NetDragon Websoft Holdings Limited — Proxy Solicitation & Information Statement 2013

Apr 15, 2013

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in NetDragon Websoft Inc., you should at once hand this circular and the accompanying proxy form to the purchaser(s) or transferee(s), or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s).

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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NetDragon Websoft Inc. 網龍網絡有限公司

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 777)

PROPOSALS FOR GENERAL MANDATES TO ISSUE AND REPURCHASE SHARES RE-ELECTION OF DIRECTORS AND

NOTICE OF ANNUAL GENERAL MEETING

A notice convening the annual general meeting of NetDragon Websoft Inc. to be held at Plaza Meeting Room, Regus Conference Centre, 35/F, Central Plaza, 18 Harbour Road, Wanchai, Hong Kong on Friday, 24 May 2013 at 3:00 p.m. is set out on pages 15 to 19 of this circular. A form of proxy for use at the annual general meeting is enclosed herewith. Whether or not you intend to attend and vote at the annual general meeting in person, you are requested to complete and return the accompanying proxy form to the branch share registrar of the Company in Hong Kong, Tricor Investor Services Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong in accordance with the instructions printed thereon as soon as possible but in any event not later than 48 hours before the time appointed for holding the annual general meeting (or any adjournment thereof). Completion and return of the proxy form will not preclude you from attending and voting in person in the annual general meeting (or any adjournment thereof) if you so wish.

15 April 2013

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Appendix — Explanatory Statement for the Repurchase Mandate . . . . . . . . . . . . . . . . . . .	9
Notice of Annual General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15

— i —

DEFINITIONS

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

“AGM” the annual general meeting of the Company to be held at Plaza Meeting Room, Regus Conference Centre, 35/F, Central Plaza, 18 Harbour Road, Wanchai, Hong Kong on Friday, 24 May 2013 at 3:00 p.m. or any adjournment thereof (as the case may be), notice of which is set out on pages 15 to 19 of this circular; “associate(s)” has the meaning ascribed to it under the Listing Rules; “Board” the board of Directors; “BVI” the British Virgin Islands; “Chairman” chairman of the Board; “Company” NetDragon Websoft Inc., a company incorporated in the Cayman Islands with limited liability, the shares of which are listed on the Main Board of the Stock Exchange; “connected person(s)” has the same meaning as ascribed to it under the Listing Rules; “Director(s)” Director(s) of the Company; “Group” the Company and its subsidiaries; “HKD” Hong Kong dollars, the lawful currency of Hong Kong; “Hong Kong” the Hong Kong Special Administrative Region of the People’s Republic of China; “IDG Group” IDG Technology Venture Investments, L.P., IDG-Accel China Growth Fund L.P., IDG-Accel China Growth Fund-A L.P. and IDG-Accel China Investors L.P.; “Issue Mandate” a general and unconditional mandate to be granted to the Directors at the AGM to allot, issue and otherwise deal with Shares not exceeding 20% of the issued share capital of the Company as at the date of the passing of such resolution plus the amount representing the aggregate nominal amount of the share capital of the Company repurchased by the Company under the Repurchase Mandate; “Latest Practicable Date” 11 April 2013, being the latest practicable date prior to the printing of this circular for ascertaining certain information referred to in this circular;

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	DEFINITIONS
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange;
“Repurchase Mandate”	a general and unconditional mandate to be granted to the
	Directors at the AGM to repurchase up to 10% of the issued
	share capital of the Company as at the date of the passing of
	such resolution;
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the
	Laws of Hong Kong);
“Share(s)”	the ordinary share(s) of USD0.01 each in the capital of the
	Company;
“Shareholder(s)”	the holder(s) of the Share(s);
“Stock Exchange”	The Stock Exchange of Hong Kong Limited;
“Takeovers Codes”	the Codes on Takeovers and Mergers and Share Repurchases;
“USD”	US dollars, the lawful currency of the United State of
	America;
“%”	per cent.

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LETTER FROM THE BOARD OF DIRECTORS

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NetDragon Websoft Inc. 網龍網絡有限公司

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 777)

Executive Directors: Liu Dejian (Chairman) Liu Luyuan Zheng Hui Chen Hongzhan

Non-executive Director: Lin Dongliang

Independent non-executive Directors: Chao Guowei, Charles Lee Kwan Hung Liu Sai Keung, Thomas

Registered office: Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Head office and principal place of business in Hong Kong: Unit No. 2209 22nd Floor West Tower Shun Tak Centre 200 Connaught Road Central Hong Kong 15 April 2013

To the Shareholders

Dear Sir or Madam,

PROPOSALS FOR GENERAL MANDATES TO ISSUE AND REPURCHASE SHARES RE-ELECTION OF DIRECTORS AND NOTICE OF ANNUAL GENERAL MEETING

