STATUTORY AND GENERAL INFORMATION

Transcription

1 1. FURTHER INFORMATION ABOUT THE COMPANY A. Incorporation The Company was established in the Cayman Islands as an exempted company with limited liability on 29 July The registered office of the Company is situated at Scotia Centre, 4th Floor, P.O. Box 2804, George Town, Grand Cayman, Cayman Islands. The Company has established a principal place of business in Hong Kong at Unit 06, 3rd Floor, Beautiful Group Tower, 77 Connaught Road Central, Hong Kong and was registered as an oversea company in Hong Kong under Part XI of the Companies Ordinance on 18 July The Company has appointed Tam Hon Shan, Celia as the Company s process agent for the acceptance of service of process in Hong Kong. App1A 5 3rd Sch.(29) B. Changes in share capital and shareholding structure of the Company The alterations to the share capital and shareholding structure of the Company which have taken place within the two years immediately preceding the date of this document are set out below and in paragraph 1D headed Group reorganisation in this appendix: App1A 26(1) App1A 17 App1A 26(2) 3rd Sch.(11) (1) on 1 March 2007, the increase of the authorised share capital of the Company from US$0.53 million (divided into 50,000,000 common Shares and 3,000,000 preferred Shares) to US$5.3 million (divided into 500,000,000 common Shares and 30,000,000 preferred Shares); (2) on 15 October 2007, the conversion of 5,333,332 preferred Shares held by IDG Technology Venture Investments, L.P. into 5,333,332 common Shares; and (3) on 15 October 2007, the decrease of the authorised share capital of the Company from US$5.3 million to US$5 million by the cancellation of 30,000,000 preferred Shares and the increase of the authorised share capital of the Company from US$5 million to US$10 million by the creation of 500 million Shares. (4) As at 18 October 2007, being the latest practicable date for the printing of the Prospectus, our issued share capital was US$444, divided into 44,440,786 Shares of US$0.01 each, which were held and paid up as follows: Shareholders Number of Shares Approximate percentage of shareholding (%) DJM Holding Ltd. 18,740, Fitter Property Inc. 3,729, Eagle World International Inc. 3,371, Richmedia Holdings Limited 2,684, V-1

2 Shareholders Number of Shares Approximate percentage of shareholding (%) Cristionna Holdings Limited 1,400, Chen Feng 760, Maincorp Worldwide Ltd. 384, Lilywhites Venture Limited 354, Wu Chak Man 240, Growing Up Capital Inc. 223, Main Shine Company Limited 220, Kellyton International Limited 100, Peony Glory Holding Ltd. 99, IDG Technology Venture Investments, L.P. 5,333, IDG-Accel China Growth Fund L.P. 1,182, IDG Technology Venture Investments, III L.P. 966, IDG-Accel China Growth Fund-A L.P. 241, IDG-Accel China Investors L.P. 110, Happy Sunshine Limited 2,000, SEQUEDGE The First Chinese Equities Fund on Prospective for Listing 1,300, Giant East Investments Ltd. 500, China Venture Capital Company Limited 400, Aura Investment Holdings Limited 50, SACE Investments Limited 50, Total 44,440, (note) Note: Numbers do not add up to 100 percent due to rounding. (5) Immediately after the completion of the International Placing and the Capitalisation Issue on 2 November 2007, the authorised share capital of the Company was US$10,000, divided into 1,000,000,000 Shares of US$0.01 each of which 540,007,860 Shares of US$0.01 each were allotted and issued fully paid or credited as fully paid and 459,992,140 Shares remained unissued. These 540,007,860 Shares were issued at the price of HK$13.18 per Shares. V-2

3 (6) On 9 November 2007, the Over-allotment Option was exercised in full and 16,200,000 Shares were allotted and issued at the price of HK$13.18 per Share to cover the over-allocation in the International Placing as described in the Company s announcement dated 9 November (7) During the period from December 2007 and up to the Latest Practicable Date, the Company repurchased 15,795,000 Shares on the Stock Exchange at an aggregate consideration of HK$195,055, before expenses. Details of the share repurchases are set out in paragraph 1H headed Repurchases by the Company of its own Shares in this appendix. (8) Other than pursuant to (i) the exercise of any option which may be granted under the GEM Share Option Scheme and the Proposed Share Option Scheme; or (ii) the general mandates referred to in paragraphs 1F and 1G in this appendix, the Company has no present intention to issue any of the authorised but unissued share capital of the Company and, without the prior approval of the Shareholders in general meeting, no issue of the Shares will be made which would effectively alter the control of the Company. Save as disclosed above and in paragraph 1D headed Group reorganisation in this appendix, there has been no alteration in the share capital of the Company within the two years immediately preceding the date of this document. C. Changes in share capital of the Company s subsidiaries The following alterations in the share capital of the Company s subsidiaries took place within the two years immediately preceding the date of this document: App1A 26(1) App1A 26(2) NetDragon (BVI) The following alterations to the share capital and shareholding structure of NetDragon (BVI) have taken place within the two years immediately preceding the date of this document: (1) On 10 January 2007, an aggregate of 2,200,000 common shares of US$0.01 each were allotted and issued at a consideration of US$4.14 per share to IDG Technology Venture Investment III, L.P., IDG-Accel China Growth Fund L.P., IDG-Accel China Growth Fund-A L.P., IDG-Accel China Investors L.P., SEQUEDGE The First Chinese Equities Fund on Prospective for Listing, Giant East Investments Limited, SACE Investments Limited and Aura Investment Holdings Limited. V-3

