China Digital Video Holdings Limited 中國數字視頻控股有限公司

CHINA DIGITAL VIDEO HOLDINGS LIMITED 中國數字視頻控股有限公司

Dreamwork_cover_A20_21_5mmOL.indd 2 10/6/2016 上午10:35 IMPORTANT

IMPORTANT: If you are in any doubt about any of the contents of this prospectus, you should seek independent professional advice.

China Digital Video Holdings Limited 中國數字視頻控股有限公司 (incorporated in the Cayman Islands with limited liability) LISTING ON THE GROWTH ENTERPRISE MARKET OF THE STOCK EXCHANGE OF HONG KONG LIMITED BY WAY OF GLOBAL OFFERING

Number of Offer Shares under the : 155,000,000 Shares (subject to the Global Offering Over-allotment Option) Number of Hong Kong Offer Shares : 15,500,000 Shares (subject to reallocation) Number of International Offer Shares : 139,500,000 Shares (subject to reallocation and the Over-allotment Option) Maximum Offer Price : HK$2.57 per Offer Share, plus brokerage of 1%, SFC transaction levy of 0.0027% and Stock Exchange trading fee of 0.005% (payable in full on application in Hong Kong dollars and subject to refund) Nominal Value : US$0.00001 per Share Stock Code : 8280 Sole Sponsor

Sole Global Coordinator

Joint Bookrunners

Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this prospectus, 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 prospectus. A copy of this prospectus, together with the documents specified under the section headed “Appendix V—Documents Delivered to the Registrar of Companies and Available for Inspection” to this prospectus, has been registered by the Registrar of Companies in Hong Kong as required by section 342C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong). The Securities and Futures Commission and the Registrar of Companies in Hong Kong take no responsibility as to the contents of this prospectus or any other documents referred to above. The Offer Price is expected to be determined by agreement between the Sole Global Coordinator (on behalf of the Hong Kong Underwriters) and us on or around June 20, 2016 and, in any event, not later than June 22, 2016. The Offer Price will be not more than HK$2.57 per Offer Share and is currently expected to be not less than HK$1.90 per Offer Share, unless otherwise announced. Applicants for Hong Kong Offer Shares are required to pay, upon application, the maximum Offer Price of HK$2.57 per Offer Share for each Hong Kong Offer Share together with brokerage of l%, SFC transaction levy of 0.0027% and Stock Exchange trading fee of 0.005%, subject to refund if the Offer Price as finally determined is less than HK$2.57 per Offer Share. If, for any reason, the Offer Price is not agreed by June 22, 2016 between the Sole Global Coordinator (on behalf of the Hong Kong Underwriters) and us, the Global Offering will not proceed and will lapse. The Sole Global Coordinator (on behalf of the Hong Kong Underwriters) may, where considered appropriate and with our consent, reduce the number of Hong Kong Offer Shares and/or the indicative Offer Price range below that stated in this prospectus (which is HK$1.90 to HK$2.57) at any time prior to the morning of the last day for lodging applications under the Hong Kong Public Offering. In such a case, notices of the reduction in the number of Hong Kong Offer Shares and/or the indicative Offer Price range will be available on the website of the Stock Exchange at www.hkexnews.hk and on our website at www.cdv.com as soon as practicable following the decision to make such reduction, and in any event not later than the morning of the day which is the last day for lodging applications under the Hong Kong Public Offering. Further details are set forth in the sections headed “Structure of the Global Offering” and “How to Apply For Hong Kong Offer Shares” in this prospectus. Prior to making an investment decision, prospective investors should consider carefully all of the information set out in this prospectus, including the risk factors set out in the section headed “Risk Factors” in this prospectus. Prospective investors of the Hong Kong Offer Shares should note that the obligations of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement to subscribe, and to procure subscribers to subscribe for, the Hong Kong Offer Shares, are subject to termination by the Joint Bookrunners (on behalf of the Hong Kong Underwriters) if certain grounds arise prior to 8:00a.m on the Listing Date. Such grounds are set out in the section headed “Underwriting—Underwriting Arrangements and Expenses—Hong Kong Public Offering—Grounds for Termination” in this prospectus. It is important that you refer to that section for further details. The Offer Shares have not been and will not be registered under the U.S. Securities Act or any state securities law in the United States and may not be offered, sold, pledged or transferred within the United States, except that Offer Shares may be offered, sold or delivered to QIBs in reliance on an exemption from registration under the U.S. Securities Act provided by, and in accordance with the restrictions of, Rule 144A or another exemption from the registration requirements of the U.S. Securities Act. The Offer Shares may be offered, sold or delivered outside the United States in offshore transactions in accordance with Regulation S. June 15, 2016 CHARACTERISTICS OF GEM

GEM has been positioned as a market designed to accommodate companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors.

Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to higher market volatility than securities traded on the Main Board and no assurance is given that there will be a liquid market in the securities traded on GEM.

The principal means of information dissemination on GEM is by publication on the Internet website operated by the Stock Exchange. Listed companies are not generally required to issue paid announcements in gazetted newspapers. Accordingly, prospective investors should note that they need to have access to the Stock Exchange’s website at www.hkexnews.hk in order to obtain up-to-date information on companies listed on GEM.

—i— EXPECTED TIMETABLE

Latest time to complete electronic applications under White Form eIPO service through the designated website www.eipo.com.hk(2) ...... 11:30 a.m. on Monday, June 20, 2016

Application lists open(3) ...... 11:45 a.m. on Monday, June 20, 2016

Latest time to lodge White and Yellow Application Forms ...... 12:00 noon on Monday, June 20, 2016

Latest time to complete payment of White Form eIPO applications by effecting internet banking transfers or PPS payment transfer(s) ...... 12:00 noon on Monday, June 20, 2016

Latest time to give electronic application instructions to HKSCC(4) ...... 12:00 noon on Monday, June 20, 2016

Application lists close(3) ...... 12:00 noon on Monday, June 20, 2016

Expected price determination date(5) ...... onorabout Monday, June 20, 2016

(1) Announcement of

• the Offer Price; • the level of applications in the Hong Kong Public Offering; • an indication of the level of interest in the International Placing; and • the basis of allotment of the Hong Kong Offer Shares,

to be published on the website of the Stock Exchange at www.hkexnews.hk and on the website of our Company at www.cdv.com on or before ...... Friday, June 24, 2016

(2) Results of allocations of the Hong Kong Public Offering (with successful applicants’ identification document numbers, where appropriate) to be available through a variety of channels (see paragraph headed “Publication of Results” in the section headed “How to Apply for Hong Kong Offer Shares”) ...... Friday, June 24, 2016

—ii— EXPECTED TIMETABLE

(3) A full announcement of the Hong Kong Public Offering containing the information referred to in the above announcements will be published on the website of the Stock Exchange at www.hkexnews.hk and our Company’s website at www.cdv.com(6) ...... Friday, June 24, 2016

Results of allocations in the Hong Kong Public Offering will be available at www.iporesults.com.hk, with a “search by ID” function ...... Friday, June 24, 2016

Dispatch of Share certificates or deposit of the Share certificates into CCASS in respect of wholly or partially successful applications pursuant to the Hong Kong Public Offering on or before(7)(9) ...... Friday, June 24, 2016

Dispatch of refund cheques and White Form e-Refund payment instructions in respect of wholly or partially successful applications (if applicable) or wholly or partially unsuccessful applications pursuant to the Hong Kong Public Offering on or before(8)(9) ...... Friday, June 24, 2016

Dealings in Shares on the Stock Exchange expected to commence on ...... Monday, June 27, 2016

Notes: 1. All times refer to Hong Kong local time, except as otherwise stated. 2. You will not be permitted to submit your application through the designated website at www.eipo.com.hk after11:30 a.m. on the last day for submitting applications. If you have already submitted your application and obtained an application reference number from the designated website at or before 11:30 a.m., you will be permitted to continue the application process (by completing payment of application monies) until 12:00 noon on the last day for submitting applications, when the application lists close. 3. If there is a tropical cyclone warning signal number 8 or above, or a “black” rainstorm warning in force at any time between 9:00 a.m. and 12:00 noon on June 20, 2016, the application lists will not open on that day. Further information is set out in the section entitled “How to Apply for Hong Kong Offer Shares - Effect of Bad Weather on the Opening of the Application Lists” in this prospectus. 4. Applicants who apply for Hong Kong Offer Shares by giving electronic application instructions to HKSCC via CCASS should refer to the paragraph headed “Applying by Giving Electronic Application Instructions to HKSCC via CCASS” in the section headed “How to Apply for Hong Kong Offer Shares” in this prospectus. 5. The Price Determination Date is expected to be on or around Monday, June 20, 2016 and, in any event, not later than Wednesday, June 22, 2016. If, for any reason, the Offer Price is not agreed between the Sole Global Coordinator (on behalf of the Hong Kong Underwriters) and us by Wednesday, June 22, 2016, the Global Offering will not proceed and will lapse. 6. None of the website or any of the information contained on the website forms part of this prospectus.

— iii — EXPECTED TIMETABLE

7. Share certificates will only become valid certificates of title provided that the Global Offering has become unconditional in all respects and neither of the Underwriting Agreements has been terminated in accordance with its terms, which is scheduled to be at or around 8:00 a.m. on Monday, June 27, 2016. 8. e-Refund payment instructions or refund cheques will be issued in respect of wholly or partially unsuccessful applications pursuant to the Hong Kong Public Offering and also in respect of wholly or partially successful applications if the final Offer Price is less than the price payable on application. Part of the applicant’s Hong Kong identity card number or passport number, or, if the application is made by joint applicants, part of the Hong Kong identity card number or passport number of the first-named applicant, provided by the applicant(s) may be printed on the refund cheque, if any. Such data would also be transferred to a third party for refund purposes. Banks may require verification of an applicant’s Hong Kong identity card number or passport number before encashment of the refund cheque. Inaccurate completion of an applicant’s Hong Kong identity card number or passport number may invalidate or delay encashment of the refund cheque. 9. Applicants who have applied on WHITE Application Forms or White Form eIPO for 1,000,000 or more Hong Kong Offer Shares and have provided all information required by the Application Form may collect any refund cheques and/or Share certificates in person from our Company’s Hong Kong Share Registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong from 9:00 a.m. to 1:00 p.m. on Friday, June 24, 2016 or such other date as notified by our Company in the newspapers as the date of dispatch/collection of Share certificates/e-Refund payment instructions/refund cheques. Applicants being individuals who is eligible for personal collection may not authorize any other person to collect on their behalf. Applicants being corporations which is eligible for personal collection must attend through their authorized representatives bearing letters of authorization from their corporation stamped with the corporation’s chop. Both individuals and authorized representatives of corporations must produce evidence of identity acceptable to our Hong Kong Share Registrar at the time of collection.

Applicants who have applied on YELLOW Application Forms for 1,000,000 or more Hong Kong Offer Shares may collect their refund cheques, if any, in person but may not elect to collect their Share certificates as such Share certificates will be issued in the name of HKSCC Nominees and deposited into CCASS for the credit to their or the designated CCASS Participants’ stock account as stated in their Application Forms. The procedures for collection of refund cheques for YELLOW Application Form applicants are the same as those for WHITE Application Form applicants.

Applicants who have applied for Hong Kong Offer Shares by giving electronic application instructions to HKSCC via CCASS should refer to the section headed “How to Apply for Hong Kong Offer Shares—14. Dispatch/Collection of Share Certificates and Refund Monies—Personal Collection—(iv) If you apply via Electronic Application Instructions to HKSCC” in this prospectus for details.

Applicants who have applied through the White Form eIPO service and paid their applications monies through single bank accounts may have refund monies (if any) dispatched to the bank account in the form of e-Refund payment instructions. Applicants who have applied through the White Form eIPO service and paid their application monies through multiple bank accounts may have refund monies (if any) dispatched to the address as specified in their application instructions in the form of refund cheques by ordinary post at their own risk.

Applicants who have applied for less than 1,000,000 Hong Kong Offer Shares and any uncollected Share certificates and/or refund cheques will be dispatched by ordinary post, at the applicants’ risk, to the addresses specified in the relevant applications.

Further information is set out in the sections headed “How to Apply for Hong Kong Offer Shares—13. Refund of Application Monies” and “How to Apply for Hong Kong Offer Shares—14. Dispatch/Collection of Share Certificates and Refund Monies” in this prospectus.

The above expected timetable is a summary only. You should refer to the sections headed “Structure of the Global Offering” and “How to Apply for Hong Kong Offer Shares” in this prospectus for details of the structure of the Global Offering, including the conditions of the Global Offering, and the procedures for application for the Hong Kong Offer Shares.

—iv— CONTENTS

IMPORTANT NOTICE TO INVESTORS

This prospectus is issued by the Company solely in connection with the Hong Kong Public Offering and the Hong Kong Offer Shares and does not constitute an offer to sell or a solicitation of an offer to buy any security other than the Hong Kong Offer Shares offered by this prospectus pursuant to the Hong Kong Public Offering. This prospectus may not be used for the purpose of, and does not constitute, an offer or invitation in any other jurisdiction or in any other circumstances. No action has been taken to permit a public offering of the Offer Shares in any jurisdiction other than Hong Kong and no action has been taken to permit the distribution of this prospectus in any jurisdiction other than Hong Kong. The distribution of this prospectus and the offering of the Offer Shares in other jurisdictions are subject to restrictions and may not be made except as permitted under the applicable securities laws of such jurisdictions pursuant to registration with or authorization by the relevant securities regulatory authorities or an exemption therefrom.

You should rely only on the information contained in this prospectus and the Application Forms to make your investment decision. We, the Sole Sponsor, the Sole Global Coordinator, the Joint Bookrunners, the Underwriters, any of their respective directors, advisers, officers, employees, agents or representatives or any other person or party involved in the Global Offering have not authorized anyone to provide you with information that is different from what is contained in this prospectus. Any information or representation not made in this prospectus must not be relied on by you as having been authorized by us, the Sole Sponsor, the Sole Global Coordinator, the Joint Bookrunners, the Underwriters, any of their respective directors, advisers, officers, employees, agents or representatives or any other person or party involved in the Global Offering. The contents of our website at http://www.cdv.com do not form part of this prospectus.

Page

CHARACTERISTICS OF GEM ...... i

EXPECTED TIMETABLE ...... ii

CONTENTS ...... v

SUMMARY ...... 1

DEFINITIONS ...... 13

GLOSSARY OF TECHNICAL TERMS ...... 26

FORWARD-LOOKING STATEMENTS ...... 27

RISK FACTORS ...... 29

WAIVERS FROM COMPLIANCE WITH THE GEM LISTING RULES AND EXEMPTION FROM COMPLIANCE WITH THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE ...... 65

INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING ...... 69

—v— CONTENTS

Page

DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING ...... 74

CORPORATE INFORMATION ...... 77

INDUSTRY OVERVIEW ...... 79

REGULATIONS ...... 94

HISTORY, REORGANIZATION AND GROUP STRUCTURE ...... 108

BUSINESS ...... 131

DIRECTORS AND SENIOR MANAGEMENT ...... 174

RELATIONSHIP WITH CONTROLLING SHAREHOLDERS ...... 185

CONTINUING CONNECTED TRANSACTIONS ...... 193

SUBSTANTIAL SHAREHOLDERS ...... 201

CORNERSTONE INVESTORS ...... 203

SHARE CAPITAL ...... 207

FINANCIAL INFORMATION ...... 212

FUTURE PLANS AND USE OF PROCEEDS ...... 277

UNDERWRITING ...... 283

STRUCTURE OF THE GLOBAL OFFERING ...... 295

HOW TO APPLY FOR HONG KONG OFFER SHARES ...... 306

APPENDIX I ACCOUNTANT’S REPORT ...... I-1

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION ...... II-1

APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW ...... III-1

APPENDIX IV STATUTORY AND GENERAL INFORMATION ...... IV-1

APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES AND AVAILABLE FOR INSPECTION ...... V-1

—vi— SUMMARY

This summary aims to give prospective investors an overview of the information contained in this prospectus and should be read in conjunction with the full text of this prospectus. As this is a summary, it does not contain all the information that may be important to prospective investors. Prospective investors should read the whole prospectus before you decide to invest in the Offer Shares. There are risks associated with any investment in companies listed on GEM. Some of the particular risks relating to investing in the Offer Shares are set out in the section headed “Risk factors” on pages 29 to 64 in this prospectus. Prospective investors should read that particular section carefully before deciding to invest in the Offer Shares. Various expressions used in this summary are defined in the sections headed “Definitions” and “Glossary of technical terms” on pages 13 to 26 in this prospectus.

OVERVIEW We are a leading digital video technology solution and service company in the TV broadcasting industry in China. We provide a full range of solutions, services and products to TV broadcasters and other digital video content providers, focusing mainly on the post-production segment, a critical part of the PRC TV broadcasting market. We are the second largest company in the post-production segment in China with a 6.8% market share in terms of 2015 revenue, while no single market player had a market share greater than 10%, according to the Frost & Sullivan Report. According to the same source, we had leading market shares for virtual studio solutions, digital broadcast automation solutions, multi-camera recording and editing service and graphics creation systems in terms of 2015 revenue. We have been at the forefront of digital video technology innovation in China. Our emphasis on developing a demand-driven and highly responsive R&D is particularly critical for us because of our focus on the solutions and services businesses, where the customers demand customized services. According to the Frost & Sullivan Report, our Group owns the largest intellectual property portfolio in the TV broadcasting industry in China in terms of intellectual property rights, which included 353 PRC-registered patents, 144 PRC-registered software and other copyrights as of December 31, 2015. During the Track Record Period, we served a large number of central-, provincial- and municipal-level TV broadcasters and operators in China, including CCTV, the largest broadcaster in China, Shanghai Media Group, 28 of the 31 provincial-level and numerous municipal-level TV broadcasters and operators in China. We have established business relationship with most of the central- and provincial-level TV stations in China and with some of the provincial-level TV broadcasters in China for over 20 years. We have also served alternative broadcasting platforms, such as cable network operators, Internet media content providers and IPTV operators.

OUR BUSINESS We offer solutions, services and products to facilitate the processing, enhancement and management of digital video content at the post-production stage between the ingestion of raw content and the output of finished content. • Solutions. Our solutions business represents the majority of our business. We offer solutions that consist of multiple products customized and integrated with our proprietary software into cohesive systems that enable our customers to streamline the different workflows that take place at the post-production stage and upgrade to more advanced broadcasting standards, and many of our solution contracts include more than one type of solution. Our key solutions include (i) news workflow solutions, (ii) digital broadcast automation solutions, (iii) virtual studio solutions, (iv) program production solutions and (v) media asset management solutions. Our virtual studio solutions and digital broadcast automation solutions, which are generally offered to customers as standalone solutions, each had an industry-leading market share of 7.5% and 7.1%, respectively, in China in terms of 2015 revenue according to the Frost & Sullivan Report. In 2013, 2014 and 2015, revenue derived from digital broadcast automation solutions was approximately RMB27.0 million, RMB72.4 million and RMB99.4 million, respectively, representing approximately

—1— SUMMARY

5.4%, 17.8% and 16.4%, respectively, of our total revenue for the same periods; and the revenue we derived from virtual studio solutions was approximately RMB33.9 million, RMB25.6 million and RMB20.3 million, respectively, representing approximately 6.7%, 6.3% and 3.4%, respectively, of our total revenue for the same periods.

• Services. We offer specialized outsourcing services using solutions and products provided by us and other suppliers to our customers, including (i) multi-camera recording and editing, (ii) live sports broadcasting, (iii) graphics template design, (iv) digitization and cataloging of media assets, and (v) system maintenance. According to the Frost & Sullivan Report, in terms of 2015 revenue, our multi-camera recording and editing service, which is an emerging solution that we pioneered in 2013 and marketed under the brand “CreaStudio,” and our live sports broadcasting service ranked first and second with a market share of 10.4% and 25.0%, respectively, in China. In 2013, 2014 and 2015, the revenue we derived from multi-camera recording and editing service was approximately RMB3.1 million, RMB5.6 million and RMB9.3 million, respectively, representing approximately 0.6%, 1.4% and 1.5%, respectively, of our total revenue for the same periods; and the revenue we derived from live sports broadcasting service was approximately RMB20.3 million, RMB9.1 million and RMB14.0 million, respectively, representing approximately 4.0%, 2.2% and 2.3%, respectively, of our total revenue for the same periods.

• Products. Our stand-alone products combine our proprietary software with third-party hardware to enable our customers to process and add value to their digital video content. Our key products include (i) video editing systems, (ii) graphics creation systems, and (iii) visual effects and video compositing systems. According to the Frost & Sullivan Report, our graphics creation systems had an industry-leading market share of 25.2% in China in terms of 2015 revenue. In 2013, 2014 and 2015, the revenue we derived from the sale of our graphics creation systems was approximately RMB35.8 million, RMB26.1 million and RMB38.2 million, respectively, representing approximately 7.1%, 6.4% and 6.3%, respectively, of our total revenue for the same periods.

The following table sets forth a breakdown of our revenue derived from each business line, as an absolute amount and as a percentage of revenue, for the period indicated.

For the year ended December 31,

2013 2014 2015

Amount % of total Amount % of total Amount % of total

(RMB in thousands, except percentages)

Solutions...... 385,253 76.6 303,159 74.6 454,334 75.0 Services ...... 59,626 11.9 60,573 14.9 77,096 12.7 Products...... 58,085 11.5 42,637 10.5 74,553 12.3 Total revenue...... 502,964 100.0 406,369 100.0 605,983 100.0

—2— SUMMARY

Meicam had approximately 2.1 million downloads with over 40,000 weekly active users. As of the Latest Practicable Date, Meicam had not generated any revenue. In 2014, we invested in three joint ventures, namely, Beijing Hermit, Beijing Yueying and Xin’aote Cloud, to help with driving our future growth.

OUR COMPETITIVE STRENGTHS We believe the following strengths differentiate us from other industry participants and have enabled us to compete effectively in our industry: • leading market position with strong brand recognition and a distinguished history; • highly responsive R&D supported by strong technology expertise and a large intellectual property portfolio; • large, diverse and high-quality customer base with long-term relationships; • new businesses leveraging our technical expertise to drive future growth; • nationwide sales coverage with efficient and effective customer services; and • professional and experienced management team.

OUR BUSINESS STRATEGY Our long-term objective is to become a leading integrated digital video technology, service and media company in China. To that end, we intend to implement a business strategy with the following components: • gain market share by offering solutions based on latest industry trends and expanding customer base; • create recurring and high margin revenue streams by further strengthening and developing our service business; • further develop and invest in innovative products and businesses; and • selectively pursue strategic investments and acquisitions.

RESEARCH AND DEVELOPMENT We are highly committed to our research and development efforts and have allocated significant financial resources into building an industry-leading R&D team. In 2013, 2014 and 2015, our total research and development expenses (including both capitalized and expensed) amounted to RMB66.9 million, RMB70.6 million and RMB68.0 million, respectively, representing 13.3%, 17.4% and 11.2%, respectively, of our revenue in these periods. As of December 31, 2015, our R&D team consisted of 155 employees, representing 16.5% of our total employees, of whom 70 have post-undergraduate degrees and 61 have more than five years of industry experience. Mr. Jichuan Sun, our chief technology officer, has more than 20 years of industry experience and led the development of the first generation of domestically developed Chinese character generators and video editing systems in China. We have pioneered a series of industry-leading innovations in China, including, among others, (i) in 1994, the first Windows-based Chinese character generator in China; (ii) in 1997, the first video editing system in China; (iii) in 2001, the first domestically developed 3D virtual studio solutions recognized by SARFT; (iv) in 2005, the first HD video editing system in China; (v) in 2010, the first domestically developed visual effects and video compositing system; and (vi) in 2013, the cutting-edge multi-camera recording and editing system, which we launched under the brand “CreaStudio.” As of December 31, 2015, we had 353 patents registered with and 572 patent applications pending approval by the PRC State Intellectual Property Office. Of these 353 PRC-registered patents, approximately 89% are inventions with the remaining being utility models. On average, we have filed

—3— SUMMARY more than 50 patent applications each year since 2012. As of December 31, 2015, we had 144 software and other copyrights registered with the PRC Copyright Protection Center. Our Group owns the largest intellectual property portfolio in the TV broadcasting industry in China in terms of intellectual property rights according to the Frost & Sullivan Report.

CUSTOMERS

In 2013, 2014 and 2015, we served 326, 351 and 359 customers, respectively, including CCTV, the largest broadcaster in China, Shanghai Media Group, 28 of the 31 provincial-level and numerous municipal-level TV broadcasters and operators in China, including, without limitation, Beijing TV, Tianjin TV, Zhejiang TV, Jiangsu Broadcasting Corporation and Dalian TV. In 2013 and 2014, CCTV was our largest customer. We have also established business relationship with most of the central- and provincial-level TV stations in China and with some of the provincial-level TV broadcasters in China for over 20 years. In addition, we have expanded our business and customer base to serve alternative broadcasting platforms, such as cable network operators, Internet media content providers and IPTV operators, and other industry users including government entities, meteorological bureaus and schools.

In 2013, 2014 and 2015, our single largest customer represented 10.8%, 8.1% and 5.9%, respectively, of our total revenue. In the same periods, our five largest customers collectively represented 31.2%, 24.3% and 24.1%, respectively, of our total revenue.

SALES AND MARKETING

We have established a nationwide sales coverage through our in-house sales team and distributors, which provides us with the depth needed to serve the large broadcaster customers and the breadth to help us to reach the smaller local broadcasters. Our in-house direct sales mainly focus on serving provincial-level broadcasters and larger broadcaster customers. We achieve most of our direct sales to new customers through winning contracts in formal bidding process, which we participate by submitting proposals tailored to the requirements of our potential customers. Since February 2014, to complement our direct sales, we introduced distribution sales which mainly focus on TV broadcasters below the provincial-level as well as other media operators including governmental agencies, schools and state-owned and private enterprises with needs for our solutions and products.

SUPPLIERS

Based on our customers’ needs, we design the hardware specifications of the servers and workstations for our solutions, services and products and perform most of the system integration in-house. We procure standard and readily available hardware components such as servers, workstations, memory modules and network equipments and third-party software tailored to meet certain customers’ specific needs from third-party suppliers. We negotiate the terms of such purchase contracts directly with the original hardware manufacturers. We typically place orders for hardware components and workstations from our suppliers after we have obtained and confirmed orders from customers. This allows us to maintain effective and efficient inventory control and minimizes obsolescence risk and storage costs for hardware components and workstations. In January 2015, we entered into framework agreements on an annual basis with several of our major suppliers, pursuant to which we made prepayments to such suppliers in exchange for discounts when procuring hardware components from them. In 2013, 2014 and 2015, purchases from our single largest supplier accounted for 18.6%, 9.4% and 15.2%, respectively, of our total purchase. In the same periods, purchases from our five largest suppliers collectively accounted for 59.6%, 35.7% and 46.7%, respectively, of our total purchase.

—4— SUMMARY

SUMMARY FINANCIAL INFORMATION

Selected Line Items of Consolidated Statement of Comprehensive Income

For the year ended December 31, 2013 2014 2015 (RMB in thousands)

Revenue...... 502,964 406,369 605,983 Cost of sales...... 366,276 287,363 393,812 Gross profit ...... 136,688 119,006 212,171 Other income(1) ...... 42,535 33,213 77,586 Operating profit/(loss)(2) ...... 19,012 (33,740) 99,898 (Loss)/profit before income tax...... (10,357) (76,506) 127,370 (Loss)/profit for the year ...... (12,190) (69,400) 114,114 Non-IFRS Financial Measures: Adjusted net (loss)/profit (unaudited)(3) ...... (20,937) (54,399) 26,402 Adjusted EBITDA (unaudited)(3) ...... 5,529 (32,111) 80,047

Notes: (1) Other income primarily included value-added tax refunds and subsidy income from government during the Track Record Period. (2) Operating profit/(loss) is defined as gross profit and other income less interest income, selling and marketing expenses, administrative expenses, share-based compensation expense and research and development expenses. (3) Adjusted net (loss)/profit is defined as (loss)/profit for the year excluding share-based compensation expense, fair value changes on redeemable convertible preferred shares, loss on extinguishment of redeemable convertible preferred shares, expenses related to the Listing, gain on disposal of intangible assets, gain on disposal of a subsidiary, subsidy income from government and value-added tax refunds. Adjusted EBITDA is defined as adjusted net (loss)/profit for the year before depreciation and amortization, interest income, finance costs and income taxes. See “Financial Information—Non-IFRS Financial Measures” for a reconciliation of our (loss)/profit for the year under IFRS to the definitions of adjusted net (loss)/profit and adjusted EBITDA.

Revenue and Net (Loss)/Profit

Our financial results in 2014 were significantly affected by the PRC government’s anti-corruption campaign which caused changes in management of some of our major customers, particularly CCTV, at the beginning of 2014, which resulted in delay and postponement of these customers’ business activities, including procurement on new projects. We believe the events occurred in 2014 to be unusual, and contributed to two trends in our financial track record during the Track Record Period: (i) the decrease of 19.2% of our revenue from 2013 to 2014 and the net operating cash outflow in 2014, and (ii) the increase of 49.1% of our revenue from 2014 to 2015, as our business volume increased and customer base continued to expand.

In addition, we recorded fair value loss of RMB26.7 million and RMB28.1 million, respectively, in 2013 and 2014 and fair value gain of RMB70.8 million in 2015 on redeemable convertible preferred shares, which has been a main reason that contributed to a net loss of RMB12.2 million and RMB69.4 million, respectively, in 2013 and 2014, and a net profit of RMB114.1 million in 2015. Upon completion of a Qualified IPO, all of our outstanding redeemable convertible preferred shares will have been converted to Shares. As a result, we do not expect to recognize any fair value or fair value changes on these redeemable convertible preferred shares in future periods. For details in discussion on our financial results, see “Financial Information”.

—5— SUMMARY

Cost of Sales

The following table sets forth the components of cost of sales for the period indicated.

For the year ended December 31, 2013 2014 2015 %of %of %of Amount total Amount total Amount total (RMB in thousands, except percentages)

Cost of software and hardware equipment ..... 275,460 75.2 199,076 69.3 298,664 75.8 Employee compensation ...... 49,491 13.5 54,381 18.9 53,516 13.6 Installation costs...... 11,570 3.2 4,855 1.7 4,766 1.2 Amortization and depreciation...... 7,185 2.0 14,024 4.9 14,018 3.6 Traveling expenses...... 5,698 1.6 4,027 1.4 6,064 1.5 Business tax charged to operations...... 3,215 0.9 3,590 1.2 7,022 1.8 Others...... 13,657 3.7 7,410 2.6 9,762 2.5 Total cost of sales...... 366,276 100.0 287,363 100.0 393,812 100.0

Cost of software and hardware equipment primarily includes purchase fees for servers, workstations, memory modules, network equipments and third-party software from third-party suppliers for our in-house developed solutions and products, which we procure based on orders from our customers. During the Track Record Period, our cost of software and hardware equipment, representing the largest component of our cost of sales, fluctuated as a result of the fluctuation of our revenue. For more details, see “Financial Information—Results of Operations.”

Gross Profit and Gross Profit Margin

The following table sets forth a breakdown of our gross profit and gross profit margin derived from each business line for the period indicated.

For the year ended December 31, 2013 2014 2015 Gross profit Gross profit Gross profit Gross profit margin (%) Gross profit margin (%) Gross profit margin (%) (RMB in thousands, except percentages)

Solutions ...... 79,632 20.7 71,303 23.5 125,342 27.6 Services ...... 19,369 32.5 19,454 32.1 36,203 47.0 Products ...... 37,687 64.9 28,249 66.3 50,626 67.9 Total ...... 136,688 27.2 119,006 29.3 212,171 35.0 During the Track Record Period, the general increase in our gross profit margin was mainly driven by our effective procurement management and increased economies of scale due to increased sales. For further details, see “Financial Information—Results of Operations.” Value-added Tax Refunds and Government Subsidies We develop and update, if necessary, operating software incorporated in our solutions and products. In 2013, 2014 and 2015, we received value-added tax refunds in the amount of RMB19.7 million, RMB16.3 million and RMB23.9 million, respectively, representing 3.9%, 4.0% and 3.9%, respectively, of our revenue in these periods. We receive such refund of value-added tax on our sales of self-developed software products as part of the PRC government’s policy of encouraging software development. While sales of software products are generally subject to value-add tax of 17% in the PRC, companies that develop their own software products and have such products registered with the relevant tax authorities in the PRC are entitled to refund of value-add taxes equivalent to the excess over 3% of their value-added tax burden. CDV WFOE, as a registered software enterprise, is entitled to such 14% value-added tax refund based on the recurring sales of our solutions, services and

—6— SUMMARY products. For further details, see “Risk Factors—Risks Relating to our Business and Industry—Receipt of value-added tax refunds has historically been important to our business, and we may not continue to receive such tax refunds in the future” and “Regulations—Tax—Value-Added Tax.”

In 2013, 2014 and 2015, we received government subsidy income in the amount of RMB17.9 million, RMB12.4 million and RMB15.3 million, respectively, representing 3.6%, 3.0% and 2.5%, respectively, of our revenue in these periods. Currently, various levels of the PRC government, including the central and municipal governments and their committees, provide subsidies to entities which engage in technology development under relevant government policies. As a technology-oriented company, we continuously allocate resources in our R&D activities. Therefore, we regularly apply for and receive cash subsidy grants from the PRC government, which may be granted unconditionally or with certain conditions, for our operating and R&D activities. Conditions on government subsidies generally include various minimum qualifications for grantees and restrictions on the use of such cash subsidies. For details, see “Risk Factors—Risks Relating to Our Business and Industry—We may not continue to receive sustainable government subsidies.”

Our Directors are of the view that we will continue to receive value-added tax (“VAT”) refunds and government grants, as we are not aware of any event or circumstance indicating that the laws and regulations governing VAT refunds and government grants might significantly change in the foreseeable future. Such rules have been enacted under a general policy of support for software development by the PRC government, and this supportive policy is intended to boost technology-oriented industries and improve the national economy. These policy directions have been reiterated several times in notices and guidance issued by various PRC governmental authorities, such as The Circular on Value-added Tax Policy on Software Products issued by the Ministry of Finance and SAT in 2011, and The Notice on Further Promoting Software and Integrated Circuit Development and The Notice on Promoting Software and Integrated Circuit Development issued by the State Council in 2011 and 2000, respectively. King & Wood Mallesons, our PRC legal advisors, confirm that they are not aware of any circumstances indicating that there will be material changes to PRC laws and regulations applicable to VAT refunds and government grants as of the date of this Prospectus. Han Kun Law Offices, PRC legal advisors to the Sponsor, concur with the view of King & Wood Mallesons. On that basis, and having discussed with both PRC legal advisors and the Company regarding the issue, the Sole Sponsor confirms that it is not aware of any circumstances that would cause it to disagree with the view of the Directors.

Selected Line Items of Consolidated Statement of Financial Position As of December 31, 2013 2014 2015 (RMB in thousands)

Non-current assets ...... 180,039 163,164 164,310 Current assets ...... 568,222 549,872 640,399 Current liabilities...... (877,131) (918,529) (310,669) Redeemable convertible preferred shares ...... (563,829) (633,255) — Net current (liabilities)/assets...... (308,909) (368,657) 329,730 Total assets less current liabilities...... (128,870) (205,493) 494,040 Non-current liabilities ...... (12,971) (6,476) (617,924) Redeemable convertible preferred shares ...... (—) (—) (607,832) Capital deficiency and net liabilities ...... (141,841) (211,969) (123,884)

As of December 31, 2015, redeemable convertible preferred shares of RMB607.8 million was classified as non-current liabilities upon the extension of redemption period to March 31, 2017 granted by the preferred shareholders in July 2015. As a result of such extension, we recognized a net current asset position as of December 31, 2015, but our non-current liabilities increased significantly as of that date. Furthermore, our Pre-IPO Investors have provided written confirmations to us that they would deem this Global Offering as a Qualified IPO. As a result, upon completion of a Qualified IPO, all redeemable convertible preferred shares will have been converted to Shares. Accordingly, upon conversion of the redeemable convertible preferred shares into Shares, the liabilities for the redeemable convertible preferred shares will be derecognized, and the fair value of the Shares issued

—7— SUMMARY for the conversion of the redeemable convertible preferred shares, which is equal to the carrying amount of the redeemable convertible preferred shares immediately before the conversion, will be accounted for as an increase in share capital and reserves. Accordingly, we expect to have a net asset position immediately after the Global Offering (assuming other relevant amounts remain constant).

Trade and Bills Receivables

In accordance with the percentage of completion method, we recognize substantially all of revenue from solution contracts once we have obtained customers’ acceptance of delivery, installation and testing of our solution equipment. We classify our trade and bills receivables to into billed receivables and unbilled receivables. When contract amounts have become outstanding in accordance with payment milestones in the relevant contracts, we record such amounts as billed receivables. For contracts amounts which have been recognized as revenue under the percentage of completion method and will become due for billing and invoicing, i.e., outstanding upon completion of final inspection by and receipt of acceptance from customers, we record them as unbilled receivables until we issue invoices to the customers.

The following table sets forth our billed and unbilled receivables during the Track Record Period: As of and for the year ended December 31, 2013 2014 2015 (RMB in thousands)

Billed receivables ...... 70,871 82,357 222,123 Unbilled receivables ...... 96,861 127,784 104,392 Total trade and bills receivables...... 167,732 210,141 326,515

The increase in our billed receivables from 2013 to 2014 was primarily attributable to delay in payments from certain major customers due to the 2014 anti-corruption campaign, and the increase from 2014 to 2015 was primarily due to increased sales in 2015 and our efforts to improve collection, including, among other measures, active monitoring of and coordination with our customers on final inspection, which led to more prompt final inspection and acceptance by some of our customers and enabled us to issue invoices and re-classify unbilled receivables as billed receivables more efficiently. For details, see “Financial Information — Description of Certain Consolidated Statement of Financial Position Items — Trade and Other Receivables — Trade and Bills Receivables — Recent Measures to Increase Collection.” The increase in our unbilled receivables from 2013 to 2014 was primarily attributable to an increase in business volume, and the decrease from 2014 to 2015 reflects our aforementioned efforts to improve collection which enabled re-classification of unbilled receivables as billed receivables, partially offset by an increase in business volume. For details, see “Financial Information — Description of Certain Consolidated Statement of Financial Position Items — Trade and Other Receivables — Trade and Bills Receivables—Billed Receivables” and “— Unbilled Receivables.” Selected Line Items of Consolidated Statement of Cash Flows For the year ended December 31, 2013 2014 2015 (RMB in thousands)

Net cash from/(used in) operating activities ...... 74,007 (71,929) 27,467 Net cash (used in)/from investing activities ...... (141,985) 18,680 (123,622) Net cash (used in)/from financing activities ...... (56,825) 59,926 29,676 Net (decrease)/increase in cash and cash equivalents ...... (124,803) 6,677 (66,479) Cash and cash equivalents at the beginning of the year...... 216,741 90,557 97,372 Cash and cash equivalents at the end of the year ...... 90,557 97,372 30,935

We recorded net operating cash inflow of RMB74.0 million in 2013, net operating cash outflow of RMB71.9 million in 2014 and net operating cash inflow of RMB27.5 million in 2015. The net operating cash outflow in 2014 was primarily due to the decrease in cash generated from operations and the increase in trade and bills receivables, both mainly attributable to the reasons as discussed under “—Revenue and Net (Loss)/profit” above. For details, see “Financial Information—Liquidity

—8— SUMMARY and Capital Resources—Cash Flow.” For the relevant risks relating to net operating cash outflow, see “Risk Factors—Risks Relating to Our Business and Industry—If we are unable to obtain the additional capital we need in a timely manner or on acceptable terms, or at all, our business, financial condition, results of operations and prospects may be materially and adversely affected.”

KEY FINANCIAL RATIOS

The following table sets forth certain key financial ratios as of the date or for the period indicated. As of and for the year ended December 31, 2013 2014 2015

Gross profit margin ...... 27.2% 29.3% 35.0% Net profit margin...... NM NM 18.8% Current ratio(1) ...... 0.65 0.60 2.06 Quick ratio(2) ...... 0.53 0.53 1.96 Interest coverage ratio(3) ...... NM NM 8.79 Non-IFRS financial ratio Adjusted net (loss)/profit margin(4) ...... NM NM 4.4% Adjusted EBITDA margin(5)...... 1.1% NM 13.2%

Notes: (1) Current ratio is derived by dividing our current assets by our current liabilities at the end of each financial period. (2) Quick ratio is our current assets less inventories dividing by current liabilities at the end of each financial period. (3) Interest coverage ratio is calculated by dividing our profit from operations for the period, which is profit before finance costs and income tax expenses, by finance costs for each of the financial period. (4) Adjusted net (loss)/profit margin is calculated by dividing our adjusted net (loss)/profit for the year by revenue for each of the financial year. For reconciliation of adjusted net (loss)/profit, a non-IFRS financial measure, to our (loss)/profit for the year, see “Financial Information—Non-IFRS Financial Measures.” (5) Adjusted EBITDA margin is calculated by dividing our adjusted EBITDA for the year by revenue for each of the financial period. For reconciliation of adjusted EBITDA a non-IFRS measure, to our (loss)/profit for the year, see “Financial Information—Non-IFRS Financial Measures.” “NM” means not meaningful.

RECENT DEVELOPMENTS

We recorded unaudited revenue of approximately RMB73.5 million for the two months ended February 29, 2016, which increased compared to the same period of 2015. Revenue for the two months ended February 29, 2016 disclosed above is extracted from our Company’s unaudited interim financial statements as of and for the two months ended February 29, 2016, which have been reviewed by our reporting accountants in accordance with the Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity.” Our gross profit margin for the two months ended February 29, 2016 remained relatively stable as compared to that in the same period of 2015.

As of April 30, 2016, our contract backlog (net of estimated VAT) amounted to RMB59.8 million. For more details, see “Business—Backlog.”

As of April 30, 2016, we had settled RMB79.2 million, or 24.2%, of our trade and bills receivables as of December 31, 2015.

As of April 30, 2016, we had bank and other borrowings of RMB59.5 million and total banking facilities of RMB68.4 million, of which RMB32.3 million was unutilized.

—9— SUMMARY

Our Directors have confirmed that, except as otherwise disclosed in this prospectus, up to the date of this prospectus, there has been no material adverse change in our financial, operational or trading position since December 31, 2015.

LISTING EXPENSES We incurred listing expenses of RMB15.2 million during the Track Record Period recorded under administrative expenses under the relevant accounting standards. Based on our current estimate, we expect to incur further listing expenses (including underwriting commissions) amounting to RMB29.3 million in 2016, of which approximately RMB20.6 million is directly attributable to the issue of new Shares to the public and to be accounted for as a deduction from equity, and of which approximately RMB8.7 million is expected to be reflected in our consolidated statements of comprehensive income. The listing expenses above are the latest practicable estimates and are provided for reference only and actual amounts may differ. Our Directors do not expect such expenses to have a material adverse impact on our financial results for the year ending December 31, 2016. GLOBAL OFFERING STATISTICS

Offer size : Initially 155,000,000 Shares, representing approximately 25.0% of the enlarged issued share capital of the Company Offering structure : 15,500,000 Shares, representing approximately 10.0% for Hong Kong Public Offering (subject to reallocation) and 139,500,000 Shares, representing approximately 90.0% for International Placing (subject to reallocation and the Over-allotment Option) Over-allotment Option : Up to 23,250,000 Shares, representing approximately 15.0% of the number of Offer Shares initially available under the Global Offering Offer Price Per Share : HK$1.90 to HK$2.57 per Share

Based on Offer Price Based on Offer Price per Share of HK$1.90 per Share of HK$2.57

Market capitalization of our Shares(1) ...... HK$1,178 million HK$1,593 million Unaudited pro forma adjusted net tangible asset value per Share(2)...... HK$1.07 HK$1.23

Notes: (1) The calculation of market capitalization is based on 155,000,000 Shares expected to be issued under the Global Offering, and assuming that 620,000,000 Shares are issued and outstanding immediately following the completion of the Global Offering. (2) The unaudited pro forma adjusted consolidated net tangible asset per Share is calculated after making the adjustments referred to in “Appendix II—Unaudited Pro Forma Financial Information.”

DIVIDEND POLICY

We did not declare any dividends during the Track Record Period and up to the Latest Practicable Date. In the future, we expect to distribute up to 30% of our annual distributable profit as dividends. However, there is no assurance that we will be able to distribute dividends of such amount or any amount each year or in any year. Our future dividend policy will be determined by our Board of Directors based on our results of operations, cash flows, financial position, cash dividends we receive from our subsidiaries, future business prospects, statutory and regulatory restrictions on the payment of dividends by us, and other factors that our Board of Directors may consider relevant. PRE-IPO SHARE OPTION SCHEME We have adopted the Pre-IPO Share Option Scheme on December 20, 2010. The principal terms of the Pre-IPO Share Option Scheme are set out in the paragraph headed “D. Pre-IPO Share Option Scheme” in Appendix IV on page IV-28 in this prospectus. As of the Latest Practicable Date, options to subscribe for an aggregate of 25,930,000 Shares have been granted under the Pre-IPO Share Option

—10— SUMMARY

Scheme, and remained outstanding as of the Latest Practicable Date. Among such outstanding options, the exercise price for (i) the options to subscribe for an aggregate of 22,995,000 Shares is equivalent to the fair market value of the ordinary shares of the Company as of December 31, 2010 as appraised by an independent valuer, being US$1.16 per Share; and (ii) the options to subscribe for an aggregate of 2,935,000 Shares is US$0.00001 per Share. We have further adjusted, pursuant to the authority granted to our Board under the Pre-IPO Share Option Scheme, the total number of Shares subject to the options granted under the Pre-IPO Share Option Scheme to 77,893,000 as a result of the Capitalization Issue, with their respective exercise price remaining unchanged. The Shares subject to the options granted under the Pre-IPO Share Option Scheme after adjustment, being an aggregate of 77,893,000 Shares, represent (i) approximately 12.56% of our issued share capital immediately upon completion of the Global Offering (excluding all Shares which may be allotted and issued upon the exercise of the Over-allotment Option or any option granted under the Pre-IPO Share Option Scheme); and (ii) approximately 11.16% of our issued share capital immediately upon completion of the Global Offering (assuming all options granted under the Pre-IPO Share Option Scheme are exercised, but without taking into account any Share which may be allotted and issued upon the exercise of the Over-allotment Option). Assuming our Company had been listed on the Stock Exchange since January 1, 2015 with 620,000,000 Shares in issue, the diluted earnings per Share for profit attributable to ordinary equity holder of our Company for the year ended December 31, 2015 would be approximately RMB11.51 cents. Based on the same assumption and further assuming all the options granted under the Pre-IPO Share Option Scheme in respect of 77,893,000 Shares were exercised in full on January 1, 2015, the diluted earnings per Share for profit attributable to ordinary equity holder of our Company for the year ended December 31, 2015 would be approximately RMB10.23 cents. OUR SHAREHOLDERS Controlling Shareholder Immediately following the completion of the Global Offering (assuming no exercise of the Over-allotment Option or any option granted under the Pre-IPO Share Option Scheme), Wing Success will own approximately 38.76% of the post offering enlarged issued share capital of our Company. Mr. Zheng has the power to exercise all the voting rights attached to the shares of Wing Success and he will continue to be our ultimate Controlling Shareholder. For further details, see “Relationship with Controlling Shareholders” on page 185 of this prospectus. Pre-IPO Investors From January 2008 to October 2014, and as of December 31, 2015, IFC, Intel Capital, Vertex Tech, Federal HK, Carvillo, Founder Hong Kong and HK Aoxin acquired, net of redemption and modification during the Track Record Period, for a total of 87,634,786 preferred shares in our Company (consist of 22,400,000 redeemable convertible series A preferred shares for a consideration of US$6.7 million, 14,000,000 redeemable convertible series A-1 preferred shares and 6,250,000 non-redeemable convertible series A-1 preferred shares for a consideration of US$8.1 million, 34,833,333 redeemable convertible series B preferred shares for a consideration of US$50.0 million and 10,151,453 redeemable convertible series C preferred shares for a consideration of US$16.3 million), representing approximately 48.32% of the issued share capital of our Company, for an aggregate consideration of approximately US$81.1 million (approximately RMB532.2 million). The total consideration for the pre-IPO investment was fully settled by December 31, 2014. Except for Carvillo which is a substantial shareholder of us who will hold 15.82% of our Shares immediately following the completion of the Global Offering, each of the Pre-IPO Investors is an independent third party. Our Directors are of the view that our Company will benefit from the investors’ commitment to our Company and their investments demonstrate their confidence in our operation and serve as an endorsement of our performance, strength and prospects. See “History, Reorganization and Group Structure—Pre-IPO Investments” on page 117 of this prospectus for further details. FUTURE PLANS AND USE OF PROCEEDS Assuming the Over-allotment Option is not exercised and assuming an Offer Price of HK$2.24 per Offer Share, being the midpoint of the stated Offer Price range of HK$1.90 to HK$2.57 per Offer Share, the net proceeds of the Global Offering (after deduction of underwriting fees and estimated expenses paid and payable by us in relation to the Global Offering) would be approximately HK$287.0 million which we presently plan to use as follows: • Approximately 47%, or HK$134.9 million, is expected to be used primarily for business expansion and development;

—11— SUMMARY

• Approximately 15%, or HK$43.1 million, is expected to be used primarily for potential strategic investment and acquisition to increase our portfolio of solutions, services and products. For details on our selection criteria for acquisition targets, see “Business—Business Strategy—Selectively pursue strategic investments and acquisitions.” As of the Latest Practicable Date, our Directors confirm that, except as disclosed, we did not identify any target company for acquisition for our use of net proceeds from the Global Offering; • Approximately 15%, or HK$43.1 million, is expected to be used primarily for further enhancing our R&D capabilities. For details, see “Future Plans and Use of Proceeds—Use of Proceeds;” • Approximately 10%, or HK$28.7 million, is expected to be used to repay certain of our existing bank borrowings. The bank borrowings include a one-year term loan of US$5.0 million (approximately HK$38.8 million) bearing an interest rate of 2.63% per annum payable in August 2016; • Approximately 3%, or HK$8.6 million, is expected to be used primarily for promotion and marketing, such as advertising through traditional media such as TV and Internet and attending internal or domestic exhibitions; and • The remaining up to approximately 10%, or HK$28.7 million, is expected to be used for our working capital and other general corporate purposes. For details of our future plans and use of proceeds, see the section headed “Future Plans and Use of Proceeds” on page 277 of this prospectus. SUMMARY OF PROMINENT RISK FACTORS There are certain risks relating to investment in the Offer Shares. Some of the particular risks in investing in the Offer Shares are further described in the section entitled “Risk Factors” beginning on page 29 of this prospectus. You should read that section carefully before you decide to invest in the Offer Shares. We believe some of the more significant risk factors include: (i) our revenue declined in 2014 and may continue to fluctuate in the future; (ii) our significant outstanding billed receivables and turnover days of our average billed receivables may adversely affect our financial condition and results of operations; (iii) if the digital video technology solution and services industry in China fails to grow as expected, our future growth and results of operations would be materially and adversely affected; (iv) we drive a significant portion of our revenues from our major customers in each period; loss of our major customers could have a material adverse effect on our financial condition and results of operations; (v) receipt of value-added tax refunds has historically been important to our business, and we may not continue to receive such tax refunds in the future; and (vi) our mobile application business is relatively new with an evolving business model; if our new business fails to generate and increase its revenue at the expected level and pace, our overall growth and profitability would be adversely affected. DISCLOSURE UNDER CHAPTER 17 OF THE GEM LISTING RULES

Our Directors confirm that, expect as otherwise disclosed in this prospectus, as of the latest Practicable Date, there was no circumstance that would give rise to a disclosure requirement under Rules 17.15 to 17.21 of the GEM Listing Rules. DIRECTORS’ CONFIRMATION ON NO MATERIAL ADVERSE CHANGE

As of the date of this prospectus, our Directors confirm that there has been no material adverse change in the financial or trading positions or prospects of our Company since December 31, 2015, the date of the latest audited consolidated financial statements of our Company. Our Directors confirm that they have performed sufficient due diligence on our Company to ensure that, up to the date of this prospectus, there has been no material adverse change in our financial or trading position or prospects since December 31, 2015, and there have been no events since December 31, 2015 which would materially affect the information shown in the Accountant’s Report set out in Appendix I to this prospectus.

—12— DEFINITIONS

In this prospectus, unless the context otherwise requires, the following terms shall have the meanings set out below.

“Application Form(s)” WHITE application form(s), YELLOW application form(s) and GREEN applications form(s) or, where the context so requires, any of them

“Articles” or “Articles of the articles of association of the Company, conditionally Association” adopted on May 23, 2016, which will become effective upon the Listing Date, and as amended from time to time, a summary of which is set out in Appendix III to this prospectus

“associate(s)” has the meaning ascribed thereto under the GEM Listing Rules

“Audit Committee” the audit committee of the Board

“Beijing Hermit” Beijing Hermit Culture & Media Co., Ltd. (北京海米文化傳媒有限公司), a limited liability company incorporated in the PRC on September 17, 2014 and is held as to 40% equity interest by CDV WFOE. Details of the shareholding of the remaining 60% equity interest are set out in “History, Reorganization and Group Structure—Acquisitions and Disposals and New Businesses”

“Beijing Meicam” Beijing Meicam Network Technology Co., Ltd. (北京美攝網絡科技有限公司), initially known as Beijing Meicam Network Co., Ltd. (北京美攝網絡有限公司), is a limited liability company incorporated in the PRC on October 23, 2014 and is held as to 40% equity interest by CDV WFOE. It is deemed as a subsidiary of our Company pursuant to a voting rights proxy agreement. Details of the shareholding of the remaining 60% equity interest are set out in “History, Reorganization and Group Structure—Acquisitions and Disposals and New Businesses”

“Beijing Yueying” Beijing Yue Ying Technology Co., Ltd. (北京悅影科技有限公司), a limited liability company incorporated in the PRC on December 9, 2014 and is held as to 35.2% equity interest by CDV WFOE. Details of the shareholding of the remaining 64.8% equity interest are set out in “History, Reorganization and Group Structure— Acquisitions and Disposals and New Businesses”

—13— DEFINITIONS

“Beijing Zhengqi” Zhengqi (Beijing) Video Technology Co., Ltd. (北京正奇聯訊科技有限公司), a limited liability company incorporated in the PRC on October 23, 2012 and is a wholly-owned subsidiary of CDV WFOE

“Board” or “Board of Directors” our board of Directors

“Business Day” or “business day” a day on which commercial banks in Hong Kong are generally open for normal banking business to the public and which is not a Saturday, Sunday or public holiday in Hong Kong

“BVI” the British Virgin Islands

“CAGR” compound annual growth rate

“Carvillo” or “Series B Investor” Carvillo Success Limited, a limited liability company incorporated under the laws of Cayman Islands on November 29, 2010 and a Pre-IPO Investor

“Capitalization Issue” the issue of Shares to be made upon capitalization of certain sums standing to the credit of the share premium account of our Company, details of which are set out in the section headed “Appendix IV— Statutory and General Information — A. Further Information about Our Group — 3. Resolutions in writing of the Shareholders of our Company passed on May 23, 2016” in this prospectus

“Cayman Companies Law” or the Companies Law, Cap. 22 (Law 3 of 1961, as consolidated “Companies Law” and revised) of the Cayman Islands, as amended or supplemented or otherwise modified from time to time

“CCASS” the Central Clearing and Settlement System established and operated by HKSCC

“CCASS Clearing Participant” a person admitted to participate in CCASS as a direct clearing participant or general clearing participant

“CCASS Custodian Participant” a person admitted to participate in CCASS as a custodian participant

“CCASS Investor Participant” a person admitted to participate in CCASS as an investor participant who may be an individual, joint individuals or a corporation

“CCASS Participant” a CCASS Clearing Participant, a CCASS Custodian Participant or a CCASS Investor Participant

—14— DEFINITIONS

“CDV Cloud” China Digital Video Cloud (Beijing) Technology Co., Ltd (北京新奧特雲視科技有限公司), a limited liability company incorporated in the PRC on April 25, 2014, a subsidiary of our Company prior to May 2015 and a connected person of our Company

“CDV WFOE” China Digital Video (Beijing) Limited (新奧特(北京)視頻技術有限公司), a limited liability company incorporated in the PRC on June 21, 2007 and a wholly-owned subsidiary of the Company

“China” or “PRC” the People’s Republic of China, but for the purpose of this prospectus and for geographical reference only and except where the context requires, references in this prospectus to “China” and the “PRC” do not include Hong Kong, Macau and Taiwan

“close associate(s)” has the meaning ascribed thereto under the GEM Listing Rules

“Companies Ordinance” the Companies Ordinance (Chapter 622 of the Laws of Hong Kong), as amended or supplemented or otherwise modified from time to time

“Companies (Winding Up and the Companies (Winding Up and Miscellaneous Provisions) Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong), as Ordinance” amended or supplemented or otherwise modified from time to time

“Company,” “our Company,” China Digital Video Holdings Limited (中國數字視頻控股有 “we,” “CDV,” or “us” 限公司), previously known as China Digital Video Limited, a company incorporated in the Cayman Islands on January 8, 2007 as an exempted limited liability company

“connected person” has the meaning ascribed thereto in the GEM Listing Rules

“Controlling Shareholders” has the meaning ascribed thereto in the GEM Listing Rules and for the purpose of this prospectus, unless the context otherwise requires, refers to, collectively, Mr. Zheng and Wing Success

“CSRC” the China Securities Regulatory Commission (中國證券監督管理委員會)

—15— DEFINITIONS

“Deed of Indemnity” the deed of indemnity dated May 23, 2016 entered into by our Controlling Shareholders in favour of our Company to provide certain indemnities, particulars of which are set out in the paragraph headed “E. Other Information — 1. Estate duty, tax and other indemnity” in Appendix IV to this prospectus

“Director(s)” our director(s)

“EIT” the PRC enterprise income tax

“EIT Law” the PRC Enterprise Income Tax Law

“EIT Regulations” the Regulation on the Implementation of the EIT Law

“Federal HK” Federal Hong Kong Investment Limited, a limited liability company incorporated in Hong Kong on November 23, 2006 and a Pre-IPO Investor

“Founder Easiprint” Beijing Founder Easiprint Co., Ltd (北京方正印捷數碼技術有限公司), a limited liability company incorporated in the PRC on July 15, 2004, and an independent third party

“Founder Electronics” Beijing Founder Electronics Co., Ltd. (北京北大方正電子有限公司), a limited liability company incorporated in the PRC on November 6, 1995 and an independent third party

“Founder Hong Kong” or “Series Founder Group (Hong Kong) Limited, a company C Investor” incorporated in Hong Kong on October 25, 2013 as an exempted limited liability company and a Pre-IPO Investor

“Frost & Sullivan” Frost & Sullivan (Beijing) Inc., Shanghai Branch Co., our industry consultant, an independent third party

“Frost & Sullivan Report” the report we commissioned from Frost & Sullivan in respect of the TV broadcasting industry in China

“Future Success Trust” an irrevocable discretionary trust settled by Mr. Zheng Fushuang as the settlor pursuant to a trust arrangement dated June 17, 2011

“GEM” the Growth Enterprise Market of the Stock Exchange

“GEM Listing Rules” the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited

“Global Offering” the Hong Kong Public Offering and the International Placing

—16— DEFINITIONS

“GREEN application form(s)” the application form(s) to be completed by the White Form eIPO Service Provider designated by the Company, Computershare Hong Kong Investor Services Limited

“Group” or “our Group” we and our subsidiaries or, where the context so requires, in respect of the period prior to us becoming the holding company of our present subsidiaries, such subsidiaries as if they were our subsidiaries at that time

“HK$” or “Hong Kong dollars” Hong Kong dollars and cents respectively, the lawful currency or “HK dollars” or “cents” of Hong Kong

“HK Aoxin” Hong Kong Aoxin Share Limited, a limited liability company incorporated under the laws of Hong Kong on July 21, 2015 and a Pre-IPO Investor

“HKSCC” Hong Kong Securities Clearing Company Limited, a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited

“HKSCC Nominees” HKSCC Nominees Limited, a wholly-owned subsidiary of HKSCC

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

“Hong Kong Offer Shares” the 15,500,000 Shares initially offered by us for subscription pursuant to the Hong Kong Public Offering (subject to reallocation as described in the section headed “Structure of the Global Offering” in this prospectus)

“Hong Kong Public Offering” the offer of the Hong Kong Offer Shares for subscription by the public in Hong Kong at the Offer Price on the terms and conditions described in this prospectus and the Application Forms

“Hong Kong Share Registrar” Computershare Hong Kong Investor Services Limited

“Hong Kong Takeovers Code” or the Code on Takeovers and Mergers issued by the SFC, as “Takeovers Code” amended, supplemented or otherwise modified from time to time

“Hong Kong Underwriters” the underwriters of the Hong Kong Public Offering listed in the section headed “Underwriting—Hong Kong Underwriters” in this prospectus

—17— DEFINITIONS

“Hong Kong Underwriting the underwriting agreement dated June 14, 2016 relating to Agreement” the Hong Kong Public Offering and entered into among us, the Controlling Shareholders, the Sole Sponsor, the Sole Global Coordinator and the Joint Bookrunners as further described in the section headed “Underwriting—Underwriting Arrangements and Expenses” in this prospectus

“ICPE” India China Pre-IPO Equity (C.I.) Ltd., a private equity fund registered in the Cayman Islands and a Pre-IPO Investor which has disposed of all of its interest in our Company

“IFC” International Finance Corporation, a member of the World Bank Group and a Pre-IPO Investor

“IFRS” International Financial Reporting Standards

“independent third party(ies)” person(s) or company(ies) and their respective ultimate beneficial owner(s), who/which, to the best of our Directors’ knowledge, information and belief, having made all reasonable enquiries, is/are not connected with us or our connected persons as defined under the GEM Listing Rules

“Intel Capital” Intel Capital Corporation, a Delaware corporation incorporated on April 6, 1998 and a Pre-IPO Investor

“International Offer Shares” the 139,500,000 Shares being initially offered in the International Placing together with, where relevant, any additional Shares which may be issued by our Company pursuant to the exercise of the Over-allotment Option (subject to reallocation as described in the section headed “Structure of the Global Offering” in this prospectus)

“International Placing” the offer of the International Offer Shares by the International Underwriters at the Offer Price outside the United States in offshore transactions in accordance with Regulation S and in the United States to QIBs only in reliance on Rule 144A or any other available exemption from registration under the U.S. Securities Act, as further described in the section headed “Structure of the Global Offering” in this prospectus

“International Underwriters” the underwriters of the International Placing, who are expected to enter into the International Underwriting Agreement to underwrite the International Placing

—18— DEFINITIONS

“International Underwriting the underwriting agreement expected to be entered into on or Agreement” around June 20, 2016 by, among others, us, the Controlling Shareholders, the Sole Sponsor, the Sole Global Coordinator, the Joint Bookrunners and the International Underwriters in respect of the International Placing, as further described in the section headed ”Underwriting—International Placing” in this prospectus

“Joint Bookrunners” Jefferies Hong Kong Limited and Ping An of China Securities (Hong Kong) Company Limited

“Latest Practicable Date” June 7, 2016, being the latest practicable date prior to the printing of this prospectus for the purpose of ascertaining certain information contained in this prospectus

“Listing” the listing of our Shares on the Growth Enterprise Market of the Stock Exchange

“Listing Date” the date, expected to be on or around June 27, 2016, on which our Shares are listed and from which dealings therein are permitted to take place on GEM

“Listing Division” the Listing Department of the Stock Exchange

“Macau” the Macau Special Administrative Region of the PRC

“Memorandum” or “Memorandum our memorandum of association to be adopted prior to the of Association” Listing, which will become effective upon the Listing Date, as amended from time to time, a summary of which is set out in Appendix III to this prospectus

“MIIT” Ministry of Industry and Information Technology of the PRC (中華人民共和國工業和信息化部)

“MOC” Ministry of Culture of the People’s Republic of China (中華人民共和國文化部)

“MOFCOM” Ministry of Commerce of the People’s Republic of China (中華人民共和國商務部)

“Mr. Liu” Mr. Liu Baodong (劉保東), our chief executive officer and executive Director

“Mr. Zheng” Mr. Zheng Fushuang (鄭福雙), chairman of the Board, executive Director and ultimate Controlling Shareholder

“NDRC” the National Development and Reform Commission of the PRC (中華人民共和國國家發展和改革委員會)

—19— DEFINITIONS

“Nomination Committee” the nomination committee of the Board

“Non-competition Deed” a deed of non-competition entered into by our Controlling Shareholders on May 23, 2016 in favor of our Company

“Offer Price” the final offer price per Offer Share in Hong Kong dollars (exclusive of brokerage of 1%, SFC transaction levy of 0.0027% and Stock Exchange trading fee of 0.005%) of not more than HK$2.57 and expected to be not less than HK$1.90, at which Hong Kong Offer Shares are to be subscribed and to be determined in the manner further described in the section headed “Structure of the Global Offering—Pricing and Allocation” in this prospectus

“Offer Share(s)” the Hong Kong Offer Shares and the International Offer Shares together with, where relevant, any additional Shares which may be issued by our Company pursuant to the exercise of the Over-allotment Option

“Over-allotment Option” the option expected to be granted by our Company to the International Underwriters, exercisable by the Sole Global Coordinator (on behalf of the International Underwriters) pursuant to the International Underwriting Agreement, pursuant to which our Company may be required to allot and issue up to an aggregate of 23,250,000 additional Shares, representing 15% of the total number of Shares initially available under the Global Offering at the Offer Price to, among other things, cover over-allocations in the International Placing, if any, further details of which are described in the section headed “Structure of the Global Offering” in this prospectus

“Peking Founder” Peking University Founder Group Company Limited (北大方正集團有限公司), a company incorporated in the PRC on December 12, 1992 and an independent third party

“PRC Government” or “State” the central government of the PRC, including all governmental subdivisions (including provincial, municipal and other regional or local government entities) and its organs or, as the context requires, any of them

“Pre-IPO Investors” Series A Investors, Series A-1 Investors, Series B Investor and Series C Investor, each a Pre-IPO Investor

—20— DEFINITIONS

“Pre-IPO Share Option Scheme” the share option plan adopted by our Company on December 20, 2010, the principal terms of which are summarized in the section headed “Statutory and General Information—D. Pre-IPO Share Option Scheme” in Appendix IV to this prospectus

“Price Determination Agreement” the agreement to be entered into by the Sole Global Coordinator (on behalf of the Hong Kong Underwriters) and us on the Price Determination Date to record and fix the Offer Price

“Price Determination Date” the date, expected to be on or around June 20, 2016 (Hong Kong time) on which the Offer Price is determined, or such later time as the Sole Global Coordinator (on behalf of the Hong Kong Underwriters) and us may agree, but in any event no later than June 22, 2016

“QIB” a qualified institutional buyer within the meaning of Rule 144A

“Qualified IPO” a qualified initial public offering as defined under the Shareholders’ Agreement, which requires, among others, a valuation of our Company at no less than US$250 million immediately prior to an initial public offering; notwithstanding the foregoing, we have received written confirmations from Pre-IPO Investors that the Global Offering will qualify as a Qualified IPO

“R&D” research and development

“Regulation S” Regulation S under the U.S. Securities Act

“Remuneration Committee” the remuneration committee of the Board

“RMB” or “Renminbi” the lawful currency of the PRC

“Reorganization” the reorganization arrangements undergone by us in preparation for the Listing as described in the section headed “History, Reorganization and Group Structure—Reorganization” in this prospectus

“Rule 144A” Rule 144A under the U.S. Securities Act

“SAFE” State Administration of Foreign Exchange of the PRC (中國國家外匯管理局)

“SAIC” State Administration of Industry and Commerce of the PRC (中國國家工商行政管理總局)

—21— DEFINITIONS

“SAPPRFT” the State Administration of Press, Publication, Radio, Film and Television of the PRC (中華人民共和國國家新聞出版廣播電影電視總局), formed in 2013 upon the merger of the General Administration of Press and Publication of the PRC (中華人民共和國國家新聞出版總署) and SARFT

“SARFT” the State Administration of Radio, Film and Television of the PRC (中華人民共和國國家廣播電影電視總局), a predecessor to SAPPRFT

“SAT” State Administration of Taxation of the PRC (國家稅務總局)

“Series A Investors” IFC, Intel Capital, ICPE and Vertex Tech, each a Series A Investor

“Series A-1 Investors” IFC, Intel Capital, Vertex Tech and Federal HK each a Series A-1 Investor

“SFC” the Securities and Futures Commission of Hong Kong

“SFO” or “Securities and Futures the Securities and Futures Ordinance (Chapter 571 of the Ordinance” Laws of Hong Kong), as amended or supplemented from time to time

“Shanghai Media Group” Shanghai Media Group Co., Ltd. (上海文化廣播影視集團有限公司), a limited liability company incorporated in the PRC on March 28, 2014 and any of its subsidiaries, as the case may be, an independent third party

“Shareholder(s)” holder(s) of our Shares

“Shareholders’ Agreement” a shareholders’ agreement dated October 27, 2014 entered into among the Company, Mr. Zheng, Series A Investors, Series A-1 Investors, Series B Investors and Series C Investors

“Shares” ordinary share(s) in our capital with nominal value of US$0.00001 each

“Silicon Valley Technology” Beijing Silicon Valley Technology Development Co., Ltd. (北京硅谷科技發展有限責任公司), a limited liability company established in the PRC on July 23, 1998 and a connected person of our Company

“Sole Global Coordinator” Jefferies Hong Kong Limited

“Sole Sponsor” Jefferies Hong Kong Limited

“Stabilizing Manager” Jefferies Hong Kong Limited

—22— DEFINITIONS

“Stock Borrowing Agreement” the stock borrowing agreement expected to be entered into between the Stabilizing Manager, Jefferies Hong Kong Limited and Wing Success on the Price Determination Date, pursuant to which the Stabilizing Manager may borrow up to 23,250,000 Shares from Wing Success to cover any over-allocations under the International Placing, if any

“Stock Exchange” The Stock Exchange of Hong Kong Limited

“subsidiaries” has the meaning ascribed thereto in section 15 of the Companies Ordinance

“substantial shareholder” has the meaning ascribed thereto in the GEM Listing Rules

“Supply Framework Agreement” a framework agreement to be entered into between our Company and Xin’aote Video, the major terms of which are set out in the section headed “Continuing Connected Transaction” in this prospectus

“Synergetic Innovation Fund” Synergetic Innovation Fund Management Co., Ltd. (協同創新基金管理有限公司), a limited liability company incorporated in the PRC on August 7, 2013 and a connected person

“Track Record Period” the period comprising the three financial years ended December 31, 2013, 2014 and 2015

“Underwriters” the Hong Kong Underwriters and the International Underwriters

“Underwriting Agreements” the Hong Kong Underwriting Agreement and the International Underwriting Agreement

“U.S.” or “United States” the United States of America, its territories, its possessions and all areas subject to its jurisdiction

“US$,” “USD” or “U.S. dollars” United States dollars, the lawful currency for the time being of the United States

“U.S. Securities Act” the U.S. Securities Act of 1933, as amended and supplemented or otherwise modified from time to time, and the rules and regulations promulgated thereunder

“Vertex Asia” Vertex Asia Growth Ltd., a fund managed by Vertex Venture Holdings Limited and a Pre-IPO Investor

“Vertex Tech” Vertex Technology Fund (III) Ltd., a fund managed by Vertex Venture Holdings Limited and a Pre-IPO Investor

—23— DEFINITIONS

“White Form eIPO” the application for Hong Kong Offer Shares to be issued in the applicant’s own name by submitting applications online through the designated website of White Form eIPO at www.eipo.com.hk

“White Form eIPO Service Computershare Hong Kong Investor Services Limited Provider”

“Wing Success” Wing Success Holdings Limited (榮成控股有限公司), a limited liability company established by Mr. Zheng in the BVI on March 10, 2011 and is wholly owned by ZFS Holdings

“Wisdom Group Limited” Shining Wisdom Group Limited (亮智集團有限公司), a limited liability company incorporated in the BVI on March 28, 2006 and is directly held as to 100% by Mr. Zheng

“Xin’aote Cloud” CDV (Beijing) Yun Duan Technology Co., Ltd (新奧特 (北京) 雲端科技有限公司), a limited liability company incorporated in the PRC on December 29, 2014 and is held as to 40% equity interest by CDV WFOE. Details of the holders remaining 60% equity interest are set out in “History, Reorganization and Group Structure—Acquisitions and Disposals and New Businesses”

“Xin’aote Digital” Xin’aote Digital Technology Co., Ltd. (新奧特數字技術股份有限公司), a limited liability company incorporated in the PRC on June 6, 1994, a connected person of our Company which is indirectly held as to 71.7% equity interest by Mr. Zheng

“Xin’ato Investment” Xin’aote Investment Group Limited (新奧特投資集團有限公司), a limited liability company incorporated in the PRC on September 6, 1996, a connected person of our Company, which is directly held as to 95% equity interest by Mr. Zheng and as to 5% equity interest by Mr. Guo Langhua, Our executive Director

“Xin’aote Video” Xin’aote Silicon Valley Video Technology Co., Ltd. (新奧特硅谷視頻技術有限責任公司), a limited liability company incorporated in the PRC on December 30, 1997, a connected person of our Company which is indirectly held as to 90.3% equity interest by Mr. Zheng. Xin’aote Video is our predecessor company

—24— DEFINITIONS

“Xinxin Holding” Xinxin Holding Co., Ltd. (信心控股有限公司), a limited liability company incorporated in the PRC on November 15, 2005, a connected person of our Company which is directly held as to 44% equity interest by Mr. Zheng and as to 56% equity interest by certain independent third parties

“Xinxin Shengtong” Beijing Xinxin Shengtong Science & Technology Development Co., Ltd (北京信心晟通科技發展有限公司), a limited liability company incorporated in the PRC on August 31, 2015 and a connected person of our Company

“ZFS Holdings” ZFS Holdings Limited, a limited liability company incorporated in the BVI on April 1, 2011 and is wholly owned by HSBC International Trustee Limited

“%” per cent.

The English translation of the PRC entities, enterprises, nationals, facilities, regulations in Chinese or another language included in this prospectus is for identification purposes only. To the extent there is any inconsistency between the Chinese names of the PRC entities, enterprises, nationals, facilities, regulations and their English translations, the Chinese names shall prevail.

In this prospectus, unless otherwise specified, references to “provinces” in the PRC also include ethnic minority autonomous regions and municipalities directly administered by the central government.

—25— GLOSSARY OF TECHNICAL TERMS

This glossary contains definitions of certain terms used in this prospectus in connection with our Group and our business. Some of these may not correspond to standard industry definitions.

“HD” high-definition

“IPTV” an interactive TV service system which transmits its digital signals through Internet protocol, instead of being delivered through traditional terrestrial, satellite signal, and cable TV formats

“new media” an all-encompassing term that includes all electronic communication formats ever since the emergence of major static text image formats for online communications

“omnimedia” the delivery of various formats of media content such as text, images, audio and video through the integration of a variety of media platforms such as radio and TV broadcast, Internet, mobile network, cable and satellite communications. Omnimedia encompasses the integration of various forms of media services including radio and TV broadcast, IPTV, Internet video, mobile video, electronic newspaper and magazines and traditional print media

“OTT” an Internet-based TV service system, which integrates cable digital TV with Internet video content. In China, OTT service providers include Tmall, Skyworth, Coship Electronics and others

“PaaS” the platform as a service model, which refers to the cloud computing service that provides a platform to allow customers to develop, run, and manage Web applications without the complexity of building and maintaining the infrastructure typically associated with developing and launching an application

“SaaS” the software as a service model, which refers to software licensing and delivery model in which software is licensed on a subscription basis and is centrally hosted in cloud platform

“SD” standard-definition

“ultra-HD” ultra-high-definition, which includes 4K (2160p) and 8K (4320p) digital video formats

—26— FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. All statements other than statements of historical facts contained in this prospectus, including, without limitation, those regarding our future financial position, our strategy, plans, objectives, goals and targets, future developments in the markets where we participate or are seeking to participate, and any statements preceded by, followed by or that include the words “believe,” “expect,” “aim,” “intend,” “project,” “will,” “may,” “plan,” “consider,” “anticipate,” “seek,” “should,” “would,” “could” or similar expressions or the negative of these words or other similar expressions or statements, are forward-looking statements.

These forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond our control, which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

These forward-looking statements are based on numerous assumptions regarding our present and future business strategies and the environment in which we will operate in the future. Important factors that could cause our actual performance or achievements to differ materially from those in the forward-looking statements include, among others, the following:

• our anticipated growth strategies, including our plan to pursue selective acquisitions or strategic alliances;

• our operations and business prospects;

• our future business development, results of operations and financial condition;

• our sales and marketing activities;

• our capital expenditure plans, future capital needs and funding plan;

• expected changes in our revenues and certain cost or expense items;

• our ability to increase our market share among traditional media operators and expand our customer base to include new media operators and leverage our brand;

• trends and competition in the TV broadcasting post-production industry;

• our ability to control costs;

• our dividend policy;

• our Directors’ expectations and estimates on the operations such as the retention of financial, technical and human resources to meet routine operations and business expansions;

• the amount and nature of, and potential for, future development of our business;

—27— FORWARD-LOOKING STATEMENTS

• the regulatory environment and operating conditions in the industry and geographical markets in which we operate;

• the general economic trend and conditions of the PRC as well as the global market; and

• certain statements in the section headed “Financial Information” in this prospectus with respect to trend in prices, volumes, operations, margins, overall market trends and risk management.

We believe that the sources of information and assumptions contained in such forward-looking statements are appropriate sources for such statements and have taken reasonable care in extracting and reproducing such information and assumptions. We have no reason to believe that information and assumptions contained in such forward-looking statements are false or misleading or that any fact has been omitted that would render such forward-looking statements false or misleading in any material respect.

The information and assumptions contained in the forward-looking statements have not been independently verified by us, the Controlling Shareholders, the Sole Sponsor, the Sole Global Coordinator, the Joint Bookrunners, the Underwriters, any other party involved in the Global Offering or their respective directors, officers, employees, advisers or agents and no representation is given as to the accuracy or completeness of such information or assumptions on which the forward-looking statements are made. Additional factors that could cause our actual performance or achievements to differ materially include, but are not limited to, those discussed under the section headed “Risk factors” and elsewhere in this prospectus.

These forward-looking statements are based on current plans and estimates, and apply only as of the date they are made. We undertake no obligation to update or revise any forward-looking statements in light of new information, future events or otherwise. Forward-looking statements involve inherent risks and uncertainties and are subject to assumptions, some of which are beyond our control. We caution you that a number of important factors could cause actual outcomes to differ, or to differ materially, from those expressed in any forward-looking statement. Accordingly, prospective investors should not place undue reliance on any forward-looking information. All forward-looking statements contained in this prospectus are qualified with reference to cautionary statements set out in this section.

In this prospectus, statement of or references to our intentions or those of any of our Directors are made as at the date of this prospectus. Any such intentions may change in light of future developments.