INTRODUCTION

The purpose of this circular is to provide you with information in respect of the resolutions to be proposed at the AGM relating to (i) the granting to the Directors a general mandate to allot, issue and deal with Shares not exceeding 20% of the Shares in the issued share capital of the Company as at the date of passing of such resolution; (ii) the granting to the Directors a general mandate to repurchase the Shares not exceeding 10% of the Shares in the issued share capital of the Company as

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LETTER FROM THE BOARD OF DIRECTORS

at the date of the passing of such resolution; and (iii) the re-election of retiring Directors. This circular contains the explanatory statement in compliance with the Listing Rules and to give all the information reasonably necessary to enable Shareholders to make an informed decision on whether to vote for or against the resolutions.

A notice convening the AGM is set out on page 15 to page 19 to this circular.

GENERAL MANDATES

At the AGM, separate ordinary resolutions will be proposed to grant to the Directors general and unconditional mandates to authorize the Directors (i) to allot, issue and otherwise deal with Shares not exceeding 20% of the aggregate nominal amount of the issued share capital of the Company at the date of passing of the resolution; (ii) to exercise all powers of the Company to repurchase issued and fully paid Shares up to a maximum of 10% of the aggregate nominal amount of the issued share capital of the Company at the date of the passing of the resolution; and (iii) to extend the general mandate granted to the Directors to allot, issue and deal with additional Shares as mentioned in paragraph (i) above by the amount representing the aggregate nominal amount of the share capital of the Company repurchased by the Company under the Repurchase Mandate.

As at the Latest Practicable Date, there were in issue an aggregate of 505,480,403 Shares. Subject to the passing of the proposed resolutions for the grant of the Issue Mandate and the Repurchase Mandate, and on the basis that no further Shares will be issued or repurchased prior to the date of the AGM, exercise in full of the Repurchase Mandate will result in up to 50,548,040 Shares being repurchased by the Company, and the Directors will be authorised to allot and issue under the Issue Mandate up to 101,096,080 Shares, and to the extent the Repurchase Mandate is exercised, plus the amount of Shares representing the aggregate nominal amount of the share capital of the Company repurchased by the Company under the Repurchase Mandate.

The Issue Mandate and the Repurchase Mandate shall continue in force during the period ending on the earliest of (a) the date of the next annual general meeting; or (b) the date by which the next annual general meeting of the Company is required to be held by law or by its articles of association; or (c) the date upon which such authority is revoked or varied by an ordinary resolution of the Shareholders in a general meeting of the Company.

EXPLANATORY STATEMENT

An explanatory statement containing all relevant information relating to the proposed Repurchase Mandate is set out in the Appendix to this circular. The information in the explanatory statement is to provide you with information reasonably necessary to enable you to make an informed decision on whether to vote for or against the resolution to grant to the Directors the Repurchase Mandate.

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LETTER FROM THE BOARD OF DIRECTORS

RE-ELECTION OF DIRECTORS

As at the Latest Practicable Date, the executive Directors are Liu Dejian (Chairman), Liu Luyuan, Zheng Hui and Chen Hongzhan; the non-executive Director is Lin Dongliang; and the independent non-executive Directors are Chao Guowei, Charles, Lee Kwan Hung and Liu Sai Keung, Thomas.

Pursuant to the articles of association of the Company, at each annual general meeting, one-third of the Directors for the time being (or, if their number is not three or a multiple of three, the number nearest to but not less than one-third), shall retire from office by rotation provided that every Director shall be subject to retirement by rotation at least once every three years.

Accordingly, Liu Dejian, Chao Guowei, Charles and Lin Dongliang will retire as Directors in accordance with the articles of association of the Company. Liu Dejian, Chao Guowei, Charles and Lin Dongliang being eligible, offer themselves for re-election at the AGM.