4 (2) On 10 January 2007, 1,000,000 and 200,000 common shares of US$0.01 each in NetDragon (BVI) were transferred from DJM Holding Ltd. to each of Happy Sunshine Limited and China Venture Capital Company Limited, respectively. The shareholding structures of NetDragon (BVI) immediately before and after such transfers and allotments were as follows: Shareholders Number of common shares held before 10 January 2007 (%) Number of common shares held after 10 January 2007 (%) DJM Holding Ltd. 10,570, ,370, Zheng Hui 4,271, ,271, Liu Luyuan 1,342, ,342, Cristionna Holdings Limited 700, , Chen Feng 350, , Wu Chak Man 120, , IDG-Accel China Growth Fund L.P. 591, IDG Technology Venture Investment III, L.P. 483, IDG-Accel China Growth Fund-A L.P. 120, IDG-Accel China Investors L.P. 55, Happy Sunshine Limited 1,000, SEQUEDGE The First Chinese Equities Fund on Prospective for Listing 650, Giant East Investments Limited 250, China Venture Capital Company Limited 200, Aura Investment Holdings Limited 25, SACE Investments Limited 25, ,353, (note) 19,553, (note) V-4

5 Note: Numbers do not add up to 100 percent due to rounding. Shareholders Number of preferred shares held before 10 January 2007 (%) Number of preferred shares held after 10 January 2007 (%) IDG Technology Venture Investments, L.P. 2,666, ,666, (3) On 18 May 2007, an aggregate of 19,553,727 common shares of US$0.01 each in NetDragon (BVI) were transferred by DJM Holding Ltd., Liu Luyuan, Zheng Hui, Chen Feng, Wu Chak Man, Cristionna Holdings Limited, IDG Technology Venture Investment III, L.P., IDG-Accel China Growth Fund L.P., IDG-Accel China Growth Fund-A L.P., IDG-Accel China Investors, L.P., SEQUEDGE The First Chinese Equities Fund on Prospective for Listing, Giant East Investments Limited, SACE Investments Limited, Aura Investment Holdings Limited, Happy Sunshine Limited and China Venture Capital Company Limited to the Company, in consideration of the allotment and issue of an aggregate of 19,553,727 Shares by the Company to the above transferors or their nominees. (4) On 18 May 2007, 2,666,666 preferred shares in NetDragon (BVI) were transferred by IDG Technology Venture Investments, L.P. to the Company in consideration of the allotment and issue of 2,666,666 preferred Shares by the Company to IDG Technology Venture Investments, L.P.. Immediately after the above share transfers and as at the Latest Practicable Date, NetDragon (BVI) was owned as to 100% by the Company. TQ Digital In January 2008, the registered capital of TQ Digital was increased from RMB45,000,000 to RMB645,000,000 whereas approximately RMB345,000,000 was fully paid. Glory More Glory More was incorporated on 31 January 2008 in Hong Kong with limited liability. One subscriber share, being all the issued share capital of Glory More, was transferred at par to NetDragon BVI on 27 February Save as disclosed above, there has been no alteration in the share capital of the Company s subsidiaries within the two years preceding the date of this document. V-5

6 D. Group reorganisation In preparation for the GEM Listing, the companies comprising the Group underwent a reorganisation to rationalise the corporate structure of the Group, which involved the following events and the events set out in paragraph 1B headed Changes in share capital and shareholding structure of the Company in this Appendix: (1) on 1 March 2007, the increase of the authorised share capital of the Company from US$0.53 million (divided into 50,000,000 Shares and 3,000,000 preferred Shares) to US$5.3 million (divided into 500,000,000 Shares and 30,000,000 preferred Shares); (2) on 1 March 2007, the transfers of 1,625,380 and 350,000 Shares at par by each of Zheng Hui and Chen Feng to Fitter Property Inc. and Earnstar Trading Limited, respectively; (3) on 26 March 2007, the transfer of 2,235,427 Shares at par by DJM Holding Ltd. to Fitter Property Inc.; (4) on 26 March 2007, the allotment and issue of an aggregate of 4,674,790 Shares at par by the Company to Richmedia Holdings Limited, Fitter Property Inc., Netpro Enterprise Inc., Cristionna Holdings Limited, IDG Technology Venture Investment III, L.P., IDG-Accel China Growth Fund L.P., IDG-Accel China Growth Fund-A L.P., IDG-Accel China Investors, L.P., SEQUEDGE The First Chinese Equities Fund on Prospective for Listing, Giant East Investments Limited, SACE Investments Limited, Aura Investment Holdings Limited, Happy Sunshine Limited and China Venture Capital Company Limited; V-6

7 (5) on 1 April 2007, the transfers of 350,000 and 120,000 Shares at par by each of Earnstar Trading Limited and Netpro Enterprise Inc. to Chen Feng and Wu Chak Man, respectively; The shareholding structures of the Company immediately before and after such transfers and allotments as set out in paragraphs (3) to (5) above were as follows: Shareholders Number of Shares held before 26 March 2007 (%) Number of Shares held after 1 April 2007 (%) DJM Holding Ltd. 11,605, ,370, Fitter Property Inc. 1,625, ,271, Richmedia Holdings Limited 1,298, ,342, Cristionna Holdings Limited 700, Chen Feng 350, , Wu Chak Man 120, IDG-Accel China Growth Fund L.P. 591, IDG Technology Venture Investment III, L.P. 483, IDG-Accel China Growth Fund-A L.P. 120, IDG-Accel China Investors, L.P. 55, Happy Sunshine Limited 1,000, SEQUEDGE The First Chinese Equities Fund on Prospective for Listing 650, Giant East Investments Limited 250, China Venture Capital Company Limited 200, Aura Investment Holdings Limited 25, SACE Investments Limited 25, ,878, (note) 19,553, (note) Note: Numbers do not add up to 100 percent due to rounding. V-7