—28— RISK FACTORS

An investment in our Shares involves various risks. Prospective investors should carefully consider all of the information in this prospectus including the risks and uncertainties described below before making an investment in the Offering Shares. Our business, financial condition or results of operation could be materially and adversely affected by any of these risks and uncertainties. The trading price of our Offer Shares could decline due to any of these risks and uncertainties, and prospective investors may lose all or part of their investment. This prospectus also contains forward-looking information that involves risks and uncertainties.

RISKS RELATING TO OUR BUSINESS AND INDUSTRY

Our revenue declined in 2014 and may continue to fluctuate in the future.

In 2013, 2014 and 2015, our revenue amounted to RMB503.0 million, RMB406.4 million and RMB606.0 million, respectively. We recorded a net loss of RMB12.2 million and RMB69.4 million in 2013 and 2014, respectively, and a net profit of RMB114.1 million in 2015. We generated relatively low revenue and high net loss in 2014 as compared to 2013, primarily reflecting, among others, the completion of a number of large-scale projects in 2013, delays in procurement at some of our large customers, increasing competition in certain product lines and fair value losses on our redeemable convertible preferred shares. Our ability to grow our revenue depends on, among other things, relationship with our customer base, R&D capability, develop and upgrade solutions, services and products catering to our customers’ needs, the quality and timeliness of delivery of our solutions, ability to control expenses, the success of our investments and joint ventures and the development and conditions of China’s digital video market. If we fail to increase revenue at the rate we anticipate, we may not be able to achieve or maintain profitability. We may also incur losses in the future for a number of reasons, including the other risks described in this prospectus, and any unforeseen expenses, difficulties, complications, delays and other unknown events related to our business and operations.

Our significant outstanding billed receivables and turnover days of our average billed receivables may adversely affect our financial condition and results of operations.

We receive payments from customers in installments in accordance with the credit terms in our sales contracts. For further details, see “Business—Customers—Payment and Credit Term.” Any extended delay in payments by any major customer would have a material adverse effect on the aging schedule and turnover days of our trade and bills receivables. We classify our trade and bills receivables into billed receivables and unbilled receivables. We recognize substantially all of revenue from solution contracts once we have obtained customers’ acceptance of delivery, installation and testing of our solution equipment and we issue invoices to our customers for the contract amounts that have become outstanding in accordance with the relevant contracts, which amounts will be recorded as billed receivables. For the contract amounts that will become outstanding upon completion of final inspection by and receipt of acceptance from customers, we record such amounts as unbilled receivable until we issue invoices for such amounts to the customers. As of December 31, 2013, 2014 and 2015, our billed receivables were RMB70.9 million, RMB82.4 million and RMB222.1 million, respectively, and our average billed receivables turnover days were 50 days, 86 days and 108 days, respectively, in 2013, 2014 and 2015. In addition, as of December 31, 2013, 2014 and 2015, we

—29— RISK FACTORS determined trade receivables of RMB3.5 million, RMB12.4 million and RMB13.0 million, respectively, as individually impaired. As a result, we recognized provision for impairment loss of RMB3.5 million, RMB7.8 million and RMB11.7 million, respectively, and bad debts written off of nil, RMB4.6 million and RMB1.3 million, respectively, in 2013, 2014 and 2015.

Our customers’ ability to pay may be impaired by a number of factors such as unfavorable market conditions for China’s TV broadcasting industry or deteriorating liquidity of our customers. The occurrence of any of these factors could affect our customers’ ability to make timely payments and we cannot assure you that our customers will make payment in full to us on a timely basis, or at all. Delays in receiving payments from, or non-payment by, our customers may adversely affect our cash flow position and our ability to meet our working capital requirements. In addition, customers’ defaults in making payments to us on our solution, service or product sales contracts for which we have already incurred significant costs and expenditures can reduce our financial resources that would otherwise be available.

If the digital video technology solution and services industry in China fails to grow as expected, our future growth, financial condition and results of operations would be materially and adversely affected.

Our solutions, services and products primarily serve the TV broadcasting services industry in China, and historically, our revenue growth has been driven by the development of this industry and related technology spending by TV broadcasters and new media and other digital video content creators in China. The digital video technology solution and services industry in China may not continue to grow as projected or at all due to various factors, including:

• the lack of, or delays in, acceptance by the general public of digital video technologies, such as HD and 4K technology and their applications;

• the lack of , or delays in, adoption of cloud-based computing as a platform for digital video content delivery;

• the lack of, or delays in, the implementation of regulations and policies of the PRC government relating to the digital video market in China;

• the lack of growth of TV broadcasters’ advertising revenues in China; and

• continued deterioration of general economic conditions in China.

In particular, our future success significantly depends on the pace at which the TV broadcasters in China transition from analog to digital transmission and from standard to the 4K ultra-high definition standard. Such transition may be delayed by various factors, some of which are beyond our control. Such transition has resulted in increased demand of digital video content creators for more sophisticated solutions, services and products. However, these TV broadcasters may decide that the benefits of digitization and transition to 4K ultra-high definition standard are outweighed by the costs or other considerations. In particular, TV audience in China are accustomed to viewing TV content for

—30— RISK FACTORS free or at relatively low prices, and may not be willing to pay for digital TV subscription, TV programs in 4K ultra-high definition or other value-added services. We cannot assure you that PRC TV broadcasters will continue to be successful in promoting digital TV subscriptions, TV programs in 4K ultra-high definition or other value-added services.

If the TV broadcasting industry in China fails to grow as expected, the related technology spending of TV broadcasters and new media and other digital video content creators may decline, which will in turn reduce the market demand for our solutions, services and products. As a result, our future growth, financial condition and result of operations would be materially and adversely affected.

We derive a significant portion of our revenue from our major customers in each period. Loss of our major customers could have a material adverse effect on our financial condition and results of operations.

We have derived, and we expect to continue to derive, a significant portion of our revenue from a number of major customers. In 2013, 2014 and 2015, sales to our single largest customer represented 10.8%, 8.1% and 5.9%, respectively, of our total revenue and sales to our five largest customers accounted for 31.2%, 24.3% and 24.1%, respectively, of our total revenue. Since our customers may be at different stages of periodic system upgrade cycles during any given period, our largest customers typically vary from period to period. Our revenue in a single period could be significantly affected if one or more large customers cancel, delay or reduce their purchase with us. We derive a significant portion of our revenue from the installation of, and major upgrades to, our solutions and products for our major customers and we also provide a significant portion of our services to customers who have installed our solutions and products. The success of our business depends to a significant extent on being retained by our major customers to perform major upgrades.

We cannot assure you that we will be able to successfully retain our major customers. Our major customers may decide to cancel or reduce spending on digital video technology solutions or services due to a challenging economic or regulatory environments or insufficient consumer demand for digital video. As our solutions and products provide functions that are critical to our customers’ operation, any failure to meet a customer’s expectations could materially and adversely affect our ability to be selected as the technology provider for such customer’s future technology upgrade. Furthermore, our major customers may demand price reductions due to their limited budget or price reductions offered by our competitors. If we are unable to retain our major customers, our financial condition and results of operations may be materially and adversely affected.

Major PRC TV broadcasters are controlled by the PRC government and are highly regulated. Any adverse change in government policies or the regulatory environment could reduce demand for our solutions, services and products and materially and adversely affect our business, financial condition and results of operations.

Major PRC TV broadcasters are directly or indirectly owned by national, provincial or local governments in the PRC, and their operations, business strategies and capital expenditure budgets are significantly influenced by government policies. In particular, any changes in PRC government policies resulting in reduction in TV broadcasters’ needs or funds available to purchase our solutions, services and products, such as fewer government subsidies or withholding approval for system

—31— RISK FACTORS expansion, could result in such customers cancelling or reducing their purchases from us and have a material adverse effect on our business, financial condition and results of operations. Furthermore, the TV broadcasting industry in the PRC is highly regulated. Government regulations with respect to TV broadcasting content, the amount and content of advertising, the pricing of TV subscriptions, the role of private sector investment and the role of foreign investment significantly affect the operation, business strategies and financial performance of our customers. In addition, if any of our major customers or any of their senior management or key personnel fails to comply with any applicable laws and regulations, including PRC and other applicable anti-corruption laws and regulations, or is subject to any investigation related to such failure or alleged failure by any regulatory body, our customers’ business operations, financial condition and prospects might be adversely affected, which may in turn disrupt their upgrade, replacement or expansion plans and disrupt their planned procurement from us. For example, our financial results in 2014 were significantly affected by the PRC government’s anti-corruption campaign at the beginning of 2014, which caused changes in management of some of our major customers, particularly CCTV, which resulted in delay and postponement of these customers’ business activities, including procurement from us on new projects. Furthermore, favorable government policies that promote technological upgrades, such as the PRC government’s promotion of increased digitization, HD migration and convergence of networks and media formats, are a key growth driver for the PRC TV broadcasting industry according to the Frost & Sullivan Report. In this industry environment, we have derived revenue recently from sales of HD- and media convergence-related solutions to PRC TV broadcasters. An adverse change to such policies may halt technological upgrade plans at PRC TV broadcasters, which may result in their postponement or cancellation of purchases from us and adversely affect our business and results of operations.

Receipt of value-added tax refunds has historically been important to our business, and we may not continue to receive such tax refunds in the future.

We have historically received value-added tax refunds from the PRC government on our sales of self-developed software products as part of the PRC government’s policy of supporting software development. In 2013, 2014 and 2015, we received value-added tax refunds in the amount of RMB19.7 million, RMB16.3 million and RMB23.9 million, respectively, representing 3.9%, 4.0% and 3.9%, respectively, of our revenue in these periods. In 2013, excluding the impact of value-added tax refunds, we would have incurred a net operating loss (which is gross profit plus other income less interest income and operating expenses) rather than a net operating profit. The receipt of value-added tax refunds, therefore, has had a significant impact on our results of operations. Although we are not aware of any event or circumstance indicating that the laws and regulations governing VAT refunds might significantly change in the foreseeable future, we cannot assure you that government’s policy of supporting software development will continue. We also cannot assure you that we will continue to receive such refunds at historical level, if at all. In addition, the amount of value-added refunds entitled by us is tied to the amount of sales generated from self-developed software products. To meet the changing technological needs, we have continuously updated our key software products. Nonetheless, given the short life cycle of technology used in the broadcasting industry, if the existing key software copyrights expire and we fail to continue to update the existing software products or develop new software products, we may not be able to continue to receive value-added refunds. If any of the foregoing occurs, our results of operations and growth prospects may be materially and adversely affected.

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Our mobile application business is relatively new with an evolving business model. If our new business fails to generate or increase its revenue at the expected level and pace, our overall growth and profitability would be adversely affected.

We recently entered into the mobile application business after launching Meicam (“美攝”), which had not generated revenue during the Track Record Period and bears risks and uncertainties that are unique to that business. Mobile application is a business that requires to make our technology accessible to a mass-market and generally young audience. This is different from our traditional core market of TV broadcasters. The risks and uncertainties presented in this business include: (i) our ability to develop a viable revenue model in the foreseeable future; (ii) our ability to continue to increase our user base and activity level; (iii) our ability to develop additional functionalities and features; and (iv) our ability to strengthen the recognition of the “Meicam” brand. If any of these risks and uncertainties materializes, and we fail to achieve the level of revenue growth and profitability from this new business as expected, our overall growth and profitability would be adversely affected.

Our success depends on our ability to keep pace with the rapid changes in digital video technology and to provide innovative solutions, services and products in response to rapidly evolving market demand. Our failure to do so may have a materially adverse effect on our business, financial condition and result of operations.

The TV broadcasting post-production industry is characterized by rapid technological improvements, evolving industry standards, changing customer preferences and frequent introduction of new solutions, services and products. Because of the development of digital video technologies and the progress of digitization and integration of traditional broadcasting networks and new media networks, video content distribution models and audience habits and preferences have changed dramatically in the last few years and may continue to change rapidly in the future. We may fail to predict accurately the future development trends, and such changes may deviate from our strengths, making our existing solutions, services and products obsolete or less relevant. Our brand image and reputation in the market and our future success will continue to depend on our ability to anticipate these changes and to develop innovative solutions, services and products to meet our customers’ evolving needs. We may fail to anticipate or respond to these new changes in a timely or cost-effective manner due to the complexity and sophistication of digital video technologies and our normal product development cycles. If we are unable to accurately predict market trends or adapt to evolving market demand, our ability to innovate and meet customer needs will suffer and our revenues and profitability as well as our reputation will be materially and adversely affected. Our failure to address these developments may also have a materially adverse effect on our competitiveness and our ability to meet our growth targets.

If we fail to protect our intellectual property rights, our business and competitive position would be severely harmed.

Our intellectual property is crucial to our competitiveness. As of December 31, 2015, we owned 353 patents registered with, and had 572 patent applications pending approval by the PRC State Intellectual Property Office and also owned 144 software and other copyrights registered with the PRC Copyright Protection Center. We rely on a combination of patent, trademark and copyright laws, trade secrets, confidentiality procedures and contractual provisions to protect our intellectual property

—33— RISK FACTORS rights and to meet the obligations we owe to third parties from whom we license intellectual property rights. Nevertheless, these afford only limited protection and it can be difficult and expensive to police unauthorized use of our proprietary technologies. In addition, intellectual property rights historically have not been enforced in the PRC as vigorously as in many other developed jurisdictions, and intellectual property theft is a serious risk for companies operating in the PRC. Moreover, litigation may be necessary to enforce our intellectual property rights, and could result in substantial costs, divert the attention and resources of our management and technical personnel and disrupt our business. The validity and scope of any claims relating to our patents or other intellectual properties may involve complex technological, legal and factual questions and analyses and, as a result, the outcome may be highly uncertain. In addition, there is no guarantee that we would be able to detect unauthorized use of our intellectual property and halt such use through litigation. Failure to protect our intellectual property rights could have a materially adverse effect on our business, financial condition and results of operations and may severely harm our competitive position.

Certain trademarks we use to market our products under the brand of “新奧特” (“Xin’aote”), which is held by one of our related parties, Xin’aote Digital. We maintain trademark license agreements with Xin’aote Digital for the use of the “Xin’aote” trademark. For further details, see “Continuing Connected Transactions—Exempt Continuing Connected Transactions—Trademark Licensing Agreement.” If we fail to renew the authorization to use such trademarks or Xin’aote Digital suspends its authorizations of such trademarks to us, our business, financial condition and results of operations may be materially and adversely affected. We are also exposed to the risk that a third party successfully challenges Xin’aote Digital’s ownership of, or our right to use, the “Xin’aote” trademarks or if a third party uses the “Xin’aote” trademarks without authorization.

If we fail to expand our solution, service and product offerings or design and implement solutions to meet increasingly complex customer demands and attract new customers, our financial condition and results of operations may be materially and adversely affected.

We have been expanding, and plan to continue to expand, our product and service offerings in response to technological advances and customer demands and to attract new customers. Our solutions also face increasingly complex demands from our customers, which require us to integrate an expanding array of products at lower cost and higher performance. The success of our expanded solution, service and product offerings and our ability to attract new customers depends on our understanding of our customers’ operations, our ability to meet our customers’ demands in a cost-competitive and effective manner and our R&D capabilities to provide innovative and customized solutions, services and products for our customers. In particular, we may face a number of challenges relating to our solution, service and product offerings, including:

• understanding the needs of particular customers and customizing our solutions, services and products to meet their needs;

• integrating and customizing a rapidly growing number of solutions, services and products for our customers’ specific needs and under hardware constraints;

• predicting the trend of technological advance and developing new solutions, services and products;

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• maintaining the quality of our solutions, services and products;

• controlling costs relating to hardware purchases and R&D activities; and

• maintaining close customer relationship and high levels of customer satisfaction.

Failure to successfully market our expanded product offerings or implement large and complex solutions could damage our reputation, affect our ability to attract new customers or retain existing customers, which in turn will have a material adverse effect on our financial condition and results of operations.

We generally win solution contracts from new customers by bidding on major system installations and upgrades by TV broadcasters. The success of our business depends significantly on our ability to attract new customers for our solutions, services and products. We cannot assure you that we will be able to successfully attract new customers and diversify our customer base. Our prospective customers may decide to cancel or reduce spending on digital video technologies or services, and may demand price reductions. If we are unable to continue to attract a sufficient number of new customers or diversify our customer base, our business, financial condition, results of operations and prospects may be materially and adversely affected.

We operate in a highly competitive market, and our competitors may have various advantages, including the ability to draw upon a greater depth and breadth of resources than those available to us. Our failure to compete successfully in the market could have a material adverse effect on our business, financial condition and results of operations.

The TV broadcasting post-production industry in which we operate is highly competitive. In particular, there is intense pressure on technology and service providers to innovate, expand functionalities, upgrade product lines, accelerate development of new solutions, services and products and reduce prices. We face competition from both domestic and international companies. Most of our sales to customers are made pursuant to formal bids. Customers consider many factors when evaluating our solutions, services and products comparable to those of our competitors, including innovation, ease of use, functionality, reliability, performance, compatibility, reputation, price, training and after-sales maintenance support. Relationships with current and potential customers and business track records in the TV broadcasting post-production industry are also important in winning bids and securing future engagements. We may not be able to compete effectively against our competitors in all respects. For example, some of our major competitors, such as Sobey, may have greater R&D capabilities. Some of our competitors may have longer operating history, greater market shares, better brand recognition, and superior financial, technical, marketing, distribution and support resources. For instance, Dayang is one of our major domestic competitors, which had a 6.8% market share in the TV broadcasting post-production industry in China in terms of its revenue in 2015, according to the Frost & Sullivan Report. Our competitors may also have track records in other related fields, such as computer-generated imagery, or CGI, technology, video production systems and high-end multimedia equipment, that may facilitate their marketing efforts. As a result, these competitors may be able to deliver more innovative solutions, services or products, penetrate the market more effectively, respond more quickly to new technological trends and changes in market

—35— RISK FACTORS demand, devote more resources to the development, marketing and sale of their solutions, services and products, or price their solutions, services and products more competitively than us. Our failure to compete successfully in the market could have a material adverse effect on our business, financial condition and results of operations.

We recorded net current liabilities as of December 31, 2013 and 2014. We cannot assure you that we will not experience net current liabilities in the future, which could expose us to liquidity risks.

As of December 31, 2013 and 2014, we had net current liabilities of RMB308.9 million and RMB368.7 million, respectively, primarily due to the redeemable convertible preferred shares recorded as current liabilities of RMB563.8 million and RMB633.3 million outstanding as of the respective dates. As of December 31, 2015, we had a net current assets position of RMB329.7 million because redeemable convertible preferred shares of RMB607.8 million were classified as non-current liabilities upon the extension of the redemption period on these preferred shares. Upon completion of a Qualified IPO, all of our outstanding redeemable convertible preferred shares will have been converted to ordinary shares and become part of our share capital and reserve. See “Financial Information—Net Current (Liabilities)/Assets” for further discussion on our net current liabilities and redeemable convertible preferred shares.

We cannot assure you that we will not experience net current liabilities in the future. A net current liabilities position exposes us to liquidity risks. Our future liquidity, the redemption of our redeemable convertible preferred shares, the payment of trade and other payables and the repayment of debt financing will primarily depend on our ability to generate adequate cash inflows from our operating activities. If we are unable to maintain sufficient working capital, our business, financial position, results of operation and prospects would be materially and adversely affected.

Our solutions, services and products may experience quality issues that could have a materially adverse effect on our reputation and customer relationships, which may in turn have a negative impact on our revenue and profitability.

Our solutions, services and products use complex software and may have coding defects or errors that may impair our customers’ ability to use our solutions, services and products. Similarly, the hardware we assemble for our customers in connection with our solutions may include design or manufacturing defects that could cause malfunctions. There may also be compatibility issues among our software and hardware, our third-party suppliers’ software and hardware and our customers’ other software and hardware. We cannot assure you that we would be able to detect and resolve all such defects and issues through our quality control measures. In particular, commercial objectives such as the need to meet customer expectations regarding solutions, services and products release dates may affect the time, effort and resources that are available to be allocated to quality control matters.

We typically provide warranties of one to three years for our solutions and products. Our customers may uncover latent defects in our products or solutions that were not apparent at the time of the sale of our products or the implementation of our solutions. Such defects may be discovered

—36— RISK FACTORS before or after the warranty period has expired. Our customer is typically allowed to withhold 5% to 10% of the contract’s aggregate value as a performance deposit, which would generally be paid to us within one month after the warranty expires. If our solutions or products fail to perform as warranted and we are unable to resolve the performance issues in a timely manner, we may have to forfeit our performance deposits and our relationships with our customers may be damaged. Any defects in our products or underperformance of our solutions could cause the loss of customers or revenues, delays in revenue recognition, increased levels of product returns or replacements, damage to our market reputation and significant increases in warranty claims and other expenses, all of which could result in a material decrease in our profitability.

If we cannot successfully manage our growth, our business, financial condition, results of operations and prospects could be materially and adversely affected.

As we continue to grow, we must continue to improve our managerial, technical and operational knowledge and allocation of resources and implement an effective management information system. Our ability to manage future growth will depend in large part upon a number of factors, including our ability to:

• attract and retain our qualified technical personnel in order to continue to develop reliable and saleable solutions, services and products that respond to evolving customer needs;

• build and train sales and marketing forces to expand our presence in the evolving PRC marketplace and to continually keep staff informed of the technical features, issues and key selling points of our solutions, services and products;

• increase our manpower and production capacity to meet unexpected surges in customer demand;

• develop customer support capacity as sales increase without diverting resources from product and solution development efforts; and

• manage relationships with a growing number of customers, suppliers, contractors, service providers and other third parties.

We cannot assure you that we will not experience issues such as capital constraints, operating difficulties at new operational locations or difficulties in expanding our existing business and operations. Our expansion plans may disrupt our existing operations and have a materially adverse effect on our business, financial condition, results of operations and prospects.

If we fail to attract, train and retain competent digital video software engineers, our business, financial condition, results of operations and prospects could be materially and adversely affected.

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The success of our business depends significantly on our ability to attract, train and retain highly skilled software engineers with extensive experience in digital video technologies, who are not easily replaceable by other software engineers in the job market. In China, there is currently a limited supply of software engineers with experience in the highly specialized TV broadcasting post-production industry. Competition for skilled labor is intense and may require us to offer higher compensation and other benefits in order to attract and retain skilled personnel, which could materially and adversely affect our financial condition and results of operations. We cannot assure you that we will continue to be able to successfully attract and train additional competent digital video software engineers or retain those we currently employ. Our ability to serve our customers effectively will suffer if we cannot successfully attract, train and retain highly specialized digital video software engineers, and our business and prospects, as well as our financial condition and results of operation, could be materially and adversely affected.

Most of our solution contracts are project-based and do not necessarily provide for subsequent engagements. If we are unable to continue to generate a sufficient number of new and unique solution contracts, our business, financial condition, results of operations and prospects will be materially and adversely affected.

Our customers generally retain us on a project-by-project basis in connection with the installation or major upgrade of their systems, rather than on a recurring or retainer basis under long-term contracts. Although a substantial portion of our revenues are generated from repeat customers, our solution contracts are typically project-based and one-off in nature. Consequently, we must continually seek new and unique solution contracts with both new and repeat customers. In 2013, 2014 and 2015, revenue from our solution contracts accounted for 76.6%, 74.6% and 75.0%, respectively, of our revenue. Any failure to continue generating a sufficient number of new and unique solution contracts would have a material adverse effect on our business, financial condition, results of operations and prospects.

We enter into fixed-price contracts with a majority of our solutions customers, and our failure to accurately estimate the resources and time required for these contracts could materially affect our profitability.

A majority of our solutions are provided on a fixed-price basis that requires us to undertake projections and planning related to purchases of necessary hardware and other costs and availability of digital video software engineering resources. We bear the risk of cost overruns and completion delays in connection with these projects. In particular, we may be unable to recover any cost overruns absent an agreement with the customer to amend the relevant project contract to respond to the change of circumstances. We generally are unable to pass on any increase in costs to our customers if we experience an unexpected cost increase, such as an increase in the prices charged to us by our third-party suppliers of software and hardware components, during the period from signing of a solutions contract to placing the relevant purchase orders to our suppliers for the relevant equipment, unless the cost increase results from a change of software or hardware components demanded by our customers. The actual costs may differ from our estimates due to unanticipated technical problems which may require us to incur additional costs we cannot recover, failure to properly estimate the

—38— RISK FACTORS repair or maintenance requirements of our customers, and other unforeseeable reasons. In addition, implementations of these projects are subject to various factors such as cost of supplies and disruption of supply. Some of these factors may be beyond our control and our customers’ control. These unforeseen factors which we are exposed to may hinder the smooth implementation of these projects within the fixed budget and time frame, which would cause cost overruns and penalties. During the Track Record Period, we did not encounter any of the aforementioned issues with respect to our solutions business that had a material adverse effect on our financial condition or results of operations. However, we cannot assure you that we will be able to continue to accurately estimate the resources and time required for a project, and failure to do so may materially and adversely affect our financial performance and results of operation.

The length of our sales cycle is unpredictable, which makes it difficult for us to forecast revenue and may increase the volatility of our operating results.

We have a lengthy sales cycle that typically begins with our receipt of an initial request from a customer and ends when we finish delivery to, installation for and final inspection or assessment of our products by our customers. We typically need to obtain a design win to receive orders from our customers. In some cases, due to the rapid growth of new product applications and technologies, this process can be time-consuming and requires substantial investment of our time and resources. This process involves pre-sale activities before our customers engage us. In addition, our customers may require significant time to test, evaluate and design our products or solutions into their products or systems. Following a design win, we may need several months to complete installation and testing and provide technical training and other support for our customers. The trial operation period from delivery, installation and testing to final inspection and acceptance of our solutions may last three to six months whereas the trial operation periods for a limited number of our solution contracts last more than six months, and a significant number of solution contracts do not specify a timeframe on final inspection. Many factors beyond our control could affect the length of the sales cycle of our products. The uncertainties on the sales cycle length may make it difficult for us to forecast our revenue and may increase the volatility of our operating results.

We rely on third-party suppliers to provide us with hardware and software components for our solutions, services and products. Any disruptions to these supply arrangements could jeopardize the production of our products and the implementation of our solutions, which could materially and adversely affect our business, financial condition, results of operations and prospects.

We rely on third-party suppliers, in certain cases sole suppliers or a limited number of suppliers, to provide us with hardware and software components necessary for our solutions, services and products. In 2013, 2014 and 2015, purchases from our single largest supplier represented 18.6%, 9.4% and 15.2%, respectively, of our total purchases, and purchases from our five largest suppliers collectively represented 59.6%, 35.7% and 46.7%, respectively, of our total purchases during the same periods. Although we generally prefer to establish multi-source supply arrangements for the hardware and software components used in our solutions, multi-source arrangements are not always possible or cost-effective. We consequently depend on sole suppliers for certain hardware and software components, including certain critical items such as certain specialized graphics cards. We do not

—39— RISK FACTORS generally carry significant inventories of, and might not have guaranteed supply for, these sole-sourced components. If any of our sole suppliers were to cease, suspend or limit production or shipment of these components to us, or adversely modify supply terms or pricing, the availability of our products and our ability to successfully implement solutions may be materially impaired. We cannot assure you that we will be able to obtain these components or acceptable substitutes from alternative suppliers on commercially reasonable terms or at all. We may also be required to expend significant development resources to redesign our solutions to accommodate substitute components, which could materially and adversely affect our business, financial condition, results of operations and prospects.

We depend on the availability and proper functioning of certain third-party hardware and technologies that we incorporate into our solutions and products, which exposes us to various risks that may materially and adversely affect our revenues, costs, profitability and future growth.

We purchase third-party hardware and license third-party technologies for incorporation into our certain solutions and products to provide critical functionalities. Furthermore, the profit margins for our solutions and products are affected by the license and purchase fees we pay for the third-party hardware and technologies. If we are unable to pass on the associated cost increases of the third-party hardware or technologies to our customers, our profit margins may decline and our financial condition and results of operations would suffer. Third-party hardware and technologies may also include defects or errors that could adversely affect the performance of our solutions or products. As a result, we may be responsible for additional warranty costs to replace or repair such solutions or products to the extent the warranties we provide to our customers differ from the warranties our suppliers provide to us in terms of warranty period and coverage. In addition, such defects or errors may harm our market reputation as well as significantly reduce our sales.

Moreover, third-party technologies may include certain open source software code that, if used in combination with our own software, may jeopardize our intellectual property rights. If any third-party technology license expires, is terminated or ceases to be available on commercially reasonable terms, we may be required to expend considerable resources integrating alternative third-party technologies or developing our own substitute technologies. Any failure to procure the necessary third-party hardware and technologies may result in sales of our solutions and products being delayed or suspended or our distribution of solutions and products with reduced feature sets or functionalities, and may materially reduce our revenues, profitability and future growth.

We may be exposed to infringement or misappropriation claims by third parties, which may have a material adverse effect on our business, financial condition, results of operations and prospects.

We may be exposed to intellectual property rights infringement or misappropriation claims by third parties when we develop and use our own technology and know-how. We may also be subject to litigation involving claims of patent infringement or violation of other intellectual property rights of third parties. The defense against any of these claims would be both costly and time-consuming, and

—40— RISK FACTORS could significantly divert the efforts and resources of our management and technical personnel. An adverse determination in any such litigation or proceedings to which we may become a party could subject us to significant liability to third parties, require us to seek licenses from third parties or redesign our solutions, services and products, or subject us to injunctions prohibiting the development and sale of our solutions, services or products or the use of technologies. To the extent that licenses are not available to us on commercially reasonable terms or at all, we may be required to expend considerable time and resources developing alternative technologies, sales of our solutions, services or products may be delayed or suspended, or we may be forced to develop our solutions, services and products with reduced features or functionalities. Protracted litigation could also result in our customers or potential customers deferring, reducing or cancelling their purchases of our solutions, services and products. In addition, we could face disruptions to our business operations as well as damage to our reputation as a result of such claims, and our business, financial condition, results of operations and prospects could be materially and adversely affected.

Our results of operations may fluctuate from period to period and our failure to achieve expected earnings could cause the market price of our Shares to decline significantly.

Our results of operations from period to period have varied in the past and are likely to continue to vary in the future due to a number of factors. In particular, we typically experience higher sales activities in the fourth quarter of each calendar year as the state-owned TV broadcasters in China usually concentrate their purchases in such period. In addition, our revenue in any particular period may reflect a number of large orders for our integrated solutions. As a result, even minor variations in the rate and timing of our sales to prospective buyers could result in significant changes in our revenues during a particular period and lead to inaccuracies in our previous budgets and other plans, and those variations could adversely affect our financial performance. For example, sales to one or more of our customers may be delayed or may not be completed within a given period end, or the contract terms may otherwise preclude us from recognizing revenues during a particular period. In addition, customers may reduce their capital investments in our solutions, services and products in response to slowing of economic growth or their digitization processes. Also, any of our large customers may terminate their relationship with us or significantly reduce the amount they spend with us. Furthermore, our results of operations are affected by the fluctuation of our cost of revenues and operating expenses from period to period. In light of the foregoing, period-to-period comparisons of our results of operations are not necessarily meaningful and should not be relied upon as indications of likely future performance. Fluctuations in revenue or our failure to achieve expected earnings per share could cause the market price of our Shares to decline significantly.

We may lose the business opportunities to provide solutions, services and products to Xin’aote Video for Special Qualification Projects under certain circumstances.

Xin’aote Video, our predecessor company prior to the Reorganization and a connected person of our Company after the Reorganization, engages in certain projects involving the provision of solutions, services and products for certain entities (including government agencies and military units) that require the provider of solutions, services and products to have qualifications that can only be obtained by non-foreign owned domestic companies (the “Special Qualification Projects”). Upon completion of the Reorganization, Xin’aote Video, through its networks and contacts accumulated in the past years, continues to be invited to bid for such Special Qualification Projects. As a

—41— RISK FACTORS foreign-invested company, we are not eligible to bid for such Special Qualification Projects. Since Xin’aote Video does not have the capability or resources to provide digital video technology solutions and services for such Special Qualification Projects, it purchases such solutions, services and products from us. In 2013, 2014 and 2015, Xin’aote Video’s purchase of solutions, services and products from us for the Special Qualification Projects amounted to RMB0.5 million, RMB2.1 million and RMB6.1 million, respectively. To continue and regulate this business arrangement, we will enter into a Supply Framework Agreement with Xin’aote Video and continue to provide solutions, services and products to Xin’aote Video for its participation in the Special Qualification Projects. For detailed information about this arrangement, see “Continuing Connected Transactions—Non-exempt Continuing Connected Transactions—Supply Framework Agreement.” King & Wood Mallesons, our PRC legal advisors, are of the view that because we only provide digital video technology solutions and services required by Xin’aote Video and do not participate in the Special Qualification Project as a direct supplier to Xin’aote Video’s customers, our participation in the Special Qualification Project through the Supply Framework Agreement will not be deemed as a breach of the relevant laws and regulations regarding restriction on foreign owned companies.

Notwithstanding the entry into the Supply Framework Agreement between us and Xin’aote Video, if any of Xin’aote Video’s contracts for Special Qualification Projects is terminated, its qualification for participating in such projects is cancelled or it fails to enter into new contracts for Special Qualification Projects, we will lose the business opportunity to provide solutions, services and products to Xin’aote Video for such projects. As a result, our business and results of operation may be adversely affected.

We are dependent on the continued service of our management team, and our business, financial condition and results of operations will suffer greatly if we lose their services.

Our future success depends on the continued services of our key executives. In particular, we rely heavily on our founder and chairman of our Board, Mr. Zheng, and other members of our senior management team for their business vision, management skills, technical expertise, experience in the TV broadcasting post-production industry and working relationships with many of our customers. If Mr. Zheng or any other member of our senior management ceases working for us, we may not be able to replace them easily and our business may be severely disrupted. We do not have key person insurance.

If any of our executive officers joins our competitors or if we otherwise fail to retain of any of them, we may lose customers, know-how and key personnel. Each of our executive Directors has entered into an employment agreement with us, which contains confidentiality and non-competition provisions. However, if any dispute arises between any of our executive officers and us, we cannot assure you whether and how any of these agreements could be enforced in China, where these executive officers reside, because of the uncertainties in the PRC legal system. Moreover, the PRC regulatory regime has continued to evolve, and from time to time the applicable PRC regulatory agencies may promulgate new regulations, re-interpret existing regulations or take regulatory positions that are different from the past positions, as well as commence enforcement action against individuals and companies operating in China. We cannot assure you that the continued evolution of the PRC regulatory regime and any actions taken by the applicable PRC regulatory agencies would not have a materially adverse effect on us and/or our senior management or other personnel.

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The interest of our ultimate Controlling Shareholder may conflict with the interests of the public shareholders.

Immediately after the completion of the Capitalization Issue and the Global Offering, our ultimate Controlling Shareholder, Mr. Zheng, who is also the founder and chairman of our Board, has, in his capacity as the settlor and a beneficiary of the Future Success Trust, the power to exercise all the voting rights over approximately 38.76% of our issued share capital (assuming the Over-allotment Option is not exercised). Subject to our Memorandum and Articles of Association and applicable law and regulations, our ultimate Controlling Shareholder will continue to have the ability to exercise a controlling influence on our management, policies and business by controlling the composition of our Board of Directors, determining the timing and amount of our dividend payments, approving significant corporate transactions including mergers and acquisitions, and approving our annual budgets. We cannot assure you that our ultimate Controlling Shareholder will not cause us to enter into transactions or take, or fail to take, other actions or make decisions that will conflict with the best interest of public shareholders.

We may not be able to effectively identify or pursue target companies for acquisitions, and even if we complete such acquisitions, we may not be able to successfully integrate the target companies, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

In September 2013, we acquired the digital broadcast automation solutions business from Founder Electronics. As part of our business strategy, we plan to continue acquire companies, technologies and products that we believe can improve our ability to compete in our existing markets or help us enter new markets. Our ability to implement our acquisition strategy will depend on our ability to identify suitable targets to reach agreement with them on commercially reasonable terms and the availability of financing to complete acquisitions, as well as our ability to obtain any required shareholder or government approvals. Moreover, these acquisitions may expose us to new operational, regulatory, market and geographic risks and challenges, including:

• difficulties in integrating the operations, policies and personnel of the target company;

• potential loss of key employees of the target company;

• potential loss of key business relationships and the reputation of the businesses we acquire;

• the possibility of incurring significant impairment losses related to goodwill and other intangible assets;

• uncertainty of entry into markets in which we have limited or no experience and in which competitors have stronger market positions;

• unsatisfactory performance of the businesses we acquire;

• issues not discovered in due diligence, which may include product quality issues or legal contingencies; and

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• responsibility for the liabilities associated with the businesses we acquire, including those which we may not anticipate.

Any of these events could disrupt our ability to manage our business, result in our failure to derive the intended benefits of the acquisitions, cause us to be unable to recover our investments or result in our having to recognize goodwill impairment charges, which could in turn materially and adversely affect our business, financial condition, results of operations and prospects.

We use certain third-party distributors for the sale of our solutions and products, and hence failure to maintain relationships with our existing distributors or to attract new distributors could materially and adversely affect our business, financial condition, results of operations and prospects.

Since February 2014, we engaged distributors to complement our direct sales to sell our solutions and products. As of December 31, 2014 and 2015, we had seven and 15 distributors, respectively. In 2014 and 2015, sales to our distributors accounted for approximately 1.3% and 0.7%, respectively, of our total revenue. Our distribution agreements with our distributors are generally for a term of one year, renewable annually at our discretion based on the performance and credit history of our distributors. There is no assurance that we will be able to successfully renew our existing distribution agreements upon their expiration on favorable terms, or at all. Furthermore, if we fail to maintain our relationships with our existing distributors and are unable to attract new distributors, or if we elect to terminate the relationships with one or more of our distributors as a result of their breach of our distribution agreements, our ability to effectively sell our solutions and products in a given region or to a certain group of customers may be negatively impacted. In such cases, our results of operations and brand image may be materially and adversely affected.

If we are unable to obtain the additional capital we need in a timely manner or on acceptable terms, or at all, our business, financial condition, results of operations and prospects may be materially and adversely affected.

In 2014, we recorded net operating cash outflow. Historically, we funded our operations through equity financing, credit facilities and offering of several series of redeemable convertible preferred shares to investors. We believe that our current cash and cash equivalents, anticipated cash flow from operations and the proceeds from this offering will be sufficient to meet our anticipated cash needs for the foreseeable future. We may, however, require additional cash resources due to changed business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If these resources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. Our ability to obtain additional capital in the future is subject to a variety of uncertainties, including:

• our future financial condition, results of operations and cash flows;

• conditions in Hong Kong and other capital markets in which we may seek to raise funds;

• investors’ perception of, and demand for, securities of digital video technology solution and service companies; and

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• economic, political and other conditions in the PRC and elsewhere.

We may be unable to obtain additional capital in a timely manner or on acceptable terms, or at all. Moreover, the sale of additional equity and equity-related securities could result in additional dilution to our shareholders. Furthermore, the incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financing covenants that would restrict our operations.

We rely on a single facility for most of our operations. Any destruction of, or significant disruption of operations at, this facility could materially and adversely affect our ability to conduct our business.

We maintain our corporate headquarter at, and substantially all of our operations, including our R&D activities are concentrated within, a single facility that we lease in Beijing, China. As we do not have any backup facilities, we depend on this facility for the continued operation of our business. In addition, we currently do not maintain any business disruption or similar insurance coverage. A major earthquake, fire or other catastrophic event that may result in the destruction of, or significant disruption to, this facility could severely affect our ability to develop our products, implement our solutions or generally conduct our business operations, and would have a material adverse effect on our financial condition, results of operations and prospects.

The discontinuation of or reduction in any preferential tax treatments currently available to our subsidiaries in the PRC may have an adverse effect on our financial condition and results of operations.

Under the EIT Law, both foreign-invested and domestic enterprises are generally subject to a uniform income tax rate of 25%. However, certain of our subsidiaries currently enjoy tax incentives in the form of preferential income tax rates. CDV WFOE obtained the “High and New Technology Enterprise” (“高新技術企業”) qualification in 2012 and has renewed its qualification in 2015. It was also accredited as “Key Software Enterprise under the National Plan” (國家規劃佈局內重點軟件企業) and enjoyed a preferential income tax rate of 10% in 2013 and 2014. In 2015, CDV WFOE enjoyed a preferential income tax rate of 15%. Beijing Zhengqi obtained the “High and New Technology Enterprise” qualification in 2014 and enjoyed a preferential income tax rate of 15% in 2014 and 2015. The preferential tax treatment in connection with “High and New Technology Enterprise” qualification for CDV WFOE and Beijing Zhengqi is valid until July 2018 and October 2017, respectively. Such preferential tax treatments are subject to reassessment and we cannot assure you that our subsidiaries will continue to enjoy such preferential tax treatments. If any of those subsidiaries is not able to obtain any further preferential tax treatment when its existing preferential tax treatment expires, our financial conditions and results of operations may be adversely affected.

We may not continue to receive sustainable government subsidies.

We have historically received subsidy payments from the PRC government mainly to encourage and support our research and development activities. In 2013, 2014 and 2015, we received government subsidies of RMB17.9 million, RMB12.4 million and RMB15.3 million, respectively. The government subsidies are subject to the sole discretion of the relevant governmental authorities and they granted,

—45— RISK FACTORS often with certain conditions, in connection with the government’s efforts to promote the development and innovation of the Chinese indigenous technologies and other policies, and, thus, are subject to change and termination. Such conditions typically include minimum qualifications on grantees, including business track record, number of employees, revenue, and R&D and/or fixed asset expenditure levels, and use restrictions, which generally allow grantees to only use cash subsidies for R&D activities and procurement of R&D-related fixed assets. We cannot assure you that we will continue to receive government subsidies in similar amounts, or at all. In the event that we lose such government subsidies, our financial condition and results of operations may be adversely affected.

Any material disputes between our joint venture partners and us may adversely affect the results of operations and financial condition of the relevant joint venture.

We have established and will continue to establish joint ventures with third parties for the development of new businesses, investment and R&D of video digital solutions and products. If there is a material dispute between us and our joint venture partners in connection with the performance of a party’s obligations or the scope of a party’s responsibilities under a joint venture agreement, we may not be able to resolve such disputes through negotiation. In the event that a material dispute cannot be resolved, the business and operations of the joint venture may be adversely affected, and the joint venture agreement may be terminated by mutual consent of the parties or as a result of a material breach of one party. In addition, the operational, financial or other conditions of our joint venture partners may deteriorate, which may adversely affect their ability to continue to perform their obligations under the joint venture agreements or other contracts, which in turn could have an adverse impact on the business of the joint venture. In the event that any of the above occurs, our financial condition and results of operations may be adversely affected.

We may be subject to fines due to the lack of registration of our leases.

Pursuant to the Measures for Administration of Lease of Commodity Properties《商品房屋租賃 ( 管理辦法》), which was promulgated by the Ministry of Housing and Urban-Rural Development of the PRC (中華人民共和國住房和城鄉建設部) on December 1, 2010 and became effective on February 1, 2011, both lessors and lessees are required to file the lease agreements for registration and obtain property leasing filing certificates for their leases. During the Track Record Period, we failed to register 24 lease agreements we entered into as tenant for certain properties which were used as office premises. We may be required by relevant government authorities to file the lease agreements for registration within a time limit, and may be subject to a fine for non-registration exceeding such time limit, which may range from RMB1,000 to RMB10,000 subject to the discretion of the government authorities. See “Business—Legal Proceedings and Compliance—Historical Non-compliance Incidents—Lack of Lease Registration.”

An unforeseen catastrophic event or adverse public health epidemics or pandemics may have a material adverse effect on our business, financial condition and results of operations.

We provide solutions, services and products to customers with complex, geographically dispersed businesses in China, where natural disasters, such as earthquakes, floods, fires, heavy rains and sand storms, may strike with little or no warning. Implementing our solutions and providing our services generally require a significant amount of on-site operations by our personnel at our

—46— RISK FACTORS customers’ premises, while some of our services are provided remotely through third-party telecommunications infrastructure in China. At any particular time, we would be implementing solutions for only a limited number of customers, and our inability to implement solutions for any of these customers on a timely basis or at all may have a material adverse effect on our operations and profitability, as well as our reputation and prospects. Moreover, any injury to our personnel or damage to physical equipment and telecommunication infrastructure caused by a natural disasters, terrorist activity, cyber attacks, acts of war or other catastrophic events may significantly limit our ability to develop our products, implement our solutions, provide our services or conduct other business operations, and have a material adverse effect on our business, financial condition and results of operations.

We have limited insurance coverage, which could have a material adverse effect on our financial condition and results of operations.

Unlike insurance companies in more developed markets, insurance companies in China currently offer a very limited range of insurance products. Other than property and casualty insurance for some of our assets, directors and officers insurance and insurance relating to pecuniary damages caused by defects in our solutions, services and products, we do not have insurance to cover our business or interruptions of our business, litigation or product liability. Furthermore, the cost of insuring against these risks and the difficulties associated with acquiring such insurance on commercially reasonable terms generally make it impractical for us to have such insurance. Any uninsured occurrence of loss or damage to our property, litigation or business disruption may cause us to incur substantial costs and divert our resources, which could have a material adverse effect on our financial condition and results of operations.

Our non-IFRS financial measures set out in this prospectus may be calculated differently by investors and other market participants.

Adjusted net (loss)/profit and adjusted EBITDA included in this prospectus are not recognized measures of financial performance under IFRS. Our management uses these non-IFRS financial measures in its analysis of our operations as we believe that they are useful measures for certain investors to assess our operating results. For the definitions of our adjusted net (loss)/profit and adjusted EBITDA as well as reconciliation of our (loss)/profit for the year under IFRS to adjusted net (loss)/profit and adjusted EBITDA, see “Financial Information—Non-IFRS Financial Measures.”

These non-IFRS financial measures are not necessarily comparable to similar measures that may be presented by other companies and they may be calculated differently by investors and other market participants. Therefore, comparison of such measures with other companies may not be meaningful. Investors should not consider these measures as alternatives to any measures determined in accordance with IFRS or as being indicative of funds available to fund our cash needs, including our ability to make distribution to our Shareholders.

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Our backlog may not be indicative of our future results of operations.

We have provided our contract backlog amounts, which represent the aggregate value of contracts we have executed with customers as of a certain date, less revenue already recognized in connection with such contracts up to and including the same date. Backlog serves as an estimate of the value of work contracted for and yet to be completed, and thus an estimate of revenue expected to be recognized in the future in connection with the relevant contracts. However, we determine the amount of our contract backlog based on the assumption that the relevant contracts will be performed in full in accordance with their terms. As this assumption may not be true with respect to each and every relevant contract we have executed or will execute in the future, our backlog amounts may not be indicative of our actual earnings in the future.

We have not experienced material modifications, termination or cancellation of our contracts by our customers. However, we cannot assure you that we will not be subject to any material modification, termination or cancellation of our contracts by our customers in the future, and such material modification, termination or cancellation may have a material adverse effect on our results of operations. Our procurement, manufacture and delivery process may also be disrupted by delay due to reasons beyond our control, which may hinder or prevent full and timely completion of our work in connection with our existing contracts. We also cannot guarantee that our backlog amount will be recognized timely, or at all, or that our backlog amount once recognized will result in profits. Based on the foregoing, we caution you not to rely on our backlog information presented herein as an indicator of our future results of operations and earnings.

Any non-compliance with relevant anti-bribery and anti-corruption laws by our employees or parties who have a business relationship with us may materially and adversely affect our business operation.

Our industry and our customers’ industry are subject to anti-bribery and anti-corruption laws and regulations. In the PRC, where we operate all of our businesses and generate all of our revenue, we must strictly comply with the PRC criminal laws and other applicable regulations, which prohibit companies and their intermediaries from making improper payments or other improper monetary transfers or contributions to government officials or other parties for the purpose of obtaining or retaining business, including improperly influencing the result of the public tender process. For details regarding our participation in the public tender process, see “Business—Sales and Marketing—Direct Sales.” While we have implemented, and will further implement before the Global Offering, specific internal controls and procedures to monitor internal and external compliance with anti-corruption laws, regulations and policies, we cannot assure you that such internal controls and procedures will always protect us from penalties that may be imposed by PRC government authorities due to violations committed by our employees or other parties with whom we have business relationships. If our employees or other parties we have business relations with are found or alleged to be in violation of anti-corruption regulations, we may as a result face fines, become involved in lawsuits, lose permits, licenses and key personnel, as well as suffer damage to our reputation. Any of these consequences of anti-corruption violations or alleged violations could have a material adverse effect on our business, financial condition and results of operations.

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In addition, our major customers being the state-owned TV broadcasters in China are also subject to PRC anti-bribery and anti-corruption laws and regulations as well as the PRC government’s supervision and investigation. Their business activities with us may be delayed or suspended if they are subject to penalty or investigation due to failure to comply with anti-corruption rules in China. For example, as part of the anti-corruption campaign initiated by the PRC government in 2013 and 2014, a number of senior employees at CCTV were detained and investigated in the beginning of 2014. As a result, ongoing projects and procurement on new projects at CCTV, including those with us, were delayed or put on hold, to which the decrease in our revenue for that year was partially attributable.

Our goodwill and intangible assets could become impaired, which could adversely affect our results of operations and financial condition.

As of December 31, 2013, 2014 and 2015, we recorded goodwill of RMB74.2 million, RMB74.2 million and RMB74.2 million and intangible assets (which comprise primarily intellectual properties, software, patents, trademarks and licenses related to our solutions, services and products of) RMB75.2 million, RMB70.4 million and RMB68.0 million, respectively, which represented, in the aggregate, 20.0%, 20.3% and 17.7%, respectively, of our total assets as of December 31, 2013, 2014 and 2015. Such goodwill and intangible assets are primarily associated with our acquisition of digital broadcast automation solutions business which we operated through Beijing Zhengqi, which we acquired in September 2013. Our goodwill and intangible assets with indefinite useful life or those not yet available for use are tested for impairment at least annually, irrespective of whether there is any indication that they are impaired. All other intangible asset balances are tested for impairment whenever there are any indications that the asset’s carrying amount may not be recoverable. Impairment of goodwill and intangible assets may result from, among other things, deterioration in our performance, adverse market conditions, the failure of our acquired business to perform in accordance with our expectation or adverse changes in laws or regulations. Any impairment of goodwill or intangible assets resulting from this periodic assessment would result in a non-cash charge against current earnings, which could lead to an adverse impact on our results of operations and financial condition.

RISKS RELATING TO DOING BUSINESS IN CHINA

The economic, political and social conditions in China, as well as government policies, could affect our business and prospects.

The PRC economy differs from the economies of most of the developed countries in many aspects, including:

• the amount and degree of government involvement;

• growth rate and degree of development;

• uniformity in the implementation and enforcement of laws;

• control over capital investment;

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• control of foreign exchange; and

• allocation of resources.

The PRC economy has been transitioning from a centrally planned economy to a more market-oriented economy. For over three decades, the PRC government has implemented economic reform measures to utilize market forces in the development of the PRC economy. In addition, the PRC government continues to play a significant role in regulating industries and the economy through policy measures. We cannot predict whether changes in PRC economic, political or social conditions and in PRC laws, regulations and policies will have any adverse effect on our current or future business, results of operations or financial condition.

In addition, many of the economic reforms carried out by the PRC government are unprecedented or experimental and are expected to be amended and improved over time. Other political, economic and social factors may also lead to further adjustments of the reform measures, which may not necessarily have a positive effect on our business development and operations. For example, the PRC government has in the past implemented a number of measures intended to slow down certain segments of the economy that the government believed to be over-heating. These measures have included restricting foreign investment in certain sectors, raising benchmark interest rates of commercial banks, reducing currency supply and placing additional limitations on the ability of commercial banks to make loans by raising bank reserves against deposits and raising the thresholds and minimum loan interest rate. These actions, as well as future actions and policies of the PRC government, could cause a decrease in the overall level of economic activity and in turn have a material and adverse impact on our business, results of operations and financial condition.

Changes in government control of currency conversion and in PRC foreign exchange regulations may adversely affect our business operations.

The PRC government imposes controls on the convertibility between the Renminbi and foreign currencies and the remittance of foreign exchange out of China. We receive substantially all our revenue in Renminbi. Under our current corporate structure, our income is primarily derived from dividend payments from our PRC subsidiaries. Our PRC subsidiaries must convert their Renminbi earnings into foreign currency before they may pay cash dividends to us or service their foreign currency denominated obligations. Under existing PRC foreign exchange regulations, payments of current-account items may be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements.

However, approval from appropriate governmental authorities is required when Renminbi is converted into foreign currencies and remitted out of China for capital-account transactions, such as the repatriation of equity investment in China and the repayment of the principal of loans denominated in foreign currencies. Such restrictions on foreign exchange transactions under capital accounts also affect our ability to provide financing to our PRC subsidiaries. Subsequent to this offering, we have the option, as permitted by the PRC foreign investment regulations, to invest the net proceeds from this offering in the form of registered capital into our PRC subsidiaries to finance our operations in China. Our choice of investment is affected by the relevant PRC regulations with respect to capital-account and current-account foreign exchange transactions in China. In addition, our transfer

—50— RISK FACTORS of funds to our subsidiaries in China is subject to approval by PRC governmental authorities in the case of an increase in registered capital. These limitations on the flow of funds between us and our PRC subsidiaries could restrict our ability to provide financing to these subsidiaries, to undertake certain business opportunities and act in response to changing market conditions.

Continued deterioration of economic conditions could negatively impact our business.

Our business may be adversely affected by changes in national or global economic conditions and local economic conditions in the markets in which we operate, including GDP growth, inflation, interest rates, availability of and access to capital markets, consumer spending rates, energy availability and costs and the effects of governmental initiatives to manage economic conditions. Any such changes could adversely affect the demand for our products, and we may be required to reduce the prices of our products, such changes may also adversely affect the cost and availability of our needed raw materials. Any of these could negatively impact our financial results. For example, there have recently been significant turmoil in the major Chinese stock markets, declines in the global prices of commodities, including oil, depreciation in the value of the RMB and significant uncertainty regarding the Greek debt crisis. In particular, as China transitions to a consumption-based economy, China’s forecast growth rate is expected to be significantly lower than its average growth rate over the past thirty years. Disruptions and instability in credit and other financial markets and deterioration of national and global economic conditions, could, among other things:

• make it more difficult or costly for us to obtain financing for our operations or investments or to refinance our debt;

• cause our lenders to depart from prior credit industry practice and make the granting of any technical or other waivers under our credit agreements more difficult or expensive;

• impair the financial condition of some of our customers, suppliers or counterparties to our derivative instruments, thereby increasing customer bad debts, non-performance by suppliers or counterparty failures, negatively impacting our treasury operations; and

• negatively impact demand for our products, which could result in a reduction of sales, operating income and cash flows.

The M&A Rules and other regulations may make it difficult for us to make future acquisitions or dispositions of our business operations or assets in China.

The M&A Rules established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex. Such regulations require, among other things, that MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor acquires control of a PRC domestic enterprise or a foreign company with substantial PRC operations, if certain thresholds under the Provisions of the State Council on Thresholds for Prior Notification of Concentrations of Undertakings《國務院關於經營者 ( 集中申報標準的規定》), effective on August 3, 2008, were triggered. In addition, PRC national security review rules which became effective on September 1, 2011 require acquisitions by foreign investors of PRC companies engaged in military related or certain other industries that are crucial to

—51— RISK FACTORS national security be subject to security review before consummation of any such acquisition. It is not certain whether businesses we may acquire would fall within the scope of industries required for national security review and whether such acquisitions may be required to go through the national security review process. Complying with the requirements of these regulations to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval from MOFCOM, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share, as well as our overall competitiveness.

Our holding company structure may restrict our ability to receive dividends or other payments from our PRC subsidiaries, which could restrict our ability to act in response to changing market conditions and to satisfy our liquidity requirements.

We are a holding company, and we may rely on dividends and other distributions on equity to be paid by our PRC subsidiaries for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt we may incur. If any of our PRC subsidiaries incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us. Under PRC laws and regulations, our PRC subsidiaries, as foreign-invested enterprises in the PRC, may pay dividends only out of their respective accumulated profits as determined in accordance with PRC accounting standards and regulations. In addition, a foreign-invested enterprise in China is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund certain statutory reserve funds, until the aggregate amount of such a fund reaches 50% of its registered capital. At its discretion, the foreign-invested enterprise may allocate a portion of its after-tax profits based on PRC accounting standards to an enterprise expansion fund and a staff welfare and bonus fund. These enterprise expansion reserve and staff welfare and bonus funds are not distributable as cash dividends. As of December 31, 2015, none of our PRC subsidiaries had a statutory reserve fund that reached 50% of their respective registered capital. Therefore, our PRC subsidiaries would continue to allocate at least 10% of their respective after-tax profits to the statutory reserve fund until the aggregate amount of such a fund reaches the 50% threshold.

In addition, our PRC subsidiaries generally should audit their yearly financial statements according to PRC GAAP and pass resolutions for dividend distribution prior to paying dividend to us. Furthermore, dividends paid to us by our PRC subsidiaries are subject to the 10% withholding tax unless we are considered a PRC resident enterprise under the EIT Law and such dividends qualify as tax-exempt income. See “—Our global income and the dividends that we may receive from our PRC subsidiaries may be subject to PRC taxes under the EIT Law, which may have a material adverse effect on our results of operations” and “Regulations—Tax—Enterprise Income Tax.”

As a result of these PRC laws and regulations and the requirement that distributions by PRC subsidiaries can only be paid out of distributable profits computed in accordance with PRC accounting standards and regulations, our PRC subsidiaries are restricted from transferring a portion of their net assets to us. Amounts restricted include paid-in capital and the statutory reserves of our PRC subsidiaries.

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Any limitation on the ability of our PRC subsidiaries to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business. See “—Our global income and the dividends that we may receive from our PRC subsidiaries may be subject to PRC taxes under the EIT Law, which may have a material adverse effect on our results of operations.”

PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident beneficial owners or our company to liabilities or penalties, limit our ability to contribute capital to our PRC subsidiaries, limit the ability of our PRC subsidiaries to increase their registered capital or distribute profits to us, or otherwise materially and adversely affect us.

SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment through Special Purpose Vehicles《國家外匯管理局關於境內居民通過境外特殊目的公司境外投融資及返程投資外 ( 匯管理有關問題的通知》) (“SAFE Circular 37”), on July 4, 2014, which replaced the former circular commonly known as “SAFE Circular 75” promulgated by SAFE on October 21, 2005. SAFE Circular 37 requires PRC residents to register with local branches of SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred to in SAFE Circular 37 as a “special purpose vehicle.” SAFE Circular 37 further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as increase or decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material event. In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfil the required SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its PRC subsidiary. Moreover, failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for evasion of foreign exchange controls.

We have requested our beneficial owners who are subject to SAFE regulations to make the necessary registrations under SAFE regulations. Our ultimate Controlling Shareholder, Mr. Zheng, had registered with the local SAFE branch under the previously-effective SAFE Circular 75 on February 1, 2008 and December 21, 2011, respectively. However, we may not at all times be fully aware or informed of the identities of all of our beneficial owners who are PRC citizens or residents, and we may not always be able to compel our beneficial owners to comply with SAFE Circular 37; nor can we ensure you that their registrations, if they choose to apply, will be successful. The failure or inability of our PRC resident beneficial owners to make any required registrations or comply with these requirements may subject such beneficial owners to fines and legal sanctions and may also limit our ability to contribute additional capital into or provide loans (including using the proceeds from the Global Offering) to our operations in China, limit our PRC subsidiary’s ability to pay dividends or otherwise distribute profits to us, or otherwise materially and adversely affect us.

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PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from making loans or additional capital contributions to our PRC operating subsidiaries.

As the offshore holding company of our PRC subsidiaries, any capital contributions or loans that we make to our PRC subsidiaries, including from the proceeds of our securities offerings, are subject to PRC regulations. Any loans by us to our PRC subsidiaries to finance the operations of our PRC subsidiaries, which are foreign-invested enterprises, may not exceed statutory limits and are required to be registered with SAFE or its local branches. We may also decide to finance our PRC subsidiaries by means of capital contributions. These capital contributions must be approved by MOFCOM or its local branches. We cannot assure you that we will be able to obtain these government approvals or registrations on a timely basis, if at all. If we fail to obtain such approvals or registrations, our ability to use our net proceeds from our initial public offering and to capitalize our operations in China may be severely restricted, and could materially and adversely affect our liquidity and our ability to fund and expand our business.

On August 29, 2008, SAFE promulgated the Circular on Foreign Currency Capital of Foreign-Funded Enterprises《關於完善外商投資企業外匯資本金支付結匯管理有關業務操作問題的 ( 通知》) (“SAFE Circular 142”), which provided that the registered capital of a foreign-invested company converted from foreign currencies may (i) only be used for purposes within the business scope approved by the applicable governmental authority and (ii) not be used for equity investments by the foreign-invested company within the PRC unless otherwise provided. On March 30, 2015, SAFE promulgated the Circular of SAFE on Relevant Issues Concerning the Reform of the Administrative Method of the Conversion of Foreign Exchange Funds by Foreign-invested Enterprises (《國家外匯管理局關於改革外商投資企業外匯資本金結匯管理方式的通知》) (“SAFE Circular 19”), which has become effective and replaced the SAFE Circular 142 since June 1, 2015. Under SAFE Circular 19, the foreign exchange capital in the capital account of foreign-invested enterprises can be settled at the banks based on the actual operation needs of the enterprises subject to certain restrictions. The proportion of discretionary settlement of foreign exchange capital is temporarily determined as 100%. However, SAFE regulations and rules may still significantly limit our ability to transfer the net proceeds from our securities offering to our affiliated PRC entities or their respective subsidiaries through our PRC subsidiaries in China, which may adversely affect the business expansion of our affiliated PRC entities or their respective subsidiaries, and our affiliated PRC entities and their respective subsidiaries may not be able to convert the net proceeds from the Global Offering into Renminbi to invest in or acquire any other PRC companies, or establish other variable interest entities in the China. See “Regulations—Foreign Currency Exchange” and “Regulations—Dividend Distribution.”

A failure to comply with PRC regulations regarding the registration of shares and share options held by our employees who are PRC domestic individuals may subject such employees or us to fines and other legal or administrative sanctions.

In February 2012, SAFE promulgated the Notice on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plans of Overseas Publicly-Listed Companies《境內個人參與境外上市公司股權激勵計劃外匯管理有關問題的通知》 ( ) (“Circular 7”), which replaced the Application Procedures of Foreign Exchange Administration for

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Domestic Individuals Participating in Employee Stock Ownership Plans or Stock Option Plans of Overseas Publicly-Listed Companies《境內個人參與境外上市公司員工持股和認股期權計劃等外匯 ( 管理操作規程》) issued by SAFE in March 2007. Under these rules, PRC residents who participate in stock incentive plan in an overseas publicly-listed company are required to register with SAFE or its local branches and complete certain other procedures. Participants of a stock incentive plan who are PRC residents must retain a qualified PRC agent, which could be a PRC subsidiary of such overseas publicly-listed company or another qualified institution selected by such PRC subsidiary, to conduct SAFE registration and other procedures with respect to the stock incentive plan on behalf of its participants. Such participants must also retain an overseas entrusted institution to handle matters in connection with their exercise of stock options, the purchase and sale of corresponding stocks or interests and fund transfers. In addition, the PRC agent is required to amend SAFE registration with respect to the stock incentive plan if there is any material change to the stock incentive plan, the PRC agent or the overseas entrusted institution or other material changes. We and our PRC resident employees who have been granted share options, or PRC option holders, will be subject to these rules upon the Listing and trading of the Shares on the Stock Exchange. If we or our PRC option holders fail to comply with these rules, we or our PRC option holders may be subject to fines and other legal or administrative sanctions, as a result of which our business operations and equity incentive plans could be materially and adversely affected. See “Regulations—Foreign Currency Exchange” and “Regulations—Dividend Distribution.”

Our global income and the dividends that we may receive from our PRC subsidiaries may be subject to PRC taxes under the EIT Law, which may have a material adverse effect on our results of operations.

Under the EIT Law and the Implementation Regulations to the PRC Enterprise Income Tax Law (《中華人民共和國企業所得稅法實施條例》) (“the EIT Law Implementation Regulations”), both effective from January 1, 2008, an enterprise established outside of the PRC with its “de facto management body” within the PRC is considered to be a “resident enterprise” and will be subject to enterprise income tax at the rate of 25% on its worldwide income. The EIT Law Implementation Regulations define the term “de facto management body” as a management body that exercises full or substantial control and management authority over the production, operation, personnel, accounts and assets of an enterprise. SAT issued the Notice Regarding the Determination of Chinese-Controlled Offshore Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies《國家稅務總局關於境外註冊中資控股企業依據實際管理機構標準認定為居民 ( 企業有關問題的通知》) (“Circular 82”), on April 22, 2009. Circular 82 provides certain specific criteria for determining whether the “de facto management body” of a Chinese-controlled offshore incorporated enterprise is located in China. On July 27, 2011, SAT issued Administrative Measures of Enterprise Income Tax of Chinese-controlled Offshore Incorporated Resident Enterprises (Trial)《境外註冊中資控股居民企業所得稅管理辦法》 ( (試行)) (“Bulletin 45”), which became effective on September 1, 2011, to provide further guidance on the implementation of Circular 82. Bulletin 45 clarifies certain issues related to determining PRC resident enterprise status and post-determination administration. Bulletin 45 specifies that when provided with a copy of a Chinese tax resident determination certificate issued by the competent tax authorities from an offshore incorporated PRC resident enterprise, the payer should not withhold tax on payments of PRC-sourced dividends, interest and royalties to the offshore incorporated PRC resident enterprise. On January 29, 2014, SAT further issued Announcement on Determination of Resident Enterprises under De Facto

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Management Body Standard《關於依據實際管理機構標準實施居民企業認定有關問題的公告》 ( ) (“Bulletin 9”), which delegates the determination of the status of offshore incorporated PRC resident enterprise to the provincial-level tax authorities. Bulletin 9 is applicable to the enterprise income tax filings for 2013 and onwards. See “Regulations—Tax—Enterprise Income Tax.” Although Circular 82 applies only to offshore enterprises controlled by PRC enterprises or PRC corporate groups and not those controlled by PRC individuals or non-PRC persons, the determining criteria set forth in Circular 82 may reflect SAT’s general position on how the “de facto management body” test should be applied in determining the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises or individuals or foreign enterprises.

We do not believe that we should be treated as a PRC resident enterprise, however, it is unclear whether we will be classified as a PRC resident enterprise. If we are treated as a PRC resident enterprise for PRC enterprise income tax purposes, we would be subject to the 25% enterprise income tax rate on our global income as well as PRC enterprise income tax reporting obligations. Although under the EIT Law and the EIT Law Implementing Regulations if we were treated as a PRC tax resident enterprise dividends paid to us from our PRC subsidiaries should qualify as tax-exempt income, there is no assurance that we would enjoy such tax-exempt treatment on dividends paid to us from our PRC subsidiaries in the same manner as offshore incorporated PRC resident enterprises controlled by PRC enterprises or PRC corporate groups enjoy under Circular 82 and Bulletin 45. As a result, such dividends may be subject to a 10% withholding tax, as SAT and other PRC authorities have not yet issued guidance with respect to the treatment of outbound remittances to entities that are treated as resident enterprises controlled by PRC individuals and non-PRC persons, like us, for PRC enterprise income tax purposes.

We may be required to withhold PRC income tax on the dividends we pay you (if any), and any gain you realize on the transfer of our ordinary shares may be subject to PRC tax if we are treated as a PRC “resident enterprise.”

Pursuant to the EIT Law, we may be treated as a PRC resident enterprise for PRC tax purposes. See “—Our global income and the dividends that we may receive from our PRC subsidiaries may be subject to PRC taxes under the EIT Law, which may have a material adverse effect on our results of operations.” If we are so treated by the PRC tax authorities, we may be obligated to withhold PRC income tax on payments of dividends on our ordinary shares to investors that are non-resident enterprises of the PRC because the dividends payable on our Shares may be regarded as being derived from sources within the PRC. The withholding tax rate would generally be 10% on dividends paid to non-resident enterprises. In addition, if we are treated as a PRC tax resident enterprise, any gain realized by investors who are non-resident enterprises of the PRC from the transfer of our ordinary shares may be regarded as being derived from sources within the PRC and be subject to withholding tax at the rate of 10%. The PRC tax may be reduced under applicable tax treaty.

Moreover, if we are treated as a PRC resident enterprise, it is possible that a non-resident individual investor would be subject to PRC individual income tax at a rate of 20% under the PRC Individual Income Tax Law《中華人民共和國個人所得稅法》 ( ) (the “IITL”), on dividends paid to such investor (which tax on dividends may be withheld at source) and any capital gains realized from the transfer of our ordinary shares if such dividends and gains are deemed income derived from sources within the PRC. The PRC tax rate may be reduced under applicable tax treaty. A non-resident

—56— RISK FACTORS individual is an individual who is not domiciled in the PRC and does not reside within the PRC or has resided within the PRC for less than one year. Pursuant to the IITL and its implementation rules, the taxable gain from the transfer of our ordinary shares will be based on the total amount obtained minus all the costs and expenses that are permitted under PRC tax laws to be deducted from the income. The foregoing PRC tax may reduce your investment return on our ordinary shares and may also affect the price of our ordinary shares.

The PRC tax authorities’ enhanced scrutiny of PRC enterprise income tax on offshore equity transfers may have a negative impact on your investment in our ordinary shares.

In connection with the EIT Law, the Ministry of Finance of the PRC (中華人民共和國財政部) and SAT jointly issued, on April 30, 2009, the Notice on Issues Concerning Process of Enterprise Income Tax in Enterprise Restructuring Business《關於企業重組業務企業所得稅處理若干問題的通 ( 知》) (“Circular 59”). On December 10, 2009, SAT issued the Notice Concerning the Strengthening of Enterprise Income Tax Administration with Respect to Equity Transfers by Non-resident Enterprises 《關於加強非居民企業股權轉讓所得企業所得稅管理的通知》( ) (“Circular 698”). Both Circular 59 and Circular 698 became effective retroactive to January 1, 2008. On February 3, 2015, SAT issued Announcement on Several Issues regarding the Indirect Assets Transfer by Non-resident Enterprises (《關於非居民企業間接轉讓財產企業所得稅若干問題的公告》), or Bulletin 7, which replaced certain provisions under Circular 698 and provided more detailed rules as to the tax administration over indirect transfers by non-resident enterprises. By promulgating and implementing these rules, the PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of equity interests in a PRC resident enterprise and other taxable PRC assets by a non-PRC resident enterprise.

Under Bulletin 7, if a non-PRC resident enterprise transfers the equity interests of a PRC resident enterprise or other taxable PRC assets indirectly via disposing of the equity or other similar interests of an overseas holding company, or indirect transfer, and such indirect transfer lacks a reasonable commercial purpose and was established for the purpose of avoiding PRC tax, such Indirect Transfer may be treated as a direct transfer of equity interests in the PRC resident enterprise or other taxable PRC assets. As a result, any gain from such Indirect Transfer may be subject to PRC withholding tax at the rate of up to 10% (or PRC enterprise income tax at the rate of 25% if the transferred asset relates to the asset of a permanent establishment in China). The payer of transfer proceeds under such an Indirect Transfer of equity interests in a PRC resident enterprise is obligated to withhold the aforesaid PRC withholding tax. If the payer fails to make such withholding, it may be subject to an administrative fine ranging from 50% to 300% of the amount of tax that was not withheld which may be reduced or exonerated in certain circumstances. Further, the transferor under indirect transfer must file and pay the withholding tax to the competent tax authority, or otherwise the tax authority may pursue the transferor for the unpaid withholding tax and impose a late payment interest. The PRC tax authorities may enforce Bulletin 7 with respect to the transfer of equity interests in our Company or our non-PRC subsidiaries by non-PRC resident investors other than transfer of equity securities through public markets, such as the Stock Exchange where our ordinary shares are listed (that is, these rules are not applicable if both the purchase and sale of equity interests are made on the Stock Exchange).

Circular 698 provides that, where a non-PRC resident enterprise transfers its equity interests in a PRC “resident enterprise” to its related parties at a price lower than the fair market value, the relevant PRC tax authority has the power to make a reasonable adjustment to the taxable income of the transaction.

—57— RISK FACTORS

Bulletin 7 became effective as of February 3, 2015, although it has retroactive effect. There is little guidance and practical experience as to the retrospective application of Bulletin 7 and Circular 698, and it is possible that the PRC tax authorities would pursue our offshore shareholders to conduct a filing regarding our offshore restructuring transactions where non-resident investors were involved and would request our PRC subsidiary to assist in providing such disclosures. In addition, if our offshore subsidiaries are deemed to lack substance they could be disregarded by the PRC tax authorities. Some of our shareholders have made some share transfers in our Company prior to our initial public offering and not made tax filings in accordance with Circular 698. As a result, we and such non-PRC resident shareholders may be at risk of being taxed under Circular 698 and Bulletin 7, and may be required to expend valuable resources to comply with Circular 698 and Bulletin 7 or to establish that we should not be taxed under Circular 698 or Bulletin 7, which may have a material adverse effect on our financial condition and results of operations.

The PRC tax authorities have the discretion under Circular 59, Circular 698 and Bulletin 7 to make adjustments to the taxable capital gains based on the difference between the fair value of the equity interests transferred and the cost of investment. We may pursue acquisitions in the future that may involve complex corporate structures. If we are considered a non-PRC resident enterprise under the EIT Law and if the PRC tax authorities make adjustments under Circular 59, Circular 698 or Bulletin 7, our income tax costs associated with such potential acquisitions will increase, which may have an adverse effect on our financial condition and results of operations.

SAFE regulations may limit our ability to finance our PRC subsidiaries effectively with the net proceeds from the Global Offering, which may make it more difficult for us to pursue growth through acquisitions and also affect the value of your investment.

We plan to finance our PRC subsidiaries with the net proceeds from the Global Offering through additional capital contributions or overseas shareholder loans, which require registration with or approvals from the relevant PRC government authorities. Any overseas shareholder loans to our PRC subsidiaries must be registered with the local branch of SAFE as a procedural matter, and such loans cannot exceed the difference between the total amount of investment our PRC subsidiaries are approved to make under the relevant PRC laws and their respective registered capital. In addition, the amounts of the capital contributions are subject to the approval of MOFCOM in China or its local counterpart. We cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, or at all, with respect to making future loans or capital contributions to our PRC subsidiaries with the net proceeds from the Global Offering. If we fail to complete such registrations or obtain such approvals, our ability to contribute additional capital to fund our PRC operations may be negatively affected, which could have a materially adverse effect on our liquidity and our ability to fund and expand our business.

Fluctuations in the value of the Renminbi may adversely affect our business and the value of distributions by our PRC subsidiaries.

The value of the Renminbi depends, to a large extent, on the PRC domestic and international economic, financial and political developments and governmental policies, as well as the currency’s supply and demand in the local and international markets. From 1994 to 2005, the conversion of the Renminbi into foreign currencies was based on exchange rates set and published daily by PBOC in

—58— RISK FACTORS light of the previous day’s interbank foreign exchange market rates in China and the then current exchange rates on the global financial markets. The official exchange rate for the conversion of the Renminbi into the U.S. dollar was largely stable until July 2005. On July 21, 2005, PBOC revalued the Renminbi by reference to a basket of foreign currencies, including the U.S. dollar. As a result, the value of the Renminbi appreciated by more than 2% on that day. Since then, the PRC central bank has allowed the official Renminbi exchange rate to float against a basket of foreign currencies. Further, from May 18, 2007, PBOC enlarged the floating band for the trading prices in the inter-bank foreign exchange market of the Renminbi against the U.S. dollar from 0.3% to 0.5% around the central parity rate, effective on May 19, 2007. This allows the Renminbi to fluctuate against the U.S. dollar by up to 0.5% above or below the central parity rate published by the PBOC. On June 19, 2010, the PBOC announced its intention to proceed with the reform of the Renminbi exchange rate regime to increase the Chinese currency’s exchange rate flexibility. The floating band was further widened to 1.0% on April 16, 2012 revised up to 2.0% on March 17, 2014. The PBOC announced on August 11, 2015 that it would revise the middle price quotation mechanism for determination the USD-RMB exchange rates. On the same day, the daily reference rate for the Renminbi against the U.S. dollar depreciated by 1.9% as compared to August 10, 2015. The Renminbi depreciated further against the U.S. dollar since the second half of 2015. There can be no assurance that such exchange rate will not fluctuate widely against the U.S. dollar or any other foreign currency in the future. Since our income and profits are denominated in Renminbi, any appreciation of the Renminbi will increase the value of dividends and other distributions payable by our PRC subsidiaries in foreign currency terms. Conversely, any depreciation of the Renminbi will decrease the value of dividends and other distributions payable by our PRC subsidiaries in foreign currency terms. In addition, some of our hardware components are imported from international markets such as the U.S. and Canada. If the Renminbi continues to depreciate significantly or if the volume of our imports from these markets increases significantly, our operating results may be materially and adversely affected. Fluctuation of the value of the Renminbi will also affect the amount of our foreign debt service in Renminbi terms since we have to convert the Renminbi into foreign currencies to service our indebtedness denominated in foreign currencies.

Interpretation of the PRC laws and regulations involves uncertainty and the current legal environment in China could limit the legal protections available to us and to you.

Our business is conducted in China and our principal operating subsidiaries are located in China. Consequently, we are subject to the PRC laws and regulations. The PRC legal system is a civil law system based on written statutes, and prior court decisions have limited precedential value and can only be used as a reference. Additionally, PRC written laws are often principle-oriented and require detailed interpretations by the enforcement bodies to further apply and enforce such laws. Since 1979, the PRC legislature has promulgated laws and regulations in relation to economic matters such as foreign investment, corporate organization and governance, commercial transactions, taxation and trade, with a view to developing a comprehensive system of commercial law, including laws relating to property ownership and development. However, because these laws and regulations have not been fully developed, and because of the limited volume of published cases and the non-binding nature of prior court decisions, interpretation of PRC laws and regulations involves a degree of uncertainty and the legal protection available to us and to you may be limited. Depending on the governmental agency or the presentation of an application or case to such agency, we may receive less favorable

—59— RISK FACTORS interpretations of laws and regulations than our competitors. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention. All these uncertainties may cause difficulties in the enforcement of our land use rights, entitlements under our permits, and other statutory and contractual rights and interests.

RISKS RELATING TO THE GLOBAL OFFERING

There has been no prior public market for our Shares and the liquidity, market price and trading volume of our Shares may be volatile.