Liu Dejian, aged 41, is the Chairman and executive Director of the Company. Mr. Liu led us to become one of the PRC’s leading online game and mobile Internet operations companies. He is mainly responsible for the overall business strategic development of the Group & 91 Group and is the chief game designer of our game development team. Mr. Liu Leads the game development team on the design of the online game products. He formulates the development policy and contributes to the growth of the Company as a competitive online game operator and developer. Apart from his management and leadership, Mr. Liu constantly holds training seminars to further enhance the development of our human resources. Prior to starting NetDragon (Fujian), Mr. Liu graduated with a Bachelor’s degree of Science in Chemistry from University of Kansas in the USA in 1995. He had been the vice-president of Beso Biological Research Centre, Inc (“Beso”) from 1995 to 2005. He was also the vice-president of Fuzhou Yangzhenhua 851 Bio-Engineering Research Inc. (“Fuzhou 851”) from 1995 to 2000 and then promoted to be the president since 2001. Mr. Liu was first introduced to the technology of Internet during his study in the USA when he established a website for marketing of softwares. Anticipating that Internet would have a good development opportunity in the PRC, he founded NetDragon (Fujian) in 1999 when he came back to the PRC. He was awarded as the Most Influential Person within the Online Game Industry in China in the Chinese Game Industry Annual Conference 2009 in January 2010 「( 2009 年度中國遊戲產業最具影響力人物」). He was also awarded as “Excellent Entrepreneur of China Game Industry 「中國遊戲行業優秀企業家」( ) in the China Game Industry Annual Conference in December 2009. He was appointed as vice-chairman of Fujian Province Association of Youth Entrepreneur 「福建省青年企業家協會」( ) in April 2006. He also obtained Fujian Youth Entrepreneur Achievement Award 「福建青年創業成就獎」( ) in April 2005, Go Tone Fujian IT Industry Top 10 Outstanding Youth 「全球通福建( IT行業十大傑出青年」) in May 2005, Certificate of Fujian Entrepreneurial Tutor of the Chinese Youth Business International Programme 「中國青年創業國際計劃福建創業導師證書」( ) in June 2005, Fujian Youth Technology Award 「福建省青年科技獎」( ) in March 2010, Software Outstanding Talent in Fujian Province 「福建省軟件傑出人才」( ) in September 2010 and Entrepreneurial Excellence Award in Haixi 「海西創業英才獎」( ) in April 2012, and he was appointed as a member of the Second Council of The Association for Redound Reposal, Fujian (福建省誠信促進會第二屆理事會) in July 2012. In June 2011, Mr. Liu received the Management Talent Award* 「領軍人物獎」( ). Mr. Liu is also a director of NetDragon Websoft (Hong Kong) Limited (“NetDragon (Hong Kong)”), NetDragon (BVI),

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LETTER FROM THE BOARD OF DIRECTORS

91 Wireless, BoYuan (Hong Kong) Wireless Websoft Technology Limited (“BoYuan (Hong Kong)”). Mr. Liu is a brother of Liu Luyuan and a cousin of Zheng Hui. Mr. Liu entered into a service contract with the Company for a term of three years commenced from 24 June 2008 subject to termination in certain circumstances as stipulated therein. Pursuant to the service contract, Mr. Liu is entitled to an annual remuneration of RMB559,200 per year. He is entitled to a bonus payment on such amount as shall be determined by the Board in its absolute discretion. The determination of his emoluments is based on salaries paid by comparable companies, time commitment, his duties and responsibilities in the Company, the Company’s performance and its remuneration policy.

As at the Latest Practicable Date, Mr. Liu is interested in 95.40% of the issued share capital of DJM Holding Ltd., which in turn was interested in 36.82% of the issued share capital of the Company. Mr. Liu was also deemed to be interested in 98.86% of the registered capital of NetDragon (Fujian), which in turn was interested in 99.00% of the registered capital of Shanghai Tiankun Digital Technology Ltd. (“NetDragon (Shanghai)”). Liu Dejian is a brother of Liu Luyuan and a cousin of Zheng Hui who have agreed to act in concert to acquire interests in the registered capital of NetDragon (Fujian). All of Liu Dejian, Liu Luyuan and Zheng Hui were deemed to be interested in 49.03% of the issued share capital of the Company through their direct and deemed shareholding in all of the DJM Holding Ltd., Richmedia Holdings Limited, Fitter Property Inc. and Eagle World International Inc.. In addition, as at the Latest Practicable Date, Mr. Liu also held 1,884,000 share options of the Company.

Chao Guowei, Charles, aged 48, is an independent non-executive Director of the Company since 15 October 2007. Mr. Chao is also the chairman of the audit committee, a member of our remuneration committee and nomination committee. Mr. Chao is the Chairman and Chief Executive Officer of SINA Corporation (“SINA”), a publicly listed company in Nasdaq. Mr. Chao joined SINA as a Vice President of Finance in 1999 and served as its Co-Chief Operating Officer, President and Chief Financial Officer before his current position as the Chairman and Chief Executive Officer. Prior to joining SINA, Mr. Chao served as an experienced audit manager in PricewaterhouseCoopers LLP to provide audit and business consulting services for companies in Silicon Valley, California. Mr. Chao is currently a director of Focus Media Holding Limited, a publicly listed company in Nasdaq. Mr. Chao has been appointed as a Co-Chairman of the Board of Directors of E-House (China) Holdings Limited, a publicly listed company in New York Stock Exchange, since April 2012. Mr. Chao graduated with a Master’s degree in professional Accounting from the University of Texas at Austin in 1993, a Master’s degree in Journalism from the University of Oklahoma in 1991 and a Bachelor’s degree in Journalism from the Fudan University in 1988.