8 Shareholders Number of preferred Shares held before 26 March 2007 (%) Number of preferred Shares held after 1 April 2007 (%) IDG Technology Venture Investments, L.P. 2,666, ,666, (6) on 18 May 2007, the transfer of an aggregate of 19,553,727 shares of US$0.01 each in NetDragon (BVI) by DJM Holding Ltd., Liu Luyuan, Zheng Hui, Chen Feng, Wu Chak Man, Cristionna Holdings Limited, IDG Technology Venture Investment III, L.P., IDG-Accel China Growth Fund L.P., IDG-Accel China Growth Fund-A L.P., IDG-Accel China Investors, L.P., SEQUEDGE The First Chinese Equities Fund on Prospective for Listing, Giant East Investments Limited, SACE Investments Limited, Aura Investment Holdings Limited, Happy Sunshine Limited and China Venture Capital Company Limited to the Company in consideration of the allotment and issue of an aggregate of 19,553,727 Shares by the Company to the above transferors or their nominees and the transfer of 2,666,666 preferred shares of US$0.01 each in NetDragon (BVI) by IDG Technology Venture Investments, L.P. to the Company in consideration of the allotment and issue of 2,666,666 preferred Shares by the Company to IDG Technology Venture Investments, L.P.; (7) on 21 June 2007, the transfer of an aggregate of 1,441,550 Shares at par by Fitter Property Inc. to Chen Feng, Maincorp Worldwide Ltd., Lilywhites Venture Limited, Peony Glory Holding Ltd., Kellyton International Limited, Growing Up Capital Inc. and Main Shine Company Limited, and the transfer of 3,371,292 common Shares by Fitter Property Inc. to Eagle World International Inc. in consideration of the allotment of 1 share of US$1.00 each by Eagle World International Inc. to Flowson Company Limited. The shareholding structure of the Company immediately after such transfers and the allotments mentioned in paragraph (6) was as follows: Shareholders Number of Shares held after 21 June 2007 (%) DJM Holding Ltd. 18,740, Fitter Property Inc. 3,729, Eagle World International Inc. 3,371, Richmedia Holdings Limited 2,684, Cristionna Holdings Limited 1,400, Chen Feng 760, Maincorp Worldwide Ltd. 384, Lilywhites Venture Limited 354, V-8

9 Shareholders Number of Shares held after 21 June 2007 (%) Wu Chak Man 240, Growing Up Capital Inc. 223, Main Shine Company Limited 220, Kellyton International Limited 100, Peony Glory Holding Ltd. 99, IDG-Accel China Growth Fund L.P. 1,182, IDG Technology Venture Investments, III L.P. 966, IDG-Accel China Growth Fund-A L.P. 241, IDG-Accel China Investors L.P. 110, Happy Sunshine Limited 2,000, SEQUEDGE The First Chinese Equities Fund on Prospective for Listing 1,300, Giant East Investments Ltd. 500, China Venture Capital Company Limited 400, Aura Investment Holdings Limited 50, SACE Investments Limited 50, ,107, (note) Note: Numbers do not add up to 100 percent due to rounding. Shareholder Number of preferred Shares held after 21 June 2007 (%) IDG Technology Venture Investments, L.P. 5,333, (8) on 24 August 2007, the transfer of one subscriber Share at par in NetDragon (HK) from Gold Regal Development Limited to NetDragon (BVI); (9) on 15 October 2007, the conversion of 5,333,332 preferred Shares held by IDG Technology Venture Investments, L.P. into 5,333,332 Shares; (10) on 15 October 2007, the execution of a trust deed by Flowson Company Limited in favour of employees of the Group; V-9

10 (11) on 15 October 2007, the decrease of the authorised share capital of the Company from US$5.3 million to US$5 million by the cancellation of 30,000,000 preferred Shares and the increase of the authorised share capital of the Company from US$5 million to US$10 million by the creation of 500 million Shares; and (12) pursuant to the Capitalisation Issue, we allotted and issued 399,967,074 Shares to holders of Shares whose names appeared on the register of members of the Company at the close of business on 23 October E. Subsidiaries of the Company (1) Name: TQ Digital App1A 29(1) App1A 29(2) 3rd Sch.(29) Date of establishment: Place of establishment: Nature: Registered capital: Percentage of equity interest attributable by the Company: Scope of business: Term: 28 February 2003 (converted to a wholly foreign owned enterprise on 28 November 2003) the PRC wholly foreign owned enterprise RMB645,000,000 (whereas approximately RMB345,000,000 was fully paid) 100% Sales, research and development of computer softwares; computer networks engineering and information technology services; and repair and maintenance of computers from 28 February 2003 to 27 February 2023 (2) Name: NetDragon Date of establishment: 25 May 1999 Place of establishment: Nature: Registered capital: the PRC limited liability company RMB10,000,000 (whereas RMB10,000,000 was fully paid) V-10

11 Percentage of equity interest attributable by the Company: Scope of business: None Provision of computer networks engineering and information technology services; provision of internet information technology services; computer application installation, repair and maintenance; research and development of computer softwares; wholesale of electronic products, hardwares and softwares of computers and related products; design, production, agency and publication of advertisements in the PRC, provision of industry-related technical consultation services, self-running and provision of agency services in respect of the import and export of technology relating to various types of products (other than such technology and products the operation of which by NetDragon is restricted or the import and export of which are prohibited by the PRC government). Term: from 25 May 1999 to 25 May 2009 (3) Name: NetDragon (Shanghai) Date of establishment: 20 December 2004 Place of establishment: Nature: Registered capital: Percentage of equity interest attributable by the Company: Scope of business: the PRC limited liability company (domestic joint venture) RMB1,000,000 (whereas RMB1,000,000 was fully paid) None technology development, technology transfer and provision of technical consultation and other services in respect of computer networks, hardwares and softwares of computer and the communication field; sale of related products. V-11

12 Term: from 20 December 2004 to 19 December 2024 (4) Name: NetDragon (BVI) Date of Incorporation: 8 January 2003 Place of Incorporation: Nature: Particulars of issued and fully paid share capital: British Virgin Islands Limited liability company US$222, (divided into 19,553,727 common shares of US$0.01 each and 2,666,666 preferred shares of US$0.01 each) Effective interest held by the Company: 100% Principal Activities: Investment holding (5) Name: NetDragon (USA) Date of Incorporation: 10 July 2003 Place of Incorporation: Nature: Particulars of issued common stock State of California, USA Domestic stock corporation US$600,000 (divided into 600,000 shares of common stock issued at US$1.00 each) Effective interest held by the Company: 100% Principal Activities: Provision of operational support to the Group (6) Name: NetDragon (HK) Date of Incorporation: 28 June 2007 Place of Incorporation: Nature: Particulars of issued and fully paid share capital: Hong Kong Limited liability company HK$1 (divided into 1 share of HK$1) Effective interest held by the Company: 100% Principal Activities: Operation of online games V-12