Prior to the Global Offering, there was no public market for our Shares. The initial issue price range for our Shares will be the result of negotiations among us and Sole Global Coordinator (on behalf of the Underwriters), and the Offer Price may differ significantly from the market price for our Shares following the Global Offering. We have applied for the listing of, and permission to deal in, our Shares on the Stock Exchange. A listing on the Stock Exchange, however, does not guarantee that an active trading market for our Shares will develop or, if it does, that it will sustain or that the market price of our Shares will not decline significantly following the Global Offering. Furthermore, the liquidity, the price and trading volume of our Shares may be volatile, which may be subject to a number of factors, including but not limited to:

• actual or anticipated fluctuations in our results of operations;

• restrictive regulations or limitations imposed on our industry by relevant authorities;

• recruitments or losses of key personnel by us or our competitors;

• announcements of competitive developments, acquisitions or strategic alliances in our industry;

• changes in earnings estimates or recommendations by securities analysts;

• actual or potential litigation or regulatory investigations; and

• general economic and market conditions or other developments affecting us and our industry.

In addition, stock markets and the shares of other China-based companies listed on the Stock Exchange have from time to time experienced significant price and volume fluctuations that are not related or disproportionate to the operating performance of such companies. These broad market fluctuations may also materially and adversely affect the market price of our Shares.

Because the Offer Price is higher than our net tangible book value per Share, you will incur immediate dilution.

The Offer Price of the Shares is higher than the net tangible book value per Share issued to existing holders of our Shares. Therefore, you and other purchasers of the Shares in the Global

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Offering will experience an immediate dilution in pro forma net tangible book value and existing holders of our Shares will receive an increase in net tangible book value per share of their Shares. In addition, if we issue additional Shares or equity-linked securities in the future, you and other purchasers of our Shares may experience further dilution in the net tangible assets book value per Share if we issue additional Shares at a price lower than the net tangible assets book value per Share at the time of their issuance.

Future sales or a major divestment of Shares by any of our Controlling Shareholders and Pre-IPO Investors could adversely affect the prevailing market price of our Shares.

The future sale of a significant number of our Shares in the public market after the Global Offering, or the possibility of such sales, by our Controlling Shareholders and Pre-IPO Investors, could adversely affect the market price of our Shares and could materially impair our future ability to raise capital through offerings of our Shares. Although our Controlling Shareholders and Pre-IPO Investors have agreed to a lock-up of their Shares, any major disposal of our Shares by any of our Controlling Shareholders and Pre-IPO Investors upon expiration of the relevant lock-up periods (or the perception that these disposals may occur) may cause the prevailing market price of our Shares to fall which could negatively impact our ability to raise equity capital in the future.

There may be dilution because of the issuance of Shares pursuant to the options granted under the Pre-IPO Share Option Scheme.

We had granted an aggregate of 25,980,000 Shares under the Pre-IPO Share Option Scheme to certain members of our senior management and Directors as of December 31, 2015. In addition, we have adjusted, pursuant to the authority granted to our Board under the Pre-IPO Share Option Scheme, the total number of Shares subject to the options granted under the Pre-IPO Share Option Scheme to 77,893,000 as a result of the Capitalization Issue. Further details of the Pre-IPO Share Option Scheme are summarized in “Appendix IV—Statutory and General Information—D. Pre-IPO Share Option Scheme.” The exercise of share options under the Pre-IPO Share Option Scheme will result in an increase in the number of Shares, and may result in a dilution to the percentage of ownership of the shareholders of our Company, the earnings per Share and net asset value per Share depending on the exercise price.

You may experience difficulties in enforcing your shareholder rights because we are incorporated in the Cayman Islands; Cayman Islands law is different from the law of Hong Kong and other jurisdictions and may not provide the same protections to minority shareholders.

We are an exempted company incorporated in the Cayman Islands with limited liability, and the law of the Cayman Islands differs in some respects from that of Hong Kong or other jurisdictions where investors may be located.

Our corporate affairs are governed by our memorandum and articles of association, the Cayman Companies Law and the common law of the Cayman Islands. The rights of shareholders to take legal action against us and our Directors, actions by minority shareholders and the fiduciary responsibilities of our Directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively

—61— RISK FACTORS limited judicial precedent in the Cayman Islands as well as from English common law, which has persuasive but not binding authority on a court in the Cayman Islands. The rights of our Shareholders and the fiduciary responsibilities of our Directors under Cayman Islands law may not be as clearly established as they would be under statutes or judicial precedents in Hong Kong, the United States or other jurisdictions where investors may be located. In particular, the Cayman Islands has a less developed body of securities law.

As a result, our Shareholders may have more difficulty in protecting their interests in the face of actions taken by our management, Directors or major Shareholders than they would as shareholders of a Hong Kong company, a United States company or companies incorporated in other jurisdictions. For example, the Cayman Islands does not have a statutory equivalent of sections 722 to 726 of the Companies Ordinance, which provides a remedy for shareholders who have been unfairly prejudiced by the conduct of the company’s affairs.

Due to a gap of up to five business days between pricing and commencement of trading of the Offer Shares, the initial trading price could be lower than the Offer Price.

The Offer Price will be the result of negotiations between us and the Sole Global Coordinator (on behalf of the Underwriters), determined on the Price Determination Day. Our Offer Shares, however, will not commence trading until the Listing Date, which is expected to be up to five business days after the Price Determination Date. The market price of our Offer Shares could fall during such period, due to market conditions or other reasons, and therefore the initial trade price of our Offer Shares may be lower than the Offer Price. Because you will be unable to sell or otherwise deal in our Offer Shares prior to the commencement of trading, you are subject to the risk of such price decline.

The trading price of the Shares may fluctuate.

The trading price of the Shares may fluctuate in response to a number of events including variations in our operating results, new sectors or locations for our business, our direct competitors, general performance of the GEM, the Main Board or other equity capital markets, changes in recommendations or financial estimates by analysts and investors’ general perception on our future prospects. In addition, there is no guarantee that there will be a liquid market in the Shares.

We may be unable to pay any dividend on our Shares.

Our Company is a holding company incorporated with limited liability under the laws of Cayman Islands with production subsidiaries in the PRC. Therefore, the availability of funds to us to pay dividends to our Shareholders and to service our indebtedness will depend heavily upon dividends received from our operating subsidiaries in the PRC. If these subsidiaries incur debt or losses, such indebtedness or losses may impair their ability to pay dividends or other distributions to us. As a result, our ability to pay dividends and to service our indebtedness will be restricted. In the future, we expect to distribute up to 30% of our annual distributable profit as dividends, subject to the determination by our board of Directors based on a number of factors. For further information regarding our dividend policy, see “Financial Information—Dividends.” Our ability to declare dividends in relation to our Shares will also depend on our future financial performance, which in turn depends on our success in implementing our business strategy and expansion plans and on financial,

—62— RISK FACTORS competitive, regulatory, and other factors, general economic conditions, demand for and prices of our services, costs of supplies and other factors specific to our industry, many of which are beyond our control. The receipt of dividends from our operating subsidiaries may also be affected by the passage of new laws, adoption of new regulations or changes to, or in the interpretation or implementation of, existing laws and regulations, and other events out of our control. PRC law requires that dividends be paid only out of net profit calculated according to PRC accounting principles, which differ in many aspects from generally accepted accounting principles in other jurisdictions. In addition, restrictive covenants in our credit facilities or other agreements that we may enter into in the future may also restrict the ability of our operating subsidiaries to make distributions to us. Therefore, these restrictions on the availability and usage of our major source of funding may affect our ability to pay dividends to our Shareholders.

There can be no assurance of the accuracy or completeness of certain facts, forecasts and other statistics obtained from various government publications, market data providers and other independent third-party sources, including the industry expert report, contained in this prospectus.

Certain facts, forecasts and other statistics relating to China and other countries and regions contained in this prospectus have been derived from various government publications, market data providers and other independent third-party sources, including Frost & Sullivan, an independent industry expert, and generally are believed to be reliable. However, we cannot guarantee the accuracy and completeness of such information. These facts, forecasts and other statistics have not been independently verified by us, the Sole Sponsor, the Sole Global Coordinator, the Joint Bookrunners, the Underwriters, their respective directors and advisers or any other parties involved in the Global Offering and none of them make any representation as to the correctness, accuracy or completeness of such information. We have, however, exercised reasonable care in the reproduction and extraction of such facts, forecasts and statistics from the relevant official government publications and the Frost & Sullivan Report for the purpose of inclusion in this prospectus. Due to possibly flawed or ineffective collection methods or discrepancies between published information and market practice and other problems, the facts, forecasts and statistics in this prospectus may be inaccurate or may not be comparable to facts, forecasts and statistics produced with respect to other economies. Furthermore, we cannot assure you that they are stated or compiled on the same basis or with the same degree of accuracy as may be the case elsewhere. Our directors have reviewed and considered these uncertainties to the facts, forecasts and other statistics contained in this prospectus. Accordingly, you should not unduly rely upon the facts, forecasts and statistics with respect to China, the PRC economy and the industries contained in this prospectus.

This prospectus contains forward-looking statements relating to our plans, objectives, expectations and intentions, which may not represent our overall performance for periods of time to which such statements relate.

This document contains certain forward-looking statements and information relating to us and our subsidiaries that are based on the beliefs of our management as well as assumptions made by and information currently available to our management. When used in this document, the words “aim,” “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “going forward,” “intend,” “ought to,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “will,”

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“would” and similar expressions, as they relate to us or our management, are intended to identify forward-looking statements. Such statements reflect the current views of our management with respect to future events, operations, liquidity and capital resources, some of which may not materialize or may change. These statements are subject to certain risks, uncertainties and assumptions, including the other risk factors as described in this document. You are strongly cautioned that reliance on any forward-looking statements involves known and unknown risks and uncertainties. The risks and uncertainties facing us which could affect the accuracy of forward-looking statements include, but not limited to, those set forth in “Forward-Looking Statements.”

Subject to the requirements of the GEM Listing Rules, we do not intend to publicly update or otherwise revise the forward-looking statements in this document, whether as a result of new information, future events or otherwise. As a result of these and other risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this document might not occur in the way we expect or at all. Accordingly, you should not place undue reliance on any forward-looking information. All forward-looking statements in this document are qualified by reference to this cautionary statement.

You should rely on this prospectus, and not place any reliance on any information contained in press articles or other media, in making your investment decision.

You should rely only on the information contained in this prospectus and the Application Forms to make your investment decision. We have not authorized anyone to provide you with information that is not contained in, or is different from what is contained in, this prospectus. Prior or subsequent to the publication of this prospectus, there has been or may be press and media coverage regarding us and the Global Offering, in addition to marketing materials published by us in compliance with the GEM Listing Rules. We have not authorized any such press and media reports, and the financial information, financial projections, valuations and other information purportedly about us contained in such unauthorized press and media coverage may be untrue and may not reflect what is disclosed in this prospectus. We make no representation as to the appropriateness, accuracy, completeness, or reliability of any such information or publication, and accordingly do not accept any responsibility for any such press or media coverage or the inaccuracy or incompleteness of any such information. To the extent that any such information appearing in the press and media is inconsistent or conflicts with the information contained in this prospectus, we disclaim it, and accordingly you should not rely on any such information. In making your decision as to whether to purchase our Shares, you should rely only on the information included in this prospectus.

—64— WAIVERS FROM COMPLIANCE WITH THE GEM LISTING RULES AND EXEMPTION FROM COMPLIANCE WITH THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE

In preparation for the Listing, we have sought the following waivers from strict compliance with the relevant provision of the GEM Listing Rules and the Companies (Winding up and Miscellaneous Provisions) Ordinance:

QUALIFICATION OF JOINT COMPANY SECRETARY

Pursuant to Rules 5.14 and 11.07 of the GEM Listing Rules, the secretary of our Company must be a person who has the requisite academic or professional qualifications or relevant experiences to discharge the functions of a company secretary.

We have appointed Mr. Qian Yiyue (錢禕玥) as one of our joint company secretaries. Mr. Qian does not possess a qualification as stipulated in Rule 5.14 of the GEM Listing Rules, and therefore he does not meet all the requirements under Rules 5.14 and 11.07 of the GEM Listing Rules.

We have appointed Mr. Au Wai Keung (區偉強), who possesses the qualification required under Rule 5.14, to act as another joint company secretary to provide assistance to Mr. Qian for an initial period of three years from the Listing Date so as to fully comply with the requirements set forth under Rules 5.14 and 11.07 of the GEM Listing Rules.

Mr. Au will work closely with Mr. Qian to jointly discharge duties and responsibilities as joint company secretaries and assist Mr. Qian to acquire the relevant experience as required under Rules 5.14 and 11.07 of the GEM Listing Rules. In addition, we will ensure Mr. Qian has access to relevant training and support to familiarize himself with the GEM Listing Rules and the duties required for a company secretary of a company listed on the Stock Exchange.

We have applied to the Stock Exchange for, and the Stock Exchange has granted, a waiver under and in respect of Rules 5.14 and 11.07 of the GEM Listing Rules. The waiver is valid for an initial period of three years from the Listing Date. Upon the expiry of such three-year period, the Stock Exchange will re-evaluate the experience of Mr. Qian Yiyue to consider whether he will then have acquired the relevant experiences within the meaning of Rules 5.14 and 11.07 of the GEM Listing Rules and decide whether a further waiver will be necessary.

CONTINUING CONNECTED TRANSACTIONS

We have entered into and are expected to continue with certain transactions which would constitute continuing connected transactions which are subject to announcement, reporting and annual review requirements, but are exempt from independent shareholders’ approval requirement under Chapter 20 of the GEM Listing Rules. We have applied for, and the Stock Exchange has granted, a waiver from strict compliance with the announcement requirement under Chapter 20 of the GEM Listing Rules in respect of such continuing connected transactions. Details of such continuing connected transactions and the waiver is set out in the section headed “Continuing Connected Transactions” of this prospectus.

—65— WAIVERS FROM COMPLIANCE WITH THE GEM LISTING RULES AND EXEMPTION FROM COMPLIANCE WITH THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE

WAIVER AND EXEMPTION IN RELATION TO THE PRE-IPO SHARE OPTION SCHEME

Pursuant to paragraph 10 of Part I of the Third Schedule to Companies (Winding Up and Miscellaneous Provisions) Ordinance, this prospectus is required to include details of the number, description and amount of any Shares which any person has, or is entitled to be given, an option to subscribe for, together with certain particulars of each option, including the period during which it is exercisable, the price to be paid for the Shares subscribed for under it, the consideration (if any) given or to be given for it and the name and address of the person to whom it was given.

Further, pursuant to Rule 23.02(1)(b) of the GEM Listing Rules, a new listing applicant must disclose in the prospectus full details of all outstanding options. Paragraph 27 of Part A of Appendix 1 to the GEM Listing Rules also requires the disclosure of particulars of any capital of any member of our Group which is under option, or agreed conditionally or unconditionally to be put under option, including the consideration for which the option was or will be granted and the price and duration of the option, and the name and address of the grantees.

As of the Latest Practicable Date, our Company has granted options to a total of 110 grantees under the Pre-IPO Share Option Scheme, including our Directors, directors of our subsidiaries, our senior management and other employees of our Group to subscribe for a total of 25,930,000 Shares (before adjusting the 25,930,000 Shares granted under the Pre-IPO Share Option Scheme to 77,893,000 Shares), representing (i) approximately 12.56% of the issued share capital of our Company immediately upon completion of the Global Offering (assuming no exercise of the Over-Allotment Option and any option granted under the Pre-IPO Share Option Scheme), and (ii) approximately 11.16% of the issued share capital of our Company immediately upon completion of the Global Offering, (assuming that all options granted under the Pre-IPO Share Option Scheme are exercised, but without taking into account any Shares which may be allotted and issued upon the exercise of the Over-Allotment Option).

We have applied for (i) a waiver from strict compliance with the disclosure requirements under Rule 23.02(1)(b) of and paragraph 27 of Part A of Appendix 1 to the GEM Listing Rules and (ii) an exemption from strict compliance with paragraph 10(d) of Part I of the Third Schedule to the Companies (Winding up and Miscellaneous Provisions) Ordinance regarding the options granted under the Pre-IPO Share Option Scheme on the following grounds:

(A) in light of the large number of the grantees involved, strict compliance with such disclosure requirements in setting out full details of all grantees under the Pre-IPO Share Option Scheme would be unduly burdensome for us, which would significantly increase the cost and timing for information compilation, prospectus preparation and printing;

(B) Disclosure of full details of all grantees under the Pre-IPO Share Option Scheme in this prospectus would expose us to increased risks of internal conflicts and could have an adverse impact on the morale among the grantees under the Pre-IPO Share Option Scheme;

(C) the exercise in full of the options granted under the Pre-IPO Share Option Scheme would not cause any material adverse impact on our financial position;

—66— WAIVERS FROM COMPLIANCE WITH THE GEM LISTING RULES AND EXEMPTION FROM COMPLIANCE WITH THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE

(D) non-compliance with the disclosure requirements would not prevent us from providing our potential investors with an informed assessment of our activities, assets, liabilities, financial position, management and prospects;

(E) the information contained in the prospectus regarding the Pre-IPO Share Option Scheme, including the dilution effect and impact on earnings per Share upon full exercise of the options granted under the Pre-IPO Share Option Scheme, provides potential investors with sufficient information to make a relevant assessment of us in their investment decision making process; and

(F) the exemption will not prejudice the interest of the investing public.

We have received a waiver from the Stock Exchange from strict compliance with the disclosure requirements under Rule 23.02(1)(b) of and paragraph 27 of Part A of Appendix 1 to the GEM Listing Rules regarding the options granted under the Pre-IPO Share Option Scheme, subject to the following conditions:

(1) a certificate of exemption from strict compliance with the relevant Companies (Winding Up and Miscellaneous Provisions) Ordinance requirements shall be granted by the SFC and the particulars of the exemption shall be disclosed in this prospectus;

(2) the following information shall be clearly disclosed in the prospectus:

(a) full details of all the options granted by our Company under the Pre-IPO Share Option Scheme to each Director and member of the senior management of our Group and connected person of our Company, such details to include all the particulars required under Rule 23.02(1)(b) of and paragraph 27 of Part A of Appendix 1 to the GEM Listing Rules;

(b) in respect of the options granted by our Company under the Pre-IPO Share Option Scheme to the persons other than those referred to in sub-paragraph (2)(a) above, (i) the aggregate number of such grantees and the number of Shares subject to the options granted to them, (ii) the consideration paid for the grant of options to such grantees, and (iii) the exercise period and the exercise price for options to such grantees;

(d) the aggregate number of Shares subject to the outstanding options granted under the Pre-IPO Share Option Scheme and the percentage to our Company’s total issued share capital represented by such number of Shares;

(e) the dilutive effect upon full exercise of all the options granted under the Pre-IPO Share Options; and

—67— WAIVERS FROM COMPLIANCE WITH THE GEM LISTING RULES AND EXEMPTION FROM COMPLIANCE WITH THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE

(3) a list of all the grantees who have been granted options under the Pre-IPO Share Option Scheme (including the persons referred to in sub-paragraph (2)(a) above) containing all the particulars as required under Rule 23.02(1)(b) of and paragraph 27 of Part A of Appendix 1 to the GEM Listing Rules shall be made available for public inspection as set out in the section headed “Documents Delivered to the Registrar of Companies and Available for Inspection” in Appendix V to this prospectus.

We have received from the SFC a certificate of exemption from strict compliance with paragraph 10(d) of Part I of the Third Schedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance regarding certain information of the grantees subject to the following conditions:

(1) full details of the options granted by our Company under the Pre-IPO Share Option Scheme to each Director and member of the senior management of our Group and connected persons of our Company shall be disclosed in this prospectus, such details to include all the particulars required under paragraph 10 of Part I of the Third Schedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance;

(2) in respect of the options granted by our Company under the Pre-IPO Share Option Scheme to the persons other than those referred to in paragraph (1) above, (a) the aggregate number of such grantees and the number of Shares subject to the options granted to them, (b) the consideration paid for the grant of options to such grantees, and (c) the exercise period and the exercise price for options to such grantees, shall be clearly disclosed in this prospectus;

(3) a full list of all the grantees who have been granted options under the Pre-IPO Share Option Scheme (including the persons referred to in paragraph (1) above) containing all the particulars as required under paragraph 10 of Part 1 of the Third Schedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance shall be made available for public inspection as set out in the section headed “Documents Delivered to the Registrar of Companies and Available for Inspection” in Appendix V to this prospectus; and

(4) the particulars of such exemption shall be disclosed in this prospectus.

Further details of the Pre-IPO Share Option Scheme are set forth in the section headed “Appendix IV—Statutory and General Information—D. Pre-IPO Share Option Scheme.”

—68— INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING

DIRECTORS’ RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS

This prospectus includes particulars given in compliance with the Companies (Winding Up and Miscellaneous Provisions) Ordinance, the Securities and Futures (Stock Market Listing) Rules (Chapter 571 V of the Laws of Hong Kong) (as amended) and the GEM Listing Rules for the purpose of giving information to the public with regard to our Group. Our Directors collectively and individually accept full responsibility for the accuracy of the information contained in this prospectus. Our Directors confirm, having made all reasonable enquiries, that, to the best of their knowledge and belief, the information contained in this prospectus is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement in this prospectus misleading.

THE HONG KONG PUBLIC OFFERING AND THIS PROSPECTUS

This prospectus is published solely in connection with the Hong Kong Public Offering, which forms part of the Global Offering. For applicants under the Hong Kong Public Offering, this prospectus and the Application Forms set out the terms and conditions of the Hong Kong Public Offering.

The Offer Shares are offered solely on the basis of the information contained and representations made in this prospectus and the Application Forms and on the terms and subject to the conditions set out herein and therein. No person is authorized to give any information in connection with the Global Offering or to make any representation not contained in this prospectus, and any information or representation not contained herein must not be relied upon as having been authorized by our Company, the Sole Sponsor, the Sole Global Coordinator, the Joint Bookrunners, the Underwriters, any of their respective directors, agents, employees or advisors or any other party involved in the Global Offering.

Neither the delivery of this prospectus nor any offering, sale or delivery made in connection with the Offer Shares should, under any circumstances, constitute a representation that there has been no change or development reasonably likely to involve a change in our affairs since the date of this prospectus or imply that the information contained in this prospectus is correct as of any date subsequent to the date of this prospectus.

OFFER SHARES FULLY UNDERWRITTEN

The Listing is sponsored by the Sole Sponsor. The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters under the terms of the Hong Kong Underwriting Agreement and is subject to us and the Sole Global Coordinator (for itself and on behalf of the Hong Kong Underwriters) agreeing on the Offer Price. An International Underwriting Agreement relating to the International Placing is expected to be entered into on or around June 20, 2016, subject to the Offer Price being agreed. The International Placing will be fully underwritten by the International Underwriters under the terms of the International Underwriting Agreement to be entered into. The Global Offering is managed by the Sole Global Coordinator.

—69— INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING

If, for any reason, the Offer Price is not agreed among us and the Sole Global Coordinator (for itself and on behalf of the Hong Kong Underwriters), the Global Offering will not proceed and will lapse. For full information about the Underwriters and the underwriting arrangements, please see the section headed “Underwriting” in this prospectus.

PROCEDURES FOR APPLICATION FOR HONG KONG OFFER SHARES

The procedures for applying for Hong Kong Offer Shares is set out in the section entitled “How to Apply for Hong Kong Offer Shares” and on the relevant Application Forms.

STRUCTURE OF THE GLOBAL OFFERING

Details of the structure of the Global Offering, including its conditions, are set out in the section headed “Structure of the Global Offering” in this prospectus.

OVER-ALLOTMENT OPTION AND STABILIZATION

Details of the arrangements relating to the Over-allotment Option and stabilization are set out in the section headed “Structure of the Global Offering” in this prospectus.

RESTRICTIONS ON OFFER OF THE OFFER SHARES

Each person acquiring the Hong Kong Offer Shares under the Hong Kong Public Offering will be required to, or be deemed by his acquisition of Offer Shares to, confirm that he is aware of the restrictions on offers of the Offer Shares described in this prospectus.

No action has been taken to permit a public offering of the Offer Shares in any jurisdiction other than in Hong Kong, or the distribution of this prospectus and/or Application Forms in any jurisdiction other than Hong Kong. Accordingly, this prospectus and/or Application Forms may not be used for the purpose of, and does not constitute an offer or invitation in any jurisdiction or in any circumstances in which such an offer or invitation is not authorized or to any person to whom it is unlawful to make such an offer or invitation. The distribution of this prospectus and the offering of the Offer Shares in other jurisdictions are subject to restrictions and may not be made except as permitted under the applicable securities laws of such jurisdictions pursuant to registration with or authorization by the relevant securities regulatory authorities or an exemption therefrom.

APPLICATION FOR LISTING ON GEM

We have applied to the Listing Division for the granting of the listing of, and permission to deal in, the Shares in issue and to be issued pursuant to the Global Offering (including any additional Shares which may be issued upon the exercise of the Over-allotment Option and the options granted under the Pre-IPO Share Option Scheme) on GEM.

—70— INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING

Under section 44B(l) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, if the permission for the Shares to be listed on GEM pursuant to this prospectus has been refused before the expiration of three weeks from the date of the closing of the Global Offering or such longer period not exceeding six weeks as may, within the said three weeks, be notified to our Company for permission by or on behalf of the Stock Exchange, then any allotment made on an application in pursuance of this prospectus shall, whenever made, be void.

Pursuant to Rule 11.23(7) of the GEM Listing Rules, at the time of Listing and at all times thereafter, our Company must maintain the “minimum prescribed percentage” of 25% of the issued share capital of our Company in the hands of the public (as defined in the GEM Listing Rules).

Save as disclosed in this prospectus, no part of our Company’s share or loan capital is listed on or dealt in on any other stock exchange and no such listing or permission to list is being or proposed to be sought in the near future.

COMMENCEMENT OF DEALINGS IN THE SHARES

Dealings in the Shares on GEM are expected to commence on June 27, 2016. The Shares will be traded in board lots of 2,000 Shares each. The GEM stock code of the Shares will be 8280.

ADMISSION OF THE SHARES INTO CCASS

If the Stock Exchange grants the listing of, and permission to deal in, our Shares and we comply with the stock admission requirements of HKSCC, our Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the Listing Date or any other date as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange is required to take place in CCASS on the second Business Day after any trading day. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time. Investors should seek the advice of their stockbroker or other professional advisor for details of the settlement arrangement as such arrangements may affect their rights and interests. All necessary arrangements have been made enabling the Shares to be admitted into CCASS.

Our Company’s principal register of members will be maintained by our principal registrar, Maples Fund Services (Cayman) Limited, in the Cayman Islands and our Company’s Hong Kong register of members will be maintained by our Hong Kong Share Registrar, Computershare Hong Kong Investor Services Limited, in Hong Kong. Unless the Directors otherwise agree, all transfer and other documents of title of Shares must be lodged for registration with and registered by the Hong Kong Share Registrar and may not be lodged in the Cayman Islands.

—71— INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING

All Offer Shares will be registered on the Hong Kong register of members of our Company in Hong Kong. Dealings in the Shares registered on our Hong Kong register of members will be subject to Hong Kong stamp duty. The stamp duty is charged to each of the seller and purchaser at the ad valorem rate of 0.1% of the consideration for, or (if greater) the value of, the Shares transferred. In other words, a total of 0.2% is currently payable on a typical sale and purchase transaction of the Shares. In addition, a fixed duty of HK$5 is charged on each instrument of transfer (if required).

PROFESSIONAL TAX ADVICE RECOMMENDED

Potential investors in the Global Offering are recommended to consult their professional advisors if they are in any doubt as to the taxation implications of subscribing for, purchasing, holding or disposal of, and dealing in our Shares (or exercising rights attached to them). None of us, the Sole Sponsor, the Sole Global Coordinator, the Underwriters, any of their respective directors or any other person or party involved in the Global Offering accepts responsibility for any tax effects on, or liabilities of, any person resulting from the subscription, purchase, holding or disposal of, dealing in, or the exercise of any rights in relation to, our Shares.

EXCHANGE RATE CONVERSION

Solely for your convenience, this prospectus contains translations of certain Renminbi amounts into Hong Kong dollars, of Renminbi amounts into U.S. dollars and of Hong Kong dollars into U.S. dollars at specified rates.

Unless we indicate otherwise, the translation of Renminbi into Hong Kong dollars, of Renminbi into U.S. dollars and of Hong Kong dollars into U.S. dollars, and vice versa, in this prospectus was made at the following rate:

• RMB0.84331 to HK$1.00 (being the prevailing exchange rate on May 27, 2016 set by the People’s Bank of China)

• HK$7.7663 to US$1.00 (being the noon buying rate as set forth in the H.10 statistical release of the Federal Reserve Board on May 27, 2016)

• RMB6.5615 to US$1.00 (being the noon buying rate as set forth in the H.10 statistical release of the Federal Reserve Board on May 27, 2016)

No representation is made that any amounts in Renminbi, Hong Kong dollars or U.S. dollars can be or could have been at the relevant dates converted at the above rates or any other rates or at all.

LANGUAGE

If there is any inconsistency between this prospectus and the Chinese translation of this prospectus, this prospectus shall prevail. Translated English names of Chinese laws and regulations, governmental authorities, departments, entities (including certain of our subsidiaries), institutions, natural persons, facilities, certificates, titles and the like included in this prospectus and for which no official English translation exists are unofficial translations for identification purposes only. In the event of any inconsistency, the Chinese name prevails.

—72— INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING

ROUNDING

Unless otherwise stated, all the numerical figures are rounded to one decimal place. Any discrepancies in any table or chart between totals and sums of amounts listed therein are due to rounding.

—73— DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

Name Address Nationality

Executive Directors

Mr. Zheng Fushuang (鄭福雙) No.602, Unit 3, No.21 Building, Chinese Wan Liu Wan Quan Xin Xin Jia Yuan, Haidian District, Beijing, China

Mr. Liu Baodong (劉保東) 4188-1383, Wang Jing Xi Yuan, Canadian Si Qu, Chao Yang District, Beijing, China

Mr. Guo Langhua (郭朗華) Floor 6, Silicon Valley Plaza, Chinese Haidian District, Beijing 100080, China

Independent non-executive Directors

Mr. Frank Christiaens Floor 6, 123 Cambie Street, Belgian Vancouver, BC V6B 1B8, Canada

Mr. Zhang Yaqin (張亞勤) Baidu Campus, American No. 10, Shangdi 10th Street, Haidian District, Beijing 100085, China

Ms. Cao Qian (曹茜) No. 909, Zhichunli 2, Shuangyushu, Chinese Haidian District, Beijing 100086, China

For further information about our Directors, please refer to the section headed “Directors and Senior Management” in this prospectus.

—74— DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

PARTIES INVOLVED IN THE GLOBAL OFFERING

Sole Sponsor Jefferies Hong Kong Limited 22/F Cheung Kong Centre 2 Queen’s Road Central Central Hong Kong

Sole Global Coordinator Jefferies Hong Kong Limited 22/F Cheung Kong Centre 2 Queen’s Road Central Central Hong Kong

Joint Bookrunners Jefferies Hong Kong Limited 22/F Cheung Kong Centre 2 Queen’s Road Central Central Hong Kong

Ping An of China Securities (Hong Kong) Company Limited 28/F, 169 Electric Road North Point Hong Kong

Legal advisors to the Company as to King & Wood Mallesons Hong Kong and U.S. Law 13/F, Gloucester Tower, The Landmark 15 Queen’s Road Central Central Hong Kong

Legal advisors to the Company as to King & Wood Mallesons PRC Law 20th Floor, East Tower World Financial Center 1 Dongsanhuan Zhonglu Chaoyang District Beijing, 100020 PRC

Legal advisors to the Company as to Maples and Calder Cayman Islands Law 53/F, The Centre 99 Queen’s Road Central Hong Kong

—75— DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

Legal advisors to the Sole Sponsor Sidley Austin and the Underwriters as to Hong 39/F, Two International Finance Centre Kong and U.S. Law 8 Finance Street Central Hong Kong

Legal advisors to the Sole Sponsor Han Kun Law Offices and the Underwriters as to PRC Suite 906, Office Tower C1, Oriental Plaza Law No. 1 East Chang An Ave Beijing, 100738 PRC

Auditors and reporting accountants Grant Thornton Hong Kong Limited Level 12, 28 Hennessy Road Wanchai Hong Kong

Industry consultant Frost & Sullivan (Beijing) Inc., Shanghai Branch Co., 2802-2803, Tower A, Dawning Center 500 Hongbaoshi Road Shanghai, 201103 PRC

Receiving bank Wing Lung Bank Limited 16th Floor Wing Lung Bank Building 45 Des Voeux Road Central Hong Kong

—76— CORPORATE INFORMATION

Registered office in the Cayman P.O. Box 309, Ugland House Islands Grand Cayman KY1-1104 Cayman Islands

Principal place of business and China Digital Video Technical Plaza headquarters in PRC No. 49 Wukesong Road Haidian District Beijing PRC

Principal place of business in Hong Room 606-607, 6/F Kong under part 16 of the China Merchants Building Companies Ordinance 152-155 Connaught Road Central Hong Kong

Company’s website www.cdv.com (The contents of the website do not form part of this prospectus.)

Joint company secretaries Mr. Au Wai Keung (區偉強) (HKICPA) Flat G, 12/F Block 1 Aquamarine, 8 Sham Shing Road Kowloon Hong Kong

Mr. Qian Yiyue (錢禕玥) 8th Floor, China Digital Video Technical Plaza, No. 49 Wukesong Road Haidian District Beijing PRC

Authorized representatives (for the Mr. Au Wai Keung (區偉強) purpose of the GEM Listing Rules) Flat G, 12/F Block 1 Aquamarine, 8 Sham Shing Road Kowloon Hong Kong

Mr. Qian Yiyue (錢禕玥) 8th Floor, China Digital Video Technical Plaza, No. 49 Wukesong Road Haidian District Beijing PRC

Compliance officer Mr. Guo Langhua (郭朗華)

—77— CORPORATE INFORMATION

Members of Audit Committee Ms. Cao Qian (chair) Mr. Zhang Yaqin Mr. Frank Christiaens

Members of Remuneration Committee Mr. Frank Christiaens (chair) Mr. Zhang Yaqin Mr. Guo Langhua

Members of Nomination Committee Mr. Zheng Fushuang (chair) Mr. Zhang Yaqin Ms. Cao Qian

Principal share registrar and transfer Maples Fund Services (Cayman) Limited office in the Cayman Islands PO Box 1093, Boundary Hall Cricket Square Grand Cayman KY1-1102 Cayman Islands

Hong Kong Share Registrar Computershare Hong Kong Investor Services Limited Shops 1712-1716, 17th Floor, Hopewell Centre 183 Queen’s Road East Wanchai Hong Kong

Compliance adviser Reorient Financial Markets Limited Unit 1102-03, 11/F, Far East Finance Centre 16 Harcourt Road Admiralty Hong Kong

Principal bankers China Merchants Bank, West Sanhuan Branch No. 67 Fucheng Road Haidian District Beijing PRC

China Merchants Bank, Shuangyushu Branch Science and Technology Building No. 9 Zhongguancun South Street Haidian District Beijing PRC

Beijing Bank, Hongxing Branch Union plaza No. 20 Chaoyangmen Outer Street Chaoyang District Beijing PRC

—78— INDUSTRY OVERVIEW

This section contains certain information and statistics relating to our industry which is derived from official government sources. In addition, this section and elsewhere in the prospectus contain information extracted from a report commissioned by us, or the Frost & Sullivan Report, prepared by Frost & Sullivan for purposes of this prospectus.(1) We believe that the sources of the information in this “Industry Overview” section are appropriate sources for such information, and we have taken reasonable care in extracting and reproducing such information. We have no reason to believe that such information is materially false or misleading, and no fact has been omitted that would render such information materially false or misleading. Our Directors confirm that, after taking reasonable care, they are not aware of any adverse change in market information since the date of the Frost & Sullivan Report which may qualify, contradict or have an adverse impact on the quality of information in this section. However, the information has not been independently verified by us, the Sole Sponsor or any other party involved in the Global Offering and no representation is given as to its accuracy. Except as otherwise noted, all the data and forecast in this section are derived from the Frost & Sullivan Report. ABOUT THIS SECTION

We commissioned Frost & Sullivan, an independent global consulting company, to provide prospective investors with the relevant material industry information on the TV broadcasting industry in China. The Frost & Sullivan Report dated March 16, 2016 is independent from our influence. Frost & Sullivan received a total commission of RMB950,000 for the research and preparation of the Frost & Sullivan Report, and we believe that such fees reflect the market rate. The payment of such amount was not conditional on our successful listing or on the research findings of the Frost & Sullivan Report. Other than the Frost & Sullivan Report, no other information disclosed in this prospectus is extracted from reports commissioned by us or the Sole Sponsor.

Research Methodology

Frost & Sullivan’s independent research was undertaken through both primary and secondary research obtained from various sources within the TV broadcasting industry, and the industry segment classifications derived from its research are consistent with the industry norm. Primary research involves interviewing leading industry participants while secondary research involves reviewing companies’ reports, independent research reports and data from Frost & Sullivan’s own research database. Projected data was obtained from historical data analysis plotted against macroeconomic data as well as specific industry-related drivers.

Bases and Assumptions

Frost & Sullivan developed its report on the following bases and assumptions for historical data and projections: (i) the social, economic and political environment is likely to remain stable; and (ii) key industry drivers are likely to continue to affect the market over the forecast period. For the projection of total market size, Frost & Sullivan plots available historical data against macroeconomic data as well as data with respect to related industry drivers.

Note: (1) Frost & Sullivan is a global consulting company founded in 1961 with more than 1,800 industry consultants and analysts based in 40 global offices. Its professional services cover technology research, market research, mega trends, economic research, best practices, training, customer research, competitive intelligence and corporate strategy.

—79— INDUSTRY OVERVIEW

Definition and Segmentation

According to the Frost & Sullivan Report, video production process can be divided into three stages: preliminary planning, image capturing and post-production. Preliminary planning mainly includes both concept and script creation while image capturing refers to capturing moving images with electronic medias such as video tape, hard disk or solid state storage.

TV broadcasting post-production refers to, among others, making combinations and reductions of parts of video, stunt editing, title editing and sound effect editing. In the TV broadcasting post-production industry, post-production companies provide hardware, software and maintenance service to video production companies, enabling them to engage in video post-production in both live production and editing control unit. The diagram below illustrates the value chain of TV broadcasting industry and the role of post-production within the TV broadcasting industry.

Product Stage Post Production Stage Transmission Stage

Preliminary Planning Editing Content Storage (Concept and script creation)

Graphics & Visual Playout Image Capturing Effects

Workflow Integration & Transmission Content Management

Hardware-based Software-based Hardware-based

According to the Frost & Sullivan Report, the TV broadcasting post-production industry can be further divided into three business segments:

• Solution, which refers to integrate solution of multiple hardware and software systems and project management that can facilitate customers’ post-production functions, such as news broadcasting, digital broadcast automation, virtual studio and media asset management.

• Service, which refers to customized service utilizing different products or solutions to meet customers’ specific post-production needs, such as sports event broadcasting, media asset cataloging, system maintenance, graphic template design and live entertainment broadcasting.

• Product, which refers to individual hardware or software system provided to customers for their video post-production needs, such as nonlinear editing system, graphic creation system and effect synthesis system.

—80— INDUSTRY OVERVIEW

TV BROADCASTING INDUSTRY IN CHINA

According to the Frost & Sullivan Report, China’s TV broadcasting industry is in a stage of stable development. Traditionally, the TV broadcasting stations are the main players in the TV broadcasting industry. But with the development of Internet and Cable TV, a growing number of new media providers, such as Internet companies and OTT TV are both entering and promoting technology upgrades in the industry.

With growing competition, media providers are placing greater emphasis on the quality of TV programs. As a result, the production time of TV programs is expected to increase from 4,411.8 thousand hours in 2016 to 5,851.6 thousand hours in 2020, representing a CAGR of 7.3%, and that the contribution of production cost in the overall cost structure of China’s TV broadcasting industry is also expected to increase from 50.0% in 2016 to 50.8% in 2020.

Broadcast and TV Stations in China

According to the Frost & Sullivan Report, broadcast and TV stations, the major players in the TV broadcasting industry in China, offer integrated functions of both the broadcast stations and TV stations. The level of integration and concentration of the TV broadcasting industry in China has increased significantly during the past six years. Such transformation offers significant advantages to established players within the industry that have strong customer bases.

Broadcast and TV stations in China can be divided into central-, provincial- (including provincial-level municipalities) and sub-provincial levels. According to the Frost & Sullivan Report, large central- and provincial-level broadcast and TV stations are generally at the forefront of technology upgrades and often set new industry standards, while the smaller sub-provincial and local level broadcast and TV stations typically adopt the similar upgrades once the new technology and industry standards have become norm. The Frost & Sullivan Report further estimates that broadcast and TV stations generally perform technology upgrade once every three to five years.

TV Subscribers and Production Time in China

Due to the increasing population and rising needs for cultural entertainment, China’s TV subscribers have been inevitably growing, as evidenced by a growth at a CAGR of 12.1% from 2010 to 2015 and an expected growth at a CAGR of 15.7% from 2016 to 2020, according to the Frost & Sullivan Report. HD digital TV service in China is attracting an increasing number of subscribers, who have switched from the traditional standard definition TV service. The Frost & Sullivan Report estimates that the number of HD digital TV subscribers reached 142.1 million in China in 2015 from 4.9 million in 2010, representing a CAGR of 96.1%. The number of HD digital TV subscribers in China is expected to reach 777.9 million by 2020 from 226.0 million in 2016, representing a CAGR of 36.2%.

—81— INDUSTRY OVERVIEW

With Internet’s continually increasing bandwidth and speed, both IPTV and OTT TV are becoming increasingly popular due to their richer and customized video contents as compared to traditional TV services. As a result, the number of subscribers for IPTV and OTT TV in China have also grown substantially and reached 102.9 million in 2015 from only 8.1 million in 2010, representing a CAGR of 66.3%. The rapid development of IPTV and OTT TV are promoting major technological upgrades in China’s TV broadcasting industry and continue to attract an increasing number of subscribers. The number of subscribers for IPTV and OTT TV is expected to reach 444.9 million in 2020 from 153.4 million in 2016, representing a CAGR of 30.5%.

While according to the Frost & Sullivan Report, the number of TV programs in China from 2010 to 2020 is expected to stabilize at the level of approximately 3,300 each year, production time of TV programs in China has grown steadily, increasing to 4,019.8 thousand hours in 2015 from 2,742.9 thousand hours in 2010, representing a CAGR of 7.9%. The increasing production time indicates a greater emphasis on the quality of TV programs among media providers in order to compete for audience’s attention in an increasingly competitive market. As this trend continues, TV program production time in China is expected to further grow and reach 5,851.6 thousand hours by 2020, representing a CAGR of 7.3% from 2016 to 2020.

Market of TV Broadcasting Industry in China

According to the Frost & Sullivan Report, China’s TV broadcasting industry is currently operating in a strong position, largely attributable to an increase in consumer demand and stable funding from the government. New business models such as HDTV, Pay TV, IPTV and OTT TV are playing an increasingly important role in China’s TV broadcasting industry as well. Such new business models are both strengthening the traditional broadcast and TV value chain and expanding the audience base in China.

Revenue of China’s TV broadcasting industry has experienced a steady growth with a CAGR of 17.1% from 2010 to 2015. The total market is expected to further grow from RMB593.1 billion in 2016 to RMB1,085.9 billion in 2020, representing a CAGR of 16.3%.

Key Growth Drivers of TV Broadcasting Industry in China

The Frost & Sullivan Report identifies the following key growth drivers for China’s TV broadcasting industry:

• Favorable policies. Favorable policies from government authorities, such as the “Convergence of Three Networks” (三網融合), which aims to encourage digitalization in TV broadcasting in order to accomplish an integrated network of Telecom, Cable TV and Internet networks capable of providing multi-media service with no barriers, two-way network modification for cable TV, which is a key component of the convergence of three networks and leans on upgrade of network infrastructure in TV broadcasting, and omnimedia, which calls for a convergence of traditional and new media, are driving demand for technology upgrades in China’s TV broadcasting industry. Since the TV broadcasting sector is a politically sensitive industry, it also enjoys stable public funding indicative of the PRC government’s efforts to promote its development.

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• Demand for high quality and high mobility content. As mobile devices become more affordable, consumers in China are increasingly using such devices to access media contents on the move. As a result, demand for media contents that are accessible on mobile devices is becoming one of the key drivers for growth in the industry. Additionally, the quality of media content is becoming more important as consumers expect fresh, entertainment-oriented media content and an enhanced viewing experience. Such new expectations offer content providers opportunities to generate new revenue streams and are also driving industry players to devote more time and expenses to produce higher-quality contents.

• Digitalization and HD migration. Continuous upgrades in transmission network and increasing consumer demand for better viewing experience will continue to drive the adoption of HD TV in China. With ongoing digitization process, HD TV is gradually replacing standard definition TV in households in China while cable TV network has become the main transmission channel for HD TV channels. As a result, China became the largest 4K TV market in the world in 2013.

Expenditure of TV Broadcasting Industry in China

According to the Frost & Sullivan Report, the TV broadcasting industry in China spent approximately 81.2% of its total expenses in production and broadcasting in 2015. Production cost includes expenses for program planning, script writing, imaging capturing, post-production and equipment investment. With audience demanding more HD TV programs and high-quality media contents, China’s TV broadcasting industry is expected to further invest in TV program production in the future. Production cost as a percentage of China’s TV broadcasting industry’s total cost structure is expected to exceed 50% after 2016.

18.7% 18.6% 18.7% 18.8% 19.0% 18.8% 18.5% 18.3% 18.2% 18.1% 17.9%

32.6% 32.6% 32.4% 31.9% 31.6% 31.6% 31.5% 31.4% 31.4% 31.4% 31.3%

48.7% 48.8% 48.9% 49.3% 49.4% 49.7% 50.0% 50.3% 50.4% 50.6% 50.8%

2010 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E

Production cost Broadcasting cost Management cost

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Investment in equipment and expenditure for post-production represent the majority of production cost for the TV broadcasting industry in China. Since industry players have to keep up with the technological development of the TV broadcasting industry by upgrading their post-production systems, expenditure for post-production is expected to remain steady as major portion of the overall production cost for China’s TV broadcasting industry.

19.6% 19.4% 19.0% 18.5% 17.4% 17.2% 17.0% 16.6% 16.3% 16.1% 16.1%

20.3% 20.5% 20.8% 21.3% 22.4% 22.5% 22.7% 23.1% 23.3% 23.5% 23.6%

60.1% 60.1% 60.1% 60.2% 60.2% 60.3% 60.3% 60.3% 60.4% 60.4% 60.6%

2010 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E

Equipment Investment Post-production Others

TV BROADCASTING POST-PRODUCTION INDUSTRY IN CHINA

Overview

According to the Frost & Sullivan Report, the TV broadcasting industry in China relies on its suppliers to provide much of the content on TV, value-added service (including games, music and shopping) and hardware and software in order to generate media contents for the audience. Post-production companies in China, play the role of integrating hardware and software, either proprietary or provided by suppliers, into various customized solutions and services for the end users in China’s TV broadcasting industry.

Post-production companies in China have also allocated more funding into research and development of software in recent years to reduce their dependence on upstream software providers.

Market of TV Broadcasting Post-Production Industry in China

According to the Frost & Sullivan Report, China’s TV broadcasting post-production market size increased to RMB8,847.9 million in 2015 from RMB5,035.1 million in 2010, representing a CAGR of 11.9%. The growth of the market, however, was significantly affected by the political events of 2013 and 2014, which witnessed an extensive crackdown on corruption in China. As part of the anti-corruption campaign, in the beginning of 2014, a number of senior employees at CCTV, China’s largest state-owned television network, were detained and investigated. As a result, ongoing projects and procurement on new projects at CCTV were delayed or put on hold. In addition, events at CCTV, the bellwether of the industry, also affected timing of completion and procurement on new projects at China’s provincial-level and other major television stations. According to the Frost & Sullivan Report, China’s top three post-production companies, Sobey (as defined below), Dayang (as defined below) and our Company, were affected to a similar degree due to our similar business structures and focus on post-production business. Other post-production companies such as CSS (as defined below) and

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Jetsen (as defined below), however, were influenced differently by the anti-corruption campaign due to the lower proportions of their post-production business in terms of 2014 revenue and their varied customer bases. The industry, however, has largely recovered in 2015. Driven by digitalization, favorable government policies and adoption of HD concept in China and the increased demand for post-production solutions, services and products as a result, the total market size for China’s TV broadcasting post-production industry is expected to reach RMB17,341.4 million by 2020, growing at a CAGR of 15.0% from 2016 to 2020. The chart below illustrates the growing market size of TV broadcasting post-production industry in China.

RMB Million 20,000.0 17,341.4 14,910.5 15,000.0 12,921.0 11,283.7 9,930.0 10,000.0 8,847.9 7,920.2 8,015.4 6,055.0 6,998.3 5,000.0 5,035.1

0.0 2010 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E

Within the TV broadcasting post-production market in China, the solution segment has occupied the largest share and continues to grow while the product segment’s share has steadily declined. As the technology infrastructure and business operation of TV broadcasters and other digital content creators have become more complex and sophisticated in recent years, customers increasingly choose to engage solution providers to provide integrated digital video solutions that allow them to focus on content production and management. As a result, China’s TV broadcasting post-production solution providers are currently making the strategic transformation to become full solution providers to strive for higher profit margin and stronger relationship with clients. Smaller players in the TV broadcasting post-production industry have to lower their prices in order to compete for market share.

The chart below illustrates the growing share of the solutions segment in the TV broadcasting post-production industry in China.

100.0% 11.2% 11.6% 12.3% 12.8% 13.2% 12.7% 12.0% 11.3% 10.5% 9.7% 9.0%

80.0%

60.0% 61.7% 65.4% 70.2% 74.2% 77.3% 78.6% 80.2% 81.8% 83.3% 84.8% 86.3% 40.0%

20.0% 27.1% 23.1% 17.5% 13.1% 9.5% 8.7% 7.8% 0.0% 7.0% 6.2% 5.4% 4.7% 2010 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E

Product Solution Service

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Price Trend of Hardware Components

In the TV broadcasting post-production industry in China, due to customers’ unique specifications and requirements in each project, post-production service providers generally procure customized hardware and software components for the solutions, services and products they offer to customers. The three most common hardware components for post-production service providers are customized workstation computers, servers and graphic cards. With the constant upgrading of computer technology and high number of hardware manufacturers, price of hardware components, particularly for workstations and servers, have decreased in recent years as illustrated in the chart below(1)(2).

120.0

100.0 100.0 99.8 96.9 97.3 91.4 80.0 71.9 67.5 61.9 60.0 55.5 40.0 30.0 20.0 0.0 2012 2013 2014 2015 Workstation Computers Servers Graphic Cards

Notes: (1) Index of 2012 is set at 100. (2) Workstation computers refer to model of HP Z820. Servers refer to model of HP380G8. Graphic cards refer to model series of LE500.

Key Growth Drivers

The Frost & Sullivan Report identifies the following key factors contributing to the growth of China’s TV broadcasting post-production industry:

• Strong government support. The Third Plenary Session of the 18th Central Committee of the Communist Party of China (十八屆三中全會) held in 2013 further emphasized the convergence of traditional media and new media in order to realize the integration of news media resources.

• Rapid development in omnimedia convergence and cloud computing. Omnimedia convergence refers to convergence of traditional and new media to disseminate information based on users’ needs and to receive and incorporate user feedback and content contribution through as many diverse media channels as possible, including broadcasting, telecommunication and social networking. Omnimedia convergence is currently at a stage of rapid development in the PRC, with both significant investment in content offerings and distribution platforms. Such developments, together with the policy spelled out in The Guidance on Promoting the Convergence of Traditional Media and New Media approved by the PRC government in August 2014, suggest tremendous opportunities for companies processing and integrating content for applications in various media platforms, such as video post-production solution providers. Cloud computing and big data are required to

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realize information spreading across various platforms to reach target end-users, which are the two technologies key to the realization of omnimedia convergence. Such key technologies have now been adopted for various post-production tasks such as media asset management, media content distribution, data aggregation and transcoding, improving the efficiency and optimizing the process for program production and broadcasting, which contribute to convergence of different media platforms and help understanding of end-user behavior analysis. Therefore, they have been spurring the TV broadcasting post-production industry. The omnimedia market size, as measured by revenue obtained from businesses involved in capturing, producing and delivering omnimedia contents, has grown at a CAGR of 18.4% from 2010 to 2015 and is expected to keep growing at a CAGR of 16.6% from 2016 to 2020.

• Strong demand in technology upgrades. Technology upgrades, such as the migration to HD and 4K ultra-HD content, and new requirements driven by OTT TV and mobile devices are creating increasing demand for the post-production industry. TV broadcasting industry in China is entering the HD and 4K ultra-HD era, which represents the forefront of broadcasting technology. As a result, audience is demanding larger screens, more delicate images and stronger visual impacts offered by HD and 4K ultra-HD broadcasting. Multiple-screen, transmission technology (4G) and infrastructure (integration of three networks) upgrading have enabled post-production systems to achieve higher standards in quantity and quality, potentially generating new opportunities for China’s TV broadcasting post-production industry.

• Larger clients pool. The rapid development of new media such as OTT TV suppliers, Internet media content providers, We-Media have created new client base for the post-production industry. Furthermore, with the growing demand for personal video post-production, the consumer market is likely to further contribute to the growth of the post-production industry.

Potential Challenges

The Frost & Sullivan Report has also identified the following constraints which can present challenges for the participants in China’s TV broadcasting post-production industry:

• Capital intensity. The TV broadcasting post-production industry is heavily capital-intensive. Market participants have to make significant investment in research and development of technology and products. In contrast to companies in the manufacturing industry, TV broadcasting post-production solution providers have to continuously invest in research and development in order to remain competitive.

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• Heavy reliance on technicians. The integration of solutions and software development relies heavily on technicians. Experienced and skilled technicians are therefore key assets for any solution provider because it generally takes at least three to four years to cultivate an experienced technician. However, a solution provider faces the risk of having its experienced technicians poached by competitors, often resulting in lack of willingness to train and develop technicians among industry participants. Consequently, the strong demand for limited talented technicians has become a key constraint for the industry.

• Sensitivity to government policies and regulations. Whilst the TV broadcasting industry has experienced steady growth, the sector is under strict governmental supervision in China and thus highly politically sensitive to the development of policies and regulations of the PRC government. Industry examinations and approvals are therefore major constraints on market participants’ operations in the TV broadcasting post-production industry.

Related Market Opportunities In the Video Market

As one of the most abundant media contents and an element foundational to the realization of omnimedia convergence, video content drives a growing market. Videos are mainly divided into three forms, namely, TV programs, on-line videos and film videos. The PRC video market size as measured by revenue has registered a CAGR of 19.5% from 2010 to 2015, and is expected to keep growing at a CAGR of 24.0% from 2016 to 2020. Revenue derived from the TV programs sector represented the largest component of the video market with RMB506.5 billion revenue contribution in 2015. Nonetheless, the on-line videos and film videos sectors have been booming to expect to reach an aggregate market share of 37.1% in 2020 from 15.9% in 2015. Led by increasing users and spending of time on internet-based video, on-line video market has been growing at a CAGR of 52.5% from 2010 to 2015, driving the overall video market’s historical growth. As the number of new media providers in the TV broadcasting industry, i.e., OTT TV, which is capable of providing internet based videos with the similar function as on-line videos, keeps increasing, the on-line video market is expected to grow at a slower pace from 2016 to 2020 at a CAGR of 21.5%. The growing video market, together with the trend of HD transformation and 4K-definition, generates great market potential for video post-production companies.

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COMPETITION AND ENTRY BARRIERS

Competitive Landscape

According to the Frost & Sullivan Report, the size of China’s TV broadcasting post-production market reached RMB8,847.9 million in 2015 from RMB8,015.4 million in 2014, with the top five participants in 2015, including our Group, occupying over 30.0% of market share, as illustrated in the figure below:

Sobey 9.8% Our Group 6.8%

Dayang 6.8%

Jetsen 5.5% Others 67.1% CSS 4.0%

According to the Frost & Sullivan Report, market size of the solution segment, service segment, product segment within the TV broadcasting post-production industry in China reached RMB6,958.0 million, RMB1,120.4 million, RMB769.5 million in 2015, respectively, with the top five participants, including our Group, occupying approximately 34.9%, 22.1% and 30.7% of market share, respectively, as illustrated in the figures below:

Sobey Our Group Our Group 9.7% 11.2% 6.9% CSS Dayang 4.9% Jetsen Dayang 4.3% 7.5% 6.9% Sobey Sobey Our Group 3.3% 6.6% 6.5% Dayang 2.7% Jetsen 4.9% CSS CSS Others 5.7% Others 2.7% 65.1% Others 69.3% Jetsen 77.9% 3.9%

Solution Market Service Market Product Market

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According to the Frost & Sullivan Report, the section market sizes of virtual studio solutions, digital broadcast automation solutions, multi-camera recording and editing services, live sports broadcasting services and graphics creation systems reached RMB271.4 million, RMB1,398.6 million, RMB89.6 million, RMB56.0 million and RMB151.6 million in 2015, respectively, with the top two or three participants, including our Group, occupying approximately 17.6%, 18.0%, 25.2%, 68.7% and 42.6%, respectively, of market share within their respective solution, service and product segments, as illustrated in the figures below: Virtual Studio Solutions Section Digital Broadcast Automation Solutions Section Our Group Our Group 7.5% 7.1% DLP Sobey 6.6% 5.8% Ideapool Dayang 3.5% 5.1%

Others Others 82.4% 82.0%

Multi-Camera Recording And Live Sports Broadcasting Service Section Editing Services Section Our Group 10.4% Our Group Dayang Others 25.0% 7.9% 31.3%

Sobey 6.9%

Others Dayang 74.8% 9.1%

CCS 34.6%

Graphics Creation Systems Section

Our Group 25.2%

Others 57.4% Dayang 17.4%

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According to the Frost & Sullivan Report, our major competitors in the TV broadcasting post-production industry in China include the following:

• Sobey. Sobey Digital Technology Co., Ltd. (成都索貝數碼科技股份有限公司) (“Sobey”) provides post-production designs, solutions and consulting services.

• Dayang. Dayang Technology Development Inc. (北京中科大洋科技發展股份有限公司) (“Dayang”) is a manufacturer and developer of digital solutions for standard-definition, HD and web-based products for content creation, inputting, archiving, transcoding, broadcasting and media asset management.

• CSS. Century Sage Scientific Holdings Limited (世紀睿科控股有限公司) (“CSS”) is an integrated provider of hardware and software application solutions to facilitate content production, broadcast and transmission, event broadcast and system maintenance. In addition, it develops and sells broadcast and transmission equipments.

• Jetsen. Beijing Jetsen Century Technology Co., Ltd. (北京捷成世紀科技股份有限公司) (“Jetsen”) focuses on providing audio and video technologies and value-added services for digital contents, as well as hardware sales and hardware assembly services, to a great variety of customers such as TV stations, the military, research facilities and enterprises in other industries.

• BMD. Beijing Bluemade Technology Video Communication Co., Ltd. (北京藍美視訊科技有限公司) (“BMD”) focuses on R&D, sales and integration solutions of audio and video products.

• DLP. Shenzhen DLP-Digital Technology Co., Ltd. (深圳迪樂普數碼科技有限公司) (“DLP”) is a participant in the virtual studio segment and has expanded to the broadcasting market. In recent years, DLP has also focused on art direction support and value-added services.

• Idealpool. Beijing Idealpool Technology Inc. (北京東方艾迪普科技發展有限公司) (“Idealpool”) focuses on graphics rendering engine technology and virtual studio solutions.

Entry Barriers

The Frost & Sullivan Report identifies the following key barriers to entry into the TV broadcasting post-production industry in China:

• Customer relationship. The majority of customers in the TV broadcasting post-production industry are broadcast and TV stations, which are under strict governmental supervision. Customers are cautious in selecting solution providers and generally give preference to long-term business partners. Brand awareness also plays an important role, making it more difficult for new participants to gain market shares.

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• Technology know-how and industry experience. The TV broadcasting post-production industry also involves a number of advanced technologies, including coding, non-linear editing and mass storage. Maintenance and services also require knowledge of equipment maintenance and technical support. Furthermore, in-depth knowledge and understanding about customers’ requirements and business process are required to offer integrated solutions that can meet customers’ expectations. End-users also pay close attention to the industry experience of solution providers during the bidding process for sales contracts. Since the integration of hardware varies across different projects, only solution providers with successful track record and experience are regarded credible by end-users.

• Sales and support network. A nationwide sales and support network is crucial to the TV broadcasting post-production industry solution providers. According to the Frost & Sullivan Report, at least 31 sales offices are required to reach all of the province-level broadcast and TV stations in order to ensure smooth communication with such customers and offer satisfactory level of technical support. Sound after-sales service is also one of the key selecting criteria for customers in the TV broadcasting post-production industry.

MOBILE VIDEO EDITING APPLICATION

According to the Frost & Sullivan Report, China has become the largest smartphone market globally in 2013. China’s mobile network users are also staying longer on their mobile applications, with an average of nearly two hours per day in 2015 and an estimated average of more than three hours per day by 2020.

In addition, with the rapid growth and advancement of mobile network and technology in China, both the social needs and communication habits of consumers have changed. Consumers have gradually switched from using only text messages to also using photos, voice messages and videos with their mobile devices to communicate with each other. Compared to text messages, these new media tools are able to provide more abundant information and also allow for deeper emotional interaction. As a result, mobile applications designed for editing video contents are becoming more important and popular in the daily social life of mobile users in China.

Business Model and Valuation

The development of mobile applications, particularly for video editing, is a relatively new industry with an evolving business model. A developer usually offers its new mobile application to users to download and use for free. Once the mobile application has gained a significant and stable user base, advertisers may consider purchasing advertising slots from the developer to reach the mobile application’s users. The developer can also generate revenue by charging users a fee to download and use the mobile application and for other value-added services. The key metrics for determining the valuation of a mobile application include the number of its potential, active and paid users, the average time spent on the application by its users, its technological capability and its market share.

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Comparison with Major Video Editing Mobile Applications

The following chart illustrates Meicam’s functions and capabilities as compared to other major video editing mobile applications:

Definition Length of Customized Capture/ Effect Available Video Template Editing/ Compositing Platform Content Sharing

• 1920*1080 No limit Yes Yes Professional IOS / Android Meicam • 1280*270 effect / Linux/ Windows/Mac

• 480*480 10 seconds No No Editing Simple filter IOS/Android effect Meipai

• 480*480 5 minutes No Yes Simple filter IOS/Android • 640*360 effect Xiaoying

• 1280*270 No limit No Only Editing Professional IOS effect Replay

—93— REGULATIONS

We are conducting the provision of digital video technology and service business in the PRC. This section summarizes the principal PRC regulations relating to our business.

FOREIGN OWNERSHIP

According to the Catalogue of Industries for Guiding Foreign Investment (2015 Revisions)《外 ( 商投資產業指導目錄》(2015修訂版)) promulgated by MOFCOM and NDRC, the provision of digital video technology and related services falls within the “encouraged” or “permitted” category of industries for foreign investment in China. Foreign investors may establish and operate such business in the PRC through Sino-foreign equity joint ventures, Sino-foreign contractual joint ventures and wholly foreign-owned enterprises. We are permitted to establish wholly foreign-owned enterprises in China, such as CDV WFOE.

BROADCAST AND TELEVISION INDUSTRY AND GOVERNMENT PROCUREMENT

The PRC broadcast and television industry, in which most of our customers operate, is subject to extensive government regulation and control. All PRC television stations are directly or indirectly owned or controlled by provincial or local governments, and their business decisions and strategies are significantly affected by government budgets and spending plans.

Television stations are subject to laws and regulations promulgated from time to time by State Administration of Radio, Film and Television, or SARFT and other ministries and government departments, including the Regulations on Broadcasting and Television Administration《廣播電視管 ( 理條例》) promulgated by the State Council on August 11, 1997, as amended by the State Council on December 7, 2013, or the Television Broadcasting Regulations. Under the Television Broadcasting Regulations, television stations must be established by either SARFT or its relevant local branches or the Ministry of Education or its local branches.

According to the Provisions on the Administration of Landing Facilities for Satellite Television Transmissions《衛星電視廣播地面接收設施管理規定》 ( ) promulgated by the State Council on October 5, 1993, as amended by the State Council on July 18, 2013, and its implementation rules, foreign channels are prohibited from landing in China, except for major hotels and certain approval locations. Foreign companies may only distribute their content in China through state-owned television broadcasters.

The purchase of products and services by television stations is subject to laws and regulations relating to government procurement. The PRC Government Procurement Law（《中華人民共和國政府採購法》), or the Procurement Law, promulgated by the Standing Committee of the NPC on June 29, 2002, as amended by the Standing Committee of the NPC on August 31, 2014, requires that certain products, projects and services procured with government funds by any entity, including television stations, must satisfy minimum standards promulgated by governments from time to time and must comply with the Procurement Law. Government procurement must strictly comply with approved government budgets and is required to be conducted mainly by means of public bidding procedures.

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The majority of our customers are state-owned television broadcasters. We are typically required to attend public bidding procedures for the sale of our products, solutions and services to these customers.

The bidding and tendering activities in China are governed by the Bidding Law of the PRC (《中華人民共和國招標投標法》) promulgated by the Standing Committee of the NPC on August 30, 1999, or the Bidding Law and the Implementation of the Bidding Law《中華人民共和國招標投標法實施條 ( 例》) promulgated by the State Council on December 20, 2011. In accordance with the Bidding Law, the tenderer shall formulate the bidding documents in accordance with the requirements as set forth in the bid-invitation documents. The bidding documents shall respond to the substantial requirements and conditions as provided in the bid-invitation documents. Tenderers shall not collude with each other in setting bidding prices, nor shall they exclude other tenderers from fair competition and harm the lawful rights and interests of the tenderee and other tenderers.

INTELLECTUAL PROPERTY PROTECTION

Patent Law

In accordance with the PRC Patent Law《中華人民共和國專利法》 ( ), first promulgated on March 12, 1984, as amended by the Standing Committee of the NPC on September 4, 1992, August 25, 2000 and December 27, 2008, the State Intellectual Property Office is responsible for administering patents nationwide in the PRC and is solely responsible for accepting and reviewing patent applications and granting patent rights. The patent administration departments at the provincial or municipal level are responsible for administering patents within their respective jurisdictions.

Under the PRC Patent Law, patents are grouped into three categories: inventions, utility models and designs. The PRC patent system adopts a “first-to-file” principle, which means that, where more than one person files a patent application for the same invention, a patent will be granted to the person who filed the application first. In addition, the PRC Patent Law requires absolute novelty in order for an invention to be patentable. Under this requirement, any relevant written or oral publication, demonstration or use prior to filing a patent application may prevent an invention from being patented in the PRC. Patents for inventions remain valid for twenty years, and patents for utility models and designs remain valid for ten years, in each case from the filing date of the patent application.

In accordance with the PRC Patent Law, a patent application or patent right may be transferred between parties upon execution of a written agreement between the parties, which becomes effective upon registration with the State Intellectual Property Office.

All of our patents have been registered with the PRC State Intellectual Property Office under the name of CDV WFOE and Beijing Meicam. See “Business—Intellectual Property.”

—95— REGULATIONS

Trademark Law

In accordance with the PRC Trademark Law《中華人民共和國商標法》 ( ), first promulgated on August 23, 1982, as amended by the Standing Committee of the NPC on February 22, 1993, October 27, 2001 and August 30, 2013, the Trademark Office of the State Administration for Industry and Commerce is responsible for the registration and administration of trademarks in China. The State Administration for Industry and Commerce has established a Trademark Review and Adjudication Board for resolving trademark disputes.

As with patents, China has adopted a “first-to-file” principle for trademarks. If two or more applicants apply for registration of identical or similar trademarks for the same or similar commodities, the application that was filed first will receive preliminary approval and will be publicly announced. For applications filed on the same day, the trademark that was first used will receive preliminary approval and will be publicly announced.

Registered trademarks remain valid for ten years from the date that registration is approved. A registrant may apply to renew a registration within twelve months prior to the expiration date of the registration. If the registrant fails to apply in a timely manner, a grace period of six additional months may be granted. If the registrant fails to apply before the grace period expires, the registered trademark will be deregistered. Renewed registrations remain valid for ten years. There is no limit to the number of trademark renewal periods, provided that the trademark has been used in accordance with PRC Laws.

Under the PRC Trademark Law, a registered trademark may be transferred between parties upon execution of a transfer agreement and approval and publication by the Trademark Office of the State Administration for Industry and Commerce.

A registered trademark may be licensed to other parties, and products making use of such licensed trademark must state the name of the licensees and production location of such products. Any trademark licensing agreement could be enforceable without filing with the Trademark Office of the State Administration for Industry and Commerce, but all trademark licensing agreements are required to be filed by licensor for recordkeeping purposes with the Trademark Office of the State Administration for Industry and Commerce.

The PRC Copyright Law《中華人民共和國著作權法》 ( ), first promulgated on September 7, 1990, as amended by the Standing Committee of the NPC on October 27, 2001 and amended by the Standing Committee of the NPC on February 26, 2010, set forth the basic legal system for the protection of copyright in the PRC. The Regulations on Computer Software Protection《中華人民共 ( 和國計算機軟件保護條例》), or the Software Regulations, promulgated on June 4, 1991 by the State Council, as amended by the State Council on December 20, 2001 and January 30, 2013, and the Measures on the Registration of Computer Software Copyright《計算機軟件著作權登記辦法》 ( ), promulgated on February 20, 2002, were formulated in accordance with the PRC Copyright Law. In accordance with the Software Regulations, a software copyright owner may apply for the registration

—96— REGULATIONS of software at software registration institutions recognized by the National Copyright Administration. A registration certificate may serve as preliminary proof of the copyright ownership of a registrant. A software copyright of a legal person remains valid for a period of fifty years from the date of publication of such copyright.

We have applied for the registration certificates for our software copyrights from the China Copyright Protection Center. All of these software copyrights are registered in the name of CDV WFOE and are owned by CDV WFOE. See “Business—Intellectual Property” for more detailed information regarding our software copyrights.

SOFTWARE PRODUCTS AND SOFTWARE ENTERPRISES

According to the Measures on Administration of Software Products《軟件產品管理辦法》 ( ), promulgated by MIIT on March 1, 2009, or the Software Products Measures, software products developed in the PRC falling into certain stipulated categories are entitled to benefit from the encouragement policies upon the condition that the registration and filing have been completed in accordance with the Software Products Measures.

In addition, according to Measures on the Recognition Standards and Administration of Software Enterprises (Provisional)《軟件企業認定標準及管理辦法》 ( (試行)) promulgated by the Ministry of Information Industry (the predecessor of MIIT), the Ministry of Education, the Ministry of Science and Technology and the SAT on October 16, 2000, and the Measures for the Recognition of Software Enterprise《軟件企業認定管理辦法》 ( ), promulgated by the MIIT, the NDRC, the Ministry of Finance, and the SAT on February 6, 2013, or collectively the Software Enterprises Measures, an enterprise which is recognized as a software enterprise in accordance with standards and procedures stipulated in the Software Enterprises Measures may enjoy preferential treatments under the Software Products VAT Circular (as defined below in “Regulations—Tax—Value-Added Tax”). CDV WFOE has been granted a software enterprise certificate. See “Regulations—Tax—Enterprise Income Tax” and “Regulations—Tax—Value-Added Tax” for the preferential policies applicable to CDV WFOE.

FOREIGN CURRENCY EXCHANGE

Foreign Currency Exchange

The principal regulations governing foreign currency exchange in the PRC are the Regulations of the PRC on Foreign Exchange Administration《中華人民共和國外匯管理條例》 ( ) promulgated by the State Council, or the Foreign Exchange Regulations, as amended in August 2008. Under the Foreign Exchange Regulations, Renminbi is freely convertible for current account items, including the distribution of dividends, interest payments, trade and service-related foreign exchange transactions. In order to convert Renminbi for capital account items, such as direct investments, loans, repatriation of investments and investments in securities outside of the PRC, the prior approval of, and registration with SAFE, are required.

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Dividends paid by a subsidiary to its overseas shareholders are deemed income to shareholders and are taxable in China. Pursuant to the Administration Rules of the Settlement, Sale and Payment of Foreign Exchange《結匯、售匯及付匯管理規定》 ( ), promulgated by the People’s Bank of China on June 20, 1996, foreign-invested enterprises in China may purchase or remit foreign currency, subject to a cap approved by SAFE, for settlement of current account transactions without the approval of SAFE. Foreign currency transactions under the capital account are still subject to limitations and require approvals from, or registration with, the SAFE and other relevant PRC governmental authorities.

Circular 19

On March 30, 2015, the SAFE promulgated the Circular on Reforming the Management Approach regarding the Settlement of Foreign Exchange Capital of Foreign-invested Enterprises《國 ( 家外匯管理局關於改革外商投資企業外匯資本金結匯管理方式的通知》), or Circular 19, pursuant to which the foreign exchange capital in the capital account of foreign-invested enterprises can be discretionarily settled at the banks based on the actual operation needs of the enterprises. The proportion of discretionary settlement of foreign exchange capital is temporarily determined as 100%. The registered capital of a foreign-invested company settled in Renminbi and converted from foreign currencies may not be directly or indirectly used for the payment beyond the business scope of the enterprises approved by MOFCOM and SAIC or their respectively local counterparts, and may not be directly or indirectly used for granting the entrust loans in Renminbi (unless permitted by the scope of business), repaying the inter-enterprise borrowings (including advances by the third party) or repaying the bank loans in Renminbi that have been sub-lent to the third party. The domestic equity investment of foreign-invested enterprises made with the capital obtained from foreign exchange settlement shall be based on the actual investment scale and be transferred to the account pending for foreign exchange settlement payment opened by the invested enterprises.

Circular 37

SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment through Special Purpose Vehicles《國家外匯管理局關於境內居民通過特殊目的公司境外投融資及返程投資外匯管 ( 理有關問題的通知》), or Circular 37, on July 4, 2014, which replaced the former circular commonly known as “SAFE Circular 75” promulgated by SAFE on October 21, 2005. Circular 37 requires PRC residents to register with local branches of SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred to in Circular 37 as a “special purpose vehicle.” Circular 37 further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as increase or decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material event. In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the

—98— REGULATIONS offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its PRC subsidiary. Moreover, failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for evasion of foreign exchange controls.

Share Option Rules

On December 25, 2006, the People’s Bank of China issued the Administration Measures on Individual Foreign Exchange《個人外匯管理辦法》 ( ), and the SAFE issued implementation rules《個 ( 人外匯管理辦法實施細則》) on January 5, 2007, both of which became effective on February 1, 2007. Under these regulations, all foreign exchange matters pertaining to employee stock ownership plans, stock option plans or related plans in which onshore individuals participate require the approval of SAFE or its authorized branches. Pursuant to SAFE Circular 37, PRC residents who participate in share incentive plans in overseas non-publicly-listed companies may submit applications to SAFE or its local branches for the foreign exchange registration with respect to offshore special purpose companies.

In addition, under the Notices on Issues concerning the Foreign Exchange Administration for Domestic Individuals Participating in Share Incentive Plans of Overseas Publicly-Listed Companies (《國家外匯管理局關於境內個人參與境外上市公司股權激勵計劃外匯管理有關問題的通知》), or the Share Option Rules, issued by SAFE on February 15, 2012, PRC residents who are granted shares or share options by companies listed on overseas stock exchanges under share incentive plans are required to (i) register with SAFE or its local branches, (ii) retain a qualified PRC agent, which may be a PRC subsidiary of the overseas listed company or another qualified institution selected by the PRC subsidiary, to conduct SAFE registration and other procedures with respect to the share incentive plans on behalf of the participants, and (iii) retain an overseas institution to handle matters in connection with their exercise of share options, purchase and sale of shares or interests and funds transfers. We will make efforts to register our stock option plans in compliance with these requirements.

See “Risk Factors—Risks Relating to Doing Business in China—Changes in government control of currency conversion and in PRC foreign exchange regulations may adversely affect our business operations.”

M&A RULES AND OVERSEAS LISTING

On August 8, 2006, six PRC regulatory agencies, including MOFOM, the State-owned Assets Supervision and Administration Commission, SAT, SAIC, the China Securities Regulatory Commission, or the CSRC and SAFE, jointly issued the Rules for Merger with and Acquisition of Domestic Enterprises by Foreign Investors《關於外國投資者併購境內企業的規定》 ( ), or the M&A Rules, which became effective on September 8, 2006 and was amended on June 22, 2009. The M&A Rules governs transactions relating to (i) foreign investors’ acquisition of shares of PRC non-foreign-invested enterprises and subscription for the capital increase of PRC non-foreign-invested

—99— REGULATIONS enterprise, (ii) foreign investors’ purchase and operation of assets of PRC domestic enterprises via its established foreign-invested enterprises, and (iii) foreign investors’ acquisition of assets of PRC domestic enterprises, which would subsequently be used for the establishment and operation of foreign-invested enterprises.

The M&A Rules requires offshore special purpose vehicles controlled directly or indirectly by PRC companies or individuals and formed for the purpose of listing PRC onshore interests on overseas stock exchanges to obtain CSRC approval prior to such listing. The CSRC approval procedures require filing documents with the CSRC and normally take several months to complete. The scope of applicability of this regulation remains unclear. There has been, and continues to be, significant uncertainties over the application of the M&A Rules, and we cannot assure you that our restructuring in 2008 is not subject to the M&A Rules.

DIVIDEND DISTRIBUTION

The principal regulations governing distributions of dividends by foreign-invested companies include the Foreign-invested Enterprise Law《中華人民共和國外資企業法》 ( ) promulgated by the Standing Committee of the NPC on April 12, 1986, as amended on October 31, 2000, and the Implementation Rules under the Foreign-invested Enterprise Law《中華人民共和國外資企業法實施 ( 細則》) promulgated by the State Council on December 12, 1990, as amended on April 12, 2001 and February 19, 2014.

Under these rules, foreign-invested enterprises in the PRC may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, foreign-invested enterprises are required to allocate at least 10% of their respective after-tax accumulated profits each year, if any, to fund certain reserve funds unless these reserves have reached 50% of the registered capital of the enterprises. These reserves are not distributable as cash dividends. The amount of registered capital of CDV WFOE is currently US$50 million. As of December 31, 2014, CDV WFOE had allocated RMB9.8 million (US$1.5 million) to the reserves. CDV WFOE will no longer be required to allocate at least 10% of its accumulated profits each year to the reserves under the current applicable PRC laws after such reserves reach US$25 million. However, this required reserves amount will be increased proportionately if the registered capital of CDV WFOE is increased in the future. Historically, CDV WFOE has not paid any dividends to us. CDV WFOE is not expected to distribute profits to us in the near future as we continue to focus on the expansion of our business in China.

The restriction that CDV WFOE may pay dividends only out of its accumulated profits after funding the statutory reserve funds may have a material adverse effect on our ability to conduct our business. See “Risk Factors—Risks Relating to Doing Business in China—PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from making loans or additional capital contributions to our PRC operating subsidiaries.”