Mr. Chao entered into an appointment letter with the Company for an initial term of three years commencing from 24 June 2008 subject to termination in certain circumstances as stipulated therein. Pursuant to the appointment letter, Mr. Chao is entitled to an annual remuneration of RMB366,000. The determination of his emoluments is based on salaries paid by comparable companies, time commitment, his duties and responsibilities in the Company, the Company’s performance and its remuneration policy.

As at the Latest Practicable Date, Mr. Chao was interested in 997,019 Shares representing approximately 0.20% of the total issued share capital of the Company.

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LETTER FROM THE BOARD OF DIRECTORS

Lin Dongliang, aged 50, is a non-executive Director of the Company. Mr. Lin graduated with a Master’s degree in Engineering Management in 1988 from Tsinghua University. He joined IDG Technology Venture Investment Inc. as its vice president in 1994, and has served as a member of the general partners of IDG Technology Venture Investment since 1999. He has over 12 years of experience in venture investment. He was nominated by the IDG Group to the Board as a non-executive Director since 15 December 2004. Mr. Lin is also a non-executive director of Superdata Software Holdings Limited, a company previously listed on GEM from 6 June 2003 to 18 May 2006 upon its withdrawal, since July 2002.

Mr. Lin entered into an appointment letter with the Company for an initial term of three years commencing from 24 June 2008 subject to termination in certain circumstances as stipulated therein. Pursuant to the appointment letter, Mr. Liu is not entitled to any annual remuneration.

Save as disclosed hereof, as at the Latest Practicable Date, and to the best knowledge and belief of the Board, the Directors confirmed that:

• (a) each of Liu Dejian, Chao Guowei, Charles and Lin Dongliang is not connected with any Director, senior management, management Shareholder, substantial Shareholder or controlling Shareholder of the Company;

• (b) each of Liu Dejian, Chao Guowei, Charles and Lin Dongliang has no other interests in the Shares which are required to be disclosed under Part XV of the SFO;

• (c) each of Liu Dejian, Chao Guowei, Charles and Lin Dongliang does not hold any directorships in listed public companies in the last three years;

• (d) there is no other information that needs to be disclosed pursuant to any of the requirements as set out in Rule 13.51(2)(h) to (v) of the Listing Rules; and

• (e) the Company is not aware of any other matter that needs to be brought to the attention of the Shareholders and the Stock Exchange in relation to the re-election of Directors.

GENERAL INFORMATION

The notice convening the AGM is set out on pages 15 to 19 of this circular.

A form of proxy for use at the AGM is enclosed with this circular. Whether or not you intend to attend the AGM in person, you are requested to complete and return the accompanying proxy form to the Company’s branch share registrar in Hong Kong, Tricor Investor Services Limited of 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong in accordance with the instructions printed thereon not less than 48 hours before the time appointed for holding the AGM. The return of the proxy form will not preclude you from attending and voting in person if you so wish.

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LETTER FROM THE BOARD OF DIRECTORS

VOTING AT THE ANNUAL GENERAL MEETING

Pursuant to Rule 13.39 of the Listing Rules, all votes of the Shareholders at the general meetings must be taken by poll. The chairman of the AGM will therefore demand a poll for every resolution put to the vote of the AGM pursuant to article 66 of the articles of association of the Company.

RECOMMENDATION

The Directors consider that the proposals for general mandates to issue and repurchase Shares and re-election of Directors are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend all Shareholders to vote in favour of all the resolutions to be proposed at the AGM in respect thereof.

Yours faithfully, For and on behalf of the Board NetDragon Websoft Inc. Liu Dejian Chairman

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APPENDIX EXPLANATORY STATEMENT FOR THE REPURCHASE MANDATE

This is an explanatory statement given to all Shareholders, as required by the Listing Rules, to provide requisite information of the Repurchase Mandate.

1. SHARE CAPITAL

As at the Latest Practicable Date, the issued and fully-paid share capital of the Company was 505,480,403 Shares of USD0.01 each.

Subject to the passing of the ordinary resolution granting the Repurchase Mandate and on the basis that no further Shares are issued or repurchased prior to the AGM, the Company would be allowed under the Repurchase Mandate to repurchase a maximum of 50,548,040 Shares, being 10% of the entire issued capital of the Company.