13 (7) Name: Glory More Date of Incorporation: 31 January 2008 Place of Incorporation: Nature: Particulars of issued and fully paid share capital: Hong Kong Limited liability company HK$1 (divided into 1 share of HK$1) Effective interest held by the Company: 100% Principal Activities: Investment holding (8) Name: TQ Online Date of establishment: 18 March 2008 Place of establishment: Nature: Registered capital: Percentage of equity interest attributable by the Company: Scope of business: the PRC Wholly foreign owned enterprise RMB50,000,000 (whereas RMB50,000,000 was fully paid) 100% Sales, research and development of computer softwares; computer networks engineering and information technology services; and repair and maintenance of computers F. General mandates to issue new Shares and repurchase Shares At the annual general meeting of the Company held on 28 April 2008, the following ordinary resolutions had been passed by the Shareholders: (a) a general unconditional mandate be given to the Directors to allot or issue securities of the Company including the Shares and to make or grant offers, agreements or options, including warrants to subscribe for Shares which might require securities to be issued, allotted or disposed of (otherwise than by way of rights or an issue of Shares upon the exercise of any options which may be granted under the GEM Share Option Scheme or any other option scheme or similar arrangement for the time being adopted for the grant or issue to officers and/or employees of the Company and/or any of its subsidiaries of Shares or rights to acquire Shares or any scrip dividend schemes or similar arrangements providing for the allotment and issue of Shares of the Company in lieu of the whole or part of a dividend on Shares in accordance with the Articles or a specific authority granted by the V-13

14 Shareholders in general meeting) with an aggregate nominal value not exceeding 20% of the total nominal value of the share capital of the Company in issue as at 28 April 2008, such mandate to remain in effect until whichever is the earliest of: (aa) the conclusion of the Company s next annual general meeting; (bb) the expiration of the period within which the Company s next annual general meeting is required by the Articles or applicable law to be held; or (cc) the passing of an ordinary resolution of the Shareholders in general meeting revoking, varying or renewing such mandate; (b) a general unconditional mandate be given to the Directors authorising them to exercise all powers of the Company to repurchase on GEM such number of securities as will represent up to 10% of the total nominal amount of the share capital of the Company in issue as at 28 April 2008, such mandate to remain in effect until whichever is the earliest of: (aa) the conclusion of the Company s next annual general meeting; (bb) the expiration of the period within which the Company s next annual general meeting is required by the Articles or applicable law to be held; or (cc) the passing of an ordinary resolution of the Shareholders in general meeting revoking, varying or renewing such mandate; and (c) the general unconditional mandate mentioned in paragraph (a) above be extended by the addition to the aggregate nominal value of the share capital of the Company which may be allotted or agreed conditionally or unconditionally to be allotted by the Directors pursuant to such general mandate of an amount representing the aggregate nominal value of the share capital of the Company repurchased by the Company pursuant to the mandate to repurchase securities referred to in paragraph (b) above provided that such extended amount shall not exceed 10% of the total nominal amount of the share capital of the Company in issue as at 28 April G. Grant of new general mandates to issue Share and repurchase Shares App1A 28(2) In light of the Introduction and any change of issued share capital of the Company after the annual general meeting held on 28 April 2008 during which the Directors were granted the existing general mandates, the Directors proposed to seek the approval of the Shareholders to grant the Directors new general mandates to issue Shares and repurchase Shares. The new general mandates have similar terms to the existing general mandates save that: (i) the new general mandates cater for the situation that the Shares are listed on the Main Board; V-14

15 (ii) the maximum aggregate nominal amount of the Shares that may be issued and repurchased under the new general mandates will be determined on the basis of the aggregate nominal amount of the Shares in issue as at the date of the EGM to be held on 12 June 2008 (instead of the date of the last annual general meeting held on 28 April 2008); and (iii) the new general mandates will supersede the existing general mandates. Details of the new general mandates are set out in the circular of the Company dated 27 May H. Repurchase by the Company of its own Shares This section includes information required by the Stock Exchange to be included in this document concerning the repurchase by the Company of its own securities. (1) Provisions of the Main Board Listing Rules The Main Board Listing Rules permit companies whose primary listing is on the Main Board to repurchase their securities on the Stock Exchange subject to certain restrictions, the most important of which are summarised below: (i) Shareholders approval All proposed repurchases of securities on the Stock Exchange by a company with a primary listing on the Stock Exchange must be approved in advance by an ordinary resolution of its shareholders, either by way of general mandate or by specific approval of a particular transaction. (Note: Pursuant to an ordinary resolution to be passed by the Shareholders at the EGM, a general unconditional mandate ( Repurchase Mandate ) will be granted to the Directors authorising the repurchase by the Company on the Stock Exchange, or on any other stock exchange on which the securities of the Company may be listed and which is recognised by the SFC and the Stock Exchange for this purpose, of Shares with an aggregate nominal value not exceeding 10% of the aggregate nominal amount of the share capital of the Company in issue as at the date of the EGM, at any time until the conclusion of the next annual general meeting of the Company, the expiration of the period within which the next annual general meeting of the Company is required by any applicable law or the Articles to be held or when such mandate is revoked or varied by an ordinary resolution of the Shareholders in general meeting, whichever is the earliest.) (ii) Source of funds R10.06(1)(b)(iii) Repurchases must be funded out of funds legally available for the purpose in accordance with the Articles and the laws of the Cayman Islands. A listed company may not repurchase its own securities on the Stock Exchange for a consideration other than cash or for settlement otherwise than in accordance with the trading rules of the Stock Exchange from time to time. V-15