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LABOR

The principal labor laws and regulations in the PRC include the PRC Labor Law《中華人民共 ( 和國勞動法》), the PRC Labor Contract Law《中華人民共和國勞動合同法》 ( ), the Implementation Regulations of the PRC Labor Contract Law《中華人民共和國勞動合同法實施條例》 ( ), the Work-related Injury Insurance Regulations《工傷保險條例》 ( ), the Interim Provisions on Registration of Social Insurance《社會保險登記管理暫行辦法》 ( ) and the Interim Regulations on the Collection and Payment of Social Insurance Fees《社會保險費徵繳暫行條例》 ( ). Pursuant to the PRC Labor Law and the PRC Labor Contract Law, an employment relationship is established from the date when an employee commences working for an employer, and a written employment contract shall be entered into on the same day.

Employers must pay their employees’ wages equal to or above local minimum wage standards, establish labor safety and workplace sanitation systems, comply with state labor rules and standards and provide employees with appropriate training regarding workplace safety. Violations of the PRC Labor Contract Law and the PRC Labor Law may result in fines or other administrative sanctions or, in the case of serious violations, criminal liability.

We have entered into written employment contracts with all of employees.

Labor Dispatch

According to the Interim Regulations on Labor Dispatch《勞務派遣暫行規定》 ( ), or the Labor Dispatch Regulations approved by the Ministry of Human Resources and Social Security of the PRC, which became effective on March 1, 2014, labor dispatch is only applicable for temporary, auxiliary or substitute positions and the number of the dispatched workers must be reduced to no more than 10% of the total number of employees within two years of the Labor Dispatch Regulations coming into effect. If the Company fail to do so, it may be warned and ordered to correct our non-compliance activities by the relevant governmental authorities within a prescribed time limit, and may be subject to a fine ranging from RMB5,000 to RMB10,000 per dispatch worker. In addition, the Company may also be held jointly and severally liable with employment agencies for damages if such violation has caused damage to the dispatched workers. We employ dispatched workers for our media asset management solutions business.

Regulations Relating to Mobile Application, Telecommunication Service and Internet Information Services

China’s mobile application industry is at an early stage of development and there are few PRC laws or regulations specifically regulating the mobile application industry. The information and services provided through the mobile application determine which relevant laws and regulations apply to it.

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In September 2000, the State Council issued the Regulations on Telecommunications of China《中華人民共和國電信條例》 ( ), as amended on July 29, 2014 and February 6, 2016, or the Telecommunications Regulations, to regulate telecommunication activities in China. The telecommunications industry in China is governed by a licensing system based on the classifications of the telecommunications services set forth under the Telecommunications Regulations. The MIIT, together with the provincial-level communications administrative bureaus, supervises and regulates the telecommunications industry in China. The Telecommunications Regulations divide the telecommunications services into two categories: infrastructure telecommunications services and value-added telecommunications services. The operation of value-added telecommunications services is subject to the examination, approval and licenses granted by the MIIT or its provincial-level communications administrative bureaus. According to the Catalog of Classification of Telecommunications Businesses《電信業務分類目錄》 ( ) effective in March 2016, provision of information services through the internet is classified as value-added telecommunications services.

In September 2000, the State Council issued the Administrative Measures on Internet Information Services《互聯網信息服務管理辦法》 ( ), or the Internet Measures, to regulate the provision of information services to online users through the Internet. According to the Internet Measures, Internet information services are divided into two categories: services of profitable nature and services of a non-profitable nature. A profitable Internet information service provider is required to obtain ICP licence. If an Internet information service provider of a profitable nature fails to obtain an ICP license, the relevant local branch of the MIIT may levy fines, confiscate its income or even block its website. When the ICP service involves areas of news, publication, education, medical treatment, health, pharmaceuticals and medical equipment, and if required by law or relevant regulations, specific approval from the respective regulatory authorities must be obtained prior to applying for the ICP license from the MIIT or its provincial level counterpart.

In May 2010, SAIC adopted the Interim Measures for the Administration of Online Commodities Trading and Relevant Services《網絡商品交易及有關服務行為管理暫行辦法》 ( ), which took effective in July 2010. These measures were replaced by the Measures for the Administration of Online Commodities Trading《網絡交易管理辦法》 ( ) issued by SAIC on January 26, 2014 which became effective on March 15, 2014. Under these measures, enterprises or other operators which engage in online commodities trading and other services and have been registered with SAIC or its local branches must make the information stated in their business license available to the public or provide a link to their business license on their website. Online distributors must adopt measures to ensure safe online transactions, protect online users’ rights. Information on products and transactions released by online distributors must be authentic, accurate, complete and sufficient.

TAX

Enterprise Income Tax

On March 16, 2007, the NPC enacted the PRC Enterprise Income Tax Law 《中華人民共和國企( 業所得稅法》), or the EIT Law. On December 6, 2007, the State Council promulgated the Implementation Regulations to the PRC Enterprise Income Tax Law 《中華人民共和國企業所得稅法( 實施條例》), or the EIT Law Implementation Regulations. Both the EIT Law and the EIT Law Implementation Regulations became effective on January 1, 2008. Under the EIT Law and the EIT

— 102 — REGULATIONS

Law Implementation Regulations, foreign invested enterprises, or FIEs, and domestic companies are subject to a uniform income tax rate of 25% unless otherwise specified. High and new technology Enterprises that require key state support are subject to the reduced enterprise income tax rate of 15%.

Under the EIT Law and the EIT Law Implementation Regulations, dividends paid to foreign enterprise investors by PRC tax resident enterprises are subject to PRC withholding tax at the rate of 10% unless the foreign enterprise investor’s jurisdiction of incorporation has a tax treaty with the PRC that provides for a preferential withholding tax rate.

Under the EIT Law, enterprises organized under the laws of jurisdictions outside China with “de facto management bodies” that are located within China may be considered PRC tax resident enterprises and are therefore subject to PRC enterprise income tax at the rate of 25% on their worldwide income. The EIT Law Implementation Regulations define the term “de facto management body” as a management body that exercises full or substantial control and management authority over the production, operation, personnel, accounts and assets of an enterprise. SAT, issued the Notice Regarding the Determination of Chinese-Controlled Offshore Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies 《國家稅務總局關於境外註冊中( 資控股企業依據實際管理機構標準認定為居民企業有關問題的通知》), or Circular 82, on April 22, 2009. Circular 82 provides specific criteria for determining whether the “de facto management body” of a Chinese-controlled offshore enterprise is located in China, which include the presence in the PRC of the following locations: (1) the location where senior management members responsible for an enterprise’s daily operations discharge their duties; (2) the location where financial and human resource decisions are made or approved by organizations or persons; (3) the location where the major assets and corporate documents are kept; and (4) the location where more than half (inclusive) of all directors with voting rights or senior management have their habitual residence. Although Circular 82 applies only to offshore enterprises controlled by PRC enterprises, rather than enterprises controlled by PRC individuals and non-PRC persons such as our company, the criteria set forth in Circular 82 may reflect SAT’s general position on how the “de facto management body” test could be applied in determining the tax residency status of offshore enterprises. On July 27, 2011, the SAT issued Administrative Measures of Enterprise Income Tax of Chinese-controlled Offshore Incorporated Resident Enterprises (Trial) 《境外註冊中資控股居民企業所得稅管理辦法》( (試行)), or Bulletin 45, which became effective on September 1, 2011, as amended on April 17, 2015, to provide further guidance on the implementation of Circular 82. Bulletin 45 clarifies certain issues related to determining PRC resident enterprise status and post-determination administration. Bulletin 45 specifies that when provided with a copy of a Chinese tax resident determination certificate issued by the competent tax authorities from an offshore incorporated PRC resident enterprise, the payer is not subject to withholding tax when paying Chinese-sourced dividends, interest and royalties to the offshore incorporated PRC resident enterprise. On January 29, 2014, SAT further issued Announcement on Determination of Resident Enterprises under De Facto Management Body Standard (《國家稅務總局關於依據實際管理機構標準實施居民企業認定有關問題的公告》), or Bulletin 9, which delegates the determination of offshore incorporated PRC resident enterprise to the provincial-level tax authority. Bulletin 9 is applicable to the enterprise income tax filings for 2013 and onwards.

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There are currently no detailed rules or precedents governing the procedures and specific criteria for determining whether a given entity constitutes a “de facto management body,” and a final confirmation by SAT as to the “residency” status of offshore enterprises is generally necessary. Despite the present uncertainties resulting from the limited PRC tax guidance on this issue, we do not believe that the legal entities organized outside of the PRC within our Group should be treated as PRC resident enterprises for EIT law purposes. If we were treated as a PRC resident enterprise, although under the EIT Law and the EIT Law Implementing Regulations dividends paid to us from our PRC subsidiaries should qualify as tax-exempt income, there is no assurance that we would enjoy such tax-exempt treatment on dividends paid to us from our PRC subsidiaries in the same manner as offshore incorporated PRC resident enterprises controlled by PRC enterprises or PRC corporate groups enjoy under Circular 82 and Bulletin 45. As a result, it is not certain that such dividends will not be subject to PRC withholding tax as SAT and other PRC authorities have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises controlled by PRC individuals and non-PRC persons, like us, for PRC enterprise income tax purposes. In addition, the EIT Law Implementation Regulations provide that, (i) if an enterprise that distributes dividends is domiciled in the PRC, or (ii) if gains are realized from transferring equity interests of enterprises domiciled in the PRC, then such dividends or capital gains are treated as PRC-sourced income. It is not yet clear how the term “domicile” will be interpreted under the EIT Law, and it may be interpreted as the jurisdiction where an enterprise is a tax resident. As a result, if we were deemed to be a PRC tax resident enterprise, any dividends that we pay to our non-PRC shareholders which are non-PRC enterprises, as well as gains realized by such shareholders from the transfer of our shares, may be regarded as PRC-sourced income and become subject to PRC withholding tax of 10%, unless a reduced rate is provided under applicable tax treaties.

The PRC withholding tax may be exempted or reduced by the State Council or pursuant to an applicable tax treaty with the PRC that provides for a different withholding agreement between the PRC and the jurisdictions in which the non-resident enterprise reside. The PRC has entered into tax treaties with Hong Kong and more than 90 countries. Under such tax treaties, certain income, such as dividend, royalties, interest or capital gains derived in China by residents of the contracting country might be entitled to preferential treaty benefits, i.e., a lower withholding tax rate than the statutory 10%, provided that the overseas enterprise receiving the income qualifies as a “beneficial owner.” SAT issued the Circular on How to Interpret and Recognize the “Beneficial Owner” in Tax Treaties 《國( 家稅務總局關於如何理解和認定稅收協定中“受益所有人”的通知》) in October 2009, or Circular 601. According to Circular 601, the term “beneficial owner” refers to an individual, company or organization that has both ownership and right of control over the assets or rights generating a stream of income. An agent or a conduit company is not regarded as a beneficial owner. Local tax authorities are required to investigate whether an applicant satisfies the requirements to qualify as a beneficial owner, which is a prerequisite to enjoy the benefit of a reduced withholding tax on dividends, interest, royalties or capital gains under tax treaty provisions. If such non-resident enterprises cannot provide valid documents supporting their status as beneficiary owners under Circular 601, they will not be approved to enjoy tax treaty benefits.

In the event that we are treated as PRC tax resident, dividends to be distributed by us to our non-PRC shareholders whose jurisdictions have tax treaties with China providing for preferential withholding arrangements will not be entitled to the benefits under such withholding arrangements unless such holder is considered a beneficial owner under Circular 601.

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Under the PRC Individual Income Tax Law 《中華人民共和國個人所得稅法》( ), or IITL, if we are treated as a PRC resident enterprise, it is possible that non-resident individual investors of our shares be subject to PRC individual income tax at a rate of 20% on dividends paid to such investors and any capital gains realized from the transfer of our ordinary shares if such dividends or capital gains are deemed income derived from sources within the PRC, except in the case of individuals that qualify for a lower rate under a tax treaty. A non-resident individual is an individual who has no domicile in the PRC and does not stay within the PRC or has stayed within the PRC for less than one year. Pursuant to the IITL and its implementation rules, for purposes of the PRC individual income tax, the taxable income will be based on the total income obtained from the transfer of our ordinary shares minus all the costs and expenses that are permitted under PRC tax laws to be deducted from the income.

See “Risk Factors—Risks Relating to Doing Business in China—Our holding company structure may restrict our ability to receive dividends or other payments from our PRC subsidiaries, which could restrict our ability to act in response to changing market conditions and to satisfy our liquidity requirements”.

In connection with the EIT Law, on April 30, 2009, the Ministry of Finance and SAT jointly issued the Notice on Issues Concerning Process of Enterprise Income Tax in Enterprise Restructuring Business 《財政部國家稅務總局關於企業重組業務企業所得稅處理若干問題的通知》( ), or Circular 59. On December 10, 2009, SAT issued the Notice on Strengthening the Management of the Enterprise Income Tax Collection of Proceeds from Equity Transfers by Non-resident Enterprises 《國家稅務總( 局關於加強非居民企業股權轉讓所得企業所得稅管理的通知》), or Circular 698. Both Circular 59 and Circular 698 became effective retroactively as of January 1, 2008. Further, on July 26, 2010, SAT issued the Measures for the Enterprise Income Tax Administration of Enterprise Restructuring 《企( 業重組業務企業所得稅管理辦法》), which became effective retroactively as of January 1, 2010. Subsequently, on February 3, 2015, SAT issued Announcement on Several Issues regarding the Indirect Assets Transfer by Non-resident Enterprises 《國家稅務總局關於非居民企業間接轉讓財產( 企業所得稅若干問題的公告》), or Bulletin 7, which replaces certain provisions under Circular 698 and issues more detailed rules as to the tax administration over the indirect transfer by the non-resident enterprises. Bulletin 7 became effective as from February 3, 2015, while it would have retroactive effect to the transactions occurred before February 3, 2015 but not yet make tax treatment. By promulgating and implementing these three regulations, the PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of equity interests in a PRC resident enterprise by a non-resident enterprise.

— 105 — REGULATIONS of the un-withheld tax which may be reduced or exonerated in certain circumstances, and further, the transferor under Indirect Transfer shall file and pay the withholding tax to the competent tax authority, or otherwise the tax authority may pursue the transferor for the unpaid withholding tax as well as the late payment interest. In addition, the PRC tax authorities have the discretion under Circular 698 to make reasonable tax adjustments if the equity transfer between non-resident and its related party is not deemed to have been conducted at arm’s-length and results in a reduction of tax payments due. See “Risk Factors—Risks Relating to Doing Business in China—Our global income and the dividends that we may receive from our PRC subsidiaries may be subject to PRC taxes under the EIT Law, which may have a material adverse effect on our results of operations”.

Circular on Income Tax Policies for Further Encouraging the Development of Software Industry and Integrated Circuit Industry《關於進一步鼓勵軟件產業和集成電路產業發展企業所得稅政策的通 ( 知》), or Circular 27, promulgated by the Ministry of Finance and SAT on April 20, 2012 and as amended by the Ministry of Finance, SAT, NDRC and MIIT on May 4, 2016, provides certain preferential treatment in respect of enterprise income tax for newly established eligible software enterprises. Under the Circular 27, the eligible software enterprises within the territory of China, upon certification, the enterprise income tax shall be exempt for the first and second year and shall be levied thereon at half of the statutory rate of 25% for the third through fifth year thereafter until the expiration of the preferential period which shall be calculated from the profit making year to December 31, 2017.

CDV WFOE is a high and new technology enterprises entitled to an exemption from enterprise income tax during the period from May 24, 2012 until May 23, 2015, during which CDV WFOE is subject to enterprise income tax at a reduced rate of 15%. Such reduced rate has been preliminarily approved to extend to July 2018.

Business Tax

Under the Provisional Regulations on Business Tax《中華人民共和國營業稅暫行條例》 ( ) promulgated by the State Council on December 13, 1993, as amended on November 10, 2008 (effective from January 1, 2009), businesses that provide services, assign intangible assets or sell immovable properties are subject to business tax at a rate ranging from 3% to 20% of the income for services rendered, intangible assets assigned or immovable properties sold.

Value-Added Tax

Pursuant to the Provisional Regulations on Value-Added Tax of the PRC《中華人民共和國增值 ( 稅暫行條例》), promulgated by the State Council on December 13, 1993, as amended on November 10, 2008 (effective on January 1, 2009) and February 6, 2016 (effective on February 6, 2016, and the Rules for Implementation of Provisional Regulations on Value-Added Tax of the PRC《中華人民共 ( 和國增值稅暫行條例實施細則》) promulgated by the Ministry of Finance on December 25, 1993, as amended on December 15, 2008 (effective on January 1, 2009) and on October 28, 2011, all entities and individuals engaged in selling goods, providing repair and placement services or importing goods into the PRC are generally subject to a value-added tax, or VAT, at a rate of 17% of the gross sales proceeds received (with the exception of certain goods subject to a rate of 13% or lower), less any VAT already paid or borne by the taxpayer on goods or services purchased and utilized in the production

— 106 — REGULATIONS of goods or provision of services that have generated the gross sales proceeds. SAT and Ministry of Finance enacted the Notice on Including Railway Transportation and Postal Services Sectors into the Pilot Scheme on Switching from Business Tax to VAT promulgated on December 12, 2013《關於將 ( 鐵路運輸和郵政業納入營業稅改徵增值稅試點的通知》), which provides that the business of providing technical, informative services in respect of manufacturing, cultural industries, modern logistics industry etc., including R&D and technical services, information technology services, cultural creativity services, logistics supporting services, tangible personal property leasing services, attestation consulting services, radio and television services, are subject to VAT at a rate of 6%.

The Circular on Value-added Tax Policy on Software Products《關於軟件產品增值稅政策的通 ( 知》), promulgated by Ministry of Finance and SAT on October 13, 2011 (“Software Products VAT Circular”), provides that, if general VAT taxpayers sell software products developed and produced by them, VAT shall be collected at a tax rate of 17% and the refund-upon-collection policy shall be applied to the part VAT in excess of 3% of their actual tax burden. CDV WFOE, as a software enterprise, is entitled to such 14% refund.

— 107 — HISTORY, REORGANIZATION AND GROUP STRUCTURE

OVERVIEW

We began our business through Beijing Xin’aote Electronic Company Ltd. (北京市新奧特電子有限公司)(“Xin’aote Electronic”), a PRC enterprise jointly established by Mr. Zheng, as one of the founders and the single largest shareholder, in 1990. In 1997, Mr. Zheng, as a major shareholder, established Xin’aote Video, which was subsequently used as the major operating subsidiary of Xin’aote Electronic to carry on our business. Mr. Zheng, who has extensive industry knowledge in our business, established these companies using his industry knowledge and personal resources.

With our continued development over the years, we have become a leading digital video technology solution and service company in the TV broadcasting industry in China providing a full range of solutions, services and products to television broadcasters and other digital video content providers, focusing mainly on the post-production segment of the PRC television broadcasting market.

In anticipation of introducing the Pre-IPO Investors, CDV WFOE was incorporated by our Company in 2007 and our business (primarily including the business contracts and employment contracts of the employees relating to our business) were effectively transferred from Xin’aote Video to CDV WFOE through a series of business restructuring in 2007 and 2008 (the “Reorganization”).

Set forth below are the key milestones in our predecessor and our Group’s development.

1990 • Incorporated Xin’aote Electronic and commenced our business 1994 • Established business relationship with CCTV • Launched the first Windows-based Chinese character generator in China 1997 • Launched the first video editing system in China 2001 • Launched the first domestically developed 3D virtual studio solutions certified by SARFT 2005 • Launched the first HD video editing system in China 2007 • Incorporated China Digital Video Holdings Limited, or CDV, our Company • Established China Digital Video (Beijing) Limited, or CDV WFOE, formerly known as Xin’aote (Beijing) Video Technology Co., Ltd. (新奧特（北京）視頻技術有限公司), our principal wholly-owned subsidiary in the PRC 2008 • Received investment from the Series A Investors, namely, IFC, Intel Capital, ICPE and Vertex Tech 2009 • Received investment from the Series A-1 Investors, namely, IFC, Intel Capital, Vertex Tech and Federal HK 2010 • Launched the first domestically developed visual effects and video compositing system, under the Brand Dunhuang, • Received investment from the Series B Investor, Carvillo 2013 • Acquired the entire equity interest of Beijing Zhengqi 2014 • Established Beijing Hermit, Xin’aote Cloud and Beijing Yueying as our joint ventures • Established Beijing Meicam as our subsidiary • Received investment from the Series C Investor, the Founder Hong Kong

— 108 — HISTORY, REORGANIZATION AND GROUP STRUCTURE

OUR CORPORATE STRUCTURE PRIOR TO THE REORGANIZATION

Prior to the Reorganization, Mr. Zheng carried out a series of restructuring of the companies controlled by him, as a result of which Xin’aote Electronic was disposed of to an independent third party. The chart below illustrates the corporate structure of the companies carrying out our business immediately prior to the Reorganization in 2007:

Mr. Zheng

95.00%(1)

Xinxin Holding (PRC)

71.68%(2)

Xin’aote Digital (PRC)

95.00%(3)

Xin’aote Video (PRC)

Notes:

(1) The remaining equity interest in Xinxin Holding was held by an independent third party.

(2) The remaining equity interest in Xin’aote Digital was held by independent third parties.

(3) The remaining equity interest in Xin’aote Video was held by independent third parties.

Prior to the Reorganization, we conducted our business primarily through Xin’aote Video.

REORGANIZATION

The Reorganization was designed to comply with the applicable PRC laws and regulations and involved (i) the incorporation of CDV WFOE, (ii) the transfer of most of the then-effective customer contracts relating to our business from Xin’aote Video to CDV WFOE, (iii) the transfer of the employment contracts of the employees of Xin’aote Video to CDV WFOE; and (iv) the transfer of all the fixed assets and intellectual properties owned by Xin’aote Video and Xin’aote Digital to Xinxin Shengtong, a company wholly-owned by Mr. Zheng which, in turn, granted an exclusive license to use such intellectual properties and leased the fixed assets to CDV WFOE.

— 109 — HISTORY, REORGANIZATION AND GROUP STRUCTURE

The Reorganization consists of the following major steps and arrangements:

Incorporation of our Company

On January 8, 2007, our Company was incorporated in the Cayman Islands as an exempted company with limited liability by a nominee company. On June 14, 2007, Mr. Zheng acquired one share in our Company, representing the then entire issued share capital of our Company at a par value of US$1.00.

Establishment of CDV WFOE

On June 21, 2007, our Company, as the sole shareholder, established CDV WFOE in the PRC as a wholly-foreign-owned company with a registered capital of US$10 million. CDV WFOE is our major operating subsidiary in the PRC.

Transfer of Customer Contracts and Employees

On January 8, 2008, Xin’aote Video and CDV WFOE entered into a business contracts transfer agreement (the “Business Contracts Transfer Agreement”) pursuant to which, Xin’aote Video shall transfer or sub-lease to CDV WFOE the then-effective customer contracts relating to our business. The transfer contemplated under the Business Contracts Transfer Agreement was completed in January 2008.

As part of the Reorganization, Xin’aote Video terminated the employment relationship with all of its employees relating to our business and at the same time, CDV WFOE entered into new employment agreements with these employees. The transfer of the employment relationship from Xin’aote Video to CDV WFOE was completed in August 2008.

Following such transfer, Xin’aote Video ceased to conduct our business. Xin’aote Video is currently mainly engaged in the distribution of electronic products in the PRC.

Transfer of Assets and Intellectual Property Rights to Xinxin Shengtong and Further License and Lease to CDV WFOE

Xinxin Shengtong was established by Mr. Zheng (as the sole shareholder) as a limited liability company in the PRC in August 2005. We introduced Xinxin Shengtong, a readily available entity, which was wholly-owned by Mr. Zheng, to facilitate the Reorganization. To comply with the applicable PRC laws and regulations, Xinxin Shengtong was designed to take on all the fixed assets and intellectual properties relating to our business from Xin’aote Video and Xin’aote Digital and subsequently lease or license such assets and intellectual properties to CDV WFOE.

—110— HISTORY, REORGANIZATION AND GROUP STRUCTURE

Pursuant to a series of transfer agreements, Xin’aote Video and Xin’aote Digital transferred their fixed assets (mainly office equipment) and intellectual properties (including patents, “新奧特” trademarks and trade secrets) relating to our business to Xinxin Shengtong. Such transfer was for our convenient operation by consolidating the ownership of such assets and intellectual properties under Xinxin Shengtong for further lease and license to CDV WFOE in compliance with the applicable PRC laws and regulations. It was also to ensure Xin’aote Video would not be able to continue to engage in our business after the Reorganization. At the same time, Xin’aote Video and Xin’aote Digital also granted an exclusive license to CDV WFOE to use their intellectual properties on our products and services which were to be transferred to Xinxin Shengtong till Xinxin Shengtong completed the transfer procedures and became the registered owner of these intellectual properties. Xinxin Shengtong also entered into the assets lease agreement and intellectual property rights license agreement with CDV WFOE.

The fixed assets and intellectual properties (save for “新奧特” trademarks) held by Xin’aote Video and Xin’aote Digital have been transferred to Xinxin Shengtong. Xin’aote Digital, as the then registered owner of “新奧特” trademarks, filed an application for the recognition of “新奧特”asa “well-known trademark” at the time when the transfer agreement was entered into. The parties subsequently decided not to proceed with such transfer as it might delay the application process. On August 28, 2015, Xin’aote Digital and Xinxin Shengtong entered into a supplemental agreement pursuant to which they have agreed not to proceed with the transfer. As “新奧特” trademarks are also used in Mr. Zheng’s businesses outside our Group, we do not plan to acquire the “新奧特” trademarks.

Termination of Lease and License Arrangements

Subsequent to the Reorganization, we have independently developed our own patents and other intellectual properties in line with our evolving business. We also purchased our own office equipment and fixed assets. As a result, in December 2010, CDV WFOE terminated the assets lease agreement and the intellectual property rights license agreement with Xinxin Shengtong.

We maintain the trademark license agreement with Xin’aote Digital in relation to the use of “新奧特” as it is well recognized in our industry. For detail of the terms of such license agreement, please refer to the section headed “Continuing Connected Transactions—Exempt Continuing Connected Transactions—Trademark Licensing Agreement” in this prospectus.

Following the Reorganization, Xin’aote Video ceased to conduct business related to our business, and CDV WFOE then became the sole entity conducting our business in the PRC, with the major part of CDV WFOE’s intellectual property rights, assets, personnel and businesses being newly developed, purchased, employed or expanded after the Reorganization.

King & Wood Mallesons, our PRC legal advisors, have confirmed that we have obtained all approvals in respect of the Reorganization from the competent PRC authorities, and the Reorganization was in compliance with the relevant PRC laws and regulations.

— 111 — HISTORY, REORGANIZATION AND GROUP STRUCTURE

The Reorganization and the investment by our Series A Investors (namely, IFC, Intel Capital, ICPE and Vertex Tech) were conducted concurrently. Further details of the investment by our Series A Investors are set out below under “Pre-IPO Investments—Series A Investment—Series A Tranche” in this section. Set forth below is the structure of our Group immediately after the completion of the major steps of Reorganization and the Series A Investment of Series A Tranche in August 2008 assuming all of the series A preferred shares were fully converted into ordinary shares.

Intel Capital ICPE Vertex Tech Mr. Zheng IFC (Delaware) (Cayman) (Singapore)

70.59% 14.71% 5.88% 4.41% 4.41%

The Company (Cayman)

Offshore 100%

Onshore

CDV WFOE (PRC)

ACQUISITIONS AND DISPOSALS AND NEW BUSINESSES

Acquisition of the Digital Broadcast Automation Solutions Business

To expand our market share in the video-related and digital broadcast automation solutions business in the PRC, in March 2013, CDV WFOE entered into a series of agreements to acquire the digital broadcast automation solutions business (the “Digital Broadcast Automation Solutions Business”) and the entire equity interest in Beijing Zhengqi from the companies within the group of Peking Founder. Such agreements include:

(a) an agreement with Founder Electronics in relation to the acquisition of the Digital Broadcast Automation Solutions Business and employees by CDV WFOE from Founder Electronics for nil cash consideration and we made several commitments to Founder Electronics. Please refer to note 26 of the Accountant’s Report in Appendix I of this prospectus for details of the commitments. As of the Latest Practicable Date, we have fully fulfilled the commitments to Founder Electronics;

(b) an agreement with Founder Electronics and Founder Easiprint in relation to the acquisition of their respective 60% and 40% equity interest in Beijing Zhengqi by CDV WFOE for a total cash consideration of RMB4 million which represented the then registered capital of Beijing Zhengqi; and

—112— HISTORY, REORGANIZATION AND GROUP STRUCTURE

(c) an agreement with Peking Founder and Founder Electronics in relation to the acquisition of certain patents, trademarks and software copyrights which were important to the Digital Broadcast Automation Solutions Business by CDV WFOE from Peking Founder and Founder Electronics for an aggregate consideration of RMB101.5 million which was determined after arm’s length negotiations.

The Digital Broadcast Automation Solutions Business was injected into Beijing Zhengqi and the acquisition of the entire equity interest in Beijing Zhengqi was completed in November 2013.

King & Wood Mallesons, our PRC legal advisors, have confirmed that we have obtained all necessary approvals and completed all the necessary legal filings and registrations with the competent PRC government authorities for this acquisition.

Establishment of Subsidiary — Beijing Meicam

On October 23, 2014, Beijing Meicam, was established in the PRC with a registered capital of RMB25 million. At the incorporation of Beijing Meicam, CDV WFOE subscribed for 40% of its registered capital by contribution of intellectual properties. Synergetic Innovation Fund and Mr. Zheng Pengcheng (鄭鵬程), a former employee of CDV WFOE, subscribed for 40% and 20% of the registered capital of Beijing Meicam by cash, respectively.

Although we own less than 50% of the equity interests in Beijing Meicam, it is deemed as a subsidiary of our Group as we can control 60% of the voting rights of Beijing Meicam through a voting rights proxy agreement dated June 29, 2015 (“Proxy Agreement”) with Mr. Zheng Pengcheng (鄭鵬程). Mr. Zheng Pengcheng (鄭鵬程) is the beneficial owner of the 20% equity interest shareholding in Beijing Meicam. He does not hold such equity interest as our nominee. Mr. Zheng Pengcheng (鄭鵬程) was a former employee of CDV WFOE who specialized in R&D work. Appreciating his lack of experience and expertise in business management and in view of his trust and confidence, gained from his work at CDV WFOE, in the experience and capability of the management of CDV WFOE to manage the business operations of Beijing Meicam, Mr. Zheng Pengcheng (鄭鵬程) entered into the Proxy Agreement. The Proxy Agreement is effective retrospectively on September 30, 2014, the same date as the shareholders’ agreement among the shareholders of Beijing Meicam, and will remain effective as long as Mr. Zheng Pengcheng (鄭鵬程) is a shareholder and director of Beijing Meicam. Pursuant to the Proxy Agreement, CDV WFOE is authorized to exercise Mr. Zheng Pengcheng’s rights on his behalf at the shareholders’ and directors’ meetings of Beijing Meicam. Such authorization includes (i) to execute any document at the shareholders’ and directors’ meetings; (ii) to exercise his voting rights at the shareholders’ and directors’ meetings in accordance with CDV WFOE’s own decisions; and (iii) to appoint the legal representatives, directors, supervisors, general manager and other senior management of Beijing Meicam. Furthermore, pursuant to the Proxy Agreement, Mr. Zheng Pengcheng (鄭鵬程) will refrain from exercising his rights to vote at the shareholders’ and directors’ meeting of Beijing Meicam. King & Wood Mallesons, our PRC legal advisors, are of the view that the Proxy Agreement is legal and binding and will not be deemed void under the relevant PRC laws and regulations regarding foreign ownership restrictions.

—113— HISTORY, REORGANIZATION AND GROUP STRUCTURE

Our new product, Meicam, was developed and launched by Beijing Meicam in October 2014. For detailed information regarding Meicam, please refer to the section headed “Business—Our Business—New Business—Mobile Application” in this prospectus. King & Wood Mallesons, our PRC legal advisors, have confirmed that as the current mobile application business engaged by Beijing Meicam does not involve the provision of profitable internet information service, the operation and business engaged by Beijing Meicam are not subject to any foreign investment restrictions. As further advised by our PRC legal advisors, if Beijing Meicam engages in providing profitable internet information service in the future, it will be required to hold ICP license and the equity interest held by its foreign investors shall not exceed 50% of its total equity interest under the applicable PRC laws and regulations. According to the verbal confirmation from Ministry of Industry and Information Technology (工業和信息化部)(“MIIT”), the supervising authority of Beijing Meicam in relation to ICP license, Beijing Meicam is permitted to apply for ICP license as long as the equity interest held by its foreign investors does not exceed 50% of its total equity interest. Our PRC legal advisors, who were also involved in the verbal inquiries with MIIT, have also confirmed that MIIT is an appropriate and competent authority to provide confirmation in this respect. The equity interest held by CDV WOFE in Beijing Meicam is less than 50% and we have no intention to increase our equity interest in Beijing Meicam to 50% or more. Our PRC legal advisors are further of the view that there is no substantive legal impediment for us to own and operate business of Beijing Meicam when it engages in profitable internet information service business in the future.

Establishment of Joint Ventures

We established the following joint ventures to leverage our core strengths in digital video technology to expand into a wider range of products and applications. The businesses which will be engaged by these joint ventures are extension of our core business and required significant amount of capital commitments for their operation and development. Accordingly, we contributed our intellectual property rights to subscribe for 40% of the equity interest of such joint ventures and introduced Synergetic Innovation Fund and former employees of our Group who contributed cash to the capital of such joint ventures. We review our investments in such joint ventures based on their performance and the synergies that they bring to our Group. King & Wood Mallesons, our PRC legal advisors, have confirmed that since the following joint ventures currently are not engaged in providing profitable internet information service, the operation and business engaged by the following joint ventures are not subject to any foreign investment restrictions.

Beijing Hermit

On September 17, 2014, Beijing Hermit was established in the PRC with a registered capital of RMB10 million. At the establishment of Beijing Hermit, CDV WFOE subscribed for 40% of its registered capital by contribution of intellectual property rights. Synergetic Innovation Fund and Mr. Ren Leshi (任樂時), a former employee of CDV WFOE, contributed 40% and 20% of the registered capital of Beijing Hermit by cash, respectively. In July 2015, Mr. Ren Leshi (任樂時) transferred his 20% capital contribution in Beijing Hermit to an independent third party. On September 16, 2015, the then shareholders of Beijing Hermit, including CDV WFOE and Synergetic Innovation Fund, entered into a capital increase agreement with two independent third parties. Pursuant to such capital increase agreement, the two independent third parties and Synergetic Innovation Fund agreed to contribute a total of RMB15,000,000 in cash to the share capital of Beijing Hermit, and such capital contribution

—114— HISTORY, REORGANIZATION AND GROUP STRUCTURE shall account for 33.33% of the total enlarged share capital of Beijing Hermit. As of the Latest Practicable Date, Beijing Hermit is in the process of filing such changes in the shareholding structure with the relevant administrative authority for industry and commerce. Upon completion of such filing process, the registered capital of Beijing Hermit will be increased from RMB10,000,000 to RMB15,000,000 and our shareholding structure in Beijing Hermit will be dilluted to 26.67%.

Beijing Hermit has developed the “AutoAd” technology to insert virtual advertising images during the broadcasting of sport events. King & Wood Mallesons, our PRC legal advisors are of the view that the business engaged by Beijing Hermit is not subject to any restriction on foreign investment. For detailed information regarding the AutoAd technology, please refer to the section headed “Business—Our Business—Joint Ventures—Virtual Advertising and Others”.

Xin’aote Cloud

On December 29, 2014, Xin’aote Cloud was established in the PRC with a registered capital of RMB25 million. At the establishment of Xin’aote Cloud, CDV WFOE subscribed for 40% of its registered capital by contribution of intellectual property rights. Synergetic Innovation Fund and Mr. Yang Zhao (楊朝), a former employee of CDV WFOE, subscribed for 40% and 20% of the registered capital of Xin’aote Cloud by cash, respectively. Xin’aote Cloud plans to develop a mobile application which facilitates interactions between teachers and parents. King & Wood Mallesons, our PRC legal advisors, are of the view that as Xin’aote Cloud does not engage in providing profitable internet information service, it is not subject to any restriction on foreign investment. As further advised by our PRC legal advisors, if Xin’aote Cloud engages in providing profitable internet information service in the future, it will be required to hold ICP license and the equity interest held by its foreign investors shall not exceed 50% of its total equity interest under the applicable PRC laws and regulations. The equity interest held by CDV WOFE in Xin’aote Cloud is less than 50% and we have no intention to increase our equity interest in Xin’aote Cloud to 50% or more. Our PRC legal advisors are further of the view that there is no substantive legal impediment for us to own and operate business of Xin’aote Cloud when it engages in providing profitable internet information service business in the future.

Beijing Yueying

On December 9, 2014, Beijing Yueying was established in the PRC with a registered capital of RMB10 million. At the incorporation of Beijing Yueying, CDV WFOE subscribed for 40% of its registered capital by contribution of intellectual property rights. Synergetic Innovation Fund and Mr. Wang Wei (王威), a former employee of CDV WFOE, subscribed for 40% and 20% of the registered capital of Beijing Yueying by cash, respectively. On July 8, 2015, CDV WFOE, Synergetic Innovation Fund and Mr. Wang Wei (王威), the then shareholders of Beijing Yueying, entered into a capital increase agreement with an independent third party. Pursuant to which the independent third party agreed to subscribe for an additional RMB1,363,636 of the registered capital of Beijing Yueying for a cash consideration of RMB3,000,000. Upon completion of such capital increase in September 2015, the registered capital of Beijing Yueying has been increased from RMB10,000,000 to RMB11,363,636, and our shareholding in Beijing Yueying has been dilluted to 35.2%. Beijing Yueying plans to develop a mobile application for the sharing of event-based photos and videos. King & Wood Mallesons, our

—115— HISTORY, REORGANIZATION AND GROUP STRUCTURE

PRC legal advisors, are of the view that as Beijing Yueying does not engage in providing profitable internet information service, it is not subject to any restriction on foreign investment. As further advised by our PRC legal advisors, if Beijing Yueying engages in providing profitable internet information service in the future, it will be required to hold ICP license and the equity interest held by its foreign investors shall not exceed 50% of its total equity interest under the applicable PRC laws and regulations. The equity interest held by CDV WOFE in Beijing Yueying is less than 50% and we have no intention to increase our equity interest in Beijing Yueying to 50 % or more. Our PRC legal advisors are further of the view that there is no substantive legal impediment for us to own and operate business of Beijing Yueying when it engages in providing profitable internet information service business in the future.

Disposal of CDV Cloud

Pursuant to an equity interest transfer agreement dated May 13, 2015, CDV WFOE which then held 80% of the equity interest in CDV Cloud agreed to dispose of 60% and 20% of its equity interest in CDV Cloud to Mr. Zheng and an independent third party for a consideration of RMB6,000,000 and RMB2,000,000, respectively. CDV Cloud was established in PRC on April 25, 2014 and was held as to 80% and 20% of the equity interest by CDV WFOE and an independent third party at the time of establishment. The consideration was determined based on then paid-up registered capital of CDV Cloud. The disposal was completed in May 2015.

CDV Cloud was a provider of cloud services under a platform-as-a-service model, or PaaS, where it delivered a computing platform (including operating system, programming-language execution environment, database and web server) to digital video technology customers. The PaaS business carried on by CDV WFOE was at an early development stage and required significant capital and other resources. We chose to allocate and focus our resources on our core business and disposed of equity interest in CDV Cloud to Mr. Zheng, who was interested in investing in his own funds on and helped obtain funding from third parties for CDV Cloud. Subsequent to the disposal, CDV Cloud underwent a capital increase process and as a result of which the equity interest of Mr. Zheng in CDV Cloud was reduced to 43.64%.

We have begun to invest and develop the cloud-based video editing system, namely, the software-as-a service model or SaaS, supported by cloud computing technologies and third party cloud platform providers. Unlike the PaaS which provides a computing platform to digital video technology customers, the SaaS provides software which is centrally hosted in cloud platform for licensing subscription by customers. Due to our limitation in expertise, we currently do not plan to extend our business to PaaS. On such basis, our Directors are of the view that there is no potential competition between the business of CDV Cloud (PaaS) and our development of SaaS. The Sole Sponsor concurs with the view of our Directors.

Disposal of AllOne Sports

On August 4, 2015, our Company transferred the entire issued 10,000 share capital (being 10,000 shares) of AllOne Sports Company Limited (“AllOne Sports”), a company incorporated in Hong Kong, to Mr. Zheng at the par value for a total consideration of HK$10,000. AllOne Sports has not commenced any business since its incorporation. The disposal was to simplify the structure of our Group.

—116— HISTORY, REORGANIZATION AND GROUP STRUCTURE

Deregistration of the Digital Video (Singapore)

We completed the deregistration process of China Digital Video (Singapore) Pte. Ltd. (“Digital Video (Singapore)”) in April 2016. Historically, Digital Video (Singapore) has not engaged in any material business activities.

PRE-IPO INVESTMENTS

Series A Investment

On September 9, 2007, our Company, Xin’aote Video, Xinxin Holding, CDV WFOE, Xinxin Shengtong and Mr. Zheng entered into a securities purchase agreement with the IFC, the Intel Capital, the ICPE and the Vertex Tech (each a “Series A Investor” and collectively the “Series A Investors”). The securities purchase agreement was amended on November 6, 2007 and January 8, 2008, respectively (collectively, the “Series A Securities Purchase Agreement”).

Series A Tranche

Under the Series A Securities Purchase Agreement, the Series A investment (the “Series A Investment”) shall be completed by two tranches, the initial closing (the “Initial Closing”) and the second closing (the “Second Closing”). At the Initial Closing, the Series A Investors shall subscribe for (i) an aggregate of 33,333,334 series A preferred shares, representing 29.41% of the post-Initial Closing enlarged issued share capital (on an as-converted basis and excluding the options granted under the Pre-IPO Share Option Scheme) of our Company, for an aggregate consideration of US$10 million, and (ii) the warrants exercisable for an additional aggregate of 6,666,667 additional series A preferred shares (the “Warrants”) for an aggregate consideration of US$2 million. At the Second Closing, the Series A Investors and a strategic investor who was yet to be determined shall subscribe for an aggregate of 28,888,889 series A preferred shares for consideration of US$13 million.

The Initial Closing took place in January 2008 and an aggregate of 33,333,334 series A preferred shares were issued to the Series A Investors as mentioned above according to their respective agreed number and percentage of series A preferred shares.

For further details of the Series A Tranche, see the table below under “Details of the Pre-IPO Investments”.

Transfer of ICPE Shares

Shortly after the transfer of all its series A preferred shares and Warrants (the “ICPE Shares”) by ICPE to Mr. Liu for a consideration of US$1,500,000, the ICPE Shares were transferred to Vertex Asia for the same amount of consideration in August 2009. Upon completion of the transfer of the ICPE Shares, the Series A Investors comprised IFC, Intel Capital, Vertex Tech and Vertex Asia.

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Series A-1 Tranche

On August 11, 2009, our Company, Xin’aote Video, Xinxin Holding, CDV WFOE, Xinxin Shengtong and Mr. Zheng, entered into an amended and restated securities purchase agreement (the “Series A-1 Securities Purchase Agreement”) with IFC, Intel Capital, Vertex Tech and Federal HK (each a “Series A-1 Investor” and collectively the “Series A-1 Investors”) and Vertex Asia to, among others, amend the number of shares to be subscribed for by the investors at the Second Closing. Pursuant to the Series A-1 Securities Purchase Agreement, the Series A-1 Investors shall subscribe for an aggregate of 27,500,000 series A-1 preferred shares (instead of 28,888,889 series A preferred shares as stated in the Series A Securities Purchase Agreement), representing 19.53% of the post-Initial Closing enlarged issued share capital (on an as-converted basis and excluding the Shares which may be issued upon the exercise of any option granted under the Pre-IPO Share Option Scheme) of our Company, for an aggregate consideration of US$11 million.

The Second Closing took place in August 2009 and an aggregate of 27,500,000 series A-1 preferred shares were issued to the Series A-1 Investors as mentioned above according to their respective agreed number and percentage of series A-1 preferred shares.

For further details of the Series A-1 Tranche, see the table below under “Details of the Pre-IPO Investments”.

Exercise of Warrants

In January 2011, Series A Investors exercised the Warrants and an aggregate of 6,666,666 series A preferred shares were issued to IFC, Intel Capital, Vertex Tech and Vertex Asia. For further details of the exercise of warrants, see the table below under “Details of the Pre-IPO Investments.”

Redemption of Shares

On September 23, 2013, Vertex Tech delivered a notice to our Company to exercise its right to redeem all its 6,000,000 series A preferred shares at the price of US$0.60 per share and all its 3,750,000 series A-1 preferred shares with redemption price of US$0.80 per share. The redemption of such series A preferred shares and series A-1 preferred shares was completed on June 26, 2015 and the total redemption price in the amount of US$6,600,000 was fully paid by us on June 24, 2015. Upon completion of such redemption, Vertex Tech ceased to hold any share in our Company.

On September 23, 2013, Vertex Asia delivered a notice to our Company to exercise its right to redeem all its 6,000,000 series A preferred shares at the price of US$0.60 per share. The redemption of such series A preferred shares was completed on June 26, 2015 and the total redemption price in the amount of US$3,600,000 was fully paid by us on June 24, 2015. Upon completion of such redemption, Vertex Asia ceased to hold any share in our Company.

—118— HISTORY, REORGANIZATION AND GROUP STRUCTURE

On September 23, 2013, IFC delivered a notice to our Company to exercise its right to redeem all its 20,000,000 series A preferred shares at the price of US$0.60 per share and all its 12,500,000 series A-1 preferred shares at the price of US$0.80 per share. We paid the redemption price of US$4,400,000 to IFC in full on October 24, 2014. By an amended and restated settlement agreement dated July 30, 2015 entered into between our Company and IFC, it was agreed that in consideration of our payment of US$4,400,000 to IFC, the redemption of 4,000,000 series A preferred shares and 2,500,000 series A-1 preferred shares held by IFC was deemed to have completed on July 23, 2015. Upon completion of such redemption, IFC held 16,000,000 series A preferred shares and 10,000,000 series A-1 preferred shares.

On September 23, 2013, Intel Capital delivered a notice to our Company to exercise its right to redeem all its 8,000,000 series A preferred shares at the price of US$0.60 per share and all its 5,000,000 series A-1 preferred shares at the price US$0.80 per share. We paid the redemption price of US$1,760,000 to Intel Capital in full on October 24, 2014. By an amended and restated settlement agreement dated July 30, 2015 entered into between our Company and Intel Capital, it was agreed that in consideration for our payment of US$1,760,000, the redemption of 1,600,000 series A preferred shares and 1,000,000 series A-1 preferred shares held by Intel Capital was deemed to have completed on July 23, 2015. Upon completion of such redemption, Intel Capital held 6,400,000 series A preferred shares and 4,000,000 series A-1 preferred shares.

Transfer of Shares by IFC and Intel Capital

On July 30, 2015, IFC and Intel capital (as the sellers), HK Aoxin (as the buyer), an independent third party, and our Company, entered into a securities purchase agreement (the “SPA”). Pursuant to the SPA, IFC shall sell 6,000,000 series A preferred shares and 3,750,000 series A-1 preferred shares for a consideration of US$6,600,000 to HK Aoxin and Intel Capital shall sell 2,400,000 series A preferred shares and 1,500,000 series A-1 preferred shares to HK Aoxin for a consideration of US$2,640,000. As informed by HK Aoxin, the consideration under the SPA was fully settled on August 5, 2015. Upon completion of the transactions under the SPA, IFC held 10,000,000 series A preferred shares and 6,250,000 series A-1 preferred shares, Intel Capital held 4,000,000 series A preferred shares and 2,500,000 series A-1 preferred shares and HK Aoxin held 8,400,000 series A preferred shares and 5,250,000 series A-1 preferred shares. For further details, see the table below in “—Details of Transfer of Shares by IFC and Intel Capital to HK Aoxin”.

Series B Investment

On October 28, 2011, our Company, CDV WFOE, Wing Success and Mr. Zheng entered into series B securities purchase agreement with Carvillo (the “Series B Securities Purchase Agreement”). Pursuant to the Series B Securities Purchase Agreement, the Series B Investor shall subscribe for an aggregate of 34,833,333 series B preferred shares, representing 16.67% of

—119— HISTORY, REORGANIZATION AND GROUP STRUCTURE post-closing enlarged issued share capital (on an as-converted basis and excluding the options granted under the Pre-IPO Share Option Scheme) of our Company, for a consideration of US$50,000,000 (the “Series B Investment”). The Series B Investment was completed in November 2011 and an aggregate of 34,833,333 series B preferred shares were issued to Carvillo. For further details, see the table below in “—Details of the Pre-IPO Investments”.

Series C Investment

On October 27, 2014, our Company, CDV WFOE, Wing Success and Mr. Zheng entered into series C securities purchase agreement with Founder Hong Kong (the “Series C Securities Purchase Agreement”). Pursuant to the Series C Securities Purchase Agreement, Series C Investor shall subscribe for an aggregate of 10,151,453 series C preferred shares, representing 5.85% of post-closing enlarged issued share capital (on an as-converted basis and excluding the Shares which may be issued upon the exercise of any option granted under the Pre-IPO Share Option Scheme) of our Company, for a consideration of US$16,285,319 (equal to RMB100,000,000) (the “Series C Investment”). The Series C Investment was completed in October 2014 and an aggregate of 10,151,453 series C preferred shares were issued to the Founder Hong Kong. For further details, see the table below in “—Details of the Pre-IPO Investments”.

Principal Terms of the Pre-IPO Investments

Pursuant to the Shareholders’ Agreement among our Company, Mr. Zheng, and our then Pre-IPO Investors dated October 27, 2014, the Pre-IPO Investors are entitled to certain preferred shareholders’ rights, including (i) veto right over certain significant corporate matters, (ii) redemption right in the event that a Qualified IPO does not occur by March 31, 2017, (iii) pre-emptive right with respect to certain share issuance by our Company, (iv) customary information and inspection rights, and (v) right of first refusal, co-sale right and tag-along right with respect to certain share transfers by other shareholders of our Company. All of such rights granted to the Pre-IPO Investors under the Shareholders’ Agreement will terminate upon completion of a Qualified IPO save for the information and inspection rights which shall survive the Qualified IPO only to the extent permissible under the GEM Listing Rules and applicable laws. Accordingly, the provisions under the Shareholders’ Agreement which provide the Pre-IPO Investors with the information and inspection rights which are preferential than those available to the general public under the GEM Listing Rules will not survive the Qualified IPO due to the equal treatment principle under the GEM Listing Rules. The Qualified IPO requires, among others, a valuation of our Company at no less than US$250 million immediately prior to such offering (the “Minimun Valuation Requirement”). We have obtained our Pre-IPO Investors consent to waive the Minimun Valuation Requirement and deem this Global Offering as a Qualified IPO.

Pursuant to the Shareholders’ Agreement, the preferred shares issued to the Pre-IPO Investors will automatically be converted into ordinary shares of the Company immediately prior to the completion of the Qualified IPO. The conversion ratio between preferred shares and ordinary shares for (i) the series A preferred shares and series A-1 preferred shares shall be 1:0.75, (ii) series B preferred shares shall be 1:0.9375 and (iii) series C preferred shares shall be 1:1. All the Shares to be held by our Pre-IPO Investors, other than Carvillo, who will be our substantial shareholder, following the completion of the Global Offering, will be counted as part of the public float of our Company.

— 120 — Details of the Pre-IPO Investments

The below table summarizes the details of our Pre-IPO investments: ITR,ROGNZTO N RU STRUCTURE GROUP AND REORGANIZATION HISTORY, Investments Series A Investment Series B Investment Series C Investment Series A Tranche Series A-1 Tranche Exercise of Warrants Amended and Restated Securities Series B Securities Series C Securities Agreements Securities Purchase Agreement(1) Securities Purchase Agreement(1) Purchase Agreement Purchase Agreement Purchase Agreement

Investors IFC IFC IFC Intel Capital Intel Capital Intel Capital Carvillo Founder Hong Kong Vertex Tech Vertex Tech Vertex Tech ICPE (2) Federal HK Vertex(2) Asia

September 9, 2007 (amended on September 9, 2007 (amended on Date of the agreement November 6, 2007 and January 8, August 11, 2009 November 6, 2007 and January 8, October 28, 2011 October 27, 2014 2008) 2008)

Completion date January 8, 2008 August 18, 2009 January 8, 2011 November 23, 2011 October 27, 2014 2 — 121 —

Number of preferred shares and shareholding percentageIFC:16,666,667, 14.71% IFC:12,500,000, 8.88% IFC: 3,333,333, 1.91% in our Company on the respective completion date Intel Capital: 6,666,667, 5.88% Intel Capital: 5,000,000, 3.55% Intel Capital:1,333,333, 0.77% (on an as-converted basis and assuming no exercise ofVertex Tech: 5,000,000, 4.41% Vertex Tech: 3,750,000, 2.66% Vertex Tech: 1,000,000, 0.57% 34,833,333, 16.67% 10,151,453, 5.85% any option granted under the Pre-IPO Share Option ICPE: 5,000,000, 4.41% Federal HK: 6,250,000, 4.44% Vertex Asia: 1,000,000, 0.57% Scheme) Total: 33,333,334, 29.41% Total: 27,500,000, 19.53% Total: 6,666,666, 3.83% (8)

Cumulative shareholding IFC: 24,375,000, 18.66% percentage in our Company upon completion of exercise Intel Capital: 9,750,000, 7.46% of Warrants (on an as-converted basis and Vertex Tech: 7,312,500, 5.60% —— assuming no exercise of any option granted under the Vertex Asia: 4,500,000, 3.44% Pre-IPO Share Option Scheme) Federal HK: 4,687,500, 3.59% Investments Series A Investment Series B Investment Series C Investment Series A Tranche Series A-1 Tranche Exercise of Warrants IFC: US$5,000,000 IFC: US$5,000,000 IFC: US$1,000,000 Intel Capital: US$2,000,000 Intel Capital: US$2,000,000 Intel Capital: US$400,000 US$16,285,319 Amount of consideration Vertex Tech: US$1,500,000 Vertex Tech: US$1,500,000 Vertex Tech: US$300,000 US$50,000,000 (US$ equivalent of

ICPE: US$1,500,000 Federal HK: US$2,500,000 Vertex Asia: US$300,000 RMB100,000,000) STRUCTURE GROUP AND REORGANIZATION HISTORY, Total: US$10,000,000 Total: US$11,000,000 Total: US$2,000,000

Cost per share (on an as-converted basis and upon completion of the Global Offering and assuming no exercise of the Over-allotment Option and any option granted under theUS$0.1332 US$0.1775 US$0.1332 US$0.5097 US$0.5340 Pre-IPO Share Option Scheme)

(8)

IFC: February 29, 2008 IFC: August 13, 2009 IFC: January 13, 2011 Intel Capital: February 29, 2008 Intel Capital: August 18,2009 Intel Capital: December 23, 2010 Payment date November 28, 2011 October 30, 2014 Vertex Tech: February 29, 2008 Vertex Tech: August 18,2009 Vertex Tech: January 7, 2011 ICPE: February 29, 2008 Federal HK: August 19,2009 Vertex Asia: January 7, 2011 2 — 122 — Based on arm’s length Based on arm’s length Based on arm’s length negotiation Based on arm’s length negotiation Based on arm’s length negotiation negotiation with reference negotiation with reference Basis for the determination with reference to the agreed with reference to the agreed with reference to the agreed to the agreed assessment to the agreed assessment of the consideration assessment of the value of our assessment of the value of our assessment of the value of our of the value of our Group of the value of our Group Group at the time of execution of Group at the time of execution of Group at the time of execution of at the time of execution at the time of execution such agreement such agreement such agreement of such agreement of such agreement

(Discount)/Premium to the Offer Price (53.8)%

(3) (38.4)%(3) (53.8)%(3) 76.7%(3) 85.2%(3)

Acquisition of assets in Xin’aote Research and development, Video to expand and enhance our broadcasting, media assets Working capital Working capital Working capital Use of proceeds and whether PRC operations, research and production, merger and acquisition fully utilized development and working capital. and working capital. The proceeds have been fully The proceeds have been fully The proceeds have been fully The proceeds have been The proceeds have been utilized. utilized. utilized. fully utilized. fully utilized.

Shareholding percentage in (4) our Company immediately IFC: 7.87% prior to the Global Offering (5) (on an as-converted basis Intel Capital: 3.15% and assuming no exercise of Federal HK: 3.03% 21.10% 6.56% any option granted under the Vertex Tech: nil(6) Pre-IPO Share Option Scheme) ICPE: nil(2) (8) Vertex Asia: nil(7) Investments Series A Investment Series B Investment Series C Investment Series A Tranche Series A-1 Tranche Exercise of Warrants Shareholding percentage in IFC: 5.91% our Company immediately upon completion of the Intel Capital: 2.36% Global Offering (on an as-converted basis and Vertex Tech: nil STRUCTURE GROUP AND REORGANIZATION HISTORY, 15.82% 4.92% assuming no exercise of any Federal HK: 2.27% option granted under the Pre-IPO Share Option ICPE: nil Scheme and Over-allotment Option) Vertex Asia: nil

Notes:

(1) The Series A Investors were also granted the Warrants exercisable for an additional aggregate of 6,666,667 additional series A preferred shares for consideration of US$ 2 million.

(2) After the Initial Closing, ICPE transferred all the series A preferred shares and the Warrants held by it to Mr. Liu who subsequently transferred such series A preferred shares

2 — 123 — and Warrants to Vertex Asia on August 6, 2009.

(3) The consideration was not determined with reference to the Offer Price. The discount to the Offer Price is for illustration only and is calculated based on: i. the amount of consideration paid by each Pre-IPO Investor divided by the number of Shares held by each Pre-IPO Investor immediately upon the completion of the Capitalization Issue and the Global Offering;

ii. the Offer Price of HK$2.24, being the mid-point of the indicative range of the Offer Price range of HK$1.90 and HK$2.57; and iii. the exchange rate of HK$7.7663: US$1.00 and RMB0.84331:HK$1.00 (4) On July 23, 2015, our Company redeemed a total of 4,000,000 series A preferred shares and 2,500,000 series A-1 preferred shares held by IFC. On July 30, 2015, IFC transferred its 6,000,000 series A preferred shares and 3,750,000 series A-1 preferred shares to HK Aoxin. (5) On July 23, 2015, our Company redeemed the 1,600,000 series A preferred shares and the 1,000,000 series A-1 preferred shares held by Intel Capital. On July 30, 2015, Intel Capital transferred its 2,400,000 series A preferred shares and its 1,500,000 series A-1 preferred shares to HK Aoxin. (6) On June 26, 2015, our Company redeemed the 6,000,000 series A preferred shares and the 3,750,000 series A-1 preferred shares held by Vertex Tech. (7) On June 26, 2015, our Company redeemed the 6,000,000 series A preferred shares held by Vertex Asia. (8) The preferred shares held by the Pre-IPO Investors will be automatically converted into ordinary shares immediately prior to the completion of the Global Offering. The conversion ratio between preferred share and ordinary share for (i) the Series A preferred share and Series A-1 preferred share shall be 1:0.7500; (ii) Series B preferred share shall be 1:0.9375 and (iii) Series C preferred share shall be 1:1. HISTORY, REORGANIZATION AND GROUP STRUCTURE

Details of Transfer of Shares by IFC and Intel Capital to HK Aoxin

Agreement Securities Purchase Agreement

Parties of the agreement IFC, Intel Capital, HK Aoxin and the Company

Date of the agreement July 30, 2015

Completion date August 25, 2015

Number of preferred shares and IFC: 10,000,000 series A preferred shares and shareholding percentage in our Company on 6,250,000 series A-1 preferred shares, 7.87% the completion date (on an as-converted basis and assuming no exercise of any Intel Capital: 4,000,000 series A preferred option granted under the Pre-IPO Share shares and 2,500,000 series A-1 preferred Option Scheme) shares, 3.15%

HK Aoxin: 8,400,000 series A preferred shares, 5,250,000 series A-1 preferred shares, 6.61%

Amount of consideration US$9,240,000

Cost per share (on an as-converted basis US$0.3005 and upon completion of the Global Offering and assuming no exercise of the Over-allotment Option and any options granted under the Pre-IPO Share Option Scheme)

Payment date August 5, 2015

(Discount)/Premium to the Offer Price(1) 4.2%

Shareholding percentage in our Company IFC: 7.87% immediately prior to the Global Offering Intel Capital: 3.15% (on an as-converted basis and assuming no HK Aoxin: 6.61% exercise of the Over-allotment Option and any option granted under the Pre-IPO Share Option Scheme)

Note:

(1) The consideration was not determined with reference to the Offer Price. The discount to the Offer Price is for illustration only and is calculated based on: i. the amount of consideration paid by HK Aoxin divided by the number of Shares held by HK Aoxin immediately upon the completion of the Capitalization Issue and the Global Offering; ii. the Offer Price of HK$2.24, being the mid-point of the indicative range of the Offer Price range of HK$1.90 and HK$2.57; and iii. the exchange rate of HK$7.7663: US$1.00 and RMB0.84331:HK$1.00

— 124 — HISTORY, REORGANIZATION AND GROUP STRUCTURE

Information regarding the Pre-IPO Investors

IFC

IFC is a member of the World Bank Group and is established by its articles of agreement, among 184 member countries, including the PRC. IFC fosters sustainable economic growth in developing countries by financing private sector investment, mobilizing capital in the international financial markets, and providing advisory services to businesses and governments. Since 1985, IFC has financed more than 200 projects in China to support sustainable private sector development in a wide range of industry including manufacturing and services sector, banking and financial market, infrastructure, agriculture, health & education, and private equity funds.

Intel Capital

Intel Capital is a Delaware corporation. Intel Capital, which is Intel’s global investment organization, makes equity investments in innovative technology start-ups and companies worldwide. Intel Capital invests in a broad range of companies offering hardware, software, and services targeting enterprise, mobility, consumer internet, digital media and semiconductor manufacturing.

Vertex Tech

Vertex Tech is a fund managed by Vertex Venture Holdings Limited (the “Vertex Venture”) and focuses on investing in start-up technology companies in Asia and the United States.

Vertex Asia

Vertex Asia is a fund managed by Vertex Venture and focuses on investing in growth companies in Asia.

ICPE

India China Pre-IPO Equity (C.I.) Ltd., a private equity fund registered in the Cayman Islands.

Federal HK

Federal HK is a limited liability company incorporated in Hong Kong. It is a wholly-owned subsidiary of Hunan TV & Broadcast Intermediary Co., Ltd and mainly engages in culture and media businesses investment.

Carvillo

Carvillo is a limited liability company incorporated under the laws of Cayman Islands. Carvillo was owned as to 80% by New Horizon Capital III, L.P. and 20% by an individual who is an independent third party. It is mainly engaged in investments.

— 125 — HISTORY, REORGANIZATION AND GROUP STRUCTURE

Founder Hong Kong

Founder Hong Kong is a limited liability company incorporated under the laws of Hong Kong. It is mainly engaged in investment and trading. Founder Hong Kong is a subsidiary of Peking Founder, which is a diversified conglomerate group engaged in five industries, being, intellectual technology, healthcare, properties, financial and commodities.

HK Aoxin

HK Aoxin is a limited liability company incorporated under the laws of Hong Kong. HK Aoxin is held by two private investors. It is mainly engages in investment and trading.

To the best knowledge, information and belief of our Directors, other than their respective investments in our Company, each of the Pre-IPO Investors and its respective ultimate beneficial owner are independent of and not connected with our Directors, chief executive or substantial shareholders or any of our subsidiaries or their respective associates.

Sole Sponsor’s Confirmation

On the basis that the investments by the Pre-IPO Investors have been settled more than 28 clear days before the date of submission of the initial listing application, the Sponsor confirms that such investment has complied with the Interim Guidance on Pre-IPO Investments issued on October 13, 2010, Guidance Letters HKEx-GL43-12 issued in October 2012 and updated in July 2013 and HKEx-GL44-12 issued in October 2012 of the Stock Exchange.

Previous Listing Attempt

In 2011, our Company sought an initial public offering in the United States (the “attempted U.S. listing”). As part of the attempted U.S. listing, our Company submitted the application documents on a confidential basis, including a draft registration statement (the “Registration Statement”), to the U.S. Securities and Exchange Commission (the “SEC”) for its review. As part of the SEC’s review process, we received five rounds of comments, with 100, 43, 9, 5 and 2 comments, respectively. We believe that the number of comments in each round and the number of rounds of comments during the SEC review process were within the usual range for U.S. listing applications by PRC-based issuers like us. The SEC comments generally related to disclosure requirements on various sections of the Registration Statement such as prospectus summary, corporate structure and history, risk factors, use of proceeds, management’s discussion and analysis of the Group’s results of operations, industry and business sections, as well as the audited financial statements. In particular, SEC requested clarification and/or disclosure of (i) material terms of the agreements in connection with the Reorganization and validity of such agreements, key steps taken to implement the Reorganization and applicability of M&A Rules to the Reorganization; (ii) methods that our Group adopted to maintain long-term business relationship with our key customers; (iii) potential conflict of interest between Mr. Zheng and our Group; and (iv) the methodology for determining the amount of the change in redemption value of the redeemable convertible preferred shares. We resolved the SEC’s comments by (i) explaining or clarifying to the SEC in our response to the SEC comments, (ii) adding disclosure as the SEC requested, and (iii) revising or restructuring certain disclosure for clearer presentation. The

— 126 — HISTORY, REORGANIZATION AND GROUP STRUCTURE final two outstanding comments from the SEC in its fifth comment letter related to (i) fluctuation of quarterly results due to seasonality; and (ii) American depositary receipts. We had no material difficulty in resolving these comments. However, at that time, in September 2011, we decided to suspend the attempted U.S. listing due to unfavorable capital market conditions in the U.S. at the time.

Our Directors confirm that (i) the SEC comments were primarily relating to disclosure or required clarification; (ii) in preparing this prospectus, we have taken into account, to the extent applicable, all of regulatory comments we received from SEC after giving regard to the significant changes in our business, financial conditions and market environment and the relevancy of such comments to the Track Record Period of our Company, in order for the investors to form an informed assessment of our Company in the context of the Listing based on this prospectus; and (iii) we decided to suspend the attempted U.S. listing due to unfavourable capital market conditions, but not due to any difficulty in resolving the SEC comments. On such basis, our Directors take the view that there is nothing in relation to the attempted U.S. listing and relevant to the Listing which would affect our Company’s suitability for the Listing. Based on the information provided by the Company, the Sole Sponsor concurs with the Directors’ view above and is not aware of any substantial matter in relation to the attempted U.S. listing that needs to be brought to the Stock Exchange’s attention.

TRUST ARRANGEMENT

On April 1, 2011, Mr. Zheng, as the sole shareholder, established ZFS Holdings. On March 10, 2011, Mr. Zheng, as the sole shareholder, established Wing Success. On June 15, 2011, Mr. Zheng donated all his 80,000,000 ordinary Shares as a gift to Wing Success by a deed of gift. On the same day, Mr. Zheng donated his interest in the entire issued share capital of Wing Success to ZFS Holdings by a deed of gift.

On June 17, 2011, Mr. Zheng, as the settlor, established a trust over his entire interest in ZFS Holdings (“Future Success Trust”) and transferred such interest to HSBC International Trustee Limited (“HSBC Trustee”), as the original trustee. Future Success Trust is a discretionary trust with Mr. Zheng, his spouse and their children as discretionary beneficiaries.

The trust was established and is enforceable under the law of British Virgin Islands and customary powers granted to the trustees including power to pay or apply the whole or any part of the capital of the trust fund to or for the benefit of all or any one or more of the beneficiaries. Mr. Zheng as the settlor has the power to add and/or exclude beneficiaries. Mr. Zheng as the settlor has the power to amend the trust. Mr. Zheng can nominate the directors of ZFS Holdings.

— 127 — HISTORY, REORGANIZATION AND GROUP STRUCTURE

CORPORATE AND SHAREHOLDING STRUCTURE

The following diagram illustrates our corporate and shareholding structure immediately prior to the completion of the Global Offering (assuming all preferred shares are fully converted and none of the option granted under the Pre-IPO Share Option Scheme is exercised):

Future Success Trust(1)

ZFS Holdings(2) (BVI)

100%

Wing HK Founder Carvillo Intel Capital Federal HK Success IFC Aoxin Hong Kong (Cayman) (Delaware) (HK) (BVI) (HK) (HK)

51.68%21.10%(3) 7.87%(3) 6.61%(3) 6.56%(3) 3.15%(3) 3.03%(3)

100%

The Company (Cayman)

100%

Offshore

Onshore CDV WFOE (PRC)

100% 40% 40% 35.2% 40%

Beijing (5) Beijing (5) Beijing Zhengqi Meicam(4) Beijing Hermit Yueying(5) Xin’aote Cloud (PRC) (PRC) (PRC) (PRC) (PRC)

Notes:

(1) Mr. Zheng is the settlor and a beneficiary of Future Success Trust which holds the entire issued share capital of ZFS Holdings. (2) ZFS Holdings is controlled by HSBC Trustee as trustee of the Future Success Trust. (3) The preferred shares held by the Pre-IPO Investors will be automatically converted into ordinary shares immediately prior to the completion of the Global Offering. The conversion ratio between preferred share and ordinary share for (i) the Series A preferred share and Series A-1 preferred share shall be 1:0.7500; (ii) Series B preferred share shall be 1:0.9375 and (iii) Series C preferred share shall be 1:1. (4) Beijing Meicam is deemed as a subsidiary of our Group as we can control 60% of the voting rights of Beijing Meicam through an agreement with Mr. Zheng Pengcheng, a 20% shareholder in Beijing Meicam. (5) Beijing Hermit, Beijing Yueying and Xin’aote Cloud are our non-consolidated joint ventures.

— 128 — HISTORY, REORGANIZATION AND GROUP STRUCTURE

The following diagram illustrates our corporate and shareholding structure immediately following the completion of the Global Offering (assuming no exercise of the Over-allotment Option and any option granted under the Pre-IPO Share Option Scheme):

Future Success Trust(1)

ZFS Holdings(2) (BVI)

100%

Wing Founder HK Carvillo Intel Capital Federal HK Public Success IFC Hong Kong Aoxin (Cayman) (Delaware) (HK) Investors (BVI) (HK) (HK)

38.76%15.82%(3) 5.91%(3) 4.92%(3) 4.96%(3) 2.36%(3) 2.27%(3) 25.00%

100%

The Company (Cayman)

100%

Offshore

Onshore CDV WFOE (PRC)

100% 40% 40% 35.2% 40%

Beijing Beijing Beijing Zhengqi Beijing Hermit(5) (5) Meicam(4) Yueying(5) Xin’aote Cloud (PRC) (PRC) (PRC) (PRC) (PRC)

Notes:

(1) Mr. Zheng is the settlor and a beneficiary of Future Success Trust which holds the entire issued share capital of ZFS Holdings.

(2) ZFS Holdings Limited is controlled by HSBC Trustee as trustee of the Future Success Trust. (3) The preferred shares held by the Pre-IPO Investors will be automatically converted into ordinary shares immediately prior to the completion of the Global Offering. The conversion ratio between preferred share and ordinary share for (i) the Series A preferred share and Series A-1 preferred share shall be 1:0.7500; (ii) Series B preferred share shall be 1:0.9375 and (iii) Series C preferred share shall be 1:1. (4) Beijing Meicam is deemed as a subsidiary of our Group as we can control 60% of the voting rights of Beijing Meicam through an agreement with Mr. Zheng Pengcheng, a 20% shareholder in Beijing Meicam. (5) Beijing Hermit, Beijing Yueying and Xin’aote Cloud are our non-consolidated joint ventures.

— 129 — HISTORY, REORGANIZATION AND GROUP STRUCTURE

COMPLIANCE WITH LAWS

M&A Rules

The Rules on Merger and Acquisition of Domestic Enterprises by Foreign Investors (the “M&A Rules”) (關於外國投資者併購境內企業的規定), which was promulgated by the Ministry of Commerce, the State Asset Supervision and Administration Commission, the CSRC, the State Administration of Taxation, the State Administration for Industry and Commerce and the SAFE became effective on September 8, 2006, revised on June 22, 2009 and applies in the event that foreign investors acquire PRC enterprises. Our PRC legal advisors have advised that the M&A Rules are not applicable to the Reorganization and the Listing and it is unnecessary for us to obtain approval from the CSRC in respect of the Reorganization and our listing for the reasons that (i) CDV WFOE was incorporated as a wholly foreign-owned enterprise by means of foreign direct investment rather than merger and acquisition as defined under the M&A Rules (ii) our Company has not acquired any equity of, or acquired and operated any assets of PRC domestic enterprises owned by its shareholders that are PRC enterprises or individuals as defined under the M&A Rules after the effective date of the M&A Rules; and (iii) there is no provision in the M&A Rules that clearly classifies our Company’s Reorganization as a merger and acquisition transaction falling under the M&A Rules.

Circular 37 Registrations

On July 14, 2014, SAFE promulgated the Notice on Issues Relating to the Administration of Foreign Exchange in Overseas Investment and Financing and Reverse Round-trip Investment by Domestic Residents via Special Purpose Vehicles《關於境內居民通過特殊目的公司境外投融資及返 ( 程投資外匯管理有關問題的通知》)(“SAFE Circular 37”). SAFE Circular 37 requires PRC domestic residents to register with local branches of SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with such PRC domestic residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred to in SAFE Circular 37 as a special purpose vehicle (“SPV”). SAFE Circular 37 further requires timely amendments to the registration for any major change in respect of the SPV, including, among other things, any major change of the SPV’s PRC resident shareholder, name of the SPV, term of operation, or any increase or reduction of the SPV’s registered capital contributed by the PRC domestic resident, share transfer or swap, and merger or division.

Given that Mr. Zheng is a PRC domestic resident and resides in the PRC, he is required to carry out the foreign exchange registration with local foreign exchange authority pursuant to the then in force SAFE Circular 75 and Circular 37. Mr. Zheng has completed the foreign exchange registration with the governing SAFE authority under the SAFE Circular 75.

— 130 — BUSINESS

OVERVIEW

We are a leading digital video technology solution and service company in the TV broadcasting industry in China. We provide a full range of solutions, services and products to TV broadcasters and other digital video content providers, focusing mainly on the post-production segment, a critical part of the PRC TV broadcasting market. We are the second largest company in the post-production segment in China with a 6.8% market share in terms of 2015 revenue, while no single market player had a market share greater than 10%, according to the Frost & Sullivan Report. According to the same source, we had leading market shares for virtual studio solutions, digital broadcast automation solutions, multi-camera recording and editing service and graphics creation systems in terms of 2015 revenue.

We have been at the forefront of digital video technology innovation in China. Our emphasis on developing a demand-driven and highly responsive R&D is particularly critical for us because of our focus on the solutions and services businesses, where the customers demand customized services. According to the Frost & Sullivan Report, our Group own the largest intellectual property portfolio in the TV broadcasting industry in China in terms of intellectual property rights, which included 353 PRC-registered patents and 144 PRC-registered software and other copyrights as of December 31, 2015.

Our solutions, services and products businesses facilitate the processing, enhancement and management of digital video content at the post-production stage between the ingestion of raw content and the output of finished content.

• Solutions. We customize and integrate multiple products with our proprietary software into cohesive systems that enhance our customers’ ability to streamline the different workflows that take place at the post-production stage and upgrade to more advanced broadcasting standards. Our key solutions include news workflow solutions, digital broadcast automation solutions, virtual studio solutions, program production solutions and media asset management solutions.

• Services. We deploy our proprietary and third-party solutions and products to provide specialized outsourcing services to our customers, including multi-camera recording and editing, live sports broadcasting, digitization and cataloging of media assets, system maintenance and graphics template design.

• Products. Our products enable our customers to add value to their digital video content. Our key products include video editing systems, graphics creation systems, as well as other visual effects and video compositing systems. Each product combines our proprietary software with third-party hardware, which we configure to our own specifications according to customer needs.

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During the Track Record Period, CCTV, the largest national TV broadcaster in China, had been our largest customer in 2013 and 2014, and we also served 28 of the 31 provincial-level and numerous municipal-level TV broadcasters and operators in China, as well as alternative broadcasting platforms, such as cable network operators, Internet media content providers and IPTV operators. We have established business relationship with most of the central- and provincial-level TV stations in China and with some of the provincial-level TV broadcasters in China for over 20 years.

In recent years, we have sought to leverage our core strengths in digital video technology to expand into emerging product areas to capitalize the growth potential of the consumer market. For instance, in October 2014, we launched Meicam (“美攝”), a mobile application designed to make it fast and easy to create and edit high-quality customized videos on smart phones. As of December 31, 2015, Meicam had approximately 2.1 million downloads with over 40,000 weekly active users. In addition, in 2014, our joint venture, Beijing Hermit, in which we hold a 40% equity interest, developed AutoAd, which is a digital technology that enables the insertion of virtual advertising images to live sporting events, and has acquired joint marketing rights to sell virtual advertising on the games of a leading European professional football league during broadcasting its 2015/16 and 2016/17 seasons in China.

Our revenue totaled RMB503.0 million, RMB406.4 million and RMB606.0 million in 2013, 2014 and 2015, respectively. We had a net loss of RMB12.2 million and RMB69.4 million, respectively, in 2013 and 2014, and we had a net profit of RMB114.1 million in 2015. During the Track Record Period, our net (loss)/profit for the year was primarily affected by fair value change on redeemable convertible preferred shares. In 2013 and 2014, we had non-IFRS adjusted net loss of RMB20.9 million and RMB54.4 million, respectively, and had adjusted net profit of RMB26.4 million in 2015. For reconciliation of the non-IFRS adjusted net (loss)/profit to our (loss)/profit for the year, see “Financial Information—Non-IFRS Financial Measures.”

COMPETITIVE STRENGTHS

We believe the following strengths differentiate us from other industry participants and have enabled us to compete effectively in our industry.

Leading market position with strong brand recognition and a distinguished history

We are one of the largest digital video technology solution and service companies in China. In our main business, which is post-production system solutions primarily targeting TV broadcasters, we were ranked among the top three in China with a 6.8% market share in terms of 2015 revenue, while no single market player had a market share greater than 10%, according to the Frost & Sullivan Report. In particular, according to the same report, in terms of 2015 revenue, we were highly ranked in several key categories which are the core building blocks of our industry:

• our graphics creation systems had an industry-leading market share of 25.2%;

• our virtual studio solutions had an industry-leading market share of 7.5%;

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• our digital broadcast automation solutions had an industry-leading market share of 7.1%; and

• our live sports broadcasting services ranked second with a market share of 25.0%.

In addition, in multi-camera recording and editing service, which is an emerging solution that we pioneered in 2013 and marketed under the brand “CreaStudio,” we had the industry-leading market share of 10.4% in terms of 2015 revenue, according to the Frost & Sullivan Report.

