required to obtain prior approval for change in control or ownership of Macau Pass from AMCM for the Acquisition, which is one of the conditions precedent to Closing under Closing Condition (ii) stated above.

Financial information

Set out below are the audited financial information of the Target Group for the two years ended December 31, 2019 and 2020, which are summarised from the accountant’s report set out in Appendix II to this circular:

		Year ended	December 31,
	2019		2020
		equivalent to		equivalent to
		approximately		approximately
	MOP’000	HK$’000	MOP’000	HK$’000
Profit/(loss) before taxation	43,897	42,618	(10,730)	(10,417)
Profit/(loss) after taxation	38,720	37,592	(10,462)	(10,157)

The loss of the Target Group for the year ended December 31, 2020, as compared to the profit recorded for the year ended December 31, 2019, was mainly attributable to a combination of factors including: (a) the drop in revenue from the acquiring services business, which was affected by the outbreak of COVID-19 pandemic in early 2020 and the associated closure of border of Macau resulting in a decline in consumers and visitors spending, and was partially compensated by the increase in revenue from the MPay Services; and (b) the increase in staff costs and depreciation and amortization expenses for business and market expansion, and continues to focus on product upgrade and development.

With the COVID-19 pandemic being kept under control in Macau, the re-opening of the border between Macau and the PRC since the third quarter of 2020 and the gradual recovery of tourist activities in Macau, the boost in local spending brought about by the electronic consumption voucher scheme (the “ E-voucher Scheme ”) launched by the government of Macau which ran from May to December 2020 and the increasing popularity in using mobile payments in Macau, the Target Group managed to return to a profit-making position for the trailing 12-month period ended the April Cut-off Date from its loss-making position for the year ended December 31, 2020. Further details of the financial information on the Target Group are set out in Appendix II to this circular.

LETTER FROM THE BOARD

Prior to the date of the Agreement, the Target Group held certain assets and liabilities which were not related to the businesses of Macau Pass and the PRC Company. A reorganization has been completed before the date of the Agreement to exclude such assets and liabilities from the Target Group. As at April 30, 2021, the audited consolidated net assets of the Target Group amounted to approximately MOP104.3 million (equivalent to approximately HK$101.3 million), which included certain assets and liabilities (other than those related to Macau Pass and the PRC Company) in the net amount of approximately MOP5.0 million (equivalent to approximately HK$4.9 million). For illustrative purpose only, after taking into account the estimated Bonus Payments of approximately MOP43.9 million (equivalent to approximately HK$42.6 million), the consolidated net assets of the Target Group as at April 30, 2021 would amount to approximately MOP60.4 million (equivalent to approximately HK$58.7 million). The aforesaid assets and liabilities of the Target Group (which are not related to Macau Pass and the PRC Company) contributed an aggregate net income of approximately MOP2.3 million (equivalent to approximately HK$2.2 million) and net loss of approximately MOP0.15 million (equivalent to approximately HK$0.15 million) to the net profit/(loss) of the Target Group for each of the two years ended December 31, 2019 and 2020, respectively.

FINANCIAL EFFECTS OF THE ACQUISITION

Upon Closing, the Target will become an indirect wholly-owned subsidiary of the Company and the financial statements of the Target Group will be consolidated into the financial statements of the Group. The unaudited pro forma financial information of the Enlarged Group illustrating the financial impact of the Acquisition on the results, assets and liabilities of the Group is set out in Appendix III to this circular.

Assets and liabilities

The unaudited consolidated total assets and total liabilities of the Group as at June 30, 2021, as extracted from the interim report of the Company for the six months ended June 30, 2021, were approximately HK$3,092.0 million and approximately HK$174.4 million respectively. Based on the unaudited pro forma financial information of the Enlarged Group as set out in Appendix III to this circular, assuming that the Closing had taken place on June 30, 2021, the pro forma total assets and total liabilities of the Enlarged Group (after taking into account the Bonus Payments) would have increased to approximately HK$3,730.1 million and approximately HK$822.2 million respectively.

Earnings

The audited loss after tax of the Group for the year ended December 31, 2020 as extracted from the annual report of the Company for the year ended December 31, 2020 was approximately HK$109.5 million. According to the unaudited pro forma financial information of the Enlarged Group as set out in Appendix III to this circular, assuming that Closing had taken place on January 1, 2020, the pro forma loss after tax of the Enlarged Group for the year ended December 31, 2020 (after taking into account the Bonus Payments) would amount to approximately HK$191.5 million.

In the event that the conditions precedent to payment of the Deferred Consideration have not been satisfied (or waived by the Purchasers) on or before the Second Payment Date, the amount equivalent to the consideration payable in cash in respect of the Deferred Consideration previously provided for by the Group will be reversed and recognised in profit or loss for the Enlarged Group.

LETTER FROM THE BOARD

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

REASONS FOR AND BENEFITS OF THE ACQUISITION

The Group is an integrated technology and services company engaged in the lottery and mobile games and entertainment market with a focus on the PRC and selected international markets. Since the first half of 2021, the Group has also commenced to supply non-lottery hardware products (such as point-of-sale terminals) for use in the retail sector in the PRC.

The Directors are of the view that the Acquisition would create tremendous synergies to the Group’s existing business, particularly for the mobile games and entertainment and supply of non-lottery hardware businesses, as well as broadening the revenue base of the Group through integrations along the value chain as explained below:

Expected synergies from the integration of the Group’s games and entertainment business with the MPay e-wallet payment platform

In respect of its games and entertainment business, the Group designs, operates and/or provides online and mobile games and entertainment contents to several online or mobile shopping and payment platforms. For instance, the Group has previously cooperated with several online shopping platforms of the Alibaba Group and the Ant Group in the PRC to develop and operate various games and entertainment platforms, and is currently in collaboration with a mobile payment platform in India to develop and operate a non-lottery games and entertainment platform, as further described below.

Since 2017, the Group cooperated with the Taobao mobile channel of Alibaba Group and the Alipay mobile channel of Ant Group to operate several games and entertainment platforms. These platforms aimed at building up the user base of Taobao and Alipay as well as encouraging users’ engagement in and consumptions at Taobao or payment using Alipay by offering the following major services: (a) online collection for free coupons from different merchants; or (b) various games and entertainment options; or (c) users’ reward points redemption center. Users could collect for free or use their reward points to redeem coupons offered by participating merchants on these platforms for their products or services consumptions. The Group was entitled to receive commission income or technical service fee income from the aforesaid services.

The Group also pursued strategic business expansion overseas and currently holds a 45% equity investment in a joint venture (namely, Paytm First Games Private Limited) (the “ Paytm JV ”) established in 2017 with One97 Communications Limited (“ One97 ”, together with its subsidiaries, the “ Paytm Group ”). One97 is the owner of a leading mobile payment platform, namely “Paytm”, in India. The Paytm JV is principally engaged in the development and operation of a mobile non-lottery games and entertainment platform, namely, “Paytm First Games”, attached to the “Paytm” payment platform, with games content provided by the Group. The online games content provided by the Group to “Paytm First Games” have helped the Paytm Group to enhance user engagement in and loyalty to its “Paytm” payment platform, and to further broaden its revenue and customer base. The Group generates revenue from the Paytm JV for the provision of online game contents to the “Paytm First Games” platform for the enjoyment of the “Paytm” users and is entitled to share the profits (if any) of Paytm JV as its shareholder in accordance with its equity holding percentage.

LETTER FROM THE BOARD

With the experience obtained from the aforesaid cooperation and collaboration in the PRC and India, and in view of the ongoing digital development in the macro-environment, particularly the increasing popularity of online shopping and the usage of digital payment over traditional ways of payment, the Company considers it strategically sound for the Group to move upwards in the value chain to become an owner and operator of a payment platform to create synergies with its mobile games and entertainment business. The Target Group, which is a well-established and leading payment service provider in Macau with strong position across the payment card, e-wallet and acquiring services, represents a good investment opportunity for the Group to achieve the aforesaid strategy. The integration with an e-wallet operator provides the Group with its own platform to maximize the economic benefits that may be generated from its games and entertainment business. The Group may utilize its technical capabilities and experience to build a mobile games and entertainment platform attached to MPay (the “ Macau G&E Platform ”) which provides integrated features combining games and entertainment contents, online shopping and reward points redemption service for the enjoyment of the MPay users. The games and entertainment contents to be provided by the Group is expected to broaden the scope of services offered to users of MPay, thereby enhancing users’ stickiness and loyalty in using the MPay platform, stimulating purchases by the MPay users from the participating merchants on the Macau G&E Platform, and increasing the commission income that may be earned by Macau Pass. Through the operations of the Macau G&E Platform, it is anticipated that the Group would be able to access the online traffic volume from the MPay e-wallet payment platform and enjoy different streams of income generated around the Group’s games and entertainment business, including but not limited to:

(i) technology service fee payable by Macau Pass for the Group’s provision and maintenance of the online games and entertainment contents to the Macau G&E Platform, which shall be intra-group transactions following Closing;
(ii) advertising income receivable from merchants for placing advertisements to promote their products on the Macau G&E Platform; and
(iii) revenue generated through providing the reward points redemption service by the Group to the MPay users on the Macau G&E Platform. This new platform will encompass various reward schemes such as offering coupons or products to be provided by participating merchants to be procured by the Group. When MPay users purchase coupons or products on the Macau G&E Platform using funds maintained in their MPay accounts and/or reward points earned from either their spendings via MPay or playing the games on the platform, the Group shall be entitled to receive sales commissions from the merchants or sales revenue in situations where the Group makes purchases of coupons or products at discounted prices from the merchants and sells them to MPay users.

LETTER FROM THE BOARD

Expansion of coverage of the Group’s non-lottery hardware business to the Macau retail market

The Group is one of the leading suppliers of lottery terminals in the PRC, and occupies the largest market share in sports lottery terminal market. Since the first half of 2021, the Group has commenced to supply non-lottery hardware products such as point-of-sale terminals for use in the PRC retail sector. Such terminals share similar technology and components underlying the lottery terminal hardware products supplied by the Group over the years. The supply of non-lottery hardware products by the Group to the retail sector is consistent with its business strategy to broaden the product spectrum of its hardware business. As Macau Pass also sells or leases payment terminals to its well-established client base of merchants in Macau, the Acquisition represents an expansion of the coverage of the non-lottery hardware business of the Group from the PRC retail sector to the Macau retail market.

Expansion of the Group’s business coverage in the Macau market

Apart from its businesses in the PRC and the investment in India as explained above, the Company, through its 30% indirectly owned associated company, holds a 33.3% interest in Ant Bank in Macau. Ant Bank officially commenced operations in April 2019 and provides mobile payment services and financial banking services in Macau. It has launched the Alipay (Macao) e-wallet payment service in Macau in September 2019 and continues to expand into other online and offline payment scenarios, as well as to open and expand offline merchant service network through cooperation with local acquirers such as Macau Pass. Two Directors, namely Mr. Sun Ho and Mr. Ji Gang, are also directors of Ant Bank and have direct involvement and hands-on experience in the management of the business. Besides, Mr. Sun Ho had extensive experience in strategy, management, auditing and financial management of Chinese and international enterprises, while Mr. Ji Gang is currently the Vice President and Head of Strategic Investment of Ant Holdco, responsible for the global strategic investments for Ant Holdco and has many years of experience in investment and the internet industry. The Company also intends to retain certain key executives of the Target Group to continue to manage its operations after Closing. With their solid and relevant knowledge and experience in the financial and payment service markets in Macau, the Company believes that its directors and management team have the relevant and sufficient experience and expertise to manage and operate the businesses of the Target Group after Closing.

The Company considers that the Acquisition is consistent with the corporate strategy of the Group in pursuing overseas investments and globalizing its business portfolio, as well as strengthening its presence in the Macau market. It also represents a vertical integration opportunity for Macau Pass’ acquiring service with the e-wallet payment services of Ant Bank, as described below.

Vertical integration with the Group’s investment in Ant Bank

The Acquisition represents a vertical integration opportunity to consolidate the Target Group’s business, as a leading mobile e-wallet acquirer in Macau which provides acquiring services for, among others, Ant Bank’s Alipay (Macao) e-wallet payment service, thereby capturing additional source of revenue along the supply chain of mobile e-wallet payment services. Leveraging on the experience of the aforesaid two Directors in Ant Bank, the Acquisition is also a business expansion of the Group to engage further in the e-wallet payment services through acquiring the entire interests in the Target Group in addition to its minority interest held in Ant Bank, increasing the Group’s exposure to the customer base in Macau.

Based on the above, the Directors consider that the terms of the Agreement are fair and reasonable and the Acquisition is in the interests of the Company and the Shareholders as a whole.

LETTER FROM THE BOARD

(III) POSSIBLE CONTINUING CONNECTED TRANSACTIONS

On September 10, 2021, the Company entered into the Framework Agreement with the Alipay Entities to set out the terms and conditions of the future business cooperation (in respect of Macau Pass’ acquiring services) between Macau Pass and the Alipay Entities subject to and with effect from Closing.

Details of the Framework Agreement are as follows:

THE FRAMEWORK AGREEMENT

Date

September 10, 2021

Parties

(i) The Company (for itself and on behalf of its subsidiaries);
(ii) Alipay (for itself and on behalf of its subsidiaries and affiliates);
(iii) Alipay Singapore (for itself and on behalf of its subsidiaries and affiliates); and
(iv) Ant Bank (for itself and on behalf of its subsidiaries and affiliates).

Alipay is principally engaged in the provision of internet payment, mobile phone payment, bank card acceptance, issuance and acceptance of prepaid cards (limited to online real-name payment accounts recharge) and related services. Alipay Singapore, via its operating subsidiaries, is principally engaged in the provision of cross-border digital payment and merchant acquiring services.

Ant Bank, officially commenced operations in April 2019, provides mobile payment services and financial banking services in Macau. It has launched the Alipay (Macao) e-wallet payment service in Macau in September 2019 and continues to expand into other online and offline payment scenarios, as well as to open and expand offline merchant service network through cooperation with local acquirers.

Hangzhou Junhan Equity Investment Partnership (Limited Partnership) (“ Junhan ”) and Hangzhou Junao Equity Investment Partnership (Limited Partnership) (“ Junao ”), each being a limited liability partnership incorporated under the laws of the PRC, hold approximately 29.86% and 20.66% equity interests in Ant Holdco, respectively. Hangzhou Yunbo Investment Consultancy Co., Ltd. (“ Yunbo ”) is the executive partner and general partner of, and controls, Junhan and Junao. Pursuant to a concert party agreement entered into between Mr. Ma Yun, Mr. Jing Eric Xiandong, Ms. Jiang Fang, and Mr. Hu Simon Xiaoming and the articles of association of Yunbo, Mr. Ma Yun has ultimate control over Ant Holdco. Mr. Ma Yun is a partner of Alibaba Holding and he holds a 34% equity interest in Yunbo. Mr. Hu Simon Xiaoming holds a 22% equity interest in Yunbo. Mr. Jing Eric Xiandong and Ms. Jiang Fang are directors of Ant Holdco and each holds a 22% equity interest in Yunbo.

LETTER FROM THE BOARD

Duration and conditions precedent

Subject to the satisfaction of the conditions precedent under the Framework Agreement as set out below, the duration of such agreement shall commence on the Effective Date and end on December 31, 2023:

(i) the Company having obtained the approval of the Board and the Independent Shareholders at the SGM by way of poll in relation to the Framework Agreement and the transactions contemplated thereunder (including the Annual Caps) in accordance with the GEM Listing Rules;
(ii) each of the Company and the Alipay Entities having complied with all requirements as may be imposed by the relevant regulatory authorities (including the Stock Exchange) in relation to the Framework Agreement and the transactions contemplated thereunder, if any, and having obtained all authorizations, approvals and permits necessary for the performance of its respective obligations under the Framework Agreement and the transactions contemplated thereunder in accordance with all applicable legal and regulatory requirements (including the GEM Listing Rules); and
(iii) the Group entering into the Agreement with the Target Group and the Sellers, and the Closing having taken place in respect of the Agreement.

Acquiring service business cooperation

(i) The operating entities of the Alipay Entities and the Target Group (i.e. Macau Pass) shall carry out their business cooperation in accordance with the specific execution agreements as described in paragraph (iv) below which shall set out their respective rights and obligations under such cooperation.
(ii) Macau Pass shall provide acquiring services to the merchants (the “ MP Merchants ”) via Macau Pass’ payment terminals, merchant QR code or online payment gateway, enabling the MP Merchants to accept different third party payment platforms including but not limited to the Alipay E-Wallets.
(iii) The Alipay Entities shall provide the services of processing, authorization and settlement of payments made by users via the Alipay E-Wallets and such services shall include transactions initiated by either:
(a) the MP Merchants scanning the barcode or QR code generated in the relevant Alipay E-Wallet app installed on the users’ smartphones (or portable devices) with the point-of-sale terminals or app of the MP Merchants; or
(b) the users scanning the barcode or QR code displayed at the MP Merchants using the scanning feature in the relevant Alipay E-Wallet app installed on the users’ smartphones (or portable devices).

LETTER FROM THE BOARD

(iv) For the purposes of setting out detailed terms of execution of the continuing connected transactions (“ CCTs ”) contemplated under the Framework Agreement, the operating entities designated by the Enlarged Group (i.e. Macau Pass) and the Alipay Entities to implement the business cooperation contemplated under such master framework agreement may from time to time enter into specific execution agreements (or supplemental agreements thereto) (collectively, the “ Specific Execution Agreements ”) which set out the detailed terms of execution in relation to the CCTs in accordance with the broad terms agreed in the Framework Agreement. The terms of the Specific Execution Agreements are expected to include, but not limit to:
(a) details of the business cooperation and responsibilities of each party;
(b) the Service Fees payable by Macau Pass to the Alipay Entities;
(c) the fund settlement process adopted by the Alipay Entities;
(d) where applicable, any designated payment scenarios (such as vending machines, self-service kiosks, car parks, parking meters etc.) which are agreed to be included in the scope of the business cooperation;
(e) the right of the Alipay Entities to suspend or terminate their services if certain features of their services may be subject to a high risk of unauthorized payments or fraudulent transactions by a MP Merchant;
(f) the obligations of each party to comply with applicable laws for the operation of its business and the performance of its obligations under the Specific Execution Agreements, including laws on anti-corruption, anti-money laundering, counter-terrorism financing and sanctions;
(g) protection of personal information privacy;
(h) confidentiality obligations of each party; and
(i) governing law for the Specific Execution Agreements and dispute resolutions.

The pricing and other terms of the Specific Execution Agreements shall be negotiated on an arm’s length basis between the parties thereto and shall be determined in accordance with the pricing policy set out in the paragraph headed “Pricing policy and payment terms” and the Annual Caps set out in the sub-section headed “Historical Transaction Amounts and Basis of Determining the Annual Caps” below.

LETTER FROM THE BOARD

Pricing policy and payment terms

As a general principle, the pricing and other terms of the Framework Agreement and the Specific Execution Agreements in respect of the acquiring services of Macau Pass shall be determined in the ordinary and usual course of business on normal commercial terms (as defined under the GEM Listing Rules) and shall be negotiated on an arm’s length basis between the parties thereto. The pricing for the Service Fees payable by Macau Pass to the Alipay Entities shall be based on fixed percentages of the transaction value processed under the Specific Execution Agreements which shall be within the normal range of such fees paid by Macau Pass in respect of its acquiring services to other payment service providers which are third parties independent of Macau Pass and its connected persons (which is currently in the region of 0.5% to 1.8% of the transaction value for processing payment of the transactions), and shall be determined with reference to various factors, including the industries of the merchants involved, the monthly transaction volume processed through Macau Pass and whether the transactions are online or offline. Such pricing shall be set out clearly in the Specific Execution Agreements. The terms offered by Macau Pass to the Alipay Entities should be in line with and not more favorable than those offered to other payment service providers which are third parties independent of Macau Pass and its connected persons.

Where the Alipay Entities offer any concession on the Service Fees to other independent third party acquirers in respect of similar transactions, they shall offer the same or no less favorable concession to Macau Pass.

The aggregate amount of payments processed/collected by the Alipay Entities from the users of the Alipay E-Wallets in respect of the transactions made by such users, less (i) any refunds to the users; (ii) any other amount that the Alipay Entities are entitled to withhold, deduct or set-off in accordance with the terms of the Specific Execution Agreements; and (iii) the Service Fees payable by Macau Pass to the Alipay Entities, shall be settled and remitted by the Alipay Entities to the designated bank account of Macau Pass within three working days from the date of transactions, unless the settlement amount involved falls short of the pre-agreed floor limit. In the event that the settlement amount involved falls short of the pre-agreed floor limit, such amount will be retained until the accumulated balance due to Macau Pass exceeds the pre-agreed floor limit, and such accumulated balance shall then be settled and remitted to Macau Pass accordingly.

HISTORICAL TRANSACTION AMOUNTS AND BASIS OF DETERMINING THE ANNUAL CAPS

Historical amounts of the Service Fees

Set out in the table below were the unaudited historical amounts of the Service Fees paid by Macau Pass to the Alipay Entities for the past three years ended December 31, 2018, 2019 and 2020 and the six months ended June 30, 2021 (collectively, the “ Track Record Period ”):

			For the six months
	For the year ended December 31,		ended June 30,
2018	2019	2020	2021
HK$’000	HK$’000	HK$’000	HK$’000
29,905	46,808	28,408	43,557

LETTER FROM THE BOARD

The increase in Service Fees paid by Macau Pass to the Alipay Entities for the year ended December 31, 2019 was in line with the increase in acquiring service revenue of Macau Pass for such year, which was attributable to a number of factors including (i) Macau Pass’ strengthened publicity and promotional efforts; (ii) enhanced functionalities of Macau Pass’ electronic and mobile payment applications to cater for different consumption patterns; and (iii) the year-on-year increase of approximately 10.1% in the number of visitor arrivals to approximately 39,406,000 in Macau in 2019 according to the data released by the Statistics and Census Service of the Government of Macau (the DSEC).

The decrease in Service Fees paid by Macau Pass to the Alipay Entities for the year ended December 31, 2020 was mainly attributable to the decrease in revenue from the acquiring services of Macau Pass, which was affected by the outbreak of COVID-19 pandemic in early 2020 and the associated closure of border of Macau resulting in a decline in visitors spending.

The increase in Service Fees paid by Macau Pass to the Alipay Entities for the six months ended June 30, 2021 was attributable to the surge in revenue from the acquiring services of Macau Pass, primarily as a result of (i) the COVID-19 pandemic being kept under control in Macau; (ii) the re-opening of the border between Macau and the PRC since the third quarter of 2020 and the gradual recovery of tourist activities in Macau, and (iii) the expansion of the network of merchants in Macau by Macau Pass.

Annual Caps for the Service Fees

The table below sets forth the Annual Caps for the Service Fees payable by Macau Pass to the Alipay Entities under the Framework Agreement for the period from the Effective Date and ending on December 31, 2021, and for the two years ending on December 31, 2022 and 2023:

For the period commencing
from the Effective Date and	For the year ending	For the year ending
ending on December 31, 2021	December 31, 2022	December 31, 2023
HK$’000	HK$’000	HK$’000
27,000	95,000	100,000

Basis for determining the Annual Caps

The Annual Caps for the Service Fees are determined mainly with reference to the projected amounts of payment transactions processed through the acquiring services provided by Macau Pass for the Alipay Entities which are estimated after taking into account factors including (i) the historical figures of the number and value of the online and offline transactions processed through the acquiring services provided by Macau Pass to merchants for accepting the Alipay E-Wallets during the Track Record Period; (ii) the Service Fee rates charged by the Alipay Entities to Macau Pass; (iii) the estimated growth in the number and value of the transactions processed through the acquiring services provided by Macau Pass to merchants for accepting the Alipay E-Wallets in light of (a) the resumption of tourists activities in Macau as the COVID-19 pandemic has been kept under control in the city; (b) the expansion of its network of merchants by Macau Pass in Macau; (c) the increase in per capita consumption of mainland Chinese tourists in Macau; and (d) the competition of acquiring services provided by other acquirers and banks in Macau.

LETTER FROM THE BOARD

REASONS FOR AND BENEFITS OF THE FRAMEWORK AGREEMENT

As disclosed in the section headed “Information on the Target Group” in the “Letter from the Board” in this circular, it is one of the principal activities of Macau Pass to provide acquiring services to merchants to enable them to accept payments made via different payment methods of other payment service providers, including the Alipay E-Wallets. Certain continuing Service Fees were also paid by Macau Pass in its ordinary and usual course of business to the Alipay Entities during the Track Record Period. As Macau Pass shall become a wholly-owned subsidiary of the Company upon Closing, the transactions contemplated under the Framework Agreement, including the payment of Service Fees by Macau Pass to the Alipay Entities in respect of its acquiring services, will be in the ordinary and usual course of business of the Enlarged Group. Given the increasing usage of digital payment by customers in Macau with Alipay E-Wallets operated by the Alipay Entities which is a popular payment option, the entering into of the Framework Agreement enables the Enlarged Group to continue its business relationships with the Alipay Entities in compliance with the GEM Listing Rules.

In view of the above, the Board is of the view that the terms of the Framework Agreement and the transactions contemplated thereunder (including the Annual Caps) are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole.

INTERNAL CONTROL MEASURES FOR THE CCTS

Following Closing, the relevant team responsible for negotiating the terms of business cooperation with the Alipay Entities should submit the draft Specific Execution Agreement for review and approval by the Company’s chief financial officer who will check the terms of such business cooperation with reference to, among other things, the factors considered in determining the pricing and payment terms of the CCTs to ensure that the pricing and other terms of the CCTs are determined in accordance with the pricing policy and the terms set out in the Specific Execution Agreement are (i) in line with and not more favorable to the Alipay Entities than those offered by Macau Pass to other payment service providers which are third parties independent of Macau Pass and its connected persons or (ii) in line with and not less favourable to Macau Pass than those offered by the Alipay Entities to other acquiring services providers which are independent of Macau Pass and its connected persons.

In addition, the Enlarged Group (including Macau Pass) will from time to time review the pricing basis of the Service Fees by comparing them against the services fees in respect of Macau Pass’ acquiring services payable by Macau Pass to other independent third party payment platforms for comparable services. The finance department of the Company will also from time to time conduct market researches, which may include obtaining the market information on the service fees payable by other acquiring services providers to other payment service providers comparable to the Alipay Entities to ensure that the pricing basis of the Service Fees is in line with normal market practices and no more favorable to the Alipay Entities than those available to independent third-party payment platforms under the same or similar conditions.

LETTER FROM THE BOARD

Annual Caps. The Framework Agreement includes a customary provision pursuant to which the Alipay Entities shall generally allow the auditors of the Company access to information necessary to report on the CCTs. The parties to the Framework Agreement have also agreed that they must abide by the GEM Listing Rules when performing their obligations under the terms of the Framework Agreement, including but not limited to the Annual Caps of the Service Fees payable by Macau Pass to the Alipay Entities as set out in the announcement or circular issued by the Company in accordance with the GEM Listing Rules. If the accumulated amounts of the CCTs are about to exceed the Annual Caps which will result in the Enlarged Group (including Macau Pass) being unable to perform its contractual obligations stipulated under the terms of the Framework Agreement and/or the Specific Execution Agreements (as the case may be), the Enlarged Group (including Macau Pass) shall be allowed to temporarily suspend the performance of its contractual obligations stipulated in such agreements until the Enlarged Group (including Macau Pass) complies with the GEM Listing Rules (including obtaining approval of the revised annual cap amount(s) for the CCTs), and such temporary suspension shall not constitute a breach of any provisions of such agreements by the Enlarged Group (including Macau Pass). The Company and the Alipay Entities have also agreed to amend or update the relevant terms of the Framework Agreement and/or the Specific Execution Agreements (as the case may be) in response to any future amendments to the GEM Listing Rules in respect of connected transaction requirements.

As part of the overall monitoring of the CCTs, sample checks will be conducted by the Group’s internal audit department at least annually on, among other things, the pricing, payment terms and the utilization of the Annual Caps. In addition, the CCTs will be subject to annual review by the independent non-executive Directors and the auditors of the Company of their terms and the Annual Caps, and the Company is required to report the findings of such annual review in its annual report in compliance with the GEM Listing Rules.

(IV) GEM LISTING RULES IMPLICATIONS

The Acquisition constitutes a very substantial acquisition for the Company under Chapter 19 of the GEM Listing Rules and is subject to the reporting, announcement and Shareholders’ approval requirements.

Ali Fortune, the controlling shareholder of the Company holding 6,502,723,993 Shares (representing approximately 55.7% of the issued share capital of the Company as at the Latest Practicable Date), is indirectly owned as to 60% and 40% by Alibaba Holding and Ant Holdco respectively. Ant Holdco is indirectly held by Alibaba Holding as to 33% of its equity interest. Alipay is a direct wholly-owned subsidiary, and Alipay Singapore is an indirect wholly-owned subsidiary, of Ant Holdco. Ant Bank is an indirect 66.7%-owned subsidiary of Ant Holdco and its other 33.3% equity interest is held by a 30% indirectly owned associated company of the Company. Ant Holdco and the Alipay Entities are associates of Alibaba Holding. By virtue of the aforesaid relationships, the Alipay Entities are connected persons of the Company, and therefore the Framework Agreement and the transactions contemplated thereunder constitute continuing connected transactions for the Company under Chapter 20 of the GEM Listing Rules. As the Annual Caps will exceed 5% of the relevant applicable percentage ratios and HK$10,000,000 per annum, the Framework Agreement and the transactions contemplated thereunder (including the Annual Caps) will be subject to the reporting, annual review, announcement and Independent Shareholders’ approval requirements under Chapter 20 of the GEM Listing Rules.

LETTER FROM THE BOARD

As (i) Ms. Hu Taoye, Mr. Yang Guang and Mr. Li Faguang are employees of Alibaba Group; (ii) Mr. Sun Ho and Mr. Ji Gang are also directors of Ant Bank; (iii) Mr. Zou Liang is an employee of Ant Group; and (iv) Ms. Monica Maria Nunes is proposed to be appointed as a director of Macau Pass following Closing (subject to Closing and the approval from AMCM), each of these Directors is deemed or may be perceived to have a material interest in the Framework Agreement and the transactions contemplated thereunder (including the Annual Caps), and had therefore abstained from voting on the Board resolution for approval of the Framework Agreement and the transactions contemplated thereunder (including the Annual Caps). Ms. Monica Maria Nunes is also deemed or may be perceived to have a material interest in the Acquisition, and had therefore abstained from voting on the Board resolution for approval of the Agreement and the transactions contemplated thereunder.

In the event that Closing takes place and the proposed appointment of Ms. Monica Maria Nunes as a director of Macau Pass is approved by AMCM, the Company shall appoint a new independent non-executive Director in place of Ms. Monica Maria Nunes to ensure compliance with Rules 5.05, 5.05A and 5.06 of the GEM Listing Rules.

(V) FINANCIAL ADVISER, INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

Optima Capital Limited has been appointed as the financial adviser of the Company in respect of the Agreement, the Framework Agreement and the respective transactions contemplated thereunder. The Independent Board Committee, comprising two independent non-executive Directors, namely Mr. Feng Qing and Dr. Gao Jack Qunyao, has been established to give recommendation to the Independent Shareholders on the terms of the Framework Agreement and the transactions contemplated thereunder (including the Annual Caps). The other independent non-executive Director, Ms. Monica Maria Nunes, is not included as a member of the Independent Board Committee by reason of her potential appointment as a director of Macau Pass following Closing (subject to Closing and the approval from AMCM) as explained above. The Independent Financial Adviser has been appointed to advise the Independent Board Committee and the Independent Shareholders in this regard.

(VI) THE SGM

The SGM will be convened and held at 11:00 a.m. on Thursday, November 18, 2021 at Holiday Inn Express Hong Kong Causeway Bay, Meeting Room I & II, 7/F, 33 Sharp Street East, Causeway Bay, Hong Kong for the Shareholders or the Independent Shareholders (as the case may be) to consider and, if thought fit, pass the resolutions to approve the resolutions in respect of the Agreement and the transactions contemplated thereunder, and the Framework Agreement and the transactions contemplated thereunder (including the Annual Caps). As at the Latest Practicable Date, (i) Ali Fortune was interested in 6,502,723,993 Shares (representing approximately 55.7% of the issued share capital of the Company); (ii) Mr. Sun Ho was interested in 2,052,408,000 Shares (representing approximately 17.58% of the issued share capital in the Company); (iii) Ms. Hu Taoye was interested in 384,000 Shares (representing less than 0.01% of the issued share capital in the Company); and (iv) Ms. Monica Maria Nunes was interested in 1,750,000 Shares (representing approximately 0.015% of the issued share capital in the Company). All of them shall abstain from voting on the resolution(s) in relation to the Framework Agreement and the transactions contemplated thereunder (including the Annual Caps) to be proposed at the SGM. In addition, Ms. Monica Maria Nunes shall abstain from voting on the resolution(s) in relation to the

LETTER FROM THE BOARD

Agreement and the transactions contemplated thereunder to be proposed at the SGM. Mr. Zou Liang, Mr. Ji Gang, Mr. Yang Guang and Mr. Li Faguang did not hold any Shares as at the Latest Practicable Date. Save for the aforesaid, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, no other Shareholder has a material interest in the Agreement and/or the Framework Agreement and is required to abstain from voting on the resolutions to approve the Agreement and the transactions contemplated thereunder or the Framework Agreement and the transactions contemplated thereunder (including the Annual Caps) at the SGM.

The SGM Notice is set out on pages SGM-1 to SGM-2 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 Hong Kong branch share registrar, Tricor Abacus Limited at Level 54, 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 notice of the SGM will be conducted by way of a poll at the SGM as prescribed under the GEM Listing Rules. An announcement on the poll results will be made by the Company after the SGM.

(VII) 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 resolution to approve the Framework Agreement and the transactions contemplated thereunder (including the Annual Caps), and the letter of advice from the Independent Financial Adviser which contains its advice to the Independent Board Committee and the Independent Shareholders regarding the Framework Agreement and the transactions contemplated thereunder (including the Annual Caps).

The Directors (including the independent non-executive Directors whose opinion has been set out in this circular after taking into consideration the advice of the Independent Financial Adviser) are of the view that the transactions contemplated under the Agreement and the Framework Agreement are entered into in the ordinary and usual course of business of the Group, on normal commercial terms after arm’s length negotiations between the parties, and the terms of the Agreement and the Framework Agreement together with the Annual Caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole, and recommend that the Shareholders or the Independent Shareholders (as the case may be) to vote in favor of the resolutions relating thereto at the SGM.

(VIII) ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the appendixes to this circular and the notice of the SGM.

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

Chairman & CEO

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [126 x 39] intentionally omitted <==

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

(incorporated in Bermuda with limited liability)

(Stock Code: 8279)

October 29, 2021

To the Independent Shareholders

Dear Sir or Madam,

POSSIBLE CONTINUING CONNECTED TRANSACTIONS

We refer to the circular dated October 29, 2021 of the Company (the “ Circular ”) of which this letter forms part.

Capitalized terms used in the Circular shall have the same meanings in this letter unless the context otherwise requires.

We have been appointed by the Board to form the Independent Board Committee to advise you in connection with the Framework Agreement and the transactions contemplated thereunder (including the Annual Caps), details of which are set out in the letter from the Board in the Circular.

Opus Capital Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders as to whether the terms of the Framework Agreement (including the Annual Caps) are fair and reasonable and on normal commercial terms or better and whether the entering into of the Framework Agreement and the transactions contemplated thereunder is in the ordinary and usual course of business of the Group and in the interests of the Company and the Shareholders as a whole.