16 (2) Reasons for repurchases The Directors believe that it is in the best interest of the Company and its shareholders for the Directors to have a general authority from Shareholders to enable the Company to repurchase Shares in the market. Repurchases of Shares will only be made when the Directors believe that such a repurchase will benefit the Company and the Shareholders. Such repurchases may, depending on the market conditions and funding arrangements at the time, lead to an enhancement of the net asset value per Share and/or its earning per Share or both. R10.06(1)(b)(ii) (3) Funding of repurchases Repurchase pursuant to the Repurchase Mandate would be financed out of funds of the Company legally available for such purpose in accordance with the Articles, the Main Board Listing Rules and the applicable laws and regulations of the Cayman Islands. There might be a material adverse impact on the working capital or gearing position of the Company (as compared with the position disclosed in this document) in the event that the Repurchase Mandate is exercised in full. However, the Directors do 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 the gearing levels which in the opinion of the Directors are from time to time appropriate for the Company. R10.06(1)(b)(iv) (4) Share Capital Exercise in full of the Repurchase Mandate, on the basis of 540,232,860 Shares in issue immediately after the Main Board Listing, could accordingly result in up to 54,023,286 Shares being repurchased by the Company during the period until: R10.06(1)(b)(i) (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 any applicable law or the Articles to be held; or (iii) the date on which the Repurchase Mandate is revoked or varied by an ordinary resolution of the Shareholders in general meeting, whichever occurs first. V-16

17 (5) Share repurchase made by the Company From the date of GEM Listing to the Latest Practicable Date, the Company repurchased an aggregate of 15,975,000 Shares on the Stock Exchange at an aggregate consideration of HK$195,055, before expenses. The repurchases were effected by the Directors for the enhancement of shareholder value in the long term. Details of the share repurchases are as follows: R10.06(1)(b)(viii) Month of repurchases Number of ordinary shares repurchased Highest price paid per share Lowest price paid per share Aggregate consideration paid HK$ HK$ HK$ 2007 December 116, ,670, January 4,159, ,823, February 11,699, ,561, Total 15,975, ,055, 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 listed securities of the Company during the previous six months immediately preceding the Latest Practicable Date. V-17

18 (6) Share prices The highest and lowest prices at which the Shares traded on the Stock Exchange during each of the previous seven months preceding the Latest Practicable Date since the completion of GEM Listing on 2 November 2007 were as follows: R10.06(1)(b)(x) Price per Share Highest Lowest HK$ HK$ 2007 November December January February March April May (up to the Latest Practicable Date) (7) Disclosure of interests None of the Directors and, having made all reasonable enquires, none of their respective associates, has any present intention, if the Repurchase Mandate is approved by the Shareholders, to sell any Shares to the Company or its subsidiaries. No connected person (as defined in the Main Board Listing Rules) of the Company has notified the Company that he/she has have a present intention to sell Shares to the Company, or has undertaken not to do so, if the Repurchase Mandate is exercised. R10.06(1)(b)(v) R10.06(1)(b)(ix) (8) Directors undertaking The Directors have undertaken to the Stock Exchange that, so far as the same may be applicable, they will exercise the Repurchase Mandate in accordance with the Main Board Listing Rules, the Articles and the applicable laws and regulations of the Cayman Islands. R10.06(1)(b)(vi) (9) Takeovers Code consequences 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 Hong Kong Code on Takeovers and Mergers (the Takeovers Code ). As a result, a shareholder, or a group of shareholders acting in concert, depending on the level of increase of the shareholder s interest, could obtain or consolidate control of the Company and become obliged to make a mandatory offer in accordance with Rule 26 of the Takeovers Code and the provision may apply as a result of any such increase. Immediately after the completion of the Main Board Listing, Liu Dejian, Liu Luyuan and R10.06(1)(b)(vii) V-18

19 Zheng Hui, as parties acting in concert (the Concert Parties ), will be beneficially interested in 278,959,040 Shares, representing approximately 51.64% 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 Liu Dejian, Liu Luyuan and Zheng Hui will be increased to approximately 57.38% of the issued share capital of the Company. Accordingly, a mandatory offer under Rule 26 of the Takeovers Code on Liu Dejian, Liu Luyuan and Zheng Hui will not arise as a result of the exercise in full of the Repurchase Mandate. Save as disclosed in this document, the Directors are not aware of any consequences of repurchases which would arise under the Takeovers Code. (10) Public float implication If the Repurchase Mandate is fully exercised immediately after the Main Board Listing but taking no account of any Shares which may be allotted and issued pursuant to the exercise of options which may be granted under the GEM Share Option Scheme and the Proposed Share Option Scheme, the total number of Shares which will be repurchased pursuant to the Repurchase Mandate shall be 54,023,286 Shares (being 10% of the issued share capital of the Company based on the aforesaid assumptions). The aggregate percentage shareholding of Liu Dejian, Liu Luyuan and Zheng Hui together with IDG Group and Cristionna Holdings Limited will be increased from approximately 68.56% to approximately 76.16% of the issued share capital of the Company immediately following the full exercise of the Repurchase Mandate. In the event that the Repurchase Mandate is exercised in full, the number of Shares held by the public would result in the number of Shares held by the public being reduced to less than 25% of the total number of Shares in issue. Any repurchase of Shares which results in the number of Shares held by the public being reduced to less than the prescribed percentage of the Shares then in issue could only be implemented with the approval of the Stock Exchange to waive the Main Board Listing Rules requirements regarding the public float under Rule 8.08 of the Main Board Listing Rules. However, the Directors have no present intention to exercise the Repurchase Mandate to such an extent that, in the circumstances, there is insufficient public float as prescribed under the Main Board Listing Rules. V-19

