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 registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser. If you have sold or transferred all your shares in Leyou Technologies Holdings Limited (the ‘‘Company’’), you should at once hand this circular accompanying with the form of proxy to the purchaser or transferee, or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee. Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular. This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities mentioned herein. LEYOU TECHNOLOGIES HOLDINGS LIMITED 樂遊科技控股有限公司 (Incorporated in the Cayman Islands with limited liability) (Stock Code: 1089) (i) VERY SUBSTANTIAL ACQUISITION; AND (ii) NOTICE OF EXTRAORDINARY GENERAL MEETING Financial adviser to the Company A notice convening the extraordinary general meeting of the Company to be held at Conference Suite, Level 3, JW Marriott Hong Kong, Pacific Place, 88 Queensway, Hong Kong on Thursday, 9 March 2017 at 10:00 a.m. is set out on pages EGM-1 to EGM-2 of this circular. A form of proxy for use at the extraordinary general meeting is enclosed with this circular. Such form of proxy is also published on the website of (i) the Company at http://leyoutech.com.hk and (ii) The Stock Exchange of Hong Kong Limited at www.hkex.com.hk. Whether or not you are able to attend and/or vote at the extraordinary general meeting of the Company in person, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon and deposit the same at the Company’s Hong Kong branch share registrar and transfer office, Tricor Investor Services Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, as soon as possible and in any event not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from subsequently attending and voting in person at the extraordinary general meeting of the Company or any adjournment thereof (as the case may be) should you so wish. 22 February 2017 * for identification purposes only CONTENTS Page Definitions ................................................................. 1 Glossary .................................................................. 15 Letter from the Board ...................................................... 17 Corporate Information ..................................................... 39 Risk Factors Relating to the Subject Companies .............................. 40 Industry Overview Relating to the Subject Companies ......................... 66 Regulatory Overview Relating to the Subject Companies ....................... 91 Group Structure, History and Development of the Subject Companies .......... 119 Business of the Acquired Group ............................................. 125 Business of the Target Group ............................................... 161 Directors and Senior Management of the Subject Companies ................... 194 Management Discussion and Analysis of the Acquired Group .................. 199 Management Discussion and Analysis of the Target Group ..................... 232 Indebtedness Statement and Working Capital Sufficiency of the Enlarged Group ...................................................... 257 Appendix I – Accountants’ Report on the Target Group ................. I-1 Appendix II – Accountants’ Report on the Acquired Group ............... II-1 Appendix III – Unaudited Pro Forma Financial Information of the Enlarged Group ................................... III-1 Appendix IV – General Information ..................................... IV-1 Notice of EGM ............................................................. EGM-1 – i – DEFINITIONS In this circular, the following expressions have the following meanings, unless the context otherwise requires: ‘‘2017 Accounts’’ the consolidated audited accounts of the Target Group for FY2017 including an audited balance sheet and profit and loss account, prepared in accordance with IFRS ‘‘2017 Audited Net Income’’ the aggregate Net Income of the Target Group as set out in the 2017 Accounts ‘‘2017 Payment’’ asdefinedinthesubsectionheaded‘‘Letter from the Board – TheSaleandPurchaseAgreement– Earn-Out Consideration’’ in this circular ‘‘2018 Accounts’’ the consolidated audited accounts of the Target Group for FY2018 including an audited balance sheet and profit and loss account, prepared in accordance with IFRS ‘‘2018 Audited Net Income’’ the aggregate Net