2. REASONS FOR REPURCHASE

The Directors have no present intention to repurchase any Shares but consider that the Repurchase Mandate will provide the Company with the flexibility to make such repurchase as and when appropriate and is beneficial to the Company. Such repurchases may, depending on the market conditions and funding arrangements at the time, lead to an enhancement of the net asset value of the Company and its assets and/or its earnings per Share. As compared with the position of the Company in its consolidated financial statements for the year ended 31 December 2012 (being the most recent published audited accounts), the Directors consider that there would not be any material adverse impact on the working capital and on the gearing position of the Company in the event that the proposed repurchases were to be made in full during the proposed repurchase period. However, the Directors will not propose to exercise the Repurchase Mandate to such an extent as would, in the circumstances, have a material adverse effect on the working capital requirements of the Company or on its gearing levels which in the opinion of the Directors are from time to time appropriate for the Company.

3. FUNDING OF REPURCHASES

Repurchase of the Shares will be funded out of funds legally available for such purpose in accordance with the memorandum and articles of association of the Company and the applicable laws of the Cayman Islands.

The Company is empowered by its memorandum and articles of association to repurchase its Shares. The Cayman Islands law provides that the amount of capital repaid in connection with a share repurchase may only be paid out of either the capital paid up on the relevant shares, or the profits that would otherwise be available for distribution by way of dividend or the proceeds of a new issue of shares made for such purpose. The amount of premium payable on redemption may only be paid out of either the profits that would otherwise be available for distribution by way of dividend or out of the share premium of the Company. Under the Cayman Islands law, the repurchased Shares will remain part of the authorised but unissued share capital.

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EXPLANATORY STATEMENT FOR THE REPURCHASE MANDATE

APPENDIX

4. UNDERTAKING BY DIRECTORS

The Directors have undertaken to the Stock Exchange that, so far as the same may be applicable, they will exercise the powers of the Company to make repurchase pursuant to the Repurchase Mandate and in accordance with the Listing Rules, the memorandum and articles of association of the Company and any applicable laws of the Cayman Islands.

None of the Directors, to the best of the knowledge and belief of the Directors having made all reasonable enquiries, nor any of the associates of any of the Directors has any present intention, in the event that the proposed Repurchase Mandate is approved by the Shareholders, to sell Shares to the Company in the event that the Repurchase Mandate is approved by the Shareholders.

At the Latest Practicable Date, no connected person of the Company has notified the Company that he/she has a present intention to sell Shares to the Company nor he/she has undertaken not to sell any of the Shares held by him/her to the Company in the event that the Repurchase Mandate is approved by the Shareholders.

5. EFFECT OF THE CODES ON TAKEOVERS AND MERGERS AND SHARE REPURCHASE AND MINIMUM PUBLIC FLOAT

If as a result of a repurchase of Shares, a Shareholder’s proportionate interest in the voting rights of the Company increases, such increase will be treated as an acquisition for the purpose of the Takeovers Codes. As a result, a Shareholder, or a group of Shareholders acting in concert (within the meaning under the Takeovers Codes), depending on the level of increase in the Shareholders’ interests, could obtain or consolidate control of the Company and become(s) obliged to make a mandatory offer in accordance with Rule 26 of the Takeovers Codes.

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APPENDIX

EXPLANATORY STATEMENT FOR THE REPURCHASE MANDATE

As at the Latest Practicable Date, the register of the Shareholders maintained by the Company pursuant to Section 336 under Part XV of the SFO showed that the Company has been notified of the following interests, being 5% or more of the Company’s issued share capital:

			Approximate
			percentage of
	Number of	Approximate	shareholding if
	Shares and	percentage of	the Repurchase
	underlying	existing	Mandate is
Name of Shareholder	shares held	shareholding	exercised in full
Liu Dejian (Note 1)	251,351,170	49.73%	55.25%
Liu Luyuan (Note 1)	251,151,700	49.69%	55.21%
Zheng Hui (Note 1)	249,751,700	49.41%	54.90%
DJM Holding Ltd.	186,078,100	36.82%	40.90%
Richmedia Holdings Ltd.	26,344,800	5.21%	5.79%
IDG Group (Note 2)	78,333,320	15.50%	17.22%
Ho Chi Sing	78,333,320	15.50%	17.22%
Zhou Quan	73,490,095	14.54%	16.15%

Notes:

1. Liu Dejian is interested in 95.40% of the issued share capital of DJM Holding Ltd., which in turn is interested in 36.82% of the issued share capital of the Company.

Liu Luyuan is interested in 100.00% of the issued share capital of Richmedia Holdings Limited, which in turn is interested in 5.21% of the issued share capital of the Company.

Zheng Hui is interested in 4.60% and 100.00%, respectively, of the issued share capital of DJM Holding Ltd. and Fitter Property Inc., which in turn is interested in 36.82% and 3.76%, respectively, of the issued share capital of the Company. Zheng Hui owns the voting rights in respect of all the issued shares of Flowson Company Limited. Flowson Company Limited is interested in 100% of the issued share capital of Eagle World International Inc., which in turn is interested in 3.25% of the issued share capital of the Company.