For identification purpose only

IBC-1

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

We wish to draw your attention to the letter from the Board, as set out on pages 8 to 34 of the Circular, and the letter of advice from the Independent Financial Adviser, as set out on pages IFA-1 to IFA-19 of the Circular. Having considered the terms of the Framework Agreement and the Annual Caps and the advice given by the Independent Financial Adviser and the principal factors and reasons taken into consideration by it in arriving at its advice, we are of the opinion that the entering into of the Framework Agreement and the transactions contemplated thereunder is in the ordinary and usual course of business of the Group and in the interests of the Company and the Shareholders as a whole, and the terms of the Framework Agreement and the transactions contemplated thereunder (including the Annual Caps) are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned.

Accordingly, we recommend the Independent Shareholders to vote in favor of the resolution to be proposed at the SGM to approve the Framework Agreement and the transactions contemplated thereunder (including the Annual Caps).

Yours faithfully

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

IBC-2

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of a letter from Opus Capital to the Independent Board Committee and the Independent Shareholders in respect of the Framework Agreement and the transactions contemplated thereunder (including the Annual Caps), which has been prepared for the purpose of inclusion in this circular.

==> picture [37 x 39] intentionally omitted <==

18th Floor, Fung House 19-20 Connaught Road Central Central, Hong Kong October 29, 2021

To: the Independent Board Committee and the Independent Shareholders of AGTech Holdings Limited

Dear Sirs or Madams,

POSSIBLE CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Framework Agreement and the transactions contemplated thereunder (including the Annual Caps), details of which are set out in the letter from the Board (the “ Letter from the Board ”) contained in the circular of AGTech Holdings Limited (the “ Company ”, together with its subsidiaries, the “ Group ”) dated October 29, 2021 (the “ Circular ”), of which this letter forms part. Capitalized terms used in this letter shall have the same meanings as those defined in the Circular unless the context requires otherwise.

As set out in the Letter from the Board, the Acquisition represents a vertical integration opportunity to consolidate the Target Group’s business, as a leading mobile e-wallet acquirer in Macau. Macau Pass provides acquiring services to merchants which enable merchants to accept different payment methods of other payment service providers, including but not limited to the “Alipay” e-wallet, the “AlipayHK” e-wallet and Ant Bank’s “Alipay (Macao)” e-wallet (collectively, the “ Alipay E-Wallet(s) ”) operated by the Alipay Entities and/or their affiliate(s), WeChat Pay and other e-wallets launched by certain other banks in Macau (collectively, the “ Other Payment Service Providers ”). This acquiring service benefits the merchants as it provides flexibility to customers of the merchants who may choose their preferred payment platforms at checkout. The application of such integrated payment system is also extended to self-service kiosks or vending machines of merchants. In consideration of Macau Pass providing such acquiring services, Macau Pass receives commission income (based on a percentage of the transaction value) from merchants for processing payment of the transactions and pays a portion of such commission (based on a percentage lower than the commission rate of the transaction value) as service fees (the “ Service Fees ”) to the Other Payment Service Providers. Besides Service Fees, in case of payments involving cross-border transactions and depending on respective arrangements between Macau Pass and the Other Payment Service Providers, Macau Pass may also receive foreign exchange conversion income from certain Other Payment Service Providers.

IFA-1

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The SGM will be convened and held by the Company to consider and, if thought fit, approve the resolutions in respect of, among others, the Framework Agreement and the transactions contemplated thereunder (including the Annual Caps). As at the Latest Practicable Date, (i) Ali Fortune was interested in 6,502,723,993 Shares (representing approximately 55.7% of the issued share capital of the Company); (ii) Mr. Sun Ho was interested in 2,052,408,000 Shares (representing approximately 17.58% of the issued share capital in the Company); (iii) Ms. Hu Taoye was interested in 384,000 Shares (representing less than 0.01% of the issued share capital in the Company); and (iv) Ms. Monica Maria Nunes was interested in 1,750,000 Shares (representing approximately 0.015% of the issued share capital in the Company). All of them shall abstain from voting on the resolutions in relation to, among others, the Framework Agreement and the transactions contemplated thereunder (including the Annual Caps) to be proposed at the SGM.

Save for the aforesaid, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, no other Shareholder has a material interest in, among others, the Framework Agreement and is required to abstain from voting on the resolutions to approve the resolutions in respect of, among others, the Framework Agreement and the transactions contemplated thereunder (including the Annual Caps) at the SGM.

IFA-2

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

THE INDEPENDENT BOARD COMMITTEE

The Independent Board Committee comprising two independent non-executive Directors, namely Mr. Feng Qing and Dr. Gao Jack Qunyao, has been established to give recommendation to the Independent Shareholders in connection with the Framework Agreement and the transactions contemplated thereunder (including the Annual Caps). We have been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in the same regard.

OUR INDEPENDENCE

We were appointed as the independent financial adviser to advise the independent board committee and the independent shareholders of (i) Alibaba Pictures Group Limited (stock code: 1060) (“ Alibaba Pictures ”), a listed subsidiary of Alibaba Holding, in respect of the revision of certain terms for certain continuing connected transactions, details of such transaction are set out in the circular of Alibaba Pictures dated January 21, 2021; (ii) Alibaba Health Information Technology Limited (stock code: 241) (“ Alibaba Health ”), a listed subsidiary of Alibaba Holding, in respect of (a) the revision of an existing annual cap, details of such transaction are set out in the circular of Alibaba Health dated February 8, 2021 and (b) the renewal of certain continuing connected transactions, details of such transaction are set out in the circular of Alibaba Health dated March 8, 2021 (collectively, the “ Past Appointments ”). The Past Appointments are independent of this current appointment with the Company.

As at the Latest Practicable Date, save for the aforementioned, we did not have any relationship with, or interest in, the Company, the Group, Alibaba Holding, Alipay Entities or other parties that could reasonably be regarded as relevant to our independence. During the two years immediately prior to this letter, we have not acted as an independent financial adviser to the Company. Apart from the normal professional fees paid or payable to us in connection with the Past Appointments and the current appointment as the Independent Financial Adviser, no arrangements exist whereby we had received or will receive any fees or benefits from the Company, the Group, Alibaba Holding, Alipay Entities or other parties that could reasonably be regarded as relevant to our independence. Accordingly, we consider that we are independent pursuant to Rule 17.96 of the GEM Listing Rules.

BASIS OF OUR OPINION

In formulating our advice and recommendation to the Independent Board Committee and the Independent Shareholders, we have reviewed, amongst other things:

(i) the Framework Agreement;
(ii) the annual report of the Company for the year ended December 31 (“ FY ”), 2020 (the “ 2020 Annual Report ”);
(iii) the interim report of the Company for the six months ended June 30 (“ 1H ”), 2021 (the “ 2021 Interim Report ”);

IFA-3

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(iv) the Circular; and
(v) other information as set out in the Circular.

We have relied on the truth, accuracy and completeness of the statements, information, opinions and representations contained or referred to in the Circular and the information and representations made to us by the Company, the Directors and/or the management of the Group (collectively, the “ Management ”). We have assumed that all information and representations contained or referred to in the Circular and provided to us by the Management, for which they are solely and wholly responsible, are true, accurate and complete in all respects and not misleading or deceptive at the time when they were provided or made and will continue to be so up to the Latest Practicable Date. The Shareholders will be notified of material changes as soon as possible, if any, to the information and representations provided and made to us after the Latest Practicable Date and up to and including the date of the SGM.

We have also assumed that all statements of belief, opinion, expectation and intention made by the Management in the Circular were reasonably made after due enquiries and careful consideration and there are no other facts not contained in the Circular, the omission of which make any such statement contained in the Circular misleading. We have no reason to suspect that any relevant information has been withheld, or to doubt the truth, accuracy and completeness of the information and facts contained in the Circular, or the reasonableness of the opinions expressed by the Management, which have been provided to us.

We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. However, we have not carried out any independent verification of the information provided by the Management, nor have we conducted any independent investigation into the business, financial conditions and affairs of the Group or its future prospects.

The Directors jointly and severally accept full responsibility for the accuracy of the information disclosed and confirm, having made all reasonable enquiries that to the best of their knowledge and belief, there are no other facts not contained in this letter, the omission of which would make any statement herein misleading.

This letter is issued to the Independent Board Committee and the Independent Shareholders solely for their consideration of the Framework Agreement and the transactions contemplated thereunder (including the Annual Caps), and except for its inclusion in the Circular, is not to be quoted or referred to, in whole or in part, nor shall this letter be used for any other purposes without our prior written consent.

IFA-4

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion and recommendation to the Independent Board Committee and the Independent Shareholders, we have taken into consideration, inter alia, the following principal factors and reasons:

1. Background of the Framework Agreement

As disclosed in the Letter from the Board, Macau Pass provides acquiring services to merchants enabling them to accept, among others, the Alipay E-Wallet(s), such that their customers may choose their preferred payment platforms at checkout. Macau Pass receives commission income (based on a percentage of the transaction value) from the merchants for processing payment of the transactions and pays a portion of such commission as the Service Fees (which is set at a lower percentage of the transaction value) to the other payment platforms such as the Alipay Entities. As Macau Pass shall become a wholly-owned subsidiary of the Company upon Closing, the aforesaid payment of Service Fees by Macau Pass to the Alipay Entities in respect of its acquiring services shall constitute continuing connected transactions for the Company under Chapter 20 of the GEM Listing Rules upon Closing. To ensure that such existing business cooperation between Macau Pass and the Alipay Entities will comply with the requirements of the GEM Listing Rules with effect from Closing, on September 10, 2021, the Company entered into the Framework Agreement with the the Alipay Entities to set out the terms and conditions of the future business cooperation (in respect of Macau Pass acquiring services) between Macau Pass and the Alipay Entities subject to and with effect from Closing.

The principal terms of the Framework Agreement together with our analysis of same are set out in the section headed “4. Principal terms of the Framework Agreement” below.

2. Information about the parties

The Group

The Group is an integrated technology and services company engaged in the lottery and mobile games and entertainment market with a focus on China and selected international markets. Since the first half of 2021, the Group has also commenced to supply non-lottery hardware products (such as point-of-sale terminals) for use in the retail sector in the PRC.

Apart from its principal businesses in the PRC, the Group has also pursued strategic business expansion overseas and holds investments in (i) Paytm First Games Private Limited which operates a mobile non-lottery games and entertainment platform in India, namely “Paytm First Games”, and (ii) Ant Bank which focuses on providing mobile payment services (i.e. e-wallet services) and financial banking services such as deposit, loan and remittance services to residents and small and medium-sized enterprises in Macau.

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The Target Group

The Target is an investment holding company with two operating subsidiaries, namely Macau Pass and the PRC Company. Macau Pass is the principal operating company of the Target Group while the PRC Company primarily acts as the technology and product development centre to support the business and development of Macau Pass.

Macau Pass is a leading payment service provider in Macau and is an “other credit institution” licensed under the AMCM. It was incorporated in 2005 with initial focus on operating physical payment card services via “Macau Pass Cards” (the “ MP Card(s) ”) in Macau, which was later gradually expanded into other payment related businesses such as e-wallet and acquiring services.

Macau Pass currently operates four principal lines of business: (i) physical payment card services and ancillary services; (ii) e-wallet services; (iii) acquiring services and (iv) sale and leasing of payment terminals and equipment. Details of which can be referred to in the section headed “Information on the Target Group” in the Letter from the Board.

The details of the group structure of the Target Group as at the Latest Practicable Date and immediately after Closing can be referred to in the section headed “Information on the Target Group” in the Letter from the Board.

Alipay Entities

Alipay Singapore, via its operating subsidiaries, is principally engaged in the provision of cross-border digital payment and merchant acquiring services.

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3. Reasons for and benefits of entering into of the Framework Agreement

We note that Macau Pass is a leading mobile wallet acquirer in Macau. As stated in the Letter from the Board, it is one of the principal activities of Macau Pass to provide acquiring services to merchants to enable them to accept payments made via different payment methods of other payment service providers, including the Alipay E-Wallets. Certain continuing Service Fees were also paid by Macau Pass in its ordinary and usual course of business to the Alipay Entities during FY2018, FY2019, FY2020 and 1H2021. Given the increasing usage of digital payment by customers in Macau with Alipay E-Wallets operated by the Alipay Entities which is a popular payment option, the entering into the Framework Agreement enables the Enlarged Group to continue its business relationships with the Alipay Entities in compliance with the GEM Listing Rules.

As stated in the Letter from the Board, one of the benefits of the Acquisition is that it represents an opportunity to consolidate the Target Group’s business, as a leading mobile e-wallet acquirer in Macau which provides acquiring services for, among others, Alipay E-Wallets payment service, thereby capturing additional source of revenue along the supply chain of mobile e-wallet payment services. This business segment of providing acquiring services for e-wallets generated revenue in the form of commission income payable by the merchants to the Target Group of approximately HK$54.5 million, HK$86.0 million, HK$48.6 million and HK$72.6 million during FY2018, FY2019, FY2020 and 1H2021. The payment of the Service Fees to Alipay Entities for processing payment of the transactions is part of the business model of providing acquiring services and of market customs. This entails the acquiring service providers paying a portion of such commission income to the e-wallet payment platforms as service fees (which is set at a lower percentage of the transaction value compared to the commission income charged to the merchants).

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Given (i) that the provision of acquiring services has always been one of the principal business activities of Macau Pass, which following Closing would also become a principal business activity of the Enlarged Group; (ii) the long history of collaboration between Macau Pass and the Alipay Entities; (iii) one of the benefits sought by the Acquisition is to achieve a vertical integration to consolidate the Target Group’s business, as a leading mobile e-wallet acquirer in Macau which provides acquiring services for, among others, Alipay E-Wallets payment service, thereby capturing additional source of revenue along the supply chain of mobile e-wallet payment services; and (iv) that the payment of the Service Fees to Alipay Entities for processing payment of the transactions is part of the business model of providing acquiring services and is in line with market practices, we are of the view that the entering into of the Framework Agreements is in the ordinary and usual course of business of the Group following Closing and in the interests of the Company and the Shareholders as a whole.

4. Principal terms of the Framework Agreement

Summaries of the principal terms of the Framework Agreement are set out below.

Date: September 10, 2021

Parties: (1) The Company (for itself and on behalf of its subsidiaries);
(2) Alipay (for itself and on behalf of its subsidiaries and affiliates);
(3) Alipay Singapore (for itself and on behalf of its subsidiaries and affiliates); and
(4) Ant Bank (for itself and on behalf of its subsidiaries and affiliates).

Duration and conditions precedent:

(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 Framework Agreement and the transactions contemplated thereunder (including the Annual Caps) in accordance with the GEM Listing Rules;

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(b) each of the Company and Alipay Entities having complied with all requirements as may be imposed by the relevant regulatory authorities (including the Stock Exchange) in relation to the Framework Agreement and the transactions contemplated thereunder, if any, and having obtained all authorizations, approvals and permits necessary for the performance of its respective obligations under the Framework Agreement and the transactions contemplated thereunder in accordance with all applicable legal and regulatory requirements (including the GEM Listing Rules; and
(c) the Group entering into the Agreement with the Target Group and the Sellers, and Closing having taken place in respect of the Agreement.

Acquiring service business cooperation:

The operating entities of the Alipay Entities and the Target Group (i.e. Macau Pass) shall carry out their business cooperation in accordance with the Specific Execution Agreements (as defined below) which shall set out their respective rights and obligations under such cooperation.
Macau Pass shall provide acquiring services to the merchants (the “ MP Merchants ”) via Macau Pass payment terminals, merchant QR code or online payment gateway, enabling the MP Merchants to accept different third-party payment platforms including but not limited to the Alipay E-Wallets.
The Alipay Entities shall provide the services of processing, authorization and settlement of payments made by users via the Alipay E-Wallets and such services shall include transactions initiated by either:
(i) the MP Merchants scanning the barcode or QR code generated in the relevant Alipay E-Wallet app installed on the users’ smartphones (or portable devices) with the point-of-sale terminals or app of the MP Merchants; or
(ii) the users scanning the barcode or QR code displayed at the MP Merchants using the scanning feature in the relevant Alipay E-Wallet app installed on the users’ smartphones (or portable devices).

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For the purposes of setting out detailed terms of execution of the continuing connected transactions (the “ CCTs ”) contemplated under the Framework Agreement, the operating entities designated by the Enlarged Group (i.e. Macau Pass) and the Alipay Entities to implement the business cooperation contemplated under such master framework agreement may from time to time enter into specific execution agreements (or supplemental agreements thereto) (collectively, the “ Specific Execution Agreements ”) which set out the detailed terms of execution in relation to the provision of acquiring services in accordance with the broad terms agreed in the Framework Agreement. The terms of the Specific Execution Agreements are expected to include, but not limit to:
(i) details of the business cooperation and responsibilities of each party;
(ii) the Service Fees payable by Macau Pass to the Alipay Entities;
(iii) the fund settlement process adopted by the Alipay Entities;
(iv) where applicable, any designated payment scenarios (such as vending machines, self-service kiosks, car parks, parking meters etc.) which are agreed to be included in the scope of the business cooperation;
(v) the right of the Alipay Entities to suspend or terminate their services if certain features of their services may be subject to a high risk of unauthorized payments or fraudulent transactions by a MP Merchant;
(vi) the obligations of each party to comply with applicable laws for the operation of its business and the performance of its obligations under the Specific Execution Agreements, including laws on anti-corruption, anti-money laundering, counter-terrorism financing and sanctions;
(vii) protection of personal information privacy;
(viii) confidentiality obligations of each party; and
(ix) governing law for the Specific Execution Agreements and dispute resolutions.

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The pricing and other terms of the Specific Execution Agreements shall be negotiated on an arm’s length basis between the parties thereto and shall be determined in accordance with the pricing policy set out in the paragraph headed “Pricing policy and payment terms” below and the Annual Caps set out in the section headed “6. Historical amounts of the Service Fees and the Annual Caps” below.

Pricing policy and payment terms

As a general principle, the pricing and other terms of the Framework Agreement and the Specific Execution Agreements in respect of the acquiring services of Macau Pass shall be determined in the ordinary and usual course of business on normal commercial terms (as defined under the GEM Listing Rules) and shall be negotiated on an arm’s length basis between the parties thereto. The pricing for the Service Fees payable by Macau Pass to the Alipay Entities shall be based on fixed percentages of the transaction value processed under the Specific Execution Agreements which shall be within the normal range of such fees paid by Macau Pass in respect of its acquiring services to 13 other payment service providers which are third parties independent of Macau Pass and its connected persons (which is currently in the region of 0.5% to 1.8% of the transaction value for processing payment of the transactions) (the “ Normal Fee Range ”), and shall be determined with reference to various factors, including the industries of the merchants involved, the monthly transaction volume processed through Macau Pass and whether the transactions are online or offline. Such pricing shall be set out clearly in the Specific Execution Agreements. Following Closing, the Enlarged Group intends to continue to observe the existing Normal Fee Range under the Framework Agreement and the Specific Execution Agreements during their entire durations. The terms offered by Macau Pass to the Alipay Entities should be in line with and not more favorable than those offered to other payment service providers which are third parties independent of Macau Pass and its connected persons.

Where the Alipay Entities offer any concession on the Service Fees to other independent third-party acquirers in respect of similar transactions, they shall offer the same or no less favorable concession to Macau Pass.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We understand from the discussion with the Management that in determining the Service Fees payable to the Alipay Entities they have taken into consideration factors such as the normal range of such fees paid by Macau Pass in respect of its acquiring services provided to other payment platforms which are third parties independent of Macau Pass and its connected persons and market practices of charging for acquiring services.

Based on our discussion with the Management, we understand that Macau Pass has all along been appointed to provide acquiring services for the Alipay Entities, which services were governed under a set of historical specific execution agreements. We note that the historical specific execution agreements will likely subsist following Closing and hence will continue to govern what service fee rates are to be payable by Macau Pass to the Alipay Entities following Closing. As such, we consider that the review of the current and unexpired specific execution agreements entered into between Macau Pass and: (i) the Alipay Entities; and (ii) other payment platforms which are third parties independent of Macau Pass and its connected persons serve as a good reference for assessing whether the pricing terms are of normal commercial terms.

Firstly, we have obtained all the current and unexpired specific execution agreements entered into between Macau Pass and each of the Alipay Entities or its affiliate (as the case may be) (the “ Executed Alipay Agreements ”). These are all the Executed Alipay Agreements entered into between Macau Pass with all three of the Alipay Entities (i.e. Alipay, Alipay Singapore’s subsidiary and Ant Bank). We note that (i) the Executed Alipay Agreements carry the detailed terms as set out in the sub-paragraph 4 under the paragraph headed “Acquiring service business cooperation” above; and (ii) these detailed terms are in line with those set out in the Framework Agreement.

Secondly, we have, on a random basis, obtained and reviewed current and unexpired specific execution agreements entered into between other payment platforms which are third parties independent of Macau Pass and its connected persons in relation to offline transactions (the “ Sample Offline Executed I3P Agreements ”). These are the respective specific execution agreements entered into between Macau Pass with four out of a total of ten independent third-party payment platforms. After reviewing the Sample Offline Executed I3P Agreements, we note that the service fees payable by Macau Pass thereunder is within the Normal Fee Range, and other terms set out in the relevant Executed Alipay Agreements are comparable with those set out in the Sample Offline Executed I3P Agreements.

Thirdly, we understand that all the current and unexpired specific execution agreements in relation to online transactions were entered into between one payment platform which is a third party independent of Macau Pass and its connected persons (the “ Sample Online Executed I3P Agreements ”) and there was only one Executed Alipay Agreement in relation to online transactions. After reviewing the Sample Online Executed I3P Agreements, we note that the service fees payable by Macau Pass thereunder is within the Normal Fee Range, and other terms set out in the relevant Executed Alipay Agreement are comparable with those set out in the Sample Online Executed I3P Agreements.

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Lastly but not least, given the lack of Sample Online Executed I3P Agreements as all specific execution agreements were entered into with only one independent third-party payment platform in respect of online transactions, as an additional due diligence procedure, we have enquired and received confirmation from Alipay through the Management that the service fees for acquiring services in respect of online transactions currently charged by Alipay to the other independent third party acquirers in Macau are the same as those currently charged to Macau Pass.

Having considered (i) the pricing and other terms of the Framework Agreement and the Specific Execution Agreements in respect of the provision of acquiring services of Macau Pass shall be determined in the ordinary and usual course of business on normal commercial terms (as defined under the GEM Listing Rules) and shall be negotiated on an arm’s length basis; (ii) the terms offered by Macau Pass to the Alipay Entities should be in line with and not more favourable than those offered to other payment platforms which are third parties independent of Macau Pass and its connected persons or the terms offered by the Alipay Entities to other acquiring services providers in Macau which are independent of Macau Pass and its connected persons are in line with and not more favourable than those offered to Macau Pass; (iii) where the Alipay Entities offer any concession on the Service Fees to other independent third-party acquirers in respect of similar transactions, they shall offer the same concession to Macau Pass; (iv) the detailed terms of the Specific Execution Agreements and the Executed Alipay Agreements are in line with those principal terms set out in the Framework Agreement; (v) the service fees payable by Macau Pass under the Sample Offline Executed I3P Agreements and the Executed Alipay Agreements are within the Normal Fee Range; (vi) the service fees payable by Macau Pass under the Sample Online Executed I3P Agreements and the Executed Alipay Agreements are within the Normal Fee Range; (vii) we have received confirmation from Alipay through the Management that the service fees for acquiring services in respect of online transactions currently charged by Alipay to the other independent third-party acquirers in Macau are the same as those currently charged to Macau Pass; and (viii) the Group’s internal control measures to be discussed in the section headed “5. Internal control measures” below, we consider the terms of the Framework Agreement to be on normal commercial terms and fair and reasonable as far as the Independent Shareholders are concerned.

5. Internal control measures

As disclosed in the Letter from the Board, following Closing, the relevant team responsible for negotiating the terms of business cooperation with the Alipay Entities should submit the draft Specific Execution Agreement for review and approval by the Company’s chief financial officer who will check the terms of such business cooperation with reference to, among other things, the factors considered in determining the pricing and payment terms of the CCTs to ensure that the pricing and other terms of the CCTs are determined in accordance with the pricing policy and the terms set out in the Specific Execution Agreement are (i) in line with and not more favorable to the Alipay Entities than those offered by Macau Pass to other payment service providers which are third parties independent of Macau Pass and its connected persons; or (ii) in line with and not less favourable to Macau Pass than those offered by the Alipay Entities to other acquiring services providers which are independent of Macau Pass and its connected persons.

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In addition, the Group (including Macau Pass) will from time to time (i.e. on an annual basis and when the Group enters into or renews specific execution agreements) review the pricing and other terms of the Service Fees by comparing them against the services fees and other terms in respect of Macau Pass acquiring services payable by Macau Pass to other independent third-party payment platforms for comparable services. When other independent third-party payment platforms revise the fees charged to Macau Pass and if such revised fees fall outside the abovementioned existing Normal Fee Range, this may prompt Macau Pass to revisit the Services Fees under the Specific Execution Agreements and see if any adjustments to the Services Fees would be required when entering into or renewing Specific Execution Agreements. The business and finance department of the Company will also conduct market researches under the same time intervals, which may include obtaining the market information on the service fees payable by other acquiring services providers to other payment service providers comparable to the Alipay Entities to ensure that the pricing basis of the Service Fees is in line with normal market practices and no more favorable to the Alipay Entities than those available to independent third-party payment platforms under the same or similar conditions.

Furthermore, the Group has internal controls in place to monitor the utilization of the Annual Caps which require the submission of monthly reports on the accumulated amounts of the CCTs by the finance team to the Company’s chief financial officer, the company secretary and the internal auditor. The company secretary shall promptly liaise with the business team as and when any of the Annual Caps has been 70% utilized in order to agree and implement measures to control and avoid exceeding any of the Annual Caps. The Framework Agreement includes a customary provision pursuant to which the Alipay Entities shall generally allow the auditors of the Company access to information necessary to report on the CCTs. The parties to the Framework Agreement have also agreed that they must abide by the GEM Listing Rules when performing their obligations under the terms of the Framework Agreement, including but not limited to the Annual Caps of the Service Fees payable by Macau Pass to the Alipay Entities as set out in the announcement or circular issued by the Company in accordance with the GEM Listing Rules. If the accumulated amounts of the CCTs are about to exceed the Annual Caps which will result in the Enlarged Group (including Macau Pass) being unable to perform its contractual obligations stipulated under the terms of the Framework Agreement and/or the Specific Execution Agreements (as the case may be), the Enlarged Group (including Macau Pass) shall be allowed to temporarily suspend the performance of its contractual obligations stipulated in such agreements until the Enlarged Group (including Macau Pass) complies with the GEM Listing Rules (including obtaining approval of the revised annual cap amount(s) for the CCTs), and such temporary suspension shall not constitute a breach of any provisions of such agreements by the Enlarged Group (including Macau Pass). The Company and the Alipay Entities have also agreed to amend or update the relevant terms of the Framework Agreement and/or the Specific Execution Agreements (as the case may be) in response to any future amendments to the GEM Listing Rules in respect of connected transaction requirements.

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We have obtained and reviewed the internal control guideline in relation to connected transactions of the Group (the “ IC Guideline ”) and noted that the internal control procedures are in line with those as set in the Letter from the Board (the “ IC Procedures ”).

From the IC Procedures, we note that, for the execution level, the Management will check to ensure that the terms offered by Macau Pass to the Alipay Entities are in line with and not more favorable than those offered to other payment service providers which are third parties independent of Macau Pass and its connected persons. The finance department will also regularly review the pricing basis of the Service Fees and monitor the utilization of the Annual Caps. For the Board level, the CCTs will be subject to annual review by the independent non-executive Directors. We have obtained the annual review record by the independent non-executive Directors on the continuing connected transactions conducted by the Group for FY2020 and noted that the independent non-executive Directors confirmed that the continuing connected transactions conducted by the Group in FY2020 were conducted in the ordinary and usual course of business of the Group, on normal commercial terms or better and the terms were fair and reasonable and in the interests of Shareholders as a whole. For the expert level, independent auditors conducted an annual review on the CCTs for FY2020.

For our due diligence purpose, we have also discussed with Management and understood that the Management is aware of the IC Procedures and will comply with IC Procedures when conducting the transactions contemplated under the Framework Agreement after Closing.

Given (i) the existence of such three layers (i.e. execution level, Board level and expert level) of the IC Procedures in place; and (ii) the Management is aware of the IC Procedures and will comply with IC Procedures when conducting the transactions contemplated under the Framework Agreement after Closing, we concur with the Company that it has adopted adequate internal control measures to comply with the GEM Listing Rules requirements with respect to (i) the supervision and monitoring of the Annual Caps of the transactions contemplated under the Framework Agreement; and (ii) ensuring that the relevant continuing connected transactions will be conducted in accordance with the pricing policies set out in the Framework Agreement.

6. Historical amounts of the Service Fees and the Annual Caps

Set out in the table below were the unaudited historical amounts of the Service Fees paid by Macau Pass to the Alipay Entities for FY2018, FY2019, FY2020 and 1H2021 (collectively, the “ Track Record Period ”):

Table 1: Historical amounts of the Service Fees

FY2018	FY2019	FY2020	1H2021
HK$’000	HK$’000	HK$’000	HK$’000
29,905	46,808	28,408	43,557

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The increase in Service Fees paid by Macau Pass to the Alipay Entities for FY2019 was in line with the increase in acquiring service revenue of Macau Pass for such year, which was attributable to a number of factors including (i) Macau Pass’ strengthened publicity and promotional efforts; (ii) enhanced functionalities of Macau Pass’ electronic and mobile payment applications to cater for different consumption patterns; and (iii) the year-on-year increase of approximately 10.1% in the number of visitor arrivals to approximately 39,406,000 in Macau in 2019 according to the data released by the Statistics and Census Service of the Government of Macau (the “ DSEC ”).

The decrease in Service Fees paid by Macau Pass to the Alipay Entities for FY2020 was mainly attributable to the decrease in revenue from the acquiring services of Macau Pass, which was affected by the outbreak of COVID-19 pandemic (the “ Pandemic ”) in early 2020 and the associated closure of border of Macau resulting in a decline in visitors spending.

The increase in Service Fees paid by Macau Pass to the Alipay Entities for 1H2021 was attributable to the surge in revenue from the acquiring services of Macau Pass, primarily as a result of (i) the Pandemic being kept under control in Macau; (ii) the re-opening of the border between Macau and the PRC since the third quarter of 2020 and the gradual recovery of tourist activities in Macau, and (iii) the expansion of the network of merchants in Macau by Macau Pass.

The table below sets forth the Annual Caps for the Service Fees payable by Macau Pass to the Alipay Entities under the Framework Agreement for the period commencing from the Effective Date and ending on December 31 (the “ Remaining FY2021 ”), 2021, FY2022 and FY2023:

Table 2: Annual Caps for the Service Fees

Remaining FY2021	FY2022	FY2023
HK$’000	HK$’000	HK$’000
27,000	95,000	100,000

Basis of determining the Annual Caps

As stated in the Letter from the Board, the Annual Caps for the Service Fees are determined mainly with reference to the projected amounts of payment transactions processed through the acquiring services provided by Macau Pass for the Alipay Entities which are estimated after taking into account factors including (i) the historical figures of the number and value of the online and offline transactions processed through the acquiring services provided by Macau Pass to merchants for accepting the Alipay E-Wallets during the Track Record Period; (ii) the Service Fee rates charged by the Alipay Entities to Macau Pass; (iii) the estimated growth in the number and value of the transactions processed through the acquiring services provided by Macau Pass to merchants for accepting the Alipay E-Wallets in light of (a) the resumption of tourists’ activities in Macau as the Pandemic has been kept under control in the city; (b) the expansion of its network of merchants by Macau Pass in Macau; (c) the increase in per capita consumption of mainland Chinese tourists in Macau; and (d) the competition of acquiring services provided by other acquirers and banks in Macau.

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7. Our analysis on the Annual Caps

In assessing the fairness and reasonableness of the Annual Caps, we first considered the historical amounts of the Service Fees.

According to Table 1 above, we note that the historical amounts of the Service Fees during 1H2021 amounted to approximately HK$43.6 million which was significantly higher than the historical amounts of the Service Fees for the corresponding periods in FY2018, FY2019 and FY2020. As advised by the Management, such an increase was due to Macau Pass business fell into a trough during the Pandemic from February to July 2020, and beginning from August 2020 after the re-opening of border policy, the Macau Pass acquiring business recovered remarkably, which had benefited from Macau being the only tourist area that does not need two-way compulsory quarantine for mainland Chinese tourists. According to the DSEC, because of the travel restrictions, the number of visitor arrivals decreased to 5,897,000 in 2020 from 39,406,000 in 2019, represented a year-on-year (“ YoY ”) decrease of approximately 85%. Also, the total spending of visitors dropped by approximately 81.4% from approximately MOP64,077 million in 2019 to approximately MOP11,938 million in 2020. With the gradual ease of travel restrictions as well as the implementation of measures to fight against the Pandemic, Macau’s economy is expected to recover gradually in 2021. According to the International Monetary Fund, the real gross domestic product growth rate of Macau could reach approximately 61.2% in 2021. Meanwhile, according to the DSEC, the YoY increase of the total spending of visitors (excluding gaming expenses) in the 1st quarter of 2021 was approximately 23.5%. As advised by the Management, there has always been seasonal effects throughout the year. While there were Chinese New Year, Labour Day and Tuen Ng Festival in the first half of 2021, there will be Mid-Autumn Festival, National Day and Christmas in the second half of 2021. As such, the historical amounts of the Service Fees during 1H2021 can be a relevant indicator for an estimation of the transaction amount of the Service Fees for FY2022 and the years beyond. Should the historical amounts of the Service Fees during 1H2021 be annualized, it would amount to approximately HK$87.2 million which is comparable to the Annual Caps of FY2022 and FY2023 of HK$95 million and HK$100 million respectively.

As further advised by the Management, the typical peak sales season of the year for Macau Pass would be November and December. We have obtained from the Management the historical monthly Service Fees paid by Macau Pass to Alipay Entities through the provision of acquiring services for FY2018, FY2019 and FY2020 and note that in a typical year, November and December’s average monthly Service Fees during this period was approximately 84.2% (the “ End-of-the-Year Seasonality Factor ”) more than the average monthly Service Fees for the other months (i.e. January to October) during the years under review. Therefore, given that the historical amounts of the Service Fees during 1H2021 amounted to approximately HK$43.6 million, the prorated Service Fees for November and December 2021 would be approximately HK$14.5 million (before taking into account the End-of-theYear Seasonality Factor). By also taking into account the End-of-the-Year Seasonality Factor, the Service Fees for November and December 2021, which are estimated to be the relevant period of the Remaining FY2021, could well be adjusted to approximately HK$26.7 million, which is very close to the Annual Cap for the Remaining FY2021 of HK$27.0 million.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

To further assess the fairness and reasonableness of the Annual Caps, we have obtained and reviewed the calculation worksheet of the Annual Caps. It was noted that the Annual Caps were determined based on the historical number and value of the online and offline transactions processed through the acquiring services provided by Macau Pass to merchants for accepting the Alipay E-Wallets (the “ Online and Offline Transaction(s) ”) during the Track Record Period. Then, we noted that the number of the Online and Offline Transactions adopted in the estimation of the Annual Cap for the Remaining FY2021 made reference to the actual number of the Online and Offline Transactions for the first quarter of 2021 (“ Q1 2021 ”) with a 15% estimated decrease over Q1 2021 for the third quarter of 2021 (“ Q3 2021 ”) and a 10% estimated growth over Q1 2021 for the fourth quarter of 2021 (“ Q4 2021 ”); while the per-transaction value of the Online and Offline Transactions adopted in the estimation of the Annual Cap for the Remaining FY2021 made reference to the actual per-transaction value of the Online and Offline Transactions for Q1 2021 and the second quarter of 2021 (“ Q2 2021 ”) for Q4 2021 and Q3 2021 respectively without any increment. As advised by the Management and indicated in the relevant calculation worksheet, the aforesaid 10% increment over Q1 2021 for Q4 2021 in the number of the Online and Offline Transactions was adopted after considering the expected resumption of tourism activities in Macau as Macau gradually recovered from the Pandemic in 2021 and in view of the long holidays for the PRC’s National Day and Christmas in Q4 2021; whereas the assumption that the aforesaid per-transaction value of Q1 2021 and Q2 2021 can be maintained at the same levels in Q4 2021 and Q3 2021 is due to the increase in average per capita spending of visitors in Macau in 2021 as compared to that in 2020. As noted from the data released by the DSEC, there were less than 5.9 million visitor arrivals in Macau for 2020 while there were already more than 3.9 million visitor arrivals in Macau during the first half of 2021. In Q2 2021, there were approximately 2.2 million visitor arrivals in Macau, representing a YoY increase of approximately 4.3 times. Further, the per capita spending of visitors in Macau was more than MOP3,250 in the first half of 2021 while it was less than MOP3,150 in the second half of 2020. Indeed, the actual per-transaction value of the offline transactions for Alipay processed by Macau Pass in Q1 2021 has increased by approximately 84.7% over that in 2020. As such, we agree that, in view of (i) the expected resumption of tourism activities in Macau as it gradually recovered from the Pandemic in 2021; and (ii) the forthcoming long holidays for the PRC’s National Day and Christmas in Q4 2021, the adoption of the estimated increase in average per capita spending of visitors in Macau in 2021 as compared to that in 2020 in the calculation worksheet for Q4 2021 is fair and reasonable.