Income of the Target Group as set out in the 2018 Accounts ‘‘2018 Payment’’ asdefinedinthesubsectionheaded‘‘Letter from the Board – TheSaleandPurchaseAgreement– Earn-Out Consideration’’ in this circular ‘‘2019 Accounts’’ the consolidated audited accounts of the Target Group for FY2019 including an audited balance sheet and profit and loss account, prepared in accordance with IFRS ‘‘2019 Audited Net Income’’ the aggregate Net Income of the Target Group as set out in the 2019 Accounts ‘‘2019 Payment’’ asdefinedinthesubsectionheaded‘‘Letter from the Board – TheSaleandPurchaseAgreement– Earn-Out Consideration’’ in this circular ‘‘39% Acquisition’’ sale and purchase of the 39% Sale Shares, subject to the terms and conditions set forth in the New Shareholders’ Agreement and the Second Acquisition Agreement ‘‘39% Acquisition Closing Date’’ no later than 13 May 2016 (or otherwise agreed by the 39% Vendors and Multi Dynamic Games), being the date on which the 39% Acquisition closing takes place ‘‘39% Call Option’’ the right to purchase the 39% Sale Shares – 1 – DEFINITIONS ‘‘39% Consideration’’ the consideration for the 39% Acquisition ‘‘39% Sale Shares’’ an aggregate of 7,800,000 common shares and 3,900 class B special shares of Digital Extremes, representing 39% of the issued share capital of Digital Extremes on the date of, which are legally and beneficially owned by the 39% Vendors ‘‘39% Vendors’’ Ontario Ltd. 1, Ontario Ltd. 4, Ontario Ltd. 5 and DE Employee Trust ‘‘58% Acquisition’’ the acquisition of the Leyou Sale Shares and PW Sale Shares by Multi Dynamic Games and Perfect Online respectively pursuant to the Acquisition Agreement (as amended by the Supplemental SPA) ‘‘Acquisition Agreement’’ the conditional sale and purchase agreement dated 14 October 2014 entered into among Multi Dynamic Games, Perfect Online, the Vendors, Digital Extremes and certain other parties in respect of the Acquisition ‘‘Acquired Group’’ collectively, Digital Extremes and Digital Extremes US or any of them ‘‘Acquisition’’ the proposed acquisition of the shares in Splash Damage, Fireteam and Warchest from PW and the Optionholders pursuant to the Sale and Purchase Agreements ‘‘Adjustment Payment’’ the Completion Consideration less the Initial Consideration ‘‘Advance Payment’’ asdefinedinthesubsectionheaded‘‘Letter from the Board – TheSaleandPurchaseAgreement– Initial Consideration’’ in this circular ‘‘Aggregated Adjustment Payment’’ the sum of any positive Initial Adjustment Payment, any positive Adjustment Payment and any NIC Liabilities Shortfall Payment ‘‘Agreed NIC Liabilities’’ 50% of the employer national insurance contributions payable by the Target Group in respect of the exercise of unapproved options under the Share Option Plans – 2 – DEFINITIONS ‘‘Announcements’’ the announcements of the Company dated 30 May 2016, 3 July 2016 and 26 September 2016 in relation to the Acquisition, and each an ‘‘Announcement’’ ‘‘associate(s)’’ shall have the same meaning as ascribed to it under the Listing Rules ‘‘Board’’ the board of Directors ‘‘Business Day’’ a day (other than a Saturday, Sunday or public holiday) on which licensed banks are generally open for business in Hong Kong, Canada, and England and Wales ‘‘BVI’’ the British Virgin Islands ‘‘CAD’’ Canadian dollars, the lawful currency of Canada 1 Ending Value ‘‘CAGR’’ compound annual growth rate = # of years −1 Beginning Value ‘‘Company’’ Leyou Technologies Holdings Limited 樂遊科技控股有限 公司, a company incorporated in the Cayman Islands with limited liability, the Shares of which are listed on the Main Board of the Stock Exchange (stock code: 1089) ‘‘Completion’’ completion of the sale and purchase of the Splash Damage Shares, the Splash Damage Option Shares, the Fireteam Shares, the Fireteam Option Shares, the Warchest Shares and the Warchest Option Shares pursuant to the Sale and Purchase Agreements and as defined in the subsection headed ‘‘Letter from the Board – TheSaleandPurchase Agreement – Completion’’ in this circular ‘‘Completion Accounts’’ the audited accounts of the Target Group as at the date of Completion – 3 – DEFINITIONS ‘‘Completion Consideration’’ an amount equal to the sum of: (a) the Completion Value; plus (b) cash balance of the Target Group as at Completion; less (c) debt balance of the Target Group as at Completion; less (d) the Working Capital