20 2. FURTHER INFORMATION ABOUT THE BUSINESS A. Summary of material contracts The following contracts (not being contracts in the ordinary course of business of the Company) have been entered into by the Company or any of its subsidiaries within the two years immediately preceding the date of this document and are or may be material: App1A 52 3rd Sch.(17) (1) an exclusive service agreement (in English) dated 1 July 2005 between NetDragon (USA) and NetDragon (Shanghai) pursuant to which NetDragon (Shanghai) has been appointed as the exclusive provider of customer service for NetDragon (USA) regarding the English version of Conquer Online in consideration for a monthly fee; the agreement was terminated with immediate effect by an exclusive service agreement termination and mutual release agreement (in English) dated 30 June 2007 between NetDragon (USA) and NetDragon (Shanghai); (2) an agreement for the acquisition of the entire issued share capital of NetDragon Websoft Inc. (a company incorporated in the British Virgin Islands) (in English) dated 18 May 2007 between the Company and all the then shareholders of NetDragon (BVI) pursuant to which the Company acquired 19,553,727 common shares of US$0.01 each and 2,666,666 series A preferred shares of US$0.01 each in NetDragon (BVI) from the then shareholders of NetDragon (BVI) by allotting and issuing an aggregate of 19,553,727 Shares of US$0.01 each and 2,666,666 preferred Shares of US$0.01 each in the Company to the relevant shareholders of NetDragon (BVI) and/or their nominees; (3) an online games cooperation memorandum (in Chinese) dated 8 June 2007 between TQ Digital and NetDragon confirming the cooperation arrangements between TQ Digital and NetDragon prior to 1 January 2007; (4) a service agreement (in English) dated 1 July 2007 between NetDragon (USA) and NetDragon (Shanghai) pursuant to which NetDragon (Shanghai) would provide various services to NetDragon (USA) in consideration for a flat fee of US$500 per month; (5) an equity interest pledge agreement (in Chinese) dated 28 September 2007 between TQ Digital, NetDragon and all of the equity holders of NetDragon pursuant to which all such equity holders granted to TQ Digital a continuing first priority security interest over their respective equity interests in the registered capital of NetDragon, for the purpose of securing the performance of the contractual obligations by NetDragon s equity holders under the Structure Contracts; (6) a cooperation framework agreement (in Chinese) dated 15 October 2007 between TQ Digital and NetDragon pursuant to which TQ Digital and NetDragon agreed to cooperate in the provision of services relating to the online games development for and the operation of the online game business of NetDragon ; (7) an agreement for cooperation and licence in respect of online games (in Chinese) dated 15 October 2007 between TQ Digital and NetDragon pursuant to which TQ Digital V-20

21 agreed to license its online games softwares for Eudemons Online to NetDragon for operation and usage in the PRC in consideration for an initial license fee of RMB40,000,000 and a per annum license fee based on 40% of monthly revenue of NetDragon ; (8) an agreement for cooperation and licence in respect of online games (in Chinese) dated 15 October 2007 between TQ Digital and NetDragon pursuant to which TQ Digital agreed to license its online games softwares for Conquer Online to NetDragon for operation and usage in the PRC in consideration for an initial license fee of RMB20,000,000 and a per annum license fee based on 40% of monthly revenue of NetDragon ; (9) an agreement for cooperation and licence in respect of online games (in Chinese) dated 15 October 2007 between TQ Digital and NetDragon pursuant to which TQ Digital agreed to licence its online games softwares for Zero Online to NetDragon for operation and usage in the PRC in consideration of an initial licence fee of RMB60,000,000 and a per annum licence fee based on 40% of monthly revenue of NetDragon ; (10) an agreement for cooperation and licence in respect of online games (in Chinese) dated 15 October 2007 between TQ Digital and NetDragon pursuant to which TQ Digital agreed to licence its online games softwares for Monster & Me to NetDragon for operation and usage in the PRC in consideration of an initial licence fee of RMB5,000,000 and a per annum licence fee based on 40% of monthly revenue of NetDragon ; (11) an agreement for cooperation and licence in respect of online games (in Chinese) dated 15 October 2007 between TQ Digital and NetDragon pursuant to which TQ Digital agreed to licence its online games softwares for Era of Faith to NetDragon for operation and usage in the PRC in consideration of an initial licence fee of RMB5,000,000 and a per annum licence fee based on 40% of monthly revenue of NetDragon ; (12) an agreement for cooperation and licence in respect of online games (in Chinese) dated 15 October 2007 between TQ Digital and NetDragon pursuant to which TQ Digital agreed to licence its online games software for Happiness Q (currently named as Way of the Five ) to NetDragon for operation and usage in the PRC in consideration of an initial licence fee of RMB80,000,000 and a per annum licence fee based on 40% of monthly revenue of NetDragon ; (13) an agreement for cooperation and licence in respect of online games (in Chinese) dated 15 October 2007 between TQ Digital and NetDragon pursuant to which TQ Digital agreed to licence its online games software for Piao Miao Online (currently named as Tian Yuan ) to NetDragon for operation and usage in the PRC in consideration of an initial licence fee of RMB80,000,000 and a per annum licence fee based on 40% of monthly revenue of NetDragon ; (14) an agreement for cooperation and licence in respect of online games (in Chinese) dated 15 October 2007 between TQ Digital and NetDragon pursuant to which TQ Digital V-21