From the review of the calculation worksheet, it was noted that the Annual Cap for FY2022 was based on: (i) the number of the Online and Offline Transactions for FY2021 with a 5% increment; (ii) the per-transaction value of the offline transactions for FY2021 with a 5% increment; and (iii) the per-transaction value of the online transactions for FY2021 without any increment. As advised by the Management, it is expected that the tourism activities in Macau may further improve in 2022 as Macau will recover further from the Pandemic in view of the increase in the city’s vaccination rates. As such, a mild 5% increment was adopted in both the number of transactions and per-transaction value for offline transactions (physical visit) while there is only a mild 5% increment in the number of transactions but no increment in the per-transaction value for online transactions. Considering that the penetration of e-payment in Macau merchants has reached a relatively high level in 2021 and there are other acquirers providing the Alipay Entities with acquiring services, the Management considers that the per-transaction value and the number of transactions of tourists have increased to a relative high level in Q1 2021 after the recovery of tourism, and estimates that the overall volume of online and offline transactions processed by Macau Pass between 2021 and 2022 will also grow modestly.

IFA-18

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

From the review of the calculation worksheet, it was noted that the Annual Cap for FY2023 was based on: (i) the number of the offline transactions for FY2022 without any increment; (ii) the per-transaction value of the offline transactions for FY2021 with a 5% increment; and (iii) the number of the online transactions for FY2021 with a 5% increment; and (iv) the per-transaction value of the online transactions for FY2021 without any increment. As advised by the Management, it is expected that the tourism in Macau may be relatively stable in 2023 as visitors (especially mainland Chinese tourists) may have other destinations for travel other than Macau in 2023 with the expectation of the gradual overcoming of the Pandemic around the world. As such, a mild 5% increment was adopted only in the per-transaction value for offline transactions and the number of online transactions while there is no increment adopted in the number of offline transactions and the per-transaction value for online transactions.

Further, it is also noted that the Service Fee rates charged by the Alipay Entities to Macau Pass was consistently adopted throughout the entire duration of the Framework Agreement in the calculation worksheet.

In view of the above which are consistent with the determination basis of the Annual Caps as stated in the Letter from the Board, we consider that the Annual Caps are fair and reasonable.

OPINION AND RECOMMENDATION

In view of the above principal factors and reasons, we consider that the entering into of the Framework Agreement and the transactions contemplated thereunder is in the ordinary and usual course of business of the Group and in the interests of the Company and the Shareholders as a whole, and the terms of the Framework Agreement and the transactions contemplated thereunder (including the Annual Caps) are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we recommend the Independent Board Committee to recommend, and we ourselves recommend, the Independent Shareholders to vote in favor of the resolution to be proposed at the SGM to approve the Framework Agreement and the transactions contemplated thereunder (including the Annual Caps).

Yours faithfully, For and on behalf of Opus Capital Limited Cheung On Kit Andrew Executive Director

Mr. Cheung On Kit Andrew is an Executive Director of Opus Capital Limited and is licensed under the SFO as a Responsible Officer to conduct Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities. Mr. Cheung has over 13 years of corporate finance experience in Asia Pacific and has participated in and completed various financial advisory and independent financial advisory transactions.

IFA-19

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL INFORMATION OF THE GROUP

The audited consolidated financial statements of the Group for each of the three years ended December 31, 2018, 2019 and 2020 respectively, and the unaudited condensed consolidated financial information of the Group for the six months ended June 30, 2021, together with the relevant notes thereto are disclosed in the following documents, were published on both the Stock Exchange’s website (http:// www.hkexnews.hk) and the Company’s website (https://www.agtech.com/) as follows:

the annual report of the Company for the year ended December 31, 2018 (the “ 2018 AR ”) published on March 28, 2019 (pages 137-214) (https://www1.hkexnews.hk/listedco/ listconews/gem/2019/0328/gln20190328077.pdf);
the annual report of the Company for the year ended December 31, 2019 (the “ 2019 AR ”) published on March 30, 2020 (pages 135-222) (https://www1.hkexnews.hk/listedco/ listconews/gem/2020/0330/2020033000434.pdf);
the annual report of the Company for the year ended December 31, 2020 (the “ 2020 AR ”) published on March 30, 2021 (pages 167-254) (https://www1.hkexnews.hk/listedco/ listconews/gem/2021/0330/2021033001690.pdf); and
the interim report of the Company for the six months ended June 30, 2021 (the “ 2021 IR ”) published on August 13, 2021 (pages 2-17) (https://www1.hkexnews.hk/listedco/listconews/ gem/2021/0813/2021081301357.pdf).

I-1

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. MANAGEMENT DISCUSSION AND ANALYSIS ON THE GROUP

The Group is an integrated technology and services company engaged in the lottery and mobile games and entertainment market with a focus on the PRC and selected international markets. As a member of the Alibaba Group, the Group is the exclusive lottery platform of Alibaba Group and Ant Group.

Currently, the Group’s businesses are broadly divided into three categories:

(i) Lottery:
(a) lottery hardware sales and services;
(b) lottery distribution through physical channels and ancillary services;
(ii) Games and entertainment; and
(iii) Non-lottery hardware sales and services.

The Group is a Gold Contributor of the World Lottery Association (WLA), an associate member of the Asia Pacific Lottery Association (APLA), and an official partner of the International Mind Sports Association (IMSA).

The business review, business outlook and review of operating results of the Group for each of the three years ended December 31, 2018, 2019 and 2020 and the six months ended June 30, 2021 can be found in the “DISCUSSION AND ANALYSIS OF THE GROUP’S RESULTS AND BUSINESS” section in the respective annual reports and interim report of the Company as follows:

Pages 83 - 93 of the 2018 AR;
Pages 81 - 88 of the 2019 AR;
Pages 103 - 112 of the 2020 AR; and
Pages 21 - 32 of the 2021 IR.

I-2

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. INDEBTEDNESS OF THE ENLARGED GROUP

As at September 30, 2021, being the most recent practicable date for the purpose of this indebtedness statement, the Enlarged Group had the following indebtedness:

Lease liabilities

As at the close of business on September 30, 2021, the Enlarged Group had lease liabilities under Hong Kong Financial Reporting Standard 16 in the following amount:

	HK$’000
Lease liabilities	36,495

Bank guarantee

As at the close of business on September 30, 2021, the Enlarged Group had bank guarantee in the following amount:

	HK$’000
Bank guarantee	19

The bank guarantee was secured by a restricted bank deposit of the Target Group which was held for performance guarantees provided by a Macau bank in favor of the Macau government for service projects to the extent of MOP20,000 (equivalent to approximately HK$19,000).

Save as disclosed above, and apart from intra-group liabilities and normal trade payables, the Enlarged Group did not have any debt securities issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptance or acceptance credits, debentures, mortgages, charges, hire purchase or finance lease commitments, guarantees or other material contingent liabilities as at September 30, 2021.

4. WORKING CAPITAL STATEMENT OF THE ENLARGED GROUP

The Directors are of the opinion that, taking into account the cash flows generated from the operating activities, the financial resources available to the Enlarged Group including internally generated funds and the effect of the Acquisition, the working capital available to the Enlarged Group is sufficient for the Enlarged Group’s requirements for at least 12 months from the date of this circular.

5. MATERIAL ADVERSE CHANGE

The Directors were not aware of, as at the Latest Practicable Date, any material adverse change in the financial and trading position of the Group since December 31, 2020, being the date to which the latest published audited financial statements of the Company were made up.

I-3

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

6. FINANCIAL AND TRADING PROSPECTS

Despite ongoing headwinds and uncertainties with regard to the COVID-19 situation globally, we have seen a steady recovery in the PRC market since lottery related activities resumed. Indeed, businesses of the Group have been rebounding from the impact of the COVID-19 pandemic since the second half of 2020 through to the first half of 2021. As disclosed in the 2021 IR, the revenue of the Group amounted to approximately HK$77.9 million, representing an increase of approximately 77.6% over the corresponding period in 2020; whereas the loss for the aforesaid six-month period was approximately HK$43.7 million, representing a decrease of approximately 60.2% from the corresponding period in 2020. The Group will proactively transform and build on our leading position within the Chinese lottery industry. As the exclusive lottery business platform of Alibaba Group and Ant Group, we expect to further align and benefit from synergies created through cooperation with Alibaba Group and Ant Group.

Our continuing efforts to partner with additional provincial lottery authorities of China in areas such as technology and business innovation, channel expansion and distribution, smart hardware terminals, data services, and other value added ancillary services are all part of our lottery initiatives. Transformation towards digitalization will continue, as our lottery solutions will enhance synergy and create value to the lottery industry chain. Our platform is expected to be well equipped for applications within the Alibaba digital ecosystem, in addition to any potential change in distribution channels other than the current retail model. While the Group believes that the potential of internet and mobile distribution channels in the PRC lottery markets are promising, there is still uncertainty as to the timing of the potential re-opening of the online lottery distribution market under the applicable PRC laws and regulations. In this respect, we will continue to closely monitor policy developments.

The Group continues to operate the lottery resources channel on mobile Taobao and mobile Alipay to serve as a one-stop platform on lottery related information for existing and potential customers. We aim to roll out further engagement features and tools through innovation to improve user experience and engagement. The Group will continue to leverage and explore opportunities for collaboration with Alibaba Group’s retail ecosystem to enhance its lottery distribution models. We believe that the integration of lottery services and products through physical retail distribution channel and networks will continue to create synergy and opportunities in the future.

Transition to other consumer sectors presents an opportunity for the further development of the Group’s hardware business. The hardware supplied for the retail market share similar technology and components that underlie the lottery hardware products supplied by the Group throughout the years. We believe our hardware division continues to be well positioned to take advantage of such opportunities in the foreseeable future.

The Group is also leveraging our existing products and technology to innovate and improve on digitalization of sporting content. Building off the successful launch of our fantasy sports products on the Paytm First Games platform in India, we will continue to seek for strong suitable partners in selected international markets to leverage on our platforms of games and entertainment offerings, as well as technical and operation abilities to further our B2B business segment.

I-4

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

With regards to our investment in Ant Bank, the Group will continue to dedicate our commitment and support to grow the business and further capitalize on opportunities in Macau and overseas.

The Group’s continuing investment to enhance our technology infrastructure and develop our in-house capabilities through games and lottery entertainment as a medium continues to be a demonstration of our commitment to generate long term sustainable growth for the Shareholders.

I-5

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

(A) ACCOUNTANT’S REPORT OF THE TARGET GROUP

The following is the text of a report set out on pages II-1 to II-3, received from the Company’s reporting accountant, PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this circular.

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ACCOUNTANT’S REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE DIRECTORS OF AGTECH HOLDINGS LIMITED

Introduction

We report on the historical financial information of Macau Pass Holding Limited (the “ Target Company ”) and its subsidiaries (together, the “ Target Group ”) set out on pages II-4 to II-61, which comprises the consolidated and company statements of financial position as at December 31, 2018, 2019 and 2020 and April 30, 2021, and the consolidated statements of profit or loss, the consolidated statements of comprehensive income, the consolidated statements of changes in equity and the consolidated statements of cash flows for each of the years ended December 31, 2018, 2019 and 2020 and the four months ended April 30, 2021 (the “ Track Record Period ”) and a summary of significant accounting policies and other explanatory information (together, the “ Historical Financial Information ”). The Historical Financial Information set out on pages II-4 to II-61 forms an integral part of this report, which has been prepared for inclusion in the circular of AGTech Holdings Limited (the “ Company ”) dated October 29, 2021 (the “ Circular ”) in connection with the proposed acquisition of the Target Company by the Company.

Directors’ responsibility for the Historical Financial Information

The directors of the Company are responsible for the preparation of Historical Financial Information that gives a true and fair view in accordance with the basis of presentation and preparation set out in Notes 1.3 and 2.1 to the Historical Financial Information, and for such internal control as the directors determine is necessary to enable the preparation of Historical Financial Information that is free from material misstatement, whether due to fraud or error.

II-1

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

The financial statements of the Target Group for the Track Record Period (“ Underlying Financial Statements ”), on which the Historical Financial Information is based, were prepared by the directors of the Target Company. The directors of the Target Company are responsible for the preparation of the Underlying Financial Statements that give a true and fair view in accordance with Hong Kong Financial Reporting Standards (“ HKFRSs ”) issued by the Hong Kong Institute of Certified Public Accountants (the “ HKICPA ”), and for such internal control as the directors determine is necessary to enable the preparation of Underlying Financial Statements that are free from material misstatement, whether due to fraud or error.

Reporting accountant’s responsibility

Our responsibility is to express an opinion on the Historical Financial Information and to report our opinion to you. We conducted our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 200, Accountants’ Reports on Historical Financial Information in Investment Circulars issued by the HKICPA. This standard requires that we comply with ethical standards and plan and perform our work to obtain reasonable assurance about whether the Historical Financial Information is free from material misstatement.

Our work involved performing procedures to obtain evidence about the amounts and disclosures in the Historical Financial Information. The procedures selected depend on the reporting accountant’s judgement, including the assessment of risks of material misstatement of the Historical Financial Information, whether due to fraud or error. In making those risk assessments, the reporting accountant considers internal control relevant to the entity’s preparation of Historical Financial Information that gives a true and fair view in accordance with the basis of presentation and preparation set out in Notes 1.3 and 2.1 to the Historical Financial Information in order to design procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our work also included evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the Historical Financial Information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion, the Historical Financial Information gives, for the purposes of the accountant’s report, a true and fair view of the financial position of the Target Company as at December 31, 2018, 2019 and 2020 and April 30, 2021 and the consolidated financial position of the Target Group as at December 31, 2018, 2019 and 2020 and April 30, 2021 and of its consolidated financial performance and its consolidated cash flows for the Track Record Period in accordance with the basis of presentation and preparation set out in Notes 1.3 and 2.1 to the Historical Financial Information.

II-2

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Review of stub period comparative financial information

We have reviewed the stub period comparative financial information of the Target Group which comprises the consolidated statement of profit or loss, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the four months ended April 30, 2020 and other explanatory information (the “ Stub Period Comparative Financial Information ”). The directors of the Company are responsible for the presentation and preparation of the Stub Period Comparative Financial Information in accordance with the basis of presentation and preparation set out in Notes 1.3 and 2.1 to the Historical Financial Information. Our responsibility is to express a conclusion on the Stub Period Comparative Financial Information based on our review. We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the HKICPA. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Based on our review, nothing has come to our attention that causes us to believe that the Stub Period Comparative Financial Information, for the purposes of the accountant’s report, is not prepared, in all material respects, in accordance with the basis of presentation and preparation set out in Notes 1.3 and 2.1 to the Historical Financial Information.

Report on matters under the Rules Governing the Listing of Securities on GEM of The Stock Exchange of Hong Kong Limited

Adjustments

In preparing the Historical Financial Information, no adjustments to the Underlying Financial Statements have been made.

PricewaterhouseCoopers

Certified Public Accountants Hong Kong October 29, 2021

II-3

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

I HISTORICAL FINANCIAL INFORMATION OF THE TARGET GROUP

Preparation of Historical Financial Information

Set out below is the Historical Financial Information which forms an integral part of this accountant’s report.

The Underlying Financial Statements, on which the Historical Financial Information is based, were audited by PricewaterhouseCoopers in accordance with Hong Kong Standards on Auditing issued by the HKICPA.

The Historical Financial Information is presented in Macau Patacas (“ MOP ”) and all values are rounded to the nearest thousand (MOP’000) except when otherwise indicated.

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

Note Revenue 5 Cost of cards and card readers 6 Employee benefits 7 Depreciation and amortisation expenses 8 Other operating income 9 Other operating expenses 10 Other gains, net 11 Operating profit/(loss) Finance income, net 12 Profit/(loss) before income tax Income tax (expense)/credit 13 Profit/(loss) for the year/period Attributable to: Owners of the Target Company Non-controlling interests	Year ended December 31 2018 2019 MOP’000 MOP’000 145,762 206,688 (2,562) (4,186) (33,700) (46,903) (25,130) (38,756) 3,890 5,325 (60,067) (90,400) 1,927 6,998 30,120 38,766 1,088 5,131 31,208 43,897 (3,708) (5,177) 27,500 38,720 20,145 38,342 7,355 378 27,500 38,720	Four months ended April 30 2020 2020 2021 MOP’000 MOP’000 MOP’000 (Unaudited) 175,603 41,012 131,823 (6,218) (3,668) (817) (55,630) (15,350) (14,559) (49,685) (12,648) (13,345) 9,340 535 2,251 (92,447) (21,977) (62,838) 1,725 39 1,849 (17,312) (12,057) 44,364 6,582 1,599 768 (10,730) (10,458) 45,132 268 100 (5,135) (10,462) (10,358) 39,997 (10,354) (10,264) 39,507 (108) (94) 490 (10,462) (10,358) 39,997

II-4

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Profit/(loss) for the year/period Other comprehensive income for the year/period Items that may be reclassified subsequently to profit or loss: Currency translation differences Total comprehensive income for the year/period Attributable to: Owners of the Target Company Non-controlling interests	Year ended December 31 2018 2019 MOP’000 MOP’000 27,500 38,720 – 9 27,500 38,729 20,145 38,351 7,355 378 27,500 38,729	Four months ended April 30 2020 2020 2021 MOP’000 MOP’000 MOP’000 (Unaudited) (10,462) (10,358) 39,997 482 (87) 96 (9,980) (10,445) 40,093 (9,872) (10,351) 39,603 (108) (94) 490 (9,980) (10,445) 40,093	Four months ended April 30 2020 2020 2021 MOP’000 MOP’000 MOP’000 (Unaudited) (10,462) (10,358) 39,997 482 (87) 96 (9,980) (10,445) 40,093 (9,872) (10,351) 39,603 (108) (94) 490 (9,980) (10,445) 40,093
			40,093

			39,603 490
			40,093

II-5

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Note Assets Non-current assets Property, plant and equipment 14 Right-of-use assets 15 Intangible assets 16 Prepayments 19 Total non-current assets Current assets Inventories 17 Trade and other receivables and prepayments 19 Amount due from shareholders 24 Restricted cash 20 Cash and cash equivalents 20 Total current assets Total assets Liabilities Current liabilities Floats balance due to card or account holders 21 Trade and other payables 22 Contract liabilities 5 Card deposits due to cardholders 21 Amounts due to shareholders 24 Lease liabilities 23 Income tax payable Total current liabilities Non-current liabilities Lease liabilities 23 Total liabilities Equity Share capital 25 Reserves Equity attributable to owners of the Target Company Non-controlling interests Total equity Total equity and liabilities	As at December 2018 2019 MOP’000 MOP’000 13,639 14,794 – 15,141 18,179 29,941 5,199 1,546 37,017 61,422 6,572 5,556 113,690 64,822 200 – 2,317 20 157,453 503,595 280,232 573,993 317,249 635,415 124,290 179,577 100,820 311,142 1,128 4,057 18,799 17,031 – 10,046 – 7,880 3,778 5,174 248,815 534,907 – 8,566 248,815 543,473 200 200 67,552 87,686 67,752 87,886 682 4,056 68,434 91,942 317,249 635,415	31 2020 MOP’000 23,643 7,421 29,332 1,428 61,824 3,599 116,514 – 20 386,150 506,283 568,107 285,680 154,047 11,343 16,418 10,046 5,867 183 483,584 2,641 486,225 200 77,814 78,014 3,868 81,882 568,107	As at April 30 2021 MOP’000 21,600 5,043 31,253 1,281
			59,177
			4,725 118,438 – 20 477,923
			601,106
			660,283

			331,041 159,122 11,038 16,283 27,486 4,769 5,281
			555,020
			1,013
			556,033
			200 99,977
			100,177 4,073
			104,250
			660,283

II-6

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

STATEMENTS OF FINANCIAL POSITION OF THE TARGET COMPANY

Note Assets Non-current assets Property, plant and equipment Investment in subsidiaries Total non-current assets Current assets Amount due from a subsidiary 24 Amounts due from related parties 24 Amounts due from shareholders 24 Cash and cash equivalents 20 Total current assets Total assets Equity Share capital 25 Reserves 26 Total equity Liabilities Current liabilities Amounts due to shareholders 24 Amount due to related company 24 Amount due to a subsidiary 24 Total liabilities Total equity and liabilities	As 2018 MOP’000 – – – – – 200 – 200 200 200 – 200 – – – – 200	at December 31 2019 2020 MOP’000 MOP’000 – 626 315,164 327,044 315,164 327,670 – 7,920 – 400 – – 62 120 62 8,440 315,226 336,110 200 200 (63) 19,544 137 19,744 10,046 10,046 245,643 3,626 59,400 302,694 315,089 316,366 315,226 336,110	As at April 30 2021 MOP’000 574 327,044
			327,618
			– 4,694 – 28,315
			33,009
			360,627

			200 30,247
			30,447
			27,486 – 302,694
			330,180
			360,627

II-7

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Note At January 1, 2018 Profit for the year Total comprehensive income for the year Issuance of shares Transfer to legal reserve Transaction with non-controlling interests (Note (i)) At December 31, 2018 At January 1, 2019 (as originally presented) Initial adoption of HKFRS 16 2.1.2 Total equity at January 1, 2019 (as restated) Profit for the year Other comprehensive income for the year – Currency translation differences Total comprehensive income for the year Transfer to legal reserve Deemed distribution to shareholders Transaction with non-controlling interests (Note (ii)) At December 31, 2019 Note:	Attributable to owners Target Company Share capital (Note 25) Retained earnings MOP’000 MOP’000 – 12,168 – 20,145 – 20,145 200 – – (2,247) – – 200 30,066 200 30,066 – (397) 200 29,669 – 38,342 – – – 38,342 – (3,069) – – – – 200 64,942	of the Other reserves (Note 26) MOP’000 12,272 – – – 2,247 22,967 37,486 37,486 – 37,486 – 9 9 3,069 (17,820) – 22,744	Non- controlling interests MOP’000 16,294 7,355 7,355 – – (22,967) 682 682 (4) 678 378 – 378 – – 3,000 4,056	Total equity MOP’000 40,734 27,500 27,500 200 – – 68,434 68,434 (401) 68,033 38,720 9 38,729 – (17,820) 3,000 91,942

(i) On August 15, 2018, the ultimate controlling party of the Target Group through Macau Pass Holdings Limited (“MPHLBVI”), incorporated in British Virgin Islands and wholly owned by Mr. Liu Hei Wan, purchased a total of 39% shareholding of Macau Pass S.A. from the non-controlling shareholders. Certain of such non-controlling shareholders are also directors of Macau Pass S.A..

(ii) On April 29, 2019, Macau Pass Investments, Limited was incorporated with non-controlling interest amounting to MOP3,000,000.

II-8

APPENDIX II

FINANCIAL INFORMATION OF THE TARGET GROUP

Note At January 1, 2020 Loss for the year Other comprehensive income for the year – Currency translation differences Total comprehensive income for the year Transfer to legal reserve Transaction with non-controlling interests (Note) At December 31, 2020 At January 1, 2021 Profit for the period Other comprehensive income for the period – Currency translation differences Total comprehensive income for the period Transactions with owners: Dividends declared 27 At April 30, 2021 (Unaudited) At January 1, 2020 Loss for the period Other comprehensive income for the period – Currency translation differences Total comprehensive income for the period At April 30, 2020	Attributable to owners Target Company Share capital (Note 25) Retained earnings MOP’000 MOP’000 200 64,942 – (10,354) – – – (10,354) – (2,253) – – 200 52,335 200 52,335 – 39,507 – – – 39,507 – (17,440) 200 74,402 200 64,942 – (10,264) – – – (10,264) 200 54,678	of the Other reserves (Note 26) MOP’000 22,744 – 482 482 2,253 – 25,479 25,479 – 96 96 – 25,575 22,744 – (87) (87) 22,657	Non- controlling interests MOP’000 4,056 (108) – (108) – (80) 3,868 3,868 490 – 490 (285) 4,073 4,056 (94) – (94) 3,962	Total equity MOP’000 91,942 (10,462) 482 (9,980) – (80) 81,882 81,882 39,997 96 40,093 (17,725) 104,250 91,942 (10,358) (87) (10,445) 81,497

Note:

In FY20, Macau Pass S.A. passed the resolution to return the supplementary capital to its shareholders including MOP80,000 to its non-controlling shareholders, and the authorised share capital of Macau Pass S.A. has increased with capital contribution of MOP200,000 from its non-controlling shareholders as disclosed in Note 1.2(a).

In FY20, Macau Pass S.A. has declared a final dividend to its shareholders including MOP200,000 to its non-controlling shareholder, as disclosed in Note 27.

II-9

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

CONSOLIDATED STATEMENTS OF CASH FLOWS

Note Profit/(loss) before income tax Adjustment for: Interest income 12 Finance costs 12 Depreciation and amortisation expenses 8 Unrealised foreign exchange difference Gain on negative goodwill on acquisition 11 Other expense/(gains) Changes in working capital Decrease/(increase) in inventories (Increase)/decrease in trade and other receivables Decrease in restricted cash Increase/(decrease) in trade and other payable (excluding amount due to related companies) Increase/(decrease) in contract liabilities Increase in card floats and card deposits due to cardholders Cash generated from operations Income tax paid Net cash generated from operating activities	Year ended December 31 2018 2019 MOP’000 MOP’000 31,208 43,897 (1,088) (5,454) – 323 25,130 38,756 – 25 – (3,463) 246 (24) 2,008 1,063 (53,809) 53,252 – 2,297 28,741 (35,880) 1,128 2,929 22,104 53,519 55,668 151,240 (1,455) (3,780) 54,213 147,460	Four months ended April 30 2020 2020 2021 MOP’000 MOP’000 MOP’000 (Unaudited) (10,730) (10,458) 45,132 (6,973) (1,754) (847) 391 155 79 49,685 12,648 13,345 483 (96) 73 – – – (478) (81) (157) 1,957 (2,246) (1,126) (51,634) (323,914) (1,564) – – – 77,035 (39,281) 14,529 7,286 8,419 (305) 105,490 1,765,978 45,226 172,512 1,409,370 114,385 (4,491) – (32) 168,021 1,409,370 114,353

II-10

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Note Cash flows from investing activities Interest received Purchases of property, plant and equipment Payments for intangible assets Proceeds from acquisition of subsidiary 28 Net cash used in investing activities Cash flows from financing activities Dividends paid Interest element of lease rentals paid Payment of principal portion of lease liabilities Capital contribution from/(repaid to) non-controlling shareholders (Note) Proceeds from shareholders Proceeds from/(repaid to) related companies Net cash generated from/(used in) financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year/period	Year ended December 31 2018 2019 MOP’000 MOP’000 1,064 5,377 (14,133) (11,826) (20,619) (32,534) – 3,170 (33,688) (35,813) – – – (316) – (4,980) – 3,000 – 10,246 1,338 226,545 1,338 234,495 21,863 346,142 135,590 157,453 157,453 503,595	Four months ended April 30 2020 2020 2021 MOP’000 MOP’000 MOP’000 (Unaudited) 7,047 1,692 633 (25,326) (11,009) (2,296) (25,417) (15,919) (8,653) – – – (43,696) (25,236) (10,316) (200) – (285) (387) (152) (77) (7,173) (2,040) (2,448) 200 – (80) – 7,920 – (234,210) (237,782) (9,374) (241,770) (232,054) (12,264) (117,445) 1,152,080 91,773 503,595 503,595 386,150 386,150 1,655,675 477,923

Note:

On April 29, 2019, Macau Pass Investments, Limited was incorporated with share capital of MOP300,000,000. Capital contribution of MOP3,000,000, representing 1% of its share capital was injected from its non-controlling shareholders.

During the year ended December 31, 2020, the authorised share capital of Macau Pass S.A. has increased (See Note 1.2). Capital contribution of MOP200,000, representing 1% of its increased capital was injected from its non-controlling shareholders.

II-11

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

(a) Reconciliation of liabilities arising from financing activities is as follows:

At January 1, 2018 Cash flows – Addition Non-cash changes – Addition At December 31, 2018 and at January 1, 2019 Recognised on adoption of HKFRS 16 Restated liabilities at January 1, 2019 Cash flows – Addition – Repayment – Interest paid Non-cash changes – Addition – Deemed distribution (Note 26) – Finance costs – Early termination of lease contracts – Exchange differences At December 31, 2019	Amounts due to related parties MOP’000 – 1,338 – 1,338 – 1,338 226,545 – – – 17,820 – – 1 245,704	Amounts due to/ (from) shareholders MOP’000 – – (200) (200) – (200) 10,246 – – – – – – – 10,046	Lease liabilities MOP’000 – – – – 7,623 7,623 – (4,980) (316) 14,640 – 316 (837) – 16,446	Total MOP’000 – 1,338 (200) 1,138 7,623 8,761 236,791 (4,980) (316) 14,640 17,820 316 (837) 1 272,196

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APPENDIX II

Reconciliation of liabilities arising from financing activities is as follows:

At January 1, 2020 Cash flows – Repayment – Interest paid Non-cash changes – Addition – Early termination of lease contracts – Rent concession gain (Note 23) – Finance costs – Exchange differences At December 31, 2020 and at January 1, 2021 Cash flows – Repayment – Interest paid Non-cash changes – Early termination of lease contracts (Note 26) – Rent concession gain (Note 23) – Finance costs – Dividends declared – Exchange differences At April 30, 2021	Amounts due to related parties MOP’000 245,704 (234,210) – 80 – – – (1) 11,573 (9,454) – – – – – – 2,119	Amounts due to shareholders MOP’000 10,046 – – – – – – – 10,046 – – – – – 17,440 – 27,486	Lease liabilities MOP’000 16,446 (7,173) (387) 236 (851) (150) 387 – 8,508 (2,448) (77) (129) (150) 77 – 1 5,782	Total MOP’000 272,196 (241,383) (387) 316 (851) (150) 387 (1) 30,127 (11,902) (77) (129) (150) 77 17,440 1 35,387

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APPENDIX II

FINANCIAL INFORMATION OF THE TARGET GROUP

(Unaudited) At January 1, 2020 Cash flows – Addition – Repayment – Interest paid Non-cash changes – Early termination of lease contracts – Finance costs At April 30, 2020	Amounts due to related parties MOP’000 245,704 – (237,782) – – – 7,922	Amounts due to shareholders MOP’000 10,046 7,920 – – – – 17,966	Lease liabilities MOP’000 16,446 – (2,040) (152) (829) 152 13,577	Total MOP’000 272,196 7,920 (239,822) (152) (829) 152 39,465

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

II NOTES TO THE HISTORICAL FINANCIAL INFORMATION

1 GENERAL INFORMATION, REORGANISATION AND BASIS OF PRESENTATION

1.1 General information

Macau Pass Holding Ltd. (the “ Target Company ”) was incorporated in Macau on May 30, 2018 as an exempted company with limited liability under Chapter IV of the Commercial Code of Macau. The address of the registered office is Avenida da Amizade, no. 918, Edificio World Trade Centre Macau, 9 andar, em Macau.

The Target Company is an investment holding company. The Target Company and its subsidiaries (together, the “ Target Group ”) are principally engaged in (i) the provision of physical payment card services via “Macau Pass Cards” and ancillary card services; (ii) the provision of e-wallet services known as “MPay”; (iii) the provision of acquiring services for other payment service providers; and (iv) sales and leasing of payment terminals and equipment in Macau (“ Macau Payment Business ”). The ultimate controlling party of the Target Group is Mr. Liu Hei Wan (“ Mr. Liu ”) throughout the track record period from January 1, 2018 to April 30, 2021.

1.2 Reorganisation

Prior to the completion of the reorganisation (the “ Reorganisation ”) as described below, the Macau Payment Business was primarily carried out by Macau Pass S.A. which was 99% owned by Macau Pass Holdings Limited (“ MPHLBVI ”), incorporated in British Virgin Island and wholly owned by Mr. Liu.

On May 21, 2019, the Target Company acquired 99% equity interest in Macau Pass S.A. from MPHLBVI.

On July 5, 2019, the Target Company acquired 100% equity interest in Zhuhai Hengqin Zhongaotong Electronic Payment Technology Co., Ltd.. Following such acquisition, the Target Company became the holding company of the companies now comprising the Target Group upon completion of the Reorganisation.

Upon completion of the Reorganisation and as at the date of this report, the Target Company had effective interests in the following subsidiaries:

				Effective interests	held by the Target Group	held by the Target Group	held by the Target Group
	Place and date of
	incorporation/
	establishment						As at date
	and kind of legal	Issued and paid				At	of the
Company name	entity	up capital		At December 31		April 30	report
								Principal
			2018	2019	2020	2021		activities	Note
Directly held
Macau Pass S.A.	Macau, February	MOP30,000,000	99%	99%	99%	99%	99%	(i) the provision of	(a)
	25, 2005,							physical payment
	limited liability							card services via
	company by							“Macau Pass
	shares							Cards” and
								ancillary card
								services; (ii) the
								provision of
								e-wallet services
								known as
								“MPay”; (iii) the
								provision of
								acquiring
								services for other
								payment service
								providers; and
								(iv) sales and
								leasing of
								payment
								terminals and
								equipment

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APPENDIX II

Effective interests held by the Target Group

	Place and date of
	incorporation/
	establishment						As at date
	and kind of legal	Issued and paid				At	of the
Company name	entity	up capital		At December 31		April 30	report
								Principal
			2018	2019	2020	2021		activities	Note
Zhuhai Hengqin	PRC, March 6,	RMB300,000	N/A	100%	100%	100%	100%	Provision of	(b)
Zhongaotong	2013, limited							professional IT
Electronic Payment	liability							services, and
Technology Co., Ltd.	company							distribution and
								resale of POS
								machine
								hardware and
								software
Macau Pass	Macau, April 29,	MOP300,000,000	N/A	99%	99%	99%	N/A	Investment	(c)
Investments,	2019, limited							holding
Limited	liability
	company by
	shares

Notes:

(a) In FY18 and FY19 the authorised share capital of Macau Pass S.A. is 100,000 shares with a par value of MOP100 per share and the supplementary capital with amount of MOP8,000,000 as required by the Monetary Authority of Macau (“AMCM”). Both the share capital and the supplementary capital have been fully paid up in FY18 and FY19.

In FY20, the authorised share capital of Macau Pass S.A. has increased from 100,000 shares to 300,000 shares with par value of MOP100 per share. And pursuant to the resolution passed in the annual general meeting of the Macau Pass S.A. held in March 2020, it was resolved that Macau Pass S.A. shall return the aforesaid supplementary capital of MOP8,000,000 to its shareholders including MOP80,000 to non-controlling shareholders. Following the approval by the AMCM, the supplementary share capital was reclassified to the amount payable to the shareholders in December 2020 which have been settled by cash in January 2021.