Liu Dejian is a brother of Liu Luyuan and a cousin of Zheng Hui who have agreed to act in concert to acquire interests in the Shares in the Company. All of Liu Dejian, Liu Luyuan and Zheng Hui are deemed to be interested in 49.03% of the issued share capital of the Company through their direct and deemed shareholding in all of DJM Holding Ltd., Richmedia Holdings Limited, Fitter Property Inc. and Eagle World International Inc. On 7 December 2009, 1,600,000 and 1,400,000 share options of the Company were granted to Liu Dejian and Liu Luyuan respectively, under the Company’s share option scheme. On 22 July 2011, the Company granted 284,000 share options to each of Liu Dejian, Liu Luyuan and Zheng Hui.

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APPENDIX

EXPLANATORY STATEMENT FOR THE REPURCHASE MANDATE

1. The IDG Group is comprised of four limited partnerships, namely IDG Technology Venture Investments, L.P., IDG-Accel China Growth Fund L.P., IDG-Accel China Growth Fund-A L.P. and IDG-Accel China Investors L.P., being interested in approximately 2.15%, 10.29%, 2.10%, and 0.96%, respectively, in the Company who are deemed to be acting in concert to acquire interests in the Company, and their respective controlling entities. The controlling structure of each of the above partnerships are as follows:

2. a) IDG Technology Venture Investments, L.P. is controlled by its sole general partner, IDG Technology Venture Investments, LLC, which in turn is controlled by its managing members, Zhou Quan and Ho Chi Sing.

3. b) IDG-Accel China Growth Fund L.P. and IDG-Accel China Growth Fund-A L.P. are controlled by their sole general partner, IDG-Accel China Growth Fund Associates L.P., which in turn is controlled by its sole general partner, IDG-Accel China Growth Fund GP Associates Ltd. IDG-Accel China Growth Fund GP Associates Ltd. is held as to 35.00% by each of Zhou Quan and Ho Chi Sing.

4. c) IDG-Accel China Investors L.P. is controlled by its sole general partner, IDG-Accel China Investor Associates Ltd., which in turn is held as to 100.00% by Ho Chi Sing.

In the event that the Directors shall exercise in full the Repurchase Mandate, the total interests of the above Shareholders would be increased to approximately the respective percentages shown in the last column above. As at the Latest Practicable Date, Liu Dejian, Liu Luyuan and Zheng Hui, as parties acting in concert (the “Concert Parties”), are beneficially interested in 247,860,662 Shares, representing approximately 49.03% of the issued share capital of the Company. As DJM Holding Ltd. is a corporation controlled by Liu Dejian, one of the Concert Parties, the interest in the Company held by DJM Holding Ltd. is accordingly regarded as part of the interest in the Company held by the Concert Parties and the increase of shareholding in the Company by DJM Holding Ltd. is examined with reference to the total increase of shareholding in the Company by the Concert Parties. In the event that the Directors should exercise in full the Repurchase Mandate, the aggregate shareholding of the Concert Parties will be increased to approximately 54.48% of the issued share capital of the Company. Accordingly, a mandatory offer under Rule 26 of the Takeovers Code will not arise as a result of the exercise in full of the Repurchase Mandate.

Assuming that there is no issue of Shares in the Company between the Latest Practicable Date and the date of a repurchase, an exercise of the Repurchase Mandate whether in whole or in part will not result in less than the relevant prescribed minimum percentage of the Shares of the Company being held by the public as required by the Stock Exchange. The Directors have no intention to exercise the Repurchase Mandate to an extent as may result in a public shareholding of less than such prescribed minimum percentage.

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APPENDIX

EXPLANATORY STATEMENT FOR THE REPURCHASE MANDATE

6. SHARE PURCHASE MADE BY THE COMPANY

During the twelve months preceding the Latest Practicable Date, the Company repurchased 9,635,500 Shares on the Stock Exchange at an aggregate consideration of HK$55,946,260 before expenses. The repurchases were effected by the Directors for the enhancement of shareholder value in the long term. Details of the Share repurchases are as follows:

	Number of			Aggregate
	ordinary Shares	Highest price	Lowest price	consideration
Date of repurchases	repurchased	paid per Share	paid per Share	paid
1 June 2012	1,500,000	5.50	5.07	8,027,705
4 June 2012	1,000,000	5.60	5.26	5,500,795
5 June 2012	549,000	5.60	5.45	3,061,210
6 June 2012	392,500	5.70	5.65	2,231,500
7 June 2012	1,000,000	5.90	5.73	5,833,305
8 June 2012	1,115,000	6.00	5.80	6,615,660
11 June 2012	219,000	6.00	6.00	1,314,000
12 June 2012	500,000	6.10	5.91	2,996,520
13 June 2012	1,000,000	6.10	6.04	6,072,865
14 June 2012	1,543,500	6.10	5.83	9,226,995
15 June 2012	566,500	6.10	6.03	3,453,205
21 June 2012	100,000	6.45	6.45	645,000
22 June 2012	150,000	6.45	6.45	967,500

The repurchased Shares were cancelled on delivery of the share certificates during the year. The nominal value of the cancelled Shares was transferred to the capital redemption reserve and the relevant aggregate consideration was paid out from the Company’s retained profits.