In November 2014, we were selected by Shanghai Media Group to jointly develop an omnimedia convergence platform that enabled Shanghai Media Group to source news materials from not only its traditional media platforms such as TV and radio, but also the new media platforms such as Internet media, social media and mobile applications, and to store, produce and ultimately distribute news contents through these channels in a targeted manner. In the new era where audience demands the latest news from the widest variety of sources, the new omnimedia convergence platform allows Shanghai Media Group to meet audience’s new expectations. For further details on our omnimedia platform, see “—Our Business—Our Solutions—Case Studies—Customer A” below. Our omnimedia convergence platform for Shanghai Media Group was the first such platform in China, according to the Frost & Sullivan Report.

Founded 25 years ago, we have built “新奧特” (“Xin’aote”) into a brand name that we believe is among the best-known and trustworthy in the industry in China today. We developed the first generation of Chinese character generators and video editing systems in China, which established our reputation in the industry. Our industry leading position has also been well-recognized by customers and regulatory bodies. For instance, we were the domestic digital video technology and service provider selected to serve the Beijing 2008 Summer Olympic Games and also provided international broadcasting center solution and service for the 2010 World Expo in Shanghai. The quality of our customer base, with the likes of CCTV and provincial-level broadcasters as our core customers, and the long history of those relationships further illustrate the recognition and trust that our “新奧特” (“Xin’aote”) brand has gained over the years.

Highly responsive R&D supported by strong technology expertise and a large intellectual property portfolio

We place great emphasis in developing a demand-driven and highly responsive R&D team. This is particularly critical for us because of our focus on the solutions and services businesses, where customers demand customized services. Through our on-site maintenance teams, we are able to get first-hand feedback from our customers and provide solutions tailored to their differentiated needs and requirements, which we believe in turn contributed to increased customer loyalty. The extent of our R&D efforts is reflected in the following:

• IP portfolio. As a result of our continued focus on innovation, we have built an extensive intellectual property portfolio. As of December 31, 2015, our Group had 353 PRC-registered patents, 144 PRC-registered software and other copyrights and 572 patent applications pending approval by the PRC State Intellectual Property Office.

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• Team. We have built an industry-leading R&D team with strong technology expertise. As of December 31, 2015, our R&D team had 155 employees, representing 16.5% of our total workforce, of whom 70 have post-undergraduate degrees and 61 have more than five years of industry experience. Mr. Jichuan Sun, our chief technology officer, has more than 20 years of industry experience and led the development of the first generation of domestically developed Chinese character generators and video editing systems in China.

• Results. Our R&D team has pioneered a series of industry-leading innovations in China, which we believe have given us a first mover advantage in rapidly gaining market share in these market sub-segments. These innovations include:

o in 1994, the first Windows-based Chinese character generator in China;

o in 1997, the first video editing system in China;

o in 2001, the first domestically developed 3D virtual studio solutions recognized by SARFT;

o in 2005, the first HD video editing system in China;

o in 2010, the first domestically developed visual effects and video compositing system, which we launched under the brand Dunhuang; and

o in 2013, the cutting-edge multi-camera recording and editing system that allows for secure, reliable and quick integration and editing of recordings from over 40 cameras at once, which we launched under the brand “CreaStudio.”

• Financial resources. We have expended significant resources on our R&D. In 2013, 2014 and 2015, our total R&D expenditures (including both capitalized and expensed) amounted to RMB66.9 million, RMB70.6 million and RMB68.0 million, respectively, representing 13.3%, 17.4% and 11.2%, respectively, of our revenue in these periods.

Large, diverse and high-quality customer base with long-term relationships

We have a large, diverse and high-quality customer base. In 2013, 2014 and 2015, we served 326, 351 and 359 customers, respectively, which included TV broadcasters, new media operators, other digital video content providers and other industry users including government entities, meteorological bureaus and schools.

Our customer base during the Track Record Period covers most of the central-, provincial- and capital city-level TV broadcasters in China, including 28 of the 31 provincial-level TV broadcasters during the Track Record Period. Our customer base includes the dominant players in the media business, such as CCTV, the largest TV broadcaster in China, and Shanghai Media Group, both of which are among the most well-recognized names and historically have been our top customers. The larger broadcasters in China such as CCTV and the provincial-level TV broadcasters, compared to their smaller peers, have greater demand for high-end products and more advanced solutions that are

— 134 — BUSINESS supported by both higher revenue bases and government subsidies. In addition, the supplier qualification standards at the larger broadcasters are often more stringent, which is a further testament to our “新奧特” (“Xin’aote”) brand and the quality of our products and services. The results of our product development efforts for our larger broadcaster customers then can be offered to smaller local broadcasters at more cost effective prices.

We have established long-term relationships with most of the central- and provincial-level TV stations in China, and with some of the provincial-level TV broadcasters in China for over 20 years. Among our top 10 customers in 2015, five had business relationships with us for more than 15 years. These long-term relationships enable us to better understand our customers’ long-term needs and help them achieve better system continuity and compatibility through system expansions, upgrades or replacements, which is usually of a three to five year cycle, according to the Frost & Sullivan Report. For instance, during early 2010s, many of our TV broadcaster customers engaged us to upgrade their systems or procure additional solutions, services or products to commence simultaneous high-definition and standard-definition, or HD/SD, broadcasting. As the TV broadcasting industry in China migrates to a 4K ultra-high definition standard, continuing its omnimedia convergence as well as a cloud-computing platform, we expect to benefit further from these relationships as they implement their next phase of expansions and upgrades.

New businesses leveraging our technical expertise to drive future growth

In recent years, we have sought to leverage our core strengths in digital video technology to expand into a wider range of products and applications. For instance, to address the rising market demand for digital video content creation and distribution on consumer mobile devices, we have successfully developed video-editing mobile application based on our industry-leading visual effects and video compositing technologies, including the Dunhuang-series visual effects and video comprising systems. Launched in October 2014, Meicam (“美攝”) is a mobile application that allows users to conveniently create and edit high-quality videos using a variety of advanced features and share the finished contents on a variety of social media platforms. As of December 31, 2015, we had approximately 2.1 million downloads with over 40,000 and 110,000 weekly and monthly active users, respectively. We are currently developing a number of viable revenue models for Meicam, including revenue-share from sales of user-generated model templates.

In addition, leveraging our core technology and our strong market position in the live sports broadcasting business, our joint venture, Beijing Hermit, in which we hold a 40% equity interest, has developed a digital technology, AutoAd, to insert virtual advertising images to live sporting events. In April 2015, Beijing Hermit entered into a cooperation agreement with a third party, which owns the broadcasting rights to the games of a leading European professional football league in China, to jointly market and sell virtual advertising in China where the games are broadcasted during the 2015/16 and 2016/17 seasons.

We believe the successful launch of these new products will be critical steps in our efforts to further diversify our product portfolio and drive our growth.

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Nationwide sales coverage with efficient and effective customer services

Our in-house direct sales team mainly focuses on serving provincial-level broadcasters and larger broadcaster customers. Direct sales to our core customers enable us to better understand the needs of these customers, which, in turn, helps us (i) in the pre-sale process, design better solutions to meet their needs, thereby driving sales; and (ii) in after-sales services, respond more quickly to customers’ issues to maintain service quality. We provide efficient and effective customer services, such as on-site maintenance services and routine technical support, with a view to ensuring that technical issues are resolved on a real-time basis. Our direct sales efforts supported by our strong customer services, we believe, have strengthened the stability of our technical support team, which, in turn, would enhance our service quality and customer experience.

Complementing our in-house direct sales team is our distribution network comprising 15 distributors in nine provinces and provincial-level municipalities as of December 31, 2015. Our distributors mainly focus their sales and support efforts on smaller local TV broadcasters and other industry users including governmental agencies, schools and state-owned and private enterprises, and are selected based on their local knowledge and industry contacts. According to the Frost & Sullivan Report, there were approximately 1,996 local broadcasters below the provincial-level in 2013. We believe that the model of using distributors to target smaller local broadcasters and industry users is the most effective and efficient way of reaching out to this part of our customer base.

Professional and experienced management team

Members of our management team have strong academic backgrounds in computer science and engineering and extensive knowledge of, and experience in, China’s TV broadcasting post-production industry. Our Board of Directors and senior management members have an average of 10 years of experience in the TV broadcasting post-production industry. Mr. Fushuang Zheng, our founder and chairman of our Board, is a well-recognized industry pioneer and visionary and has been critical in developing and maintaining key customer relationships. Mr. Baodong Liu, our chief executive officer, has applied his international engineering and management experience in guiding our growth. Mr. Jichuan Sun, our chief technology officer, has more than 20 years of industry experience and led the development of the first generation of domestically developed Chinese character generators and video editing systems in China. Our management team possesses complementary skills required for many aspects of our business, including software development, operations, finance as well as sales and marketing. These skills have been enhanced by management training received from leading domestic and foreign institutions and extensive overseas experience in engineering development and management. We believe the leadership, vision, management experience and the proven track record of this management team will continue to be instrumental in driving our future success.

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BUSINESS STRATEGY

Our long-term objective is to become a leading integrated digital video technology, service and media company in China. To that end, we intend to implement a business strategy with the following components.

Gain market share by offering solutions based on latest industry trends and expanding customer base

We expect that the next phase of system expansions and upgrades in the post-production market will be driven by (i) transition to a cloud computing platform for digital video content delivery; (ii) omnimedia convergence; (iii) continuing upgrades to high definition standard; and (iv) upgrades to a 4K ultra-high definition standard. We plan to capture the opportunities presented by these industry trends through:

• adding new functions to our customized solutions to meet the diverse and growing business requirements and technological sophistication of our customer base;

• assisting our existing customers in system expansions and upgrades to capture a larger portion of their incremental technological capital expenditures as new projects emerge; and

• leveraging existing customer relationships and cross-selling to departments within existing customers who do not currently use our products.

In addition, leveraging our core strengths in high-end post-production technology, we will seek to penetrate the mid-tier market of professional users by developing products that meet their demands. For example, in August 2015, we developed a new cloud-based video editing system under the brand “Aquila.” Aquila utilizes cloud technology to create a collaborative workflow platform that allows multiple users to simultaneously conduct both sophisticated and basic video editing from any location with network connectivity. We intend to market “Aquila” to both professional and casual users who demand both mobility and collaboration with their work.

Create recurring and high margin revenue streams by further strengthening and developing our service business

We plan to increase revenue streams generated from our service business, which represents recurring revenue, by focusing on high margin areas. To that end, we plan to transition our CreaStudio multi-camera recording and editing service from primarily recording and editing video footages for entertainment TV shows to jointly producing and operating entertainment media contents together with media rights holders using the footage captured by our CreaStudio systems, which we believe can generate consistent and high margin revenue. As part of the joint production, we plan to enter into agreements with the relevant media rights holders regarding the use of their media contents. We also strive to further enhance the quality and capabilities of our other services. Accordingly, we plan to invest approximately 17% of our net proceeds from our Global Offering in enhancing our services business by purchasing new equipment and facilities.

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We also aim to further develop new services that can generate recurring and high margin revenue for us. For example, in August 2015, we began to invest in cloud technologies and launched a cloud-based video editing system under the brand “Aquila.” According to the Frost & Sullivan Report, the software as a service (the “SaaS”) model supported by cloud computing technologies, which allows vendors to charge customers a subscription fee to store media contents on vendors’ cloud servers and access software applications to remotely conduct post-production tasks, is expected to play a greater role in China’s digital video market. To capture this trend and develop our own service based on the SaaS model, which we believe offers us the opportunity to generate recurring revenue and high gross profit margin, we plan to invest approximately 15% of our net proceeds from our Global Offering in cloud computing resources for digital video content delivery.

Further develop and invest in innovative products and businesses

We plan to continue to develop and invest in innovative products and businesses by leveraging our core digital video technology. Our mobile application business targeted at the mass-market audience, Meicam, is currently at a preliminary stage where it is gaining user base and activity level. Our next objectives for Beijing Meicam include:

• diversifying and refining revenue models;

• increasing user base and activity level by offering various kinds of online and offline marketing and promotional activities;

• improving technology and user experience by analyzing user activities, conducting market research, collecting data on user habits and reviewing user feedbacks;

• strengthening brand recognition by increasing marketing activities; and

• expanding user base through partnerships with branded mobile handset manufacturers.

Selectively pursue strategic investments and acquisitions

We believe that the TV broadcasting post-production industry in China today is fragmented and ripe for consolidation. During the Track Record Period, we acquired the digital broadcast automation solutions business from Founder Electronics and have completed a successful integration. We intend to continue to actively explore strategic investment and acquisition opportunities to increase the depth and breadth of our portfolio of solutions, services and products in order to maintain our market leadership. The suitable opportunities we intend to pursue include:

• cutting-edge digital video technologies in international markets to further enhance our core technology, as well as technologies that will help us capture key industry trends, such as big data, cloud computing and 4K ultra-high definition standard;

• smaller domestic competitors with attractive niche customer base to further expand our customer reach; and

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• investment opportunities in which we have a significant stake and are able to leverage our core technology. A recent successful example of this is Beijing Hermit, our joint venture in which we own a 40% equity interest. Beijing Hermit has developed a digital technology that inserts virtual advertising images to live sporting events, which is expected to generate significant revenue in the foreseeable future.

To capture industry opportunities, we plan to allocate approximately 15% of our net proceeds from our Global Offering towards making acquisitions. As of the Latest Practicable Date, our Directors confirm that, except as disclosed, we did not identify any target company for acquisition.

OUR BUSINESS

Historically, our business focused on serving the post-production market of the TV broadcasters, new media and other digital video content providers. We broadly categorize our major business lines into solutions, services and products. In recent years, we have also increased focus on developing new businesses to expand our offerings and customer base. These new businesses did not generate revenue during the Track Record Period.

The following table sets forth our revenue by business line as well as their respective percentage of the total revenue for the period indicated.

For the year ended December 31,

2013 2014 2015

Amount % of total Amount % of total Amount % of total

(RMB in thousands, except percentages)

Our Solutions

Our solutions business has represented the majority of our business. We offer solutions that consist of multiple products customized and integrated into cohesive systems that enable our customers to streamline the different workflows that take place at the post-production stage and upgrade to more advanced broadcasting standards. As the technology infrastructure and business operation of TV broadcasters and other digital content creators have become more complex and sophisticated in recent years, our customers increasingly choose to engage us to provide integrated digital video solutions that allow them to focus on content production and management. Based on our customers’ needs, we design, implement and test solutions that are tailored to fit their specific business workflow and technology infrastructure by leveraging our extensive and industry-leading product portfolio, including our graphics creation systems, and our technical expertise and industry know-how. Some of our solutions can be replicated with minimal alterations while other solutions are

— 139 — BUSINESS highly customized. Each approach has its own advantages and both have been contributing to the growth of our business. Our solution contracts are typically project-based and, in that sense, one-off in nature. See “Risk Factors — Risks Relating to Our Business and Industry — Most of our solution contracts are project-based and do not necessarily provide for subsequent engagements. If we are unable to continue to generate a sufficient number of new and unique solution contracts, our business, financial condition, results of operations and prospects will be materially and adversely affected.”

We provide solutions to address customers’ discrete functional needs and business processes at various stages in the digital video production and broadcasting workflow, including:

• News workflow solutions automating the TV news production workflow, including news gathering, script editing and review, dubbing, program arrangement, program review, graphics creation and broadcasting on both high-definition and standard-definition. Through news workflow solutions, we are able to develop a fully integrated news production process for our customers.

• Digital broadcast automation solutions coordinating and controlling the news and program production systems and the digital broadcast automation system to facilitate digital content delivery. We acquired Beijing Zhengqi and the digital broadcast automation solutions business from Founder Electronics in September 2013 and operated such acquired business through Beijing Zhengqi. Since then, we have successfully combined the strengths in software development of that business with the system integration capabilities of our existing business to an industry-leading business, with an industry-leading 7.1% market share in China in terms of 2015 revenue, according to the Frost & Sullivan Report. In 2013, 2014 and 2015, the revenue we derived from digital broadcast automation solutions was approximately RMB27.0 million, RMB72.4 million and RMB99.4 million, respectively, representing approximately 5.4%, 17.8% and 16.4%, respectively, of our total revenue for the same periods.

• Virtual studio solutions using digital technology and camera tracking systems to replace a studio’s single-color background with a designated virtual background to generate virtual studio effects, which are widely applied in producing news, weather and sports programs. Our virtual studio solutions are offered under the brand “Mariana.” We have in recent years diversified our offering of virtual studio solutions to meet customers’ different specifications, reaching the lower end of the market, which consists of the smaller local broadcasters, under the brands of “Mariana.VS” and “Mariana.VG,” as well as higher end of the market of major broadcasters, under the brand of “Mariana.VS.Pro.” In 2001, we successfully developed the first set of true 3D virtual studio systems in China which has been recognized by SARFT. Our virtual studio solutions had an industry-leading 7.5% market share in China in terms of 2015 revenue, according to the Frost & Sullivan Report. In 2013, 2014 and 2015, the revenue we derived from virtual studio solutions was approximately RMB33.9 million, RMB25.6 million and RMB20.3 million, respectively, representing approximately 6.7%, 6.3% and 3.4%, respectively, of our total revenue for the same periods.

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• Program production solutions managing the program production process, including topic selection, program planning, program editing, video and audio packaging, advertisement management, audience rating analysis and decision-making analysis.

• Media asset management solutions providing the systematic tools to acquire, index, catalog, retrieve and browse multimedia content, which enable users to easily search and obtain programs from TV network, Internet or other media platforms.

The following illustrates our selected solutions described above.

News Workflow Solution Digital Broadcast Automation Solution

Virtual Studio Solution Program Production Solution

Case Studies

Customer A

Customer A is a leading TV and radio broadcasting, news and Internet media company based in Shanghai, China.

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Customer’s project requirements. With the rapid development of Internet and mobile network as new platforms for the generation of news materials and contents, Customer A sought to design and implement an integrated news workflow solution that expands beyond the traditional news production media such as TV, radio and newspapers to include new media platforms such as Internet media, social media and mobile applications.

Our solutions. In November 2014, we, as the overall solutions provider, worked closely with Customer A to assess its needs and jointly developed an omnimedia convergence platform that allows Customer A to achieve integration between its traditional news production venues and the new Internet and mobile-based news mediums. The omnimedia convergence platform we designed and implemented for Customer A includes the following key components:

• an integrated media storage system that stores, integrates and manages the sourcing of news materials from both traditional and new Internet and mobile-based sources;

• an integrated media production system that manages news materials from varied sources and generate a variety of news contents for both traditional and new Internet and mobile-based venues;

• an integrated coordination system that manages the overall integration of both the sourcing of materials and the production of contents using the traditional and new Internet and mobile-based venues; and

• ancillary programs that manage the transmission and transcoding of news materials and finished contents from and to both the traditional and new Internet and mobile-based platforms.

Results. The omnimedia convergence platform transformed Customer A’s news sourcing and production system based on traditional platforms into one that is capable of sourcing news contents using both traditional and new Internet and mobile-based platforms in an integrated fashion and generating news contents through these channels in a targeted manner, thus allowing Customer A to produce media contents that better satisfy the need of the audience for the latest news from the widest variety of sources. After the omnimedia convergence platform was implemented, we continued to work closely with Customer A to operate and maintain the platform.

Customer B

Customer B is the largest TV broadcaster in China. Customer B frequently hosts major arts and entertainment variety shows and TV specials targeting the national audience.

Customer’s project requirements. To meet the demanding technical requirements of hosting large-scale TV shows that are often broadcasted live, Customer B required a high-performing post-production and broadcasting platform capable of handling a large quantity of video and audio information and rapidly generating contents for multiple media platforms while at the same time ensuring security and stability of broadcasting. In addition, the post-production platform has to accommodate the locations of the TV shows, which are frequently outdoor and far from studios.

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Our solutions. We worked together with Customer B’s producing teams and jointly develop a new integrated management platform (“IMP”) that met Customer B’s specifications. The new IMP is a one-stop post-production and broadcasting station, which has integrated functions of video storage, processing, editing and broadcasting with the following key features:

• advanced hardware components that allowed the IMP to maximize its data input, processing and output capability in order to handle the large-scale TV programs hosted by Customer B;

• integration of our advanced Himalaya-series video editing and Dunhuang-series visual effects and video compositing systems which are well-suited for Customer B’s entertainment-oriented TV shows;

• an open design allowing the IMP to work seamlessly with Customer B’s other functions, such as broadcast control, and to ensure security and stability of broadcasting; and

• the ability to work with other IMPs which can further increase the efficiency of Customer B’s video post-production capability.

Results. We worked closely with Customer B throughout the stages of installation, testing and trial operation for the IMP and successfully accomplished the objectives set by Customer B. In addition, the variety of new technologies developed and used in our IMP for Customer B won us a number of professional awards, including the prestigious “National Science and Technology Progress Award (First Class)” (“國家科學技術進步獎一等獎”).

Customer C

Customer C is the official weather service agency for an autonomous region in southwestern China. One of the core functions of Customer C is to produce broadcasting content for weather forecasts and weather-related news and analysis for public information.

Customer’s project requirements. Customer C sought to modernize its news studio and to establish a new media production platform that could generate contents not only for TV and radio, but also for mobile applications, Internet, social media and other new media platforms. In addition, Customer C aimed to enhance its capacity to produce content that featured more colorful graphics, aesthetically pleasing virtual effects and more interactions with audience in order to attract and appeal to audience.

Our solutions. We worked closely with Customer C to create a comprehensive solution that included the remodeling of its news studio and establishment of a new media production platform through using a number of our products and services. For example, for remodeling Customer C’s news studio, we provided our technical expertise in designing and arranging multi-media setup, lighting effects, large background TV screens and green screen backgrounds that enables the customer to feature virtual effects and 3D graphics, locations of anchors and audience seating areas and other

— 143 — BUSINESS aspects of studio designs. In addition, we utilized several of our products and services, particularly our Mariana-series graphics creation systems and “Tianmu” (“天目”) meteorological graphics system, to help Customer C set up a new media production platform that has enabled it to integrate information from and generate contents for both traditional and new media.

Results. Compared to the traditional weather program that featured one presenter in front of a camera, Customer C’s new studio and media production platform allowed for the production of contents that featured a more lively presentation of weather news and analysis with multiple presenters and camera angles, more colorful graphics and virtual effects and more interactions between presenters and audience in the studio and at home.

Our Services

We provide specialized services to assist our customers in using the solutions and products provided by us and other suppliers more effectively and efficiently. Our services primarily include:

• Multi-camera recording and editing services. We use our CreaStudio-series systems to provide integrated services, including recording, processing, editing and broadcasting, for popular entertainment shows in China on season- or series-based contracts. Our advanced CreaStudio-series systems can simultaneously store, integrate, export and replay multi-camera recordings (over 40 cameras at once) in a secure, reliable and convenient fashion, which is a critical requirement for entertainment programs. As a result, our CreaStudio-series systems allow directors to select the best frames from various angles and produce high quality TV shows. As part of the services, our experienced technicians work with show producers to provide training, set up cameras, install our systems, perform rehearsals and assist in editing and production of content. Since 2012, our CreaStudio-series systems and services have been selected by a number of highly popular entertainment shows in China produced by major broadcasters, such as the first season of “Dream Star” (“夢想星搭檔”) by CCTV, the first season of “The Voice of China” (“中國好聲音”) by Zhejiang TV, the first season of “Duets China” (“最美和聲”) by Beijing TV, and “If You Are the One” (“非誠勿擾”) by Jiangsu Broadcasting Corporation in 2015. According to the Frost & Sullivan Report, we, through our CreaStudio-series systems and services, had an industry-leading 10.4% market share in the multi-camera recording and editing services in China in terms of 2015 revenue. In 2013, 2014 and 2015, the revenue we derived from multi-camera recording and editing service was approximately RMB3.1 million, RMB5.6 million and RMB9.3 million, respectively, representing approximately 0.6%, 1.4% and 1.5%, respectively, of our total revenue for the same periods.

• Live sports broadcasting. We use our proprietary solutions and products, including our patented sports event score-logging system, to provide technical services for the live broadcasting of sporting events on project-by-project basis, including coordinating the recording, editing and broadcasting of videos, centralizing the recording, processing and displaying of scores, producing and broadcasting virtual effects and supplying information to sports commentators. We were the domestic digital video technology solution and service provider selected to serve the Beijing 2008 Summer Olympics Games. We also provided live sports broadcasting services for the 2010 Asian Games in Guangzhou, the 2011

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Summer Universiade (2011年世界大學生夏季運動會) in Shenzhen, the 12th National Games of the PRC (中華人民共和國第十二屆運動會) in Liaoning province in 2013, the 2014 Youth Olympic Games in Nanjing and the 1st National Youth Games of the PRC (第一届全國青年運動會) in Fujian province in 2015. According to the Frost & Sullivan Report, our live sports broadcasting services were ranked second with a 25.0% market share in China in terms of revenue in 2015. In 2013, 2014 and 2015, the revenue we derived from live sports broadcasting service was approximately RMB20.3 million, RMB9.1 million and RMB14.0 million, respectively, representing approximately 4.0%, 2.2% and 2.3%, respectively, of our total revenue for the same periods.

• Graphics template design. We provide standard templates for TV programs, such as score-displaying graphics for sports game shows, as part of our graphics creation system product and our solutions containing this product. Some customers engage us to design or customize graphics templates for their digital video programs when these standard templates are insufficient to meet their needs.

• Digitization and cataloging of media asset. We use our media asset management products and solutions to help TV broadcasters digitize and catalog their analog media content on project-by-project basis. We have also started serving other types of customers such as publishers and archives to digitize their collections of paper-based documents.

• System maintenance. We provide long-term, on-site system maintenance services on project-by-project basis to customers who have installed our solutions. When providing these services, we are able to uncover opportunities to improve our solutions and products and help customers uncover their potential need for system expansion, upgrades and additional solutions and products.

The following illustrates our selected services described above.

Multi-Camera Recording and Editing Service Live Sports Broadcasting Service

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Our Products

Our products combine our proprietary software with third-party hardware configured to our specifications to help our customers process digital video content after its capture and ingestion. Our products focus on providing certain key functionalities of digital video post-production, and primarily include:

• Video editing systems that edit digital video of news, advertisements, channel labels, banners and captions. The video editing system is one of our principal products and a key component in many of our solutions. Our Himalaya-series video editing systems are able to address our customers’ technological needs at various levels, ranging from sophisticated, high-end editing to entry-level, basic editing. Our video editing systems support real-time editing, multi-format video editing, integrated subtitle editing, special video and audio effects management, and have a user-friendly editing interface and numerous other features.

• Graphics creation systems that generate graphics and texts and integrate them into news, sports broadcasting, weather forecasts, TV shows and other TV programs and movies. Our Mariana-series graphics creation systems offer high-performance and real-time text and graphic rendering capability, easy-to-use editing and playback features and tools to allow for independent creations of a wide variety of TV shows that are well-suited to meet the demands of professional broadcasters today. According to the Frost & Sullivan Report, Mariana-series is the first domestically developed graphics creation system in China. We have also recently developed a meteorological graphics system under the brand “Tianmu” (“天目”) that we market to local government meteorological bureaus. To meet the demand of professional meteorology broadcasting, Tianmu offers its users the ability to quickly store and integrate real-time weather data from the source and accurately generate a rich array of texts, images and 3D animations to simulate and present various kinds of climate and weather effects for our customers. According to the Frost & Sullivan Report, our graphics creation systems had an industry-leading market share of 25.2% in China in terms of 2015 revenue. In 2013, 2014 and 2015, the revenue we derived from the sale of our graphics creation systems was approximately RMB35.8 million, RMB26.1 million and RMB38.2 million, respectively, representing approximately 7.1%, 6.4% and 6.3%, respectively, of our total revenue for the same periods.

• Visual effects and video compositing systems that edit and compose video content during post- production to create special visual effects such as motion detection and tracking, color correction and 3D-space compository. In 2010, we launched our Dunhuang-series visual effects and video compositing system, which is the first domestically developed system of its kind in China according to the Frost & Sullivan Report. Compared to traditional video editing systems, the Dunhuang-series has a more comprehensive and advanced set of functions targeting more sophisticated, high-end customers.

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New Business—Mobile Application

In recent years, we have sought to leverage our core strengths, including our extensive experience and technical expertise in the digital video industry, to expand into products addressing the evolving consumer market. Through the expansion, we believe that we are able to further diversify our product portfolio, drive revenue growth and enhance our competitiveness in the industry. To that end, we have successfully developed a key product, Meicam (“美攝”).

Utilizing our visual effects and video compositing technologies in the Dunhuang-series, which are normally deployed in large-scale TV stations, we launched “Meicam,” a mobile application on the Android and iOS operating systems in October and November 2014, respectively, and kept updating the same till the latest versions in May 2016. Meicam allows users to conveniently create and edit high-quality videos using a variety of advanced features and share the finished contents on social media platforms. By leveraging our over 20 years of experience and technical expertise, our in-house R&D team created Meicam and its technology included a number of independently developed patents, copyrights and trademarks. We believe Meicam is the first high-end video editing mobile application in China.

By using Meicam, users can directly record videos with unlimited length of time, freely edit the videos afterwards and conveniently share the finished contents on various social media platforms without time limit. During the recording, Meicam offers a variety of 3D theme templates with automated theme applicable mode, which allows users to conveniently add special effects to their videos through simple actions. Meicam also offers 1080p high-definition filming, as compared to 720p offered by some of our competitors. Meicam has powerful video editing functions, which enables users to complete video cropping and video speed, and to add captions or subtitles, a variety of themes and other features. All of these features of Meicam will, we believe, make it a preferred choice for customers to create a high quality and individualized video. In addition, photos can be imported into movies with the chosen themes, background and music.

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The screenshots below illustrate Meicam’s ability to edit a video using a variety of templates, which are from our Dunhuang-series, background music, texts and other professional visual effects and editing techniques:

Meicam supports the iOS, Android, Windows and Mac OS operating systems and be used on smart phones, tablets and personal computers, which makes it easy to share and access to the finished contents on various social media platforms, including smart phones, Internet and TV.

Meicam is currently free to download and use. As of December 31, 2015, we had approximately 2.1 million downloads with over 40,000 and 110,000 weekly and monthly active users, respectively. We currently do not offer paid advertising on Meicam. We plan to continue to develop and enhance Meicam’s technology and explore opportunities to monetize Meicam while adhering to the high standards of our users’ experience. We are currently developing a number of viable revenue models for Meicam, including revenue-share from sales of user-generated video templates. As of the Latest Practicable Date, none of the viable revenue models for Meicam had been implemented and Beijing Meicam is currently not engaged in any internet information service of a profitable nature.

Joint Ventures—Virtual Advertising and Others

Leveraging our core digital video technology as well as experience in live sports broadcasting and virtual effects, we invested in our joint venture, Beijing Hermit, in which we own a 40% equity interest. In 2014, Beijing Hermit developed the “AutoAd” technology to insert virtual advertising images during the broadcasting of sporting events. AutoAd technology allows for real-time insertion

— 148 — BUSINESS of virtual advertisement, whether in the form of images or animations, in the signals of broadcasting of any sport discipline. AutoAd enables TV broadcasters to replace physical advertising panels placed on the playfield or video advertisements (usually shown between intervals of a broadcasted sporting event) with virtual images on the screen when broadcasting the same event in other regions. We believe that the use of virtual advertisements through AutoAd offers the following advantages compared to traditional placing of advertisements in-between broadcasting of sporting events:

• High efficiency and effectiveness. Compared to traditional video advertisements, virtual advertisements such as AutoAd is more highly integrated with and causes less disruptions to the game, and as a result receive greater attention from the audience and therefore more effective;

• Quality. Through its advanced tracking technology, AutoAd can seamlessly integrate images or animations into the live action of sports broadcasting, which offers a more natural viewing experience for audience; and

• Flexibility. AutoAd can place virtual advertisements in a wide variety of sporting events and broadcast media platforms, including TV, Internet or mobile applications.

In April 2015, Beijing Hermit entered into a cooperation agreement with a third party (the “Broadcast Right Holder”), which owns the broadcast rights to the games of a leading European professional football league (the “League”) in China with respect to joint marketing and selling of virtual advertisements in China where the games will be broadcasted during the 2015/16 and 2016/17 seasons. As part of the cooperation agreement, Beijing Hermit and the Broadcast Right Holder will jointly solicit advertising customers to purchase and place AutoAd virtual advertisements during the broadcasting of the relevant games in China, with the following key provisions:

• Placing of virtual advertisements. Prior to placing a virtual advertisement for any advertising customer, Beijing Hermit must obtain approval from the Broadcast Right Holder with respect to certain aspects of such virtual advertisement, including but not limited to, the presentation method, content, location of placement, and size of the virtual advertisement;

• Broadcasting slots. Beijing Hermit can only place virtual advertisements during specified time slots during the broadcasting of any of the League’s games;

• Payment and profit allocation. Beijing Hermit is entitled to 50% of the excess of income derived from purchases and placements by advertising customers over certain costs and expenses shared between Beijing Hermit and the Broadcast Right Holder. The Broadcast Right Holder is responsible for the collection of payments from advertising customers;

• Negative covenants. Beijing Hermit’s and the Broadcast Right Holder’s choice of advertising customers is limited by certain negative covenants specified in the agreement, such as restrictions on soliciting advertising customers from industries that the League’s officially designated sponsors belong to; and

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• Duration and termination. Once executed, the agreement will remain effective until the end of the last game of the 2016/2017 season of the League. Beijing Hermit and the Broadcast Right Holder may extend the agreement to the 2017/18 and 2018/19 seasons in writing prior to the expiration of the agreement. The two parties may also terminate the agreement under certain circumstances. For example, they may terminate the agreement if they agree that the use of virtual advertisements is not commercially feasible, or if the League rejects any virtual advertisement proposal provided by the parties to the extent that the purpose of the agreement is frustrated.

In addition, in 2014, we further invested in our joint ventures, Beijing Yueying and Xin’aote Cloud, which are at the early stages of their business developments. Beijing Yueying plans to develop a mobile application for the sharing of event-based photos and videos. Xin’aote Cloud plans to develop a mobile application to facilitate interactions between teachers and parents.

OUR PRODUCT AND SOLUTION DEVELOPMENT

Our product and solution teams focus on managing the processes of product and solution development, which we believe helps us achieve higher efficiency and delivers superior customer experience. We typically carry out product development in-house and carry out solution development on our customers’ premises. Our product and solution development typically involves the following steps which may be repeated as customer’s needs evolve:

• Assessing the customer’s needs. We first consult with our customers to determine their needs and prepare an analysis report.

• Converting needs into an overall design. Our development team then translates the customer’s needs into a design concept based on our technology platform. Meanwhile, our development and testing teams prepare a system testing plan.

• Preparing a detailed design. We then expand the initial conceptual design and testing plans into more detailed designs and testing procedures. During our system design phase, we leverage our technical expertise and industry know-how to identify the components we are able to supply ourselves and the components to be procured from third parties, and then design an integration plan.

• Writing software program code. Our development team also writes the software program code to integrate various software components into a cohesive software system that performs effectively on the hardware system and meets the customer’s design specifications.

• Integrating hardware components. Our development team integrates components and modules from various suppliers into a hardware system that meets the customer’s hardware design specifications.

• Implementation and testing. Our development and testing teams work together to test the interim solutions and products and prepare a system testing report, which typically requires further iterations of software and hardware revisions and testing.

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After the development is completed, our development and testing teams stay involved to improve the solutions and products, provide on-site customer support, correct design defects and provide system upgrades. We typically provide one to three years of warranty for our products, solutions and certain services. We also provide optional warranty for a fee on an annual basis after the end of the warranty period. If our solution integrates third-party products, we will match the warranty period provided by the third-party product supplier.

We believe that our development activities have achieved a high degree of efficiency by following these processes. We manage our development costs through careful budgeting and cost controls throughout the development process. We realize further efficiencies and cost-savings by using an interactive development method and component-based platform. Our component-based platform uses optimized standard software and hardware modules and management tools to achieve high quality and enhance development efficiency and reusability of the software and hardware components.

Our project management department oversees the entire development process to ensure that the project progresses according to schedule and that the process meets our quality control standards. We believe the functional separation of our development team, the testing team and the project management team builds checks and balances into the development process and provides structural assurance of quality control.

INTELLECTUAL PROPERTY

We independently develop most of the technologies for our solutions, services and products in-house. We rely on patents, trademarks, copyrights and trade secrets, as well as software registrations, licensing agreements, employee and third-party confidentiality agreements and non-compete agreements to safeguard our intellectual property. For a description of the challenges to enforce intellectual property rights in the PRC, see “Risk Factors—Risks Related to Our Business and Industry—If we fail to protect our intellectual property rights, our business and competitive position would be severely harmed.”

As of December 31, 2015, we had 353 patents registered with the PRC State Intellectual Property Office and 572 patent applications pending approval by the PRC State Intellectual Property Office. Of these 353 registered patents, approximately 89% are inventions with the remaining being utility models. On average, we have filed more than 50 patent applications each year since 2012. As of December 31, 2015, we had 144 copyrights including 143 software copyrights registered with the PRC Copyright Protection Center. For details of our intellectual property portfolio, see “Statutory and General Information—B. Further Information about Our Business—2. Intellectual Property Rights of our Group” in Appendix IV to this prospectus.

Our registered software copyrights with the PRC Copyright Protection Center are fundamental to the protection of our software and technology and also crucial to our competitiveness. For VAT refund purposes, we have also registered a number of software products with the relevant PRC tax authorities. Those software products are our operating system type of software integrated into the systems and products that we sell. Once registered for VAT refunds, the software does not need to be registered for subsequent updates in order to maintain qualification for the VAT refunds. For details

— 151 — BUSINESS on VAT refunds, see “Summary—Summary Financial Information—Value-added tax refunds and government subsidies.” Continuing sales of our systems and products, in turn, is dependent on continuing updating of the software to improve performance and functionality. Given the inherently brief technology life cycle, in order to meet changing technological needs, we have been continuously updating those core software products to ensure there continues to be market demand for those products. See “Risk Factors—Risks Relating to our Business and Industry—Receipt of value-added tax refunds has historically been important to our business, and we may not continue to receive such tax refunds in the future.”

In addition to our 353 patent rights discussed above, we transferred 63 patent rights to a third party in January 2015 under a collateralized borrowing arrangement. We are the exclusive licensee of the transferred patents during the borrowing arrangement and we will buy back the same patent rights after the end of the borrowing arrangement. For further details, see “Financial Information— Indebtedness—Other borrowings.”

As of December 31, 2015, we had three registered trademarks in China. We operate our business under the brand name of “新奧特” (“Xin’aote”), which is well recognized in our industry. The “Xin’aote” trademark is currently held by one of our related parties, Xin’aote Digital. We maintain trademark license agreements with Xin’aote Digital for the use of the “Xin’aote” trademark. For further details, see “Continuing Connected Transactions—Exempt Continuing Connected Transactions—Trademark Licensing Agreement.” Furthermore, as of December 31, 2015, we were the registered owner of nine domain names.

As of the Latest Practicable Date, we had not been subject to any material dispute or claims relating to infringement of our patents, copyrights, trademarks or domains.

RESEARCH AND DEVELOPMENT

We are highly committed to our research and development efforts and have allocated significant financial resources into building an industry-leading R&D team. Customers of our solutions and service business generally have differentiated needs and specifications for their projects and demand customized services. As a result, R&D is particularly important for us in order to provide tailored solutions and services that meet our customers’ requirements. In 2013, 2014 and 2015, our total research and development expenses (including both capitalized and expensed) amounted to RMB66.9 million, RMB70.6 million and RMB68.0 million, respectively, representing 13.3%, 17.4% and 11.2%, respectively, of our revenue in these periods. As of December 31, 2015, our R&D team consisted of 155 employees, representing 16.5% of our total employees, of whom 70 have post-undergraduate degrees and 61 have more than five years of industry experience. Mr. Jichuan Sun, our chief technology officer, has more than 20 years of industry experience and led the development of the first generation of domestically developed Chinese character generators and video editing systems in China.

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Our R&D team has pioneered a series of industry-leading innovations in China:

• in 1994, the first Windows-based Chinese character generator in China;

• in 1997, the first video editing system in China;

• in 2001, the first domestically developed 3D virtual studio solutions recognized by SARFT;

• in 2005, the first HD video editing system in China;

• in 2010, the first domestically developed visual effects and video compositing system; and

• in 2013, the cutting-edge multi-camera recording and editing system, which we launched under the brand “CreaStudio.”

In August 2015, we further developed and launched “Aquila,” a new cloud-based video editing system. Aquila utilizes cloud technology to create a collaborate workflow platform that allows multiple users to simultaneously conduct both sophisticated and basic video editing from any location with network connection. We intend to market “Aquila” to both professional and casual users who demand both mobility and collaboration with their work.

Our R&D efforts and resources are focused on areas that will keep us on the leading edge of industry and technology trends, such as 4K ultra definition broadcasting, omnimedia convergence platform and cloud-computing operating platform. Some of our current R&D efforts include upgrading the following:

Solutions/Services/Products Application Customer type

Tianmu meteorological graphics system (天目 Use real-time weather data to generate Local 三維氣象節目製播系統) texts, imageries and 3D animations to meteorological simulate and present various kinds of bureaus climate and weather effects Info Bridge Integration System (資訊滙聚系 Store and integrate information collected TV stations 統) from non-traditional media sources such as Internet, microblogs, texts and social media and distribute them to the relevant production system for editing and producing media contents Mariana.VS.Pro (虛擬演播室綜合製播系統) Use a designated virtual background to TV stations / generate virtual studio effects for news, professional weather and sports programs users Raising Hand Audience Interaction System Allow TV programs to interact directly TV stations (舉手節目互動系統) with audience using Internet and mobile-network based applications and data storage and management systems

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Solutions/Services/Products Application Customer type

Omnimedia Convergence Platform (全媒體融 A complete workflow station that allows TV stations 合演播室節目包裝系統) broadcasters to converge, integrate and source news materials and information from and generate contents for both traditional and new media platforms Full-station Technical and Quality Automatic Automatically test all finished TV stations Testing System (全台節目技術質量自動檢測 high-definition contents of a station in 系統) various aspects to ensure the security and technical quality of final broadcasting Program Quality Testing and Management Test broadcasted contents on a random TV stations System (節目質量評測管理系統) basis in terms of quality and other aspects in order to improve content production in the future NVS Video Server (NVS視頻服務器) A highly stable and secure video server TV stations that can collect, integrate and broadcast different formats of video and audio signals Aquila Cloud-based Video Editing System A cloud-based video editing system that Professional (天鷹雲編輯系統) allows for sophisticated and basic video users editing Meicam (“美攝”) Allow users to conveniently create and edit Mobile high-quality videos using a variety of application users advanced features and share the finished contents on social media platforms

CUSTOMERS

We provide our solutions, services and products to TV broadcasters, new media operators and other digital video content providers. In 2013, 2014 and 2015, we served 326, 351 and 359 customers, respectively, including CCTV, the largest broadcaster in China, Shanghai Media Group, 28 of 31 provincial-level and numerous municipal-level TV broadcasters and operators in China, including, without limitation, Beijing TV, Tianjin TV, Zhejiang TV, Jiangsu Broadcasting Corporation and Dalian TV. In addition, we have expanded our business such as new media solutions to serve certain traditional customers and alternative broadcasting platforms, such as cable network operators, Internet media content providers and IPTV operators. We have further diversified our customer base to cover other industry users including government entities, meteorological business and schools.

Due to the nature of our business and our provision of a variety of solutions, services and products, the demand from the same customer for our solutions, services or products may be different from year to year, and accordingly, the purchasing patterns of that particular customer may vary from year to year. Therefore, the periodic upgrade cycle is not necessarily the cycle to our customers, and our largest customer and our five largest customers during the Track Record Period typically varied from year to year as these customers are usually at different stages of periodic upgrade cycles during any given period. In 2013, 2014 and 2015, our single largest customer represented 10.8%, 8.1% and 5.9%, respectively, of our total revenue. For the same periods, our five largest customers collectively

— 154 — BUSINESS represented 31.2%, 24.3% and 24.1%, respectively, of our total revenue. All of our five largest customers during the Track Record Period were independent third parties. As of the Latest Practicable Date, none of our Directors, their close associates or any Shareholders who, to the knowledge of our Directors, owned more than 5% of our share capital, had any interest in any of our five largest customers. The table below sets forth our five largest customers during the Track Record Period and their respective background information:

For 2013:

Year(s) of Revenue Revenue business contribution contribution Ranking Customer Background Principal purchase relationship (RMB’000) (% of total)

1 CCTV TV broadcasting program production solutions 24 54,195 10.8 2 Shanghai TV broadcasting news workflow solutions 22 31,307 6.2 Media Group 3 Customer A governmental sports news workflow solutions 1 26,906 5.3 authority 4 Tianjin TV TV broadcasting media asset management solutions; 11 23,256 4.6 Station news workflow solutions; digitization and cataloguing of media asset services 5 Jiangsu TV broadcasting news workflow solutions; program 20 21,480 4.3 Broadcasting production solutions Corporation

Total revenue contribution by 157,144 31.2 five largest customers

For 2014:

Year(s) of Revenue Revenue business contribution contribution Ranking Customer Background Principal purchase relationship (RMB’000) (% of total)

1 CCTV TV broadcasting program production solutions 24 32,903 8.1 2 Dalian TV TV broadcasting news workflow solutions 19 19,238 4.7 Station 3 Customer B TV broadcasting digital broadcast automation 16 16,581 4.1 solutions 4 Customer C TV broadcasting program production solutions 24 16,241 4.0 5 Jiangsu TV broadcasting digital broadcast automation 20 13,668 3.4 Broadcasting solutions; program production Corporation solutions; news workflow solutions Total revenue contribution by 98,631 24.3 five largest customers

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For 2015:

Year(s) of Revenue Revenue business contribution contribution Ranking Customer Background Principal purchase relationship (RMB’000) (% of total)

1 Customer D TV broadcasting program production solutions 17 35,850 5.9 2 Dalian TV TV broadcasting program production solutions 19 33,445 5.5 Station 3 Customer C TV broadcasting program production solutions 24 26,159 4.3 4 Customer E IT service provider program production solutions 1 25,726 4.3 5 Shanghai TV broadcasting news workflow solutions 22 24,735 4.1 Media Group

Total revenue contribution by 145,915 24.1 five largest customers

Although our solutions and products contracts are typically on a project-by-project basis, we have established business relationships with most of the central- and provincial-level TV stations in China and with some of the provincial-level TV broadcasters in China for over 20 years. Among our top 10 customers in 2015, five had business relationships with us for more than 15 years. We believe we are able to cultivate and maintain long-term business relationships with our key customers through our in-depth understanding of those customers’ technological and commercial needs by paying regular visit to their management, our experience in addressing such needs in a timely manner and our provision of responsive and effective after-sale service. Moreover, our provision of long-term, on-site system maintenance services to customers who installed our solutions is also conducive to continuous contact and communication with our customers, and thus also contributes to long-standing customer relationships. For example, of our top 100 customers in 2015, which collectively represented approximately 89% of our total revenue in that period, those who were customers in any historical year prior to 2015 contributed approximately 61% of our total revenue in 2015. We have also diversified our customer base in recent years by obtaining business from entities such as schools, government entities, and meteorological bureaus. We have been continuously expanding and diversifying our customer base through various measures. We source our new customers primarily through (i) the efforts of developing new products to meet the evolving customer needs, for example, “Tianmu” meteorological graphics system, which has helped us win business from a number of governmental meteorological bureaus; (ii) the continuing marketing efforts, including, without limitation, more actively attending trade exhibitions or other industry forums to explore new sales opportunities in our traditional core market of TV broadcasters, and, in particular, the non-traditional markets, for example, customers in the education industry and (iii) establishment of business cooperation with certain supplier for referrals of potential customer, the revenue from which amounted to approximately RMB25.7 million in 2015.

Purchase made by our customers can be largely categorized into three major types, including (i) replacement of an existing system or purchase of a new system, (ii) upgrade of software or expansion and replacement of a part of a system such as certain modules and storage unit, and (iii) services and maintenance. During the Track Record Period, a majority of our sales was contributed from replacement of existing systems or purchase of new systems. Due to the TV broadcasting industry’s

— 156 — BUSINESS inherently brief technology life cycles and technology obsolescence, our customers normally expand their existing systems and replace them with new generation system at least once every three to five years, some on an even shorter cycle. Our customers are able to achieve better system continuity and compatibility if they engage us for their system expansions and upgrades. For instance, during the early 2010s, many of our TV broadcaster customers engaged us to upgrade their systems or procured additional solutions, services or products to commence simultaneous high-definition and standard-definition, or HD/SD, broadcasting. We expect the transition to HD/SD broadcasting to continue in China, particularly for smaller local broadcasters, for whom the transition may occur more slowly due to their limited resources compared to their larger counterparts. Our long-term relationships with CCTV, Shanghai Media Group and many provincial- and municipal-level TV broadcasters and operators also allow us to better penetrate the market of smaller local broadcasters, who generally upgrade their systems following the standards set by their larger peers. In addition, as the TV broadcasting industry in China transitions to a 4K ultra-high definition standard, an omnimedia convergence platform as well as a cloud-computing operating platform, we expect to benefit further more from these relationships as they implement their next phase of expansions and phases.

Payment and Credit Term

Our payment and credit terms with customers vary depending on the types of products and services we provide:

Solutions. Our standard contract for solution customers requires payments in four installments: (i) up to 30% of the total contract value upon signing of the contract; (ii) up to 60% of the total contract value upon delivery, installation and testing of the solution equipment and customers’ first inspection and acceptance (with issuance of certificates of completion as confirmation); (iii) up to 90% of the total contract value upon customers’ final inspection and acceptance after a trial operation period (for example, with inspection reports for larger and more complex solution contracts as confirmation); and (iv) any remaining balance upon satisfaction of the performance warranty, which is generally paid to us within one month after the warranty expires. Our solution customers are generally allowed to withhold 5% to 10% of the contract value as performance warranty. As it sometimes takes longer for some of our customers to pay than as stipulated by the contract schedule, we have implemented other payment schedules in recent years, such as larger first installments, as part of our efforts to improve collection. The trial operation period from delivery, installation and testing to final inspection and acceptance of our solutions may last three to six months, whereas the trial operation periods for a limited number of our solution contracts last more than six months, and a significant number of solution contracts do not specify a timeframe on final inspection. The lengthy sales cycle we have may make it difficult for us to forecast our revenue. See “Risk Factors — Risks Relating to Our Business and Industry — The length of our sales cycle is unpredictable, which makes it difficult for us to forecast revenue and may increase the volatility of our operating results.” Nonetheless, we have focused on seeking to negotiate the timeframe for final inspection on all contracts to within a prescribed period, for example, six months.

Services. For most of our services, we generally receive 30% to 50% of consideration upon signing of the agreements. After our services have ended and upon inspection and satisfactory assessment from our customers, we receive the rest of the consideration. For certain types of service agreements, such as digitization and cataloging of media asset, we generally receive consideration in installments based on the progress of the project we participate in.

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Products. For our product customers, they are typically required to pay us 30% to 60% of the total contract value upon signing of the contract and the remaining amount upon delivery of the products.

Payment and credit terms required from and granted to our direct-sales customers are stipulated in the relevant sales contracts, and if not, according to the mutual agreement or usual practice with them, upon negotiation on a case by case basis taking into account their payment history, operational scale and number of years of business relationship with us. As described above, a standard solution contract requires payments in four installments when it arrives at the respective contractual milestone, including (i) signing of the contracts, (ii) delivery , installation and testing of solution equipment, first inspection and acceptance, (iii) final inspection and acceptance and (iv) the end of warranty period. The contracts may or may not specify the payment period upon each milestone. if specified, the payment periods for different milestones may vary from one to another and the payment periods for the same milestone for different projects may also vary from one to another. For those contracts in which payment period for one or more milestones were specified, the payment period after reaching each milestone ranges from nil to 30 days. Nonetheless, we have established an internal policy and set 180 days as the maximum time span from delivery to settlement for our customers. If for any customer the trade receivables has been outstanding more than 180 days since the delivery of our solutions to such customer, we generally will urge our sales team to actively follow up with such customer on the settlement of the outstanding balance of the trade receivables immediately. For customers with good credit history and selected central- and provincial-level PRC TV broadcasters with sound financial standing and long-term business relationship with us, the settlement with such customers may be longer than 180 days. We had not formally granted extension of credit terms to our customers which are the selected central- and provincial-level PRC TV broadcasters during the Track Record Period, nor did they default on payments during the Track Record Period. In the cases where we enter into subcontracting agreements to provide our products, the timing of payment from our customers, who act as general contractors, depends on the payment and credit terms agreed upon between the general contractors and the end-users.

Licensing and Confidentiality

For our product contracts, we generally offer our customers licenses to use our copyrighted products. When providing solutions and services to our customers, our employees and our dispatched workers are prohibited from releasing or transferring our customers’ confidential information, especially any patented or copyrighted materials. Our duty of confidentiality generally extends beyond the end of the relevant contracts. When we sell products to our customers, we also require the customers to preserve the confidentiality of our patented or copyrighted materials through the term of the contracts.

Warranty

We typically provide one to three years of warranty for our solutions, products and certain services. We also provide optional warranty for a fee on an annual basis after the expiry of the

— 158 — BUSINESS warranty period. During the warranty period, we are generally responsible for the replacement, repair, maintenance and upgrading of our solutions and products. In some cases, our obligation to provide maintenance and upgrade continues after the warranty period ends and lasts throughout the lifetime of our solutions and products.

After-sale Service

We generally offer our customers a dedicated service hotline, technical training and periodic on-site inspections. Such services are typically free during the warranty period and may continue after the warranty period ends for a fee.

For certain of our solutions and services contracts, we are required to send dispatched workers to provide onsite services for our customers. For further information regarding our use of dispatched workers, see “—Employees and Dispatched Workers—Dispatched Workers” below.

SALES AND MARKETING

We have established a nationwide sales coverage through our in-house sales team and distributors, which provides us with the depth needed to serve the largest broadcaster customers and the breadth to help us to reach the smaller local broadcasters.

Direct Sales

We sell our solutions, services and products to customers primarily through our in-house sales teams. As of December 31, 2015, we had 80 full-time in-house sales personnel. We compensate our sales personnel by means of base salaries and sales commission and reward them when they achieve or exceed their sales targets. We also explore new sales opportunities through other channels including industry forums and sales visits. Through our in-house sales efforts, our business department at the headquarters is able to monitor and evaluate major broadcasters’ plans to launch major projects, system upgrades, digitization or convergence. Our direct sales of products generally require 10 to 60 days to fulfill purchaser orders while our direct sales of solutions generally require four to six months to fulfill. Since February 2014, we began to utilize distributors to help us sell our solutions, services and products to markets and customers which our in-house sales teams elected not to focus on in the past, including most TV broadcasters below the provincial-level as well as other institutional TV operators. See “—Distribution Sales” below.

Because most TV broadcasters in the PRC are state-owned entities subject to government regulations and policies, most of our direct sales to customers are made pursuant to formal bids. In general, the broadcaster submits its system requirements to a state-owned bidding company, which posts a request for bids at its website and specifies the financial and technical qualification requirements for bidders. We monitor new requests for bids and tailor our bidding proposals accordingly. We are generally required to submit our bid with a cash deposit in the amount of 1% of the estimated contract value, which is refundable in full if we fail to win the bid. If we win the bid, our cash deposit will not be refunded until we have installed and tested our products and/or solutions. After we are awarded the project as a result of our submission of a winning bid, we will enter into a project contract with the customer setting out key terms including consideration, scope of work,

— 159 — BUSINESS payment terms and technical requirements and specifications. See “—Customers” for further details. In 2013, 2014 and 2015, the success rates of our tender bids were 49.8%, 37.9% and 48.8%, respectively. Although the bidding process is generally required for us to win new contracts, we also consider it a part of our sales and marketing efforts through which we can demonstrate our solutions, services and products to potential customers. Further, we also go through such formal bidding processes when our existing customers seek to upgrade the solutions and products they purchased from us within the life cycle of the solutions and products, although we believe our chance of winning the bids is enhanced given our long-term relationship with and in-depth understanding of such existing customers. However, we typically need to renegotiate the contract terms for the upgrade.

We have implemented policies and procedures for the administration and approval of spending in connection with our projects, including costs associated with participation of public bidding and tender process, in order to prevent any misuse of company funds. Our employee code of conduct also expressly prohibits employees from engaging in any violation of relevant PRC laws and regulations, such as improperly influencing the results of tenders, and we conduct training to familiarize our employees with such policies. Furthermore, before the Global Offering, we will implement additional internal control procedures to safeguard against the risks of corruption, bribery, or other improper conduct by our employees, including during the public tendering and bidding process. For details on major measures and procedures that we have adopted and will adopt, see “—Risk Management.” During the Track Record Period and up to the Latest Practicable Date, we were in compliance with relevant PRC laws and regulations relating to the public tendering and bidding process.

After we have delivered our solutions and products to customers or have initiated our services, our dedicated technical support team provides on-site maintenance services in order to resolve any technical issues on a real-time basis.

Distribution Sales

Starting from February 2014, to complement our existing sales network, we introduced distribution sales which mainly focus on TV broadcasters below the provincial-level as well as other media operators including governmental agencies, schools and state-owned and private enterprises with needs for our solutions and products. As of December 31, 2014 and 2015, we had seven and 15 distributors, respectively. In 2014 and 2015, sales to our distributors accounted for approximately 1.3% and 0.7%, respectively, of our total revenue. As of December 31, 2015, our 15 distributors covered nine provinces and central government-administered municipalities in the PRC. We adopt distribution sales to leverage local distributors’ regional experience and optimize our cost structure, which reflects our efforts to further expand market penetration to local customers in both the traditional and non-traditional markets. However, direct sales have remained, and we believe will still remain, the primary means of sales to us, as it mainly focuses on provincial-level or large-scale TV broadcasters, which have been our core customer base.

We generally enter into standard distribution agreements with our distributors, typically for a term of one year, renewable at our discretion based on the performance and credit history of our distributors. In the distribution agreements, we usually designate geographic areas and industries or sectors where those distributors are authorized to sell our products to. Those industries or sectors include, among others, TV broadcasters below the provincial-level as well as other media operators

— 160 — BUSINESS including governmental agencies, schools and state-owned and private enterprises, and usually exclude those that we have traditionally targeted with direct sale efforts, such as provincial-level TV broadcasting stations. The distribution agreements also require our distributors to comply with our requirements in respect of, among others, quality standards, confidentiality and promotion and advertising. Our distributors are also required to comply with our pricing policies for all of our solutions and products distributed by them. If a distributor fails to comply with the agreement, we have the right to terminate the agreement with such distributor immediately.

Through the distribution agreements, we further set certain sales targets on a quarterly or annual basis for our designated solutions and products and create incentives for our distributors to exceed such targets. During the term of the agreement, the distributors will enter into separate contracts or place orders on demand with us for our solutions or products. For distributors who have successfully achieved or exceeded their quarterly or annual targets for our designated products or solutions, we typically award a certain percentage of the sales target amount for the relevant quarter or year to such distributors, who can redeem such awards either through limited reimbursements from us for any of their marketing expenses in relation to sales of our solutions and products or using the award amounts to count towards the following year’s sales targets. For distributors who have failed to meet their sales targets, we may choose to not renew our distribution agreements with them in the following year. To manage distributors, during the term of the distribution agreements, we maintain regular communication with our distributors on places of orders, provisions of after-sale services and feedback from their end-customers, among other things.

All of our existing distributors are Independent Third Parties and we do not have ownership or direct management control over our distributors. Neither our Directors nor any Shareholder or their respective associates who or which to the knowledge of our Directors hold more than 5% of the issued Shares had any interests in any of our distributors throughout the Track Record Period.

BACKLOG

Our contract backlog refers to the aggregate value of contracts we have executed with customers as of an indicated date, less revenue already recognized in connection with such contracts up to and including the same date. Contract backlog serves as our estimation of the value of work that remains to be completed as of a certain date, if the contract is performed in accordance with its terms. As of December 31, 2013, 2014 and 2015, our contract backlog (net of estimated VAT) amounted to RMB149.0 million, RMB82.0 million and RMB71.5 million, respectively, based on contracts we had entered into with our customers prior to such dates, and we recognized or expect to recognize substantially all of our contract backlog as of the respective dates as revenue during the subsequent financial year. After we are awarded a project, we will enter into a project contract with a customer a few months before we start our work. As such, contract backlog is not a measure of financial performance under IFRS and is not indicative of our future results. Cancellation or material modification of contracts we have secured or executed may affect our backlog levels.

PRICING

To determine the pricing for our solutions, services and products, we generally take into account a variety of factors, including but not limited to, relationship with the prospective customer, the

— 161 — BUSINESS complexity and innovativeness of the solution, service or product to be provided, our competitors’ pricing for a similar project, procurement costs and expected manpower required, general market demand for such solution, service or product and the benchmark minimum profit margin that we consider to be acceptable. Our pricing policy is also responsive to the competitive landscape in our industry. Historically, the quality of our products and our long-standing customer relationships have allowed us to charge a substantial premium on our products.

SUPPLIERS

Based on our customers’ needs, we design the hardware specifications of the servers and workstations for our solutions, services and products and perform most of the system integration in-house. We procure memory modules, network equipments and third-party software from well-known third-party suppliers. We typically purchase hardware components through the manufacturers’ approved distributors in China. We also purchase customized servers and workstations and software tailored to meet certain customers’ specific needs from third-party suppliers, primarily Hewlett-Packard. We negotiate the terms of such purchase contracts directly with the original hardware manufacturers.

We have adopted various measures to effectively manage procurement, including, among others: (i) centralizing the procurement process, which increases the quantity of products that we purchase each time, thus increasing our bargaining power to get a favorable term from its suppliers; and (ii) proposing procurement prices with reference to both historical low prices and prevailing market prices. We entered into framework agreements in January 2015 for a term of one year with two major suppliers, who had long-term business relationships with us. Pursuant to the framework agreements, we made prepayments to such suppliers, who agreed to provide us with hardware components at discounted prices during the relevant contract period.

In 2013, 2014 and 2015, our single largest supplier represented 18.6%, 9.4% and 15.2%, respectively, of our total purchases. In the same periods, our five largest suppliers collectively represented 59.6%, 35.7% and 46.7%, respectively, of our total purchases. All of our five largest suppliers during the Track Record Period were independent third parties. We had on average more than five years of business relationship with our five largest suppliers in 2015. As of the Latest Practicable Date, none of our Directors, their close associates or any Shareholders who, to the knowledge of our Directors, owned more than 5% of our share capital, had any interest in any of our five largest suppliers. We did not experience any material supply shortages of software and hardware equipment during the Track Record Period.

In March 2015, one of our suppliers, China National Instruments Import & Export (Group) Corporation (中國儀器進出口(集團)公司) (“China Instruments”), purchased our digital broadcast automation solution on behalf of Armenia TV for a consideration of RMB11.2 million, representing approximately 1.6% of our total revenue in 2015. Our gross profit margin for this sale was 35.5%, which was in line with the overall gross profit margin of our solutions business. In 2014, our purchases from China Instruments, mainly for hardware components, amounted to RMB2.7 million, representing approximately 1.7% of our total purchases in 2014. During the Track Record Period and up to the Latest Practicable Date, we did not enter into any additional sales contracts with any of our suppliers.

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We generally negotiate and place purchase orders for hardware components based on our customers’ demands. We believe that there are sufficient alternative hardware suppliers for us in case our current suppliers are unable to meet our needs. Generally, we purchase from our suppliers directly based on the prevailing market prices and are able to obtain volume discounts. Most of our supply contracts contain warranty provisions requiring the suppliers to repair free of charge any of their products that fail to meet the specifications for a period of one to three years from delivery. We have been granted credit periods of between 30 to 180 days by the majority of our suppliers. We generally make our payment by wire transfer.

We develop most of our software in-house and do not rely on outside suppliers. At our customers’ requests, we also customize third-party software and integrate it into our solution offerings.

INVENTORY CONTROL

Our inventory comprises mainly hardware components for the servers and workstations, which we customize and configure and sell to our customers together with our independently developed software programs. We typically place orders for hardware components and workstations from our suppliers after we have obtained and confirmed orders from customers. This allows us to maintain effective and efficient inventory control and minimizes obsolescence risk and storage costs for hardware components and workstations. In 2013, 2014 and 2015, we had average inventory turnover days of 137 days, 107 days and 45 days, respectively.

EMPLOYEES AND DISPATCHED WORKERS

As of December 31, 2015, we had a total of 941 full-time employees and 52 dispatched workers in the PRC. The following table sets forth the number of our full-time employees and dispatched workers by function as of December 31, 2015.

Number of Number of full-time dispatched Function employees % of total workers % of total

Technical support...... 561 59.6 52(1) 100.0 Research and development ...... 155 16.5 — — Management and administration ...... 145 15.4 — — Sales and marketing...... 80 8.5 — — Total...... 941 100.0 52 100.0

Note:

(1) Our dispatched workers in technical support function are employed in our media asset management solutions business. See “—Dispatched workers” below.

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The remuneration package of our employees includes salary, sales commission, bonus and other cash subsidies. In general, employee salaries are determined based on individual performance, qualification, position and seniority. We place strong emphasis on recruiting skilled personnel. We typically recruit talents from universities and technical schools and conduct annual reviews to assess employees’ performance and determine their salary, bonus and promotion. We also place a strong emphasis on providing training to our employees in order to enhance their technical and product knowledge as well as comprehension of industry quality standards. In 2010, we adopted a Pre-IPO Share Option Scheme to reward certain of our senior management and employees for their contributions to the development and success of our Group. The principal terms of the Pre-IPO Share Option Scheme are summarized in “Statutory and General Information—D. Pre-IPO Share Option Scheme” in Appendix IV to this prospectus. In 2013, 2014 and 2015, we incurred employee benefit expenses (including both capitalized and expensed) of approximately RMB135.6 million, RMB149.3 million and RMB145.5 million, respectively.

Dispatched Workers

During the Track Record Period, we entered into agreements with certain third-party employment agencies regarding the services of the dispatched workers. Such relevant agreements typically last less than two years and stipulate the service fees, scope of services, service location and service duration with respect to the dispatched workers. As of December 31, 2015, we engaged 52 dispatched workers through such employment agencies, representing around 5% of our workforce (including dispatched workers). King & Wood Mallesons, our PRC legal advisors, are of the view that such engagement of the dispatched workers in our business through third-party employment agencies is not in violation of the Labor Dispatch Regulations. The dispatched workers are deployed in our media asset management solutions business, which is project based and highly labor intensive. We deploy such dispatched workers together with our full-time employees to serve our customers for our media asset management solutions business, which provide us with a more flexible way to manage our workforce.

In accordance with the relevant agreements, we must provide the dispatched workers with a safe work environment and protective and safety equipment and we reserve the rights to request for replacement of any dispatched workers who do not meet our required standards. Dispatched workers enter into labor contracts with the relevant employment agencies instead of us. The relevant employment agents are responsible for the dispatched workers’ social insurance or employee benefits. Although we are under no statutory obligation to make social insurance contributions in relation to the dispatched workers, we may be jointly liable for any claims brought by the dispatched workers if their employment agents fail to do so. However, we would be entitled to seek indemnification from the employment agents in such cases.

Our employees do not negotiate their terms of employment through any labor union or by way of collective bargaining agreements. We believe that we have a good working relationship with our employees. During the Track Record Period and up to the Latest Practicable Date, no labor dispute had occurred which materially and adversely affected or was likely to have a material adverse effect on our operations.

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Welfare Contribution

As required by the relevant PRC laws and regulations, we make contributions to mandatory social security funds (including pension insurance, medical insurance, unemployment insurance, work-related injury insurance, maternity insurance) and housing funds for the benefit of our PRC employees. The total amount of contributions we made for such social insurance fund in 2013, 2014 and 2015 was approximately RMB21.5 million, RMB21.7 million and RMB19.1 million, respectively. The total amount of contributions we made for housing provident funds in 2013, 2014 and 2015 was RMB7.4 million, RMB8.2 million and RMB7.7 million, respectively.

COMPETITION

The entry barrier to our industry in China is relatively high as the new entrant needs to have strong R&D capabilities, brand recognition, extensive industry experience, an established sales and support network and sufficient capital resources. The track records and existing relationships with major broadcasters play significant roles as the cost of switching to a new provider for customized and integrated solutions is relatively high. When we compete for the solution projects of our existing customers, we have only a limited number of competitors. In contrast, when we compete for the digitization or convergence projects of broadcasters with whom we do not have strong existing relationships, we usually face more intense competition, and competitors with stronger relationships with these broadcasters may have a competitive advantage.

The TV broadcasting post-production industry in China is fragmented with a few large domestic companies, a large number of small domestic companies and a number of international companies. Domestic companies dominate the post-production solutions, services and products markets. International companies primarily focus on providing certain key products, often as part of integrated solutions provided by domestic companies with whom these international companies collaborate. We compete on the basis of:

• brand name and market reputation;

• completeness of product and solution offerings and system stability;

• track record and relationship with broadcasters;

• effectiveness of customer services and technical support;

• R&D capabilities; and

• pricing.

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According to the Frost & Sullivan Report, our primary domestic competitors include Sobey Digital Technology Co., Ltd. (成都索貝數碼科技股份有限公司) (“Sobey”), a subsidiary of Sony Corporation, and Dayang Technology Development Inc. (北京中科大洋科技發展股份有限公司) (“Dayang”). We compete across multiple business lines and industry segments with them in China. According to the same source, our other competitors include Century Sage Scientific Holdings Limited (世紀睿科控股有限公司), Beijing Jetsen Century Technology Co., Ltd. (北京捷成世紀科技股份有限公司), Beijing Bluemade Technology Video Communication Co., Ltd. (北京藍美視訊科技有限公司), Shenzhen DLP-Digital Technology Co., Ltd. (深圳迪樂普數碼科技有限公司) and Beijing Oriental Ideapool Technology Development Co., Ltd. (北京東方艾迪普科技發展有限公司), whom we compete against in offering certain types of products and services. Some of our competitors may have competitive advantages in certain market segments. However, no single market participant dominates the entire digital video technology and services market or any major solution segment. According to the Frost & Sullivan Report, we, Dayang and Sobey together accounted for 23.5% of the TV broadcasting post-production market in China in terms of 2015 revenue. For details, see “Industry Overview.”

AWARDS AND RECOGNITIONS

Our industry-leading position and strong brand recognition is evidenced by the numerous awards we received from various industry associations, government authorities and the public for our products and services. The table below sets out certain of the awards we have received as a digital video technology and services provider:

Year Award/Recognition Awarding Body Project/Product

2015 ...... Science and Technology China Society of Motion Smart service platform Award by China Society Picture and Television based on media big data of Motion Picture and Engineers (中國電影電視 (基於媒體大數據的智能服 Television Engineers 技術學會) 務平台) (First Class) (中國電影電視技術學會科學技術獎(一等獎))

2014 ...... Beijing Municipal Award Beijing Municipal Research, development for Science and People’s Government and commoditization of Technology (北京市人民政府) key technology for new (北京市科學技術獎) generation of HD nonlinear editing system (新一代高清非線性編輯系統的關鍵技術研發和產業化)

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Year Award/Recognition Awarding Body Project/Product

2013 ...... SARFT Scientific and SARFT HD Post-production & Technological Innovation integration networking Award for the Year of System for Shandong 2012 Radio and TV Station (國家廣播電影電視總 (山東廣播電視台高清後期局2012年度科技創新獎) 製作合成綜合網)

National and Local Joint NDRC Digital video technology Engineering Laboratory for tri-networks (國家地方聯合工程實驗室) integration (三網融合數字視頻技術)

State-Accredited NDRC, Ministry of N/A Enterprises Technology Science and Technology Center of the PRC (“MOST”) (國家認定企業技術中心) (中華人民共和國科技部), Ministry of Finance of the PRC (中華人民共和國財政部), General Administration of Customs of the PRC (中華人民共和國海關總署) and SAT

2012 ...... SARFT Scientific and SARFT New generation of Technological Innovation network programming Award for the Year of system for TV stations 2011 (新一代電視台網絡化製播系統)

Beijing Municipal Award Beijing Municipal HD/SD- 3D online for Science and People’s Government graphics creation system Technology (高標清三維圖文在線包裝系統)

Research and application of key technology for HD virtual studio system (高清虛擬演播室系統的關鍵技術研究與應用)

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Year Award/Recognition Awarding Body Project/Product

State Certificate of Key MOST, MOEP, MOFCOM HD news production, New Product and GAQSIQ automation, sharing and (國家重點新產品證書) distribution system (高清新聞製播共享發佈系統)

National Award for the The State Council of the New generation of Advancement of Science Republic of China (中華 network programming and Technology (First 人民共和國國務院) system and significant Class) application for TV (國家科學技術進步獎一等 stations (新一代電視台網獎) 絡化製播系統及重大應用)

2011 ...... SARFT Scientific and SARFT China 2010 Shanghai Technological Innovation World Expo IBC system Award for the Year of (中國2010年上海世博會國 2010 際廣播電視中心系統)

Beijing Municipal Award Beijing Municipal HD sports information for Science and People’s Government sharing system for 24th Technology (Third Class) Winter Universiade IBC (第24屆大冬會高清國際廣播電視中心(IBC)賽事信息共享系統)

BIRTV AWARD for BIRTV2011 Organization CDV visual design Outstanding Product Committee and CCTV experience (新奧特敦 “Advanced Television 煌DX5視覺效果合成系統) Engineering”

2010 ...... BIRTV AWARD for BIRTV2010 Organization Jiangsu TV Network Application Project Committee and CCTV Content Integration (BIRTV應用項目獎) “Advanced Television Platform Project BIRTV AWARD for Engineering” (江蘇有線內容集成平台項 Outstanding Product 目)

MARIANA. virtual graphics products series (MARIANA.VG虛擬圖文包裝系統)

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Year Award/Recognition Awarding Body Project/Product

2009 ...... SARFT Scientific and SARFT HD/SD sports information Technological Innovation processing and sharing Award for the Year of service system for the 2009 11th National Games IBC (國家廣播電影電視總 (第十一屆全國運動會國際局2009年度科技創新獎) 廣播電視中心(IBC)高標清賽事信息處理共享服務系統)

HD sports information sharing system for 24th Winter Universiade IBC (第24屆世界大學生冬季運動會國際廣播電視中心全高清信息共享系統)

2008 ...... SARFT Scientific and SARFT Beijing 2008 Olympics Technological Innovation Games on-venue Chinese Award for the Year of display system 2008 (北京2008年奧運會現場中 (國家廣播電影電視總文信息顯示系統) 局2008年度科技創新獎)

BIRTV AWARD for BIRTV2008 Organization MARIANA.5D broadcast Outstanding Product Committee and CCTV online graphics products “Advanced Television series Engineering” (MARIANA.5D在線圖文包裝系統)

QUALITY CONTROL

As an integrated digital video technology solution and service provider, we value client satisfaction and believe product quality to be a vital part of our business. Based on the GB/T 19001-2008/ISO 9001:2008 standard, we published a quality management handbook in 2010 specifying the quality control procedures at every stage of the development of our solutions and products and established a dedicated quality management committee consisted of senior managers to implement these procedures. Our procedures also specified the responsibility of various departments and personnel and provided the measures to be undertaken.

Before developing a new product, we perform a strategic review on the design and potential customer demand of such product. The product’s design and prototypes are also carefully evaluated and tested for any potential defects and flaws by our R&D and technical support teams. For both the

— 169 — BUSINESS hardware components we procure from third-party suppliers and software programs we develop in-house, we perform regular tests and quality inspections and screen for any defects before marketing them to customers. After we have delivered our solutions and products to customers, we often carry out day-to-day testing and real-time monitoring and collect feedbacks from our customers. We compile such feedback into evaluation reports for further improvement of the design and quality of our products.

As a result of our quality management practices, we have obtained and maintained the GB/T 19001-2008/ISO 9001:2008 certification for the design, development, installation and service of our products, including our video editing systems and graphics creation systems. Such certification demonstrates that our quality control management system meets international standards. During the Track Record Period and as of the Latest Practicable Date, we did not receive any material complaints and our products had not been subject to any material claims, litigation or investigation due to product liability.

RISK MANAGEMENT

We have implemented various risk management policies and measures to identify, assess and manage risks arising from our operations. Details on risk categories identified by our management, internal and external reporting mechanism, remedial measures and contingency management have been codified in our policies. For details of the major risks identified by our management, see “Risk Factors—Risks Relating to Our Business and Industry.”

In addition, we face various financial risks, including interest rate, price, credit and liquidity risks that arise during our ordinary course of business. See “Financial Information—Qualitative and Quantitative Disclosure about Market Risk” for a discussion of these market risks.

To monitor the ongoing implementation of our risk management policies and corporate governance measures after the Global Offering, we have adopted or will adopt, among other things, the following risk management and internal control measures:

• the establishment of an audit committee responsible for overseeing our financial records, internal control procedures and risk management systems. See “Directors and Senior Management—Board Committees—Audit Committee” for the qualifications and experience of these committee members as well as a detailed description of the responsibility of our audit committee;

• the appointment of Mr. David Cui as our chief financial officer, Mr. Guo Langhua as our compliance officer and Mr. Qian Yiyue and Mr. Au Wai Keung as our joint company secretaries to ensure the compliance of our operation with relevant laws and regulations. For their biographical details, see “Directors and Senior Management”;

• the appointment of Reorient Financial Markets Limited as our compliance adviser upon the Listing to advise us on compliance with the GEM Listing Rules; and

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• the engagement of external legal advisors to advise us on compliance with the GEM Listing Rules and to ensure our compliance with relevant regulatory requirements and applicable laws, where necessary.

Finally, we have adopted, or will adopt before the Global Offering, various internal regulations against corrupt and fraudulent activities, which includes measures against receiving bribes and kickbacks, and misuse of company assets. Major measures and procedures to implement such regulations include:

• authorizing our audit department to assume responsibility for daily execution of our anti-corruption and anti-fraud measures, including handling complaints, ensuring protection for the whistleblower and conducting internal investigations;

• providing anti-corruption compliance training periodically to our senior management and employees to enhance their knowledge and compliance with applicable laws and regulations, and including relevant policies and express prohibitions against non-compliance in staff handbooks; and

• undertaking rectification measures with respect to any identified corrupt or fraudulent activities, evaluating the identified corrupt or fraudulent activity and proposing and establishing preventative measure to avoid future non-compliance.

Our Directors and the Sole Sponsor are of the view that such controls and measures are sufficient and effective to avoid the occurrence of corruption, bribery, or other improper conduct of our employees. During the Track Record Period and up to the Latest Practicable Date, we were not subject to any government investigation or litigation with respect to claims or allegations of monetary and non-monetary bribery activities.

PROPERTIES

We currently maintain our headquarter and substantially all of our operations at the premises of China Digital Video Technology Building in Beijing. We have leased an aggregate gross floor area of approximately 10,042 square meters of office space from Xinxin Holding for our headquarter under a one-year lease beginning on June 1, 2015. We have also leased 19 properties with an aggregate gross floor area of approximately 2,315 square meters of office space from independent third parties for our service and support centers in other cities in China. As of the Latest Practicable Date, we did not own any properties.