22 agreed to licence its online games software for Heroes of Might and Magic Online to NetDragon for operation and usage in the PRC in consideration of an initial licence fee of RMB80,000,000 and a per annum licence fee based on 40% of monthly revenue of NetDragon ; (15) an online games software development service agreement (in Chinese) dated 15 October 2007 between TQ Digital and NetDragon pursuant to which TQ Digital agreed to provide online software development service to NetDragon in consideration for a service fee based on certain percentage of revenue generated by NetDragon in relation to the provision of such online software development service; (16) a technical support service agreement (in Chinese) dated 15 October 2007 between TQ Digital and NetDragon pursuant to which TQ Digital agreed to provide technical support services to NetDragon in consideration for a per annum services fee based on 20% of monthly revenue of NetDragon ; (17) an agreement for the exclusive right to acquire equity interest and assets (in Chinese) dated 15 October 2007 between TQ Digital, NetDragon and all of the equity holders of NetDragon pursuant to which NetDragon and all its equity holders granted to TQ Digital or its nominee (a) a right to acquire all or part of the equity interest in the registered capital of NetDragon ; and (b) a right to acquire all or part of the assets of NetDragon for a consideration being a nominal amount or lowest possible amount permissible under the applicable PRC laws; (18) an equity holders voting rights proxy agreement (in Chinese) dated 15 October 2007 between TQ Digital and all of the equity holders of NetDragon pursuant to which all the equity holders of NetDragon have irrevocably authorised TQ Digital or a nominee designated by TQ Digital to exercise all their voting rights in NetDragon ; (19) a deed of non-competition (in English) dated 15 October 2007 executed by each of DJM Holding Ltd., Fitter Property Inc., Richmedia Holdings Limited, Cristionna Holdings Limited, Fuzhou Tianling, Growing Up Capital Inc., Liu Dejian, Zheng Hui, Liu Luyuan, Chen Hongzhan and Wu Jialiang in favour of the Company, for itself and on behalf of other members of the Group in connection with the GEM Listing; (20) a deed of indemnity (in English) dated 22 October 2007 given by DJM Holding Ltd., Fitter Property Inc., Richmedia Holdings Limited, Cristionna Holdings Limited, Liu Dejian, Zheng Hui, Liu Luyuan and Chen Hongzhan in favour of the Company, for itself and on behalf of other members of the Group; (21) an international placing agreement (in English) dated 29 October 2007 between the Company, DJM Holdings Ltd., Fitter Property Inc., Richmedia Holdings Limited, Cristionna Holdings Limited, Maincorp Worldwide Ltd., Lilywhites Venture Limited, V-22

23 Peony Glory Holdings Ltd., Kellyton International Limited, Growing Up Capital Inc., Main Shine Company Limited, SEQUEDGE The First Chinese Equities Fund on Prospective for Listing, Chen Feng, Wu Chak Man and Bear Sterans Asia Limited (for itself and on behalf of the underwriters under the International Placing); (22) an agreement for cooperation and licence in respect of online game (in Chinese) dated 20 November 2007 between TQ Digital and NetDragon pursuant to which TQ Digital agreed to licence its online game software for Ton Ming Zhuang Online to NetDragon for operation and usage in the PRC in consideration of an initial licence fee of RMB50,000,000 and a per annum licence fee based on 40% of monthly revenue of NetDragon ; (23) a cooperation framework agreement (in Chinese) dated 16 May 2008 between TQ Online and NetDragon pursuant to which TQ Online and NetDragon agreed to cooperate in the provision of services relating to the online games development for and the operation of the online game business of NetDragon ; (24) an online games software development service agreement (in Chinese) dated 16 May 2008 between TQ Online and NetDragon pursuant to which TQ Online agreed to provide online software development service to NetDragon in consideration for a service fee based on certain percentage of revenue generated by NetDragon in relation to the provision of such online software development service; (25) a technical support service agreement (in Chinese) dated 16 May 2008 between TQ Online and NetDragon pursuant to which TQ Online agreed to provide technical support services to NetDragon in consideration for a per annum services fee based on 20% of monthly revenue of NetDragon ; and (26) a deed of non-competition (in English) dated 22 May 2008 executed by each of DJM Holding Ltd., Fitter Property Inc., Richmedia Holdings Limited, Cristionna Holdings Limited, Fuzhou Tianling, Growing Up Capital Inc., Liu Dejian, Zheng Hui, Liu Luyuan, Chen Hongzhan and Wu Jialiang in favour of the Company, for itself and on behalf of other members of the Group, details of which are set out in Relationship with the Controlling Shareholders and non-competition undertakings Non-competition undertakings. V-23

24 B. Intellectual property App1A 28(4) As at the Latest Practicable Date, the Group was the registered owner of the following domain names in the PRC: Domain Name Creation Date Expiry Date Subsidiary Filing of Renewal Application 18 June June 2008 NetDragon not yet filed 22 September September 2013 NetDragon not yet filed 4 September September 2008 NetDragon not yet filed 22 January January 2009 NetDragon not yet filed 30 December December 2008 NetDragon not yet filed 16 September September 2008 NetDragon not yet filed 4 September September 2008 NetDragon not yet filed 28 May May 2011 NetDragon (BVI) not yet filed 27 May May 2009 NetDragon (BVI) not yet filed 24 April April 2009 NetDragon (BVI) not yet filed 1 June June 2008 NetDragon (BVI) not yet filed 31 May May 2009 NetDragon (BVI) not yet filed 22 June June 2008 NetDragon (BVI) not yet filed 22 June June 2008 NetDragon (BVI) not yet filed 22 June June 2008 NetDragon (BVI) not yet filed 28 June June 2008 NetDragon (BVI) not yet filed 12 October October 2008 NetDragon (BVI) not yet filed As at the Latest Practicable Date, the Group was the registered owner of the following trademarks in the PRC: Trademark Country of Application Registration Number Class Term of Validity Subsidiary PRC January 2006 to 20 January 2016 PRC (Note 2) 21 January 2006 to 20 January 2016 PRC (Note 3) 21 January 2006 to 20 January 2016 PRC (Note 4) 7 April 2007 to 6 April 2017 TQ Digital TQ Digital TQ Digital TQ Digital V-24