The statutory financial statements of this company for the years ended December 31, 2018, 2019, and 2020 were prepared in accordance with Financial Reporting Standards issued by the Government of the Macau Special Administrative Region by the directors of this company and were audited by PricewaterhouseCoopers.

(b) The statutory financial statements of this company for the year ended December 31, 2018, 2019, and 2020 were prepared in accordance with the financial reporting standards which were applicable in the region by the directors of this company and were audited by Zhongxingcai Guanghua Certified Public Accountants LLP, Guangdong Branch (中興財光華會計師事務所(特殊普通合伙)廣東分所).

The English name of the PRC company and statutory auditor referred to above in this note represent management’s best efforts in translating the Chinese names of those companies as no English names have been registered or are available. The English name above is used for identification purpose for this set of Historical Financial Information.

(c) The statutory financial statements of this company for the period from April 29, 2019 (date of incorporation) to December 31, 2019 and for the year ended December 31, 2020 were prepared in accordance with Financial Reporting Standards issued by the Government of the Macau Special Administrative Region by the directors of this company and were audited by Baker Tilly Macao Certified Public Accountants.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

1.3 Basis of presentation

Immediately prior to and after the Reorganisation, the Macau Payment Business has been conducted through Macau Pass S.A. and were controlled by Mr. Liu. Pursuant to the Reorganisation, Macau Pass S.A. was transferred to and 99% held by the Target Company. The Target Company has not been involved in any other business prior to the Reorganisation and does not meet the definition of a business. The Reorganisation is merely a recapitalisation of the Macau Payment Business with no change in management of such business and the ultimate owner of the Macau Payment Business remains the same. Accordingly, the Target Group resulting from the Reorganisation is regarded as a continuation of the Macau Payment Business under Macau Pass S.A., and, for the purpose of this report, the assets and liabilities of Macau Pass S.A. are recognised and measured at carrying amounts of the Macau Payment Business for all periods presented.

For companies acquired from or disposed of to a third party during each of the years ended December 31, 2018, 2019 and 2020 and the four months ended April 30, 2021, they are included in or excluded from the Historical Financial Information of the Target Group from the date of the acquisition or disposal.

Inter-company transactions, balances and unrealized gains/losses on transactions between Target Group companies are eliminated on consolidation.

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APPENDIX II

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This note provides a list of significant accounting policies adopted in the preparation of the Historical Financial Information. These policies have been consistently applied to all the years and periods presented, unless otherwise stated. The Historical Financial Information is for the Target Group consisting of the Target Company and its subsidiaries.

2.1 Basis of preparation

The Historical Financial Information has been prepared in accordance with principal accounting policies as set out below which are in accordance with Hong Kong Financial Reporting Standards (“ HKFRS ”) issued by the HKICPA. The Historical Financial Information has been prepared on a historical cost basis.

The preparation of the Historical Financial Information in conformity with HKFRS requires the use of certain critical accounting estimates. It also requires directors of the Target Group to exercise its judgement in the process of applying the accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Historical Financial Information are disclosed in Note 4.

All relevant standards, amendments and interpretations to the existing standards that are effective during the Track Record Period have been adopted by the Target Group consistently throughout the Track Record Period, to the extent they become effective as required by the relevant standards, including HKFRS 9 “Financial Instruments” (“ HKFRS 9 ”) and 15 “Revenue from Contracts with Customers” (“ HKFRS 15 ”). The Director of the Target Company has assessed the impact on January 1, 2018 (the date of initial adoption of HKFRS 9 and 15) and there was no material impact to the Target Group’s impairment allowance, classification of financial assets and equity.

The Target Group has adopted HKFRS 16 “Leases” (“ HKFRS 16 ”) from January 1, 2019, the impact from the change of accounting policy have been disclosed in Note 2.1.2. The Target group has also adopted Amendments to HKFRS 16 “COVID-19 Related Rent Concession from January 1, 2020 in order to apply practical expedient on rent concession related to COVID-19 that is effective on or after June 1, 2020, the impact of the adoption is disclosed in Note 23.

2.1.1 New standards and interpretations not yet been adopted

The following new standards, amendments and interpretation to existing standards that have been issued but not yet effective for the Track Record Period and have not been early adopted by the Target Group:

		Effective for reporting
		periods beginning on
Standards affected	New standard and amendments relate to	or after
Annual Improvements Project	Annual Improvements to HKFRSs 2018 – 2020
	(amendments)	January 1, 2022
Amendments to HKFRS 3	Reference to the Conceptual Framework	January 1, 2022
Amendments to HKAS 16	Proceeds before Intended Use	January 1, 2022
Amendments to HKAS 37	Cost of Fulfilling a Contract	January 1, 2022
Amendments to HKAS 1	Classification of liabilities as current or non-current
	(amendments)	January 1, 2023
Amendments to HKAS 1	Disclosure of accounting policies	January 1, 2023
Amendments to HKAS 8	Definition of accounting estimates	January 1, 2023
Amendments to HKAS 12	Deferred tax related to assets and liabilities arising from
	a single transaction	January 1, 2023
HKFRS 17	Insurance contracts (new standards)	January 1, 2023
HKFRS 10 and HKAS 28	Sale or contribution of assets between an investor and
	its associate or joint venture (amendments)	To be determined

The Target Group will adopt the above new standards and amendments to standards when they become effective. The Target Group has commenced an assessment and does not anticipate any significant impact on the Target Group’s financial position and results of operations upon adopting these new standards and amendments to standards.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

2.1.2 Change of accounting policies

This note explains the impact of the adoption of HKFRS 16 “Leases” on the Target Group’s consolidated financial statements.

The Target Group has adopted HKFRS 16 “Leases” retrospectively from January 1, 2019, but has not restated comparatives for the 2018 reporting period, as permitted under the specific transition provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on January 1, 2019 with an amount of MOP401,000 as disclosed in consolidated statements of changes in equity which is caused by the recognition of right-of-use assets of MOP7,222,000 and lease liability of MOP7,623,000. The new accounting policies are disclosed in Note 2.25.

On adoption of HKFRS 16, the Target Group recognised lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under the principles of HKAS 17 “Leases”. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of January 1, 2019. The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on January 1, 2019 was 3.00%.

Practical expedients applied

In applying HKFRS 16 for the first time, the Target Group has used the following practical expedients permitted by the standard:

applying a single discount rate to a portfolio of leases with reasonably similar characteristics;
accounting for operating leases with a remaining lease term of less than 12 months as at January 1, 2019 as short-term leases; and
using hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

The Target Group has also elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date the Target Group relied on its assessment made applying HKAS 17 “Leases” and HKFRIC 4 “Determining whether an Arrangement contains a Lease”.

Measurement of lease liabilities

Operating lease commitments disclosed as at December 31, 2018 Discounted using the lessee’s incremental borrowing rate of at the date of initial application Less: Short-term leases not recognised as a liability Lease liabilities recognised as at January 1, 2019 Of which are: Current lease liabilities Non-current lease liabilities	2019 MOP’000 8,006 (267) (116) 7,623 3,978 3,645 7,623

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

2.2 Principles of consolidation

i. Subsidiaries

Subsidiaries are all entities (including structured entities) over which the Target Group has control. The Target Group controls an entity where the Target Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Target Group. They are deconsolidated from the date that control ceases.

The acquisition method of accounting is used to account for business combinations by the Target Group.

Inter-company transactions, balances and unrealised gains on transactions between Target Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Target Group.

Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statements of profit or loss, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of financial position respectively.

ii. Changes in ownership interests

The Target Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the Target Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of the Target Group.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

2.3 Business combinations

The Target Group applies the acquisition method to account for business combinations, regardless of whether equity instruments or other assets are acquired, except for business combination under common control. The consideration transferred for the acquisition of a subsidiary comprises the:

fair values of the assets transferred
liabilities incurred to the former owners of the acquired business
equity interests issued by the Target Group
fair value of any asset or liability resulting from a contingent consideration arrangement, and
fair value of any pre-existing equity interest in the subsidiary.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The Target Group recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets.

Acquisition-related costs are expensed as incurred.

The excess of the:

consideration transferred,
amount of any non-controlling interest in the acquired entity, and
acquisition-date fair value of any previous equity interest in the acquired entity

over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised directly in profit or loss as a bargain purchase.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss. If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from such remeasurement are recognised in profit or loss.

2.4 Non-controlling interests

(i) Change in ownership interests in subsidiaries without change of control

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

(ii) Disposal of subsidiaries

When the Group ceases to have control, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

2.5 Separate financial statements

Investments in subsidiaries are accounted for at cost less impairment. Cost includes direct attributable costs of investment. The results of subsidiaries are accounted for by the Target Company on the basis of dividend received and receivable.

Impairment testing of the investments in subsidiaries is required upon receiving a dividend from these investments if the dividend exceeds the total comprehensive income of the subsidiary in the period the dividend is declared or if the carrying amount of the investment in the separate financial statements exceeds the carrying amount in the consolidated financial statements of the investee’s net assets including goodwill.

2.6 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision-makers, who are responsible for allocating resources and assessing performance of the operating segments, have been identified as the directors of the Target Group who make strategic decisions.

2.7 Foreign currency translation

(i) Functional and presentation currency

Items included in the financial statements of each of the Target Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“ the functional currency ”). The Historical Financial Information is presented in Macau Patacas (“ MOP ”), which is the Target Company’s functional currency and the Target Group’s presentation currency.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognised in profit or loss. They are deferred in equity if they relate to qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation.

Foreign exchange gains and losses that relate to borrowings are presented in the statement of profit or loss, within finance costs. All other foreign exchange gains and losses are presented in the statement of profit or loss on a net basis within other gains, net.

Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss and translation differences on non-monetary assets such as equities classified as fair value through other comprehensive income are recognised in other comprehensive income.

(iii) Target Group companies

The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position,

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

income and expenses for each statement of profit or loss and statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and
all resulting exchange differences are recognised in other comprehensive income.

On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments, are recognised in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

(iv) Disposal of foreign operation and partial disposal

On the disposal of a foreign operation (that is, a disposal of the Target Group’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, a disposal involving loss of joint control over a joint venture that includes a foreign operation, or a disposal involving loss of significant influence over an associate that includes a foreign operation), all of the currency translation differences accumulated in equity in respect of that operation attributable to the owners of the Target Group are reclassified to profit or loss.

In the case of a partial disposal that does not result in the Target Group losing control over a subsidiary that includes a foreign operation, the proportionate share of accumulated currency translation differences is re-attributed to non-controlling interests and are not recognised in profit or loss. For all other partial disposals (that is, reductions in the Target Group’s ownership interest in associates or joint ventures that do not result in the Target Group losing significant influence or joint control), the proportionate share of the accumulated exchange difference is reclassified to profit or loss.

2.8 Property, plant and equipment

Property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Target Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the Track Record Period in which they are incurred.

Depreciation is calculated using the straight-line method to allocate their cost to residual values, over their estimated useful lives as follows:

Computer equipment and software	3–4 years
Business server system, card readers and others	2–3 years
Non-personalised cards	3 years
Office equipment	5 years
Leasehold improvements	5 years
Motor vehicles	5 years

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (Note 2.10).

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss.

2.9 Intangible assets

(i) Computer software

Costs associated with maintaining software programmes are recognised as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Target Group are recognised as intangible assets where the following criteria are met:

it is technically feasible to complete the software so that it will be available for use
management intends to complete the software and use or sell it
there is an ability to use or sell the software
it can be demonstrated how the software will generate probable future economic benefits
adequate technical, financial and other resources to complete the development and to use or sell the software are available, and
the expenditure attributable to the software during its development can be reliably measured.

Directly attributable costs that are capitalised as part of the software include employee costs and an appropriate portion of relevant overheads.

Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use.

(ii) Research and development

Research expenditure and development expenditure that do not meet the criteria in (i) above are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

(iii) Amortisation methods and periods

The Target Group amortises intangible assets with a limited useful life using the straight-line method over the following periods:

Computer software

3 years

(iv) Trademark

The intangible assets include acquired trademarks. Trademarks have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of trademarks over their estimated useful lives of 10 years.

2.10 Impairment of non-financial assets

Non-financial assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (“ cash-generating units ”). Non-financial assets that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

2.11 Financial assets

(i) Classification

The Target Group classifies its financial assets in the following categories:

those to be measured subsequently at fair value through profit or loss, and
– those to be measured at amortised cost.

The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.

The Target Group reclassifies debt investments when and only when its business model for managing those assets changes.

(ii) Recognition and derecognition

Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Target Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Target Group has transferred substantially all the risks and rewards of ownership.

(iii) Measurement

At initial recognition, the Target Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset.

Subsequent measurement of debt instruments depends on the Target Group’s business model for managing the asset and the cash flow characteristics of the asset. There is one measurement category into which the Target Group classifies its debt instruments:

Debt instruments held at amortised cost

Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss presented in other income and other net gains/(losses) together with foreign exchange gains and losses. Impairment losses are presented as separate line item in the consolidated statements of profit or loss.

Financial asset at fair value through profit or loss

The insurance contract is initially recognised at the amount of the premium paid and subsequently carried at fair value at the end of each reporting period, with changes in fair value recognised in profit or loss.

Impairment of financial assets

The Target Group has the following types of financial assets subject to the expected credit loss model:

– Trade receivables – Other receivables – Restricted cash – Cash and cash equivalents

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

For trade receivables, the Target Group applies the simplified approach where loss allowances are measured at an amount equal to lifetime expected credit losses, adjusted for forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. The identified impairment loss was immaterial.

For other receivables, the expected credit loss is determined using the general approach where 12-month expected credit losses will be recognised unless there is a significant increase in credit risk, which requires the lifetime expected credit losses to be recognised, followed by forward looking adjustments. Impairment losses are presented as impairment losses of financial assets within operating profit. Subsequent recoveries of amounts previously written off are credited against the same line item. See Note 3.1 for a detailed description of the Target Group’s accounting policies on impairment of financial assets. The identified impairment loss was immaterial.

While restricted cash and cash and cash equivalents are also subject to the impairment requirements of HKFRS 9, the identified impairment loss was immaterial.

2.12 Offsetting financial instruments

Financial assets and liabilities are offset and the net amount is reported in the consolidated statements of financial position where the Target Group currently has a legally enforceable right to offset the recognised amounts, and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

2.13 Inventories

Inventories are stated at the lower of cost and net realisable value. Costs are assigned to individual items of inventory on the basis of weighted average costs. Costs of purchased inventory are determined after deducting rebates and discounts. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.

2.14 Trade receivables

Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of

business.

Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing components, when they are recognised at fair value. The Target Group holds the trade receivables with the objective of collecting the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method. See Note 2.11 for a detailed description of the Target Group’s accounting policies on impairment of trade receivables.

2.15 Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with financial institutions with original maturities of three months or less and which are subject to an insignificant risk of changes in value.

2.16 Share capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.

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2.17 Trade and other payables

Trade and other payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade and other payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

2.18 Borrowings and borrowing costs

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facilities will be drawn down. In this case, the fee is deferred until the drawdown occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.

Borrowings are classified as current liabilities unless the Target Group has an unconditional right to defer settlement of the liability for at least twelve months after the reporting date.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. Other borrowing costs are expensed in the period in which they are incurred.

2.19 Current and deferred income tax

The income tax expense or credit for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses

(i) Current income tax

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company and its subsidiaries operate and generate taxable income.

Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities

(ii) Deferred income tax

Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Historical Financial Information. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. The deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted at the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

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Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred income tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Target Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets are recognised on deductible temporary differences arising from investments in subsidiaries only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient taxable profit available against which the temporary difference can be utilised.

Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and liabilities and where the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

2.20 Employee benefits

(i) Defined contribution plan

For defined contribution plans, the subsidiaries of the Target Group in Macau pay contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The subsidiaries have no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

(ii) Pension obligations

In accordance with the rules and regulations in the PRC, the PRC based employees of the Target Group participate in various defined contribution retirement benefit plans organised by the relevant municipal and provincial governments in the PRC under which the Target Group and the PRC based employees are required to make monthly contributions to these plans calculated as a percentage of the employees’ salaries. The municipal and provincial governments undertake to assume the retirement benefit obligations of all existing and future retired PRC based employees’ payable under the plans described above. Other than the monthly contributions, the Target Group has no further obligation for the payment of retirement and other post-retirement benefits of its employees. The assets of these plans are held separately from those of the Target Group in independently administered funds managed by the PRC government. The Target Group’s contributions to the aforesaid defined contribution retirement schemes are expensed as incurred.

(iii) Short-term obligations

Liabilities for wages and salaries, including non-monetary benefits and accumulating sick leave that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled.

The liabilities are presented within other payables in the consolidated statements of financial position.

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(iv) Bonus plan

The Target Group recognises a liability and an expense for bonuses based on the best estimation of the management. The Target Group recognises a provision where contractually obliged or where a constructive obligation has been created that could be measured reliably.

(v) Employee leave entitlement

Employee entitlement to annual leave are recognised when they have accrued to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the end of each reporting period. Employee entitlements to sick leave and maternity leave are not recognised until the time of leave.

(vi) Housing funds, medical insurance and other social insurances

Employees of the Target Group in the PRC are entitled to participate in various government supervised housing funds medical insurances and other social insurance plan. The Target Group contributes on a monthly basis to these funds based on certain percentages of the salaries of the employees, subject to certain ceiling. The Target Group’s liability in respect of these funds is limited to the contributions payable in each year. Contributions to the housing funds, medical insurances and other social insurances are expensed as incurred.

2.21 Contract assets and liabilities

Upon entering into a contract with a customer, the Target Group obtains rights to receive consideration from the customer and assumes performance obligations to transfer goods or provide services to the customer. The combination of those rights and performance obligations gives rise to a net asset or a net liability depending on the relationship between the remaining rights and the performance obligations. The contract is an asset and recognised as contract assets if the measure of the remaining rights exceeds the measure of the remaining performance obligations. Conversely, the contract is a liability and recognised as contract liabilities if the measure of the remaining performance obligations exceeds the measure of the remaining rights.

2.22 Provisions

Provisions for legal claims, service warranties and make good obligations are recognised when the Target Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.

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2.23 Revenue and income recognition

Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for goods or services supplied, stated net of discounts, returns and rebates. The Target Group recognizes revenue when or as the control of the good or service is transferred to the customer and when specific criteria have been met for each of the Target Group’s activities as described below. Payments received in advance that are related to sales of goods or provision of services not yet delivered to customers are deferred and recognized as contract liabilities.

Where multiple-element arrangement exists, the transaction price is allocated at the inception of the arrangement to each element based on their relative fair values for revenue recognition purposes. The transaction price is allocated to each element using the price charged consistently when each element is sold separately or third party evidence of the stand-alone selling price for each element, or if neither type of evidence is available, using management’s best estimate of selling price. Estimates of revenues, costs or extent of progress toward completion are revised if circumstances change. Any resulting increases or decreases in estimated revenues or costs are reflected in profit or loss in the period in which the circumstances that give rise to the revision become known by management. Incentives to customers are recorded as reduction of revenue.

The Target Group does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year, except for some contracts for sales of goods which the payment terms might provide the customers with protection from the Target Group failing to adequately complete its obligation under the contract. As a consequence, the Target Group does not adjust any of the transaction prices for the time value of money.

(a) Income from provision of physical payment card services and ancillary card services

Income from provision of physical payment card services represents fees charged to participating goods or service providers for the transaction processing services of Macau Pass cards for the payments of fares or purchases of goods and services, and is recognised at the point in time when such payments are made.

Income from ancillary card services includes sales of cards and card related other service income. The income from sales of cards is recognised at the point in time when Target Group has delivered products to the customer and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. While the card related other service income is recognised over time when the service is rendered.

(b) Income from provision of e-wallet services

Income from provision of e-wallet services represents fees charged to participating goods or service providers for the transaction processing services of e-wallet for the payments of purchases of goods and services, and is recognised at the point in time when such payments are made.

(c) Income from provision of acquiring services for other payment platforms

Income from provision of acquiring services for other payment platforms includes the fees charged to participating goods or service providers and service income from other payment service providers.

The fees charged to participating goods or service providers are for the transaction processing services of other payment platforms for the payments of purchases of goods and services, and are recognised at the point in time when such payments are made.

In case of payments involving cross-border transactions, service income is received from other payment platforms for the provision of foreign exchange conversion service by the Target Group and is recognised at the point in time when the payments of purchases of goods and services are made.

(d) Sales of payment terminals and equipment

Sales of payment terminals and equipment are recognised at a point in time when Target Group has delivered products to the customer and there is no unfulfilled obligation that could affect the customer’s acceptance of the products.

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(e) Other service income and interest income

Other service income is recognised when the control over a service is transferred to the customer at the amount of promised consideration which is expected to be received or receivable by the Target Group. Depending on the terms of the contract and the laws that apply to the contract, control of the services may be transferred over time or at a point in time.

Interest income is recognised on a time-proportion basis using the effective interest method, taking into account the principal amounts outstanding and the interest rates applicable.

2.24 Government grants

Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received, and the Target Group will comply with all attached conditions. Government grants relating to costs are deferred and recognised in the profit or loss over the period necessary to match them with the costs that they are intended to compensate.

2.25 Leases

Before adoption of HKFRS 16 as at January 1, 2019

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the consolidated statement of profit or loss on a straight-line basis over the period of the lease.

After adoption of HKFRS 16 as at January 1, 2019

Target Group as a lessee

Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Target Group. Contracts may contain both lease and non-lease components. The Target Group allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

fixed payments (including in-substance fixed payments), less any lease incentives receivable
variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date
amounts expected to be payable by the Target Group under residual value guarantees
the exercise price of a purchase option if the Target Group is reasonably certain to exercise that option, and
– payments of penalties for terminating the lease, if the lease term reflects the Target Group exercising that option.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Target Group, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.

Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

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3 FINANCIAL RISK MANAGEMENT

Right-of-use assets are measured at cost comprising the following:

the amount of the initial measurement of lease liability
any lease payments made at or before the commencement date less any lease incentives received
– any initial direct costs, and – restoration costs.

Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. If the Target Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life.

Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT-equipment and small items of office furniture.

Target Group as a lessor

When the Target Group acts as a lessor, it classifies at lease inception (or when there is a lease modification) each of its leases as either an operating lease or finance lease. When a contract contains lease and non-lease components, the Target Group allocates the consideration in the contract to each component on a relative stand-alone selling price basis.

Leases in which the Target Group does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. Operating lease income is recognised on a time proportion basis over the lease terms and is included in revenue in the consolidated statements of profit or loss due to its operating nature. Variable lease payments that do not depend on an index or a rate are recognised as income in the accounting period in which they are earned.

Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as operating lease income. Contingent rents are recognised as revenue in the period in which they are earned.

2.26 Dividend distribution

Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.

3.1 Financial risk factors

The Target Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk and interest rate risk), credit risk and liquidity risk. The Target Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Target Group’s financial performance. Risk management is carried out by the senior management of the Target Group.

(a) Market risk

(i) Foreign exchange risk

Transactional currency exposures arise from revenue or expenses by operating units in currencies other than the units’ functional currency. Substantially all of the Target Group’s revenue and expenses are denominated in the functional currency of the operating units making the revenue, and substantially all the costs of sales and services are denominated in the units’ functional currency. Accordingly, the Directors consider that the Target Group is not exposed to significant currency risk.

Majority of the Target Group’s cash at bank and in hand were denominated in Macau Patacas (“ MOP ”), Hong Kong dollars (“ HK$ ”). There had been no significant change in the exchange rate between MOP and HK$. The Target Group holds limited cash at bank and in hand denominated in Renminbi (“ RMB ”) for the years ended December 31, 2018, 2019, 2020 and April 30 2021 which are 1.9%, 0.4%, 1.2% and 0.8% of total balance. The Directors consider that there is no significant foreign exchange risk.

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(ii) Interest rate risk

The Target Group is exposed to interest rate risk related primarily to its fixed deposits held at banks. The Directors consider the Target Group’s exposure of fair value interest rate risk on fixed deposits is not significant as the interest bearing fixed deposits are within short maturity period.

The Target Group does not enter into any derivative financial instruments in order to mitigate its exposure associated with fluctuations relating to fair value of its cash flows of interest receipts. However, the management monitors interest rate exposure and will consider other necessary actions when significant interest rate exposure is anticipated.

As the Target Group is not exposed to significant interest rate risk, the Directors consider not to present the sensitivity analysis.

(b) Credit risk

Credit risk arises from trade receivables, other receivables, restricted cash and cash and cash equivalents including deposits with banks and financial institutions.

(i) Risk management

The Target Group’s exposure to credit risk arising from cash and cash equivalents is limited because the Target Group mainly deals with financial institutions which have good credit ratings.

The Target Group monitors the issuance of credit to its customer at the initial stage and with an ongoing basis to minimise the exposure to credit risk. The activities of individual credit account are monitored regularly for management to decide if the credit facility should be continued, changed or cancelled.

For trade receivables, credit evaluations are performed on all customers grouped based on shared credit risk characteristics and the days past due. These evaluations focus on the customer’s past history of making payments when due and current ability to pay, and take into account forward-looking information specific to the customer as well as pertaining to the economic environment in which the customer operates.

For the remaining financial assets the Target Group has policies and guidelines in place to assess the credit worthiness of counterparties to ensure that credits are made to parties with an appropriate credit history and a good history of performance records.

(ii) Impairment of financial assets

The Target Group has following types of financial assets that are subject to the expected credit loss

model:

Trade receivables

The Target Group applies the HKFRS 9 simplified approach to measure expected credit losses which uses a lifetime expected loss allowance for all trade receivables and contract assets.

To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The expected loss rates are based on the payment profiles of sales and the corresponding historical credit losses experienced. Given the lack of sufficient internal default experience of the Target Group, the Target Group has further incorporated proxies from external corporate credit data (such as default experience) from credit rating agencies on top of the internal data such as payment profiles of the customers of the Target Group. The expected credit losses have been estimated by further incorporating forward-looking macroeconomic factors such as GDP and inflationary rates.

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The carrying amount of trade receivables are reduced through the use of an allowance account and the amount of the loss allowance is recognised in the consolidated statements of profit or loss within impairment losses of financial assets. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited to the consolidated statements of profit or loss against impairment losses of financial assets. The Target Group’s concentration of credit risks on trade receivables as at December 31, 2018, 2019 and 2020 and April 30, 2021 of the top five customers accounted for approximately 93.1%, 73.3% and 89.6% and 76.6%, respectively.

The adoption of HKFRS 9 has no material impact on the provision of impairment loss on the financial assets as at January 1, 2018. Loss allowances for trade receivables as at December 31, 2018, 2019 and 2020 and April 30, 2021 reconcile to the opening loss allowances as follows:

Opening loss allowance at January 1 Provision of impairment loss recognised in profit or loss during the year/period Receivables written off during the period as uncollectible Closing loss allowance at December 31	At December 31 2018 2019 2020 MOP’000 MOP’000 MOP’000 112 358 414 353 386 – (107) (330) (14) 358 414 400	At April 30 2021 MOP’000 400 – –
		400

Deposits and other receivables

Deposits and other receivables at the end of each reporting period were mainly deposits placed for transaction projects which are refundable upon project completion and rental deposits. The directors of the Target Company consider the probability of default upon initial recognition of assets and whether there has been significant increase in credit risk on an ongoing basis during the year. The directors of the Target Group also make periodic collective assessments as well as individual assessment on the recoverability of the deposits and other receivables based on historical settlement records and past experience and with further incorporating of forward-looking macroeconomic factors such as GDP and inflationary rates, and consider the credit risk of the deposits and other receivables are low and the impairment provision of the deposits and other receivables is insignificant because the counterparties have strong capacity to meet their contractual cash flow obligations in the near term with no recent history of default.

Restricted cash and cash and cash equivalents

To manage this risk arising from restricted cash and cash and cash equivalents, they are mainly placed with banks with high credit rating. There has been no recent history of default in relation to these financial institutions. With incorporation of forward-looking macroeconomic factors, the expected credit loss is assessed to be minimal.

(c) Liquidity risk

Prudent liquidity risk management implies maintaining conservative level of liquid assets to ensure the availability of sufficient cash flows to meet any unexpected and material cash requirements in the ordinary course of business.

Liquidity risk relates to the risk that the Target Group will not be able to meet its obligations associated with its financial liabilities that are settled by delivering cash or another financial asset.

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The Target Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Target Group’s operations and meet its short-term and long-term funding requirements. The Target Group relies on internally generated funding as significant sources of liquidity. The maturity profile of the Target Group’s financial liabilities as at the reporting dates, based on the contracted undiscounted payments, was as follows:

At December 31, 2018 Trade and other payables (excluding other taxes payable and employee benefits accrual) Floats balance due to card or account holders Card deposits due to cardholders At December 31, 2019 Trade and other payables (excluding other taxes payable and employee benefits accrual) Floats balance due to card or account holders Card deposits due to cardholders Amounts due to shareholders Lease liabilities (including interest payable) At December 31, 2020 Trade and other payables (excluding other taxes payable and employee benefits accrual) Floats balance due to card or account holders Card deposits due to cardholders Amounts due to shareholders Lease liabilities (including interest payable) At April 30, 2021 Trade and other payables (excluding other taxes payable and employee benefits accrual) Floats balance due to card or account holders Card deposits due to cardholders Amounts due to shareholders Lease liabilities (including interest payable)	Less than 1 year MOP’000 90,243 124,290 18,799 291,574 179,577 17,031 10,046 8,274 141,330 285,680 16,418 10,046 6,034 155,805 331,041 16,283 27,486 4,880	Between 1 year and 2 years Between 2 years and 5 years MOP’000 MOP’000 – – – – – – – – – – – – – – 6,070 2,691 – – – – – – – – 2,671 – – – – – – – – – 1,023 –	Over 5 years MOP’000 – – – – – – – – – – – – – – – – – –	Total MOP’000 90,243 124,290 18,799

				291,574 179,577 17,031 10,046 17,035

				141,330 285,680 16,418 10,046 8,705

				155,805 331,041 16,283 27,486 5,903

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3.2 Capital management

The Target Group’s objectives when managing capital are to safeguard the Target Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Target Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Target Group monitors capital on the basis of the gearing ratio. This ratio is calculated as total bank borrowings divided by total equity. The Target Group does not have any bank borrowings during the Track Record Period.

All credit institutions incorporated in Macau shall observe a capital adequacy ratio as stipulated by the notice issued by AMCM. During the Track Record Period, Macau Pass S.A. has observed such requirement.

3.3 Fair value estimation

The carrying amounts of the Target Group’s financial assets and financial liabilities are measured at amortised cost which are not materially different from their fair values at the years ended December 31, 2018, 2019 and 2020 and four months ended April 30, 2020 and 2021.

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4 CRITICAL ESTIMATES AND JUDGEMENTS

Estimates and judgements used in preparing the financial statements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant effect on the carrying amounts of assets and liabilities within the next financial year are addressed below.

(a) Depreciation of property, plant and equipment and right-of-use assets, and amortisation of intangible assets

The Target Group’s management determines the estimated useful lives, residual values and related depreciation and amortisation charges for its property, plant and equipment, right-of-use assets and intangible assets respectively. This estimate is based on the historical experience of the actual useful lives and residual values of property, plant and equipment, right-of-use assets and intangible assets of similar nature and functions. Management will increase the depreciation and amortisation charge where useful lives are less than previously estimated lives and it will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or sold. Actual economic lives may differ from estimated useful lives and actual residual values may differ from estimated residual values. Periodic review could result in a change in useful lives and residual values and therefore depreciation and amortisation charge in future periods.

(b) Impairment of trade and other receivables

The loss allowances for trade and other receivables are based on assumptions about risk of default and expected loss rates. The directors of the Target Group use judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the previous credit history, aging analysis, probability of default and current market condition. In assessing the recoverability of receivables, it requires the use of judgements and estimates based on past history, existing market conditions as well as forward looking factors. A provision for impairment of trade and other receivables will be made.

(c) Income taxes

Significant judgement is required in determining the provision for income taxes. There are transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

Recognition of deferred tax assets, which principally relates to inventory impairment provision, trade receivables impairment provision and tax loss, depends on management’s expectation of future taxable profit that will be available against which the tax losses and temporary differences can be utilised. The outcome of their actual utilisation may be different.

(d) Net realisable value of inventories

Management reviews the ageing analysis at each reporting date and makes allowance for obsolete and slow-moving inventory items identified that are no longer suitable for use in production or sale. Management estimates the net realisable value for these inventories based primarily on the latest invoice prices, current market conditions and historical experience of using in production and sales. Management carries out an inventory review on a product-by-product basis at each reporting date and makes allowance for obsolete items.

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5 SEGMENT INFORMATION

The Target Group is principally engaged in the provision of physical payment card services, E-wallet services, acquiring services, as well as sales and leasing of card reader and scanner payment terminals. Information reported to the directors of the Target Company, being the chief operating decision-maker (“CODM”), for the purposes of resources allocation and assessment of performance focuses specifically on the revenue analysis by principal categories of the Target Group’s business and the profit or loss of the Target Group as a whole.

The directors of the Target Company regard the Target Group’s business as a single operating segment and review the consolidated financial statements accordingly. As the Target Group has only one operating segment qualified as reporting segment under HKFRS 8 and the information that regularly reviewed by the directors of the Target Group for the purposes of allocating resources and assessing performance of the operating segment is the financial statements of the Target Group, no separate segmental analysis is presented in the Historical Financial Information. The directors assess the performance based on profit/(loss) before income tax of the Target Group. Total assets and total liabilities are measured in a manner consistent with that in the consolidated statements of financial position.

(a) Revenue by income stream and nature

Income from provision of physical payment card services and ancillary card services Income from provision of e-wallet services Income from provision of acquiring services for other payment platforms Sales of payment terminals and equipment Other service income Subtotal Lease income of payment terminals and equipment Total	Year ended December 31 2018 2019 2020 MOP’000 MOP’000 MOP’000 55,253 60,649 61,879 339 5,357 25,952 81,902 131,912 78,440 644 465 945 3,259 3,758 3,557 141,397 202,141 170,773 4,365 4,547 4,830 145,762 206,688 175,603	Four months ended April 30 2020 2021 MOP’000 MOP’000 (Unaudited) 13,435 17,482 6,785 28,807 18,284 82,558 – 120 905 1,241 39,409 130,208 1,603 1,615 41,012 131,823	Four months ended April 30 2020 2021 MOP’000 MOP’000 (Unaudited) 13,435 17,482 6,785 28,807 18,284 82,558 – 120 905 1,241 39,409 130,208 1,603 1,615 41,012 131,823
			130,208 1,615
			131,823

(b) Time of revenue recognition

Recognised at a point in time Recognised over time Subtotal Lease income of payment terminals and equipment Total	Year 2018 MOP’000 130,994 10,403 141,397 4,365 145,762	ended December 31 2019 2020 MOP’000 MOP’000 191,369 161,262 10,772 9,511 202,141 170,773 4,547 4,830 206,688 175,603	Four months ended April 30 2020 2021 MOP’000 MOP’000 (Unaudited) 36,638 126,833 2,771 3,375 39,409 130,208 1,603 1,615 41,012 131,823	Four months ended April 30 2020 2021 MOP’000 MOP’000 (Unaudited) 36,638 126,833 2,771 3,375 39,409 130,208 1,603 1,615 41,012 131,823
				130,208

				1,615
				131,823

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

(c) Revenue from top customers

Revenue from external parties contributing 10% or more of the total revenue of the Target Group is as follows:

	Year	ended December 31		Four months	ended April 30
	2018	2019	2020	2020	2021
	MOP’000	MOP’000	MOP’000	MOP’000	MOP’000
				(Unaudited)
Customer A	25,465	39,647	23,997	5,503	25,079

(d) Revenue by geographical locations (as determined by the country/region of domicile which the Target Group operates)

	Year	ended December 31		Four months	ended April 30
	2018	2019	2020	2020	2021
	MOP’000	MOP’000	MOP’000	MOP’000	MOP’000
				(Unaudited)
Macau	145,762	206,688	175,603	41,012	131,823

(e) The total of non-current assets broken down by location of the assets, is shown in the following:

Macau The PRC Total	At December 31 2018 2019 MOP’000 MOP’000 37,017 57,165 – 4,257 37,017 61,422	2020 MOP’000 58,244 3,580 61,824	At April 30 2021 MOP’000 57,035 2,142
			59,177

The addition of property, plant and equipment, right-of-use assets and intangible assets during the Track Record Period are disclosed in note 14, note 15 and note 16 respectively. The addition of prepayment for the years ended December 31, 2018, 2019 and 2020 and four months ended April 30, 2021 are MOP5,199,000, MOP1,546,000, MOP1,428,000 and MOP1,281,000 respectively.