Because we had no single property with a carrying amount of 15% or more of our total assets as of the Latest Practicable Date, we did not prepare a valuation report with respect to our property interests in reliance upon the exemption provided by Section 6(2) of the Companies (Exemption of Companies and Prospectus from Compliance with Provisions) Notice (Chapter 32L of the Laws of Hong Kong).

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INSURANCE

With regard to our assets and properties, we purchase property insurance for the properties and motor vehicle we owned as well as goods in transit while the equipment are on their way to our customers. We have not maintained product liability insurance as it is not required under PRC laws and during the Track Record Period, we have not been subject to any material product liability claims or incurred any material costs in relation to product warranties. We maintain mandatory social insurance contribution plans for our employees in China pursuant to relevant PRC laws and regulations.

We have also purchased liability insurance policies for our directors and officers. Our Directors consider that our insurance coverage is in line with the industry practice. During the Track Record Period and up to the Latest Practicable Date, we have not received any material insurance claims against us.

HEALTH, WORK SAFETY AND ENVIRONMENTAL MATTERS

In respect of social responsibilities, in particular health, work safety and social insurance, we have entered into employment contracts with our employees in accordance with the applicable PRC laws and regulations. We maintain social welfare insurance for our full-time employees in the PRC, including pension insurance, medical insurance, personal injury insurance, unemployment insurance and maternity insurance, in accordance with relevant PRC laws and regulations.

We are subject to the PRC laws and regulations regarding labor, safety and work-related incidents. We have established safety policies and provide training to the staff prior to implementation of the project work. During the Track Record Period and up to the Latest Practicable Date, we did not encounter any material safety accident, there were no claims for personal or property damages and no compensation was paid to employees in respect of claims for personal or property damages related to safety accident.

We believe that the TV broadcasting post-production industry in which we operate in is not a major source of environmental pollution, and the impact of our operations on the environment is minimal. We were not subject to any major environmental claims, lawsuits, penalties or disciplinary actions during the Track Record Period.

LEGAL PROCEEDINGS AND COMPLIANCE

We may be subject to legal or administrative proceedings relating to our business operation from time to time. We may also initiate legal proceedings in order to protect our contractual and property rights. During the Track Record Period and up to the Latest Practicable Date, we were not involved in any material litigation or arbitration, and no litigation or arbitration is known to our Directors to be pending or threatened by or against us, that would have a material adverse effect on our business, financial condition or results of operations.

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Licenses and Permits

As confirmed by our PRC legal advisors, King & Wood Mallesons, except as otherwise disclosed in “—Historical Non-compliance Incidents” below, during the Track Record Period and up to the Latest Practicable Date, we had obtained all the necessary licenses, approvals and permits from appropriate regulatory authorities for our business operations as disclosed in this prospectus in the PRC and had complied with the applicable PRC laws and regulations in relation to our business and operations in all material respects. See “Regulations” for the details of the relevant laws and regulations. We have not been materially penalized by national or local authorities for violations of PRC laws and regulations.

Historical Non-compliance Incidents

Lack of Lease Registration

Details of the Historical Non-compliance Incident

During the Track Record Period, we failed to register 24 lease agreements we entered into as tenant for certain properties which we used as office premises. We sought cooperation from the landlords of the leased properties to register executed lease agreements. Registration of lease agreements requires the submission of certain documents of landlords, including their identity documentation, to relevant authorities and therefore the registration is subject to cooperation of landlords which is beyond our control. Our PRC legal advisors, King & Wood Mallesons, have advised us that the lack of registration will not affect the validity and enforceability of these lease agreements. However, the relevant government authorities may require us to rectify the non-compliance within a period of time and, if we fail to so rectify, impose a fine of up to RMB10,000 for each unregistered lease agreement. For the risk associated with the above property title deficiencies, see “Risk Factors—Risks Relating to Our Business and Industry—We may be subject to fines due to the lack of registration of our leases.” As of the Latest Practicable Date, we had not received any rectification order or been subject to any fine in respect of non-registration of lease agreements. In view of our Directors, such non-compliance would not have any material impact on our business operation and financial position. Accordingly, no provision was made in our financial statements.

Internal Control Measures to Ensure On-going Compliance

In order to ensure on-going compliance with the PRC laws and regulations relating to registration of executed lease agreements, under which we are the tenants, we will continue to seek cooperation from the landlords of the leased properties to register executed lease agreements with the relevant PRC government authorities. We have established internal procedures to ensure timely registration of leased properties. Our Company and subsidiaries will keep a list of our leased properties with detailed information including the status of the lease registration. We believe we have implemented adequate and effective measures internally. However, as we have no control over the landlords, there is no assurance whether and when our landlords will register the leases.

Our Directors are of the view that the aforementioned historical non-compliance incidents of our Group constitute immaterial non-compliances which do not have any material adverse impact on our Group as a whole.

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DIRECTORS

Our Board currently consists of six Directors, comprising three executive Directors and three independent non-executive Directors. The following table sets forth information regarding the Directors.

Date of Date of joining our appointment Name Age Position Group as Director Description of role

Mr. Zheng Fushuang 50 Chairman and January 8, January 8, Strategic planning and (鄭福雙) executive 2008 2008 overall management Chair of Director Nomination Committee Mr. Guo Langhua (郭朗華) 49 Vice chairman January 8, January 8, Operational management, and executive 2008 2008 Member of Remuneration Director Committee Mr. Liu Baodong (劉保東) 52 Chief February 16, February 16, Operational management executive 2007 2007 officer and executive Director Mr. Frank Christiaens 49 Independent January 28, January 28, Supervision, Member of non-executive 2011 2011 Audit Committee, Chair of Director Remuneration Committee Mr. Zhang Yaqin (張亞勤) 50 Independent January 28, January 28, Supervision, Member of non-executive 2011 2011 Audit Committee, Member of Director Remuneration Committee, Member of Nomination Committee Ms. Cao Qian (曹茜) 52 Independent May 23, 2016 May 23, 2016 Supervision, Chair of Audit non-executive Committee, Member of Director Nomination Committee

Save as disclosed below, there are no other matters concerning each of our Directors’ appointment that need to be brought to the attention of our Shareholders and the Stock Exchange and there are no other matters which shall be disclosed pursuant to Rule 17.50(2) of the GEM Listing Rules.

Executive Directors

Mr. Zheng Fushuang (鄭福雙), aged 50, is the founder of our Group. He is the chairman of our Board and an executive Director. He is primarily responsible for the overall corporate strategies and management of our Group. Mr. Zheng was appointed to our Board on January 8, 2008.

Mr. Zheng has been the chairman of CDV WFOE, our principal operating PRC subsidiary, since December 2008. Mr. Zheng has served as a director of Xinxin Holding since 2005. Prior to that, Mr. Zheng was the chairman of Xin’aote Electronic from December 1990 to November 2005, where he was mainly responsible for the overall management of the company. Before the incorporation of Xin’aote

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Electronic, Mr. Zheng worked in Beijing Liming Electronic Technology Company Limited (北京黎明電子技術公司) as a general staff who provided technical support to the company from October 1988 to June 1989 and worked in Beijing Aote Electronic Company Limited (北京奧特電子公司)asa manager in the application technology department from January 1990 to November 1990.

Mr. Zheng has over 20 years of experiences in the digital video technology industry. He has received various honors, including the “May Fourth Medal” in Beijing (北京市“五四獎章”) in April 2004, “The Bauhinia Cup Outstanding Entrepreneur Award”(香港金紫荊花杯傑出企業家獎)in December 2002, the “Best Technology Entrepreneur of Private Enterprise in China (中國優秀民營科技企業家) in November 2002 and October 2004, and the “Broadcasting Science and Technology Award (廣播電視科學技術大獎)” in January 2010. Mr. Zheng has been the member of the 15th People’s Congress of Haidian District, Beijing since November 8, 2011, and was the member of the 6th and the 10th Chinese People’s Political Consultative Conference in Beijing in December 1998 and December 2002, respectively.

Mr. Zheng is affiliated with certain social organizations, including as a member of the CDNCA International Liaison Department Committee and the GAPPRFT Professional Committee of Science and Television Technology (國家廣電總局科技委電視專業委員會) and an executive committee member of the Beijing Federation of Industry and Commence (北京工商業聯合會).

Mr. Zheng graduated from the National University of Defense Technology (國防科技大學) with a bachelor’s degree in radar and electromagnetic countermeasure in July 1985. Mr. Zheng graduated from the Institute of Electronics, Chinese Academy of Sciences (中國科學院電子學研究所) with a master’s degree in engineering in December 1988. Mr. Zheng was awarded an executive master’s degree in business administration (EMBA) from Peking University (北京大學) in January 2005.

From 2006, Mr. Zheng has been the executive director of Peking University Resources (Holdings) Company Limited (北大資源 (控股)有限公司), a company listed on the Stock Exchange (stock code: 0618) which is principally engaged in real estate development and commercial real estate operations.

Save as disclosed above, Mr. Zheng did not hold directorship in any listed public company in the last three years.

Mr. Guo Langhua (郭朗華), aged 49, is the vice chairman of our Board and an executive Director. He is primarily responsible for the overall management and operation of our Group. Mr. Guo was appointed to our Board on January 8, 2008.

Mr. Guo has been the vice chairman of CDV WFOE, our principal operating PRC subsidiary, since 2008. Mr. Guo has served as the president of Xinxin Holdings since January 2015, where he was primarily responsible for the evaluation, improvement and monitoring of the company’s management and operation.

Mr. Guo graduated from Wuhan University (武漢大學) with a bachelor’s degree in economy in June 1988 and obtained a master’s degree in business administration from China Europe International Business School (中歐國際工商學院) in October 2003.

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Mr. Guo did not hold directorship in any listed public company in the last three years.

Mr. Liu Baodong (劉保東), aged 52, is the chief executive officer of our Group and an executive Director. He is primarily responsible for the overall management and operation of our Group. Mr. Liu was appointed to our Board on February 16, 2007. He has served as the chief executive officer of CDV WFOE, our principal operating PRC subsidiary, since 2008. From 2004 to 2008, Mr. Liu was the general manager of Xin’aote Video, a predecessor company of our Group, where he was responsible for the overall management and operation of the company.

Mr. Liu worked at Sanycom Technology Co., Ltd. (三一通訊技術有限公司) (principally engaged in the communication equipment manufacturing) as the deputy general manager and later the general manager from 2001 to 2004. During the period from 1999 to 2001, Mr. Liu was the project manager and product manager of Nortel Networks Holdings (Canada) (北電網路集團 (加拿大)), a multinational telecommunications and data networking equipment manufacturer. Prior to that, Mr. Liu spent two years serving as a senior engineer and project manager for Motorola (Canada) (principally engaged in inventing, building and delivering mobile devices) from 1997 to 1999.

Mr. Liu graduated from Northwestern Polytechnic University (西北工業大學) with a bachelor’s degree in automation control in July 1983 and was awarded a master’s degree and a Ph.D. degree in applied computer science from University of Brussels (Vrije Universiteit Brussel) (比利時布魯塞爾大學) in September 1996. He also received a master’s degree of business administration from China Europe International Business School (中歐國際工商學院) in September 2007.

Mr. Liu did not hold directorship in any listed public company in the last three years.

Independent non-executive Directors

Mr. Frank Christiaens, aged 49, is an independent non-executive Director of our Company. He was appointed to our Board on January 28, 2011. Mr. Christiaens does not hold any other position with the members of our Group.

Mr. Christiaens is currently the chairman and a member of the board of CLEARink Display Corporation (USA) which is principally engaged in developing reflective display technology. He is also the chairman and a member of the board of ELIX Wireless Charging Systems Inc. (Canada) whose principal business is to provide developing wireless charging technology. In addition, Mr. Christiaens is a managing partner (overseeing the company’s overall administrative operation and coordination) of XPCP Management Corporation (Canada), a company which is principally engaged in investing in technology with relevance to Asia. Previously, Mr. Christiaens was the president and a member of the board of Suncentral Inc. (Canada) which is a company focusing on providing daylighting technology from 2012 to 2015. Mr. Christiaens was the president of the Greater China of Barco N.V. (NYSE Euronext Brussels: BAR) (China), which is a Euronext listed provider of professional display products, from May 2002 to December 2009. From March 1996 to August 2000, Mr. Christiaens worked as regional vice-president, marketing, sales & customer services of Alcatel-Lucent Bell (Euronext ALU) (the “Alcatel”), a telecommunications equipment manufacturer, where he was responsible for Alcatel’s internet division for Asia Pacific.

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Mr. Christiaens graduated from the University of Leuven (Belgium) with bachelor’s and master’s degrees in electronics engineering July 1990, and wrote his thesis on digital signal processing and artificial intelligence at the Imperial College of London. Mr. Christiaens obtained a master’s degree in business administration from Vlerick School of Business, Belgium which was previously part of the University of Leuven (Belgium) in July 1992.

Mr. Christiaens did not hold directorship in any listed public company in the last three years.

Mr. Zhang Yaqin (張亞勤), aged 50, is an independent non-executive Director of our Company. He was appointed to our Board on January 28, 2011. Mr. Zhang does not hold any other position with the members of our Group.

Mr. Zhang has extensive experience in networking, digital video and multimedia industries. Mr. Zhang is currently the president of Baidu, Inc., a company listed in NASDAQ (NASDAQ: BIDU). Mr. Zhang is in charge of new business. Prior to joining Baidu, Inc., Mr. Zhang was the corporate vice president of Microsoft Corporation and the chairman of Microsoft Asia-Pacific Research & Development Group, where he was responsible for driving Microsoft’s overall research and development efforts in China and the Asia-Pacific region. Mr. Zhang served as the managing director and the chief scientist of Microsoft Research Asia as one of its original founders from 2000 to 2004, where he was in charge of Microsoft’s mobile and embedded division in Microsoft’s headquarters. He joined Microsoft in January 1999 which brought with him a wealth of technical knowledge and business expertise in wireless and satellite communications, security, networking and digital video. Mr. Zhang is also a member of Committee 100, a group of leading Chinese-Americans to promote the political, science, social and economic exchanges between the US and China.

Mr. Zhang received his bachelor’s degree in radio electronics and master’s degree in telecommunication and electrical systems from the University of Science and Technology of China (中國科技大學) in July 1983 and January 1986, respectively. He also received his Ph.D. degree in science from George Washington University, Washington D.C. in February 1990.

Mr. Zhang has been the non-executive director of Chinasoft International Limited (中軟國際有限公司), a company listed on the Stock Exchange (stock code: 354) providing end-to-end software and information services, ranging from consulting to solution, outsourcing and IT talent training, since 2009. He is also on the board of directors of two listed companies, namely, Chinacache (NASDAQ: CCIH) and Tarena (NASDAQ: TEDU).

Save as disclosed above, Mr. Zhang did not hold directorships in any listed public companies in the last three years.

Ms. Cao Qian (曹茜), aged 52, is an independent non-executive Director of our Company. She was appointed to our Board May 23, 2016. Ms. Cao did not hold any other position with the members of our Group.

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Ms. Cao has extensive experience in auditing, accounting and financial management. Ms. Cao has been appointed as the vice general manager of the supervision and examination department of China Travel Service Ltd (中國旅行社總社監察審計部) which is principally engaged in tourism development, since February 2015. From April 2014 to February 2015, Ms. Cao was the general manager of China Travel Services Meetings, Incentives, Conferences & Exhibitions Services Co., Ltd (中旅國際會議展覽有限公司), a company specialized in providing professional services to business travelers, meeting planners and exhibition organizations. Ms. Cao also served as the vice president of the China Travel Service Head Office Co., Ltd (中國旅行社總社 (北京) 有限公司) from December 2009 to April 2014. In additional to these positions, Ms. Cao was the certified public accountant of Jingdu Public Accounting Firm (京都會計事務所) (an accounting firm in China) from early 1994 to April 1998.

Ms. Cao graduated from the Central University of Finance & Economics (中央財經大學) with a bachelor’s degree in finance and revenue in July 1986, and received an executive master’ degree of business administration (EMBA) from Peking University Guanghua School of Management (北京大學光華管理學院) in January 2005. Ms. Cao is a certified public accountant in the PRC.

Ms. Cao has been an independent non-executive director of Peking University Resources (Holdings) Company Limited (北大資源 (控股) 有限公司), a company listed on the Stock Exchange (stock code: 0618), since March 31, 2005, and she is a member of the audit committee and nomination committee.

Save as disclosed above, Ms. Cao did not hold directorships in any listed public companies in the last three years.

Save as disclosed in this section, each of our Directors confirmed that he/she does not have any relationship with other Directors, senior management or Controlling Shareholders.

SENIOR MANAGEMENT

The following table presents certain information concerning the senior management of our Group:

Date of joining Date of Description Name Age Position our Group appointment of role

Mr. Zheng 50 Chairman and January 8, May 23, Strategic planning Fushuang executive Director 2008 2008 and overall (鄭福雙) management Mr. Guo 49 Vice chairman January 8, September Operational Langhua and executive 2008 15, 2009 management (郭朗華) Director Mr. Liu 52 Chief executive February 16, March 18, Operational Baodong officer and 2007 2008 management (劉保東) executive Director

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Date of joining Date of Description Name Age Position our Group appointment of role

Mr. Sun 47 Vice president February 21, March 18, Overseeing Jichuan and chief 2008 2008 product research (孫季川) technology officer and development and information technology management Mr. David Cui 47 Chief financial August 21, August 21, Finance and (崔大偉) officer 2015 2015 accounting Mr. Qian Yiyue 37 Joint company May 4, 2008 August 21, Overseeing (錢禕玥) secretary 2015 corporate secretarial matters

Mr. Zheng Fushuang (鄭福雙), aged 50, is the founder of our Group. He is the chairman of our Board and an executive Director. His Biographical details are set out under the paragraph headed “Executive Directors” above.

Mr. Guo Langhua (郭朗華), aged 49, is the vice chairman of our Board and an executive Director. His Biographical details are set out under the paragraph headed “Executive Directors” above.

Mr. Liu Baodong (劉保東), aged 52, is the chief executive officer of our Group and an executive Director. His Biographical details are set out under the paragraph headed “Executive Directors” above.

Mr. Sun Jichuan (孫季川), aged 47, is the vice president and chief technology officer of our Company. Mr. Sun joined CDV WFOE, our principal operating PRC subsidiary, as a vice president and the chief technology officer in March 2008. Prior to joining our Group, Mr. Sun was a deputy general manager of Xin’aote Video, the predecessor company of our Group, from January 2005 to January 2008, where he was mainly responsible for overall management and operation. Mr. Sun was a senior software designer of both Canada Matrox Electronic Systems Ltd (加拿大Matrox電子系統公司) (principally engaged in designing software and hardware solutions for graphics, video, and imaging/machine vision applications) from October 2000 to December 2004 and the Research and Development Centre, Canon Australia Pty Ltd (澳大利亞佳能研發中心) (offering digital cameras speedlites, printers, faxes, scanners, video cameras, and related accessories) from September 1999 to June 2000. He was a senior software engineer in Xin’aote Electronic from September 1992 to May 1997.

Mr. Sun graduated from National University of Defense Technology (國防科技大學) with a bachelor’s degree in image display and identification in June 1989. Mr. Sun received his master’s degree in signal and information processing from the Institute of Electronics, Chinese Academy of Science (中國科學院電子學研究所) in June 1992.

Mr. Sun did not hold directorships in any listed public companies in the last three years.

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Mr. David Cui (崔大偉), aged 47, is the chief financial officer of our Company, primarily responsible for the financial management. He was appointed to such position on August 21, 2015. Mr. Cui did not hold any other position with the members of our Group.

Mr. Cui has extensive experience in public accounting and financial management. Prior to join our Company, Mr. Cui was an independent financial advisor to high growth companies on business and fund raising strategies, internal control and corporate governance, accounting matters and public offerings. From April 2011 to August 2013, Mr. Cui served as the chief financial officer in iKang Healthcare Group, Inc., Beijing (愛康國賓健康管理集團) (a company listed on Nasdaq) which is principally engaged in providing preventive healthcare services, where he was responsible for managing the overall finance function of the company. He was an audit senior manager of Deloitte & Touche, Shanghai, a global professional service provider principally engaged in offering auditing, accounting, financial advisory, risk management and tax services, where he was responsible for advising clients throughout the IPO or other offering process, from April 2007 to April 2011. Mr. Cui was the financial reporting manager of Symantec Corporation, California, which is a global leader in security, backup and availability solutions, from August 2006 to September 2006, and an audit manager of Ernst & Young LLP, California from April 2004 to August 2006. Mr. Cui was the senior auditor in the Audit and Advisory Services practice of Health Net, Inc, California, which is a managed healthcare service company listed on NYSE, from May 2001 to April 2004, where he was responsible for planning and executing financial and operation audits. From January 1996 to May 2001, Mr. Cui worked at various public accounting firms including Arthur Andersen LLP in California, BDO Dunwoody LLP and Berris Mangan Elliott (now part of KPMG) in Canada.

Mr. Cui graduated from Simon Fraser University, British Columbia, Canada (加拿大賽門費沙大學) with a bachelor’s degree in business administration in September 1997. He became a Chartered Accountant in Canada (加拿大特許會計師) in February 2000 and a Certified Public Accountant in the United States (美國註冊會計師) in July 2005.

Mr. Cui did not hold directorship in any listed public company in the last three years.

Mr. Qian Yiyue (錢禕玥), aged 37, is a joint company secretary of our Company. He was appointed to such position on August 21, 2015. For position with other members of our Group, Mr. Qian has been the Board secretary and investment relationship director (overseeing secretarial matters and investment relationship) of CDV WFOE, our principal operating PRC subsidiary, since May 2008.

Prior to join our Group, Mr. Qian was appointed as the board secretary and vice director in overseas marketing department of Vtion Technology (China) Co., Ltd (網訊技術(中國) 有限公司),a supplier of wireless computing solutions and products for mobile Internet access via broadband wireless networks in the PRC, from May 2007 to April 2008. Mr. Qian was a president assistant (mainly responsible for business development) of Canalliance Petroleum Development Inc. China office (加拿大聯合石油開發有限公司北京辦事處) from December 2005 to April 2007. During the time from September 2004 to November 2005, Mr. Qian served as the trading account manager of Swifttrade Inc., Cambridge, ON, Canada, where he was mainly responsible for commodity trading.

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Mr. Qian graduated from East China University of Science & Technology (上海華東理工大學) in Shanghai with a bachelor’s degree in business English in June 2001, and obtained a master’s degree in business administration from University of Hertfordshire in UK in conjunction with Malaspina University College in Canada in October 2004.

Mr. Qian did not hold directorship in any listed public company in the last three years.

JOINT COMPANY SECRETARY

Mr. Qian Yiyue (錢禕玥), aged 37, is a joint company secretary of our Company. He was appointed as joint company secretary on August 21, 2015. Mr. Qian’s biographical details are set forth in the paragraph headed “Senior Management” above.

Mr. Au Wai Keung (區偉強), aged 44, is a joint company secretary of our Company. He was appointed as joint company secretary on August 21, 2015. Mr. Au has extensive experience in corporate secretarial practice and has achieved various professional qualifications, including a fellow member of Hong Kong Institute of Certified Public Accountant (香港會計師公會) in May 2015 and an associate member of The Institute of Charted Accountants in England and Wales (英格蘭及威爾士特許會計師協會) in August 2008. Mr. Au is currently the director of Arion & Associates Limited (亞利安會計事務所有限公司). He was the director of Comsec Corporate Advisory Limited (匯雋企業顧問有限公司) (now dissolved) from July 2007 to October 2013. Meanwhile, Mr. Au has been serving as the company secretary of Honworld Group Limited (老恒和釀造有限公司), a company listed on the Stock Exchange (stock code: 2226), since December 2013. He has been the company secretary of China Shengmu Organic Milk Limited (中國聖牧有機奶有限公司), a company listed on the Stock Exchange (stock code: 1432), since March 2014. Prior to this, Mr. Au served as the Company Secretary of SDM Group Holdings Limited, a company listed on the Stock Exchange (stock code: 8363), from March 2014 to September 2015. Mr. Au was the company secretary of Baofeng Modern International Holdings Company Limited (寶峰時尚國際控股有限公司), a company listed on the Stock Exchange (stock: code 1121), from January 2011 to December 2013. In addition to his roles as director and company secretary, Mr. Au served as a consultant of Kennic L.H. Lui & Co, Certified Public Accountants (呂禮恒會計事務所) from October 2006 to May 2007, a finance controller of IEFTS China Limited (上海致渝計算器科技有限公司) from August 2004 to August 2006, a chief finance officer of Universal Technologies Holdings Limited (環球實業科技控股有限公司) (stock code 1026) from the time of February 2001 to June 2004, a marketing manager of Chekiang First Bank Limited (浙江第一銀行) from May 1997 to February 2001, a portfolio manager of Vincent Management Company (永勝管理公司) during the period from April 1994 to May 1997 and a negotiator of Richard Ellis Limited from September 1993 to January 1994, respectively.

Mr. Au received a bachelor’s degree in social science from the Chinese University of Hong Kong (香港中文大學) in December 1993 and a master’s degree in business administration from City University of Hong Kong (香港城市大學) in November 1999.

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BOARD COMMITTEES

Audit Committee

Our Company established the Audit Committee on May 23, 2016 in compliance with Rule 5.28 of the GEM Listing Rules with written terms of reference in compliance with the paragraph C3.3 of the Corporate Governance Code and Corporate Governance Report as set out in Appendix 15 to the GEM Listing Rules. The primary duties of the Audit Committee are to review and supervise the financial reporting process and internal control system of our Group, oversee the audit process and the audits of the financial statements of our Group.

The Audit Committee consists of three independent non-executive Directors, namely, Mr. Zhang Yaqin, Mr. Frank Christiaens and Ms. Cao Qian. Ms. Cao Qian has been appointed as the chair of the Audit Committee, and has the appropriate professional qualifications as required under the GEM Listing Rules.

Remuneration Committee

Our Company established the Remuneration Committee on May 23, 2016 in compliance with Rule 5.34 of the GEM Listing Rules with written terms of reference in compliance with paragraph B1.2 of the Corporate Governance Code and Corporate Governance Report as set out in Appendix 15 to the GEM Listing Rules. The primary duties of the Remuneration Committee are to review, determine and make recommendations to our Board on the policy and structure of the remuneration (including bonuses and other compensation) payable to our Directors and senior management and make recommendations on employee benefit arrangements.

The Remuneration Committee consists of three members, namely Mr. Zhang Yaqin, Mr. Frank Christiaens and Mr. Guo Langhua. Mr. Frank Christiaens has been appointed as the chair of the Remuneration Committee.

Nomination Committee

Our Company established the Nomination Committee on May 23, 2016 with written terms of reference in compliance with paragraph A 5.2 of the Corporate Governance Code and Corporate Governance Report as set out in Appendix 15 to the GEM Listing Rules. The primary duties of the Nomination Committee are to make recommendations to our Board on the appointment and removal of Directors of our Company.

The Nomination Committee consists of three members, namely Mr. Zheng Fushuang, Mr. Zhang Yaqin and Ms. Cao Qian. Mr. Zheng Fushuang has been appointed as the chair of the Nomination Committee.

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COMPENSATION OF DIRECTORS AND SENIOR MANAGEMENT

The aggregate amount of remuneration which our Directors have received (including fees, salaries, contributions to pension schemes, discretionary bonuses, housing and other allowances and other benefits in kind) for the years 2013, 2014 and 2015 was approximately RMB3,877,000, RMB2,825,000 and RMB2,354,000, respectively.

The aggregate amount of fees, salaries, contributions to pension schemes, discretionary bonuses, housing and other allowances and other benefits in kind paid to our five highest paid individuals of our Group, including our Directors, for the years 2013, 2014 and 2015 was approximately RMB4,650,000, RMB3,756,000 and RMB6,984,000, respectively.

Under the arrangements currently in force, the aggregate amount of remuneration, excluding discretionary bonuses, payable to our Directors for the year ending December 31, 2016 is estimated to be approximately RMB2,430,870.

No remuneration was paid by us to our Directors or the five highest paid individuals as an inducement to join or upon joining us or as a compensation for loss of office in respect of the years 2013, 2014 and 2015. Further, none of our Directors had waived any remuneration during the same period. The Company has no service contracts with any of our Directors providing for benefits upon termination of employment.

Save as disclosed above, no other payments have been made or were payable in respect of the years 2013, 2014 and 2015 by our Group to our Directors.

COMPLIANCE ADVISER

We have appointed Reorient Financial Markets Limited (瑞東金融市場有限公司)asour compliance advisor pursuant to Rule 6A.19 of the GEM Listing Rules. Pursuant to Rule 6A.23 of the GEM Listing Rules, our compliance advisor will advise us, upon our consultation, on the following circumstances:

• before the publication of any regulatory announcement, circular or financial report;

• where a transaction, which might be a notifiable or connected transaction, is contemplate including share issues and share repurchases;

• where we propose to use the proceeds of the Global Offering in a manner different from that detailed in this prospectus or where its business activities, developments or results deviate from any forecast, estimate, or other information in this prospectus; and

• where the Stock Exchange makes an inquiry of our Company regarding unusual movements in the price or trading volume of the Shares of our Company.

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The term of the appointment shall commence on the Listing Date and end on the date on which we distribute our annual report of our financial results for the second full financial year commencing after the Listing Date in accordance with Rule 18.03 of the GEM Listing Rules and such appointment may be extended by mutual agreement.

COMPLIANCE OFFICER

We have appointed Mr. Guo Langhua as our compliance officer pursuant to Rule 5.19 of the GEM Listing Rules. For his biographical details, please refer to the section headed “—Directors— Executive Directors” in this prospectus.

PRE-IPO SHARE OPTION SCHEME

In order to assist us in attracting, retaining and motivating our key employees and senior management, we have adopted a Pre-IPO Share Option Scheme on December 20, 2010, details of which are set out in Appendix IV headed “Statutory and General Information—D. Pre-IPO Share Option Scheme” to this prospectus.

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OUR CONTROLLING SHAREHOLDERS

Immediately following the completion of the Global Offering (excluding any Shares which may be allotted and issued pursuant to the exercise of the Over-allotment Option or any option granted under the Pre-IPO Share Option Scheme), Future Success Trust, through ZFS Holdings and Wing Success, will be interested, in approximately 38.76% of the post offering enlarged issued share capital of our Company. Mr. Zheng, is the settlor, and a beneficiary of the Future Success Trust. Mr. Zheng is a director of ZFS Holdings and also has the power to nominate and remove other directors of ZFS Holdings. The terms of the trust require that ZFS Holdings be managed by the directors. Accordingly, Mr. Zheng, through his control of ZFS Holdings and Wing Success, indirectly controls 38.76% in the post offering enlarged issued share capital of our Company.

RETAINED BUSINESSES OF OUR ULTIMATE CONTROLLING SHAREHOLDER

As disclosed in “History, Reorganization and Group Structure” in this prospectus, we carried out our business through Xin’aote Video which was established by Mr. Zheng in the PRC. As of the Latest Practicable Date, Mr. Zheng held 95% equity interest in Xin’aote Investment which held 95% equity interest in Xin’aote Video. The remaining 5% equity interest in Xin’aote Investment was held by Mr. Guo Langhua, Our executive Director and the remaining 5% equity interest in Xin’aote Video were held by independent third parties.

In anticipation of introducing the Pre-IPO Investors, our business (primarily including business contracts and employment contracts), were effectively transferred from Xin’aote Video and Xin’aote Digital to CDV WFOE through a series of business restructuring in 2007 and 2008. To facilitate the Reorganization, Xinxin Shengtong was introduced to take on the assets and intellectual properties from Xin’aote Video and Xin’aote Digital for further leasing and licensing to CDV WFOE. Please refer to “History, Reorganization and Group Structure—Reorganization” in this prospectus for further details of the Reorganization.

Upon completion of the Reorganization, Xin’aote Video ceased to conduct our business in the PRC and CDV WFOE has been the sole entity conducting our business in China with our own intellectual properties, assets, personnel and businesses being developed, purchased, employed or expanded. As a result, Xin’aote Video, Xinxin Shengtong and their businesses were excluded from our Group.

Both Xin’aote Digital and Xinxin Shengtong are investment holding companies and do not engage in any business operation. Xin’aote Video does not have capability and personnel to provide digital video technology solutions and services and is currently engaged in the distribution of electronic products in the PRC.

— 185 — RELATIONSHIP WITH CONTROLLING SHAREHOLDERS by non-foreign owned domestic companies (the “Special Qualification Projects”). As companies with foreign investment, we are not eligible to be granted qualifications for such Special Qualification Projects. To the best knowledge, information and belief of our Directors, it is widely known to the industry that Xin’aote Video has carried out a series of business restructuring in 2007 and 2008 to effectively transfer its digital video technology solution and service business and operations to our Group. Although Xin’aote Video does not have the capability or personnel to provide digital video technology solutions and services, it has the requisite qualifications for such Special Qualification Projects as a non-foreign owned domestic company. In order not to lose the business opportunities for the Special Qualification Project, Xin’aote Video purchases such solutions, products and services from CDV WFOE on an exclusive basis.

To regulate such arrangement on an on-going basis, we will enter into a framework agreement with Xin’aote Video. Pursuant to such framework agreement, among others, Xin’aote Video will undertake to us that (i) it will not provide digital video technology solutions, products and services to its customers by itself in any event or engage in any business that competes or may compete with our business; and (ii) upon obtaining any Special Qualification Project, it will purchase digital video technology solutions, products and services for such project from us on an exclusive basis. Accordingly, our Directors consider that Xin’aote Video is not engaged in business that competes or is likely to compete with our business. Furthermore, such exclusive arrangement will facilitate us to benefit from such projects which we would otherwise not be able to have access to. As a result, our Directors consider that it is beneficial to us to continue such arrangements with Xin’aote Video. Please refer to “Continuing Connected Transactions—Non-exempt Continuing Connected Transactions—Supply Framework Agreement” in this prospectus for further details. King & Wood Mallesons, our PRC legal advisors, are of the view that as we merely provide digital video technology solutions and services required by Xin’aote Video and do not participate in the Special Qualification Projects as a direct supplier to Xin’aote Video’s customers, our participation in the Special Qualification Projects through the Supply Framework Agreement will not be deemed as a breach of the relevant laws and regulations regarding restriction on foreign owned companies.

Mr. Zheng has also confirmed that as of the Latest Practicable Date, (i) none of Xin’aote Digital, Xin’aote Video, Xinxin Holding and Xinxin Shengtong was engaged in any business which competes or is likely to compete, directly or indirectly, with our business; and (ii) he and his close associates did not have any interest in any business which competes or is likely to compete, directly or indirectly, with our business, which would require disclosure under Rule 11.04 of the GEM Listing Rules.

INDEPENDENCE FROM OUR CONTROLLING SHAREHOLDERS

Having considered the following factors, our Directors are satisfied that we are capable of carrying on our business independently from Mr. Zheng and his close associates after the Global Offering.

Management Independence

Our management and operational decisions are made by our Board and senior management. Our Board comprises three executive Directors and three independent non-executive Directors. Save for Mr. Zheng, who is a director of Chongqing Xin’aote Investment Company Limited (重慶新奧特投資

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有限公司)(“Chongqing Xin’aote”) and Beijing Zhonglianxun Technology Co., Ltd. (北京中聯訊科技有限責任公司) and Mr. Guo Langhua, who is a director of Chongqing Xin’aote, none of our Directors holds directorship in the companies outside of our Group that are controlled by Mr. Zheng. Save for Mr. Guo Langhua, who is the president of Xinxin Holding and the general manager of Chongqing Xin’aote, none of our Directors holds any management position in the companies outside our Group that are controlled by Mr. Zheng. Notwithstanding Mr. Zheng’s directorships in his other companies and Mr. Guo’s position in Chongqing Xin’aote, they do not involve in the daily management of such companies. Furthermore, each of our executive Directors, including Mr. Zheng and Mr. Guo, will enter into a service contract with our Company for a term of three years after the Listing, pursuant to which, they shall spend sufficient time performing their responsibilities to us.

Our Board meets regularly to consider major matters affecting the operations of our Group. Our executive Directors and senior management take charge of different functions and such arrangement complement the role of Mr. Zheng as the chairman of our Board. Our Board believes that this structure is conducive to strong and consistent leadership which enables us to operate efficiently.

Each of our Directors is aware of his fiduciary duties as a director which require, among others, that he/she must act for the benefit of and in the best interests of our Company and not allow any conflict between his/her duties as a Director and his/her personal interests.

In the event that there is a potential conflict of interest arising out of any transaction to be entered into between our Group and any of our Directors, including Mr. Zheng, or their respective associates, the interested Director(s) shall abstain from voting at the relevant board meetings of our Company in respect of such transactions, and shall not be counted in forming quorum for the relevant Board meeting. The interested Director(s) shall not attend any independent board committee meetings comprising our independent non-executive Directors only.

Save for Mr. Guo, none of our senior management members holds any directorship or management position in the companies outside our Group that are controlled by Mr. Zheng. They have substantial experience in the industry we are engaged in and the majority of them have served our Group for a substantial length of time during which period they have demonstrated their capability of discharging their duties independently from our Controlling Shareholders.

Operational Independence

We have sufficient operational capacity in terms of capital, plants and machinery equipment, facilities, premises and employees to operate our business independently.

All our operating subsidiaries hold all relevant licenses and patents that are material in relation to our business operations in their own names.

Historically, we leased certain fixed assets (mainly office premises) from and used certain intellectual properties (including patents and trademarks) under the licensing arrangements with Xin’aote Digital, Xin’aote Video and Xinxin Shengtong. Nonetheless, we have independently

— 187 — RELATIONSHIP WITH CONTROLLING SHAREHOLDERS developed our own patents and other intellectual properties in line with our evolving business. We also purchased our own office equipment. As a result, we terminated the relevant assets lease agreement and patent license agreement in December 2010. For further details, please refer to “History, Reorganization and Group Structure—Reorganization.”

We have been using “新奧特” trademarks under class nine under a trademark license agreement with Xin’aote Digital (as licensor) dated January 1, 2008 (the “Trademark Licensing Agreement”). Pursuant to the Trademark Licensing Agreement, we have been granted the right to use the “新奧特” trademarks on our products and services on an exclusive basis for a consideration of RMB1,000 for a term of ten years from January 1, 2008. Upon expiry of such term, unless CDV WFOE gives prior written notice to Xin’aote Digital to terminate the Trademark Licensing Agreement, it shall be automatically renewed for a further term of ten years on the same terms as the current term. Notwithstanding that we do not own “新奧特” trademarks, our Directors consider that the arrangements under the Trademark Licensing Agreement can provide us with sufficient protection on our exclusive use of “新奧特” trademarks.

We have been leasing certain office and warehouse premises from Xinxing Holding and Xin’aote Video, respectively. Such lease arrangements have been and will be carried out on normal commercial terms. Please refer to “Continuing Connected Transactions—Non-exempt Continuing Connected Transactions—Lease Agreements” for further details of the lease arrangements. CDV WFOE has also been permitted by Silicon Valley Technology, a company controlled by Mr. Zheng, to use certain premises as its registered office for nil consideration for a period of three years starting from January 1, 2015. Please refer to “Continuing Connected Transactions—Exempt Continuing Connected Transactions—Free Use of Office Premises Agreement” for further details of such licensing arrangement. As such premises are for our use as offices or warehouses or as a registered office and it would not be difficult for us to obtain alternative premises from the market, we do not rely on such companies controlled by Mr. Zheng in respect of our operation.

We have independent access to suppliers and customers. We have been supplying digital video technology solutions, products and services to Xin’aote Video for the Special Qualification Projects. During the Track Record Period, our sales to Xin’aote Video for the Special Qualification Projects accounted for an insignificant amount of our total revenue. Sales from such Special Qualification Projects are not expected to account for a substantial amount of our future revenue. As a result, our Directors are satisfied that such transactions with Xin’aote Video will not have adverse impact on our independence.

Accordingly, our Directors are satisfied that we have been operating independently from our Controlling Shareholders and any of their respective close associates during the Track Record Period and will continue to operate independently.

Financial Independence

We have our own financial management system and ability to operate independently of the Controlling Shareholders from a financial perspective. As of the Latest Practicable Date, there were an aggregate of RMB17.3 million bank loans, banking facilities and other borrowings and facilities (utilized and unutilized) which were guaranteed by Mr. Zheng and Xinxin Holding and such guarantees will be released upon Listing.

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Our Directors confirm that we will not rely on our Controlling Shareholders for financing after the Global Offering as we expect that our working capital will be funded by our operating income and bank borrowings.

Accordingly, our Directors believe that we are able to maintain financial independence from our Controlling Shareholders and their respective close associates.

NON-COMPETITION UNDERTAKING

Mr. Zheng and Wing Success (the “Covenantors”) entered into a deed of non-competition (the “Non-competition Deed”) in favor of our Company, pursuant to which each of the Covenantors has irrevocably, jointly and severally undertaken to our Company that he or it would not, and that his or its associates (except any member of our Group, Beijing Hermit, Beijing Yueying and Xin’aote Cloud (the “Group Companies”) would not, during the restricted period set out below, directly or indirectly, either by corporate, partnership, joint venture on his or its own account or in conjunction with or on behalf of any person, firm or company, among other things, carry on, participate or be interested or engaged in or acquire or hold (in each case whether as a shareholder, partner, agent or otherwise) any business which is or may be in competition with our existing core business of research, development and sales of post-production digital video technology products, solutions and services (the “Restricted Business”).

Such non-competition undertaking does not apply in relation to:

(a) any opportunity to invest, participate, be engaged in and/or operate any Restricted Business which has first been offered or made available to us, and we, after review and approval by our Directors or Shareholders as required under the relevant laws and regulations, have declined such opportunity to invest, participate, be engaged in or operate the Restricted Business, provided that the principal terms by which any Covenantor (or his or its relevant associate(s)) subsequently invests, participates, engages in or operates the Restricted Business are not more favorable than those made available to us; or

(b) any interests in the shares or equity interests of any member of the Group Companies; or

(i) any Restricted Business conducted or engaged in by such company (and assets relating thereto) accounts for less than 10% of that company’s consolidated turnover or consolidated assets, as shown in that company’s latest audited accounts; or

(ii) the total number of the shares held by the Covenantors and/or their respective associates in aggregate does not exceed 10% of the issued shares of that class of the company in question and such Covenantors and/or their respective associates are not entitled to appoint a majority of the directors of that company.

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The “restricted period” stated in the Non-competition Deed refers to the period during which (i) our Shares remain listed on the Stock Exchange; and (ii) the relevant Covenantors and/or their respective associates, individually or jointly, are entitled to exercise or control the exercise of no less than 30% of the voting power at general meetings of our Company; and (iii) any Covenanter remains as a director of any member of the Group Companies.

The Covenantors have further undertaken to procure that, during the restricted period, any business investment or other commercial opportunity in the PRC relating to the Restricted Business (the “New Opportunity”) identified by or offered to any of them, is first referred to the Group Companies in the following manner:

(a) the Covenantors are required to refer, or to procure the referral of, the New Opportunity to the Group Companies, and shall give written notice (the “Offer Notice”) to the Group Companies of any New Opportunity containing all information reasonably necessary for the Group Companies to consider whether (i) such New Opportunity would constitute competition with the core business of the Group Companies, and (ii) it is in the interest of our Company and our Shareholders as a whole to pursue such New Opportunity, including but not limited to the nature of the New Opportunity and the details of the investment or acquisition costs; and

(b) the Covenantors will be entitled to pursue the New Opportunity only if (i) they have received a notice from the Group Companies declining the New Opportunity and confirming that such New Opportunity would not constitute competition with the core business of the Group Companies, or (ii) they have not received such notice from the Group Companies within fifteen (15) Business Days (which may be extended for a reasonable period of time as and if requested by our Board committee comprising only independent non-executive Directors (the “Independent Board Committee”) from the Group Companies’ receipt of the Offer Notice. If there is a material change in the terms and conditions of the New Opportunity pursued by the Covenantors, they will refer the New Opportunity as so revised to the Group Companies in the manner set out above.

Upon receipt of the Offer Notice, we will seek opinions and decisions from our Independent Board Committee as to whether (i) such New Opportunity would constitute competition with our core business, (ii) it is in the interest of our Company and our Shareholders as a whole to pursue the New Opportunity, and (iii) to pursue or decline the New Opportunity. Such opinions and decisions (together with their bases) from our Independent Board Committee will be disclosed in our annual reports.

Our Directors consider that our independent non-executive Directors have sufficient experience in assessing whether or not to take up any New Opportunity. Our Independent Board Committee will also review, on an annual basis, the compliance with the Non-competition Deed by the Covenantors, the results of which will be disclosed in our annual reports. In any event, our Independent Board Committee may appoint financial advisors or professional experts to provide advice, at the cost of our Company, in connection with whether to take up any New Opportunity.

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The Covenantors have further undertaken to:

(a) procure that all relevant information relating to the implementation of the Non-competition Deed in their possession and/or the possession of any of their respective associates be provided to us;

(b) allow, subject to confidentiality restrictions imposed by any third party, our representatives and those of our advisers to have access to such of their respective financial and corporate records as may be necessary for us to determine whether the non-competition undertakings in the Non-competition Deed have been complied with by the Covenantors and their respective associates;

(c) provide us, within twenty (20) Business Days from the receipt of our written request, with a written confirmation in respect of their compliance and that of their respective associates with the non-competition undertakings in the Non-competition Deed and consent to the inclusion of such confirmation in our annual reports; and

(d) provide all information necessary for the annual review by our Independent Board Committee and the enforcement of the Non-competition Deed.

The Covenantors (for themselves and on behalf of their respective associates (except for any member of the Group Companies)) have also acknowledged that we may be required by applicable laws, regulations, rules of stock exchange(s) on which we may be listed and relevant regulatory bodies, to disclose, from time to time, information on any New Opportunity, including but not limited to disclosure in public announcements or our annual reports of decisions made by us to pursue or decline such New Opportunity and have agreed to such disclosure to the extent necessary to comply with any such requirement.

INTEREST OF SUBSTANTIAL SHAREHOLDER AND DIRECTORS IN COMPETING BUSINESS

Immediately following the completion of the Global Offering (but excluding any Shares which may be allotted and issued pursuant to the exercise of the Over-allotment Option or any option granted under the Pre-IPO Share Option Scheme), Carvillo will be interested, in approximately 15.82% of the post offering enlarged issued share capital of our Company. Carvillo therefore is a substantial shareholder of our Company. Carvillo has confirmed that it does not have, nor does any of its close associates have, interest in any business which competes or is likely to compete, directly or indirectly, with our business, which would require disclosure under Rule 11.04 of the GEM Listing Rules.

Each of our Directors (other than Mr. Zheng) has confirmed that he/she and his/her respective close associates does not have any interest in any business which competes or is likely to compete, directly or indirectly, with our business, which would require disclosure under Rule 11.04 of the GEM Listing Rules.

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CORPORATE GOVERNANCE MEASURES

The Controlling Shareholders have confirmed that they fully comprehend their obligations to act as the Shareholders’ and our best interests as a whole. We believe that there are adequate corporate governance measures in place to manage existing and potential conflicts of interest. In order to further avoid potential conflicts of interest, we have implemented the following measures:

(a) as part of our preparation for the Global Offering, we have amended the Articles to comply with the GEM Listing Rules. In particular, the Articles provide that, unless otherwise provided, a Director shall not vote on any resolution approving any contract or arrangement or any other proposal in which such Director or any of his/her close associates have a material interest nor shall such Director be counted in the quorum present at the meeting;

(b) a Director with material interests is required to make full disclosure in respect of matters that conflict or potentially conflict with our interest and absent himself/herself from the board meetings on matters in which such Director or his/her close associates have a material interest, unless the attendance or participation of such Director at such meeting of the Board is specifically requested by a majority of the independent non-executive Directors;

(c) we are committed that the Board should include a balanced composition of executive and non-executive Directors (including independent non-executive Directors). We have appointed three independent non-executive Directors and we believe the independent non-executive Directors possess sufficient experience and they are free of any business or other relationship which could interfere in any material manner with the exercise of their independent judgment and will be able to provide an impartial, external opinion to protect the interests of the public Shareholders. Details of the independent non-executive Directors are set out in the section headed “Directors and Senior Management—Directors—Independent Non-executive Directors” in this prospectus;

(d) in the event that the independent non-executive Directors are requested to review any conflicts of interests circumstances between our Group on the one hand and the Controlling Shareholders and/or the Directors on the other, the Controlling Shareholders and/or the directors shall provide the independent non-executive Directors with all necessary information and the Company shall disclose the decisions of the independent non-executive Directors (including why business opportunities referred to it by the Controlling Shareholders were not taken up) either through its annual report or by way of announcements; and

(e) we have appointed Reorient Group Limited as our compliance adviser, which will provide advice and guidance to us in respect of compliance with the applicable laws and the GEM Listing Rules, including various requirements relating to directors’ duties and corporate governance.

— 192 — CONTINUING CONNECTED TRANSACTIONS

We will continue to carry out certain transactions with certain connected persons (as defined under the GEM Listing Rules) upon Listing. Such transactions will therefore constitute continuing connected transaction (as defined under the GEM Listing Rules) of our Group under Chapter 20 of the GEM Listing Rules.

CONNECTED PERSONS

The following parties are connected persons with whom we will continue to carry out transactions on a continuing basis upon Listing:

(a) Silicon Valley Technology;

(b) Xinxin Holding;

(d) Xin’aote Digital.

Other than Xinxin Holding, which is owned as to 44% by Mr. Zheng, each of Silicon Valley Technology, Xin’aote Video and Xin’aote Digital is controlled by Mr. Zheng, our ultimate Controlling Shareholder. As a result, each of Silicon Valley Technology, Xinxin Holding, Xin’aote Video and Xin’aote Digital is a connected person of our Company as defined under Rule 20.07 of the GEM Listing Rules.

EXEMPT CONTINUING CONNECTED TRANSACTIONS

Trademark Licensing Agreement

CDV WFOE (as licensee) has been using “新奧特” trademarks on its products and services under class nine, which mainly covers computer and scientific devices, pursuant to a trademark license agreement with Xin’aote Digital (as licensor) dated January 1, 2008 (the “Trademark Licensing Agreement”). Pursuant to the Trademark Licensing Agreement, CDV WFOE has been granted the right to use the 新奧特 trademarks on its products and services under class nine on an exclusive basis for a consideration of RMB1,000 for a term of ten years from January 1, 2008. Upon expiry of such term, unless CDV WFOE gives prior written notice to Xin’aote Digital to terminate the Trademark Licensing Agreement, it shall be automatically renewed for a further term of ten years on the same terms as the current term. As “新奧特” trademarks are also used by businesses outside our Group, which are controlled by Mr. Zheng, we do not plan to acquire the “新奧特” trademarks and plan to use the “新奧特” trademarks under this Trademark Licensing Agreement.

Our Directors consider that a term exceeding three years is required for the Trademark Licensing Agreement as we operate our business under “新奧特” trademarks and a licensing agreement of such duration will provide us with more security and certainty for us to use such trademarks.

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As we are only required to pay the nominal consideration under the Trademark Licensing Agreement, the transaction under the Trademark Licensing Agreement falls within the de minimis threshold as stipulated under Rule 20.74 (1) of the GEM Listing Rules and is fully exempt from the reporting, announcement and independent shareholders’ approval requirements under Chapter 20 of the GEM Listing Rules.

Free Use of Office Premises Agreement

CDV WFOE and Silicon Valley Technology entered into an agreement on December 28, 2014, pursuant to which CDV WFOE has been permitted to use certain office premises as its registered address for nil consideration (“Free Use of Office Premises Agreement”). The office premises are located at Room 1501-1506, 15/F, Silicon Valley Computer Centre, No. 1 Xicaochang, Haidian District, Beijing, the PRC. The Free Use of Office Premises Agreement is for a period of three years from January 1, 2015.

As nil consideration is payable, the transaction under the Free Use of Office Premises Agreement with Silicon Valley Technology falls within the de minimis threshold as stipulated under Rule 20.74(1) of the GEM Listing Rules and is fully exempt from the reporting, announcement and independent shareholders’ approval requirements under Chapter 20 of the GEM Listing Rules.

NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

Lease Agreements

Xinxin Lease Agreement

CDV WFOE has been leasing certain office and warehouse premises from Xinxin Holding since May 1, 2009. CDV WFOE and Xinxin Holding have entered into a supplemental lease agreement to consolidate the terms in relation to the lease of such office and warehouse premises (“Xinxin Lease Agreement”). Major terms of the Xinxin Lease Agreement are set out below:

Parties: Xinxin Holding (as the lessor); and CDV WFOE (as the lessee)

Properties: Office and warehouse premises located at CDV Technical Plaza, No. 49 Wukesong Road, Haidian District, Beijing, the PRC with an aggregate gross floor area of approximately 10,042 square meters

Term of lease: From July 1, 2015 (retrospectively) to December 31, 2017

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Rental: Between RMB1.0 to RMB5.7 per square meter per day (inclusive of management fees), depending on the location and nature of the specific premises, for an aggregate gross floor area of approximately 10,042 square meters, which is payable on a quarterly basis

Renewal: Renewable at the request of CDV WFOE by giving a one-month prior written notice to Xinxin Holding, subject to satisfaction of all requirements under laws and regulations (including the GEM Listing Rules). CDV WFOE also has a right of priority to renew such lease. Rental payable under the renewed lease agreement will be subject to negotiations between the parties by reference to the prevailing market rate for the lease of similar properties in the vicinity.

The historical transaction amounts under the Xinxin Lease Agreement for 2013, 2014 and 2015 were RMB11,860,000, RMB13,301,000 and RMB12,609,000, respectively.

Based on the terms under the Xinxin Lease Agreement, the annual rental to be paid by CDV WFOE will not exceed RMB14,500,000 for each of the years of 2016 and 2017.

The purpose of the Xinxin Lease Agreement is to enable us to continue to use the premises as our headquarters and warehouses at a cost which is less costly than constructing new premises or acquiring the premises from Xinxin Holding.

Xin’aote Video Lease Agreement

Beijing Zhengqi has been leasing its office premises from Xin’aote Video since June 1, 2014. The current lease agreement in relation to such office premises is for a period from June 1, 2015 to May 31, 2016. Beijing Zhengqi and Xin’aote Video have entered into a supplemental lease agreement in relation to such office premises to extend the term to December 31, 2017 (“Xin’aote Video Lease Agreement”). Major terms of the Xin’aote Video Lease Agreement are set out below:

Parties: Xin’aote Video (as the lessor); and Beijing Zhengqi (as the lessee)

Properties: Office premises with an aggregate gross floor area of approximately 1,195 square meters located at Room 102, 1st Floor, Digital Communication Building, No. 7 Shangdixinxi Road, Haidian District, Beijing, the PRC

Term of lease (as revised): From June 1, 2015 to December 31, 2017

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Rental: Approximately RMB1,750,000 (inclusive of management fees) per year based on RMB4.0 per square meter per day (inclusive of management fees) for an aggregate gross floor area of approximately 1,195 square meters, which is payable on a quarterly basis

Renewal: Renewable at the request of Beijing Zhengqi by giving a one-month prior written notice to Xin’aote Video, subject to satisfaction of all requirements under relevant laws and regulations (including the GEM Listing Rules). Beijing Zhengqi also has a right of priority to renew such lease. Rental payable under the renewed lease agreement will be subject to negotiations between the parties by reference to the prevailing market rate for the lease of similar properties in the vicinity.

The historical transaction amounts under the Xin’aote Video Lease Agreement for the seven months ended December 31, 2014 and the year ended December 31, 2015 were RMB784,000 and RMB1,597,000, respectively.

Based on the terms under the Xin’aote Video Lease Agreement, the annual rental to be paid by Beijing Zhengqi to Xin’aote Video will not exceed RMB1,750,000 for each of the years 2016 and 2017.

The purpose of the Xin’aote Video Lease Agreement is to enable us to continue to use such office premises at a cost which is less costly than constructing new premises or acquiring the premises from Xin’aote Video.

Independent Property Valuer’s View

As confirmed by Valuelink Management Consultants Limited, an independent third party property (including land, plant and equipment) valuer, the rentals under the Xinxin Lease Agreement and Xin’aote Video Lease Agreement are fair and reasonable and in line with the prevailing market rates for leasing similar properties in the locality that are used for similar purposes in the PRC at the relevant dates of such leases.

Supply Framework Agreement

Prior to our Reorganization, Xin’aote Video was the operating entity through which we carried on our business, including projects with certain government agencies and military units. Upon completion of the Reorganization, Xin’aote Video, through its networks and contacts accumulated in the past years, continues to be invited to bid for the projects of such government agencies and military units. Since 2013, such government agencies and military units have strengthened its internal control by requiring the providers of products and services to have qualifications that can only be obtained by non-foreign owned domestic companies (the “Special Qualification Projects”). As companies with foreign investment, we are not eligible to bid for such Special Qualification Projects. To the best knowledge, information and belief of our Directors, it is widely known to the industry that Xin’aote

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Video has carried out a series of business restructuring in 2007 and 2008 to effectively transfer its digital video technology solution and service business and operations to our Group. Although Xin’aote Video does not have the capability or personnel to provide digital video technology solutions and services, it has the requisite qualifications for such Special Qualification Projects as a non-foreign owned domestic company. In order not to lose the business opportunities for the Special Qualification Project, Xin’aote Video purchases such solutions, products and services from CDV WFOE on an exclusive basis. Our Directors consider that such arrangement will facilitate us to benefit from such projects which we would otherwise not be able to have access to and therefore, it is beneficial to us to continue such arrangements with Xin’aote Video. King & Wood Mallesons, our PRC legal advisors, are of the view that as we merely provide digital video technology solutions, products and services required by Xin’aote Video and do not participate in the Special Qualification Projects as a direct supplier to Xin’aote Video’s customers, our participation in the Special Qualification Projects through the Supply Framework Agreement will not be deemed as a breach of the relevant laws and regulations regarding restriction on foreign owned companies.

To regulate such arrangement on an on-going basis, we have entered into a framework agreement with Xin’aote Video (the “Supply Framework Agreement”). Xin’aote Video and CDV WFOE (for itself and its subsidiaries, including Beijing Zhengqi) have entered into separate agreements to set out the specific scope of services, products, terms and conditions of providing such solutions, products and services according to the principles laid down by the Supply Framework Agreement. The major terms of the Supply Framework Agreement are set out below:

Parties: CDV WFOE (for itself and its subsidiaries, as the supplier); and Xin’aote Video (as the customer);

Term of the agreement: From July 1, 2015 (retrospectively) to December 31, 2017

Exclusive supply: • Unless with the written consent of CDV WFOE, Xin’aote Video shall not bid for such Special Qualification Projects upon obtaining bidding invitations;

• Xin’aote Video undertakes not to provide digital video technology solutions, products and services to its customers by itself in any event or engage in any business that competes or may compete with the business of CDV WFOE; and

• Unless with the written consent of CDV WFOE, Xin’aote Video shall not purchase digital video technology solutions, products and services from any suppliers other than CDV WFOE.

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Bidding process: • Xin’aote Video shall notify CDV WFOE promptly after it receives any invitation to bid for any Special Qualification Projects.

• Xin’aote Video shall consult and obtain prior consent from CDV WFOE in relation to the major terms of the bidding proposal, including the bidding price and payment schedule.

Pricing: The price to provide such solutions, products and services to Xin’aote Video shall be determined based on the principle that the terms offered to Xin’aote Video shall not be less favorable to CDV WFOE than the terms offered by CDV WFOE to independent third parties. CDV WFOE shall also determine the prices with reference to the following factors: the complexity and innovativeness of the solution, service or product to be provided, the competitors’ pricing for a similar project, inventory costs and expected manpower required and general market demand for such solution, service or products plus a minimum margin between 25% and 65%, depending on the specific type of such solution, product or service and our internal review measures.

Payment and settlement: Payment and settlement schedule shall be set out in the specific sales agreements with Xin’aote Video.

Amendment and termination: CDV WFOE may unilaterally terminate the Supply Framework Agreement by serving Xin’aote Video a written notice of 15 days. Upon receipt of such notice, Xin’aote Video shall not bid for any new Special Qualification Projects.

In 2013, 2014 and 2015, the historical transaction amounts for such products and services amounted to RMB487,000, RMB2,132,000 and RMB6,108,000, respectively. The substantial increase in the sales amount during the Track Record Period was mainly due to the increased complexity and service scope for such projects, reflecting our increased capacity capability to provide more products and services.

Our Directors estimate that the total annual sales by us to Xin’aote Digital under the Supply Framework Agreement, will not exceed RMB8,500,000 and RMB10,000,000 for each of the years 2016 and 2017. In determining such annual caps, our Directors have considered the following factors:

(a) the historical amounts of such transactions mentioned above;

(b) potential opportunities for Xin’aote Video to bid for Special Qualification Projects; and

— 198 — CONTINUING CONNECTED TRANSACTIONS

(c) the anticipated expansion of our operation for such projects at an annual growth rate of approximately 15% for each of 2016 and 2017, which is in line with the average growth rate in the industry.

Internal Control Measures for Supply Framework Agreement

In relation to the transactions under the Supply Framework Agreement, we have established the following internal review procedures to ensure that our sales prices under these transactions are fair and reasonable:

• Our business departments will conduct market analysis on specific solutions, products or services and make pricing proposal to our board of directors after considering a number of factors, including overall market price and market share;

• Our business departments will also review the reasonableness of our pricing on regular basis according to the latest market intelligence and report to our board of directors, if necessary, for their approval of any adjustment;

• Our Independent Non-Executive Directors will conduct annual review on the transactions under the Supply Framework Agreement to ensure that such transactions are entered into on normal commercial terms which are fair and reasonable.

WAIVER APPLICATION FOR NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

Based on the annual rental payable under the Xinxin Lease Agreement and the Xin’aote Video Lease Agreement on an aggregate basis, the applicable percentage ratios as stated in Rule 19.07 of the GEM Listing Rules will exceed 0.1%, but will not exceed 5%. Accordingly, the transactions under the Xinxin Lease Agreement and the Xin’aote Video Lease Agreement, on an aggregate basis, constitute continuing connected transactions which are subject to announcement, reporting and annual review requirements, but are exempt from the independent shareholders’ approval requirement under Chapter 20 of the GEM Listing Rules.

Based on the highest annual cap amount for the sales amount under the Supply Framework Agreement for the three years ending December 31, 2017, the applicable percentage ratios as stated in Rule 19.07 of the GEM Listing Rules will exceed 0.1%, but will not exceed 5%. Accordingly, the transactions under the Supply Framework Agreement constitute continuing connected transactions which are subject to announcement, reporting and annual review requirements, but are exempt from the independent shareholders’ approval requirement under Chapter 20 of the GEM Listing Rules.

As the transactions under (i) the Xinxin Lease Agreement and the Xin’aote Video Lease Agreement and (ii) the Supply Framework Agreement will continue after the Listing on a recurring basis, our Directors consider that strict compliance with the announcement requirement in relation to the transactions set out above would be burdensome and impractical. Accordingly, we have applied to the Stock Exchange for, and the Stock Exchange has granted, a waiver from compliance with the announcement requirement under the GEM Listing Rules in respect of the transactions under (i) the Xinxin Lease Agreement and the Xin’aote Video Lease Agreement and (ii) the Supply Framework Agreement, respectively, for the three years ending December 31, 2017.

— 199 — CONTINUING CONNECTED TRANSACTIONS

DIRECTORS’ VIEW

Our Directors (including the independent non-executive Directors) are of the view that (a) it is in the interest of our Group to continue the transactions under the Xinxin Lease Agreement, the Xin’aote Video Lease Agreement and the Supply Framework Agreement; (b) such transactions have been and will be entered into the ordinary and usual course of business of our Group; (c) the terms of the Xinxin Lease Agreement, the Xin’aote Video Lease Agreement and the Supply Framework Agreement are on normal commercial terms and are fair and reasonable and in the interests of our Group and Shareholders as a whole; and (d) the proposed annual caps for such transactions are fair and reasonable and in the interests of our Group and Shareholders as a whole.

SOLE SPONSOR’S VIEW

The Sole Sponsor is of the view that (a) the continuing connected transactions under each of the Xinxin Lease Agreement, the Xin’aote Video Lease Agreement and the Supply Framework Agreement have been entered into in the ordinary and usual course of business of our Group, on normal commercial terms, and are fair and reasonable and in the interests of our Shareholders as a whole; and (b) the annual caps for such transactions are fair and reasonable and in the interests of our Shareholders as a whole.

— 200 — SUBSTANTIAL SHAREHOLDERS

SUBSTANTIAL SHAREHOLDER(S) OF OUR COMPANY

So far as our Directors are aware, immediately following completion of the Global Offering (assuming no exercise of the Over-allotment Option and any option granted under the Pre-IPO Share Option Scheme), the following persons will have an interest or a short position in the Shares or underlying Shares of our Company which be required to be disclosed to our Company and the Stock Exchange pursuant to the provisions of Divisions 2 and 3 of Part XV of the SFO or will be, directly or indirectly, interested in 10% or more of the number of any class of share capital carrying rights to vote in all circumstances at general meetings of our Company or any of our subsidiaries:

Immediately following the completion of the Global Offering (assuming no exercise of the Over-allotment Option and any option granted under the Pre-IPO Share Option Scheme)

Approximate percentage of Number of Shares interest in the Name of shareholder Nature of interest(1) held Company

Mr. Zheng ...... Founder of discretionary 240,318,000 38.76% trust(2) HSBC International Trustee Trustee of a discretionary 240,318,000 38.76% Limited...... trust and interest of controlled corporation(3) ZFS Holdings ...... Interest of controlled 240,318,000 38.76% corporation(3) Wing Success...... Legal owner and 240,318,000 38.76% beneficial owner Carvillo ...... Legal owner and 98,098,000 15.82% beneficial owner

Notes:

(1) All interests stated are long positions. (2) Mr. Zheng is the settlor and a beneficiary of Future Success Trust. Future Success Trust holds the entire issued share capital of ZFS Holdings which in turn holds the entire issued share capital of Wing Success. Therefore, Mr. Zheng is deemed under the SFO to be interested in the Shares held by Wing Success. (3) HSBC International Trustee Limited is the trustee of Future Success Trust and holds the entire issued share capital of ZFS Holdings which in turn holds the entire issued share capital of Wing Success. Therefore, HSBC International Trustee Limited and ZFS Holdings are each deemed under the SFO to be interested in the Shares held by Wing Success.

— 201 — SUBSTANTIAL SHAREHOLDERS

SUBSTANTIAL SHAREHOLDER(S) OF OTHER MEMBER OF OUR GROUP

Name Name of other member of our Group Percentage of interest

Synergetic Innovation ...... Beijing Meicam 40% Mr. Zheng Pengcheng(1) ...... Beijing Meicam 20%

Note:

(1) Mr. Zheng Pengcheng and CDV WFOE, a 40% shareholder of Beijing Meicam, entered into a voting rights proxy agreement, (“Proxy Agreement”). Pursuant to the Proxy Agreement, CDV WFOE is authorized to exercise Mr. Zheng Pengcheng’s right on his behalf at the shareholders’ and directors’ meetings of Beijing Meicam. For details of the arrangement of the Proxy Agreement, please refer to the section headed “History, Reorganization and Group Structure—Acquisitions and Disposals and New Businesses—Establishment of Subsidiary — Beijing Meicam” in this prospectus.

Save as disclosed above, our Directors are not aware of any other person who will, immediately following completion of the Global Offering (assuming no exercise of the Over-allotment Option and any option granted under the Pre-IPO Share Option Scheme), have an interest or a short position in the Shares or underlying Shares which will be required to be disclosed to our Company and the Stock Exchange under the provisions of Division 2 and 3 of Part XV of the SFO or will be, directly or indirectly, interested in 10% or more of the number of any class of share capital carrying rights to vote in all circumstances at general meeting of our Company or any of our subsidiaries. Our Directors are not aware of any arrangement which may at a subsequent date result in a change of control of our Company.

— 202 — CORNERSTONE INVESTORS

THE CORNERSTONE INVESTMENTS

As part of the International Placing, our Company and the Sole Global Coordinator entered into cornerstone investment agreements with three investors (collectively, the “Cornerstone Investors” and each, a “Cornerstone Investor”), who in the aggregate have agreed to subscribe at the Offer Price for such number of Shares (rounded down to the nearest whole board lot of 2,000 Shares) that may be purchased with an aggregate amount of approximately US$16.0 million (equivalent to HK$124.3 million(1)). Assuming an Offer Price of HK$1.90, being the low-end of the Offer Price range set out in this prospectus, the total number of Shares to be subscribed for by the Cornerstone Investors would be 65,428,000, representing approximately 10.6% of the Shares in issue immediately following the completion of the Global Offering (assuming no exercise of the Over-allotment Option and any option granted under the Pre-IPO Share Option Scheme); assuming an Offer Price of HK$2.24, being the mid-point of the Offer Price range set out in this prospectus, the total number of Shares to be subscribed for by the Cornerstone Investors would be 55,496,000, representing approximately 9.0% of the Shares in issue immediately following the completion of the Global Offering (assuming no exercise of the Over-allotment Option and any option granted under the Pre-IPO Share Option Scheme); and assuming an Offer Price of HK$2.57, being the high-end of the Offer Price range set out in this Prospectus, the total number of Shares to be subscribed for by the Cornerstone Investors would be 48,372,000, representing approximately 7.8% of the Shares in issue immediately following the completion of the Global Offering (assuming no exercise of the Over-allotment Option and any option granted under the Pre-IPO Share Option Scheme).

To the best knowledge of our Company, each of the Cornerstone Investors is independent from each other, independent from our Company, our connected persons and their respective associates. The Cornerstone Investors will not subscribe for any Offer Shares under the Global Offering other than pursuant to their respective cornerstone investment agreement. Immediately following the completion of the Global Offering, neither of the Cornerstone Investors will have any board representation in our Company nor be a substantial shareholder of our Company. The shareholding of the Cornerstone Investors will be counted towards the public float of our Shares.

The cornerstone investments form part of the International Placing. The Offer Shares to be purchased by the Cornerstone Investors will not be affected by any reallocation of the Offer Shares between the International Placing and the Hong Kong Public Offering in the event of over-subscription under the Hong Kong Public Offering as described in the section entitled “Structure of the Global Offering — The Hong Kong Public Offering” in this prospectus. Details of the allocation to the Cornerstone Investors will be disclosed in the allotment results announcement to be issued by our Company on or around June 24, 2016.

Note: (1) The amounts denominated in US$ have been translated, for illustration purposes only, into HK$ in this section of “Cornerstone Investors” of this prospectus at the exchange rate of US$1 = HK$7.77.

— 203 — OUR CORNERSTONE INVESTORS

Details of investment by our Cornerstone Investors are set out below:

% of Shares outstanding after the Global Offering (assuming no exercise of the Over-allotment Option and any option Investment % of Offer Shares (assuming no % of Offer Shares (assuming full granted under the Pre-IPO amount Number of shares to be subscribed exercise of Over-allotment Option) exercise of Over-allotment Option) Share Option Scheme)

HK$1.90(2) HK$2.24(3) HK$2.57(4) HK$1.90(2) HK$2.24(3) HK$2.57(4) HK$1.90(2) HK$2.24(3) HK$2.57(4) HK$1.90(2) HK$2.24(3) HK$2.57(4)

(in millions) per share per share per share per share per share per share per share per share per share per share per share per share INVESTORS CORNERSTONE

Skyworth TV.. US$5.0 20,446,000 17,342,000 15,116,000 13.2% 11.2% 9.8% 11.5% 9.7% 8.5% 3.3% 2.8% 2.4% (equivalent to HK$38.9)

0 — 204 — Ms. Qi ...... US$5.0 20,446,000 17,342,000 15,116,000 13.2% 11.2% 9.8% 11.5% 9.7% 8.5% 3.3% 2.8% 2.4% (equivalent to HK$38.9) Wilson US$6.0 Energy...... (equivalent to HK$46.6) 24,536,000 20,812,000 18,140,000 15.8% 13.4% 11.7% 13.8% 11.7% 10.2% 4.0% 3.4% 2.9%

Total...... US$16.0 (equivalent to HK$124.3) 65,428,000 55,496,000 48,372,000 42.2% 35.8% 31.2% 36.7% 31.1% 27.1% 10.6% 9.0% 7.8%

Notes: (1) The amounts denominated in US$ have been translated, for illustration purposes only, into HK$ in this section of “Cornerstone Investors” of this prospectus at the exchange rate of US$1 = HK$7.77. (2) Rounded down to the nearest board lot of 2,000 Shares and assuming an Offer Price of HK$1.90 being the low-end of the Offer Price range set forth in this prospectus. (3) Rounded down to the nearest board lot of 2,000 Shares and assuming an Offer Price of HK$2.24 being the mid-point of the Offer Price range set forth in this prospectus. (4) Rounded down to the nearest board lot of 2,000 Shares and assuming an Offer Price of HK$2.57 being the high-end of the Offer Price range set forth in this prospectus.

The information about our Cornerstone Investors set forth below has been provided by the Cornerstone Investors in connection with the investment by such Cornerstone Investors. CORNERSTONE INVESTORS

Skyworth TV Holdings Limited

Skyworth TV Holdings Limited (“Skyworth TV”) is an investment holding company incorporated in Hong Kong. Skyworth TV is a wholly owned subsidiary of Skyworth Digital Holdings Limited (SEHK Stock Code: 00751), a company incorporated in Bermuda. Skyworth Digital Holdings Limited is principally engaged in the business of manufacture and sales of consumer electronic products and accessories through its subsidiaries.

Ms. Qi Yan

Ms. Qi Yan (“Ms. Qi”) is a PRC citizen and is investing as an individual cornerstone investor. Ms. Qi serves as the senior vice president of Xiaomi Inc (小米科技有限責任公司), a company incorporated in China, and leads daily operations and external public affairs of Xiaomi Inc. Xiaomi Inc is primarily engaged in the business of research and development of mobile and internet technology, and manufacture and sale of mobile devices.

Wilson Energy Investment Limited

Wilson Energy Investment Limited (“Wilson Energy”) is a company incorporated in Hong Kong, which is wholly owned by Ms. Liao Xuan, a Hong Kong resident. Wilson Energy is principally engaged in the business of investment in a number of fields, including energy and high technology. Wilson Energy is also looking for targets for investment which are engaged in the video and audio production industry and the online payment services and systems industry in the domestic and overseas markets.

CONDITIONS PRECEDENT

The subscription obligation of each Cornerstone Investor is subject to, among other things, the following conditions precedent:

(1) the Hong Kong Underwriting Agreement and the International Underwriting Agreement having been entered into and having become effective and unconditional (in accordance with their respective original terms, or as subsequently varied by agreement of the parties thereto or waived, to the extent it may be waived, by the relevant parties) by no later than the time and date as specified in these underwriting agreements;

(2) the Hong Kong Underwriting Agreement and the International Underwriting Agreement not having been terminated;

(3) no laws having been enacted or promulgated by any governmental authority which prohibit the consummation of the transactions contemplated in the Hong Kong Public Offering, the International Placing or the cornerstone investment agreement and there being no orders or injunctions from a court of competent jurisdiction in effect precluding or prohibiting consummation of such transactions;

(4) the Listing Committee of the Hong Kong Stock Exchange having granted approval for the listing of, and permission to deal in, the Shares and such approval and permission not having been revoked prior to the commencement of dealings in the Shares on the Hong Kong Stock Exchange; and

— 205 — CORNERSTONE INVESTORS

(5) the respective representations, warranties, undertakings, acknowledgements and confirmations of the relevant Cornerstone Investor and our Company in the relevant cornerstone investment agreement being accurate and true in all material respects and not misleading and there being no breach of the relevant cornerstone investment agreement on the part of the relevant Cornerstone Investor nor our Company.

RESTRICTIONS ON THE CORNERSTONE INVESTORS’ INVESTMENT

Each of the Cornerstone Investors covenants with and undertakes to our Company and the Sole Global Coordinator that unless it has obtained prior written consent of each of our Company and the Sole Global Coordinator to do otherwise, it will not, and will procure that the Investor Subsidiary (as defined in the relevant cornerstone investment agreement) or the relevant Cornerstone Investor’s associates, as the case may be, will not, whether directly or indirectly, at any time during the period of six months following the Listing Date (the “Lock-up Period”) dispose of (as defined in the relevant cornerstone investment agreement) any of the Shares subscribed by it under the cornerstone investment agreement and any shares or other securities of our Company derived therefrom (the “Relevant Shares”) or any interest in any company or entity holding any of the Relevant Shares, including any securities convertible into or exchangeable or exercisable for or that represent the right to receive any of the forgoing securities, nor will it agree or contract to, or publicly announce any intention to enter into a transaction with a third party for disposal of the Relevant Shares, save that, subject to certain conditions as set out in the relevant cornerstone investment agreement, the relevant Cornerstone Investor may transfer the Relevant Shares to its direct or indirect wholly-owned subsidiary provided that such wholly-owned subsidiary of the relevant Cornerstone Investor undertakes in writing to, and such Cornerstone Investor undertakes to procure that such wholly-owned subsidiary will, abide by the Cornerstone Investor’s obligations under the relevant cornerstone investment agreement.

— 206 — SHARE CAPITAL

AUTHORIZED AND ISSUED SHARE CAPITAL

The following is a description of the authorized share capital and issued share capital of our Company (including Shares in issue and to be issued as fully paid or credited as fully paid) prior to and immediately following the completion of the Global Offering:

Nominal value US$ Authorized share capital As of the date of this prospectus 4,887,515,214 Ordinary shares 48,875.15214 40,000,000 Series A preferred shares(1) 400 27,500,000 Series A-1 preferred shares(1) 275 34,833,333 Series B preferred shares(1) 348.33333 10,151,453 Series C preferred shares(1) 101.51453 Immediately prior to the completion of the Global Offering 5,000,000,000 Ordinary shares 50,000

Issued and to be issued, fully paid or credited as fully paid In issue as of the date of this prospectus 80,000,000 Ordinary shares in issue as of the date of this prospectus 800 22,400,000 Series A preferred shares(2) 224 20,250,000 Series A-1 preferred shares(2) 202.5 34,833,333 Series B preferred shares(2) 348.33333 10,151,453 Series C preferred shares(2) 101.51453 To be issued pursuant to the Global Offering (assuming no exercise of the Over-allotment Option and any option granted under the Pre-IPO Share Option Scheme) 310,204,797 Shares to be issued under the Capitalization Issue 3,102.04797 155,000,000 Shares to be issued pursuant to the Global Offering 1,550 assuming no exercise of the Over-allotment Option and any option granted under the Pre-IPO Share Option Scheme Total issued share capital upon completion of the Global Offering (assuming no exercise of the Over-allotment Option and any option granted under the Pre-IPO Share Option Scheme) 620,000,000 6,200

— 207 — SHARE CAPITAL

Nominal value US$ To be issued upon full exercise of the Over-allotment Option 23,250,000 Shares 232.5 Total issued share capital upon completion of the Global Offering (assuming full exercise of the Over-allotment Option but no exercise of any option granted under the Pre-IPO Share Option Scheme) 643,250,000 Shares 6,432.5

To be issued upon full exercise of all the options granted under the Pre-IPO Share Option Scheme 77,893,000 Shares 778.93 Total issued share capital upon completion of the Global Offering assuming full exercise of the Over-allotment Option and all the options granted under the Pre-IPO Share Option Scheme: 721,143,000 Shares 7,211.43

Notes:

(1) Immediately upon the conversion of the series A preferred shares, series A-1 preferred shares, series B preferred shares and series C preferred shares into ordinary Shares and prior to the completion of the Global Offering, all the unissued series A preferred shares, series A-1 preferred shares, series B preferred shares and series C preferred shares will be re-designated as ordinary shares. As a result, the authorized share capital of our Company will become US$50,000 divided into 5,000,000,000 ordinary shares of a par value of US$0.00001 each.