Save as disclosed above, neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the Shares during the previous twelve months immediately preceding the Latest Practicable Date.

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EXPLANATORY STATEMENT FOR THE REPURCHASE MANDATE

APPENDIX

7. SHARE PRICES

The highest and lowest prices at which the Shares traded on the Stock Exchange during each of the previous 12 months immediately preceding the Latest Practicable Date were as follows:

	Price per Share	Price per Share
Month	Highest	Lowest
	HKD	HKD
2012
March	5.50	4.46
April	6.49	4.65
May	5.54	4.42
June	6.92	5.07
July	6.85	5.60
August	7.45	6.06
September	9.00	6.78
October	9.16	7.83
November	11.50	8.16
December	12.60	10.40
2013
January	11.90	9.70
February	11.40	10.02
March	10.40	8.25
April (up to the Latest Practicable Date)	11.52	8.82

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NOTICE OF ANNUAL GENERAL MEETING

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NetDragon Websoft Inc. 網龍網絡有限公司

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 777)

NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT the annual general meeting of NetDragon Websoft Inc. (the “Company”) will be held at Plaza Meeting Room, Regus Conference Centre, 35/F, Central Plaza, 18 Harbour Road, Wanchai, Hong Kong on Friday, 24 May 2013 at 3:00 p.m. for the following purposes:

ORDINARY BUSINESS

1. To receive and consider the audited consolidated financial statements of the Company and its subsidiaries for the year ended 31 December 2012 and the reports of the directors of the Company (the “Directors”) and independent auditor’s of the Company for the year ended 31 December 2012.

2. To declare a final dividend for the year ended 31 December 2012.

3. To re-appoint Messrs. Deloitte Touche Tohmatsu as auditor and to authorise the board of Directors (the “Board”) to fix their remuneration.

4. A. To re-elect Liu Dejian as Director;

5. B. To re-elect Chao Guowei, Charles as Director;

6. C. To re-elect Lin Dongliang as Director;

7. D. To authorise the Board to fix the remuneration of the Directors.

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NOTICE OF ANNUAL GENERAL MEETING

SPECIAL BUSINESS

As special business, to consider and if thought fit, pass the following resolutions with or without amendments as ordinary resolutions:

1. A. “ THAT

2. (a) subject to paragraph (c) of this Resolution, the exercise by the Directors during the Relevant Period (as hereinafter defined) to allot, issue and deal with the new shares in the capital of the Company, and to make or grant offers, agreements and options which would or might require the exercise of such powers, be and is hereby generally and unconditionally approved;

3. (b) the approval in paragraph (a) of this Resolution shall authorise the Directors during the Relevant Period to make or grant offers, agreements and options which might require the exercise of such power after the end of the Relevant Period;

4. (c) the aggregate nominal amount of the share capital allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) by the Directors pursuant to the approval in paragraph (a) of this Resolution, otherwise than pursuant to (i) a Right Issue (as hereinafter defined); or (ii) the exercise of any option scheme or similar arrangement for the time being adopted for the grant or issue to officers and/or employees of the Company and its subsidiaries and/or other eligible persons of shares or rights to acquire shares of the Company; or (iii) any scrip dividend or similar arrangement providing for the allotment of shares in lieu of the whole or part of the cash payment for a dividend on shares of the Company in accordance with the articles of association of the Company, shall not exceed 20% of the aggregate nominal amount of the share capital of the Company in issue as at the date of this Resolution and the said approval shall be limited accordingly;

5. (d) for the purpose of this Resolution:

“ Relevant Period ” means the period from the passing of this Resolution until whichever is the earliest of:

• (i) the conclusion of the next annual general meeting of the Company;

• (ii) the expiration of the period within which the next annual general meeting of the Company is required by the articles of association of the Company or any applicable law to be held; and

• (iii) the revocation or variation of the authority given under this Resolution by an ordinary resolution of the shareholders of the Company in general meeting.

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NOTICE OF ANNUAL GENERAL MEETING

“ Right Issue ” means an offer of shares or other securities of the Company open for a period fixed by the Directors to holders of shares of the Company or any class thereof on the register on a fixed record date in proportion to their then holdings of such shares or class thereof (subject to such exclusion or other arrangements as the Directors may deem necessary or expedient in relation to fractional entitlements or having regard to any restrictions or obligations under the laws of, or the requirements of any recognised regulatory body or any stock exchange in, any territory outside the Hong Kong Special Administrative Region of the People’s Republic of China).”