(f) Assets and liabilities related to contracts with customers

The Target Group has recognised the following assets and liabilities related to contracts with customers:

Contract liabilities Sales of payment terminals and equipment and provision of ancillary card services Income from provision of e-wallet service Total contract liabilities	At December 31 2018 2019 MOP’000 MOP’000 532 857 596 3,200 1,128 4,057	2020 MOP’000 1,343 10,000 11,343	At April 30 2021 MOP’000 5,733 5,305
			11,038

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

For the Target Group’s business mentioned above the unsatisfied performance obligations resulting from contracts with duration of more than one year are MOP596,000, MOP3,200,000, MOP10,000,000 and MOP5,305,000 as at year ended December 31, 2018, 2019 and 2020 and four months ended April 30, 2021. Management expect all of the transaction price allocated to unsatisfied performance obligations will be recognised as revenue during the upcoming 12-month period from each period end.

For the contracts with duration of less than one year, the aggregate amount of the transaction price allocated to these performance obligations that are unsatisfied as of the end of each reporting period and the management’s expected recognition time of such amount are not disclosed as permitted under HKFRS 15.

(f) Assets and liabilities related to contracts with customers

Revenue recognised in relation to contract liabilities

The following table shows how much of the revenue recognised in each reporting period relates to carried-forward contract liabilities and how much relates to performance obligations that were satisfied in a prior year:

Revenue recognised that was included in the contract liability balance at the beginning of the period Sales of payment terminals and equipment and provision of ancillary card services Income from provision of e-wallet services	Year ended December 31 2018 2019 2020 MOP’000 MOP’000 MOP’000 226 532 857 289 596 3,200 515 1,128 4,057	Four months ended April 30 2020 2021 MOP’000 MOP’000 (Unaudited) 857 1,343 3,200 10,000 4,057 11,343	Four months ended April 30 2020 2021 MOP’000 MOP’000 (Unaudited) 857 1,343 3,200 10,000 4,057 11,343
			11,343

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

6 COST OF CARDS AND CARD READERS

Cost of Macau Pass cards Cost of card readers Others Total	Year ended December 31 2018 2019 2020 MOP’000 MOP’000 MOP’000 2,219 3,790 5,357 343 380 718 – 16 143 2,562 4,186 6,218	Four months ended April 30 2020 2021 MOP’000 MOP’000 (Unaudited) 3,668 679 – 128 – 10 3,668 817	Four months ended April 30 2020 2021 MOP’000 MOP’000 (Unaudited) 3,668 679 – 128 – 10 3,668 817
			817

7 EMPLOYEE BENEFITS Salaries and allowances Pension costs-defined contribution plan Other social security costs, housing benefits and other staff benefits Total	Year ended December 31 2018 2019 2020 MOP’000 MOP’000 MOP’000 32,090 44,720 52,757 590 961 1,221 1,020 1,222 1,652 33,700 46,903 55,630	Four months ended April 30 2020 2021 MOP’000 MOP’000 (Unaudited) 14,399 13,904 333 323 618 332 15,350 14,559	Four months ended April 30 2020 2021 MOP’000 MOP’000 (Unaudited) 14,399 13,904 333 323 618 332 15,350 14,559
			14,559

8 DEPRECIATION AND AMORTISATION EXPENSES

Depreciation of property, plant and equipment Depreciation of right-of-use assets Amortisation of intangible assets Total	Year ended December 31 2018 2019 2020 MOP’000 MOP’000 MOP’000 10,204 11,952 16,466 – 5,972 7,179 14,926 20,832 26,040 25,130 38,756 49,685	Four months ended April 30 2020 2021 MOP’000 MOP’000 (Unaudited) 3,313 4,350 2,502 2,261 6,833 6,734 12,648 13,345	Four months ended April 30 2020 2021 MOP’000 MOP’000 (Unaudited) 3,313 4,350 2,502 2,261 6,833 6,734 12,648 13,345
			13,345

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

9 OTHER OPERATING INCOMES

Income from advertising campaigns (Note (i)) Sales of self-developed software Government grants (Note (ii)) Other income Total	Year ended December 31 2018 2019 2020 MOP’000 MOP’000 MOP’000 3,646 4,839 1,718 – – 4,097 – – 2,817 244 486 708 3,890 5,325 9,340	Four months ended April 30 2020 2021 MOP’000 MOP’000 (Unaudited) 385 – – 1,510 50 – 100 741 535 2,251	Four months ended April 30 2020 2021 MOP’000 MOP’000 (Unaudited) 385 – – 1,510 50 – 100 741 535 2,251
			2,251

Note:

(i) The Target Group were engaged in several marketing events for the purpose of promoting consumption in Macau.

(ii) Government grant is received as the financial support for new high technology company, which was one-off non-recurring subsidy provided by government in Zhuhai. There was no unfulfilled condition or other contingency attaching to the subsidy.

10 OTHER OPERATING EXPENSES

Service fee Advertising and publicity Consumable goods Handling fee paid to participating service providers Expense relating to lease Telecommunication and postage Research and development expense Repair and maintenance Legal and professional services Commission fee Auditor’s remuneration – Audit services – Non-audit services Others Total	Year ended December 31 2018 2019 2020 MOP’000 MOP’000 MOP’000 35,325 55,370 40,497 6,651 16,420 14,056 1,043 2,014 4,134 3,562 4,976 6,545 4,348 116 – 2,291 2,886 4,371 – – 2,594 713 544 652 468 244 1,463 1,782 2,785 9,467 362 464 442 20 350 20 3,502 4,231 8,206 60,067 90,400 92,447	Four months ended April 30 2020 2021 MOP’000 MOP’000 (Unaudited) 8,873 39,649 5,130 15,561 903 705 1,787 3,214 – – 1,469 1,321 – 544 168 361 63 378 349 297 137 133 7 7 3,091 668 21,977 62,838	Four months ended April 30 2020 2021 MOP’000 MOP’000 (Unaudited) 8,873 39,649 5,130 15,561 903 705 1,787 3,214 – – 1,469 1,321 – 544 168 361 63 378 349 297 137 133 7 7 3,091 668 21,977 62,838
			62,838

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

11 OTHER GAINS, NET

Exchange gain/(loss) (Note) Negative goodwill on acquisition (Note 28) Others Total	Year ended December 31 2018 2019 2020 MOP’000 MOP’000 MOP’000 1,927 3,454 1,273 – 3,463 – – 81 452 1,927 6,998 1,725	Four months ended April 30 2020 2021 MOP’000 MOP’000 (Unaudited) (42) 1,667 – – 81 182 39 1,849	Four months ended April 30 2020 2021 MOP’000 MOP’000 (Unaudited) (42) 1,667 – – 81 182 39 1,849
			1,849

Note: The exchange gain was derived from preferential exchange rate between HK$ and MOP offered by banks. Management expect such preferential exchange rate will remain available with such banks.

12 FINANCE INCOME, NET

Finance income – Interest income from bank deposits Finance cost – Interest expense on lease liabilities Finance income – net	Year ended December 31 2018 2019 2020 MOP’000 MOP’000 MOP’000 1,088 5,454 6,973 1,088 5,454 6,973 – (323) (391) – (323) (391) 1,088 5,131 6,582	Four months ended April 30 2020 2021 MOP’000 MOP’000 (Unaudited) 1,754 847 1,754 847 (155) (79) (155) (79) 1,599 768	Four months ended April 30 2020 2021 MOP’000 MOP’000 (Unaudited) 1,754 847 1,754 847 (155) (79) (155) (79) 1,599 768
			847
			(79)
			(79)
			768

13 INCOME TAX EXPENSE/(CREDIT)

(a) Income tax expense/(credit)

Current income tax – Macau complementary tax – (Over)/under provision of prior periods Income tax expense/(credit)	Year ended December 31 2018 2019 2020 MOP’000 MOP’000 MOP’000 3,717 5,174 32 (9) 3 (300) 3,708 5,177 (268)	Four months ended April 30 2020 2021 MOP’000 MOP’000 (Unaudited) – 5,435 (100) (300) (100) 5,135	Four months ended April 30 2020 2021 MOP’000 MOP’000 (Unaudited) – 5,435 (100) (300) (100) 5,135
			5,135

II-43

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

The Target Group’s principal applicable taxes and tax rates are as follows:

Macau

The entities within the Target Group incorporated in Macau are subject to Macau profits tax at progressive rates ranging from 3% to 9% on the taxable income above MOP32,000 but below MOP300,000, and thereafter at a fixed rate of 12%. In addition, a special tax incentive has provided to the effect that tax-free income threshold amounting to MOP600,000 for the years ended December 31, 2018, 2019 and 2020 and four months ended April 30, 2021. In addition, in response to the economic downturn as a result of the COVID-19 outbreak, the Macau government imposes a one-off measure to deduct MOP300,000 from the 2019 Macau complementary tax payments.

Mainland corporate income tax (“CIT”)

CIT was made on the estimated assessable profits of the entity within the Target Group incorporated and operated in the PRC, the ZAT, and was calculated in accordance with the relevant tax rules and regulations of the PRC. ZAT is qualified as High and New Technology Enterprises (“HNTE”) and entitled to enjoy a beneficial tax rate of 15% for the year ended December 31, 2019. The CIT rate for the year ended December 31, 2020 and four months ended April 30, 2021 is 25%.

Withholding tax on undistributed profits

According to the relevant tax rules and regulations of the PRC, distribution to foreign investors of profits earned by PRC companies since January 1, 2008 is subject to withholding tax of 5% or 10%, depending on the country of incorporation of the foreign investors’ foreign incorporated immediate holding companies.

During the years ended December 31, 2018, 2019 and 2020 and four months ended April 30, 2021, there were no unremitted earnings whose distribution to owners from PRC subsidiary that is subject to withholding tax of 5%. No deferred tax liabilities were provided on the unremitted earnings.

(b) Numerical reconciliation of income tax expense

Profit/(loss) before income tax Tax calculated at applicable statutory tax rate Expenses not deductible for tax purposes (Over)/under provision of prior periods Effect of progressive tax rate Special Complementary tax incentives Tax losses not recognised as deferred tax assets (Note (i)) Tax incentives for research and development expenses available for subsidiary incorporated in the PRC (Note (ii)) Other Income tax expense/(credit)	Year ended December 31 2018 2019 2020 MOP’000 MOP’000 MOP’000 31,208 43,897 (10,730) 3,745 4,702 (314) 42 50 1,284 (9) 3 (300) (17) (35) – (55) (109) – – 1,764 3,065 – (1,198) (4,003) 2 – – 3,708 5,177 (268)	Four months ended April 30 2020 2021 MOP’000 MOP’000 (Unaudited) (10,458) 45,132 24 5,640 – 91 (100) (300) – (17) – (55) 1,287 1,060 (1,311) (1,284) – – (100) 5,135

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Note:

(i) As at year ended December 31, 2020, deferred tax assets of MOP36,000 arising from the tax losses of MOP300,000 relating to Macau Pass S.A. have not been recognised due to uncertainty on assessable profits for the foreseeable future. The tax losses will expire in 3 years from December 31, 2020. There were no tax losses as at December 31, 2018 and 2019 and April 30, 2021.

For the years ended December 31, 2019 and 2020 and four months ended April 30, 2021, there were tax losses relating to Zhuhai Hengqin Zhongaotong Electronic Payment Technology Co., Ltd which amounted to RMB28,304,000 (equivalent to MOP32,527,000) and RMB38,764,000 (equivalent to MOP47,579,000) and RMB42,212,000 (equivalent to MOP52,199,000) respectively. Deferred tax assets of MOP4,879,000, MOP11,895,000 and MOP13,050,000 as at December 31, 2019 and 2020 and April 30, 2021, respectively, have not been recognised due to uncertainty on assessable profits for the foreseeable future. Tax losses will expire in 5 years from the relevant tax periods.

(ii) The Target Group obtained incentives from the PRC tax authority relating to the research and development expenses of ZAT. Under such tax incentive rule, the Target Group may claim an additional tax deduction up to 75% of the relevant research and development expenses incurred in ZAT during respective periods approved by the PRC tax authority.

14 PROPERTY, PLANT AND EQUIPMENT

At January 1, 2018 Cost Accumulated depreciation Net book amount Year ended December 31, 2018 Opening net book amount Additions Depreciation (Note 8) Net book amount At December 31, 2018 Cost Accumulated depreciation Net book amount Year ended December 31, 2019 Opening net book amount Business combination (Note 28) Additions Depreciation (Note 8) Currency translation differences Disposals Net book amount At December 31, 2019 Cost Accumulated depreciation Net book amount	Computer equipment s MOP’000 7,347 (6,144) 1,203 1,203 3,207 (1,504) 2,906 10,554 (7,648) 2,906 2,906 – 1,699 (1,569) – – 3,036 12,253 (9,217) 3,036	Business erver system, card readers and others MOP’000 27,223 (19,360) 7,863 7,863 10,873 (8,172) 10,564 38,096 (27,532) 10,564 10,564 – 7,553 (9,331) – – 8,786 45,649 (36,863) 8,786	Non- personalised cards MOP’000 6,135 (6,132) 3 3 – (3) – 6,135 (6,135) – – – – – – – – 6,135 (6,135) –	Office equipment Leasehold improvements MOP’000 MOP’000 1,174 4,441 (966) (4,085) 208 356 208 356 53 – (92) (356) 169 – 1,227 4,441 (1,058) (4,441) 169 – 169 – 1,012 161 1,297 1,277 (478) (525) (17) (2) (37) – 1,946 911 4,114 6,420 (2,168) (5,509) 1,946 911	Motor vehicles MOP’000 385 (308) 77 77 – (77) – 385 (385) – – 166 – (49) (2) – 115 768 (653) 115	Total MOP’000 46,705 (36,995)
						9,710

						9,710 14,133 (10,204)
						13,639

						60,838 (47,199)
						13,639

						13,639 1,339 11,826 (11,952) (21) (37)
						14,794

						75,338 (60,544)
						14,794

II-45

APPENDIX II

FINANCIAL INFORMATION OF THE TARGET GROUP

Year ended December 31, 2020 Opening net book amount Additions Depreciation (Note 8) Currency translation differences Disposal Net book amount At December 31, 2020 Cost Accumulated depreciation Net book amount Four months ended April 30, 2021 Opening net book amount Additions Depreciation (Note 8) Currency translation differences Net book amount At April 30, 2021 Cost Accumulated depreciation Net book amount	Computer equipment s MOP’000 3,036 4,264 (2,450) – – 4,850 16,517 (11,667) 4,850 4,850 330 (786) – 4,394 16,847 (12,453) 4,394	Business erver system, card readers and others MOP’000 8,786 19,249 (12,551) – – 15,484 64,898 (49,414) 15,484 15,484 1,643 (3,065) – 14,062 66,529 (52,467) 14,062	Non- personalised cards MOP’000 – – – – – – 5,083 (5,083) – – – – – – 5,083 (5,083) –	Office equipment Leasehold improvements MOP’000 MOP’000 1,946 911 521 419 (676) (563) 62 22 (4) – 1,849 789 4,692 3,647 (2,843) (2,858) 1,849 789 1,849 789 323 – (239) (193) 8 3 1,941 599 5,023 3,650 (3,082) (3,051) 1,941 599	Motor vehicles MOP’000 115 873 (226) 1 (92) 671 1,092 (421) 671 671 – (67) – 604 1,093 (489) 604	Total MOP’000 14,794 25,326 (16,466) 85 (96)
						23,643

						95,929 (72,286)
						23,643

						23,643 2,296 (4,350) 11
						21,600

						98,225 (76,625)
						21,600

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

15 RIGHT-OF-USE ASSETS

Year ended December 31, 2019
At January 1, 2019 as original presented
Initial adoption of HKFRS 16
At January 1, 2019 as restated
Additions due to business combination (Note 28)
Additions
Depreciation (Note 8)
Currency translation differences
Early termination of lease contracts
Closing net book amount
Year ended December 31, 2020
Opening net book amount
Additions
Depreciation (Note 8)
Currency translation differences
Termination of lease contracts
Closing net book amount
Four months ended April 30, 2021
Opening net book amount
Depreciation (Note 8)
Currency translation differences
Termination of lease contracts
Closing net book amount

Buildings
MOP’000
–
7,222
7,222
2,867
11,827
(5,972)
(47)
(756)
15,141
15,141
151
(7,179)
77
(769)
7,421
7,421
(2,261)
5
(122)
5,043

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

16 INTANGIBLE ASSETS

At January 1, 2018
Cost
Accumulated amortisation
Net book amount
Year ended December 31, 2018
Opening net book amount
Additions
Amortisation (Note 8)
Net book amount
At December 31, 2018
Cost
Accumulated amortisation
Net book amount
Year ended December 31, 2019
Opening net book amount
Business combination (Note 28)
Additions
Amortisation (Note 8)
Currency transaction differences
Net book amount
At December 31, 2019
Cost
Accumulated amortisation
Net book amount
Year ended December 31, 2020
Opening net book amount
Additions
Amortisation (Note 8)
Currency transaction differences
Net book amount

Software
MOP’000
44,623
(32,137)
12,486
12,486
20,619
(14,926)
18,179
65,243
(47,064)
18,179
18,179
65
32,534
(20,832)
(5)
29,941
97,920
(67,979)
29,941
29,941
25,417
(26,040)
14
29,332

II-48

APPENDIX II

FINANCIAL INFORMATION OF THE TARGET GROUP

At December 31, 2020 Cost Accumulated amortisation Net book amount Four months ended April 30, 2021 Opening net book amount Additions Amortisation (Note 8) Currency transaction differences Net book amount At April 30, 2021 Cost Accumulated amortisation Net book amount	Software MOP’000 123,356 (94,024)
	29,332

	29,332 8,653 (6,734) 2
	31,253

	132,013 (100,760)
	31,253

In addition, the intangible assets include trademarks acquired at a cost of MOP49,000 which were fully amortised as at January 1, 2018, December 31, 2018, 2019 and 2020, and April 30, 2021.

17 INVENTORIES

Card readers Integrated Circuit Card (“IC Card”) Other Inventory (accessories)	At December 31 2018 2019 MOP’000 MOP’000 3,950 4,053 2,540 1,430 82 73 6,572 5,556	2020 MOP’000 1,688 1,838 73 3,599	At April 30 2021 MOP’000 2,647 1,948 130
			4,725

The Directors assessed that no impairment for inventory provision was required during the years ended December 31, 2018, 2019 and 2020 and four months ended April 30, 2021.

For the years ended December 31, 2018, 2019 and 2020 and four months ended April 30, 2020 and 2021, inventories recognised as expense and included in “cost of cards and card readers” amounted to MOP2,562,000, MOP4,186,000 and MOP6,218,000 and MOP3,668,000 and MOP817,000 respectively (Note 6).

II-49

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

18 FINANCIAL INSTRUMENTS BY CATEGORY

The Target Group holds the following financial instruments:

Notes Financial assets at amortised cost Trade and other receivables 19 Amounts due from shareholders Restricted cash 20 Cash and cash equivalents 20 Total financial assets Financial liabilities at amortised cost Floats balance due to card or account holders 21 Card deposits due to cardholders 21 Trade and other payables (excluding other taxes payable and employee bonus accrual) 22 Amounts due to shareholders 24 Lease liabilities 23 Total financial liabilities	At December 31 2018 2019 MOP’000 MOP’000 112,019 64,771 200 – 2,317 20 157,453 503,595 271,989 568,386 124,290 179,577 18,799 17,031 90,443 291,574 – 10,046 – 16,446 233,532 514,674	2020 MOP’000 115,894 – 20 386,150 502,064 285,680 16,418 141,330 10,046 8,508 461,982	At April 30 2021 MOP’000 116,509 – 20 477,923
			594,452

			331,041 16,283 155,805 27,486 5,782
			536,397

19 TRADE AND OTHER RECEIVABLES AND PREPAYMENTS

Due from third parties Less: provision for impairment of trade receivables Net trade receivables Amounts due from related parties (Note 24) Deposits, prepayments and other receivables Current Non-current	At December 31 2018 2019 MOP’000 MOP’000 107,377 53,534 (358) (414) 107,019 53,120 266 688 11,604 12,560 118,889 66,368 113,690 64,822 5,199 1,546 118,889 66,368	2020 MOP’000 106,107 (400) 105,707 5,028 7,207 117,942 116,514 1,428 117,942	At April 30 2021 MOP’000 103,158 (400)
			102,758 5,232 11,729
			119,719

			118,438 1,281
			119,719

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Trade receivables are denominated in the following currencies:

MOP	At December 31 2018 2019 MOP’000 MOP’000 107,377 53,534 107,377 53,534	2020 MOP’000 106,107 106,107	At April 30 2021 MOP’000 103,158
			103,158

The credit terms of trade receivables granted by the Target Group are generally 0 to 90 days. For the years ended December 31, 2018, 2019 and 2020 and four months ended April 30, 2020 and 2021, the ageing analysis of the trade receivables based on invoice date is as follows:

Up to 3 months	At December 31 2018 2019 MOP’000 MOP’000 107,377 53,534 107,377 53,534	2020 MOP’000 106,107 106,107	At April 30 2021 MOP’000 103,158
			103,158

20 CASH AT BANK AND IN HAND

(a) The Target Group

Cash at bank and in hand Less: Restricted cash maintained at bank (Note) Cash and cash equivalents	At December 31 2018 2019 MOP’000 MOP’000 159,770 503,615 (2,317) (20) 157,453 503,595	2020 MOP’000 386,170 (20) 386,150	At April 30 2021 MOP’000 477,943 (20)
			477,923

Note: The restricted bank balances were held for performance guarantees provided by a Macau bank in favour of Macau Government for service projects to the extent of MOP2,317,000 as at December 31, 2018 and MOP20,000 as at December 31, 2019 and 2020 and as at April 30, 2021. The bank guarantees are secured by the restricted bank deposit provided by the Target Group.

Cash at bank and in hand are denominated in the following currencies:

HK$ MOP RMB Cash at bank and in hand	At December 31 2018 2019 MOP’000 MOP’000 19,252 101,484 137,453 399,969 3,065 2,162 159,770 503,615	2020 MOP’000 184,147 197,260 4,763 386,170	At April 30 2021 MOP’000 215,449 258,647 3,847
			477,943

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APPENDIX II

FINANCIAL INFORMATION OF THE TARGET GROUP

The restricted cash are denominated in MOP, and the carrying amount of the Target Group’s restricted cash and cash and cash equivalents approximated to its fair value as at December 31, 2018, 2019 and 2020 and four months ended April 30, 2021.

(b) The Target Company

At December 31 2018 2019 MOP’000 MOP’000 Cash at bank and in hand – 62 Cash and cash equivalents – 62 Cash at bank and in hand are denominated in the following currencies: At December 31 2018 2019 MOP’000 MOP’000 MOP – 62 Cash at bank and in hand – 62	2020 MOP’000 120 120 2020 MOP’000 120 120	At April 30 2021 MOP’000 28,315
		28,315

		At April 30 2021 MOP’000 28,315
		28,315

21 FLOATS BALANCE DUE TO CARD OR ACCOUNT HOLDERS AND CARD DEPOSITS DUE TO CARDHOLDERS

Floats balance due to card or account holders represent the balances of prepayment from card or account holders. The balances are repayable on demand and management expects the majority of the deposit will not be redeemable in the coming 12 months.

Card deposits due to cardholders represent the deposits from card holders. The balances are repayable on demand upon the return of the cards to the Company, management expects the majority of the deposits will not be redeemable in the coming 12 months.

Under the regulations of AMCM, the total amount of cash and bank deposits and net receivables from participating service providers of Macau Pass S.A. should not be less than the aggregate amount of floats balance due to card or account holders, card deposits and net payables to participating service providers at all times.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

22 TRADE AND OTHER PAYABLES

Trade payables Refundable deposits Amounts due to related companies (Note 24) Accruals and other payables Trade and other payables	At December 31 2018 2019 MOP’000 MOP’000 85,460 42,084 3,882 4,463 1,338 245,704 10,140 18,891 100,820 311,142	2020 MOP’000 111,738 5,683 11,573 25,053 154,047	At April 30 2021 MOP’000 131,152 7,467 2,119 18,384
			159,122

The ageing analysis of the trade payables based on invoice date is as follows:

Within 1 month Total trade payables LEASES Lease payables as follows: Within 1 year Between 1 and 2 years Between 2 and 5 years Total lease payments Less: future finance charges Total lease liabilities Less: portion classified as current liabilities Non-current lease liabilities	At December 31 2018 2019 MOP’000 MOP’000 85,460 42,084 85,460 42,084 At December 31 2018 2019 MOP’000 MOP’000 – 8,274 – 6,070 – 2,691 – 17,035 – (589) – 16,446 – (7,880) – 8,566	2020 MOP’000 111,738 111,738 2020 MOP’000 6,034 2,671 – 8,705 (197) 8,508 (5,867) 2,641	At April 30 2021 MOP’000 131,152
			131,152

			At April 30 2021 MOP’000 4,880 1,023 –
			5,903 (121)
			5,782 (4,769)
			1,013

23 LEASES

For COVID-19 related rent concessions, the Target Group has applied practical expedient to all rent concessions occurring as a direct consequence of the COVID-19 pandemic with adoption precondition met under the Amendment to HKFRS 16 Leases “COVID-19 Related Rent Concession” . Rent concession amounting to MOP150,000 respectively for the year ended December 31, 2020 and four months ended April 30, 2021 represents changes in lease payments arising from the pandemic and has been recognised in “other gains, net” in the consolidated statements of profit or loss.

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24 AMOUNTS DUE FROM/TO SHAREHOLDERS, RELATED COMPANIES AND SUBSIDIARIES

The balances are denominated in MOP and are unsecured, interest-free and are repayable on demand.

25 SHARE CAPITAL – TARGET GROUP AND COMPANY

	Number of
	shares	MOP’000
Subscribed and fully paid up
At January 1, 2018	–	–
At December 31, 2018, 2019 and 2020 and at April 30, 2021 (Note)	3	200

Note: The Target Company was incorporated in Macau on May 30, 2018.

26 OTHER RESERVES

(a) The Target Group

At January 1, 2018 Total comprehensive income for the year Transfer to legal reserve Transactions with non-controlling interest At December 31, 2018 At January 1, 2019 Total comprehensive income for the year Other comprehensive income for the year Deemed distribution (Note (ii)) Transfer to legal reserve At December 31, 2019	Capital reserve MOP’000 10,799 – 22,967 33,766 33,766 – (17,820) – 15,946	Exchange reserve MOP’000 – – – – – 9 – – 9	Legal reserve (Note (i)) MOP’000 1,473 2,247 – 3,720 3,720 – – 3,069 6,789	Total MOP’000 12,272 2,247 22,967
				37,486

				37,486 9 (17,820) 3,069
				22,744

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At January 1, 2020 Total comprehensive income for the year Other comprehensive income for the year Transfer to legal reserve At December 31, 2020 At January 1, 2021 Total comprehensive income for the period Other comprehensive gain for the period Transactions with owners Dividends declared At April 30, 2021 (Unaudited) At January 1, 2020 Total comprehensive income for the period Other comprehensive income for the period At April 30, 2020	Capital reserve MOP’000 15,946 – – 15,946 15,946 – – 15,946 15,946 – 15,946	Exchange reserve MOP’000 9 482 – 491 491 96 – 587 9 (87) (78)	Legal reserve (Note (i)) MOP’000 6,789 – 2,253 9,042 9,042 – – 9,042 6,789 – 6,789	Total MOP’000 22,744 482 2,253 25,479 25,479 96 – 25,575 22,744 (87) 22,657

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(b) The Target Company

At January 1, 2018, December 31, 2018 and at January 1, 2019 Profit for the year At December 31, 2019 At January 1, 2020 Profit for the year Transfer to legal reserve At December 31, 2020 At January 1, 2021 Profit for the period Dividend declared At April 30, 2021	Legal reserve (Note i) MOP’000 – – – – – 100 100 100 – – 100	Retained earnings MOP’000 – (63) (63) (63) 19,607 (100) 19,444 19,444 28,143 (17,440) 30,147	Total MOP’000 – (63) (63) (63) 19,607 – 19,544 19,544 28,143 (17,440) 30,247

Note:

(i) Legal reserve

In accordance with Macau Commercial Code, companies limited by quotas incorporated in Macau should set aside a minimum of 25% of the entity’s profit after tax to the legal reserve until the balance of the reserve reaches a level equivalent to 50% of the entity’s capital.

(ii) Deemed distribution

On May 21, 2019, the Target Company acquired 99% equity interest in Macau Pass S.A. from MPHLBVI (See Note 1.2). The Target Group’s consideration payable of MOP17,820,000 was debited to capital reserve during the year ended December 31, 2019, representing the deemed distribution to MPHLBVI.

27 DIVIDENDS

Pursuant to the directors’ resolutions dated March 31, 2020 and March 31, 2021, Macau Pass S.A. has declared a final dividend of MOP20,000,000 and MOP28,500,000 to shareholders, including dividend to non-controlling shareholders of MOP200,000 and MOP285,000 for the years ended December 31, 2019 and 2020 respectively.

Pursuant to the directors’ resolutions dated March 29 and April 14, 2021, and shareholders’ approvals on March 29 and April 14, 2021, a dividend of MOP17,440,000 was finally proposed and declared by the Target Company. The dividend was paid on May 31, 2021 and July 31, 2021 to the shareholders of the Target Company.

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28 BUSINESS COMBINATION

On July 5, 2019, the Target Group acquired the entire issued share capital of Zhuhai Hengqin Zhongaotong Electronic Payment Technology Co., Ltd. (“ZAT”), a company primarily acts as the technology and product development centre to support the business development of Macau Pass for a total cash consideration of RMB300,000 (equivalent to MOP344,000).

The Group is required to recognise ZAT identifiable assets, liabilities and contingent liabilities that satisfy the recognition criteria at their fair values at the acquisition date. In the preparation of the consolidated financial statements, the Target Group recorded the excess of the fair values of the acquired assets and liabilities over the cost of acquisition as negative goodwill in the consolidated income statement. Since the former shareholder intended to exit the market, the Target Group acquired ZAT with a consideration of MOP344,000 and recognised a negative goodwill of MOP3,463,000 in the year ended December 31, 2019.

(a) Details of net assets acquired and negative goodwill in respect of the acquisition of ZAT at the acquisition date were as follows:

Purchase consideration Less: fair value of net assets acquired Negative goodwill on acquisition (Note 11)	2019 MOP’000 344 (3,807) (3,463)

None of the negative goodwill is expected to be taxable for tax purposes.

The assets and liabilities of ZAT at the acquisition date were as follow:

Property, plant and equipment (Note 14) Right-of-use assets (Note 15) Intangible assets (Note 16) Inventories Other receivables, deposits and prepayments Cash and bank balances Accruals and other payables Lease liabilities Net identifiable assets acquired Purchase consideration settled in cash Less: cash and cash equivalents acquired Proceed from acquisition of ZAT	As at acquisition date MOP’000 1,339 2,867 65 48 722 3,514 (1,881) (2,867) 3,807 344 (3,514) (3,170)

(b) Revenue and profit contribution

For the year ended December 31, 2019 ZAT contributed no revenue but a net loss of MOP2,466,000 to the Target Group.

If the acquisition had occurred on January 1, 2019, consolidated pro-forma revenue and net profit for the year ended December 31, 2019 would have been MOP206,688,000 and MOP43,693,000 respectively. These amounts have been calculated using the subsidiary’s results.

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(c) Acquired receivables

No trade receivables were acquired during the acquisition.

(d) Acquisition-related costs

There is no acquisition-related costs occurred related to the business combination.

29 COMMITMENTS

Commitments under operating leases

As lessee

The total future minimum lease payments under non-cancellable operating leases are payable as follows:

			2018
			MOP’000
Office
Within	1	year	4,265
Within	2	to 5 years	3,741

There is no commitments under operating leases as at year end December 31, 2019 and 2020 and April 30, 2021 due to adoption of HKFRS 16.

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30 RELATED PARTY TRANSACTIONS

Related party transactions

Related parties are those parties that have the ability to control, jointly control or exercise significant influence over the other party in holding power over the investee; exposure or rights, to variable returns from its involvement with the investee; and the ability to use its power over the investee to affect the amount of the investor’s returns. Parties are also considered to be related if they are subject to common control or joint control. Related parties may be individuals or other entities.

(a) Transactions with related parties

(i) Transaction occurred with related parties

	Year	ended December 31		Four months	ended April 30
	2018	2019	2020	2020	2021
	MOP’000	MOP’000	MOP’000	MOP’000	MOP’000
				(Unaudited)
Income from provision of
physical payment card
services from a related
company	10,595	11,164	8,226	2,062	2,997
Income from ancillary card
services from related
companies	1,341	2,205	1,114	877	198
Sales of payment terminals
and equipment to a related
company	5	13	135	–	–
Lease income of payment
terminals and equipment
from related companies	1,907	1,970	2,296	731	739
Other service income from
related companies	1,404	1,475	6,003	406	3,811

Income from provision of physical payment card services, ancillary card services, sales of payment terminals and equipment and lease income of payment terminals and equipment are received from related companies which are controlled by directors of the Target Group. Such incomes are generated based on rates as specified in the agreements.

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The other services income is from various types of services including data analysis services provided to related companies which is controlled by directors of the Target Group. Such income are generated at mutually agreed terms.

	Year	ended December 31		Four months	ended April 30
	2018	2019	2020	2020	2021
	MOP’000	MOP’000	MOP’000	MOP’000	MOP’000
				(Unaudited)
Computer equipment and
software purchased from a
related company	–	–	1,399	1,086	–
Operating expenses paid to
related companies	2,390	1,478	1,404	484	483
Property rental and
management fee paid to
related companies	1,713	1,646	3,482	770	1,120

Purchase of computer equipment and software, paid operating expense and paid property rental and management fee are to the related companies controlled by directors of the Target Group. The terms of the transactions are mutually agreed.

(ii) Year/period end balances

The balances with shareholders of subsidiaries of the Target Group are disclosed in the consolidated statements of financial position.

(b) Key management compensation

The compensation paid or payable to key management for employment services during the Track Record Period is shown below:

Salaries and wages Bonuses Total	Year 2018 MOP’000 4,590 – 4,590	ended December 31 2019 2020 MOP’000 MOP’000 3,535 3,373 5,866 10,000 9,401 13,373	Four months ended April 30 2020 2021 MOP’000 MOP’000 (Unaudited) 1,395 1,569 – – 1,395 1,569	Four months ended April 30 2020 2021 MOP’000 MOP’000 (Unaudited) 1,395 1,569 – – 1,395 1,569
				1,569

31 CONTINGENT LIABILITIES

As at December 31, 2018, 2019 and 2020 and April 30, 2021, the Target Group did not have any material contingent liabilities.

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32 SUBSEQUENT EVENTS

Subsequent to April 30, 2021, the Target Company entered into a share transfer agreement dated May 28, 2021 with the existing shareholder of the Target Company, Mr. Liu, pursuant to which the Target Company transferred its entire 99% shareholding in Macau Pass Investments, Limited, including unpaid share capital of MOP59,400,000 to Mr. Liu for a consideration of MOP237,600,000.