25 Trademark Country of Application Registration Number Class Term of Validity Subsidiary PRC (Note 4) 28 September 2007 to 27 September 2017 PRC (Note 2) 7 January 2002 to 6 January 2012 PRC (Note 3) 7 May 2001 to 6 May 2011 PRC (Note 4) 21 February 2003 to 20 February 2013 PRC (Note 4) 21 May 2007 to 20 May 2017 PRC (Note 4) 7 March 2007 to 6 March 2027 TQ Digital NetDragon NetDragon NetDragon NetDragon NetDragon Notes: 1. Class 41 relates to education; providing of training; entertainment; sporting and cultural activities. 2. Class 42 relates to scientific and technological services and research and design relating thereto; industrial analysis and research services; design and development of computer hardware and software. 3. Class 38 relates to telecommunications. 4. Class 9 relates to scientific, nautical, surveying, photographic, cinematographic, optical, weighting, measuring, signalling, checking (supervision), life-saving and teaching apparatus and instruments; apparatus and instruments for conducting, switching, transforming, accumulating, regulating or controlling electricity; apparatus for recording, transmission or reproduction of sound or images; magnetic data carriers, recording discs; automatic vending machines and mechanisms for coin-operated apparatus; cash registers, calculating machines, data processing equipment and computers; fire-extinguishing apparatus. V-25

26 As at the Latest Practicable Date, the Group was the registered owner of the following copyrights of computer software products in the PRC: Name of computer software Registration Approval/Date Registration Number Term of Validity Subsidiary V June August 2003 (Note 2) 2003SR6560 DGY (Note 2) 6 May May August August 2008 (Note 2) TQ Digital TQ Digital V3.0 4 March June 2004 (Note 2) 2004SR01901 DGY (Note 2) 9 February February June June 2009 (Note 2) TQ Digital TQ Digital V1.0 4 March June 2004 (Note 2) 2004SR01902 DGY (Note 2) 7 December December June June 2009 (Note 2) TQ Digital TQ Digital V1.0 1 June September 2005 (Note 2) 2004SR05169 DGY (Note 2) 5 March March September September 2010 (Note 2) TQ Digital TQ Digital III V January March 2005 (Note 2) 2005SR00975 DGY (Note 2) 1 October September March March 2010 (Note 2) TQ Digital TQ Digital 91 V February March 2005 (Note 2) 2005SR01665 DGY (Note 2) 1 October September March March 2010 (Note 2) TQ Digital TQ Digital online V1.0 6 April June 2005 (Note 2) 2005SR03319 DGY (Note 2) 25 December December June June 2010 (Note 2) TQ Digital TQ Digital V May June 2005 (Note 2) 2005SR04803 DGY (Note 2) 1 December November June June 2010 (Note 2) TQ Digital TQ Digital Zero Online V August SR June June 2055 TQ Digital V-26

27 Name of computer software Registration Approval/Date Registration Number Term of Validity Subsidiary V March December 2007 (Note 2) 2007SR04208 DGY (Note 2) 28 January January December December 2012 (Note 2) TQ Digital Online V February March 2008 (Note 2) 2008SR04379 DGY (Note 2) 13 December December March March 2013 (Note 2) TQ Digital 91 V January March 2005 (Note 2) 2005SR00735 DGY (Note 2) 1 September August March March 2010 (Note 2) NetDragon NetDragon V January March 2005 (Note 2) 2005SR00734 DGY (Note 2) 16 November November March March 2010 (Note 2) NetDragon NetDragon Notes: 1. as shown on the Copyright Registration Certificate. 2. as shown on the Computer Software Product Registration Certificate. As at the Last Practicable Date, TQ Digital was the registered owner of the following certificates of copyright registration in the PRC:- Name of Works Registration number Date of Registration Subsidiary ( ) F August 2005 TQ Digital F August 2005 TQ Digital F August 2005 TQ Digital F December 2006 TQ Digital F December 2006 TQ Digital F April 2007 TQ Digital V-27

28 As at the Latest Practicable Date, the Group has made applications for the registration of the following trademarks, the registration of which has not yet been granted as at the Latest Practicable Date:- Trademark Country of Application Application Number Class Date of Application Subsidiary PRC December 2004 TQ Digital PRC (Note 2) 20 December 2004 TQ Digital PRC (Note 3) 20 December 2004 TQ Digital PRC October 2004 TQ Digital PRC (Note 2) 19 October 2004 TQ Digital PRC (Note 3) 19 October 2004 TQ Digital PRC (Note 2) 11 November 2005 TQ Digital PRC (Note 5) 11 November 2005 TQ Digital PRC (Note 6) 11 November 2005 TQ Digital PRC (Note 3) 11 November 2005 TQ Digital PRC (Note 4) 11 November 2005 TQ Digital PRC November 2005 TQ Digital PRC (Note 3) 19 December 2006 TQ Digital PRC (Note4) 19 December 2006 TQ Digital PRC December 2006 TQ Digital PRC (Note 5) 19 December 2006 TQ Digital PRC (Note 3) 3 September 2007 TQ Digital PRC (Note 2) 21 May 2007 TQ Digital PRC (Note 4) 22 September 2004 NetDragon PRC (Note 2) 22 September 2004 NetDragon PRC September 2004 NetDragon V-28

29 Trademark Country of Application Application Number Class Date of Application Subsidiary PRC (Note 7) 29 September 2004 NetDragon PRC (Note 3) 29 September 2004 NetDragon PRC (Note 2) 29 September 2004 NetDragon PRC September 2004 NetDragon PRC (Note 6) 20 December 2004 NetDragon PRC (Note 7) 29 September 2004 NetDragon PRC (Note 3) 29 September 2004 NetDragon PRC (Note 2) 29 September 2004 NetDragon PRC September 2004 NetDragon PRC (Note 6) 20 December 2004 NetDragon PRC (Note 4) 6 January 2003 NetDragon PRC (Note 3) 25 December 2007 NetDragon PRC (Note 2) 25 December 2007 NetDragon PRC (Note 4) 25 December 2007 NetDragon HK March 2008 TQ Digital Notes: 1. Class 42 relates to scientific and technological services and research and design services relating thereto; industrial analysis and research services; design and development of computer hardware and software. 2. Class 41 relates to education; provision of training; entertainment; athletic and cultural activities. 3. Class 28 relates to entertainment and playthings; gymnastic and sporting articles not included in other classes; decorations for Christmas trees. V-29