(2) Such number of shares will be automatically converted into ordinary shares immediately prior to the completion of the Global Offering. The conversion ratio for (i) the series A preferred share and series A-1 preferred share shall be 1:0.75; (ii) series B preferred share shall be 1:0.9375; and (iii) the series C preferred share shall be 1:1.

ASSUMPTIONS

The above table assumes that the Global Offering becomes unconditional and the Shares are issued pursuant to the Global Offering. The above does not take into account any Shares to be issued upon the exercise of the Over-allotment Option or any Shares which may be issued or repurchased by our Company pursuant to the general mandates granted to the Directors to issue or repurchase Shares as described below.

MINIMUM PUBLIC FLOAT

According to Rule 11.23(7) of the GEM Listing Rules, at the time of Listing and at all times thereafter, we must maintain the “minimum prescribed percentage” of 25% of the total issued share capital of our Company in the hands of the public.

— 208 — SHARE CAPITAL

RANKING

The Offer Shares will be ordinary shares in the share capital of our Company and will rank equally in all respects with all Shares currently in issue or to be issued as mentioned in this prospectus and, in particular, will rank in full for all dividends or other distributions declared, made or paid on the Shares in respect of a record date which falls after the date of this prospectus.

GENERAL MANDATE TO ISSUE SHARES

Subject to the conditions stated in the section headed “Structure of the Global Offering - Conditions of the Global Offering” in this prospectus, the Directors have been granted a general unconditional mandate to allot, issue and deal with Shares or securities convertible into the Shares or options, warrants or similar rights to subscribe for Shares or such convertible securities and to make or grant offers, agreements or options, warrants or similar rights to subscribe for Shares or such convertible securities and to make or grant offers, agreements or options which would or might require the exercise of such powers, provided that the aggregate number of Shares allotted or agreed to be allotted by the Directors other than pursuant to:

(a) a rights issue;

(b) any scrip dividend scheme or similar arrangement providing for the allotment of the Shares in lieu of the whole or part of a dividend on Shares in accordance with the Articles;

(c) the exercise of any rights of subscription or conversion into the Share in issue prior to the date of passing the relevant resolution; or

(d) a specific authority granted by the Shareholders in general meeting,

shall not exceed the aggregate of:

(i) 20% of the number of Share in issue immediately following the completion of the Global Offering (but excluding any Shares which may be issued pursuant to the exercise of the Over-allotment Option or upon exercise of options granted under the Pre-IPO Share Option Scheme); and

(ii) the total number of Shares repurchased by our Company (if any) under the general mandate to repurchase Shares referred to in the section headed “General Mandate to Repurchase Shares” below.

This general mandate to issue the Shares will expire:

(1) at the conclusion of our next annual general meeting; or

— 209 — SHARE CAPITAL

(2) at the end of the period within which we are required by any applicable law or the Articles to hold our next annual general meeting; or

(3) when varied or revoked by an ordinary resolution of our Shareholders in general meeting, whichever is the earliest.

For further details of this general mandate, please see the section “Appendix IV—Statutory and General Information—A. Further Information About Our Group—3. Resolutions in writing of the Shareholders of our Company passed on May 23, 2016” to this prospectus.

GENERAL MANDATE TO REPURCHASE SHARES

This general mandate relates only to repurchases made on the Stock Exchange, or on any other stock exchange on which the Shares are listed (and which is recognized by the SFC and the Stock Exchange for this purpose), and made in accordance with all applicable laws and the requirements of the GEM Listing Rules. A summary of the relevant GEM Listing Rules is set out in the section headed “Appendix IV—Statutory and General Information—A. Further Information about our Group—7. Repurchase of our own Shares” to this prospectus.

This general mandate to repurchase Shares will expire:

(i) at the conclusion of our next annual general meeting; or

(ii) at the end of the period within which we are required by any applicable law or our Articles to hold our next annual general meeting; or

(iii) when varied or revoked by an ordinary resolution of our Shareholders in general meeting, whichever is the earliest.

EXISTING SHARE OPTION SCHEME

We have adopted the Pre-IPO Share Option Scheme. Details of the principal terms are summarized in the section headed “Appendix IV—Statutory and General Information—D. Pre-IPO Share Option Scheme” to this prospectus.

— 210 — SHARE CAPITAL

CIRCUMSTANCES UNDER WHICH GENERAL MEETING AND CLASS MEETING ARE REQUIRED

Upon completion of the Global Offering, our Company will have only one class of Shares, namely ordinary shares, each of which ranks pari passu with the other Shares.

Pursuant to the Cayman Companies Law and the terms of the Articles, our Company may from time to time by ordinary resolution of the Shareholders (i) increase its capital; (ii) consolidate and divide its capital into the Shares of larger amount; (iii) divide its Shares into classes; (iv) subdivide its Shares into the Shares of smaller amount; and (v) cancel any Shares which have not been taken. In addition, our Company may, subject to the Cayman Companies Law, reduce or redeem its share capital or capital redemption reserve by special resolution of the Shareholders. For more details, please refer to the section headed “Appendix III—Summary of the Constitution of the Company and Cayman Islands Company Law—Summary of the Constitution of the Company—2 Articles of Association—2.5. Alteration of capital” to this prospectus.

Pursuant to the Cayman Companies Law and the terms of the Articles, all or any of the special rights attached to the Share or any class of the Shares (unless otherwise provided for in the terms of issue of the shares of that class) may be varied, modified or abrogated either with the consent in writing of the holders of not less than three-fourths in number of the issued Shares of that class or with the sanction of a special resolution passed at a separate general meeting of the holders of the Shares of that class. For more details, please refer to the section headed “Appendix III—Summary of the Constitution of the Company and Cayman Islands Company Law—Summary of the Constitution of the Company—2 Articles of Association—2.4. Variation of rights of existing shares or classes of shares” to this prospectus.

—211— FINANCIAL INFORMATION

Prospective investors should read this section in conjunction with our audited consolidated financial statements as of and for each of the years ended December 31, 2013, 2014 and 2015, including the notes thereto, as set out in the Accountant’s Report in Appendix I to this prospectus. Our audited consolidated financial statements have been prepared in accordance with the accounting policies which conform with IFRSs. Prospective investors should read the entire Accountant’s Report and not merely rely on the information contained in this section.

The following discussion and analysis contains certain forward-looking statements that reflect the current views with respect to future events and financial performance. These statements are based on assumptions and analyses made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate under the circumstances. However, whether actual outcomes and developments will meet our expectations and projections depends on a number of risks and uncertainties over which we do not have control. Unless the content otherwise requires, financial information in this section is described on a consolidated basis. For further information, prospective investors should refer to the section “Risk Factors” in this prospectus.

OVERVIEW

— 212 — FINANCIAL INFORMATION

Our revenue totaled RMB503.0 million, RMB406.4 million and RMB606.0 million in 2013, 2014 and 2015, respectively. We had a net loss of RMB12.2 million and RMB69.4 million in 2013 and 2014, respectively, and we had a net profit of RMB114.1 million in 2015. During the Track Record Period, our net (loss)/profit for the year was primarily affected by fair value change on redeemable convertible preferred shares. We had non-IFRS adjusted net loss of RMB20.9 million and RMB54.4 million in 2013 and 2014, respectively, and adjusted net profit of RMB26.4 million in 2015. For reconciliation of the non-IFRS adjusted net (loss)/profit to our (loss)/profit for the year, see “—Non-IFRS Financial Measures.”

KEY FACTORS AFFECTING OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our financial condition, results of operations and the period-to-period comparability of our financial results are principally affected by the following key factors:

• Timing of significant projects and industry cycles. Large-scale projects have historically represented a significant portion of our revenue. Take CCTV for example, which was our largest customer in 2013 and 2014, our largest project with CCTV in 2013 was a significant project in relation to its relocation, which totaled RMB37.3 million among all of our three business lines, representing 7.4% of our revenue in 2013. In 2014, our largest project with CCTV was a program production solution project, which totaled RMB15.6 million among all business lines, representing 3.8% of our revenue in 2014. However, the timing and scale of projects may vary significantly from period to period. For instance, the completion of CCTV relocation project in 2013 partially contributed to our overall revenue decrease in 2014 compared to 2013. In addition, the timing of industry upgrades for our major customers may affect our operating results. In 2014, major personnel changes for the management of some of our large customers resulted in the delay of their upgrading projects for solutions and products, which, as a result, adversely affected our revenue. For further details, see “Industry Overview—TV Broadcasting Post-Production Industry in China—Market of TV Broadcasting Post-Production Industry in China.” We believe that the next cycle of industry upgrade to 4K standard, omnimedia convergence and cloud-based computing platform will benefit us in the foreseeable future. However, if the digital video market in China fails to grow as expected, the related technology spending by TV broadcasters and new media and other digital video content creators may decline, which will in turn reduce the market demand for our products, solutions and services. See “Risk Factors—Risks Relating to Our Business and Industry—If the digital video technology solution and services industry in China fails to grow as expected, our future growth, financial condition and results of operations would be materially and adversely affected.”

• Competition. We mainly compete against Sobey and Dayang in the overall post-production market and against certain other competitors in specific business lines. For details, see “Business—Competition.” Historically, we have been able to charge a substantial premium on our products because of the quality of our products and long-standing relationships with

— 213 — FINANCIAL INFORMATION

our customers. In 2014, the competition in the market became intensified, as our competitors entered the market offering substantially lower products prices. As a result, our revenue, particularly in the sales of our video editing, graphics creation and visual effects and video compositing systems, was adversely affected.

• Revenue mix. Our revenue and gross profit margin are affected by the revenue mix of our solutions, services and products. Solutions consist of our own products and products procured from third-party suppliers, which we sell to our customers at a lower margin than our own products on an individual basis. As a result, the gross margins of our solutions are lower than that of services or products on a blended basis. Our service business has a relatively high gross profit margin because its costs, which primarily consist of labor costs and costs related to technical service and business travel, generally do not contain any hardware component costs in contrast to our solution and product businesses. Our product business has the highest gross margin among our three business lines because product contracts are typically priced at a significant premium created by our in-house software over the hardware component costs, which are the primary costs for products. The relative proportions of solutions, services and products in our revenue mix change from period to period and affect our gross profit margin in any given period. Although our gross profit decreased by 12.9% to RMB119.0 million in 2014 from RMB136.7 million in 2013, our gross profit margin increased to 29.3% in 2014 from 27.2% in 2013, primarily reflecting the effect of our cost control measures which helped lessen the cost of hardware components purchases for our solutions and products, which in turn resulted in an increase in the gross profit margins of solutions and products in 2014. In addition, the revenue, cost of sales and gross margins of our new businesses may affect our operating results. For instance, in October 2014, we launched Meicam, a mobile application for video creation, which had not generated revenue during the Track Record Period. We expect it will be an additional revenue contributor in the foreseeable future.

• Ability to introduce new offerings and upgrades. Our results of operations in any given period are affected by our ability to introduce new, or to upgrade existing, solutions, services and products to meet changing market demands and to adapt to rapidly evolving technologies. Historically, we have derived significant revenue from the introduction of new solutions, services and products, such as the CreaStudio-series system in multi-camera recording and editing services and the Dunhuang-series in visual effects and video composite systems. To that end, we allocated significant budget to R&D, with a total R&D expenditures (including those capitalized and expensed) of RMB66.9 million, RMB70.6 million and RMB68.0 million in 2013, 2014 and 2015, respectively. We plan to increase our revenue and profitability by continuing to expand and upgrade our portfolio of solutions, services and product offerings, and by charging premium prices for our solutions, services and products with more sophisticated and advanced technologies. As the market demand for sophisticated and high-tech solutions and products increases, our ability to capture the higher premiums associated with the contracts resulting from this trend by leveraging our technology expertise and industry know-how is expected to become increasingly critical to our future success.

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• Customer base and relationship with major customers. Our revenues in any given period are directly affected by the amount of solutions, services and products that we provide to our customers, which is primarily affected by the size and diversity of our customer base and our relationship with the customers. In 2013, 2014 and 2015, we served 326, 351 and 359 customers, respectively, including, without limitation, TV broadcasters, new media operators and other digital video content providers. Our customer base includes CCTV, the largest TV broadcaster in China, which had been our largest customers in 2013 and 2014, 28 of the 31 provincial-level and numerous municipal-level TV broadcasters in China. Compared to their smaller peers, the large broadcasters in China such as CCTV and the provincial-level TV broadcasters have greater demand for high-end solutions and products that are supported by higher revenue bases and larger government subsidies. Our five largest customers accounted for 31.2%, 24.3% and 24.1% of our total revenue in 2013, 2014 and 2015, respectively. The gain or loss of any key customer, any material change in the financial conditions of our key customers or any significant change in business volume from a particular customer may affect our financial performance. Our revenue decreased by 19.2% to RMB406.4 million in 2014 from RMB503.0 million in 2013. A major reason for this decrease is because we finished contracts with certain of our key customers in 2013, including a significant system upgrade service provided to CCTV as part of its relocation. In addition, our solutions and projects contracts are typically project-based and, in that sense, one-off in nature. It is therefore essential for us to build long-standing customer relationship. For example, of our top 100 customers in 2015, which collectively represented approximately 89% of our total revenue in 2015, those who were customers in any historical year prior to 2015 contributed approximately 61% of our revenue in 2015. If the digital video market in China fails to grow and the related technology upgrade by our customers decline, our financial conditions and results of operations would be materially and adversely affected.

• Quality and timeliness of delivery. Our pricing and total revenues are affected by the market demand for our solutions, services and products, which is significantly dependent on the market perception and quality of our solutions, services and products. We have established our market reputation through prompt responses to, and satisfaction of, customers’ specific needs as well as timely delivery and installation of high-quality solutions, services and products. Any delay in the delivery, performance and installation of our solutions, services or products, any defect in our products or any underperformance of our solutions or services could cause the loss of customers or revenues, increased levels of product returns or replacements, damage to our reputation and significant increases in warranty claims and other expenses, all of which could have a materially adverse effect on our profitability. Our ability to achieve or maintain high customer satisfaction is also affected by the quality of our competitors’ offerings. If we fail to effectively compete against other technology and service providers, our business, financial conditions and results of operations may be materially and adversely affected.

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• Fair value change on redeemable convertible preferred shares. During the Track Record Period, we had issued four series of redeemable convertible preferred shares. See “History, Reorganization and Group Structure—Pre-IPO Investments” and note 23 of the Accountant’s Report in Appendix I of this prospectus. For accounting purposes, we initially recognize our redeemable convertible preferred shares as financial liabilities at fair value through profit and loss. At the end of each subsequent reporting period, we re-measure the redeemable convertible preferred shares at their fair value and recognize any fair value change as gain or loss in our consolidated statements of comprehensive income. Such changes in the fair value were affected by a number of factors, including our operating results, financial condition, our equity value, the timing of a potential initial public offering and our estimated future cash flow. As of December 31, 2013 and 2014, the fair value of redeemable convertible preferred shares recognized as current liabilities on our consolidated balance sheet was RMB563.8 million and RMB633.3 million, respectively, which had been a major reason resulting in our net current liabilities position as of December 31, 2013 and 2014. In 2013 and 2014, we had fair value losses on redeemable convertible preferred shares of RMB26.7 million and RMB28.1 million, respectively, representing 5.3% and 6.9%, respectively, of our total revenue during the same periods. In 2013 and 2014, as we gradually improved our operating results, financial condition and business prospects, our increased equity value led to an increase in the fair value of our redeemable convertible preferred shares, which in turn caused us to incur fair value losses on our redeemable convertible preferred shares. As of December 31, 2015, redeemable convertible preferred shares of RMB607.8 million were classified as non-current liabilities as a result of the extension of redemption period to March 31, 2017 granted by the preferred shareholders in July 2015. As a result of such extension, we recognized a net current asset position as of December 31, 2015. In 2015, we had fair value gain on redeemable convertible preferred shares of RMB70.8 million, representing 11.7% of our 2015 revenue. Upon completion of a Qualified IPO, all of our outstanding redeemable convertible preferred shares will have been converted to ordinary shares according to their terms and conditions. As a result, we do not expect to recognize any fair value or fair value changes on these redeemable convertible preferred shares in future periods.

• Success of our acquisitions, investments and joint ventures. During Track Record Period, we acquired the digital broadcast automation system business as part of the Beijing Zhengqi acquisition, which we successfully integrated. Our digital broadcast automation system business subsequently contributed to our revenue growth in 2015. We have also invested in a number of projects by leveraging our core technologies, such as Beijing Hermit, which is engaged in virtual advertising and reflected on our income statement through equity method. We intend to explore other acquisition and investment opportunities, and the level and the timing of their success will affect our operating results.

• Billed and unbilled receivables. Consistent with industry practice, we require our customers to pay us in installments based on milestones specified in our solution sales contract, such as signing of the contract, delivery of the solution, completion of first or final inspection

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or end of warranty period. For details, see “Business—Customers—Payment and Credit Term.” Consequently, we classify our trade and bills receivables into billed receivables and unbilled receivables. Unbilled receivables represent the amount which we have recognized as revenue for work completed in contracts but are not yet contractually able to issue invoices to customers. We reclassify unbilled receivables as billed receivables after the relevant payment milestones specified in the contracts are completed and we have issued invoices to customers. As of December 31, 2013, 2014 and 2015, our unbilled receivables amounted to RMB96.9 million, RMB127.8 million and RMB104.4 million, respectively, representing approximately 57.7%, 60.8% and 32.0%, respectively, of our total trade and bill receivables during the same periods. In 2013, 2014 and 2015, the turnover days for our average billed receivables were 50, 86 and 108 days, respectively. Our average billed receivable turnover days increased in 2014 mainly due to our decreased revenue in 2014. Our average billed receivable turnover days further increased in 2015 mainly due to the transfer of a significant portion of the unbilled receivables to the billed receivables as of December 31, 2015, see “—Description of Certain Consolidated Statement of Financial Position Items — Trade and Other Receivables —Trade and Bills Receivables” for details. In addition, any provision for impairment loss and bad debts written-off may also have an adverse effect to our results of operations and financial condition.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our financial information requires us to make significant estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities and their accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these significant assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amounts of the assets and liabilities affected in the future. We have identified below the accounting policies that we believe are the most critical to our consolidated financial information and that involve the most significant estimate. For further details, please refer to note 2 and note 3 of the Accountant’s Report in Appendix I of this prospectus.

Revenue Recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services and the use by others of our assets yielding dividends, net of value-added tax, rebates and discounts. As long as it is probable that the economic benefits will flow to us and the revenue and costs, if applicable, can be measured reliably, we recognize revenue in the following manners:

Our turnover includes, separately or in combination, the sale of application solution services with equipments, the provision of consultancy services, professional services, maintenance services, customer support services, extended warranty and other services.

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Solutions

We use the “percentage of completion method” to determine the appropriate amount of revenue to recognize in a given period for the solutions sales. The stage of completion is measured by reference to the costs incurred up to the end of the reporting period as a percentage of total estimated costs. When the outcome of a contract can be estimated reliably and it is probable that the contract will be profitable, we recognize revenue as services are provided. When it is probable that total costs to service the contract will exceed total revenue allocated to solutions sales, we recognize the expected loss as an expense immediately. When the outcome of a solutions sales contract cannot be estimated reliably, we recognize revenue only to the extent of costs incurred that are likely to be recoverable. We recognize a liability upon the receipt in advance of the consideration of revenue recognition. Progress billings not yet paid by customers are included within trade and other receivables.

Services

Services, being maintenance and other professional services, are provided in the form of fixed-price contracts. We recognize sales in the period the services are provided, using a straight-line basis over the terms of the contract.

Products

We recognize sale of products, including software and hardware equipment upon transfer of the significant risks and rewards of ownership to the customers. This is usually taken as the time when the goods are delivered and the customer has accepted the products.

Multiple element arrangements

We offer certain arrangements whereby a customer can purchase equipments together with certain of the related solutions sales. When such multiple element arrangements exist, we allocate the total arrangement consideration to each element based on their relative fair values, as determined based on the current market price of each of the elements when sold separately. When we are unable to determine the fair value of each of the elements in an arrangement, we use the residual value method. Under this method, we determine the fair value of the delivered element by deducting the fair value of the undelivered element from the total contract consideration. To the extent that there is a discount on the arrangement, we allocate such discount between the elements of the contract in such a manner as to reflect the fair value of the elements.

Dividend income

We recognize dividend income when right to receive payment is established.

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Impairment of Trade and Other Receivables

Impairment losses on trade and other receivables that are stated at amortized cost are written off against the corresponding assets directly. Where the recovery of trade and other receivables is considered doubtful but not remote, the impairment losses for doubtful receivables are recorded using an allowance account. When we are satisfied that recovery of trade and other receivables is remote, the amount considered irrecoverable is written off against trade and other receivables directly and any amounts held in the allowance account in respect of that receivable are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognized in profit or loss.

We base our estimate on impairment losses on the credit history of the customers and the current market condition. Our management reassesses the adequacy of provision on a regular basis by reviewing the individual account based on past credit history and any prior knowledge of debtor insolvency or other credit risk. Such information might not be either easily accessed publicly or easily ascertained due to the fact that market volatility might bear a significant impact.

Allowance for Inventories

We state our inventories at the lower of cost and net realizable value. Cost, which comprises all costs of purchase and, where applicable, cost of conversion and other costs that have been incurred in bringing the inventories to their present location and condition, is calculated using the weighted average method. Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Our management reviews the condition of our inventories at each reporting date and makes allowance for inventories that are identified as obsolete, slow moving or no longer recoverable or suitable for use for production or maintenance. We carry out the inventory review on a product-by-product basis and makes allowances by reference to the latest market prices and current market conditions.

Fair Value of Redeemable Convertible Preferred Shares

We have issued redeemable convertible preferred shares designated as financial assets at fair value through profit or loss. Our Directors, with the assistance of an independent professional valuer, have used valuation techniques including the discounted cash flow method and option-pricing model to determine the fair value of these redeemable convertible preferred shares. When applying the valuation models, our Directors are required to make a significant estimate on assumptions such as underlying equity value, time to expiration, risk-free interest rate, expected volatility and dividend yield.

Impairment of Goodwill, Property, Plant and Equipment and Intangible Assets

Our goodwill arising on business acquisition, property, plant and equipment and intangible assets are subject to impairment testing. To determine whether these assets are impaired or not, we need to estimate the value-in-use of the cash-generating units to which these assets has been allocated. We calculate the value-in-use by estimating the future cash flows that are expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value.

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Percentage of Completion of Solutions

We determine the appropriate amount of revenue to recognize in a given period for our solutions sales according to the stage of completion for our solution sales contracts. We then measure the stage of completion by reference to the costs incurred to date compared to the total estimated costs for the contract. Because of the nature of the activity undertaken in the solution sales contracts, we may categorize the date at which the contract activity is entered into and the date when the activity is completed into different accounting periods. Our management reviews and revises the estimates of both contract revenue and contract costs for each contract as it progresses. Our management also estimates the amount of foreseeable losses of solution sales contracts based on the budgets prepared for the solution sales contracts.

Capitalization of Development Costs

We capitalize costs that are directly attributable to development activities (relating to the design and testing of our new or upgraded products) by recognizing them as intangible assets if they meet the following requirements: (i) demonstration of technical feasibility of the prospective product for internal use or sale; (ii) there is intention to complete the intangible asset and use or sell it; (iii) our ability to use or sell the intangible asset is demonstrated; (iv) the intangible asset will generate probable economic benefits through internal use or sale; (v) sufficient technical, financial and other resources are available for completion; and (vi) the expenditure attributable to the intangible asset can be reliably measured. In order to determine the amounts to be capitalized, our management makes assumptions regarding the expected future cash generation of the assets, discount rates to be applied and the expected period of benefits. As of December 31, 2013, 2014 and 2015, our capitalized development cost were approximately RMB6.4 million, RMB9.6 million and RMB12.2 million, respectively.

Depreciation of Property, Plant and Equipment

We state property, plant and equipment at historical cost less accumulated depreciation and impairment loss. Cost includes expenditures that are directly attributable to the acquisition of the asset. Depreciation is provided by writing off the cost less their residual values over their estimated useful lives, using the straight-line method, as follows:

Estimated useful life

Leasehold improvements ...... Shorter of remaining term of the lease and the estimated useful lives of the assets Computer equipment ...... 3-5 years Furniture and office equipment ...... 5 years Motor vehicles ...... 10 years

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We review the estimated useful lives of the assets regularly in order to determine the amount of depreciation expense, which is recorded during the relevant reporting period. Taking anticipated technological changes into account, we calculate the useful lives based on our historical experience with similar assets. If there are significant changes from previous estimates, we will adjust the depreciation expense for future periods.

Current and Deferred Income Taxes

Income taxes comprise current income taxes and deferred income taxes. Current income tax assets and/or liabilities are calculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate, based on our taxable profit for the year. Deferred income taxes are calculated using the liability method on temporary differences at the reporting date between the carrying amounts of assets and liabilities in the financial statements and their respective tax bases.

We are subject to income taxes in several jurisdictions. Since there are many transactions and events for which the ultimate tax determination is uncertain during our ordinary course of business, we require significant judgments in determining the provision for income taxes in each of these jurisdictions. If the final tax outcomes of these matters are different from the initially recorded amounts, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

Recognition of Share-based Compensation Expense

We granted share options to the key employees of our Group during the year ended December 31, 2015. Our Directors, with the assistance of an independent professional valuer, have used the discounted cash flow method and market approach to determine the underlying share value of our Company and have used the Binomial option-pricing model to determine the total fair value of the options granted, which is to be expensed over the vesting period as appropriate. Significant estimate on assumptions, such as underlying equity value, risk-free interest rate, expected volatility and dividend yield, is required to be made by our Directors in applying the Binomial option-pricing model.

Consolidation of Beijing Meicam in Which We Own Less Than 50%

Our subsidiaries are consolidated from the date on which control is transferred to us. Although we own less than half of the equity interests in Beijing Meicam, we are able to gain power and hence control over more than 50% of the voting rights through contractual agreement with another investor in Beijing Meicam. According to the agreement, another investor must consult and vote in the same way as we do.

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DESCRIPTION OF CERTAIN CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ITEMS

The following table sets forth a summary of our consolidated statements of comprehensive income for the period indicated. Our historical results presented below are not necessarily indicative of the results that may be expected for any future period.

For the year ended December 31,

2013 2014 2015

%of %of %of Amount revenue Amount revenue Amount revenue

(RMB in thousands, except percentages)

Revenue ...... 502,964 100.0 406,369 100.0 605,983 100.0 Cost of sales...... (366,276) (72.8) (287,363) (70.7) (393,812) (65.0) Gross profit ...... 136,688 27.2 119,006 29.3 212,171 35.0 Other income ...... 42,535 8.5 33,213 8.2 77,586 12.8 Selling and marketing expenses...... (65,626) (13.0) (74,815) (18.4) (62,005) (10.2) Administrative expenses...... (32,200) (6.4) (46,960) (11.6) (66,298) (10.9) Share-based compensation expense... (2,190) (0.4) (886) (0.2) (3,835) (0.6) Research and development expenses. (57,765) (11.5) (61,106) (15.0) (56,230) (9.3) Finance costs ...... (5,103) (1.0) (870) (0.2) (16,349) (2.7) Fair value (loss)/gain on redeemable convertible preferred shares...... (26,696) (5.3) (28,079) (6.9) 70,820 11.7 Loss on extinguishment of redeemable convertible preferred shares ...... — — (14,724) (3.6) (21,969) (3.6) Share of losses of joint ventures ...... — — (1,285) (0.3) (6,521) (1.1) (Loss)/Profit before income tax...... (10,357) (2.1) (76,506) (18.8) 127,370 21.0 Income tax (expense)/credit ...... (1,833) (0.4) 7,106 1.7 (13,256) (2.2) (Loss)/Profit for the year ...... (12,190) (2.4) (69,400) (17.1) 114,114 18.8 Other comprehensive income/(loss) Items that may be subsequently reclassified to profit or loss: Exchange difference arising on the translation of foreign operation..... 13,972 2.8 (1,614) (0.4) (34,832) (5.7) Total comprehensive income/(loss) for the year ...... 1,782 0.4 (71,014) (17.5) 79,282 13.1 (Loss)/Profit for the year attributable to: Equity holders of the Company...... (12,190) (2.4) (66,582) (16.4) 120,219 19.8 Non-controlling interests...... — — (2,818) (0.7) (6,105) (1.0) (12,190) (2.4) (69,400) (17.1) 114,114 18.8

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For the year ended December 31,

2013 2014 2015

(RMB in thousands)

Non-IFRS Financial Measures: Adjusted net (loss)/profit(1)...... (20,937) (54,399) 26,402 Adjusted EBITDA(1) ...... 5,529 (32,111) 80,047

Note: (1) Adjusted net (loss)/profit is defined as (loss)/profit for the year excluding share-based compensation expense, fair value (loss)/gain on redeemable convertible preferred shares, loss on extinguishment of redeemable convertible preferred shares, expenses related to the Listing, gain on disposal of intangible assets, gain on disposal of a subsidiary, subsidy income from government and value-added tax refunds. Adjusted EBITDA is defined as adjusted net (loss)/profit for the year before depreciation and amortization, interest income, finance costs and income taxes.

We present our adjusted net (loss)/profit and adjusted EBITDA to supplement our consolidated statements of comprehensive income for the years ended December 31, 2013, 2014 and 2015 that were prepared in accordance with IFRS to provide additional information regarding our operating performance. The use of either adjusted net (loss)/profit or adjusted EBITDA has material limitations as an analytical tool, as neither of them includes all items that impact our profit for the relevant period. Items excluded from adjusted net (loss)/profit and adjusted EBITDA are significant components in understanding and assessing our operating and financial performances. See “—Non-IFRS Financial Measures” for a reconciliation of our (loss)/profit for the year under IFRS to the definitions of adjusted net (loss)/profit and adjusted EBITDA.

Revenue

During the Track Record Period, we derived revenue primarily from (i) sale of solutions, (ii) provision of services and (iii) sale of products. The following table sets out a breakdown of our revenue derive from each business line, as an absolute amount and as a percentage of revenue, for the period indicated.

For the year ended December 31,

2013 2014 2015

Amount % of total Amount % of total Amount % of total

(RMB in thousands, except percentages)

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Solutions

We currently derive the majority of our revenue from sale of solutions to TV broadcasters, new media operators and other digital video content providers. Our solution customers are typically required to pay us in four installments: (i) up to 30% of the total contract value upon signing of the contract; (ii) up to 60% of the total contract value upon delivery, installation and testing of the solution equipment and customers’ first inspection and acceptance (with issuance of certificates of completion as confirmation); (iii) up to 90% of the total contract value upon customers’ final inspection and acceptance after a trial operation period (for example, with inspection reports for some larger and more complex solution contracts as confirmation); and (iv) any remaining balance upon satisfaction of the performance warranty, which is generally paid to us within one month after the warranty expires.

We recognize revenue and cost from solution sales on a percentage-of-completion basis according to our customer contracts. See “—Critical Accounting Policies and Estimates—Revenue Recognition.” We measure the stage of completion by reference to the costs incurred to date compared to the total estimated costs for the contract. Only those costs that reflect work performed to date are included in the costs to date. Contract costs that relate to future activity on the contract, such as purchase cost of software and hardware equipment that have been delivered to the customer or set aside for use in a contract but not yet installed, used or applied during the contract performance are not taken into account for the purpose of determining the costs incurred up to the end of the reporting period as a percentage of total estimated costs. They are, however, included in the total estimated costs. We recognize substantially all of our revenue from solution contracts once we have obtained customers’ acceptance of delivery, installation and testing of our solution equipment (with issuance of certificate of completion), since we incur substantially all of the costs in relation to our solution contracts upon delivery and installation of solution equipment. Upon completion of delivery, installation and testing, we pass the solution equipment to our customers, who assume the control and commence the use of such equipment on a trial basis. Depending on the size and complexity of the solution, the trial operation period from delivery, installation and testing of our solution equipment to completion of customers’ final inspection and acceptance of our solutions generally last three to six months, whereas a limited number of our solutions contracts have trial operation periods that last more than six months and a significant number of solution contracts do not specify a timeframe on final inspection. Our obligation during this trial operation period is to correct quality issues, if any, arising from the solution’s performance. Any costs incurred during the trial operation period are typically minimal, comprising mainly staff costs for our technicians. Therefore, we believe that this period is more akin to a warranty period and does not preclude us from recognizing revenue upon completion of delivery, installation and testing of our solution equipment. Our revenue recognition policy on solution sales as described above covers both billed and unbilled revenue as it uses costs of the respective contracts incurred up to the end of the reporting period as a measure, and did not take into account of the payment schedule under the respective contracts. As explained above, the payment schedule for our solution contracts contained trial operation period bears little relation to the performance under the contract as substantially all of the work was performed upon obtaining the customer’s first inspection and acceptance of the delivery, installation and testing of the solution equipment, therefore recording revenue based on the payment profile is not appropriate. Revenue recognized for the work that we had completed but could not bill the customers in advance of the

— 224 — FINANCIAL INFORMATION payment schedule under the respective contracts are classified as unbilled receivables, see “— Trade and Bills Receivables — Unbilled Receivables”. The Directors and Reporting Accountants are of the view that the revenue recognition policy adopted for solution sales are in compliance with the applicable accounting standard, in particular IAS 18 “Revenue”.

We price our solutions based on multiple factors, including hardware component costs, installation-related expenses and prevailing market conditions. Future growth of revenues generated from our solution will depend significantly upon our ability to increase the sale of solutions by expanding our portfolio of solutions and to continue to adapt to evolving market demand for more sophisticated and integrated solutions. We expect that the sales of solutions will continue to constitute a substantial majority of our total revenue in the near future.

Services

We derive a significant portion of our service revenue from (i) provision of continuing maintenance and technical support services relating to our solution and products sales and (ii) digitization and cataloging of media assets. We derive revenue from maintenance and technical support services generally by entering into fixed-price contracts based on estimated service hours and pre-agreed rates for each service hour. Our digitization and cataloging service contracts are also fixed-price contracts, negotiated based on estimated content hours and pre-agreed rates for each content hour. We are paid regularly during the life of the contract and recognize revenues from these two types of services on a straight-line basis or upon receiving customer acceptance. In addition, we provide multi-camera recording and editing services and live sports broadcasting services based on event-based contracts and recognize revenues upon completion of the event. The revenue recognition cycles for live sports broadcasting services vary from event to event, ranging from one month, for instance, Beijing 2008 Olympics Games, to six months, for instance, Chinese Basketball Association. The revenue recognition cycles for multi-camera recording and editing services typically depend on the length of time required to finish recording a TV show. We price our services based on multiple factors, including complexity of assignments, the level of sophistication required and prevailing market conditions.

Products

We primarily sell our products directly to TV broadcasters and new media and other digital video content providers. Our products are sold on a contract-by-contract basis. Depending on the volume of the products under a contract, delivery of products usually requires one to four weeks. We recognize these revenues when the products are delivered and the customers have accepted the products. We price our products based on multiple factors, including sophistication of the technology involved, hardware component costs and prevailing market conditions. Future growth of our revenues from products will depend significantly upon our ability to broaden our product offerings and to expand our sales through our in-house selling team and distribution network.

Revenue by Customers

The following table sets forth a distribution of our largest customers by revenue contribution and as a percentage of total revenue for the period indicated.

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For the year ended December 31,

2013 2014 2015

%of %of %of Amount revenue Amount revenue Amount revenue

(RMB in thousands, except for percentages)

Single largest...... 54,195 10.8 32,903 8.1 35,850 5.9 Five largest...... 157,144 31.2 98,631 24.3 145,915 24.1

We provide solutions, services and products primarily to TV broadcasters. Our growth in revenue from TV broadcasters was driven by the increase in demand for large-scale integrated solutions during the Track Record Period. We also provide solutions, services and products to new media and other digital video content providers as well as other industry users including government entities, meteorological bureaus and schools. We aim to continue to strengthen our expertise in serving TV broadcasters and also plan to leverage our expertise and knowledge to further penetrate other industries for additional revenue contributors.

Cost of Sales

Our cost of sales primarily comprises cost of software and hardware equipment, employee compensation, installation costs, amortization and depreciation, traveling expenses, business tax charged to our operations and other cost of sales. Cost of sales is generally recognized when revenues from the corresponding solutions, services or products are recognized. In 2013, 2014 and 2015, our cost of sales was RMB366.3 million, RMB287.4 million and RMB393.8 million, respectively.

The following table sets forth the components of cost of sales for the period indicated.

For the year ended December 31,

2013 2014 2015

Amount % of total Amount % of total Amount % of total

(RMB in thousands, except percentages)

Cost of software and hardware equipment ...... 275,460 75.2 199,076 69.3 298,664 75.8 Employee compensation...... 49,491 13.5 54,381 18.9 53,516 13.6 Installation costs ...... 11,570 3.2 4,855 1.7 4,766 1.2 Amortization and depreciation ...... 7,185 2.0 14,024 4.9 14,018 3.6 Traveling expenses ...... 5,698 1.6 4,027 1.4 6,064 1.5 Business tax charged to operations ...... 3,215 0.9 3,590 1.2 7,022 1.8 Others ...... 13,657 3.7 7,410 2.6 9,762 2.5

Total cost of sales ...... 366,276 100.0 287,363 100.0 393,812 100.0

— 226 — FINANCIAL INFORMATION

Cost of software and hardware equipment primarily includes purchase fees for servers, workstations, memory modules, network equipments and third-party software from third-party suppliers for our in-house developed solutions and products, which we procure based on orders from our customers. During the Track Record Period, our cost of software and hardware equipment, representing the largest component of our cost of sales, fluctuated as a result of the fluctuation of our revenue. “Others” primarily includes rental expenses, cost of sales in relation to the solutions and services provided by Beijing Zhengqi, which we acquired as our subsidiary from Founder Electronics in September 2013, marketing and promotional expenses.

Gross Profit and Gross Profit Margin

Our gross profit represents revenue less cost of sales. Our overall gross profit margin increased from 27.2% in 2013 to 29.3% in 2014, and further to 35.0% in 2015. The following table sets forth our gross profit and gross margin by business line for the period indicated.

For the year ended December 31,

2013 2014 2015

Gross Gross Gross Gross profit Gross profit Gross profit profit margin (%) profit margin (%) profit margin (%)

(RMB in thousands, except percentages)

Solutions...... 79,632 20.7 71,303 23.5 125,342 27.6 Services ...... 19,369 32.5 19,454 32.1 36,203 47.0 Products...... 37,687 64.9 28,249 66.3 50,626 67.9

Total...... 136,688 27.2 119,006 29.3 212,171 35.0

The general increase in our gross profit margin during the Track Record Period was mainly driven by our effective procurement management and increased economies of scale due to increased sales.

Other Income

Our other income primarily comprises (i) the refund we receive for the value-added tax paid on the sale of our independently developed software components for our solutions and products pursuant to the relevant PRC tax regulations, (ii) cash subsidies we receive from the PRC government with respect to our research and development activities, (iii) reversal of provision for doubtful debt made in prior years in the amount of RMB16.6 million as we entered into a non-recourse factoring arrangement with an independent-third-party factoring company in the end of 2015 to expedite cash collection, (iv) gain on disposal of our intangible assets, mainly intellectual property rights, to our joint ventures in June 2015 and (v) gain on disposal of our subsidiary, CDV Cloud, in May 2015.

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The following table sets forth our other income, as an absolute amount and as a percentage of revenue, for the period indicated.

For the year ended December 31,

2013 2014 2015

%of %of %of Amount revenue Amount revenue Amount revenue

(RMB in thousands, except percentages)

Other revenue Value-added tax refunds(1)...... 19,685 3.9 16,295 4.0 23,886 3.9 Interest income ...... 2,430 0.5 2,192 0.5 1,491 0.2 Reversal of provision for doubtful debt...... 857 0.2 1,983 0.5 16,650 2.7

22,972 4.6 20,470 5.0 42,027 6.9

Other net income/gain Gain on disposal of intangible assets ...... ————10,800 1.8 Gain on disposal of a subsidiary ...... ————7,872 1.3 Gain on dilution of interest in a joint venture .... ————6530.1 Subsidy income from government(2) ...... 17,948 3.6 12,393 3.0 15,347 2.5 Sundry income ...... 1,615 0.3 350 0.1 887 0.1

19,563 3.9 12,743 3.1 35,559 5.9

Total ...... 42,535 8.5 33,213 8.2 77,586 12.8

Notes:

(1) Our sales of software products in the PRC are subject to value-added tax calculated at 17%. Companies that develop their own software products and have such software products registered with the relevant authorities in the PRC are entitled to a refund of part of value-added tax in excess of 3% of the actual value-added tax burden See “Risk Factors—Risks Relating to our Business and Industry—Receipt of value-added tax refunds has historically been important to our business, and we may not continue to receive such tax refunds in the future.”

(2) Subsidy income mainly relates to cash subsidies for our operating and development activities granted by government authorities. Such subsidies are either unconditional grants or grants with conditions. Conditions may include eligibility requirements and use restrictions. See “Risk Factors—Risks Relating to Our Business and Industry—We may not continue to receive sustainable government subsidies.”

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Operating Expenses

During the Track Record Period, our operating expenses comprise (i) selling and marketing expenses, (ii) research and development expenses, (iii) administrative expenses and (iv) share-based compensation expense. The following table sets forth the breakdown of operating expenses, in absolute amount and as a percentage of total revenue, for the period indicated.

For the year ended December 31,

2013 2014 2015

%of %of %of Amount revenue Amount revenue Amount revenue

(RMB in thousands, except percentages)

Selling and marketing expenses...... 65,626 13.0 74,815 18.4 62,005 10.2 Administrative expenses...... 32,200 6.4 46,960 11.6 66,298 10.9 Share-based compensation expense...... 2,190 0.4 886 0.2 3,835 0.6 Research and development expenses (excluding the capitalized portion) ...... 57,765 11.5 61,106 15.0 56,230 9.3

Total operating expenses ...... 157,781 31.4 183,767 45.2 188,368 31.1

Selling and Marketing Expenses

Our selling and marketing expenses primarily comprise employee compensation, traveling and entertainment expenses, amortization and depreciation and marketing expenses. “Others” primarily comprises rental expenses, consulting fee and tendering service fee. In 2013, 2014 and 2015, our selling and marketing expenses were RMB65.6 million, RMB74.8 million and RMB62.0 million, respectively.

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The following table sets forth the breakdown of selling and marketing expenses, in absolute amount and as a percentage of total revenue, for the period indicated.

For the year ended December 31,

2013 2014 2015

%of %of %of Amount revenue Amount revenue Amount revenue

(RMB in thousands, except percentages)

Employee compensation ...... 24,808 4.9 30,155 7.4 26,833 4.4 Traveling and entertainment ...... 15,596 3.1 20,418 5.0 11,949 2.0 Amortization and depreciation...... 4,909 1.0 4,430 1.1 2,599 0.4 Marketing expenses...... 5,019 1.0 5,533 1.4 6,735 1.1 Others...... 15,294 3.0 14,279 3.5 13,889 2.3

Total selling and marketing expenses ...... 65,626 13.0 74,815 18.4 62,005 10.2

Administrative Expenses

Our administrative expenses primarily comprise employee compensation, provision for doubtful trade and other receivables and bad debts written off, amortization and depreciation, rental expenses, legal and professional fees, listing expenses, net exchange loss and other administrative expenses. “Others” primarily comprises bank charges, utility expenses, office supplies, service fees and travelling expenses. In 2013, 2014 and 2015, our administrative expenses were RMB32.2 million, RMB47.0 million and RMB66.3 million, respectively. For further details regarding our provision for doubtful trade and other receivables and bad debt written off, see “—Description of Certain Consolidated Statement of Financial Position Items—Trade and Other Receivables—Trade and Bills Receivables—Impairment and Provision.”

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The following table sets forth the breakdown of administrative expenses, in absolute amount and as a percentage of total revenue, for the period indicated.

For the year ended December 31,

2013 2014 2015

%of %of %of Amount revenue Amount revenue Amount revenue

(RMB in thousands, except percentages)

Employee compensation ...... 12,936 2.6 14,231 3.5 14,569 2.4 Amortization and depreciation...... 3,204 0.6 3,730 0.9 2,697 0.4 Provision for doubtful trade and other receivables and bad debt written off ...... 3,857 0.8 12,386 3.0 15,319 2.5 Rental expenses ...... 2,893 0.6 3,465 0.9 2,642 0.4 Legal and professional fee ...... 2,196 0.4 2,607 0.6 1,868 0.3 Listing-related expenses...... ————15,209 2.5 Net exchange loss ...... — — 511 0.1 3,108 0.5 Others...... 7,114 1.4 10,030 2.5 10,886 1.8

Total administrative expenses ...... 32,200 6.4 46,960 11.6 66,298 10.9

Share-based Compensation Expense

On December 20, 2010, we adopted the Pre-IPO Share Option Scheme to grant up to 26,000,000 share options (subject to adjustment, such as bonus issue, extraordinary cash dividends, share splits, reverse share splits, recapitalization, reorganizations, mergers, consolidations and combinations occurring after the date of grant of options) at the Board’s direction to our Directors, employees, consultants or advisors who have made contributions to the success of our Group. On January 1, 2011, pursuant to the Pre-IPO Share Option Scheme, we granted 26,000,000 options to certain of our employees for nil consideration with estimated fair value of approximately US$3.1 million (approximately RMB20.7 million). Each option gives the holder the right to subscribe for one ordinary share of our Company at an exercise price of US$1.16 per share. The share options are valid for a period of 10 years from January 1, 2011.

On October 1, 2015, pursuant to the Pre-IPO Share Option Scheme, we granted 2,935,000 options to certain of our employees with estimated fair value of approximately US$3.0 million (approximately RMB19.2 million). The exercise price of the share options granted is US$0.00001 per share. The share options are valid for 10 years from October 1, 2015.

As a result, we recognized total share-based compensation expense of approximately RMB2.2 million, RMB0.9 million and RMB3.8 million, respectively, for the years ended December 31, 2013, 2014 and 2015. As of December 31, 2015 and the Latest Practicable Date, options to subscribe for an aggregate of 25,980,000 Shares and 25,930,000 Shares, respectively, had been granted under the Pre-IPO Share Option Scheme by our Company and remained outstanding. For further information, see note 25 of the Accountant’s Report in Appendix I and “Statutory and General Information—D. Pre-IPO Share Option Scheme” in Appendix IV to this prospectus.

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Research and Development Expenses

Our research and development expenses primarily comprise employee compensation, amortization and depreciation, rental expenses and others. “Others” primarily includes travelling expenses, design expenses, service fees, consulting fees, office expenses and intellectual property application fees. In 2013, 2014 and 2015, our research and development expenses (excluding the capitalized portion) were RMB57.8 million, RMB61.1 million and RMB56.2 million, respectively.

The following table sets forth the breakdown of research and development expenses, in absolute amount and as a percentage of total revenue, for the period indicated.

For the year ended December 31,

2013 2014 2015

%of %of %of Amount revenue Amount revenue Amount revenue

(RMB in thousands, except percentages)

Employee compensation ...... 37,030 7.4 40,136 9.9 34,938 5.8 Amortization and depreciation...... 6,569 1.3 8,114 2.0 6,217 1.0 Rental expenses ...... 4,860 1.0 5,592 1.4 4,536 0.7 Others...... 9,306 1.9 7,264 1.8 10,539 1.7

Total R&D expenses ...... 57,765 11.5 61,106 15.0 56,230 9.3

Finance Costs

Our finance costs primarily include (i) interest expenses on bank and other borrowings and (ii) loss on non-recourse factoring of trade receivables of RMB9.4 million which represented the difference between the gross carrying amount of the trade receivables for factoring of RMB69.4 million and the factoring proceeds of RMB60.0 million under the non-recourse factoring arrangement entered into in the end of 2015. For details, please refer to note 16 of the Accountant’s Report as Appendix I to this prospectus and “— Description of Certain Consolidated Statement of Financial Position Items — Trade and Other Receivables — Trade and Bills Receivables.” In 2013, 2014 and 2015, our finance costs were RMB5.1 million, RMB0.9 million and RMB16.3 million, respectively.

Income Tax

Cayman Islands Income Tax

The Company is incorporated in the Cayman Islands as an exempted company with limited liability under the Companies Law of the Cayman Islands and therefore exempted from Cayman Islands income tax.

— 232 — FINANCIAL INFORMATION

Hong Kong Profits Tax

AllOne Sports, our wholly-owned subsidiary during the Track Record Period, is incorporated in Hong Kong. During the Track Record Period, we did not make any provision for Hong Kong profits tax because we had no assessable profits in Hong Kong. On August 4, 2015, we transferred the entire issued share capital in AllOne Sports to Mr. Zheng.

Singapore Profits Tax

Digital Video (Singapore), our wholly-owned subsidiary, is incorporated in Singapore. During the Track Record Period, we did not make any provision for Singapore profits tax because we had no assessable profits in Singapore. On August 27, 2015, we applied to deregister Digital Video (Singapore), which deregistration process was completed in April 2016.

PRC Enterprise Income Tax

Our subsidiaries located in the PRC, other than CDV WFOE and Beijing Zhengqi, were subject to the PRC corporate income tax at a rate of 25% on the assessable profits during the Track Record Period. CDV WFOE obtained the “High and New Technology Enterprise” qualification in 2012 and has renewed its qualification in 2015. It was also accredited as “Key Software Enterprise under the National Plan” (國家規劃佈局內重點軟件企業) and enjoyed a preferential income tax rate of 10% in 2013 and 2014. In 2015, CDV WFOE enjoyed a preferential income tax rate of 15% due to its “High and New Technology Enterprise” qualification. Beijing Zhengqi obtained the “High and New Technology Enterprise” qualification in 2014 and enjoyed a preferential income tax rate of 15% in 2014 and 2015. The preferential tax treatment in connection with “High and New Technology Enterprise” qualification for CDV WFOE and Beijing Zhengqi is valid until July 2018 and October 2017, respectively. We intend to apply for renewal of such treatment thereafter but there is no assurance that our application will succeed.

According to relevant PRC laws and regulations, enterprises engaged in research and development activities are entitled to claim 150% of the research and development expenses so incurred in a year as tax deductible expenses when determining their assessable profits for that year (“Super Deduction”). In 2013, 2014 and 2015, CDV WFOE and Beijing Zhengqi claimed such Super Deduction in ascertaining their tax assessable profits; and in 2013 and 2014, CDV Cloud claimed such Super Deduction in ascertaining its tax assessable profits.

PRC Withholding Tax

According to the relevant PRC laws and regulations, we are subject to a 10% withholding tax on the dividends distributed by a company established in the PRC to a non-PRC resident enterprise investor with respect to profits derived after January 1, 2008. If a non-PRC resident enterprise investor incorporated in Hong Kong meets the conditions and requirements under the double taxation treaty arrangement entered into between the PRC and Hong Kong, the relevant withholding tax rate will be reduced from 10% to 5%.

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During the Track Record Period, we had made all the required tax filings and had paid all outstanding tax liabilities with the relevant tax authorities in the relevant jurisdictions and we are not aware of any outstanding or potential disputes with such tax authorities.

RESULTS OF OPERATIONS

Year Ended December 31, 2015 Compared to Year Ended December 31, 2014

Revenue

Our revenue increased by 49.1% to RMB606.0 million in 2015 from RMB406.4 million in 2014. This increase reflected an increase in the revenue from all three of our business lines. Specifically:

• Solutions. Revenue from sale of our solutions increased by 49.9% to RMB454.3 million in 2015 from RMB303.2 million in 2014. The increase was primarily attributable to increases in revenue generated from sale of (i) the introduction of new type of news workflow solutions, i.e., omnimedia convergence platforms, of which the sale generated revenue of approximately RMB44.1 million, as a result of the spur of the rapid development in omnimedia convergence in the PRC currently, for example, we have completed significant contracts with two major customers in 2015; (ii) the increasing consumer demand for better viewing experience, together with the favorable government policies, which further stimulated the adoption of HD TV throughout China in 2015 as evidenced by significant increases in the numbers of HD TV subscribers and HD TV channels in China in 2015, resulting in an increase in revenue generated from sale of program production solutions, for example, we have completed significant contracts with three customers in 2015 which were also customers in 2014, which in the aggregate contributed an increase in revenue of approximately RMB71.3 million from 2014; (iii) digital broadcast automation solutions attributable to the enhanced synergy created by its acquisition of Beijing Zhengqi in September 2013, which solutions contributed approximately RMB97.1 million revenue in digital broadcast automation solutions in 2015, as compared to the RMB56.0 million revenue contribution in 2014; and (iv) the increase in revenue of approximately 12.3 million from 2014 to 2015 generated from sale of solutions integration of its CreaStudio-series systems(1) as a result of the wider acceptance that such type of solution has gained in the market which further increased the demand from its existing and new customers.

Note: (1) CreaStudio- series systems are multi-camera recording and editing software which we launched under the brand “CreaStudio” in 2013. The CreaStudio-series systems can simultaneously store, integrate, export and replay multi-camera recordings (over 40 cameras at once) in a secure, reliable and convenient fashion. In the case where we sell computers which has CreaStudio-series systems installed, we will record the sales generated therefrom as the revenue generated from the products. In the cases where we send our experienced technicians and use our CreaStudio-series systems to provide integrated services to our customers, including recording, processing, editing and broadcasting, for entertainment shows in China, we will record the sales generated therefrom as the revenue generated from the services; and where we use the CreaStudio-series systems and other third-party computer hardware such as severs and work stations to help customers set up platforms to make the CreaStudio-series systems compatible with or connect to the customers’ existing solutions, we will record the sales generated therefromas the revenue generated from the solutions.

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• Services. Revenue from provision of our services increased by 27.3% to RMB77.1 million in 2015 from RMB60.6 million in 2014, mainly due to the increases in revenue generated from provision of services for (i) live sports broadcasting as a result of our provision of service for the 1st National Youth Games of the PRC (第一屆全國青年運動會) in 2015; (ii) digitization and cataloging of media asset as a result of the increased sales from the existing customers in 2015; and (iii) services integration of its CreaStudio-series systems(1).

• Products. Revenue from our sale of products increased by 74.9% to RMB74.6 million in 2015 from RMB42.6 million in 2014, mainly due to increases in the number of video editing, graphics creation, visual effects and video compositing, CreaStudio-series systems(1) and other products sold as a result of (i) continuing demand from our existing traditional broadcaster customers, such as CCTV and Shanghai Media Group, as well as increasing demand from local system integration providers. The system integration providers, different from distributors which purchase products from us and then sell the products to end customers, integrate subsystem components they purchase from us and other supplies into a whole and functional systems and sell to end-customers. The increase in demand from local system integration providers primarily reflected our enhanced reputation and competitive edges of some of our products in the industry, such as our Mariana-series graphics creation systems and Dunhuang-series visual effects and video compositing systems; (ii) expansion of customer base, reflecting our development of new products such as “Tianmu” meteorological graphics systems, which helped us win business from two provincial-level governmental meteorological bureaus; and (iii) increased sales of systems incorporating our advanced or upgraded software, for which we were able to charge higher premiums than systems we sold in 2014.

In addition, the increase in revenue from 2014 to 2015 was driven by both the repeat customers and new customers. Specifically, the increase also attributable to (i) increasing wallet-share from repeat customers. For instance, there are 50 customers out of our top 100 customers in 2015 which were also customers in 2014. Those 50 repeat customers contributed in the aggregate approximately RMB316.1 million revenue, as compared to their aggregate contribution of approximately RMB179.9 million in 2014; and their purchases were mainly solutions in 2014 and 2015 and (ii) revenue contribution of new customers in the aggregate of approximately 32% of our total revenue in 2015. Out of our top 100 customers in 2015, 36 are new customers. We derived approximately RMB150.9 million revenue from the sale of the solutions from those 36 new customers, accounting for approximately 33.2% of our sales revenue from the solutions in 2015. Out of the 359 customers in 2015, 156 are new customers, including 48 in the traditional TV broadcasting industry (mainly at city- or county-level) and 108 in other industries including, among others, schools, colleges and other research institutions, local governmental meteorological bureaus as well as other governmental departments, alternative broadcasting platforms such as cable network operators and Internet media content providers, and the remaining customers in the traditional TV broadcasting industry. For details on how we sourced the new customers, see “Business — Customers.”

Cost of Sales

Our cost of sales increased by 37.0% to RMB393.8 million in 2015 from RMB287.4 million in 2014, primarily due to increases in our cost of software and hardware equipment as a result of our increased solution and product sales.

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Gross Profit and Gross Profit Margin

As a result of the foregoing, our gross profit increased by 78.3% to RMB212.2 million in 2015 from RMB119.0 million in 2014, and our gross profit margin increased to 35.0% in 2015 from 29.3% for the same period in 2014, primarily due to the following:

• Solutions. Gross profit for our solution business increased by 75.8% to RMB125.3 million in 2015 from RMB71.3 million in 2014. Gross profit margin for our solution business increased to 27.6% in 2015 from 23.5% in 2014, primarily due to (i) our provision of large news workflow solution projects for a number of major customers in 2015, which had higher gross profit margin relative to our other solution projects due to its greater complexity and sophistication; (ii) increased economies of scale resulted from overall increase in solution sales, thus lowering the average labor and other fixed costs associated with our solution business; and (iii) our efforts to manage our cost base for solution projects and the lower price for hardware components for our solutions from third-party suppliers than in 2014. For further details regarding the declining price for hardware components during the Track Record Period, see “Industry Overview—TV Broadcasting Post-Production Industry in China—Price Trend of Hardware Components.”

• Services. Gross profit for our service business increased by 86.1% to RMB36.2 million in 2015 from RMB19.5 million in 2014. Gross profit margin for our service business increased to 47.0% in 2015 from 32.1% in 2014, primarily due to (i) an increase in sales of our live sports broadcasting services and services integration of its CreaStudio-series systems which offered higher gross profit margin in 2015 as compared to 2014; and (ii) increased economies of scale and lower average labor cost resulted from overall increase in service sales.

• Products. Gross profit for our product business increased by 79.2% to RMB50.6 million in 2015 from RMB28.2 million in 2014. Gross profit margin for our product business increased to 67.9% in 2015 from 66.3% in 2014, mainly due to (i) sales of systems incorporating our advanced or upgraded software which generated higher gross profit margin than systems we sold in 2014; (ii) increased economies of scale as a result of overall increase in product sales, thus lowering the average labor and other fixed costs associated with our product business; and (iii) reduced cost base as a result of our procurement management efforts and lower price for hardware components for our products from suppliers than in 2014. For further details regarding the declining price for hardware components during the Track Record Period, see “Industry Overview—TV Broadcasting Post-Production Industry in China—Price Trend of Hardware Components.”

Other Income

Our other income increased significantly to RMB77.6 million in 2015 from RMB33.2 million in 2014, primarily due to (i) an increase of RMB14.7 million in reversal of provision for doubtful debt, as a result of a non-recourse factoring arrangement we entered into in the end of 2015, see “— Description of Certain Consolidated Statements of Comprehensive Income Items — Other Income” for

— 236 — FINANCIAL INFORMATION details, (ii) gain on disposal of intangible assets of RMB10.8 million, mainly intellectual property rights, to our joint ventures in June 2015, (iii) gain on disposal of our equity interests in CDV Cloud of RMB7.9 million in May 2015 and (iv) an increase of RMB7.6 million in value-added tax refunds as a result of our increased sales.

Selling and Marketing Expenses

Our selling and marketing expenses decreased by 17.1% to RMB62.0 million in 2015 from RMB74.8 million in 2014. This decrease mainly reflected a decrease in our sales compensation which primarily includes selling staff compensation and travelling and entertainment expenses, primarily because we continued to implement a marketing strategy of reducing the number of our sales and marketing staff to focus our in-house sales team on major and large customers while utilizing our distributors on soliciting smaller and regional TV broadcasters and other industry users. For example, the number of our full-time in-house sales personnel decreased to 80 as of December 31, 2015 from 98 as of December 31, 2014. For further details regarding our sales channels, see “Business—Sales and Marketing—Distribution Sales.” In addition, the decrease in our selling and marketing expenses as a percentage of revenue from 18.4% in 2014 to 10.2% in 2015 was affected by the increase in our revenue.

Administrative Expenses

Our administrative expenses increased by 41.2% to RMB66.3 million in 2015 from RMB47.0 million in 2014, primarily due to (i) the incurrence of listing expenses of RMB15.2 million in relation to the Global Offering, and (ii) the incurrence of RMB3.1 million exchange loss as a result of depreciation of Renminbi in connection with the US$5.0 million bank loan that we incurred in August 2015. In addition, the decrease in our administrative expenses as a percentage of revenue from 11.6% in 2014 to 10.9% in 2015 was affected by the increase in our revenue.

Share-Based Compensation Expense

We recognized share-based compensation expense of RMB3.8 million in 2015 and share-based compensation of RMB0.9 million in 2014 in connection with our Pre-IPO Share Option Scheme. For details, please refer to “— Description of Certain Consolidated Statements of Comprehensive Income Items — Operating Expenses — Share-based compensation expense” above.

Research and Development Expenses

Our research and development expenses decreased to RMB56.2 million in 2015 from RMB61.1 million in 2014, primarily due to (i) our disposal of CDV Cloud in May 2015 and (ii) a decrease in employee compensation for our R&D personnel, reflecting the effect of the measures we have taken to optimize our R&D team and improve its efficiency. However, in the long run we plan to continue to make great efforts and investment in R&D to enhance our R&D capabilities. In addition, the decrease in our research and development expenses as a percentage of revenue from 15.0% in 2014 to 9.3% in 2015 was affected by the significant increase in our revenue.

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Finance Costs

Finance costs increased to RMB16.3 million in 2015 from RMB0.9 million in 2014, mainly due to (i) an increase in interest expenses as a result of the RMB47.9 million secured borrowing we obtained from an independent third party in January 2015 and US$5.0 million (equivalent to RMB32.5 million) in U.S. dollar denominated borrowings incurred in August 2015, and (ii) loss on a non-recourse factoring of trade receivables of RMB9.4 million which represented the difference between the gross carrying amount of the trade receivables for factoring and the factoring proceeds under the non-recourse factoring arrangement that we entered into in the end of 2015. See “—Indebtedness—Other Borrowings” for details on our bank borrowings and note 16 of the Accountant’s Report as Appendix I to this prospectus and “— Description of Certain Consolidated Statement of Financial Position Items — Trade and Other Receivables — Trade and Bills Receivables” for details on the loss on non-recourse factoring of trade receivables.

Fair Value Gain/Loss on Redeemable Convertible Preferred Shares

We recorded fair value gain of RMB70.8 million on our redeemable convertible preferred shares in 2015, primarily due to the depreciation of Renminbi against U.S. dollar in 2015. We recorded fair value loss of RMB28.1 million in 2014.

Share of Losses of Joint Ventures

Our share of losses of joint ventures was RMB6.5 million in 2015 and RMB1.3 million in 2014. Our share of losses of joint ventures in 2015 was due to losses from Beijing Hermit, Beijing Yueying and Xin’aote Cloud, all of which were set up in the second half of 2014 and at the early stages of development of their business.

Profit/(Loss) Before Income Taxes

As a result of the foregoing factors, our profit before income tax amounted to RMB127.4 million in 2015 as compared to loss before income tax of RMB76.5 million in 2014.

Income Tax Expense/(Credit)

We recorded an income tax expense of RMB13.3 million in 2015 as compared to an income tax credit of RMB7.1 million in 2014.

Profit/(Loss) for the Year

As a result of the foregoing factors, our net profit in 2015 amounted to RMB114.1 million as compared to the net loss of RMB69.4 million in 2014. We had adjusted net loss of RMB54.4 million and adjusted net profit of RMB26.4 million in 2014 and 2015, respectively. The significant improvement in earnings from 2014 to 2015 was primarily attributable to (i) the 49.1% increase in revenue from 2014 to 2015, and (ii) the fixed costs and expenses, which primarily were comprised of employee compensation (excluding share-based compensation expenses) and rental expenses, accounted for approximately 23.9% of the 2015 revenue, as compared to that in 2014 which accounted for 38.2% of the 2014 revenue. This was primarily attributable to the fact that we placed greater effort

— 238 — FINANCIAL INFORMATION to control the number of, among others, sales and marketing staff and administrative staff and also the overall compensation, leading to the result that we could benefit from the economy of scale. See “Financial Information—Non-IFRS Financial Measures” for a reconciliation of our (loss)/profit for the period under IFRS to the definition of adjusted net (loss)/profit.

Other Comprehensive Income/(Loss)

We recorded other comprehensive loss of RMB34.8 million in 2015 as compared to RMB1.6 million in 2014, primarily due to exchange rate differences arising on the translation of foreign operation as a result of Renminbi’s depreciation against U.S. dollars in 2015 as compared to 2014. We maintained the proceeds from our pre-IPO investments in U.S. dollars under our offshore holding companies’ accounts.

Loss Attributable to Non-controlling Interests

Loss attributable to non-controlling interests totaled RMB6.1 million in 2015 and RMB2.8 million in 2014. Non-controlling interests in 2015 primarily represented the minority interests in Beijing Meicam.

Year Ended December 31, 2014 Compared to Year Ended December 31, 2013

Revenue

Our revenue decreased by 19.2% to RMB406.4 million in 2014 from RMB503.0 million in 2013. This decrease reflected a decrease in revenue from solution sales and sale of products, which was partially offset by an increase in revenue derived from sale of services. Specifically:

• Solutions. Revenue from our solutions sales decreased by 21.3% to RMB303.2 million in 2014 from RMB385.3 million in 2013. The decrease primarily reflected decreases in revenue generated from sales of (i) news workflow solutions as a result of our completion of a significant contract with Shanghai Media Group in 2013, (ii) program production solutions as a result of our completion of a number of significant contracts in 2013, and (iii) virtual studio solutions as a result of increasing competition. In addition, some of our major customers delayed or postponed their upgrading projects for solutions due to personnel changes in their management as a result of the ongoing anti-corruption campaign by the PRC government in 2014. Such decrease was partially offset by increases in revenue generated from sales of (i) digital broadcast automation solutions attributable to the first full-year consolidation of the operating results of Beijing Zhengqi which we acquired in September 2013; and (ii) the success of our CreaStudio-series systems, which we have increasingly marketed and sold with integrated solutions.

• Services. Revenue from our services increased by 1.6% to RMB60.6 million in 2014 from RMB59.6 million in 2013. This increase primarily reflected increases in revenue generated from sales of (i) system maintenance services attributable to a major contract from an existing customer and the first full-year consolidation of revenue from Beijing Zhengqi which we acquired in September 2013, and (ii) services related to our CreaStudio-series

— 239 — FINANCIAL INFORMATION

systems, in relation to which the products and services were relatively reduced as we have increasingly marketed and sold with integrated solutions. The increase was partially offset by (i) our completion of a significant system upgrade service contract for CCTV in 2013; and (ii) a decrease in the sale of live sports broadcasting services due to our completion of our service for the 12th National Games of the PRC (中華人民共和國第十二屆運動會)in the third quarter of 2013, which was held once every four years.

• Products. Revenue from our sale of products decreased by 26.6% to RMB42.6 million in 2014 from RMB58.1 million in 2013, primarily reflecting decreases in revenue generated from sales of (i) our video editing and graphics creation systems as a result of increasing competition and the delay and postponement for certain of our major customers’ upgrading projects for products after management changes in such customers as part of an on-going anti-corruption campaign by the PRC government in 2014, and (ii) our CreaStudio-series systems, in relation to which the products were relatively reduced as we have increasingly marketed and sold with integrated solutions and provision of our services.

Cost of Sales

Our cost of sales decreased by 21.5% to RMB287.4 million in 2014 from RMB366.3 million in 2013, primarily due to decreases in (i) cost of software and hardware equipment as a result of the decrease in our solution and product sales, and (ii) installation costs as a result of our reduced solution sales.

Gross Profit and Gross Profit Margin

As a result of the foregoing, our gross profit decreased by 12.9% to RMB119.0 million in 2014 from RMB136.7 million in 2013. Our gross profit margin increased to 29.3% in 2014 from 27.2% in 2013, primarily due to the following reasons:

• Solutions. Gross profit for our solution business decreased by 10.5% to RMB71.3 million in 2014 from RMB79.6 million in 2013. Gross profit margin for our solution business increased to 23.5% in 2014 from 20.7% in 2013, primarily due to our reduced cost base as a result of (i) our effective procurement management and (ii) reduced price for hardware components and software for our solutions from suppliers compared to 2013.

• Services. Gross profit for our service business slightly increased by 0.4% to RMB19.5 million in 2014 from RMB19.4 million in 2013. Gross profit margin for our service business remained relatively stable at 32.1% in 2014 as compared to 32.5% in 2013.

• Products. Gross profit for our product business decreased by 25.0% to RMB28.2 million in 2014 from RMB37.7 million in 2013. Gross profit margin for our product business increased to 66.3% in 2014 from 64.9% in 2013, primarily due to our reduced cost base as a result of (i) our effective procurement management and (ii) lowered price for hardware components for our products from suppliers compared to 2013.

— 240 — FINANCIAL INFORMATION

Other Income

Our other income decreased by 21.9% to RMB33.2 million in 2014 from RMB42.5 million in 2013, primarily due to (i) a decrease in government subsidies in relation to our operating and development activities and (ii) a decrease in value-added tax refunds as a result of a decrease in our sales.

Selling and Marketing Expenses

Our selling and marketing expenses increased by 14.0% to RMB74.8 million in 2014 from RMB65.6 million in 2013, primarily due to the first full-year consolidation of Beijing Zhengqi in 2014 since its acquisition in September 2013. In addition, the increase in our selling and marketing expenses as a percentage of revenue from 13.0% in 2013 to 18.4% in 2014 was affected by the decrease in our revenue.

Administrative Expenses

Our administrative expenses increased by 45.8% to RMB47.0 million in 2014 from RMB32.2 million in 2013, primarily due to an increase in our provision for doubtful trade and other receivables and bad debt written-off of RMB12.4 million in 2014 from RMB3.9 million in 2013. For details, see “—Description of Certain Consolidated Statement of Financial Position Items—Trade and Other Receivables.” In addition, the increase in our administrative expenses as a percentage of revenue from 6.4% in 2013 to 11.6% in 2014 was affected by the decrease in our revenue.

Share-Based Compensation Expense

In connection with our Pre-IPO Share Option Scheme, we recognized share-based compensation expense of RMB2.2 million and RMB0.9 million in 2013 and 2014, respectively.

Research and Development Expenses

Our research and development expenses increased by 5.8% to RMB61.1 million in 2014 from RMB57.8 million in 2013, primarily due to increased employee compensation for our R&D personnel and research and development expenses of CDV Cloud, which was established in April 2014. In addition, the increase in our research and development expenses as a percentage of revenue from 11.5% in 2013 to 15.0% in 2014 was affected by the decrease in our revenue.

Finance Costs

Our finance costs decreased by 83.0% to RMB0.9 million in 2014 from RMB5.1 million in 2013, primarily due to our repayment of bank borrowings of RMB85.9 million during 2013, which led to a decrease in our interest payment in 2014.

— 241 — FINANCIAL INFORMATION

Fair Value Loss on Redeemable Convertible Preferred Shares

Our fair value loss on redeemable convertible preferred shares increased by 5.2% to RMB28.1 million in 2014 from RMB26.7 million in 2013. This increased loss was primarily due to the increase in the fair value of our redeemable convertible preferred shares as a result of (i) our successful integration of the digital broadcast automation system business we acquired in September 2013, which increased our equity value, and (ii) our issue of series C preferred shares, which improved our financial condition.

Loss on Extinguishment of Redeemable Convertible Preferred Shares

We recorded loss on extinguishment of redeemable convertible preferred shares of RMB14.7 million in 2014 due to the modification of redemption arrangements with respect to our outstanding series A preferred shares and series A-1 preferred shares.

Share of Losses of Joint Ventures

Our share of losses of joint ventures was RMB1.3 million in 2014 and nil in 2013. Our share of losses of joint ventures in 2014 was due to losses from Beijing Hermit, Beijing Yueying and Xin’aote Cloud, all of which were set up in 2014 and at the early stages of development of their business.

(Loss)/Profit before Income Taxes

As a result of the foregoing factors, we recorded a loss before income tax of RMB76.5million in 2014 as compared to a loss before income tax of RMB10.4 million in 2013.

Income Tax (Expense)/Credit

We recorded an income tax credit of RMB7.1 million in 2014 as compared to an income tax expense of RMB1.8 million in 2013.

Loss for the Year

As a result of the foregoing factors, we recorded a net loss of RMB69.4 million in 2014 as compared to a net loss of RMB12.2 million in 2013. We had adjusted net loss of RMB20.9 million and adjusted net loss of RMB54.4 million in 2013 and 2014, respectively. See “Financial Information—Non-IFRS Financial Measures” for a reconciliation of our loss for the year under IFRS to the definition of adjusted net (loss)/profit.

Other Comprehensive Income/(Loss)

We recorded other comprehensive loss of RMB1.6 million in 2014 as compared to other comprehensive income of RMB14.0 million in 2013, primarily due to exchange rate differences arising on the translation of foreign operation as a result of Renminbi’s appreciation against U.S. dollars during 2014 as compared to 2013. We maintained the proceeds from our pre-IPO investments in U.S. dollars under our offshore holding companies’ accounts.

— 242 — FINANCIAL INFORMATION

Loss Attributable to Non-controlling Interests

We recorded loss attributable to non-controlling interests of RMB2.8 million in 2014 and nil in 2013. Non-controlling interests in 2014 primarily represented the minority interests in CDV Cloud and Beijing Meicam.

DESCRIPTION OF CERTAIN CONSOLIDATED STATEMENT OF FINANCIAL POSITION ITEMS

As of December 31,

2013 2014 2015

(RMB in thousands)

Non-current assets Property, plant and equipment...... 26,350 13,584 6,677 Intangible assets ...... 75,156 70,436 67,978 Goodwill...... 74,220 74,220 74,220 Interests in joint ventures...... — — 3,647 Other financial assets ...... — — 3,461 Deferred tax assets...... 4,313 4,924 8,327 180,039 163,164 164,310 Current assets Inventories...... 103,748 64,985 32,749 Trade and other receivables...... 264,871 330,849 420,206 Other financial assets ...... — 3,084 — Pledged bank deposits...... 21,368 3,582 6,359 Bank balances and cash ...... 178,235 147,372 181,085 568,222 549,872 640,399 Current liabilities Trade and other payables ...... (304,524) (276,287) (222,230) Income tax liabilities ...... (3,778) (87) (17,493) Redeemable convertible preferred shares...... (563,829) (633,255) — Other interest-bearing borrowings ...... (5,000) (8,900) (70,946) (877,131) (918,529) (310,669) Net current (liabilities)/assets ...... (308,909) (368,657) 329,730 Total assets less current liabilities ...... (128,870) (205,493) 494,040 Non-current liabilities Redeemable convertible preferred shares ...... — — (607,832) Other interest-bearing borrowings ...... — — (4,363) Deferred tax liabilities ...... (12,971) (6,476) (5,729) (12,971) (6,476) (617,924) Net liabilities ...... (141,841) (211,969) (123,884)

— 243 — FINANCIAL INFORMATION

Property, Plant and Equipment

Our property, plant and equipment comprise primarily leasehold improvements, computer equipment, furniture and office equipment and motor vehicles. We had property, plant and equipment in the amount of RMB26.4 million, RMB13.6 million and RMB6.7 million as of December 31, 2013, 2014 and 2015, respectively. Our property, plant and equipment decreased from RMB26.4 million as of December 31, 2013 to RMB13.6 million as of December 31, 2014 and further to RMB6.7 million as of December 31, 2015, primarily due to an excess of depreciation expense over new purchase of property, plant and equipment in 2014 and 2015, respectively, while significant purchases of computer equipment were made in 2013 as part of our business expansion.

Intangible Assets

Our intangible assets comprise primarily intellectual properties, software, patents, trademarks and licenses related to our solutions, services and products. We had intangible assets in the amount of RMB75.2 million, RMB70.4 million and RMB68.0 million, respectively, as of December 31, 2013, 2014 and 2015.

Goodwill

We recognized a carrying amount of goodwill of RMB74.2 million in 2013, 2014 and 2015, respectively, in connection with our acquisition of digital broadcast automation solutions business which we operated through Beijing Zhengqi, which we acquired in September 2013.

Inventories

The following table sets forth the principal components of our inventories as of the date indicated.

As of December 31,

2013 2014 2015

(RMB in thousands)

Equipment and parts ...... 35,379 36,137 24,019 Work in progress...... 68,369 28,848 8,730 103,748 64,985 32,749

Average inventory turnover days(1)...... 137 107 45

Note: (1) Average inventories equal inventories at the beginning of the period plus inventories at the end of the period, divided by two. Average inventory turnover days equal average inventories divided by cost of sales and multiplied by the number of days in the period.

— 244 — FINANCIAL INFORMATION

Our inventories comprise (i) equipment and parts and (ii) work in progress. Work in progress represents our cost of materials in solution projects that have been delivered to the contract site or set aside for use in the contract but not yet installed, used or applied during our performance of the contract. Our inventories decreased to RMB65.0 million as of December 31, 2014 from RMB103.7 million as of December 31, 2013 and further to RMB32.7 million as of December 31, 2015, primarily due to a decrease in work in progress as a result of the optimization of our inventory management to better match the timing between procurement of hardware equipment and software and demands arising from sale of our solutions. Our average inventory turnover days decreased from 137 days in 2013 to 107 days in 2014 and further to 45 days in 2015, as a result of the decrease in our inventories as discussed above. As of April 30, 2016, RMB14.9 million or 45.4% of our inventories as of December 31, 2015 had been subsequently sold or consumed by us.

Other Financial Assets

As of December 31, 2014, we held an unlisted convertible promissory note (the “Convertible Promissory Note”) with a principal amount of US$500,000 issued by People Power Company (“PPC”) and bears interest at a rate of 7.25% per annum, with all principal and accrued interest payable on the maturity date. The Convertible Promissory Note is due on the earliest of (i) April 30, 2016; (ii) the closing of the next equity financing by PPC in one transaction or series of related transactions for an aggregate gross purchase price paid to PPC of no less than US$1.0 million (the “Next Financing”); and (iii) upon the event of default as defined in the relevant agreement.

In addition, if PPC has not paid the entire principal plus all then accrued but unpaid interest (the “Balance”) before the closing of the Next Financing, we (within three days from the written notice of the Next Financing served by PPC) can elect to convert the entire Balance into fully paid ordinary shares of PPC at a conversion price equal to 90% of the lowest per share selling price of the shares sold by PPC in the Next Financing. We designated the entire Convertible Promissory Note as financial assets at fair value through profit or loss at initial recognition. As of December 31, 2014, our financial assets at fair value through profit or loss amounted to RMB3.1 million.