Subsequent to April 30, 2021, the shareholders of the Target Group entered into a sale and purchase agreement with, among others, AGTech Holdings Limited (the “ Company ”) dated on September 10, 2021 (the “ Agreement ”), in relation to the sale and purchase of the entire issued share capital of Target Company and 1% issued share capital of Macau Pass S.A. (the “ Transaction ”), pursuant to which Mr. Liu shall be entitled to, on the closing date of the Transaction, procure Macau Pass S.A. to pay out any excess cash of Macau Pass S.A. as bonus to the directors of Macau Pass S.A. as long as the requirements set out in the Agreement remain satisfied immediately after such payment. Such requirements include (i) the financial indebtedness requirement; (ii) minimum operating cash requirement; and (iii) the capital adequacy ratio requirement. The financial impact of the Agreement depends on the financial position of Macau Pass S.A. at the closing date of the Transaction and management is in the process of assessing the estimated impact on the consolidated financial statements of the Target Group.

III SUBSEQUENT FINANCIAL STATEMENTS

As of the date hereof, no audited financial statements have been prepared by the Target Company or any of its subsidiaries in respect of any period subsequent to April 30, 2021.

Saved as disclosed in this report, as of the date hereof, no dividend or distribution has been declared or made by the Company or any of the companies now comprising the Group in respect of any period subsequent to April 30, 2021.

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(B) MANAGEMENT DISCUSSION AND ANALYSIS ON THE TARGET GROUP

For the purposes of disclosure in this section of this circular, the Target Group comprised:

(a) Macau Pass Holding Ltd. and Macau Pass (during the three years ended December 31, 2018, 2019 and 2020 and the four months ended April 30, 2021), and
(b) the PRC Company (which was acquired by Macau Pass Holding Ltd. during the year ended December 31, 2019), and a 99%-owned subsidiary of Macau Pass Holding Ltd., Macau Pass Investments, Limited (“ MP Investments ”) (during the two years ended December 31, 2019 and 2020 and the four months ended April 30, 2021).

MP Investments was incorporated during the year ended December 31, 2019. MP Investments and a motor vehicle of Macau Pass Holding Ltd. were disposed of by Macau Pass Holding Ltd. to the Existing Target Shareholder after April 30, 2021 and were excluded from the Target Group pursuant to a reorganization of the Target Group which was completed before the date of the Agreement to exclude assets and liabilities that were not related to the businesses of Macau Pass and the PRC Company (the “ Excluded Items ”). The Excluded Items contributed to the Target Group an aggregate net income of approximately MOP2.3 million (equivalent to approximately HK$2.2 million)(primarily derived from bank interest income) for the year ended December 31, 2019 and a net loss of approximately MOP0.15 million (equivalent to approximately HK$0.15 million) and MOP72,000 (equivalent to approximately HK$69,903) for the year ended December 31, 2020 and the four months ended April 30, 2021 respectively.

1. For the year ended December 31, 2018

1.1 Operating results

For the year ended December 31, 2018, the Target Group generated revenue of approximately MOP145.8 million (equivalent to approximately HK$141.6 million). Revenue contributions were primarily from the provision of physical payment card services and ancillary services (including sales of cards and card handling services) (the “ MP Card Services ”), and the provision of acquiring services for other payment platforms (the “ Acquiring Services ”), with minimal contribution from the e-wallet services (the “ MPay Services ”) which was newly launched in 2018.

The Target Group recorded a net profit after tax of approximately MOP27.5 million (equivalent to approximately HK$26.7 million).

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1.2 Liquidity and financial resources

As at December 31, 2018, the Target Group’s current assets amounted to approximately MOP280.2 million (equivalent to approximately HK$272.0 million); whereas the Target Group’s current liabilities amounted to approximately MOP248.8 million (equivalent to approximately HK$241.6 million). Net assets of the Target Group amounted to approximately MOP68.4 million (equivalent to approximately HK$66.4 million).

As at December 31, 2018, the Target Group had no bank borrowings. The gearing ratio (defined as interest-bearing bank borrowings divided by equity) of the Target Group as at December 31, 2018 was therefore zero. The liquidity ratio (defined as current assets divided by current liabilities) of the Target Group as at December 31, 2018 was approximately 1.1, which reflected the adequacy of financial resources of the Target Group.

1.3 Capital structure and foreign exchange risk

During the year ended December 31, 2018, the Target Group mainly financed its capital requirements through its shareholder’s equity of approximately MOP68.4 million (equivalent to approximately HK$66.4 million) and its internally generated cash flows from business operations.

The Target Group had neither foreign currency hedging activities nor any financial instruments for hedging purposes during the year ended December 31, 2018.

1.4 Contingent liabilities and capital commitment

As at December 31, 2018, the Target Group did not have any material contingent liabilities or any material capital commitment which had taken legal effect on the Target Group.

1.5 Significant investments, material acquisitions and disposal

There were no significant investments, material acquisitions and disposals made by the Target Group during the year ended December 31, 2018.

1.6 Employee and remuneration policies

As at December 31, 2018, the Target Group had 116 employees. Total staff costs for the year ended December 31, 2018 were approximately MOP33.7 million (equivalent to approximately HK$32.7 million). Remuneration packages for employees were reviewed on a regular basis and principally comprised salaries, wages, housing allowances, discretionary bonuses, contributions to defined contribution retirement plan, social security fund and other benefits.

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1.7 Charge on assets

As at December 31, 2018, bank deposits totalling approximately MOP2.3 million (equivalent to approximately HK$2.2 million) were held with a designated bank to secure letters of guarantee granted by the relevant bank to the Target Group to guarantee its performance under certain business contracts with the government of Macau. The pledged bank deposits would be released upon the release of the relevant letters of guarantee granted to the Target Group.

Save as disclosed above, no asset was pledged by the Target Group as at December 31, 2018.

1.8 Future plans for material investments and acquisition of capital assets

There was no specific plan for material investments and acquisition of capital assets as at December 31, 2018.

2. For the year ended December 31, 2019

2.1 Operating results

For the year ended December 31, 2019, the Target Group generated revenue of approximately MOP206.7 million (equivalent to approximately HK$200.7 million) (2018: approximately MOP145.8 million or equivalent to approximately HK$141.6 million), representing an increase of approximately 41.8% over 2018. Revenue contributions were primarily from the MP Card Services, the MPay Services and the Acquiring Services. The increase in revenue for the year was primarily due to the increase in revenue from the Acquiring Services by approximately MOP50.0 million (equivalent to approximately HK$48.5 million) over 2018, which was attributable to a number of factors including (a) the Target Group’s strengthened publicity and promotional efforts; (b) enhanced functionalities of the Target Group’s electronic and mobile payment applications to cater for different consumption patterns; and (c) the year-on-year increase of approximately 10.1% in the number of visitor arrivals to 39,406,000 in 2019 according to the data released by the Statistics and Census Service of the Government of Macau (the “ DSEC ”). Notably, after its launch in 2018, the MPay Services had experienced an increase of approximately 1,480% in revenue in 2019 as compared to 2018.

The Target Group recorded a net profit after tax of approximately MOP38.7 million (equivalent to approximately HK$37.6 million) (2018: approximately MOP27.5 million or equivalent to approximately HK$26.7 million).

2.2 Liquidity and financial resources

As at December 31, 2019, the Target Group’s current assets amounted to approximately MOP574.0 million (equivalent to approximately HK$557.3 million); whereas the Target Group’s current liabilities amounted to approximately MOP534.9 million (equivalent to approximately HK$519.3 million). Net assets of the Target Group amounted to approximately MOP91.9 million (equivalent to approximately HK$89.2 million).

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As at December 31, 2019, the Target Group had no bank borrowings (2018: Nil). During the year, the Target Group obtained a loan in the amount of approximately MOP237.6 million (equivalent to approximately HK$230.7 million) from a related company controlled by the Existing Target Shareholder (the “ Loan ”). The Loan was interest-free, unsecured and repayable on demand and was used for capital contribution to a newly incorporated subsidiary of Macau Pass Holding Ltd., MP Investments. The Loan was subsequently repaid in full by the Target Group to the aforesaid related company during the year ended December 31, 2020. As the Loan was borrowed from a related company and interest-free, the gearing ratio (defined as interest-bearing bank borrowings divided by equity) of the Target Group as at December 31, 2019 was therefore zero (2018: zero). The liquidity ratio (defined as current assets divided by current liabilities) of the Target Group as at December 31, 2019 was approximately 1.1 (2018: 1.1), which continuously reflected the adequacy of financial resources of the Target Group.

2.3 Capital structure and foreign exchange risk

During the year ended December 31, 2019, the Target Group mainly financed its capital requirements through its shareholder’s equity of approximately MOP91.9 million (equivalent to approximately HK$89.2 million), the Loan and its internally generated cash flows from business operations.

The Target Group had neither foreign currency hedging activities nor any financial instruments for hedging purposes during the year ended December 31, 2019.

2.4 Contingent liabilities and capital commitment

As at December 31, 2019, the Target Group did not have any material contingent liabilities or any material capital commitment which had taken legal effect on the Target Group.

2.5 Significant investments, material acquisitions and disposal

During the year ended December 31, 2019, Macau Pass Holding Ltd. acquired 100% equity interest in the PRC Company and 99% equity interest in Macau Pass. Macau Pass Holding Ltd. also established a 99%-owned subsidiary, MP Investments, with authorized share capital of MOP300 million (equivalent to approximately HK$291.3 million). Save as aforesaid, there were no significant investments, material acquisitions and disposals made by the Target Group during the year ended December 31, 2019.

2.6 Employee and remuneration policies

As at December 31, 2019, the Target Group had 237 (2018: 116) employees. Total staff costs for the year ended December 31, 2019 were approximately MOP46.9 million (equivalent to approximately HK$45.5 million) (2018: approximately MOP33.7 million or equivalent to approximately HK$32.7 million). Remuneration packages for employees were reviewed on a regular basis and principally comprised salaries, wages, housing allowances, discretionary bonuses, contributions to defined contribution retirement plan, social security fund and other benefits.

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2.7 Charge on assets

As at December 31, 2019, bank deposit in the sum of MOP20,000 (equivalent to approximately HK$19,417) (2018: approximately MOP2.3 million or equivalent to approximately HK$2.2 million) was held with a designated bank to secure a letter of guarantee granted by the relevant bank to the Target Group to guarantee its performance under certain business contract with the government of Macau. The pledged bank deposit would be released upon the release of the relevant letter of guarantee granted to the Target Group.

Save as disclosed above, no asset was pledged by the Target Group as at December 31, 2019.

2.8 Future plans for material investments and acquisition of capital assets

During the year ended December 31, 2019, the Target Group intended to set up a joint venture company in the PRC, subject to the approval of a PRC regulatory authority. However, as no such approval was obtained, the formation of the relevant joint venture company had not taken its legal effect and the relevant joint venture company agreement was subsequently terminated in September 2021. Save as aforesaid, there was no specific plan for material investments and acquisition of capital assets as at December 31, 2019.

3 For the year ended December 31, 2020

3.1 Operating results

For the year ended December 31, 2020, the Target Group generated revenue of approximately MOP175.6 million (equivalent to approximately HK$170.5 million) (2019: approximately MOP206.7 million or equivalent to approximately HK$200.7 million), representing a decrease of approximately 15.0% as compared to that of 2019. Revenue contributions were primarily from the MP Card Services, the MPay Services and the Acquiring Services. The decrease in revenue was mainly attributable to the drop in revenue from the Acquiring Services, which was affected by the outbreak of COVID-19 pandemic in early 2020 and the associated closure of border of Macau resulting in a decline in consumers and visitors spending. Revenue from the MP Card Services remained steady during the COVID-19 pandemic, which was mainly attributable to the fact that the drop in transaction fee revenue from the buses was compensated by the boost in consumer spending as a result of the E-voucher Scheme launched by the Macau government in 2020 to stimulate local spending. In addition, the aforesaid drop in revenue from the Acquiring Services was partially compensated by an increase in revenue from the MPay Services by approximately MOP20.6 million (equivalent to approximately HK$20.0 million) as mobile payment had gained its increasing popularity in Macau amidst the COVID-19 pandemic and was propelled further by the E-voucher Scheme.

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The Target Group recorded a net loss after tax of approximately MOP10.5 million (equivalent to approximately HK$10.2 million) (2019: net profit of approximately MOP38.7 million or equivalent to approximately HK$37.6 million). The change from profit to loss for the year was mainly attributable to a combination of factors including: (a) the above-mentioned drop in revenue from the Acquiring Services, which was partially compensated by the increase in revenue from the MPay Services; (b) the increase in staff costs by approximately MOP8.7 million (equivalent to approximately HK$8.4 million); and (c) the increase in depreciation and amortization expenses by approximately MOP10.9 million (equivalent to approximately HK$10.6 million).

3.2 Liquidity and financial resources

As at December 31, 2020, the Target Group’s current assets amounted to approximately MOP506.3 million (equivalent to approximately HK$491.6 million); whereas the Target Group’s current liabilities amounted to approximately MOP483.6 million (equivalent to approximately HK$469.5 million). Net assets of the Target Group amounted to approximately MOP81.9 million (equivalent to approximately HK$79.5 million).

As at December 31, 2020, the Target Group had no bank borrowings (2019: Nil). The gearing ratio (defined as interest-bearing bank borrowings divided by equity) of the Target Group as at December 31, 2020 was therefore zero (2019: zero). The liquidity ratio (defined as current assets divided by current liabilities) of the Target Group as at December 31, 2020 was approximately 1.05 (2019:1.1) which continuously reflected the adequacy of financial resources of the Target Group.

3.3 Capital structure and foreign exchange risk

During the year ended December 31, 2020, the Target Group mainly financed its capital requirements through its shareholder’s equity of approximately MOP81.9 million (equivalent to approximately HK$79.5 million) and its internally generated cash flows from business operations.

The Target Group had neither foreign currency hedging activities nor any financial instruments for hedging purposes during the year ended December 31, 2020.

3.4 Contingent liabilities and capital commitment

As at December 31, 2020, the Target Group did not have any material contingent liabilities or any material capital commitment which had taken legal effect on the Target Group.

3.5 Significant investments, material acquisitions and disposal

There were no significant investments, material acquisitions and disposals made by the Target Group during the year ended December 31, 2020.

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3.6 Employee and remuneration policies

As at December 31, 2020, the Target Group had 221 (2019: 237) employees. Total staff costs for the year ended December 31, 2020 was approximately MOP55.6 million (equivalent to approximately HK$54.0 million) (2019: approximately MOP46.9 million or equivalent to approximately HK$45.5 million). Remuneration packages for employees were reviewed on a regular basis and principally comprised salaries, wages, housing allowances, discretionary bonuses, contributions to defined contribution retirement plan, social security fund and other benefits.

3.7 Charge on assets

As at December 31, 2020, bank deposit in the sum of MOP20,000 (equivalent to approximately HK$19,417) (2019: MOP20,000 or equivalent to approximately HK$19,417) was held with a designated bank to secure a letter of guarantee granted by the relevant bank to the Target Group to guarantee its performance under certain business contract with the government of Macau. The pledged bank deposit would be released upon the release of the relevant letter of guarantee granted to the Target Group.

Save as disclosed above, no asset was pledged by the Target Group as at December 31, 2020.

3.8 Future plans for material investments and acquisition of capital assets

Save as disclosed in the paragraph headed “2.8 Future plans for material investments and acquisition of capital assets” above for the year ended December 31, 2019, there was no specific plan for material investments and acquisition of capital assets as at December 31, 2020.

4 For the four months ended April 30, 2021

4.1 Operating results

For the four months ended April 30, 2021, the Target Group generated revenue of approximately MOP131.8 million (equivalent to approximately HK$128.0 million) (four months ended April 30, 2020: approximately MOP41.0 million or equivalent to HK$39.8 million), representing an increase of approximately 221.4% over the corresponding period in 2020. Revenue contributions were primarily from the MP Card Services, the MPay Services and the Acquiring Services. The increase in revenue was mainly attributable to a number of factors: (a) the COVID-19 pandemic being kept under control in Macau, (b) the re-opening of the border between Macau and the PRC since the third quarter of 2020 and the gradual recovery of tourist activities in Macau, (c) the expansion of the network of merchants in Macau by the Target Group, and (d) the increasing popularity in using mobile payments in Macau.

The Target Group recorded a net profit after tax of approximately MOP40.0 million (equivalent to approximately HK$38.8 million) for the four months ended April 30, 2021 (four months ended April 30, 2020: net loss of approximately MOP10.4 million or equivalent to approximately HK$10.1 million). The change from loss to profit was mainly attributable to the increase in revenue as mentioned above.

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4.2 Liquidity and financial resources

As at April 30, 2021, the Target Group’s current assets amounted to approximately MOP601.1 million (equivalent to approximately HK$583.6 million); whereas the Target Group’s current liabilities amounted to approximately MOP555.0 million (equivalent to approximately HK$538.8 million). Net assets of the Target Group amounted to approximately MOP104.3 million (equivalent to approximately HK$101.3 million).

As at April 30, 2021, the Target Group had no bank borrowings (December 31, 2020: nil). The gearing ratio (defined as interest-bearing bank borrowings divided by equity) of the Target Group as at April 30, 2021 was therefore zero (December 31, 2020: zero). The liquidity ratio (defined as current assets divided by current liabilities) of the Target Group as at April 30, 2021 was approximately 1.1 (December 31, 2020: 1.05) which continuously reflected the adequacy of financial resources of the Target Group.

4.3 Capital structure and foreign exchange risk

During the four months ended April 30, 2021, the Target Group mainly financed its capital requirements through its shareholder’s equity of approximately MOP104.3 million (equivalent to approximately HK$101.3 million) and its internally generated cash flows from business operations.

The Target Group had neither foreign currency hedging activities nor any financial instruments for hedging purposes during the four months ended April 30, 2021.

4.4 Contingent liabilities and capital commitment

As at April 30, 2021, the Target Group did not have any material contingent liabilities or any material capital commitment which had taken legal effect on the Target Group.

4.5 Significant investments, material acquisitions and disposal

There were no significant investments, material acquisitions and disposals made by the Target Group during the four months ended April 30, 2021. Subsequent to April 30, 2021, Macau Pass Holding Ltd. entered into a share transfer agreement dated May 28, 2021 with the Existing Target Shareholder pursuant to which Macau Pass Holding Ltd. transferred its entire 99% shareholding in MP Investments to the Existing Target Shareholder for a consideration of MOP237,600,000 (equivalent to approximately HK$230,680,000).

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4.6 Employee and remuneration policies

As at April 30, 2021, the Target Group had 226 (four months ended April 30, 2020: 244) employees. Total staff costs for the four months ended April 30, 2021 was approximately MOP14.6 million (equivalent to approximately HK$14.2 million) (four months ended April 30, 2020: approximately MOP15.4 million or equivalent to approximately HK$15.0 million). Remuneration packages for employees were reviewed on a regular basis and principally comprised salaries, wages, housing allowances, discretionary bonuses, contributions to defined contribution retirement plan, social security fund and other benefits.

4.7 Charge on assets

As at April 30, 2021, bank deposit in the sum of MOP20,000 (equivalent to approximately HK$19,417) (December 31, 2020: MOP20,000 or equivalent to approximately HK$19,417) was held with a designated bank to secure a letter of guarantee granted by the relevant bank to the Target Group to guarantee its performance under certain business contract with the government of Macau. The pledged bank deposit would be released upon the release of the relevant letter of guarantee granted to the Target Group.

Save as disclosed above, no asset was pledged by the Target Group as at April 30, 2021.

4.8 Future plans for material investments and acquisition of capital assets

II-70

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

1. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following is an illustrative unaudited pro forma financial information of the Enlarged Group (the “ Unaudited Pro Forma Financial Information ”), including the unaudited pro forma consolidated statement of financial position, the unaudited pro forma consolidated statement of profit or loss and other comprehensive income and the unaudited pro forma consolidated statement of cash flows of the Enlarged Group, for the purpose of illustrating the effect of the proposed acquisition of Macau Pass Holding Ltd. (the “ Target ”) and its subsidiaries (together, the “ Target Group ”) (the “ Acquisition ”), as if the Acquisition had been completed on (i) January 1, 2020 for the unaudited pro forma consolidated statement of profit or loss and other comprehensive income and the unaudited pro forma consolidated statement of cash flows; and (ii) June 30, 2021 for the unaudited pro forma consolidated statement of financial position.

The Unaudited Pro Forma Financial Information has been prepared by the Directors based on accounting policies consistent with those of the Group as set out in the published annual report for the year ended December 31, 2020 and the published interim report for the period ended June 30, 2021.

The accompanying Unaudited Pro Forma Financial Information has been prepared for illustrative purpose only and is based on certain assumptions, estimates, uncertainties and other currently available information. Accordingly, and because of its hypothetical nature, the Unaudited Pro Forma Financial Information may not give a true picture of the financial position, results of operations and cash flows of the Enlarged Group had the Acquisition been completed as at June 30, 2021 or January 1, 2020, where applicable, or at any future dates. Also, the fair values and carrying amounts of the identifiable net assets of the Target Group as at the date of completion of the Acquisition may be materially different from their respective values used in the preparation of the Unaudited Pro Forma Financial Information. The actual amounts of the fair values of the identifiable net assets and goodwill to be recorded in the consolidated financial statements of the Group upon the completion of the Acquisition may be materially different from the amounts presented in the Unaudited Pro Forma Financial Information and the differences may be significant.

The Unaudited Pro Forma Financial Information of the Enlarged Group should be read in conjunction with other financial information included elsewhere in this circular.

III-1

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

A. Unaudited Pro Forma Consolidated Statement of Financial Position of the Enlarged Group

Non-current assets Property, plant and equipment Right-of-use assets Investment property Goodwill Other intangible assets Deferred income tax assets Financial assets at fair value through profit or loss Other receivables, deposits and prepayments Current assets Inventories Trade receivables Other receivables, deposits and prepayments Cash and bank balances Total assets	The Group as at June 30, 2021 HK$’000 Note 1 7,869 43,587 44,493 1,121,548 1,742 4,508 68,232 16,906 1,308,885 34,695 43,821 120,036 1,584,548 1,783,100 3,091,985	Pro forma adjustments The Target Group as at April 30, 2021 MOP’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Note 2 Note 2 Note 3 Note 4 Note 5 Note 7 21,600 20,971 (557) 5,043 4,896 435,504 31,253 30,343 319,806 1,281 1,244 4,725 4,587 102,758 99,765 15,680 15,223 470 477,943 464,022 (5,662) (42,600) (700,200) (9,715)	Unaudited pro forma of the Enlarged Group HK$’000 28,283 48,483 44,493 1,557,052 351,891 4,508 68,232 18,150
		The Target Group as at April 30, 2021 MOP’000 HK$’000 Note 2 Note 2 21,600 20,971 5,043 4,896 31,253 30,343 1,281 1,244 4,725 4,587 102,758 99,765 15,680 15,223 477,943 464,022
			2,121,092
			39,282 143,586 135,729 1,290,393
			1,608,990
			3,730,082

III-2

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Current liabilities Trade payables Accruals and other payables Floats balance due to card or account holders Contract liabilities Card deposits due to cardholders Lease liabilities Current income tax liabilities Contingent consideration payables Non-current liabilities Deferred income tax liabilities Provision for warranties Lease liabilities Accruals and other payables Total Liabilities Net Assets Equity Share capital Reserves attributable to owners of the company Non-controlling interests Total equity	The Group as at June 30, 2021 HK$’000 Note 1 15,644 70,786 – 10,942 – 18,946 241 – 116,559 6,025 24,986 26,569 270 57,850 174,409 2,917,576 23,344 2,846,153 2,869,497 48,079 2,917,576	Pro forma adjustments The Target Group as at April 30, 2021 MOP’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Note 2 Note 2 Note 3 Note 4 Note 5 Note 7 131,152 127,332 55,456 53,841 (822) 331,041 321,399 11,038 10,717 16,283 15,809 4,769 4,630 5,281 5,127 70,419 38,377 1,013 983 200 194 (194) 99,977 97,065 (1,992) (42,600) (52,473) (9,715) 4,073 3,954 (2,935) (1,019)	Unaudited pro forma of the Enlarged Group HK$’000 142,976 123,805 321,399 21,659 15,809 23,576 5,368 70,419
		The Target Group as at April 30, 2021 MOP’000 HK$’000 Note 2 Note 2 131,152 127,332 55,456 53,841 331,041 321,399 11,038 10,717 16,283 15,809 4,769 4,630 5,281 5,127 1,013 983 200 194 99,977 97,065 4,073 3,954
			725,011
			44,402 24,986 27,552 270
			97,210
			822,221
			2,907,861

			23,344 2,836,438
			2,859,782 48,079
			2,907,861

III-3

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

B. Unaudited pro forma consolidated statement of profit or loss and other comprehensive income of the Enlarged Group

For the year ended December 31, 2020

Revenue Other income Net other gains Employee benefits expenses Purchase of and changes in inventories Depreciation and amortization expenses Other operating expenses Operating loss Gain on fair value changes of contingent consideration payables Net finance income Share of results of investments accounted for using equity method Loss before taxation Income tax (expense)/credit Loss for the year	The Group HK$’000 Note 1 161,649 10,859 11,426 (178,928) (45,041) (23,754) (67,298) (131,087) 69,589 44,063 (83,205) (100,640) (8,814) (109,454)		Pro forma adjustments The Target Group MOP’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Note 2 Note 2 Note 3 Note 4 Note 6 Note 7 Note 8 175,603 170,488 9,340 9,068 (225) 1,725 1,675 (55,630) (54,010) (42,600) (6,218) (6,037) (49,685) (48,238) 152 (22,427) (92,447) (89,753) 1,091 (9,715) 6,582 6,390 (900) 268 260 31 2,691	The Enlarged Group HK$’000 332,137 19,702 13,101 (275,538) (51,078) (94,267) (165,675)
			The Target Group MOP’000 HK$’000 Note 2 Note 2 175,603 170,488 9,340 9,068 1,725 1,675 (55,630) (54,010) (6,218) (6,037) (49,685) (48,238) (92,447) (89,753) 6,582 6,390 268 260
				(221,618) 69,589 49,553 (83,205)
				(185,681) (5,832)
				(191,513)

III-4

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Other comprehensive income, net of income tax Items that will not be reclassified subsequently to profit or loss: Currency translation differences Total comprehensive income for the year (Loss)/profit attributable to: Owners of the company Non-controlling interests Total comprehensive income attributable to: Owners of the company Non-controlling interests	The Group HK$’000 Note 1 33,611 (75,843) (121,372) 11,918 (109,454) (90,419) 14,576 (75,843)		Pro forma adjustments The Target Group MOP’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Note 2 Note 2 Note 3 Note 4 Note 6 Note 7 Note 8 482 468 (10,354) (10,052) 149 (42,600) (19,736) (9,715) (105) (108) (105) 105 (9,872) (9,584) 149 (42,600) (19,736) (9,715) (105) (108) (105) 105	The Enlarged Group HK$’000 34,079
			The Target Group MOP’000 HK$’000 Note 2 Note 2 482 468 (10,354) (10,052) (108) (105) (9,872) (9,584) (108) (105)
				(157,434)

				(203,431) 11,918
				(191,513)

				(172,010) 14,576
				(157,434)

III-5

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

C. Unaudited pro forma consolidated statement of cash flows of the Enlarged Group

For the year ended December 31, 2020

Cash flows from operating activities Loss before income tax Adjustments for: Share-based payments Depreciation and amortization expenses Reversal of provision for warranties Gain on disposals of property, plant and equipment Loss on fair value changes of investment properties Gain on decognition of contingent consideration payables Loss allowance on loan to – a joint venture – an associate Net finance income Other expense/(gains) Unrealized exchange difference Share of results of investments accounted for using equity method	The Group HK$’000 Note 1 (100,640) 27,218 23,754 (5,879) (25) 6,748 (69,589) 263 64 (44,063) – – 83,205 (78,944)	Pro forma adjustments The Target Group MOP’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Note 2 Note 2 Note 3 Note 4 Note 5 Note 6 Note 7 (10,730) (10,417) 118 (42,600) (22,427) (9,715) 49,685 48,238 (152) 22,427 (6,582) (6,390) 900 (478) (464) 225 483 469	The Enlarged Group HK$’000 (185,681) 27,218 94,267 (5,879) (25) 6,748 (69,589) 263 64 (49,553) (239) 469 83,205
		The Target Group MOP’000 HK$’000 Note 2 Note 2 (10,730) (10,417) 49,685 48,238 (6,582) (6,390) (478) (464) 483 469
			(98,732)

III-6

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Changes in working capital Inventories Trade and other receivables Amount due from/to fellow subsidiaries Amount due from/to a joint venture Amount due to non-controlling interests Contract liabilities Trade and other payables Provision for warranties Card floats and card deposits due to cardholders Cash generated from/(used in) operations Income taxes paid Net cash generated from/(used in) operating activities Cash flows from investing activities Acquisition of subsidiaries Purchases for property, plant and equipment Payments for intangible assets Proceeds from disposal of a subsidiary Proceeds from disposal of property, plant and equipment Investments in a joint venture Loan to a joint venture Increase in fixed deposits held at bank with original maturity over three months Decrease in pledged bank deposits Interest received Net cash used in investing activities	The Group HK$’000 Note 1 (9,445) 16,299 11,792 (11,638) (504) 2,735 (6,792) (6,255) – (82,752) (11,028) (93,780) – (4,805) – – 25 (41,874) (69,771) (690,302) 2,249 49,810 (754,668)	Pro forma adjustments The Target Group MOP’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Note 2 Note 2 Note 3 Note 4 Note 5 Note 6 Note 7 1,957 1,900 (51,634) (50,130) 638 7,286 7,074 77,035 74,791 (231,663) 105,490 102,417 (4,491) (4,360) (700,200) (25,326) (24,588) (25,417) (24,677) 230,680 300,000 7,047 6,842 (900)	The Enlarged Group HK$’000 (7,545) (33,193) 11,792 (11,638) (504) 9,809 (163,664) (6,255) 102,417
		The Target Group MOP’000 HK$’000 Note 2 Note 2 1,957 1,900 (51,634) (50,130) 7,286 7,074 77,035 74,791 105,490 102,417 (4,491) (4,360) (25,326) (24,588) (25,417) (24,677) 7,047 6,842
			(197,513) (15,388)
			(212,901) (700,200) (29,393) (24,677) 230,680 25 (41,874) (69,771) (390,302) 2,249 55,752
			(967,511)

III-7

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Cash flows from financing activities Increase in restricted cash for the purchase of shares under share award scheme Interest element of lease rentals paid Principal element of lease payments Dividend paid Capital contribution from non-controlling shareholders Proceeds from/to related companies Net cash used in financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of year Exchange (loss)/gain on cash and cash equivalents Cash and cash equivalents at the end of year	The Group HK$’000 Note 1 (10,918) (1,815) (19,787) – – – (32,520) (880,968) 1,123,876 (5,528) 237,380	Pro forma adjustments The Target Group MOP’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Note 2 Note 2 Note 3 Note 4 Note 5 Note 6 Note 7 (387) (376) (7,173) (6,964) (200) (194) 200 194 (234,210) (227,388) 503,595 488,927	The Enlarged Group HK$’000 (10,918) (2,191) (26,751) (194) 194 (227,388)
		The Target Group MOP’000 HK$’000 Note 2 Note 2 (387) (376) (7,173) (6,964) (200) (194) 200 194 (234,210) (227,388) 503,595 488,927
			(267,248) (1,447,660) 1,612,803 (5,528)
			159,615

III-8

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Notes to the Unaudited Pro Forma Financial Information of the Enlarged Group

The amounts have been extracted from the unaudited consolidated statement of financial position of the Group as at June 30, 2021 included in the published interim report of the Company for the six months ended June 30, 2021, and the audited consolidated statement of profit or loss and other comprehensive income and the audited consolidated statement of cash flows of the Group for the year ended December 31, 2020 included in the published annual report of the Company for the year ended December 31, 2020.
The amounts have been extracted from the audited consolidated statement of financial position of the Target Group as at April 30, 2021, and the audited consolidated statement of profit or loss and other comprehensive income and the audited consolidated statement of cash flows of the Target Group for the year ended December 31, 2020 contained in the accountant’s report on the Target Group as set out in Appendix II(A) to this circular.

Certain amounts extracted are reclassified to conform to the presentation of the audited financial statements of the Group. Such classification is just for the purpose of the illustration of the Unaudited Pro Forma Financial Information.

The functional currency and the presentation currency of the Target is MOP. For illustrative purpose, the assets, liabilities and equity of the Target Group as at April 30, 2021 and the audited consolidated statement of profit or loss and other comprehensive income and the audited consolidated statement of cash flows of the Target Group for the year ended December 31, 2020 are translated into HK$, the presentation currency of the Company, at the exchange rate of HK$1 = MOP1.03. No representation is made that MOP amounts have been, could have been or could be translated to Hong Kong dollar amounts, or vice versa, at that rate or at any other rates or at all.

For the purpose of the Acquisition, the Target Group has undergone a reorganization to exclude certain assets and liabilities which were not related to the businesses of Macau Pass and the PRC Company (the “ Reorganization ”) which had been completed before the date of the Agreement. Upon completion of the Reorganization, these excluded assets and liabilities will no longer be consolidated into the consolidated financial statements of the Target Group.

Subsequent to April 30, 2021, the Target entered into a share transfer agreement dated May 28, 2021 with the Existing Target Shareholder, pursuant to which the Target transferred its entire 99% shareholding in Macau Pass Investments, Limited including unpaid share capital of MOP59,400,000 to Existing Target Shareholder for a consideration of MOP237,600,000. A motor vehicle of the Target Group was also disposed of to Existing Target Shareholder after April 30, 2021 and was excluded from the Target Group pursuant to the Reorganization.

For the purpose of the unaudited pro forma consolidated statement of financial position, such assets and liabilities (other than those related to Macau Pass and the PRC Company) in the net amount of approximately HK$4.9 million as at April 30, 2021 were excluded, as if the Reorganization had been completed on June 30, 2021.

For the purpose of the unaudited pro forma consolidated statement of profit or loss and other comprehensive income, net loss of approximately HK$0.15 million contributed by the aforesaid assets and liabilities of the Target Group (which are not related to Macau Pass and the PRC Company) during the year ended December 31, 2020 were excluded, as if the Reorganization had been completed on January 1, 2020.

The adjustment of HK$42,600,000 represents the estimated amount of surplus cash that the Existing Target Shareholder is entitled to procure Macau Pass to pay out as bonus to the existing directors of Macau Pass on the Closing Date after the minimum Operating Cash requirement of MOP5 million and the Capital Adequacy Ratio Requirement having been satisfied and the Target Group having no outstanding financial indebtedness (other than those expressly permitted by the Purchasers) as at the Relevant Time.

For the purpose of the unaudited pro forma financial information of the Enlarged Group, the adjustment is estimated based on the financial position as at April 30, 2021 and the actual amount upon Closing may be different. This pro forma adjustment is not expected to have a continuing effect on the unaudited pro forma consolidated statement of profit or loss and other comprehensive income and unaudited pro forma consolidated statement of cash flows.

The adjustment represents the inclusion of identifiable assets and liabilities of the Target Group to be acquired by the Group assuming the Acquisition was completed on June 30, 2021. Upon Closing, the identifiable assets and liabilities of the Target Group will be accounted for in the consolidated financial statements of the Group at fair value under the acquisition method of accounting in accordance with Hong Kong Financial Reporting Standard 3 (Revised) “Business Combinations” (“ HKFRS 3 ”).

III-9

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

For the purpose of preparing the unaudited pro forma consolidated statement of financial position of the Enlarged Group, the Directors have estimated the fair values of the identifiable assets and liabilities of the Target Group as at April 30, 2021 and have appointed AVISTA Valuation Advisory Limited, an independent professional qualified valuer, to carry out the purchase price allocation exercise in accordance with HKFRS 3 including the assessment of fair value of the acquired assets and liabilities of the Target Group excluding certain assets and liabilities as described in Note 3 above.