• B. “ THAT

• (a) subject to paragraph (b) of this Resolution, the exercise by the Directors during the Relevant Period (as defined below) of all the powers of the Company to purchase its own shares on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”), subject to and in accordance with all applicable laws and the requirements of the Rules Governing the Listing of Securities on the Stock Exchange or of any other stock exchange, be and is hereby generally and unconditionally approved and authorised;

• (b) the aggregate nominal amount of the shares of the Company to be purchased by the Company pursuant to the approval in paragraph (a) of this Resolution during the Relevant Period shall not exceed 10% of the aggregate nominal amount of the share capital of the Company in issue as at the date of passing this Resolution and the said approval shall be limited accordingly; and

• (c) for the purpose of this Resolution:

“ Relevant Period ” means the period from the passing of this Resolution until whichever is the earliest of:

• (i) the conclusion of the next annual general meeting of the Company;

• (ii) the expiration of the period within which the next annual general meeting of the Company is required by the articles of association of the Company or any applicable law to be held; and

• (iii) the revocation or variation of the authority given under this Resolution by an ordinary resolution of the shareholders of the Company in general meeting.”

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NOTICE OF ANNUAL GENERAL MEETING

C. “ THAT

conditional upon Resolutions A and B being passed, the aggregate nominal amount of the number of shares in the capital of the Company which are repurchased by the Company under the authority granted to the Directors as mentioned in Resolution B shall be added to the aggregate nominal amount of share capital that may be allotted or agreed conditionally or unconditionally to be allotted by the Directors pursuant to Resolution A above.”

By order of the Board NetDragon Websoft Inc. Liu Dejian Chairman

Hong Kong, 15 April 2013

As at the date of this notice, the executive Directors of the Company are Liu Dejian, Liu Luyuan, Zheng Hui and Chen Hongzhan; the non-executive Director of the Company is Lin Dongliang; and the independent non-executive Directors of the Company are Chao Guowei, Charles, Lee Kwan Hung and Liu Sai Keung, Thomas.

Notes:

• (1) A member of the Company entitled to attend and vote at the annual general meeting convened by the above notice is entitled to appoint another person as his proxy to attend and, on a poll, vote on his behalf. A proxy need not be a member of the Company but must attend the annual general meeting to represent the member.

• (2) In order to be valid, the form of proxy must be deposited with the Company’s branch share registrar in Hong Kong, Tricor Investor Services Limited of 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong together with any power of attorney or other authority, under which it is signed, or a notarially certified copy of that power or authority, not less than 48 hours before the time for holding the meeting.

• (3) In the case of joint holders of any shares in the Company, any one of such joint holders may vote at the annual general meeting, either in person or by proxy, in respect of such shares as if he was solely entitled thereto, but if more than one of such joint holders are present at the meeting, either personally or by proxy, that one of the said persons so present whose name stands first on the register of members in respect of such shares shall be accepted to the exclusion of the votes of the other joint registered holders.

• (4) The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under its common seal or under the hand of an officer or attorney or other person duly authorised.

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NOTICE OF ANNUAL GENERAL MEETING

• (5) Delivery of the form of proxy will not preclude a member from attending and voting in person at the meeting convened and in such event, the form of proxy shall be deemed to be revoked.

• (6) For determining the entitlement to attend and vote at the AGM, the Company’s register of members will be closed from Wednesday, 22 May 2013 to Friday, 24 May 2013, both days inclusive, during which time no transfer of shares will be registered. In order to ensure that the shareholders are entitled to attend and vote at the AGM, the shareholders must deliver their duly stamped instruments of transfer, accompanied by the relevant share certificates, to the Company’s branch share registrar in Hong Kong, Tricor Investor Services Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong by no later than 4:30 p.m. on Tuesday, 21 May 2013 for registration of the relevant transfer.

• (7) The Board has recommended the payment of a final dividend of HKD0.2 per share for the year ended 31 December 2012 to shareholders whose names appear on the register of members of the Company on Friday, 31 May 2013 subject to the approval of the shareholders of the Company at the annual general meeting. For determining the entitlement to the proposed final dividend, the register of members of the Company will be closed from Thursday, 30 May 2013 to Friday, 31 May 2013, both dates inclusive, during which period no transfer of shares will be registered. In order to qualify for the proposed final dividend, all transfers of shares, accompanied by the relevant share certificates, must be lodged with the Company’s branch share registrar in Hong Kong, Tricor Investor Services Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong for registration not later than 4:30 p.m. on Wednesday, 29 May 2013.

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