With reference to the valuation report, the Directors estimate that the fair values of customer relationship and brand name of the Target Group are approximately HK$121,554,000 and HK$198,252,000 respectively, which are based on multi-period excess earnings method and relief-from-royalty method. These methods are commonly adopted valuation method to value customer relationship and brand name. The key assumptions used in estimating the fair values are as follows:

	Customer relationship	Brand name
Royalty rate	N/A	6%
Useful life	10-15 years	15 years

The corresponding deferred income tax liabilities of approximately HK$38,377,000 are measured at the tax rate that is expected to apply when related taxable temporary difference is settled, which is 12% as applicable to the Target Group in Macau.

The excess of the consideration over the fair value of the net identifiable assets of the Target Group acquired is recorded as goodwill in accordance with HKFRS 3. Assuming the Acquisition was completed on June 30, 2021, goodwill arising from the Acquisition is calculated as follows:

Notes Cash consideration – Initial Consideration (a) – Deferred Consideration (a) Less: Fair value change of Deferred Consideration (a) Fair value of the Consideration Less: Fair value of net identifiable assets acquired Carrying amount of identifiable net assets of the Target Group (b) Fair value adjustments on – Customer relationship – Brand name Recognition of deferred tax liabilities arising from the fair value adjustments Goodwill arising from the Acquisition	HK$’000 700,200 77,800
	778,000 (7,381)
	770,619 (53,686) (121,554) (198,252) 38,377
	435,504

(a) Pursuant to the Agreement, each of the Sellers has conditionally agreed to sell the Sale Shares free from all encumbrances and with all rights attached to the Sale Shares including the right to receive all dividends and other distributions declared, made or paid on or after Closing, and each of AGTech Investment and AGTech Services has conditionally agreed to purchase the Sale Shares for such portion of Consideration each (subject to downward adjustments) with effect from Closing.

The maximum Consideration for the Sale Shares is HK$778,000,000 (subject to downward adjustments), being the maximum aggregate amount of the Initial Consideration (HK$700,200,000) to be paid at Closing and the Deferred Consideration (HK$77,800,000 or the balance thereof after the adjustment(s), if any) shall be paid to the Sellers on the date falling on the first anniversary after the Closing Date (or the next Business Day if such anniversary falls on a non-Business Day).

III-10

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

For the purpose of the unaudited pro forma consolidated statement of financial position, it is assumed that there are no downward adjustments on the Consideration and therefore the maximum Consideration would be paid in accordance with the payment schedule.

The fair value of Deferred Consideration was determined by discounting the contractual cash flow over the contractual term at discount rate which was appropriate to the riskiness of the Deferred Consideration, with reference to the prevailing market rates.

(b) The fair value of net identifiable assets acquired represents the net asset value of the Target Group as at April 30, 2021, adjusted by the effect of the Reorganization of HK$4,900,000 and bonus payout to the directors of Macau Pass of HK$42,600,000 as set out in note 3 and note 4 to the Unaudited Proforma Financial Information.
(c) Since the identifiable net assets of the Target Group as at the Closing Date may be materially different from the fair values used in the preparation of the Unaudited Pro Forma Financial Information, the actual amounts of the identifiable net assets (including intangible assets) to be recognized in connection with the Acquisition may be different from the amounts presented above and the differences may be significant.
(d) For the purpose of preparing the Unaudited Pro Forma Financial Information, the Directors have made an assessment on whether there is any impairment in respect of intangible assets arising from the Acquisition with reference to HKAS 36 “Impairment of Assets”. They have taken into consideration the historical financial performance of the Target Group and synergy effect to the business of the Enlarged Group as key parameters for the assessment. Based on the assessment results, the Directors concluded that there is no impairment in the value of intangible assets. Upon Closing and at the end of each reporting period, the Group will adopt consistent accounting policies, principal assumptions and methodology of impairment assessment (as used in the Unaudited Pro Forma Financial Information) to assess the impairment of the Enlarged Group’s intangible assets.
The adjustment represents: (a) additional amortization of approximately HK$22,427,000 on the fair value of the customer relationship and brand name arising from the acquisition of the Target Group; and (b) the related deferred income tax impact of HK$2,691,000 as a consequence of the recognition of the fair value adjustment of customer relationship and brand name.

For the purpose of this Unaudited Pro Forma Financial Information, the Directors considered and assumed that there are no significant changes on the fair values of customer relationship and brand name as set out in the valuation report dated October 29, 2021 prepared by AVISTA Valuation Advisory Limited between January 1, 2020 and April 30, 2021 and no separate valuation report as at January 1, 2020 was prepared. Had this report been prepared, the amounts of the additional amortization expenses and deferred tax liabilities for the compilation of the unaudited pro forma financial information of the Enlarged Group may be different from the amounts presented in this appendix.

For the purpose of the unaudited pro forma consolidated statement of profit or loss and comprehensive income, the amortization of customer relationship and brand name is calculated using the straight-line method over its estimated residual life.

This pro forma adjustment is expected to have a continuing effect on the unaudited pro forma consolidated statement of profit or loss and other comprehensive income and unaudited pro forma consolidated statement of cash flows.

The adjustment represents the estimated professional fees and transaction costs of approximately HK$9,715,000 payable by the Group in connection with the Acquisition, which are assumed to be due upon Closing. This pro forma adjustment is not expected to have a continuing effect on the unaudited pro forma consolidated statement of profit or loss and other comprehensive income and unaudited pro forma consolidated statement of cash flows.
The amounts represent the adjustments of the 1% share of losses and total comprehensive loss of the Target Group to the non-controlling interests that is attributable to equity holders of the Group for the year ended December 31, 2020 assuming that Closing had taken place on January 1, 2020 for the purpose of the Unaudited Pro Forma Financial Information. This pro forma adjustment is expected to have a continuing effect on the unaudited pro forma consolidated statement of profit or loss and other comprehensive income.
Save as set out above, no other adjustment has been made to the unaudited pro forma consolidated statement of financial position of the Enlarged Group to reflect any trading results or other transactions entered into by the Group subsequent to June 30, 2021 and the Target Group subsequent to April 30, 2021. No other adjustment has been made to the unaudited pro forma consolidated statement of profit or loss and other comprehensive income and unaudited pro forma consolidated statement of cash flows of the Enlarged Group to reflect any trading results or other transactions entered into by the Group and the Target Group subsequent to December 31, 2020.

III-11

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

2. REPORT ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following is the text of a report on the unaudited pro forma financial information of the Enlarged Group received from PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this circular.

==> picture [72 x 53] intentionally omitted <==

INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION

To the Directors of AGTech Holdings Limited

We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information of AGTech Holdings Limited (the “ Company ”) and its subsidiaries (collectively the “ Group ”), and Macau Pass Holding Ltd. and its subsidiaries (the “ Target Group ”) by the directors of the Company (the “ Directors ”) for illustrative purposes only. The unaudited pro forma financial information consists of the unaudited pro forma consolidated statement of financial position as at June 30, 2021, the unaudited pro forma consolidated statement of profit or loss and other comprehensive income for the year ended December 31, 2020 and the unaudited pro forma consolidated statement of cash flows for the year ended December 31, 2020, and related notes (the “ Unaudited Pro Forma Financial Information ”) as set out on pages III-1 to III-11 of the Company’s circular dated October 29, 2021, in connection with the proposed acquisition of the Target Group (the “ Transaction ”) by the Company. The applicable criteria on the basis of which the Directors have compiled the Unaudited Pro Forma Financial Information are described on pages III-1 to III-11 of the Circular.

The Unaudited Pro Forma Financial Information has been compiled by the Directors to illustrate the impact of the Transaction on the Group’s financial position as at June 30, 2021 and the Group’s financial performance and cash flows for the year ended December 31, 2020 as if the Transaction had taken place at June 30, 2021 and January 1, 2020 respectively. As part of this process, information about the Group’s financial position has been extracted by the Directors from the Group’s interim financial information for the period ended June 30, 2021 set out in the interim report, on which no audit or review report has been published, while information about the Group’s financial performance and cash flows has been extracted by the Directors from the Group’s financial statements for the year ended December 31, 2020, on which an audit report has been published.

III-12

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Directors’ Responsibility for the Unaudited Pro Forma Financial Information

The Directors are responsible for compiling the Unaudited Pro Forma Financial Information in accordance with paragraph 7.31 of the Rules Governing the Listing of Securities on GEM of The Stock Exchange of Hong Kong Limited (the “ Listing Rules ”) and with reference to Accounting Guideline 7, Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars (“ AG 7 ”) issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”).

Our Independence and Quality Control

We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the HKICPA, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.

Our firm applies Hong Kong Standard on Quality Control 1 issued by the HKICPA and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Reporting Accountant’s Responsibilities

Our responsibility is to express an opinion, as required by paragraph 7.31(7) of the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3420, Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus , issued by the HKICPA. This standard requires that the reporting accountant plans and performs procedures to obtain reasonable assurance about whether the Directors have compiled the Unaudited Pro Forma Financial Information in accordance with paragraph 7.31 of the Listing Rules and with reference to AG 7 issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the Unaudited Pro Forma Financial Information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the Unaudited Pro Forma Financial Information.

The purpose of unaudited pro forma financial information included in a circular is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the entity as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the Transaction at June 30, 2021 or January 1, 2020 would have been as presented.

III-13

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

A reasonable assurance engagement to report on whether the unaudited pro forma financial information has been properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the directors in the compilation of the unaudited pro forma financial information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:

The related pro forma adjustments give appropriate effect to those criteria; and
The unaudited pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.

The procedures selected depend on the reporting accountant’s judgment, having regard to the reporting accountant’s understanding of the nature of the company, the event or transaction in respect of which the unaudited pro forma financial information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the unaudited pro forma financial information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion:

(a) the Unaudited Pro Forma Financial Information has been properly compiled by the Directors on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 7.31(1) of the Listing Rules.

PricewaterhouseCoopers

Certified Public Accountants

Hong Kong, October 29, 2021

III-14

VALUATION REPORT OF THE TARGET GROUP

APPENDIX IV

The following is the text of a report received from AVISTA, an independent valuer, in connection with its valuation as at April 30, 2021 of the Target Group for the purpose of incorporation in this circular.

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The Board of Directors AGTech Holdings Limited Unit 3912, 39th Floor, Tower Two Times Square, Causeway Bay Hong Kong

Ref. No: J21-00306 October 29, 2021

Dear Sirs/Madams,

Re: Valuation of 100% equity interest of a group of companies engaged in the electronic payment business

In accordance with your instruction, AVISTA Valuation Advisory Limited (“ AVISTA ” or “ we ”) has conducted a fair value valuation in connection with the 100% equity interest of a group of companies engaged in the electronic payment business, including (i) Macau Pass Holding Ltd. (the “ Holding Company ”), (ii) Macau Pass S.A. (“ Macau Pass ”) and (iii) Zhuhai Hengqin Zhongaotong Electronic Payment Technology Co. Ltd. (the “ PRC Company ”, together with the Holding Company and Macau Pass as the “ Target Group ”) as of April 30, 2021 (the “ Valuation Date ”). We understand that AGTech Holdings Limited (the “ Company ”, “ AGTech ” or “ you ”) intends to acquire the entire shareholding of the Target Group (the “ Proposed Acquisition ”).

It is our understanding that this appraisal is strictly addressed to the directors of the Company (the “ Directors ”) and used for the Proposed Acquisition solely for your internal reference purpose. This report (the “ Report ”) does not constitute an opinion on the commercial merits and structure of the Proposed Acquisition. We are not responsible for unauthorized use of the Report.

We accept no responsibility for the realisation and completeness of any estimated data, or estimates furnished by or sourced from any third parties which we have used in connection with this Report. We assumed that financial and other information provided to us are accurate and complete.

This Report presents the summary of the business appraised, describes the basis of analysis and assumptions and explains the analysis methodology adopted in this appraisal process to calculate the value.

BASIS OF ANALYSIS

We have appraised the fair value of 100% equity interest of the Target Group.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

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VALUATION REPORT OF THE TARGET GROUP

APPENDIX IV

COMPANY BACKGROUND

AGTech is an integrated technology and services company engaged in the lottery and mobile games and entertainment markets with a focus on the People’s Republic of China (the “ PRC ”) and selected international markets.

The Target Group is principally engaged in the following business activities:

Provision of physical payment card services via “Macau Pass Cards” and ancillary card services;
Provision of E-wallet services known as “MPay”;
Provision of acquiring services for other payment platforms; and
Sales and leasing of card reader and scanner payment terminals, multi-functional smart payment terminals and payment equipment for vending machines.

We understand that the Company intends to acquire the entire equity interest of the Target Group. The Proposed Acquisition constitutes a very substantial acquisition for the Company and is therefore subject to the reporting, announcement, circular and shareholders’ approval requirements under Chapter 19 of the Rules Governing the Listing of Securities on GEM of The Stock Exchange of Hong Kong Limited (the “ GEM Listing Rules ”). As such, the Company engaged us as an independent valuer to assess the fair value of the 100% equity interest of the Target Group as of the Valuation Date.

SCOPE OF WORK

In conducting this valuation exercise, we have

Co-ordinated with the Company’s representatives to obtain the required information and documents for our valuation;
Gathered the relevant information of the Target Group, including the legal documents, financial statements, etc. made available to us;
Discussed with the Company and the Target Group to understand the history, business model, operations, business development plan, etc. of the Target Group for valuation purpose;
Carried out researches in the sector concerned and collected relevant market data from reliable sources for analysis;
Studied the information of the Target Group made available to us and considered the bases and assumptions of our conclusion of value;

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VALUATION REPORT OF THE TARGET GROUP

APPENDIX IV

Selected an appropriate valuation method to analyze the market data and derived the estimated fair value of the Target Group; and
Compiled this Report on the valuation, which outlines our findings, valuation methodologies and assumptions, and conclusion of value.

When performing our valuation, all relevant information, documents, and other pertinent data concerning the assets, liabilities and contingent liabilities should have been provided to us. We relied on such data, records and documents in arriving at our opinion of values and had no reason to doubt the truth and accuracy of the information provided to us by the Company, the Target Group and their authorized representatives.

ECONOMIC OVERVIEW

Macroeconomic overview of Macau

Macau, along with Hong Kong, is one of the two special administrative regions of the PRC. According to the International Monetary Fund (“ IMF ”), the annual real gross domestic product (“ GDP ”) of Macau in 2020 was USD24.3 billion, represented a year-over-year decrease of 56.3%. The real GDP growth rate in 2020 marked the largest contraction since 2002, primarily due to a severe blow to economic activity in connection with the COVID-19 outbreak in early 2020.

The tertiary industry such as the gaming and accommodation industry has been the principal contributors to Macau’s economy. The outbreak of pandemic along with the lockdown policy as well as the global travel restrictions weakened the domestic demand and deteriorated the demand of outbound tourism. According to the Statistics and Census Service of the Government of Macau (“ DSEC ”), the tertiary industry accounted for 95.7% of the total GDP and the gaming industry contributed 50.9% to Macau’s economy in 2019. However, because of the travel restriction, the number of visitor arrivals decreased to 5,897 thousand in 2020 from 39,406 thousand in 2019, represented a year-over-year decrease of 85%. Also, the total spending of visitors dropped by 81.4% from MOP 64,077 million in 2019 to MOP 11,938 million in 2020.

With the gradual ease of travel restrictions as well as the implementation of measures to fight against the COVID-19, Macau’s economy is expected to recover gradually in 2021. According to IMF, the real GDP growth rate is expected to reach 61.2% in 2021. Meanwhile, according to DSEC, the year-over-year increase of the visitor arrivals for the first 5 months of 2021 was 4.7% and the year-over-year increase of the total spending of visitors (excluding gaming expenses) in the 1st quarter of 2021 was 23.5%.

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VALUATION REPORT OF THE TARGET GROUP

APPENDIX IV

In recent years, the Government of Macau has placed a strong emphasis on the integration with the PRC such as joining the Greater Bay Area (“ GBA ”) Initiative in order to strengthen the economic and political ties between Hong Kong, Macau and the nine cities across the Pearl River Delta. Besides, the 13th National Five-Year Plan indicated that Macau will act as an integral part of the trade and economic cooperation services platform between the PRC and Portuguese-speaking countries.

Annual GDP Growth Rate of Macau (2017-2021E)

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

80.0%
61.2%
40.0%
10% 6.5%
-2.6%
0.0%
-40.0%
-56.3%
-80.0%
2017 2018 2019 2020 2021E
GDP Growth Rate at Constant Price (%)
----- End of picture text -----

(Source: IMF)

Number of Visitor Arrivals of Macau (2017-2020)

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

50,000
40,000 39,406
35,804
32,611
30,000
20,000
10,000
5,897
0
2017 2018 2019 2020
Number of Visitor Arrivals (thousand)
----- End of picture text -----

(Source: DSEC)

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VALUATION REPORT OF THE TARGET GROUP

APPENDIX IV

INDUSTRY OVERVIEW

Overview of the Macau electronic payment market

Electronic Payments are defined as non-cash transactions processed through digital channels. The electronic payment market in Macau is growing rapidly with the increase in the number of mobile payment transactions in recent years.

According to the statistics of the Monetary Authority of Macao (the “ AMCM ”), the number of mobile payment transactions in Macau has increased from 16.52 million in 2019 to 65.49 million in 2020, representing a year-over-year increase of 296.4%. Meanwhile, the average transaction value has also increased from MOP 76.7 in the 4[th] quarter of 2019 to MOP 94.5 in the 4[th] quarter of 2020, representing a year-over-year increase of 23.2%. The increases in both the number of mobile payment transactions and the average transaction value have resulted in a boost in the total transaction value from MOP 1,225 million in 2019 to MOP 6,335 million in 2020. Moreover, the number of mobile payment terminals and QR codes has increased from 16,000 in 2018 to 70,000 in 2020, reflecting the increased adoption of electronic payment services among the merchants in Macau.

In 2021, the Government of Macau further facilitated the promotion of electronic payment by launching the “Simple Pay” service, an integrated payment system that allows merchants to accept various types of electronic payment methods in Macau by a single payment terminal or a QR code. As of the end of April 2021, over 60% of merchants in Macau have upgraded to the Simple Pay system. Furthermore, in order to alleviate the economic burden of citizens, the Government of Macau has also launched an “Electronic Consumption Benefits Plan” that allows qualified Macau citizens to receive government subsidies through the form of either “mobile payment” or “consumption card” under the plan. The government’s support for electronic payment has contributed to the digital transformation of Macau and the development of Macau’s electronic payment market.

Transaction Value of Mobile Payment in Macau (2018-2020)

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

7,000
6,335
6,000
5,000
4,000
3,000
2,000
1,225
1,000
89
0
2018 2019 2020
Transaction Value (MOP million)
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(Source: AMCM)

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VALUATION REPORT OF THE TARGET GROUP

APPENDIX IV

Total Number of Mobile Payment Terminals and QR codes (2018-2020)

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80,000
70,000
60,000
37,000
40,000
20,000 16,000
0
2018 2019 2020
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Total Number of Mobile Payment Terminals and QR codes

(Source: AMCM)

LIMITATIONS OF THE REPORT

The Report is addressed strictly to the Directors for their internal reference only. Accordingly, the Report may not be used nor relied upon in any other connection by, and are not intended to confer any benefit on, any person (including without limitation the respective shareholders of the Company and the Target Group).

The Report does not constitute an opinion on the commercial merits and structure of the Proposed Acquisition. The Report does not purport to contain all the information that may be necessary or desirable to fully evaluate the Proposed Acquisition. We are not required to and have not conducted a comprehensive review of the business, technical, operational, strategic or other commercial risks and merits of the Proposed Acquisition and such remain the sole responsibility of the Directors and the management of the Company (the “ Management ”).

We have assumed and relied upon, and have not independently verified the accuracy, completeness and adequacy of the information provided or otherwise made available to us or relied upon by us in the Report especially for the financial information of the Target Group as of April 30, 2020, December 31, 2020 and April 30, 2021 provided by the Management, whether written or verbal, and no representation or warranty, expressed or implied, is made and no responsibility is accepted by us concerning the accuracy, completeness or adequacy of all such information.

Moreover, our valuation has also relied upon other information obtained from public sources which we believe to be reliable. We accept no responsibility for accuracy and reliability of any information obtained from public sources.

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VALUATION REPORT OF THE TARGET GROUP

APPENDIX IV

The outbreak of COVID-19, as declared by the World Health Organization as a global pandemic on March 11, 2020, has been adversely affecting the global economy as well as the financial markets. As such, the subsequent impact due to COVID-19 has imposed an unprecedented set of circumstances on which to base a valuation judgement as of the Valuation Date. In particular, the increased volatilities in political, legal, fiscal, economic conditions and/or other market situations as a result of COVID-19 would bring higher uncertainties to the underlying assumptions. Consequently, higher degree of caution should be attached to our valuation than would normally be the case.

VALUATION ASSUMPTIONS OF BUSINESS ENTERPRISE VALUE ANALYSIS

In arriving at our opinion of value, we have considered the following principal factors:

the economic outlook for the region operated by the Target Group and specific competitive environments affecting the industry;
the business risks of the Target Group;
the comparable companies are engaging in business operations similar to the Target Group; and
the legal and regulatory issues of the industry in general.

A number of general assumptions have to be made in arriving at our value conclusion. The key assumptions adopted in this valuation include:

There will be no material change in the existing political, legal, technological, fiscal or economic conditions, which might adversely affect the business of the Target Group; and
We have assumed that there are no hidden or unexpected conditions associated with the assets valued that might adversely affect the reported values. Further, we assume no responsibility for changes in market conditions after the Valuation Date.

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VALUATION REPORT OF THE TARGET GROUP

APPENDIX IV

VALUATION APPROACH

General Valuation Approaches

There are three generally accepted approaches to appraise the fair value of the equity value of the Target Group, namely Income Approach, Cost Approach and Market Approach. All three of them have been considered regarding the valuation of the Target Group:

Income Approach

The income approach provides an indication of value based on the principle that an informed buyer would pay no more than the present value of anticipated future economic benefits generated by the subject asset.

The fundamental method for income approach is the discounted cash flow (“ DCF ”) method. Under the DCF method, the value depends on the present value of future economic benefits to be derived from ownership of the enterprise. Thus, an indication of the equity value is calculated as the present value of the future free cash flow of a company less outstanding interest-bearing debt, if any. The future cash flow is discounted at the market-derived rate of return appropriate for the risks and hazards of investing in a similar business.

Cost Approach

The cost approach considers the cost to reproduce or replace in new condition the assets appraised in accordance with current market prices for similar assets, with allowance for accrued depreciation arising from condition, utility, age, wear and tear, or obsolescence (physical, functional or economical) present, taking into consideration past and present maintenance policy and rebuilding history.

Market Approach

The market approach provides an indication of value by comparing the subject asset to similar assets that have been sold in the market, with appropriate adjustments for the differences between the subject asset and the assets that are considered to be comparable to the subject asset.

Under the market approach, the comparable company method computes a price multiple for publicly listed companies that are considered to be comparable to the subject asset and then applies the result to a base of the subject asset. The comparable transaction method computes a price multiple using recent sales and purchase transactions of assets that are considered to be comparable to the subject asset and then applies the result to a base of the subject asset.

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VALUATION REPORT OF THE TARGET GROUP

APPENDIX IV

Selected Valuation Approach

Each of the abovementioned approaches is appropriate in one or more circumstances, and sometimes, two or more approaches may be used together. Whether to adopt a particular approach will be determined by the most commonly adopted practice in valuing business entities that are similar in nature. In this appraisal regarding the fair value of the equity value of the Target Group, we applied the Market Approach due to the following reasons:

Cost Approach is not appropriate in current appraisal as it assumed the assets and liabilities of the Target Group are separable and can be sold separately. This methodology is more appropriate for the industry that their assets are highly liquid, like property development and financial institution. Thus, Cost Approach is not adopted in this valuation.
Income Approach is also considered inappropriate as the valuation result by income approach is more dependent on the financial projection of the Target Group prepared by the Management, in which the inputs are unobservable and subjective. Thus, Income Approach is not adopted in this valuation.
Fair value arrived from Market Approach reflects the market expectations over the corresponding industry as the price multiples of the comparable companies were arrived from market consensus. Since there are sufficient public companies in similar nature and business to that of the Target Group, their market values are good indicators of the industry. Therefore, Market Approach has been adopted in this valuation.

There are two methods commonly used in performing Market Approach, namely comparable transactions and comparable companies.

The comparable transactions are selected with reference to the following selection criteria:

The primary industry of the acquiree is being in industry of data processing and outsourced services or consumer finance, under Global Industry Classification Standard, as extracted from S&P Capital IQ;
The principal business of the acquiree is provision of the electronic payment services. Particularly, the acquiree acts as a payment services provider, and enables merchants to accept electronic payments by a variety of payment methods such as debit card, credit card and/or digital wallet;
The transaction was announced between May 2018 and April 2021; and
The financial information of the companies is available to the public.

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VALUATION REPORT OF THE TARGET GROUP

APPENDIX IV

Based on the above selection criteria, there are two transactions with the acquirees engaging in similar businesses as the Target Group within the selected timeframe. Details of the transactions are illustrated as follows:

							Implied	Implied
							Equity	Enterprise
					% of		Value/Net	Value/
	Announcement			Business Description	Shareholding		Income	EBITDA
#	Date	Acquiree	Acquirer	of the Acquiree	Acquired	Consideration	Multiple	Multiple
1)	March 18, 2019	Worldpay, Inc.	Fidelity National	Worldpay, Inc. provides	100.0%	USD35,169.8	N/A(1)	28.03x
			Information Services,	electronic payment		million
			Inc. (NYSE: FIS)	processing services.
2)	October 22, 2018	JetPay Corporation	NCR Corporation	JetPay Corporation	100.0%	USD78.4	N/A(1)	50.67x
			(NYSE: NCR)	provides debit and credit		million
				card processing, payroll,
				and card services to
				businesses.

Source: S&P Capital IQ

Notes:

(1) Since the acquiree has exhibited net loss, the corresponding multiple is considered not applicable for reference.

Given the fact that only limited number of recent comparable transactions can be identified, we consider that the multiple derived based on comparable transactions may not be representative of our valuation, and thus, the comparable transactions method is not appropriate for this valuation.

Comparable companies method is therefore selected as the primary method for this valuation. By adopting comparable companies method, we have to select the appropriate comparable public companies. The selection of the comparable companies was based on the comparability of the overall industry sector. Although no two companies are ever exactly alike, behind the differences there are certain business universals such as required capital investment and overall perceived risks and uncertainties that guided the market in reaching the expected returns for companies with certain similar attributes.

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VALUATION REPORT OF THE TARGET GROUP

APPENDIX IV

The comparable public companies are selected with reference to the following selection criteria:

The primary industry of the selected companies is being in industry of data processing and outsourced services or consumer finance, under Global Industry Classification Standard, as extracted from S&P Capital IQ;
The principal business of the selected companies is provision of the electronic payment services. Particularly, the selected companies act as payment services providers, and enable merchants to accept electronic payments by a variety of payment methods such as debit card, credit card and/or digital wallet;
The companies are listed in major exchange markets as defined by S&P Capital IQ;
The companies are profit-making in the trailing 12-months (“ LTM ”) as of the Valuation Date; and
The financial information of the companies is available to the public.

During our research process, as obtained on the best effort basis, we have identified an exhaustive list of seven comparable companies that are engaged in the provision of the electronic payment services and act as a payment services provider to enable merchants to accept electronic payments by a variety of payment methods. As mentioned above, since no two companies are ever exactly alike, the differences should not overshadow the similarities of the business nature of the companies. We consider these companies are comparable to the Target Group.

IV-11

APPENDIX IV

VALUATION REPORT OF THE TARGET GROUP

Details of the selected comparable companies are listed as follows:

					Revenue Contribution
	Company	Stock	Listing		from Business
#	Name	Code	Location	Business Description	Segment(s)(1)
1)	PayPal Holdings,	NasdaqGS:	The United	PayPal operates as a technology	Relevant to the Target
	Inc. (“Paypal”)	PYPL	States	platform company that enables digital	Group’s business:
			(the “US”)	and mobile payments on behalf of	Technology Platform
				consumers and merchants worldwide.	and Digital Payments
				The company’s platform allows	Business (100.0%)
				consumers to shop by sending payments,
				withdraw funds to their bank accounts,
				and hold balances in their PayPal
				accounts in various currencies. It also
				offers gateway services that enable
				merchants to accept payments online
				with credit or debit cards.
2)	GMO Payment	TSE:	Japan	GMO Payment provides financial	Relevant to the Target
	Gateway,	3769		services and integrated payment related	Group’s business:
	Inc. (“GMO			services. The settlement agency business	Settlement Agency
	Payment”)			segment provides credit card payment	Business (73.4%)
				processing and related services. The
				finance related business segment
				provides online advertising and various
				payment services to e-commerce
				companies. The company offers PG
				multi-payment service, a payment
				platform that provides credit card
				payment, convenience store payment,
				account transfer, and multi-currency
				credit card payment. It also provides
				GMO payment after delivery; Ginko Pay
				Base System, a smartphone app that
				enables payments to be made by an
				immediate debit from the bank account;
				and GMO-PG processing platform,
				which helps financial institutions or
				financial service providers start
				payment-related services by enabling
				payment infrastructure building, as well
				as security services. In addition, the
				company offers global payment
				services; and early payment, GMO-PG
				remittance, guarantees, and transaction
				lending services.

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VALUATION REPORT OF THE TARGET GROUP

APPENDIX IV

					Revenue Contribution
	Company	Stock	Listing		from Business
#	Name	Code	Location	Business Description	Segment(s)(1)
3)	Yeahka Limited	SEHK:	Hong Kong	Yeahka operates payment-based	Relevant to the Target
	(“Yeahka”)	9923		technology platform that provides	Group’s business:
				payment and business services to	One-stop payment
				merchants and consumers in China. It	services (79.8%)
				offers one-stop payment services, which
				include app-based and traditional
				payment services comprising mobile
				payment and bank card acquiring
				products, as well as an intelligent risk
				control platform for controlling and
				managing mobile payments. The
				company also provides
				technology-enabled business services,
				including various merchant SaaS
				products and marketing services that
				offer a variety of intelligent business
				solutions, and intelligent operation and
				management services; and a
				payment-based advertising platform,
				which provides various marketing and
				promotional tools. In addition, it offers
				fintech services for financial needs of
				customers.
4)	Hi Sun Technology	SEHK:	Hong Kong	Hi Sun, an investment holding company,	Relevant to the Target
	(China) Limited	818		provides payment processing,	Group’s business:
	(“Hi Sun”)			information security chips, platform	Payment Processing
				operation, financial, and electronic	Solutions (78.8%);
				power meters solutions in the PRC. The	Platform Operation
				payment processing solutions segment	Solutions (4.3%)
				offers payment processing services; and
				merchants recruiting, micro-lending
				business, credit assessment, and related
				products and solutions. The information
				security chips and solutions segment
				provides information
				system-consultancy services; and sells
				mag-stripe card security-decoder chips,
				and related products and solutions. The
				platform operation solutions segment
				offers telecommunication and mobile
				payment platform operation, and
				operation value-added services. The
				financial solutions segment provides
				information system consultancy,
				integration, and operation services; and
				sells information technology products to
				financial institutions and banks.

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VALUATION REPORT OF THE TARGET GROUP

APPENDIX IV

					Revenue Contribution
	Company	Stock	Listing		from Business
#	Name	Code	Location	Business Description	Segment(s)(1)
5)	QIWI plc	NasdaqGS:	The US	QIWI, together with its subsidiaries,	Relevant to the Target
	(“QIWI”)	QIWI		operates electronic online payment	Group’s business:
				systems primarily in the Russia,	Payment Services:
				Kazakhstan, Moldova, Belarus,	(89.0%)
				Romania, the United Arab Emirates, and
				internationally. It operates through
				payment services, consumer financial
				services, and Rocketbank segments. The
				company offers payment services across
				online, mobile, and physical channels
				through a network of approximately
				94,000 kiosks and 19,000 terminals that
				run its proprietary software. It also
				provides Qiwi Wallet, which is an
				online and mobile payment processing,
				and money transfer system that allows
				customers to pay for the products and
				services of merchants, as well as
				perform peer-to-peer money transfers
				through a virtual wallet; and
				Visa-branded prepaid cards. In addition,
				the company offers payment-by
				installments card systems under the
				SOVEST brand name; and value-added
				services.
6)	PayPoint plc	LSE:	The United	PayPoint provides specialist consumer	Relevant to the Target
	(“PayPoint”)	PAY	Kingdom	payment, transaction processing,	Group’s business:
			(the “UK”)	settlement, and other services and	Service Provider for
				products in the UK, Ireland, and	Consumer Payment and
				Romania. It offers bill and general	Value-Added
				services, such as prepaid energy, bills,	Transactions: (100.0%)
				and cash out services; top-ups, including
				mobiles phones, eMoney vouchers,
				prepaid debit cards, and lottery tickets;
				and retail services comprising ATM,
				card payments, parcels, money transfer,
				SIMs, EPoS, and receipt advertising.
				The company also provides MultiPay, a
				payment solution; and PayPoint One
				retail terminal. It serves consumers,
				convenience retailers, and business and
				public sectors. The company was
				founded in 1996 and is headquartered in
				Welwyn Garden City, the United
				Kingdom.

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VALUATION REPORT OF THE TARGET GROUP

APPENDIX IV

Revenue Contribution Company Stock Listing from Business # Name Code Location Business Description Segment(s)[(1)] 7) Wellnet Corporation TSE: Japan Wellnet provides payment settlement, Relevant to the Target (“ Wellnet ”) 2428 electronic billing, and electronic Group’s business: payment services in Japan. The Payment and company also develops and provides Authentication: mobile authentication solutions. In (100.0%) addition, it provides payment secretary, a smartphone app for making payments directly from bank account; payment collection/ticketing, and authentication services, as well as multi-payment, electronic ticket, electronic authentication, convenience store cash receiving, invoice issuance and storage, remittance, and various application services.

Source: S&P Capital IQ; annual, interim and/or quarterly reports of the comparable companies

(1) Based on LTM financial data from S&P Capital IQ database & annual, interim and/or quarterly reports of the comparable companies.

As the principal business of the above comparable companies is the provision of electronic payment services and act as a payment services provider to enable merchants accepting electronic payments by a variety of payment methods, these comparable companies, together with the Target Group, are considered to be similarly subject to fluctuations in the economy and performance of the electronic payment industry, among other factors. Thus, we consider they are confronted with similar industry risks and rewards.

After selecting the abovementioned comparable companies, we have to determine the appropriate valuation multiples for the valuation of the Target Group, in which we have considered price-to-book (“ P/B ”), price-to-sales (“ P/S ”), enterprise value/sales (“ EV/S ”), enterprise value/earnings before interests and taxes (“ EV/EBIT ”), price-to-earnings (“ P/E ”) and enterprise value/earnings before interests, taxes, depreciation and amortization (“ EV/EBITDA ”) multiples.

P/B multiple is considered not appropriate for this valuation because book value captures only the tangible assets of a company which, if a company creates any added market value (as reflected by a P/B ratio of larger than one), should have its own intangible competencies and advantages. These intangible company-specific competencies and advantages are not captured in the P/B ratio and so in general, the equity’s book value has little bearing with its fair value. As the business nature of the Target Group is not asset intensive, the P/B multiple is not a good measurement of the fair value of the Target Group. Thus, P/B multiple is not adopted in this valuation.

P/S and EV/S multiples are considered not appropriate for this valuation because they do not consider the profitability of the Target Group. As both P/S and EV/S multiples only focus on the sales amounts but not the margin, the result will be easily distorted if the cost structure is not being taken into account. Thus, P/S and EV/S multiples are not adopted in this valuation.

IV-15

VALUATION REPORT OF THE TARGET GROUP

APPENDIX IV

EV/EBIT multiple removes tax effect on earnings but not non-cash items in earnings, such as depreciation and amortization of fixed assets. Thus, EV/EBIT multiple is not adopted in this valuation.

P/E multiple is not adopted given the comparable companies identified operate in different jurisdictions and are subject to different tax exposure and the tax effect on earnings of the comparable companies should be eliminated. Also, P/E multiple does not eliminate differences in financial leverage and related risk features across the companies. Similar with EV/EBIT multiple, P/E multiple also comprises non-cash items in earnings, such as depreciation and amortization of fixed assets.

The EV/EBITDA multiple is the appropriate indicator of the fair value of the comparable companies. The EV/EBITDA multiple eliminates the differences in capital structure, taxation and depreciation and amortization methods across different comparable companies, it is hence adopted in the Market Approach.

The EV/EBITDA multiples of the comparable companies are as follows:

			Market			EV/EBITDA	EV/EBITDA
			Capitalization			before LOMD	after LOMD
		Currency	as of	Enterprise	LTM	and Control	and Control
No	Company Name	(in million)	April 30, 2021	Value(1)	EBITDA(2)	Premium	Premium
1	PayPal	USD	307,997	304,683	4,295	70.94	75.98
2	GMO Payment	JPY	1,043,821	981,671	13,181	74.48	79.77
3	Yeahka	HKD	28,262	25,507	551	46.28	49.57
4	Hi Sun	HKD	4,082	1,160	620	1.87	2.00
5	QIWI	USD	658	119	208	0.57	0.61
6	PayPoint	GBP	409	415	68	6.06	6.49
7	Wellnet	JPY	10,465	9,205	980	9.39	10.06
	Maximum						79.77
	Minimum						0.61
	Median(3)						10.06
	Lack of Marketability	Discount (“LOMD”)(4)					15.8%
	Control Premium(5)						27.2%

Notes:

(1) Data sourced from S&P Capital IQ database and the financial statements of the comparable companies. The enterprise values of the comparable companies are computed based on the market capitalization of the comparable companies as of April 30, 2021 and the latest financial data of the comparable companies available as of the Valuation Date.
(2) Data sourced from S&P Capital IQ database and the financial statements of the comparable companies. Unusual charges such as foreign exchange gains or losses are excluded from the calculation of the EBITDA for the comparable companies.

IV-16

VALUATION REPORT OF THE TARGET GROUP

APPENDIX IV

(3) Median and average share the same role in understanding the central tendency of a sets of numbers. Median, which would not be affected by extreme values, is regarded a better mid-point measure for skewed number distributions. Hence, median is adopted to derive the result, which we consider to be a more reasonable approach to prevent the outliners from distorting the result.
(4) LOMD reflects the fact that there is no ready market for shares in a closely held company. Ownership interests in closely held companies are typically not readily marketable compared to similar interests in publicly listed companies. Therefore, a share of stock in a privately held company is usually worth less than an otherwise comparable share in a publicly listed company.

The EV/EBITDA multiple adopted in the valuation was calculated from public listed companies, which represents marketable ownership interest; fair value calculated using such EV/EBITDA multiple, therefore, represents the marketable interest. Thus, LOMD was adopted to adjust such marketable interest fair value to non-marketable interest fair value.

The report “Stout Restricted Stock Study Companion Guide (2020 edition)” by Stout Risius Ross, LLC, a reputable research company, suggested a marketability discount is 15.8%. A marketability discount of 15.8% is considered appropriate and suitable for this valuation as we understand that the Target Group is a group of privately held companies.

The value of non-marketable interest can be calculated from marketable interest using the following formula:

Fair Value of Non-Marketable Interest = Fair Value of Marketable Interest x (1– LOMD)

(5) Control premium is the amount that a buyer is willing to pay over the minority equity value of the company in order to acquire a controlling interest in that company. The EV/EBITDA multiple adopted in the valuation was calculated from public listed companies, which represents minority ownership interest; market value calculated using such EV/EBITDA multiple, therefore, represents the minority interest. Thus, control premium was adopted to adjust such minority interest market value to controlling interest market value.

Adjustment for control is made by the application of a control premium to the value of the Target Group’s shares. The report “Control Premium Study: 1st Quarter 2021” by FactSet Mergerstat, LLC, a reputable research company, suggested a median control premium is 27.2%. A control premium of 27.2% is considered appropriate and suitable for this valuation as we understand that the Company intends to acquire a controlling stake in the Target Group.

The value of controlling interest can be calculated from minority interest using the following formula:

Fair Value of Controlling Interest = Fair Value of Minority Interest x (1 + Control Premium)

Combining the adjustments on LOMD and control premium,

Adjusted EV/EBITDA multiple = EV/EBITDA multiple x (1– LOMD) x (1 + Control Premium)

IV-17

VALUATION REPORT OF THE TARGET GROUP

APPENDIX IV

Valuation Result

LTM EBITDA of the Target Group(1) Adjusted Median EV/EBITDA Multiple Estimated 100% Enterprise Value of the Target Group Add: Cash and Cash Equivalent(1,3) Less: Debt(1,4) Less: Lease Liabilities(1) Less: Estimated bonus payments to existing directors of Macau Pass(5) Estimated 100% Equity Value of the Target Group	MOP’000 86,509 10.06x 869,922(2) 103,113 – (5,782) (43,900) 923,353

Notes:

(1) The financial data for the period from May 1, 2020 to April 30, 2021, which is based on the consolidated financial statements of the Target Group provided by the Management for the year ended December 31, 2020 and the 4-month periods ended April 30, 2020 and April 30, 2021. Foreign exchange gain or loss is excluded from the calculation of the EBITDA for the Target Group.
(2) The amount does not equal to the multiple of LTM EBITDA of the Target Group and the adjusted median EV/ EBITDA multiple illustrated above due to rounding.
(3) According to the Management, the cash and cash equivalent is calculated by cash and bank balance minus the sum of (i) floats balance due to card or account holders, (ii) card deposits due to cardholders and (iii) amount due to shareholder.
(4) According to the Management, there is no interest-bearing debt outstanding as of the Valuation Date.
(5) Pursuant to the conditional sale and purchase agreement in relation to the Proposed Acquisition, the existing controlling shareholder of the Holding Company shall be entitled to procure Macau Pass to pay out its surplus cash as bonus to the existing directors of Macau Pass on the closing date of the Proposed Acquisition as long as certain conditions are fulfilled. For illustrative purpose, the amount of such bonus payments is estimated to be HKD 42.6 million (equivalent to approximately MOP 43.9 million) based on the financial position of the Target Group as at April 30, 2021. Please note that the actual amount of the bonus payments may be different subject to the actual amount of surplus cash on the closing date of the Proposed Acquisition.

IV-18

VALUATION REPORT OF THE TARGET GROUP

APPENDIX IV

CONCLUSION OF VALUE

Based on our investigation and analysis method employed, it is our opinion that the fair value of the 100% equity interest of the Target Group as of the Valuation Date is MOP923,353,000.

The conclusion of the fair value was based on generally accepted valuation procedures and practices that rely extensively on the use of numerous assumptions and the consideration of many uncertainties, not all of which can be easily quantified or ascertained.

We hereby certify that we have neither present nor prospective interests in AGTech Holdings Limited nor the value reported.

Yours faithfully, For and on behalf of AVISTA Valuation Advisory Limited

Vincent C B Pang

CFA, FCPA(HK), FCPA (Aus.), MRICS, RICS Registered Valuer Managing Director

Analysed and Reported by:

Ivan K K Lui

CFA, FCPA(HK), MRICS, RICS Registered Valuer, LL.M. Director

Oscar C W Lee

Analyst

Note: Mr. Vincent Pang is a member of CFA Institute, a fellow member of the CPA Australia, a fellow member of the Hong Kong Institute of Certified Public Accountants, a member of RICS and a RICS Registered Valuer. He has over 20-year experience in financial valuation and business consulting in Hong Kong and the PRC.

IV-19

VALUATION REPORT OF THE TARGET GROUP

APPENDIX IV

APPENDIX – GENERAL LIMITATIONS AND CONDITIONS

This Report was prepared based on the following general assumptions and limiting conditions:

All data, including historical financial data, which we relied upon in reaching opinions and conclusions or set forth in the Report are true and accurate to our best knowledge. Whilst reasonable care has been taken to ensure that the information contained in the Report is accurate, we cannot guarantee its accuracy and we assume no liability for the truth or accuracy of any data, opinions, or estimates furnished by or sourced from any third parties which we have used in connection with the Report.
We also assume no responsibilities in the accuracy of any legal matters. In particular, we have not carried out any investigation on the title of or any encumbrances or any interest claimed or claimable against the equity interests in the Target Group appraised. Unless otherwise stated in the Report, we have assumed that the seller’s interest is valid, the titles are good and marketable, and there are no encumbrances that cannot be identified through normal processes.
The value opinion presented in this Report is based on the prevailing or then prevailing economic conditions and on the purchasing power of the currency stated in the Report as of the date of analysis. The date of value on which the conclusions and opinions expressed apply is stated in this Report.
This Report has been prepared solely for the use or uses stated. Except for extraction of or reference to the Report by the Company, its financial advisor and/or its auditors for their respective work in relation to the Proposed Acquisition, it is not intended for any other use or purpose or use by any third parties. We hereby disclaim our liability for any damages and/or loss arisen in connection with any such unintended use.
Prior written consent must be obtained from AVISTA Valuation Advisory Limited for publication of this Report. Except for disclosure in the Announcement and/or the Circular in relation to the Proposed Acquisition, no part of this Report (including without limitation any conclusion, the identity of any individuals signing or associated with this Report or the firms/companies with which they are connected, or any reference to the professional associations or organisations with which they are affiliated or the designations awarded by those organisations) shall be disclosed, disseminated or divulged to third parties by any means of publications such as prospectus, advertising materials, public relations and news.
We assume all applicable laws and governmental regulations are being complied with unless otherwise stated in this Report. We have also assumed responsible ownership and that all necessary licenses, consents, or other approval from the relevant authority or private organisations have been or to be obtained or renewed for any use that is relevant to value analysis in this Report.

IV-20

GENERAL INFORMATION

APPENDIX V

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’ AND CHIEF EXECUTIVE’S 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 Rules 5.46 to 5.67 of the GEM Listing Rules relating to securities transactions by directors, to be notified to the Company and the Stock Exchange, were as follows:

(i) Interests in Shares/Restricted Share Units:

Number of Shares/Restricted Share Units Held

				Approximate
				Percentage
				of Aggregate
				Interests to
				Total Issued
				Share Capital
	Personal	Corporate		of the
Name of Director	Interest	Interest	Total	Company
				(Note 1)
Mr. Sun Ho	46,158,000	2,006,250,000	2,052,408,000	17.584%
	(Note 2)	(Note 3)
Ms. Hu Taoye	384,000	–	384,000	0.003%
	(Note 4)
Mr. Yang Guang	–	–	–	0%
Mr. Li Faguang	–	–	–	0%
Mr. Ji Gang	–	–	–	0%
Mr. Zou Liang	–	–	–	0%
Ms. Monica Maria	1,750,000	–	1,750,000	0.015%
Nunes
Mr. Feng Qing	375,000	–	375,000	0.003%
Dr. Gao Jack Qunyao	750,000	–	750,000	0.006%

V-1

GENERAL INFORMATION

APPENDIX V

Notes:

Based on a total of 11,672,342,235 Shares in issue as at the Latest Practicable Date.
It represents 41,388,000 Shares and 4,770,000 restricted Share units (granted under the share award scheme of the Company adopted on March 17, 2017 (the “ Share Award Scheme ”)) beneficially held by Mr. Sun Ho.
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 & CEO of the Company, Mr. Sun was deemed to be interested in such Shares under the SFO.
It represents 96,000 Shares and 288,000 restricted Share units (granted under the Share Award Scheme) beneficially held by Ms. Hu Taoye.

(ii) 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:

				Approximate
				Percentage of
				Aggregate Interests
				to Total Issued Share
		Number of Shares/		Capital of Alibaba
Name of Director	Capacity	Underlying Shares Held		Holding
		(in the number of		(Note 2)
		American Depository	(in the number of
		Shares (“*ADS(s)*”)	ordinary shares of
		of Alibaba Holding)	Alibaba Holding)
		(Note 1)	(Note 1)
Ms. Hu Taoye	Note 3	16,920	135,360	0.001%
Mr. Yang Guang	Note 4	61,043	488,344	0.002%
Mr. Li Faguang	Note 5	10,981	87,848	negligible
Mr. Ji Gang	Note 6	10,235	81,880	negligible
Mr. Zou Liang	Note 7	2,540	20,320	negligible

Notes:

One ADS of Alibaba Holding represents eight ordinary shares of Alibaba Holding; and one restricted share unit (“ RSU(s) ”) of Alibaba Holding represents one ADS of Alibaba Holding.
Based on a total of 21,687,309,200 ordinary shares of Alibaba Holding in issue as at August 4, 2021.
The interest comprised 13,670 ADSs of Alibaba Holding and 3,250 RSUs of Alibaba Holding beneficially held by Ms. Hu Taoye.
The interest comprised 7,918 ADSs of Alibaba Holding and 53,125 RSUs of Alibaba Holding beneficially held by Mr. Yang Guang.
The interest comprised 606 ADSs of Alibaba Holding and 10,375 RSUs of Alibaba Holding beneficially held by Mr. Li Faguang.
The interest comprised 5,050 ADSs of Alibaba Holding and 5,185 RSUs of Alibaba Holding beneficially held by Mr. Ji Gang.
The interest comprised 840 ADSs of Alibaba Holding and 1,700 RSUs of Alibaba Holding beneficially held by Mr. Zou Liang.

V-2

GENERAL INFORMATION

APPENDIX V

(iii) Long positions in shares and underlying shares of Alibaba Pictures Group Limited (“Ali Pictures”), an associated corporation of the Company within the meaning of Part XV of the SFO:

Approximate Percentage to Total Issued Number of Share Capital of Name of Director Capacity Shares Held Ali Pictures (Note 1) Mr. Zou Liang Note 2 90,000 negligible

Notes:

Based on a total of 26,836,786,410 ordinary shares of Ali Pictures in issue as at September 30, 2021.
The interest comprised 90,000 ordinary shares of Ali Pictures 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.

V-3

GENERAL INFORMATION

APPENDIX V

3. SUBSTANTIAL SHAREHOLDERS’ INTERESTS IN SHARES, UNDERLYING SHARES 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
			percentage of
			issued share
		Number of	capital of the
Name of Shareholder	Capacity	Shares held	Company(Note 1)
Ali Fortune	Beneficial owner	6,502,723,993	55.71%
Alibaba Investment Limited	Interest of controlled	6,502,723,993_(Note 8)_	55.71%
(Note 2)	corporation
API Holdings Limited_(Note 2)_	Interest of controlled	6,502,723,993_(Note 8)_	55.71%
	corporation
Alibaba Holding_(Note 3)_	Interest of controlled	6,502,723,993_(Note 8)_	55.71%
	corporation
API (Hong Kong) Investment	Interest of controlled	6,502,723,993_(Note 8)_	55.71%
Limited_(Note 4)_	corporation
Shanghai Yunju Venture	Interest of controlled	6,502,723,993_(Note 8)_	55.71%
Capital Investment Co.,	corporation
Ltd. (formerly known as
Shanghai Yunju Investment
Management Co., Ltd.)(Note 5)
Ant Holdco_(Note 6)_	Interest of controlled	6,502,723,993_(Note 8)_	55.71%
	corporation
Hangzhou Yunbo Investment	Interest of controlled	6,502,723,993_(Note 8)_	55.71%
Consultancy Co., Ltd.(Note 7)	corporation

V-4

GENERAL INFORMATION

APPENDIX V

			Approximate
			percentage of
			issued share
		Number of	capital of the
Name of Shareholder	Capacity	Shares held	Company(Note 1)
Mr. Ma Yun_(Note 7)_	Interest of controlled	6,502,723,993_(Note 8)_	55.71%
	corporation
Mr. Jing Eric Xiandong_(Note 7)_	Interest of controlled	6,502,723,993_(Note 8)_	55.71%
	corporation
Ms. Jiang Fang_(Note 7)_	Interest of controlled	6,502,723,993_(Note 8)_	55.71%
	corporation
Mr. Hu Simon Xiaoming_(Note 7)_	Interest of controlled	6,502,723,993_(Note 8)_	55.71%
	corporation
MAXPROFIT GLOBAL	Beneficial owner	2,006,250,000_(Note 9)_	17.19%
INC_(Note 9)_

Notes:

Based on a total of 11,672,342,235 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, respectively.
Alibaba Holding holds 100% of the issued share capital of AIL.
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 Holdco 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 29.86% and 20.66% of the equity interests in Ant Holdco, respectively.
Hangzhou Yunbo Investment Consultancy Co., Ltd. (“ Yunbo ”) is the general partner of both Junhan and Junao, and is owned as to 34%, 22%, 22% and 22% by Mr. Ma Yun, Mr. Jing Eric Xiandong, Ms. Jiang Fang, and Mr. Hu Simon Xiaoming respectively. Pursuant to an agreement (the “ Concert Party Agreement ”) dated August 21, 2020 and entered into between Mr. Ma Yun, Mr. Jing Eric Xiandong, Ms. Jiang Fang, and Mr. Hu Simon Xiaoming, they have agreed on certain arrangements pertaining to their shareholdings in Yunbo. Pursuant to the SFO, since each of Mr. Ma Yun, Mr. Jing Eric Xiandong, Ms. Jiang Fang, and Mr. Hu Simon Xiaoming is a party to the Concert Party Agreement, each of them is deemed to be interested in the Shares in which the other parties to the Concert Party Agreement are interested.
Each of AIL, Alibaba Holding, API Holdings, API (Hong Kong) Investment Limited, Shanghai Yunju, Ant Holdco, Junhan, Junao, Yunbo, Mr. Ma Yun, Mr. Jing Eric Xiandong, Ms. Jiang Fang and Mr. Hu Simon Xiaoming are taken to be interested in an aggregate of 6,502,723,993 Shares by virtue of Part XV of the SFO.
As disclosed in the section headed “DISCLOSURE OF DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS” above, Mr. Sun Ho was deemed to be interested in these 2,006,250,000 Shares under the SFO by virtue of his interest in MAXPROFIT GLOBAL INC.

V-5

GENERAL INFORMATION

APPENDIX V

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 Enlarged Group which is not expiring or determinable by the employer within one year without the payment of compensation (other than statutory compensation).

5. MATERIAL CONTRACTS

The following contracts (not being contracts entered into in the ordinary course of business) were entered into by members of the Enlarged Group within the two years immediately preceding the Latest Practicable Date which are or may be material:

(i) the Agreement;
(ii) a share transfer agreement dated May 28, 2021 between the Target and the Existing Target Shareholder, pursuant to which the Target transferred its entire 99% shareholding in Macau Pass Investments, Limited to the Existing Target Shareholder for a consideration of MOP237,600,000 (equivalent to approximately HK$230,680,000). The aforesaid share transfer was part of the reorganization of the Target Group that had been completed prior to the date of the Agreement to exclude assets and liabilities from the Target Group which were not related to the businesses of Macau Pass and the PRC Company; and
(iii) two intra-group loans in the aggregate amount of MOP243,350,000 (equivalent to approximately HK$236,262,000) was granted by Macau Pass Investments, Limited (a 99%-owned subsidiary of the Target at the time of grant) as lender to the Target as borrower on February 26, 2020 and March 23, 2020 respectively. The loans were interest-free, unsecured and repayable on demand. No written contracts were entered into in respect of the loans. The loans were fully repaid in May 2021.

6. CLAIMS AND LITIGATION

As at the Latest Practicable Date, no member of the Enlarged Group was engaged in any litigation, arbitration or claim of material importance and no litigation, arbitration or claim of material importance was known to the Directors to be pending or threatened against any member of the Enlarged Group.

V-6

GENERAL INFORMATION

APPENDIX V

7. COMPETING BUSINESS

Ali Fortune, the controlling shareholder of the Company, is indirectly owned as to 60% and 40% by Alibaba Holding and Ant Holdco respectively. Ant Holdco is indirectly held by Alibaba Holding as to 33% of its equity interest and is therefore a “close associate” (as defined in the GEM Listing Rules) of Ali Fortune. Ant Bank is a joint venture company incorporated under the laws of Macau which is held as to 66.7% by two indirect wholly-owned subsidiaries of Ant Holdco and as to 33.3% by a 30% indirectly owned associated company of the Company.

As disclosed in the paragraph headed “Expansion of the Group’s business coverage in the Macau market” in the section headed “Reasons for and benefits of the Acquisition” in the “Letter from the Board” in this circular, Ant Bank officially commenced operations in April 2019. It launched the Alipay (Macao) e-wallet payment service in Macau in September 2019. Two Directors, namely Mr. Sun Ho and Mr. Ji Gang, are also directors of Ant Bank.

Following Closing, Macau Pass will become an indirect wholly-owned subsidiary of the Company and will continue to provide electronic payment services including e-wallet payment service in Macau. Nevertheless, the Company does not regard Ant Bank as a “competing business” operated by Ant Group against the Enlarged Group because:

(i) from the perspective of the Enlarged Group, Ant Bank is a joint venture company in which the Enlarged Group also has an indirect equity interest and is entitled to indirectly share its financial results; and
(ii) from the perspective of Macau Pass, Ant Bank has been a business partner in respect of Macau Pass’ acquiring service business in Macau and the two companies shall continue their business cooperation following Closing on terms and conditions consistent with their past practice.

Save as disclosed above, 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 Enlarged Group.

8. DIRECTORS’ INTERESTS IN THE ENLARGED GROUP’S ASSETS OR CONTRACTS OR ARRANGEMENTS SIGNIFICANT TO THE ENLARGED 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 December 31, 2020 (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 Enlarged Group, or are proposed to be acquired or disposed of by or leased to any member of the Enlarged Group.

V-7

GENERAL INFORMATION

APPENDIX V

Save as disclosed in:

(i) the sections headed “Directors’ Material Interests in Transactions, Arrangements or Contracts and Controlling Shareholder’s Interests in Contracts” and “Continuing Connected Transactions” in the annual report of the Company for the year ended December 31, 2020; and
(ii) the section headed “GEM Listing Rules Implications” in the “Letter from the Board” in this circular in relation to the potential conflict of interest of Ms. Monica Maria Nunes, an independent non-executive Director, on the Agreement (and the transactions contemplated thereunder) and the Framework Agreement (and the transactions contemplated thereunder), and the potential conflicts of interests of other Directors, namely, Mr. Sun Ho, Ms. Hu Taoye, Mr. Yang Guang, Mr. Li Faguang, Mr. Ji Gang and Mr. Zou Liang, on the Framework Agreement (and the transactions contemplated thereunder),

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 Enlarged Group.

9. QUALIFICATIONS AND CONSENTS OF EXPERTS

The following are the qualification of the experts who have given opinion or advice contained in this circular:

Name Qualification AVISTA Valuation Advisory Limited Independent professional valuer Opus Capital Limited A licensed corporation to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO PricewaterhouseCoopers Certified Public Accountants under the Professional Accountants Ordinance (Chapter 50 of the Laws of Hong Kong) and Registered Public Interest Entity Auditor under the Financial Reporting Council Ordinance (Chapter 588 of the Laws of Hong Kong)

Each of the above expert has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its report and/or opinion (as the case may be) and references to its name in the form and context in which they appear.

As at the Latest Practicable Date, each of the above expert did not have any shareholding, directly or indirectly, in any member of the Enlarged Group or any right or option (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for any securities in any member of the Enlarged Group.

V-8

GENERAL INFORMATION

APPENDIX V

As at the Latest Practicable Date, each of the above expert did not have any direct or indirect interest in any assets which had been, since December 31, 2020 (the date to which the latest published audited consolidated financial statements of the Group were made up), acquired or disposed of by, or leased to, or are proposed to be acquired or disposed of by, or leased to, any members of the Enlarged Group.

10. GENERAL

(i) The registered office of the Company is situated at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda and the principal office is at Unit 3912, 39/F, Tower Two, Time Square, Causeway Bay, Hong Kong.
(ii) The Hong Kong branch share registrar and transfer office of the Company is Tricor Abacus Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(iii) The company secretary of the Company is Ms. Lee Wai Yan Vivian, who was admitted as a solicitor of the High Court of Hong Kong in 2007 and is currently a member of the Law Society of Hong Kong.
(iv) The compliance officer of the Company is Mr. Sun Ho, who is the Chairman of the Company and an executive Director. Mr. Sun holds a bachelor’s degree in Economics from the University of Sydney in Australia and a master’s degree in Corporate Finance from the Hong Kong Polytechnic University. He is a member of CPA Australia and a fellow member of the Hong Kong Institute of Certified Public Accountants.
(v) As at the Latest Practicable Date, the audit committee of the Board (the “ Audit Committee ”) comprises three members, including Ms. Monica Maria Nunes (Chairperson), Mr. Feng Qing and Dr. Gao Jack Qunyao, all were independent non-executive Directors. The primary duties of the Audit Committee are to review and supervise the financial reporting process as well as the risk management and internal control systems of the Group, consider the appointment or reappointment of the auditor and provide advice and comments on the Group’s draft annual, interim and quarterly results and reports to the Board. The background and directorships (and past directorships) of other companies listed on GEM, the Main Board of the Stock Exchange or other exchanges of the members of the Audit Committee are set out below:

Ms. Monica Maria Nunes

Ms. Monica Maria Nunes is an executive director of Vodatel Networks Holdings Limited (“ Vodatel ”), the shares of which are listed on GEM (Stock Code: 8033). She is currently the managing director, finance director and the compliance officer of Vodatel. She graduated from the University of Calgary, Canada with a bachelor’s degree in commerce, and from the University of Hong Kong with a master’s degree in social sciences. She has over 26 years of management, accounting and finance experience. She is a Canadian Chartered Professional Accountant, Certified Management Accountant, and is a member of the Chartered Professional Accountants of Alberta, Canada. She is an associate of the Chartered Institute of Management Accountants and a designee of the Chartered Global Management Accountant.

V-9

GENERAL INFORMATION

APPENDIX V

Mr. Feng Qing (“Mr. Feng”)

Mr. Feng is the chairman of Beijing Yi Xin Tech Corporation. Mr. Feng was the author of the marketing economics book titled “Practical Market Theory (實用市場理論)” which was well received by the market, and became an instrumental reading in learning western economics. In 1983, Mr. Feng commenced study of macroeconomics in Switzerland.

After graduation, Mr. Feng stayed in Switzerland to work at Sulzer International AG, then one of the biggest machinery manufacturers in Switzerland, for many years. Afterwards, Mr. Feng returned to China and was engaged in satellite communication and investment and finance related work. Mr. Feng graduated from the Precision Instruments faculty (精密儀器系) of Tsinghua University, the PRC, majoring in Machinery Manufacturing Technology and Equipment (機械製造工藝及設備), and was a postgraduate student in macroeconomics of the University of Zurich in Switzerland.

Dr. Gao Jack Qunyao (“Dr. Gao”)

Dr. Gao has extensive experience in information technology (“ IT ”), media and entertainment, and venture capital. He is currently the adjunct professor of the Business School of The Chinese University of Hong Kong, the founding partner and CEO of Beijing Times Digiwork Films Technology Co., Ltd. (Smart Cinema), and the independent non-executive director of AsiaInfo Technologies Limited (a company listed on the Stock Exchange under Stock Code: 1675). During 2015 to 2017, Dr. Gao was the Group Senior Vice President and CEO of International Investments and Business Operation Department of 北京萬達文化產業集團有限公司 (Beijing Wanda Culture Industry Group Co., Ltd.) and in 2017, Interim CEO of Legendary Entertainment LLC; a director of several Wanda Group companies including Legendary Entertainment LLC, AMC Entertainment Holdings, Inc. (listed on the New York Stock Exchange, stock symbol: AMC) and Sunseeker International Limited, and the director for the EuropaCity (巴黎歐洲城) project. Dr. Gao was previously the founder and president of Gao Entertainment LLC; an independent director of AirMedia Group Inc. (the ADSs of which are listed on NASDAQ under the symbol: AMCN); an independent director of 萬通投資控股股份有限公司 (Vantone Holdings Co., Ltd.); a director of Infront Sports & Media AG, Bona Film Group Limited (the ADSs of which are listed on NASDAQ under the symbol: BONA); and an alternate director of Phoenix Media Investment (Holdings) Limited (formerly known as Phoenix Satellite Television Holdings Limited) (a company listed on the Stock Exchange under Stock Code: 2008).

Previously, Dr. Gao also held various major positions in a number of renowned companies, including senior vice president of News Corporation (a company listed on NASDAQ under the symbol: NWS); chief executive officer of News Corporation China Investments and STAR (China) Limited; chief representative of News Corporation, Beijing representative office; vice president of Autodesk China; general manager of Microsoft (China) Co., Ltd.; and general partner, executive vice president and country head (China) of Walden International, a leading venture capital firm in the United States of America. Dr. Gao holds a doctorate degree in Engineering from Harbin Institute of Technology, China. He is the author of the book titled “體驗微軟 (Experience Microsoft)” which has a wide readership in China IT communities.

for identification purpose only

V-10

GENERAL INFORMATION

APPENDIX V

(vi) In case of inconsistencies, the English texts of this circular shall prevail over the Chinese texts thereof.

11. DOCUMENTS ON DISPLAY

Copies of the following documents will be published on the website of the Stock Exchange (http://www.hkexnews.hk) and the website of the Company (http://www.agtech.com) for not less than 14 days from the date of this circular and will be available for inspection at the SGM:

(i) the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, the text of which is set out on pages IFA-1 to IFA-19 of this circular;
(ii) the accountant’s report of the Target Group from PricewaterhouseCoopers as set out in Appendix II to this circular;
(iii) the report on the unaudited pro forma financial information of the Enlarged Group from PricewaterhouseCoopers as set out in Appendix III to this circular;
(iv) the valuation report on the Target Group issued by the Valuer as set out in Appendix IV to this circular;
(v) the written consents referred to in the paragraph headed “Qualifications and Consents of Experts” in this appendix;
(vi) the Agreement (redacted) (Note) ; and
(vii) the Framework Agreement.
Note: As certain personal information (being identification number, nationality, marital status and residential address) of the Sellers, their spouses and Mr. Sun Ho contained in the Agreement (the “ Personal Information ”) is considered to be personal data, the public disclosure of the Personal Information on the websites of the Company and the Stock Exchange may constitute a possible breach of the Personal Data (Privacy) Ordinance (Cap. 486 of the laws of Hong Kong) based on the legal advice of the Hong Kong legal advisers of the Company.

In addition, the Personal Information is not public information, and the Company considers that the Personal Information is not material information relating to the Acquisition, the omission of which would not affect the Shareholders’ assessment of the commercial terms and hence the merits of the Agreement and/or the Acquisition for the purpose of making their voting decisions at the forthcoming SGM.

In light of the above, the Company has applied to the Stock Exchange and the Stock Exchange has granted a waiver from strict compliance with Rule 19.66(11) of and paragraph 42(2)(c) of Appendix 1B to the GEM Listing Rules by redacting the Personal Information in the Agreement to be published on the websites of the Company and the Stock Exchange.

V-11

NOTICE OF SGM

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

(incorporated in Bermuda with limited liability) (Stock Code: 8279)

NOTICE IS HEREBY GIVEN THAT a special general meeting (the “ SGM ”) of AGTech Holdings Limited (the “ Company ”) will be held at 11:00 a.m. on Thursday, November 18, 2021 at Holiday Inn Express Hong Kong Causeway Bay, Meeting Room I & II, 7/F, 33 Sharp Street East, 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

(i) “ THAT :
(a) the Agreement (as defined in the circular of the Company dated October 29, 2021 (the “ Circular ”) of which this notice forms part) and the transactions contemplated thereunder be and are hereby confirmed, approved and ratified; and
(b) any one director of the Company (or any two directors of the Company or one director and the secretary of the Company, in the case of execution of documents under seal) be and is hereby authorized 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 Agreement and the transactions contemplated thereunder and the implementation thereof including the affixing of seal thereon.”

(ii) “ THAT :

(a) (1) the Framework Agreement (as defined in the Circular) and the transactions contemplated thereunder be and are hereby confirmed, approved and ratified;
(2) the Annual Caps (as defined in the Circular) be and are hereby approved; and

* For identification purpose only

SGM-1

NOTICE OF SGM

(b) any one director of the Company (or any two directors of the Company or one director and the secretary of the Company, in the case of execution of documents under seal) be and is hereby authorized 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 Framework Agreement and the transactions contemplated thereunder and the implementation thereof including the affixing of seal thereon.”

By order of the Board AGTech Holdings Limited Sun Ho

Chairman & CEO

The Hong Kong Special Administrative Region of the People’s Republic of China, October 29, 2021

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 54, 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.
The record date for determining the entitlement of shareholders of the Company to attend and vote at the SGM will be Friday, November 12, 2021. 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 54, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong for registration by 4:30 p.m. on Friday, November 12, 2021.

As at the date of this notice, the Board comprises (i) Mr. Sun Ho and Ms. Hu Taoye as executive Directors; (ii) Mr. Yang Guang, Mr. Li Faguang, 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-2

AI assistant

Joy Spreader Group Inc. — Proxy Solicitation & Information Statement 2021

51106_rns_2021-10-28_064e776f-b985-4d7d-87e0-d8fff3157495.pdf

AGTech Holdings Limited 亞博科技控股有限公司[*]

(1) VERY SUBSTANTIAL ACQUISITION;

(2) POSSIBLE CONTINUING CONNECTED TRANSACTIONS;

AND

(3) NOTICE OF SPECIAL GENERAL MEETING

Independent Financial Adviser to

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

AGTech Holdings Limited 亞博科技控股有限公司[*]

(1) VERY SUBSTANTIAL ACQUISITION; AND

(2) POSSIBLE CONTINUING CONNECTED TRANSACTIONS

(I) INTRODUCTION

LETTER FROM THE BOARD

(II) THE ACQUISITION

THE AGREEMENT

Date

Parties

Subject matter

Consideration

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Adjustments to the Deferred Consideration

Closing Conditions

Conditions precedent to payment of the Deferred Consideration

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Closing

Non-competition undertaking by the Existing Target Shareholder

INFORMATION ON THE TARGET GROUP

Group structure

Business

LETTER FROM THE BOARD

License and approval

Financial information

LETTER FROM THE BOARD

FINANCIAL EFFECTS OF THE ACQUISITION

Assets and liabilities

Earnings

REASONS FOR AND BENEFITS OF THE ACQUISITION

Expected synergies from the integration of the Group’s games and entertainment business with the MPay e-wallet payment platform

LETTER FROM THE BOARD

Expansion of coverage of the Group’s non-lottery hardware business to the Macau retail market

Expansion of the Group’s business coverage in the Macau market

Vertical integration with the Group’s investment in Ant Bank

(III) POSSIBLE CONTINUING CONNECTED TRANSACTIONS

THE FRAMEWORK AGREEMENT

Date

Parties

Duration and conditions precedent

Acquiring service business cooperation

LETTER FROM THE BOARD

Pricing policy and payment terms

HISTORICAL TRANSACTION AMOUNTS AND BASIS OF DETERMINING THE ANNUAL CAPS

Historical amounts of the Service Fees

LETTER FROM THE BOARD

Annual Caps for the Service Fees

Basis for determining the Annual Caps

REASONS FOR AND BENEFITS OF THE FRAMEWORK AGREEMENT

INTERNAL CONTROL MEASURES FOR THE CCTS

LETTER FROM THE BOARD

(IV) GEM LISTING RULES IMPLICATIONS

LETTER FROM THE BOARD

(V) FINANCIAL ADVISER, INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

(VI) THE SGM

(VII) RECOMMENDATION

(VIII) ADDITIONAL INFORMATION

AGTech Holdings Limited 亞博科技控股有限公司[*]

POSSIBLE CONTINUING CONNECTED TRANSACTIONS

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Yours faithfully

POSSIBLE CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

Joy Spreader Group Inc. Proxy Solicitation & Information Statement 2021

**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[*]**