In 2015, the Next Financing occurred and we exercised our conversion option to convert our Convertible Promissory Note into preferred shares of PPC. Accordingly, the unlisted convertible promissory note was derecognized upon conversion. The unlisted preferred shares of PPC were classified as available-for-sale financial assets.

— 245 — FINANCIAL INFORMATION

Trade and Other Receivables

The following table sets forth the components of our trade and other receivable balances as of the dates indicated.

As of December 31,

2013 2014 2015

(RMB in thousands)

Trade and bills receivables From third parties ...... 184,902 232,374 337,723 From related parties ...... 490 1,250 6,842 Less: provision for impairment of trade receivables(1) ...... (17,660) (23,483) (18,050) 167,732 210,141 326,515

Other receivables ...... 98,479 122,048 97,319 Less: provision for impairment of other receivables...... (1,340) (1,340) (3,628) 97,139 120,708 93,691 Total...... 264,871 330,849 420,206

(1) Provision for impairment was made only for trade receivables due from third parties.

Trade and Bills Receivables

We issue invoices to our customers in accordance with the payment terms stipulated in the relevant sales contracts and such invoices are payable upon issuance. We generally require deposits upon signing of sales contracts. For selected large TV stations in the PRC with sound financial standing and long-term business relationship with us and certain customers with good credit history, the settlement with such customers may be longer than 180 days after issuance of invoices. During the Track Record Period, most of our trade and bill receivables were from our solution customers.

We classify our trade and bills receivables into billed receivables and unbilled receivables. Our solution customers are typically required to pay us in installments based on relevant contractual milestones, including (i) signing of the contracts, (ii) delivery, installation and testing of solution equipment, first inspection and acceptance, (iii) final inspection and acceptance and (iv) the end of warranty period. For details, see “Business—Customers—Payment and Credit Term.” We recognize substantially all of revenue from solution contracts once we have obtained customers’ acceptance of delivery, installation and testing of our solution equipment and we issue invoices to our customers for the contract amounts that have become outstanding in accordance with the relevant contracts, which amounts will be recorded as billed receivables. For the contract amounts that will become outstanding upon completion of final inspection by and receipt of acceptance from customers, we will record such

— 246 — FINANCIAL INFORMATION amounts as unbilled receivables until we issue invoices for such amounts to the customers. Unbilled receivables are generally invoiced to customers and reclassified as billed receivables within 12 months after the end of each balance sheet date in accordance with the payment terms stipulated in the relevant solution contracts. The period from delivery, installation and testing of our solution equipment to completion of customers’ final inspection and acceptance of our solutions generally last three to six months, whereas a limited number of our solution contracts have trial operation periods that last more than six months, and a significant number of solution contracts do not specify a timeframe on final inspection. Our solution customers are generally allowed to withhold 5% to 10% of the contract value as performance warranty, which are paid to us once warranty expires. As of December 31, 2013, 2014 and 2015, our trade and bills receivables contained such retention money receivables (net of provisions) of RMB28.5 million, RMB39.8 million and RMB43.0 million, respectively. Retention money receivables are normally collected within one to three years after completion of the relevant solution contract. For further details on our payment and credit terms with our customers, see “Business—Customers—Payment and Credit Term.” As a result, we believe that an aging analysis of our billed trade and bills receivables is a more meaningful indicator of the collection of our receivables than an analysis of our overall trade and bills receivables which also include our unbilled trade and bills receivables.

As of December 31, 2013, 2014 and 2015, trade receivables due from related parties, namely Xin’aote Video and CDV Cloud, amounted to RMB0.5 million, RMB1.3 million and RMB3.5 million, and nil, nil, and RMB3.3 million, respectively. See “—Related Party Transactions.”

Billed Receivables

The following table sets forth the aging analysis of our billed receivables past due but not impaired as of the date indicated as well as billed receivable turnover days for the period indicated.

As of and for the year ended December 31, 2013 2014 2015 (RMB in thousands, except for turnover days)

Billed receivables 0 to 90 days...... 35,529 36,855 149,951 90 days to 180 days...... 3,675 8,580 50,437 181 to 365 days ...... 20,762 30,574 19,435 One to two years ...... 10,905 6,348 2,300 70,871 82,357 222,123 Unbilled receivables ...... 96,861 127,784 104,392 Total trade and bills receivables...... 167,732 210,141 326,515

Average billed receivables turnover days (1) ...... 50 86 108

Note: (1) Average billed receivables equal to billed receivables (net of impairment) at the beginning of the period plus billed receivables at the end of the period, divided by two. Average billed receivables turnover days equals to average billed receivables divided by billed revenue for the year and then multiplied by the number of days in the period. In 2013, 2014 and 2015, our billed revenue totaled RMB436.3 million, RMB323.5 million and RMB515.6 million, respectively.

— 247 — FINANCIAL INFORMATION

Trade receivables that were past due but not impaired are from a number of customers that had a good track record of credit with us. Based on these customers’ past credit history, we believe that no impairment allowance is necessary with respect to these balances as there has not been a significant change in credit quality of these receivables and we still consider such balances to be fully recoverable. We do not hold any collateral with respect to trade receivables past due but not impaired. As of December 31, 2013, 2014 and 2015, 17.2%, 10.6% and 24.1% of trade receivables are due from our five largest customers, respectively.

Our billed receivables increased from RMB70.9 million as of December 31, 2013 to RMB82.4 million as of December 31, 2014, and our average billed receivables turnover days increased from 50 days in 2013 to 86 days in 2014. These increases were primarily due to delay in payments from certain major customers due to personnel changes in their management as part of the anti-corruption campaign by the PRC government in 2014, which resulted in delay or postponement in their business activities, including, without limitation, procurement and payment. For further details, see “Industry Overview—TV Broadcasting Post-Production Industry in China—Market of TV Broadcasting Post-Production Industry in China.” Our billed receivables increased from RMB82.4 million as of December 31, 2014 to RMB222.1 million as of December 31, 2015, and our average billed receivables turnover days increased from 86 days in 2014 to 108 days in 2015. These increases were primarily attributable to (i) our increased sales in 2015 and (ii) our increased efforts to improve collection, including, among other measures, actively monitoring the progress of and coordinating with our customers for final inspection of our solution equipment in 2015,which led to more prompt final inspection and acceptance by some of our customers and enabled us to issue invoices and re-classify unbilled receivables as billed receivables more efficiently. For details, see “—Recent Measures to Increase Collection.”

Unbilled Receivables

The following table sets forth the ageing analysis of our unbilled receivables as of the date indicated.

As of December 31,

2013 2014 2015

%of %of %of RMB’000 total RMB’000 total RMB’000 total

Unbilled receivables 0-90 days...... 55,019 56.8 67,974 53.2 59,592 57.1 91-180 days ...... 11,683 12.1 3,522 2.8 21,695 20.8 181-365 days ...... 10,407 10.7 24,577 19.2 19,402 18.6 1-2 years...... 19,752 20.4 31,711 24.8 3,703 3.5 96,861 100.0 127,784 100.0 104,392 100.0

Our unbilled receivables increased from RMB96.9 million as of December 31, 2013 to RMB127.8 million as of December 31, 2014, primarily reflecting an increase in business volume. Our unbilled receivables decreased to RMB104.4 million as of December 31, 2015 from RMB127.8 million

— 248 — FINANCIAL INFORMATION as of December 31, 2014, reflecting our increased efforts to improve collection such as active coordination with our customers on final inspection, which led to more prompt final inspection and acceptance by some of our customers and enabled us to issue invoices and re-classify unbilled receivables as billed receivables more efficiently, partially offset by an increase in business volume. For details, see “—Recent Measures to Increase Collection.” Unbilled receivables ageing more than 180 days represented 31.1%, 44.0% and 22.1% of our total unbilled receivables as of December 31, 2013, 2014, and 2015, respectively. The increase in such percentage as of December 31, 2014 primarily reflected the challenging industry environment, particularly in the aftermath of the CCTV anti-corruption campaign. The decrease in such percentage as of December 31, 2015 primarily reflected our increased business volume since 2014.

The following table sets forth the movement of our unbilled receivables for the periods indicated.

For the year ended December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

At the beginning of the year ...... 57,969 96,861 127,784 Billed during the year ...... (38,217) (65,150) (124,828) Additions during the year...... 77,109 96,073 101,436 At the end of the year...... 96,861 127,784 104,392

New billed receivables have increased continuously at a higher rate than new unbilled receivables. The ratio of the amount of “billed during the year” to the amount of “additions during the year” increased from 49.6% in 2013 to 67.8% in 2014 and 123.1% in 2015.

Impairment and Provision

As of December 31, 2013, 2014 and 2015, we determined trade receivables of RMB3.5 million, RMB12.4 million and RMB13.0 million, respectively, as individually impaired. For details of our policy on impairment of trade receivables, see “—Critical Accounting Policies and Estimates—Impairment of Trade and Other Receivables.” Based on this assessment, we recognized provision for impairment loss of RMB3.5 million, RMB7.8 million and RMB11.7 million, respectively, and bad debts written off of nil, RMB4.6 million and RMB1.3 million, respectively, for the years ended December 31, 2013, 2014 and 2015. Provision for impairment loss and bad debts written off have been included in “administrative expenses” on our consolidated statements of comprehensive income. The impaired trade receivables were due from customers that were experiencing financial difficulties and in default or delinquency of payments. We did not hold any collateral as security or other credit enhancements over the impaired trade receivables.

— 249 — FINANCIAL INFORMATION

The following table sets forth the movement in the provision for impairment of trade receivables as of the dates indicated.

As of December 31,

2013 2014 2015

(RMB in thousands)

Balance at the beginning of the year...... 15,000 17,660 23,483 Provision for impairment ...... 3,517 7,806 11,717 Reversal of provision for impairment ...... (857) (1,983) (16,650) Written off as uncollectible...... — — (500) Balance at the end of the year ...... 17,660 23,483 18,050

Recent Measures to Increase Collection

Trade and bills receivables that were neither past due nor impaired are from a number of customers who had no recent history of default.

Starting from 2015, to expedite the recovery of our trade and bills receivables, we have formulated and implemented various measures, including the following:

• creating a designated leadership group, which comprises key personnel in our operations and finance departments, to monitor the progress of collecting trade and bills receivables;

• actively monitoring the progress of, and coordinating with our customers on, final inspection of our solutions;

• analyzing receivable aging and establishing company-wide monthly plans including collection items, collection amounts and collection schedule, for designated personnel in our various departments, whose progress based on the collection plans becomes a factor in their performance evaluation;

• designating key personnel for the responsibility of collecting major receivable items, with such key personnel periodically updating the receivable collection status; and

• conducting review of proposed credit terms and payment arrangements for new contracts with greater scrutiny in order to increase the prospects of successfully collecting the receivables on time.

In addition, to improve liquidity and shorten cash collection cycles, in the end of 2015, we entered into a non-recourse factoring arrangement with an independent-third-party factoring company. According to the factoring arrangement, the factoring company agrees to settle our trade receivables

— 250 — FINANCIAL INFORMATION with the aggregate carrying amount of approximately RMB69.4 million and pay us factoring proceeds of RMB60.0 million. Accordingly, we made a reversal of the provision for impairment made in prior years in the amount of RMB16.6 million. Please refer to note 16 of the Accountant’s Report as Appendix I to this prospectus for details.

As of April 30, 2016, approximately RMB79.2 million, or 24.2%, of our total trade and bills receivables (net of provision) as of December 31, 2015 had been settled. Of these RMB79.2 million, approximately RMB78.3 million were settled from third parties, representing 24.5% of our total trade and bills receivables due from third parties (net of provision) as of December 31, 2015, and approximately RMB0.9 million were settled from related parties, representing 12.9% of our total trade and bills receivables due from related parties (net of provision) as of December 31, 2015.

Other Receivables

The following table sets forth the components of our other receivables as of the dates indicated.

As of December 31,

2013 2014 2015

(RMB in thousands)

Deposits, prepayments and other receivables...... 16,103 17,304 35,520 Deposit for guarantee certificate over tendering and performance ...... 14,197 13,790 14,111 Amounts due from customers for contract work ..... 205 3,013 — Amount due from a director...... 6,097 6,119 — Amounts due from related parties ...... 47,792 66,981 9,526 Amounts due from joint ventures ...... — 3,266 12,779 VAT receivables ...... 8,348 7,212 11,501 Advances to employees ...... 5,737 4,363 7,690 Deferred IPO costs...... — — 6,192 Less: provision for impairment of other receivables...... (1,340) (1,340) (3,628) Total other receivables ...... 97,139 120,708 93,691

Our other receivables increased from RMB97.1 million as of December 31, 2013 to RMB120.7 million as of December 31, 2014, primarily due to an increase in amounts due from related parties, amounts due from customers for contract work and amounts due from joint ventures. Our other receivables decreased from RMB120.7 million as of December 31, 2014 to RMB93.7 million as of December 31, 2015, primarily due to an increase in deposits, prepayments and other receivables, amounts due from joint ventures, VAT receivables, advances to employees, and deferred IPO costs, offset by the settlement of amounts due from customers for contract work and amount due from a director.

— 251 — FINANCIAL INFORMATION

Deposits, prepayments and other receivables

Our deposits, prepayments and other receivables represented prepayments made to suppliers and other operating expenses, which remained stable in 2013 and 2014. Deposits, prepayments and other receivables increased from RMB17.3 million as of December 31, 2014 to RMB35.5 million as of December 31, 2015, primarily due to our prepayments to a number of suppliers for purchase of hardware components or work stations.

Amounts due from customers for contract work

Amounts due from customers for contract work represented the balance of aggregate cost incurred and recognized profits for the service component of the solution sales. We recognize revenue from solution sales based on the percentage of completion method. Our amounts due from customers for contract work fluctuated during the Track Record Period mainly due to the variation in the size and progress of our solution contracts at the end of each reporting period.

Deposit for guarantee certificate over tendering and performance

Our deposit for guarantee certificate over tendering and performance are placed with third parties for performing our contracts. Such deposits are interest-free and will be returned when we have completed the relevant the contracts. Our deposit for guarantee certificate over tendering and performance remained stable at RMB14.2 million, RMB13.8 million and RMB14.1 million, respectively, in 2013, 2014 and 2015.

Amount due from a director

Our amount due from a director remained stable in 2013 and 2014. The amounts due from such director were unsecured, interest-free and repayable on demand by us. For further details, see “—Related Party Transactions.” We received the amount due from such director in full in 2015.

Amounts due from related parties

Amounts due from related parties represented other receivables due from Xinxin Holding, Xin’aote Video, CDV Cloud and Wisdom Group Limited. Our amounts due from related parties increased from RMB47.8 million as of December 31, 2013 to RMB67.0 million as of December 31, 2014, primarily due to an increase in the amount due from Xinxin Holding. Our amounts due from related parties decreased from RMB67.0 million as of December 31, 2014 to RMB9.5 million as of December 31, 2015, primarily due to a decrease in the amount due from Xinxin Holding and our settlement of amount due from Wisdom Group Limited in full in 2015. The amounts due from our related parties were unsecured, interest-free and repayable on demand by us. No balance due from our related parties is past due or impaired. We had settled all the amounts due from related parties in September 2015, except for RMB8.5 million in prepaid rent and rental deposit to Xinxin Holding and Xin’aote Video and RMB0.3 million in purchase of goods or services to CDV Cloud. For further details, see “—Related Party Transactions” and “Continuing Connected Transactions—Non-exempt Continuing Connected Transactions—Lease Agreements.”

— 252 — FINANCIAL INFORMATION

Amounts due from joint ventures

Our amounts due from joint ventures of RMB3.3 million in 2014 and RMB12.8 million in 2015 were related to other receivables due from Beijing Hermit, Beijing Yueying and Xin’aote Cloud. The amounts due were unsecured, interest-free and repayable on demand by us. We expect to settle all the amounts due from joint ventures before the Listing. We did not have any joint venture in 2013.

VAT receivables

Our value-added tax receivables decreased from RMB8.3 million as of December 31, 2013 to RMB7.2 million as of December 31, 2014, primarily due to our decreased sales in 2014. Our value-added tax receivables increased from RMB7.2 million as of December 31, 2014 to RMB11.5 million as of December 31, 2015, primarily due to our increased sales in 2015.

Trade and Other Payables

The following table sets forth the components of our trade and other payables as of the dates indicated.

As of December 31,

2013 2014 2015

(RMB in thousands)

Trade and bills payables ...... 121,507 91,120 104,960 Other payables ...... 183,017 185,167 117,270 Total trade and other payables ...... 304,524 276,287 222,230

Trade and Bills Payables

Our trade and bills payables primarily relate to purchases of servers, workstations, memory modules, network equipments and third-party software we procure from third-party suppliers. Our suppliers usually grant us credit periods of 30 to 180 days.

— 253 — FINANCIAL INFORMATION

The following table sets forth the aging analysis of our trade and bills payables as well as the trade and bills payables turnover days for the period indicated.

As of and for the year ended December 31,

2013 2014 2015

(RMB in thousands, except for turnover days)

0 to 90 days...... 84,777 47,621 76,543 91 days to 180 days...... 5,948 12,355 8,658 181 to 365 days ...... 10,815 9,489 6,782 One to two years ...... 6,563 6,091 5,096 Two to three years ...... 10,985 3,467 1,264 Over three years ...... 2,419 12,097 6,617 Total trade and bills payables...... 121,507 91,120 104,960

Average trade and bills payable turnover days(1) .... 127 135 91

Note:

(1) Average trade and bills payables equal trade and bills payables at the beginning of the period plus trade and bills payables at the end of the period, divided by two. Average trade and bills payables turnover days equals average trade and bills payables divided by cost of sales and then multiplied by the number of days in the period.

Our trade and bills payables decreased from RMB121.5 million as of December 31, 2013 to RMB91.1 million as of December 31, 2014, primarily due to a decrease in our purchase of hardware equipment and software from our suppliers which was in line with the decline in our sales. Our trade and bills payables increased from RMB91.1 million as of December 31, 2014 to RMB105.0 million as of December 31, 2015, primarily due to an increase in our purchase of hardware equipment and software from our suppliers which was in line with the increase in our sales. Our trade and bills payables turnover days increased from 127 days in 2013 to 135 days in 2014 mainly due to our decreased cost of sales. Trade and bills payables turnover days decreased to 91 days in 2015 mainly due to our expedited payment arrangements as part of our efforts to control procurement costs.

— 254 — FINANCIAL INFORMATION

Other Payables

The following table sets forth the components of our other payables as of the date indicated.

As of December 31,

2013 2014 2015

(RMB in thousands)

Amounts due to customers for contract work ...... 4,707 3,821 1,319 Advances from customers ...... 88,487 55,212 11,009 Other payables and accrued charges ...... 11,520 11,357 20,986 Other tax liabilities...... 2,839 15,353 62,716 Staff costs and welfare accruals ...... 15,056 10,165 8,198 Amounts due to related parties...... 43,085 74,892 — Deferred income related to government grants ...... 17,323 14,367 13,042 Total other payables ...... 183,017 185,167 117,270

Our other payables increased from RMB183.0 million as of December 31, 2013 to RMB185.2 million as of December 31, 2014, primarily due to an increase in amounts due to related parties and other tax liabilities, which was partially offset by a decrease in advances from customers and staff costs and welfare accruals. Our other payables decreased from RMB185.2 million as of December 31, 2014 to RMB117.3 million as of December 31, 2015, primarily due to our settlement of amounts due to related parties in full in 2015 and a decrease in advances from customers, which was partially offset by an increase in other tax liabilities.

Advances from customers

Our advances from customers represented payments from our customers pursuant to the payment terms specified in the solution contracts prior to our completion the relevant milestones, such as final inspection and acceptance of our solution. We recognized such advances as revenue once relevant milestones were reached. During the Track Record Period, the amount of advances from customers fluctuated mainly due to the difference in timing between customers’ payments and our completion of milestones specified in the solution contracts and recognition of revenue.

Amounts due to related parties

Amounts due to related parties represented our other payables due to Xinxin Holding and Xin’aote Video. Our amounts due to related parties increased from RMB43.1 million as of December 31, 2013 to RMB74.9 million as of December 31, 2014, primarily due to an increase in the amount of other payables due to Xinxin Holding and Xin’aote Video. The amounts due to related parties were unsecured, interest-free and repayable on demand by the related parties. We fully settled the amounts due to Xinxin Holding and Xin’aote Video in 2015. For further details, see “—Related Party Transactions.”

— 255 — FINANCIAL INFORMATION

Other tax liabilities

Our other tax liabilities represented VAT payable, surcharges and other tax payables associated with revenue as well as personal income tax payable. Our other tax liabilities increased from RMB2.8 million as of December 31, 2013 to RMB15.4 million as of December 31, 2014 and further to RMB62.7 million as of December 31, 2015, primarily due to increases in our VAT payable, which increased from RMB1.5 million as of December 31, 2013 to RMB13.7 million as of December 31, 2014 and further to RMB57.3 million as of December 31, 2015. VAT payable is calculated as “output VAT” minus “input VAT.” Output VAT payable accrues when revenue from the corresponding sale is recognized, while input VAT is recorded when we receive physical VAT invoices from our suppliers instead of accrued when we purchase software and hardware equipments, because we are of the view that the receipt of the physical VAT invoices provides sufficient evidence that the future economic benefits will flow to us. The Reporting Accountant is of the view that the above accounting treatment is in accordance with the generally accepted accounting principles.

The increase of RMB43.6 million VAT payable as of December 31, 2015 from that as of December 31, 2014 was primarily attributable to (i) an increase of RMB30.7 million in output VAT payable reflecting (x) an increase in RMB116.4million in trade and bills receivable and (y) RMB69.4 million in original amount of trade and bills receivables that have been settled through our factoring arrangement entered into in the end of 2015; and (ii) a decrease in deductible input VAT from vendors of RMB9.3 million as a result of the amount of physical VAT invoices received was of less proportion of cost of inventories during the year, due to the delay of issuing VAT invoices from our suppliers.

During the Track Record Period, we did not have any material defaults in the payment of our trade and other payables.

Redeemable Convertible Preferred Shares

During the Track Record Period, we had four series of redeemable convertible preferred shares. We recognize our redeemable convertible preferred shares as financial liabilities at fair value through profit and loss and financial liabilities at amortized cost. As of December 31, 2013 and 2014, the redeemable convertible preferred shares recognized as current liabilities on our consolidated statement of financial position were RMB563.8 million and RMB633.3 million, respectively. As of December 31, 2015, redeemable convertible preferred shares of RMB607.8 million were classified as non-current liabilities upon the extension of redemption period to March 31, 2017 granted by preferred shareholders in July 2015. In 2013, 2014 and 2015, we paid RMB12.6 million, RMB75.0 million and RMB12.7 million, respectively, towards the redemption of the redeemable convertible preferred shares. Upon completion of a Qualified IPO, all of our outstanding redeemable convertible preferred shares will have been converted to ordinary shares and become part of our share capital and reserve. See “History, Reorganization and Group Structure—Pre-IPO Investments” and note 23 of the Accountant’s Report in Appendix I of this prospectus for further details.

Other Interest-bearing Borrowings

Our other interest-bearing borrowings totaled RMB5.0 million, RMB8.9 million and RMB75.3 million as of December 31, 2013, 2014, and 2015, respectively. The significant increase in our other

— 256 — FINANCIAL INFORMATION interest-bearing borrowings from December 31, 2014 to December 31, 2015 primarily reflected RMB47.9 million in collateralized borrowings incurred in January 2015 and US$5.0 million (equivalent to RMB32.5 million) in U.S. dollar denominated borrowings incurred in August 2015. See “—Indebtedness—Other Borrowings” and “—Net Current (Liabilities)/Assets—Working Capital” for more information.

NET CURRENT (LIABILITIES)/ASSETS

The following table sets out a breakdown of our net current (liabilities)/assets as of the date indicated.

As of December 31, As of 2013 2014 2015 April 30, 2016(1)

(unaudited)

(RMB in thousands)

Current assets Inventories...... 103,748 64,985 32,749 45,884 Trade and other receivables.... 264,871 330,849 420,206 523,109 Other financial assets ...... — 3,084 — — Pledged bank deposits...... 21,368 3,582 6,359 6,359 Bank balances and cash ...... 178,235 147,372 181,085 173,813 568,222 549,872 640,399 749,165 Current liabilities Trade and other payables ...... (304,524) (276,287) (222,230) (318,695) Income tax liabilities ...... (3,778) (87) (17,493) (23,882) Redeemable convertible preferred shares ...... (563,829) (633,255) —(2) (538,237)(2) Other interest-bearing borrowings ...... (5,000) (8,900) (70,946) (59,470) (877,131) (918,529) (310,669) (940,284) Net current (liabilities)/ assets ...... (308,909) (368,657) 329,730 (191,119)

Notes:

(1) Latest practicable date for liquidity disclosure purposes. (2) Because the redemption period was extended to March 31, 2017, our redeemable convertible preferred shares were classified as non-current liabilities as of December 31, 2015, and current liabilities as of April 30, 2016. See “—Description of Certain Consolidated Statement of Financial Position Items—Redeemable Convertible Preferred Shares.”

— 257 — FINANCIAL INFORMATION

We recorded net current liabilities of RMB308.9 million and RMB368.7 million, respectively, as of December 31, 2013 and 2014, primarily because we had redeemable convertible preferred shares of RMB563.8 million and RMB633.3 million, respectively, as of the respective dates. As of December 31, 2015, redeemable convertible preferred shares of RMB607.8 million were classified as non-current liabilities upon the extension of redemption period to March 31, 2017 granted by the preferred shareholders in July 2015. As a result of such extension, we recognized net current asset position as of December 31, 2015. Furthermore, upon completion of a Qualified IPO, all of our outstanding redeemable convertible preferred shares will have been converted to ordinary shares and become part of our share capital. For further details, see “History, Reorganization and Group Structure—Pre-IPO Investments.” However, in light of our historical net current liabilities, we cannot assure you that we will not recognize net current liabilities again in the future. A net current liability position may pose certain risks for our operations. See “Risk Factors—Risks Relating to Our Business and Industry—We recorded net current liabilities as of December 31, 2013 and 2014. We cannot assure you that we will not experience net current liabilities in the future, which could expose us to liquidity risks.”

Working Capital

Despite our net current liabilities position in 2013 and 2014, we have maintained a sound liquidity position during the Track Record Period through (i) successful offering of several series of redeemable convertible preferred shares to investors, (ii) securing bank and other borrowings and (iii) our cash flow generated from operations. As of April 30, 2016, we had bank facilities in a total amount of RMB68.4 million, of which RMB32.3 million was unutilized, and other interest-bearing borrowings in a total amount of RMB59.5 million. See “—Indebtedness—Other Borrowings.”

Assuming conversion of our redeemable convertible preferred shares upon completion of a Qualified IPO, our Directors are of the opinion that our Group has sufficient working capital for its requirements for at least the next 12 months from the date of this prospectus taking into account the financial resources available to our Group, including (i) the internally generated funds available to us, (ii) the improved collection of trade and bills receivables and (iii) the estimated net proceeds from the Global Offering. The Sole Sponsor is satisfied with the view of our Directors and the statements regarding our working capital sufficiency made by our Directors above after due and careful enquiry with our Directors.

— 258 — FINANCIAL INFORMATION

LIQUIDITY AND CAPITAL RESOURCES

Cash Flow

The following table presents selected cash flow data from our consolidated statements of cash flows for the period indicated.

As of and for the year ended December 31,

2013 2014 2015

(RMB in thousands)

Net cash from/(used in) operating activities ..... 74,007 (71,929) 27,467 Net cash (used in)/from investing activities ..... (141,985) 18,680 (123,622) Net cash (used in)/from financing activities ..... (56,825) 59,926 29,676 Net (decrease)/increase in cash and cash equivalents ...... (124,803) 6,677 (66,479) Effect of foreign exchange rate changes on cash and cash equivalents held ...... (1,381) 138 42 Cash and cash equivalents at the beginning of the year ...... 216,741 90,557 97,372 Cash and cash equivalents at the end of the year...... 90,557 97,372 30,935

Net Cash From/(Used in) Operating Activities

In 2015, our net cash from operating activities was RMB27.5 million, attributable to cash generated from operations of RMB110.6 million, offset by a net cash outflow of RMB83.1 million as a result of changes in working capital. The changes in working capital were primarily attributable to (i) an increase in trade and other payables of RMB24.7 million mainly due to increased purchase of hardware components as a result of the increased sales and (ii) a decrease in inventories of RMB29.0 million mainly due to our continued inventory optimization in 2015, partially offset by an increase in trade and other receivables of RMB136.9 million mainly due to our increased sales.

In 2014, our net cash used in operating activities was RMB71.9 million, mainly attributable to cash used in operating activities of RMB68.2 million. Our cash generated from operations prior to changes in working capital was RMB10.6 million. Changes in working capital contributed to a net cash outflow of RMB78.9 million, which was primarily attributable to (i) a decrease in trade and other payables of RMB61.4 million, mainly due to decreased purchase of hardware components as a result of the decline in sales and (ii) an increase in trade and other receivables of RMB53.7 million, mainly due to longer collection period from our customers in 2014 and increase in unbilled receivables, partially offset by a decrease in inventories of RMB36.2 million mainly due to a decrease in sales in 2014.

— 259 — FINANCIAL INFORMATION

In 2013, our net cash from operating activities was RMB74.0 million, mainly attributable to cash flows from operating activities of RMB72.8 million. Our cash generated from operations prior to changes in working capital was RMB47.7 million. Changes in working capital contributed to a net cash inflow of RMB25.1 million, which was primarily attributable to a decrease in inventories of RMB69.2 million mainly due to the purchase of significant hardware component costs for several major projects as part of inventories in the end of 2012 prior to their delivery to customers and recognition as cost of sales in 2013, partially offset by (i) a decrease in trade and other payables of RMB40.0 million mainly due to the decrease in advances from customers as we completed the relevant milestones in our solution contracts and recognized customers’ payments as revenue and (ii) an increase in trade and other receivables of RMB4.1 million mainly due to increase in sales.

Net Cash (Used in)/From Investing Activities

In 2015, our net cash used in investing activities was RMB123.6 million, which was primarily attributable to (i) an increase in time deposits with original maturities exceeding three months (which for accounting purposes would not be deemed as cash and cash equivalents) in the amount of RMB100.2 million as a result of our enhanced efforts to improve the recoverability of trade receivables in 2015, (ii) purchases of property, plant and equipment of RMB4.4 million and (iii) an addition in development costs of RMB11.8 million, partially offset by proceeds from sale of a subsidiary, CDV Cloud, of RMB7.8 million.

In 2014, our net cash from investing activities was RMB18.7 million, which was primarily attributable to (i) a decrease in time deposits with original maturities exceeding three months of RMB37.7 million, (ii) a decrease in pledged bank deposits of RMB17.8 million and (iii) interest received of RMB1.9 million, partially offset by (i) an addition in amounts due from related parties of RMB19.3 million, (ii) an addition in development costs of RMB9.5 million and (iii) purchase of property, plant and equipment of RMB4.0 million used mainly in purchasing computer equipment.

In 2013, our net cash used in investing activities was RMB142.0 million, which was primarily attributable to (i) acquisition of Beijing Zhengqi for RMB112.3 million, (ii) an increase in time deposits with original maturities exceeding three months of RMB28.0 million and (iii) purchase of property, plant and equipment of RMB12.6 million used mainly in purchasing computer equipment, partially offset by (i) a decrease in pledged bank deposits of RMB16.4 million and (ii) a repayment in amounts due from related parties of RMB4.4 million.

Net Cash (Used in)/From Financing Activities

In 2015, our net cash from financing activities was RMB29.7 million, which was primarily attributable to (i) proceeds from bank borrowings of RMB50.5 million and (ii) an addition of other borrowings of RMB47.9 million, partially offset by (i) redemption of redeemable convertible preferred shares of RMB12.7 million, (ii) a decrease in amounts due to related parties of RMB6.8 million and (iii) repayment of bank and other borrowings of RMB30.7 million.

— 260 — FINANCIAL INFORMATION

In 2014, our net cash from financing activities was RMB59.9 million, which was primarily attributable to (i) proceeds from issuance of redeemable convertible preferred shares of RMB100.0 million, (ii) an addition in amounts due to related parties of RMB31.8 million and (iii) proceeds from bank borrowings of RMB8.9 million, partially offset by (i) redemption of redeemable convertible preferred shares of RMB75.0 million and (ii) repayment of bank borrowings of RMB5.0 million.

In 2013, our net cash used in financing activities was RMB56.8 million, which was primarily attributable to (i) repayment of bank borrowings of RMB85.9 million, (ii) redemption of redeemable convertible preferred shares of RMB12.6 million, and (iii) interest paid of RMB6.4 million, partially offset by (i) an addition in amounts due to related parties of RMB43.1 million and (ii) proceeds from bank borrowings of RMB5.0 million.

INDEBTEDNESS

The following table sets forth the composition of our other interest-bearing borrowings and redeemable convertible preferred shares as of the date indicated.

As of December 31, As of 2013 2014 2015 April 30, 2016(1)

(unaudited) (RMB in thousands)

Other interest-bearing borrowings Non-current: Other borrowings ...... — — 4,363 —

Current: Short term bank borrowings, unsecured ...... 5,000 8,900 46,227 36,095 Other borrowings ...... — — 24,719 23,375 5,000 8,900 70,946 59,470 5,000 8,900 75,309 59,470

Redeemable convertible preferred shares ...... 563,829 633,255 607,832 538,237

Note:

(1) Latest practicable date for liquidity disclosure purposes.

— 261 — FINANCIAL INFORMATION

Bank Borrowings

As of December 31, 2013, 2014 and 2015, our total bank borrowings amounted to RMB5.0 million, RMB8.9 million and RMB46.2 million, respectively. All of our bank borrowings were due within one year. The effective interest rate of our bank borrowings was approximately 7.8%, 7.5% and 3.7%, respectively, as of December 31, 2013, 2014 and 2015. Our bank borrowings during the Track Record Period was primarily used to fund our working capital. As of April 30, 2016, our bank borrowings amounted to RMB36.1 million.

As of December 31, 2013, 2014, 2015 and April 30, 2016, our unsecured bank borrowings were guaranteed by the following:

As of December 31, As of April 2013 2014 2015 30, 2016

(unaudited) (RMB in thousands)

Personal guarantee by Mr. Zheng ...... 5,000 5,000 — — Cross-guarantee by Mr. Zheng and Xinxin Holding ...... — — 9,959 — Cross-guarantee(1) by Mr. Liu Baodong and a third party ...... — — 3,800 3,800 Guarantee by a minority shareholder of a subsidiary of our Group ...... — 900 — — Guarantee by a third party...... — 3,000 — — 5,000 8,900 13,759 3,800

Note:

(1) As of April 30, 2016, our unsecured bank borrowings of RMB3.8 million were cross guaranteed (i.e., jointly guaranteed) by Mr. Liu Baodong and a third party, while we did not provide cross guarantees to the aforesaid parties.

In addition, during 2015, our bank borrowings of RMB32,468,000 (equivalent to US$5.0 million) as of December 31, 2015 were guaranteed by a one-year standby letter of credit issued by Bank of Ningbo Co., Ltd. for a maximum amount of US$5.0 million.

— 262 — FINANCIAL INFORMATION

Our borrowing agreements contain certain financial and non-financial covenants commonly found in lending arrangements with financial institutions in China. For example, certain of our subsidiaries are prohibited from merger, restructuring, spin-off, material asset transfer, liquidation, change of control, reduction of registered capital, change of scope of business, declaration of dividends and incurring further indebtedness without the prior consent of the relevant banks. Certain of our borrowing agreements also contain cross default provisions. During the Track Record Period and up to the Latest Practicable Date, we had not defaulted on any obligation in any material respect under our borrowing agreements and we had not experienced any material difficulties in obtaining bank borrowings.

Other Borrowings

As of December 31, 2013, 2014 and 2015, our secured other borrowings amounted to nil, nil and RMB29.1 million, respectively. The amount of our secured other borrowings totaled RMB23.4 million as of April 30, 2016.

On January 23, 2015, we entered into a collateralized borrowing arrangement with a third party (the “Buyer”). Under the arrangement, we agreed to (i) transfer 63 self-developed patent rights to the Buyer (with nil carrying amount as of the date of transfer) for a consideration of RMB50.0 million, (ii) lease back the same assets from the Buyer for a lease period from 2015 to 2017 at a fixed interest rate, and (iii) purchase such patent rights back at a consideration of RMB50.0 million once the lease period expires. During the lease period, we are the exclusive licensee for the patents transferred. We considered the substance of the above transactions and determined it to be a collateralized borrowing since we retained effective control over the leased assets through the arrangement. Accordingly, we initially recognized a borrowing of RMB47.9 million (net of directly attributable transaction costs of RMB2.1 million). As of December 31, 2015 and April 30, 2016, the borrowing is secured by our intangible assets with nil carrying amount and guaranteed by Mr. Zheng and Xinxin Holding. The amount carries an effective interest rate of 3.70% per annum and is repayable by quarterly installments until its maturity in 2017.

The personal guarantees provided by Mr. Zheng will be released before the Listing through (i) repayment of the relevant borrowings by our Group or (ii) through consent given by the relevant lenders to release such personal guarantees.

Redeemable Convertible Preferred Shares

We recognized our redeemable convertible preferred shares as financial liabilities. For further details, see “History, Reorganization and Group Structure—Pre-IPO Investments” and “Financial Information—Description of Certain Consolidated Statement of Financial Position Items—Redeemable Convertible Preferred Shares.”

— 263 — FINANCIAL INFORMATION

CONTINGENT LIABILITIES

As of the Latest Practicable Date, we did not have any contingent liabilities.

Except as disclosed herein and apart from intra-group liabilities, we did not have any outstanding loan capital, bank overdrafts and liabilities under acceptances or other similar indebtedness, debentures, mortgages, charges or loans, or acceptance credits or hire purchase commitments, guarantees or other material contingent liabilities or any covenant in connection therewith as of April 30, 2016, being the latest practicable date for the purpose of the indebtedness statement. Our Directors have confirmed that there had not been any material change in the indebtedness, capital commitments and contingent liabilities of our Group since April 30, 2016 and up to the Latest Practicable Date.

As of April 30, 2016, we did not have any definitive plan to raise external financing except for the Global Offering. As of April 30, 2016, we had total bank facilities of RMB68.4 million, of which RMB32.3 million was unutilized bank facilities.

COMMITMENTS

Capital Commitments

We incurred capital commitments of RMB32.0 million in 2014. Our capital commitments were primarily related to expenditure in respect of investment in our subsidiary, Beijing Meicam and in joint ventures including Beijing Hermit, Beijing Yueying and Xin’aote Cloud. We did not incur capital commitments as of December 31, 2015.

As of December 31, 2013, 2014 and 2015, we had the following commitments:

As of December 31,

2013 2014 2015

(RMB in thousands)

Contracted but not provided for in the financial information: Expenditure in respect of investment in a subsidiary ...... — 10,000 — Expenditure in respect of investments in joint ventures ...... — 22,000 — — 32,000 —

— 264 — FINANCIAL INFORMATION

Operating Lease Commitments

We lease our office and various residential properties under non-cancellable operating lease agreements, ranging from one to three years. The leases have varying lease terms and renewal rights. The table below sets forth our future minimum rental payments under non-cancellable operating lease agreements as of the date indicated.

For the year ended December 31,

2013 2014 2015

(RMB in thousands)

Within one year ...... 12,915 13,381 7,079 In the second to fifth year inclusive ...... 44,598 44,226 — 57,513 57,607 7,079

During the year ended December 31, 2015, our Group terminated certain long-term office lease agreements with its related companies without compensation, and renewed the office lease agreements with one year term.

As of December 31, 2015, we had no other purchase or capital commitments.

RELATED PARTY TRANSACTIONS

In 2013, 2014 and 2015, our rental expense transactions with Xinxin Holding and Xin’aote Video amounted to RMB12.3 million, RMB15.3 million and RMB14.8 million, respectively. We also engaged in sales of good and provision of services with Xin’aote Video and CDV Cloud in the amount of RMB0.5 million, RMB2.1 million and RMB10.9 million in 2013, 2014 and 2015, respectively. In 2015, we disposed of our entire equity interest in CDV Cloud to Mr. Zheng and an independent third party for a consideration of RMB6.0 million and RMB2.0 million, respectively. We also disposed of certain property, plant and equipment in the amount of RMB0.8 million to Beijing Hermit, Xin’aote Cloud and Beijing Yueying in 2015.

Guarantees

In 2013, 2014 and 2015, Mr. Zheng provided a personal guarantee for our banking borrowings of RMB5.0 million, RMB5.0 million and nil, respectively. In addition, in 2013, 2014 and 2015, Mr. Zheng and Xinxin Holding provided guarantees for certain of our unutilized banking facilities in the amount of RMB30.0 million, RMB35.0 million and nil, respectively. In January 2015, Mr. Zheng also provided a personal guarantee for our RMB50.0 million collateralized borrowing. As of February 29, 2016, Mr. Liu also provided a personal guarantee for our banking borrowing of RMB3.8 million. The personal guarantees provided by Mr. Zheng will be released before the Listing through (i) repayment of the relevant borrowings by our Group or (ii) through consent given by the relevant lenders to release such personal guarantees.

— 265 — FINANCIAL INFORMATION

Amount Due From a Director

As of December 31, 2013 and 2014, our amount due from a director, namely Mr. Zheng, amounted to RMB6.1 million and RMB6.1 million, respectively. Such amount was unsecured, interest free and repayable on demand, and was received in September 2015.

Amounts Due From Related Parties

As of December 31, 2013, 2014 and 2015, our other receivables due from related parties, namely Xinxin Holding, Xin’aote Video, CDV Cloud and Wisdom Group Limited, amounted to RMB47.8 million, RMB67.0 million and RMB9.5 million, respectively. Such amounts due were unsecured, interest free and repayable on demand.

As of December 31, 2013, 2014 and 2015, our trade receivables due from Xin’aote Video amounted to RMB0.5 million, RMB1.3 million and RMB3.5 million, respectively, in connection with Xin’aote Video’s purchase of certain solutions, services and products from us for the Special Qualification Projects. For further details, see “Continuing Connected Transactions— Non-exempt Continuing Connected Transactions—Supply Framework Agreement.”

As of December 31, 2015, our trade receivables due from CDV Cloud amounted to RMB3.3 million in connection with our provision of certain Saas solutions for a contract entered into by CDV Cloud to provide both PaaS and Saas solutions.

We had settled all the amounts due from related parties in September 2015, except for RMB8.5 million in prepaid rent and rental deposit to Xinxin Holding and Xin’aote Video and RMB0.3 million in purchase of goods and services to CDV Cloud. For further details, see “Continuing Connected Transactions—Non-exempt Continuing Connected Transactions—Lease Agreements.”

Amounts Due To Related Parties

As of December 31, 2013 and 2014, our other payables due to related parties, namely Xinxin Holding and Xin’aote Video, amounted to RMB43.1 million and RMB74.9 million, respectively. Such amounts due were unsecured, interest free and repayable on demand, and we fully settled such amounts due to related parties as of December 31, 2015.

OFF-BALANCE SHEET ARRANGEMENTS

We have not entered into any off-balance sheet arrangements or commitments to guarantee the payment obligations of any third parties. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing or hedging or research and development services with us.

— 266 — FINANCIAL INFORMATION

QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK

We are exposed to various types of market risks in the ordinary course of our business, including foreign currency risk, interest rate risk, price risk, credit risk and liquidity risk. We manage our exposure to these risks through regular operating and financial activities. The Board regularly reviews these risks and our financial risk management policy seeks to ensure that adequate resources are available to manage the market risks summarized below and to create value for our Shareholders.

Foreign Currency Risk

The transactions of the Company are denominated and settled in our functional currency, U.S. dollar. The majority of the Company’s assets and liabilities, including bank balances and the redeemable convertible preferred shares, were denominated in U.S. dollar. Our subsidiaries mainly operate in the PRC and majority of the transactions are settled in Renminbi except for certain bank balances and bank borrowings which are denominated in the U.S. dollar. Foreign currency risk arises when future commercial transactions and recognized assets and liabilities are denominated in a currency that is not either Company’s or our subsidiaries’ functional currency. We also maintained the proceeds from our pre-IPO investments in U.S. dollars under our offshore subsidiaries’ accounts during the Track Record Period. As of December 31, 2013 and 2014, we did not have significant foreign currency risk from our operations. As of December 31, 2015, we had short-term bank borrowings and bank balances denominated in U.S. dollar of RMB42.4 million and RMB2.1 million, respectively. If Renminbi had strengthened/weakened by 5% against the U.S. dollar with all other variables held constant, the profit after income tax and accumulated loss would have been approximately RMB2.0 million higher/lower and RMB2.0 million lower/higher respectively for the year ended December 31, 2015. We do not hedge against any foreign currency risk. However, our management monitors the foreign currency exposure and will consider hedging against any significant foreign currency exposure should the need arise.

Interest Rate Risk

Interest rate risk relates to the risk that the fair value or cash flows of a financial instrument will fluctuate because of changes in market interest rates. Our interest rate risk arises primarily from our bank balances which carry interest at effective market rates and our interest-bearing borrowings. Borrowings bearing variable rates expose us to cash flow interest rate risk. As of December 31, 2013 and 2014, it is estimated that a general increase/decrease of 100 basis points in interest rates, with all other variables held constant, would have decreased our loss after income tax and accumulated losses by approximately RMB1.9 million and RMB1.4 million, respectively. As at December 31, 2015, it is estimated that a general increase/decrease of 100 basis points in interest rates, with all other variables held constant, would have increased our profit after income tax and decreased our accumulated losses by approximately RMB1.4 million.

Interest rate risk also arose from our redeemable convertible preferred shares, the valuation of which is affected by market interest rate. The estimated fair value of redeemable convertible preferred shares as of December 31, 2013, 2014 and 2015 would have been approximately RMB11.8 million lower/RMB13.6 million higher, RMB27.8 million lower/RMB27.9 million higher, and RMB37.9

— 267 — FINANCIAL INFORMATION million lower/RMB44.8 million higher, respectively, should the discount rate used in the discount cash flow analysis were higher/lower by 100 basis point from management’s estimates. We have not used any derivative financial instruments to manage our interest risk exposure. Interest-earning instruments carry a degree of interest rate risk.

Price Risk

We are mainly exposed to price risk in relation to our redeemable convertible preferred shares carried at fair value through profit or loss. Fair value of redeemable convertible preferred shares is affected by changes in our market value. We are not exposed to commodity price risk. If our equity value had increased/decreased by 10% with all other variables held constant, our loss after income tax for the year ended December 31, 2013 and 2014 would have been RMB17.3 million higher/RMB18.5 million lower and RMB55.9 million higher/RMB56.9 million lower, respectively, and our profit after income tax for the year ended December 31, 2015 would have been RMB46.9 million lower/RMB49.1 million higher.

Credit Risk

We are exposed to credit risk in relation to our cash and bank deposits and trade and other receivables.

The carrying amounts of cash and cash equivalents, restricted cash and trade and other receivables included in the Accountant’s Report in Appendix I to this prospectus represent our maximum exposure to credit risk in relation to our financial assets. To manage this risk arising from cash and deposits, we only transact with state-owned financial institutions and reputable commercial banks which are all high-credit-quality financial institutions. There has been no recent history of default in relation to these financial institutions.

With respect of trade and other receivables, we perform individual credit evaluations on all customers and counterparties. These evaluations focus on the counterparties’ past history of making payments when due and current ability to pay, and take into account information specific to the counterparties as well as pertaining to the economic and business environment in which the counterparties operates. We have implemented monitoring procedures to ensure the following-up action is taken to recover overdue debts. In addition, we review the recoverable amount of each individual trade and other receivables balance at the end of each reporting periods to ensure adequate impairment losses are made for irrecoverable amounts. Given the constant repayment history, the Directors are of the view that the risk of default by these counterparties is low.

Liquidity Risk

Liquidity risk relates to the risk that we will not be able to meet our obligations associated with our financial liabilities that are settled by delivering cash or another financial asset. We are exposed to liquidity risk in respect of settlement of our trade payables and our financing obligations and also in respect of our cash flow management. Our policy is to regularly monitor current and expected

— 268 — FINANCIAL INFORMATION liquidity requirements and our compliance with lending covenants and our relationship with its bankers and related parties to ensure that we maintain sufficient reserves of cash and cash equivalents and adequate committed lines of funding from major financial institutions to meet our liquidity requirements in the short and longer term.

Analyzed below is our remaining contractual maturities for our non-derivative financial liabilities as of December 31, 2013, 2014 and 2015. When a creditor has a choice of when the liability is settled, the liability is included on the basis of the earliest date on when we might be required to pay. Where the settlement of the liability is in installments, each installment is allocated to the earliest period in which we are committed to pay.

The contractual maturity analysis below is based on the undiscounted cash flows of the financial liabilities.

Total contractual Within one year Over one year but undiscounted or on demand within five years amount Carrying amount

(RMB in thousands)

As of December 31, 2013 Trade and other payables . 194,098 — 194,098 194,098 Other interest—bearing borrowings ...... 5,285 — 5,285 5,000 Redeemable convertible preferred shares ...... 725,285 — 725,285 563,829 924,668 — 924,668 762,927

As of December 31, 2014 Trade and other payables . 202,887 — 202,887 202,887 Other interest—bearing borrowings ...... 9,423 — 9,423 8,900 Redeemable convertible preferred shares ...... 754,286 — 754,286 633,255 966,596 — 966,596 845,042

As of December 31, 2015 Trade and other payables . 134,144 — 134,144 134,144 Other interest—bearing borrowings ...... 73,828 4,528 78,356 75,309 Redeemable convertible preferred shares ...... — 779,566 779,566 607,832 207,972 784,094 992,066 817,285

— 269 — FINANCIAL INFORMATION

SUMMARY OF KEY FINANCIAL RATIOS

The following table sets forth certain key financial ratios as of the date or for the period indicated.

As of and for the year ended December 31,

2013 2014 2015

Profitability ratio Gross profit margin ...... 27.2% 29.3% 35.0% Net profit margin...... NM NM 18.8%

Liquidity ratio Current ratio(1) ...... 0.65 0.60 2.06 Quick ratio(2) ...... 0.53 0.53 1.96

Capital adequacy ratio Interest coverage ratio(3) ...... NM NM 8.79

Non-IFRS financial ratio Adjusted net (loss)/profit margin(4) ...... NM NM 4.4% Adjusted EBITDA margin(5)...... 1.1% NM 13.2%

Notes:

(1) Current ratio is derived by dividing our current assets by our current liabilities at the end of each financial period.

(2) Quick ratio is our current assets less inventories dividing by current liabilities at the end of each financial period.

(3) Interest coverage ratio is calculated by dividing our profit from operations for the period, which is profit before finance costs and income tax expenses, by finance costs for each of the financial period.

(4) Adjusted net (loss)/profit margin is calculated by dividing our adjusted net (loss)/profit for the year by revenue for each of the financial period. For reconciliation of adjusted net (loss)/profit, a non-IFRS financial measure, to our (loss)/profit for the year, see “—Non-IFRS Financial Measures.”

(5) Adjusted EBITDA margin is calculated by dividing our adjusted EBITDA for the period by revenue for each of the financial period. For reconciliation of adjusted EBITDA a non-IFRS measure, to our (loss)/profit for the year, see “—Non-IFRS Financial Measures.”

“NM” means not meaningful.

Please refer to “—Results of Operations—Year Ended December 31, 2015 Compared to Year Ended December 31, 2014” and “—Year Ended December 31, 2014 Compared to Year Ended December 31, 2013” above for a discussion of the factors affecting our gross profit margin and net profit margin during the respective periods.

— 270 — FINANCIAL INFORMATION

Current Ratio

Our current ratio decreased from 0.65 times as of December 31, 2013 to 0.60 times as of December 31, 2014 mainly due to our increased liabilities of redeemable convertible preferred shares. As of December 31, 2015, our current ratio increased to 2.06 times mainly due to our increased trade and other receivables as a result of our increased sales in 2015 and the decrease in our current liabilities in 2015 as a result of the extension of redemption period to March 31, 2017 granted by our preferred shareholders in July 2015.

Quick Ratio

As of December 31, 2013, 2014 and 2015, our quick ratio was 0.53, 0.53, and 1.96 times, respectively. Our quick ratio generally increased to 1.96 times as of December 31, 2015 primarily due to our increased trade and other receivables and the decrease in our current liabilities in 2015 as a result of the extension of redemption period to March 31, 2017 granted by our preferred shareholders in July 2015.

Interest Coverage Ratio

In 2013 and 2014, our interest coverage ratios were not meaningful because we recorded net losses in these years. In 2015, our interest coverage ratio was 8.79 times after we recorded a net profit.

Adjusted Net (Loss)/Profit Margin and Adjusted EBITDA Margin

Our adjusted net (loss)/profit margin was not meaningful in 2013 and 2014, and our adjusted EBITDA margin was not meaningful in 2014 because we recorded net losses in those years. Our adjusted EBITDA margin was 1.1% in 2013. Our adjusted net (loss)/profit margin and adjusted EBITDA margin were 4.4% and 13.2%, respectively, in 2015 after we recorded a net profit.

NON-IFRS FINANCIAL MEASURES

We use adjusted net (loss)/profit and adjusted EBITDA to provide additional information about our operating performance as we believe that they are useful measures for certain investors to assess our operating results.

Adjusted net (loss)/profit refers to our (loss)/profit for the year excluding share-based compensation expense, fair value changes on redeemable convertible preferred shares, loss on extinguishment of redeemable convertible preferred shares, expenses related to Listing, gain on disposal of intangible assets, gain on disposal of a subsidiary, value-added tax refunds and subsidy income from government. Adjusted EBITDA refers to our adjusted (loss)/profit for the year before depreciation and amortization, interest income, finance costs and income tax expenses/credit.

— 271 — FINANCIAL INFORMATION

The use of either adjusted net (loss)/profit or adjusted EBITDA has material limitations as an analytical tool, as neither of them includes all items that impact our profit for the relevant period. Items excluded from adjusted net (loss)/profit and adjusted EBITDA are significant components in understanding and assessing our operating and financial performances.

The following table reconciles our (loss)/profit for the year under IFRS to our definitions of adjusted net (loss)/profit and adjusted EBITDA for the periods indicated:

For the year ended December 31,

2013 2014 2015

(RMB in thousands)

(Loss)/Profit for the year ...... (12,190) (69,400) 114,114 Add: Share-based compensation expense...... 2,190 886 3,835 Subsidy income from government ...... (17,948) (12,393) (15,347) Value-added tax (“VAT”) refunds ...... (19,685) (16,295) (23,886) Fair value loss/(gain) on redeemable convertible preferred shares ...... 26,696 28,079 (70,820) Loss on extinguishment of redeemable convertible preferred shares ...... — 14,724 21,969 Listing-related expenses...... — — 15,209 Gain on disposal of intangible assets ...... — — (10,800) Gain on disposal of a subsidiary ...... — — (7,872) Adjusted net (loss)/profit (unaudited)...... (20,937) (54,399) 26,402

Add: Depreciation and amortization...... 21,960 30,716 25,531 Interest income ...... (2,430) (2,192) (1,491) Finance costs ...... 5,103 870 16,349 Income tax expense/(credit) ...... 1,833 (7,106) 13,256 Adjusted EBITDA (unaudited)...... 5,529 (32,111) 80,047

You should not consider our definitions of adjusted net (loss)/profit and adjusted EBITDA in isolation or construe them as alternatives to our (loss)/profit for the year indicated or as indicators of operating performance or any other standard measure under IFRS. Definitions of adjusted net (loss)/profit and adjusted EBITDA may vary between companies depending on the method of accounting adopted by a company. Therefore, our adjusted net (loss)/profit and adjusted EBITDA measures may not be comparable to similarly titled measures used by other companies.

— 272 — FINANCIAL INFORMATION

CAPITAL EXPENDITURES

We incur capital expenditures mainly for purchases and upgrade of computer equipment, furniture and office equipment, vehicles and intangible assets, leasehold improvements, capitalized costs related to our research and development personnel, and business acquisition. The following table sets forth our capital expenditures for the periods indicated.

For the year ended December 31,

2013 2014 2015

(RMB in thousands)

Purchase of property, plant and equipment ...... 12,568 3,962 4,391 Purchase of intangible assets ...... 333 58 20 Development costs ...... 9,098 9,487 11,764 Business acquisition...... 112,337 — — Total capital expenditure ...... 134,336 13,507 16,175

Capital expenditure for business acquisition in 2013 related to our acquisitions of Beijing Zhengqi and the digital broadcast automation solutions business from Founder Electronics in September 2013. We expect to incur capital expenditures of approximately RMB24.6 million in 2016 for purchases and upgrade of computer equipment, furniture and office equipment, vehicles and intangible assets, leasehold improvements and capitalized costs related to our research and development personnel.

We expect to fund these capital needs by cash generated from our operating activities as well as the net proceeds from the Global Offering. See “Future Plans and Use of Proceeds.”

— 273 — FINANCIAL INFORMATION

UNAUDITED PRO FORMA STATEMENT OF ADJUSTED NET TANGIBLE ASSETS

The following unaudited pro forma statement of our adjusted net tangible assets is prepared in accordance with Rule 7.31 of the GEM Listing Rules and is set out below to illustrate the effect of the Global Offering on the net tangible liabilities of our Group attributable to the equity owners of the Company as of December 31, 2015 as if the Global Offering had taken place on that date.

This unaudited pro forma statement of adjusted net tangible assets has been prepared for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of the financial position of our Group had the Global Offering been completed as of December 31, 2015 or at any future date.

Audited Unaudited pro consolidated net Estimated forma adjusted tangible liabilities impact to the net tangible of our Group net assets upon assets of our attributable to the the conversion Group Unaudited pro equity holders of Estimated net of the attributable to forma adjusted Company as of proceeds from preferred the equity net tangible December 31, the Global shares of the holders of the assets per 2015(1) Offering (2) Company(3) Company Share(4)

(RMB in thousands) RMB HK$

Based on an offer price of HK$1.90 per share ...... (262,127) 212,872 607,832 558,577 0.90 1.07 Based on an offer price of HK$2.57 per share ...... (262,127) 300,362 607,832 646,067 1.04 1.23

Notes: (1) The audited consolidated net tangible liabilities of our Group attributable to equity holders of the Company as of December 31, 2015 is extracted from the Accountant’s Report of our Company as set out in Appendix I to this prospectus, which is based on the audited consolidated net liabilities of the Group attributable to equity holders of the Company as of December 31, 2015 of RMB119,929,000 with an adjustment for the intangible assets and goodwill as of December 31, 2015 of RMB67,978,000 and RMB74,220,000 respectively. (2) The estimated net proceeds from the Global Offering are based on 155,000,000 Offer Shares at the Offer Price of HK$1.90 and HK$2.57 per Share after deduction of the underwriting fees and commissions and other estimated listing-related expenses (excluding listing-related expenses of approximately RMB15,209,000 which have been accounted for prior to December 31, 2015) payable by the Company and takes no account of any Shares which may be allotted and issued upon the exercise of the Over-allotment Option or any Shares which may be allotted and issued or repurchased by the Company under the general mandates granted to the Directors or any Shares which may be issued upon the exercise of the options which were granted under the Pre-IPO Share Option Scheme. (3) Pursuant to the terms and conditions of the redeemable or non-redeemable convertible preferred shares of the Company (the “Preferred Shares”), as disclosed in Note 23 to Section II of the Accountant’s Report set out in Appendix I to this prospectus, all the Preferred Shares will automatically be converted into the appropriate number of ordinary shares at the applicable then-effective conversion price upon the completion of a Qualified IPO (an IPO on a qualified exchange that values the Company at no less than US$250 million immediately prior to such IPO, and upon consummation of which at least 25% of the outstanding ordinary shares are tradable without restriction). Taking into account that our Group has obtained written confirmations (the “Waivers”) from these holders in December 2015 and January 2016 to deem the Listing as a Qualified IPO, hence, upon the Global Offering, 67,289,333 Series A

— 274 — FINANCIAL INFORMATION

Preferred Shares, 60,829,333 Series A-1 Preferred Shares, 104,637,867 Series B Preferred Shares and 30,495,000 Series C Preferred Shares will be automatically converted to ordinary shares of the Company at their respective conversion rates (being 1:0.75; 1:0.75; 1:0.9375 and 1:1 for Series A Preferred Shares, Series A-1 Preferred Shares, Series B Preferred Shares and Series C Preferred Shares respectively) and the carrying amounts of the above preferred shares of RMB607,832,000 as at December 31, 2015 recorded as liabilities of the Company will be transferred to the Company’s equity. (4) The unaudited pro forma adjusted net tangible assets per Share is arrived at after the adjustments referred to in the preceding paragraphs and on the basis of 620,000,000 Shares (being the number of ordinary shares expected to be in issue immediately after completion of the Global Offering) . No account has been taken of the Shares which may be allotted and issued upon the exercise of the Over-allotment Option or any Shares which may be allotted and issued or repurchased by the Company under the general mandates granted to the Directors or any Shares which may be issued upon the exercise of the options which were granted under the Pre-IPO Share Option Scheme. (5) Except for the Waivers obtained as mentioned in note (3) above, no adjustment has been made to reflect any trading result or other transactions of our Group entered into subsequent to December 31, 2015. (6) For the purpose of this unaudited pro forma statement of adjusted net tangible assets, the balances stated in Renminbi are converted into Hong Kong dollars at the rate of HK$1.00 to RMB0.84331.

DISTRIBUTABLE RESERVES

As of December 31, 2015, we did not have any distributable reserves.

DISCLOSURE UNDER CHAPTER 17 OF THE GEM LISTING RULES

Our Directors confirm that, except as otherwise disclosed in this prospectus, as of the Latest Practicable Date, there was no circumstance that would give rise to a disclosure requirement under Rules 17.15 to 17.21 of the GEM Listing Rules.

RULE 11.12A(1) OF THE GEM LISTING RULES — MINIMUM CASH FLOWS REQUIREMENT

Based on the Accountant’s Report in Appendix I of this prospectus, our total operating cash flow generated from operating activities before changes in working capital and income tax paid for the financial years ended December 31, 2014 and 2015 in aggregate amounted to approximately HK$144.3 million. Our Directors confirm that our Group is able to meet the cash flows requirement under Rule 11.12A(1) of the GEM Listing Rules.

DIVIDENDS

— 275 — FINANCIAL INFORMATION

LISTING EXPENSES

We incurred listing expenses of RMB15.2 million during the Track Record Period recorded under administrative expenses under the relevant accounting standards. We expect to incur further listing expenses (excluding underwriting commissions) amounting to RMB11.3 million in 2016, of which approximately RMB2.6 million is directly attributable to the issue of new Shares to the public and to be accounted for as a deduction from equity, and of which approximately RMB8.7 million is expected to be reflected in our consolidated statements of comprehensive income. The listing expenses above are the latest practicable estimates and are provided for reference only, and actual amounts may differ. Our Directors do not expect such expenses to have a material adverse impact on our financial results for the year ending December 31, 2016.

DIRECTORS’ CONFIRMATION ON NO MATERIAL ADVERSE CHANGE

Our Directors confirm that they have performed sufficient due diligence on our Company to ensure that, up to the date of this prospectus, there has been no material adverse change in our financial or trading position or prospects since December 31, 2015, and there have been no events since December 31, 2015 which would materially affect the information shown in the Accountant’s Report set out in Appendix I to this prospectus.

— 276 — FUTURE PLANS AND USE OF PROCEEDS

FUTURE PLANS

See the section headed “Business—Business Strategy” in this prospectus for a detailed description of our future plans.

Implementation plans

The implementation plans set forth below are based on certain bases and assumptions as set out in paragraph headed “Bases and assumptions” in this section. These bases and assumptions are inherently subject to many uncertainties and unpredictable factors, in particular the risk factors as set out in the section headed “Risk Factors” in this prospectus. There is no assurance that our business objectives will be achieved or our business plans will be implemented according to the estimated time frame or at all.

We set out below the implementation plans to carry out our business strategies from the Latest Practicable Date to December 31, 2018.

For the period from the Latest Practicable Date to June 30, 2016

• gain market share by offering • commercialize “Aquila,” our new cloud-based solutions based on latest industry video editing system trends and expanding customer base

• create recurring and high margin • upgrade the technology and equipments for our revenue streams by further digitization and cataloging of media asset service strengthening and developing our service business

• further develop and invest in • recruit additional talented personnel for Meicam’s innovative products and research and development team businesses • improve the existing functions and add new features for Meicam

— 277 — FUTURE PLANS AND USE OF PROCEEDS

For the period from July 1, 2016 to December 31, 2016

• gain market share by offering • enter into additional omnimedia solutions solutions based on latest industry contracts with major customers trends and expanding customer • enter into solutions contracts with major base customers to help them upgrading to high definition and 4K ultra-high definition standards • increase spending to market new products such as “Aquila” and the Tianmu meteorological graphics system • create recurring and high margin • improve the quality of our multi-camera recording revenue streams by further and editing service strengthening and developing our • recruit additional talented personnel and invest in service business additional equipments for our multi-camera recording and editing service • increase R&D spending for our live sports broadcasting service to expand its service range and capabilities • further develop and invest in • increase R&D spending to develop additional innovative products and cloud service products based on SaaS model businesses • selectively pursue strategic • initiate search for investment and acquisition investments and acquisitions targets in China, mainly upstream and downstream market participants in the post-production industry

For the period from January 1, 2017 to June 30, 2017

• gain market share by offering • enter into additional omnimedia solution contracts solutions based on latest industry with major customers trends and expanding customer • increase spending to promote our solutions base compatible with the 4K ultra-high definition standard • improve the cost-effectiveness of our solutions • create recurring and high margin • invest in cloud service resources revenue streams by further • increase R&D spending to develop additional strengthening and developing our cloud service products based on SaaS model service business • further develop and invest in • increase spending to promote Meicam and expand innovative products and its user base businesses • initiate internal R&D projects to prepare for eventual spin-offs • selectively pursue strategic • conduct market research and due diligence on investments and acquisitions potential investment and acquisition targets in China

— 278 — FUTURE PLANS AND USE OF PROCEEDS

For the period from July 1, 2017 to December 31, 2017

• gain market share by offering • increase spending to promote cloud-based solutions based on latest industry solutions trends and expanding customer • expand in-house sales team base

• create recurring and high margin • commercialize two to three cloud service products revenue streams by further • transition the existing digitization and cataloging strengthening and developing our of media asset service into a platform for trading service business digitized and catalogued media assets

• further develop and invest in • commercialize Meicam to generate revenue innovative products and streams through business-to-business transactions businesses

• selectively pursue strategic • complete one to two investments or acquisitions in investments and acquisitions China For the period from January 1, 2018 to June 30, 2018

• gain market share by offering • enter into additional omnimedia and cloud-based solutions based on latest industry solutions with major customers and popularize trends and expanding customer both solutions in the digital video market in China base

• create recurring and high margin • expand the capabilities of cloud service based on revenue streams by further SaaS model strengthening and developing our service business

• further develop and invest in • complete one to two internal R&D projects for innovative products and potential spinoffs as start-ups businesses • establish a R&D center in Chengdu, China, which is expected to focus on the fundamental research of digital video technologies, such as design and optimization of software algorithm and architecture

• selectively pursue strategic • initiate search for international investment and investments and acquisitions acquisition opportunities For the period from July 1, 2018 to December 31, 2018

• gain market share by offering • Offer comprehensive cloud-based solutions to a solutions based on latest industry larger customer base including individual trends and expanding customer consumers base

— 279 — FUTURE PLANS AND USE OF PROCEEDS

• create recurring and high margin • transition the existing multi-camera recording and revenue streams by further editing service into a one-stop service for the strengthening and developing our production of live entertainment TV programs service business

• further develop and invest in • increase spending to promote the internally innovative products and developed R&D projects and prepare for eventual businesses spinoffs

• selectively pursue strategic • Conduct market research and due diligence on investments and acquisitions potential investment or acquisition targets overseas

Basis and assumptions

The implementation plan formulated by our Directors is based on the following general assumptions:

• there will be no material changes in the existing political, legal, fiscal, social or economic conditions in the PRC or in any other places in which we carry on our business or will carry on our business;

• there will be no material changes in the prospects of the TV broadcasting industry in general and the post-production segment in particular;

• there will be no material changes in industry trends and customer preferences due to technology advancement or otherwise that we are unable to accurately predict or address;

• there will be no significant changes in our business relationship with our major customers;

• we will have sufficient financial resources to meet the planned capital expenditure and business development plans during the period to which the business objectives relate;

• there will be no material changes in the existing government policies relating to the TV broadcasting industry or in the political, economic or market conditions in the places in which we operate or will operate;

• there will be no material changes in the bases or rates of taxation in the PRC;

— 280 — FUTURE PLANS AND USE OF PROCEEDS

• our Group will be able to renew and obtain all relevant license required for our existing or proposed businesses;

• there will be no material changes in the funding required for each of the scheduled achievements as outlined under the paragraph headed “Implementation plans” above in this section;

• we will be able to retain our key staff in our management team as well as our professional staff and recruit suitable staff for our expansion when and if necessary;

• we will not be materially affected by the risk factors as set out under the section headed “Risk Factors” in this prospectus; and

• we continue our existing operations in substantially the same manner as they were carried our during the Track Record Period and we will also be able to carry out our development plans without material disruptions.

USE OF PROCEEDS

The net proceeds of the Global Offering we expect to receive (after deduction of underwriting fees and estimated expenses paid and payable by us in relation to the Global Offering and assuming that the Over-allotment Option is not exercised) are estimated to be approximately HK$234.4 million, assuming an Offer Price of HK$1.90 per Share, or HK$338.1 million, assuming an Offer Price of HK$2.57 per Share (or if the Over-allotment Option is exercised in full, HK$278.5 million, assuming an Offer Price of HK$1.90 per Share, or HK$397.8 million, assuming an Offer Price of HK$2.57 per Share).

Assuming the Over-allotment Option is not exercised and assuming an Offer Price of HK$2.24 per Offer Share, being the midpoint of the stated Offer Price range of HK$1.90 to HK$2.57 per Offer Share, the net proceeds of the Global Offering would be approximately HK$287.0 million which we presently plan to use as follows:

• Approximately 47%, or HK$134.9 million, is expected to be used primarily for business expansion and development, among which, (i) approximately 17%, or HK$48.8 million, will be used to purchase equipment and facilities to mainly enhance quality and capabilities for our services, such as live sports broadcasting, multi-camera recording and editing services and digitization and cataloging of media assets, (ii) approximately 15%, or HK$43.1 million, will be used to invest in cloud-based computing resources for digital video content delivery, (iii) approximately 10%, or HK$28.7 million, will be used to further develop our new business, Meicam, and (iv) the remaining 5%, or HK$14.4 million, will be used to continue to hire skilled personnel;

• Approximately 15%, or HK$43.1 million, is expected to be used primarily for potential strategic investment and acquisition to increase our portfolio of solutions, services and products. We intend to pursue strategic investment and acquisitions that will enable us to (i) enhance our core technology by accessing new and advanced technologies in

— 281 — FUTURE PLANS AND USE OF PROCEEDS

international markets, (ii) capture key industry trends, (iii) expand our customer reach to encompass niche customer bases, and (iv) leverage our core technology. For more information on our selection criteria for acquisition targets, see “Business—Business Strategy—Selectively pursue strategic investments and acquisitions.” As of the Latest Practicable Date, our Directors confirm that, except as disclosed, we did not identify any target company for acquisition for our use of net proceeds from the Global Offering;

• Approximately 15%, or HK$43.1 million, is expected to be used primarily for further enhancing our R&D capabilities and upgrading our information technology systems, (i) approximately 7%, or HK$20.1 million, for purchasing non-project based research and testing equipment, (ii) approximately 3%, or HK$8.6 million, for expanding our in-house R&D team, (iii) approximately 3%, or HK$8.6 million, for establishing a R&D center located in Chengdu, Sichuan province in China, which is expected to focus on the fundamental research of digital video technologies, such as design and optimization of software algorithm and architecture, and (iv) approximately 2%, or HK$5.7 million, for upgrading our existing information technology systems, such as ERP system, and purchase new information technology systems, such as office automation system;

• Approximately 10%, or HK$28.7 million, is expected to be used to repay certain of our existing bank borrowings. The bank borrowings include a one-year term loan of US$5.0 million (approximately HK$38.8 million) bearing an interest rate of 2.63% per annum payable in August 2016 used for working capital purposes;

• Approximately 3%, or HK$8.6 million, is expected to be used primarily for promotion and marketing, such as advertising through traditional media such as TV and Internet and attending internal or domestic exhibitions; and

• The remaining up to approximately 10%, or HK$28.7 million, is expected to be used for our working capital and other general corporate purposes.

If the Offer Price is fixed at HK$2.57, being the high end of the stated Offer Share range, our net proceeds will increase by approximately HK$51.1 million, as compared to the net proceeds that we would receive with the Offer Price fixed at the mid-point of the indicative range. We intend to allocate such additional proceeds to our use of proceeds proportionately as earmarked.

If the Offer Price is fixed at HK$1.90, being the low end of the stated Offer Price range, our net proceeds will instead decrease by approximately HK$52.6 million, as compared to the net proceeds that we would receive with the Offer Price fixed at the mid-point of the indicative range. In this case, we intend to reduce our use of proceeds proportionately as earmarked.

To the extent that the net proceeds to us from the Global Offering are not immediately applied to the above purposes, we will deposit the net proceeds into short-term demand deposits and/or money market instruments.

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UNDERWRITERS

Hong Kong Underwriters

Jefferies Hong Kong Limited Ping An of China Securities (Hong Kong) Company Limited

UNDERWRITING ARRANGEMENTS AND EXPENSES

Hong Kong Public Offering

Hong Kong Underwriting Agreement

Pursuant to the Hong Kong Underwriting Agreement, our Company is offering initially 15,500,000 Hong Kong Offer Shares (subject to adjustment) for subscription by way of the Hong Kong Public Offering at the Offer Price on and subject to the terms and conditions of this prospectus and the Application Forms.

Subject to the Stock Exchange granting the listing of, and permission to deal in, the Shares in issue and to be issued, and to certain other conditions described in the Hong Kong Underwriting Agreement (including the Sole Global Coordinator, on behalf of the Underwriters, and us agreeing to the Offer Price), the Hong Kong Underwriters have agreed severally to subscribe, or procure subscribers to subscribe, for the Hong Kong Offer Shares which are being offered but are not taken up under the Hong Kong Public Offering on the terms and subject to the conditions of this prospectus, the Application Forms and Hong Kong Underwriting Agreement. The Hong Kong Underwriting Agreement is conditional upon and subject to the International Underwriting Agreement having been signed and becoming unconditional and not having been terminated.

Grounds for Termination

The obligations of the Hong Kong Underwriters to subscribe or procure subscriptions for the Hong Kong Offer Shares under the Hong Kong Underwriting Agreement are subject to termination if, certain events, including force majeure, shall occur at any time prior to 8:00 a.m. on the Listing Date. The Sole Global Coordinator (for itself and on behalf of the Hong Kong Underwriters) shall be entitled by notice (orally or in writing) to our Company to terminate the Hong Kong Underwriting Agreement with immediate effect if any of the following events occurs:

(A) there shall develop, occur, exist or come into effect:

(a) any event or circumstance in the nature of force majeure (including any acts of government, declaration of a national or international emergency or war, calamity, crisis, epidemic, pandemic, outbreak of disease, economic sanctions, strikes, lock-outs, fire, explosion, flooding, earthquake, volcanic eruption, civil commotion, riots, public disorder, acts of war, outbreak or escalation of hostilities (whether or not

— 283 — UNDERWRITING

war is declared), acts of God or acts of terrorism) in or affecting the Cayman Islands, Hong Kong, the PRC, the United States, the United Kingdom, the European Union (as a whole), Japan or Singapore (collectively, the “Relevant Jurisdictions”); or

(b) any change, or any development involving a prospective change, or any event or circumstance likely to result in any change or development involving a prospective change, in any local, national, regional or international financial, economic, political, military, industrial, fiscal, regulatory, currency, credit or market conditions (including, without limitation, conditions in the stock and bond markets, money and foreign exchange markets, investment markets, the interbank markets and credit markets) in or affecting any Relevant Jurisdiction; or

(c) any moratorium, suspension or restriction (including, without limitation, any imposition of or requirement for any minimum or maximum price limit or price range) in or on trading in any securities of our Company or of any member of the Group listed or quoted on the Stock Exchange, the Shanghai Stock Exchange, the Shenzhen Stock Exchange, the New York Stock Exchange, the Singapore Exchange, the NASDAQ Global Market, the London Stock Exchange, the Tokyo Stock Exchange; or

(d) any general moratorium on commercial banking activities in Hong Kong (imposed by the Financial Secretary or the Hong Kong Monetary Authority or other competent Authority), the PRC, New York (imposed at Federal or New York State level or other competent Authority), London, or any other Relevant Jurisdiction, or any disruption in commercial banking or foreign exchange trading or securities settlement or clearance services, procedures or matters in any Relevant Jurisdictions; or

(e) any new law, or any change or any development involving a prospective change or any event or circumstance likely to result in a change or a development involving a prospective change in (or in the interpretation or application by any court or other competent authority of) existing laws, in each case, in or affecting any of the Relevant Jurisdictions; or

(f) the imposition of sanctions or the withdrawal of trading privileges, in whatever form, directly or indirectly, under any sanction laws or regulations in Hong Kong, the PRC or any other Relevant Jurisdiction; or

(g) a change or development involving a prospective change in or affecting taxes or exchange control, currency exchange rates or foreign investment regulations (including, without limitation, a material devaluation of the Hong Kong dollar or the Renminbi against any foreign currencies), or the implementation of any exchange control, in any of the Relevant Jurisdictions; or

(h) any litigation or claim of any third party being threatened or instigated against any member of the Group; or

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(i) any change or development involving a prospective change, or a materialisation of, any of the risks set out in the section headed “Risk Factors” in this prospectus; or

(j) a Director or a member of the Group’s senior management as named in this prospectus being charged with an indictable offense or prohibited by operation of law or otherwise disqualified from taking part in the management or taking directorship of a company; or

(k) the chairman, the chief executive officer or any executive Director of our Company vacating his or her office; or

(l) an authority or a political body or organization in any Relevant Jurisdiction commencing any investigation or other action, or announcing an intention to investigate or commencing any investigation or take other action, against any Director; or

(m) a contravention by any member of the Group of the GEM Listing Rules or any other applicable laws; or

(n) a prohibition on our Company for whatever reason from offering, allotting, issuing or selling any of the Shares (including the Option Shares) pursuant to the terms of the Global Offering; or

(o) non-compliance of this prospectus (or any other documents used in connection with the contemplated offer and sale of the Shares) or any aspect of the Global Offering with the GEM Listing Rules or any other applicable laws; or

(p) other than with the prior written consent of the Sole Global Coordinator, the issue or requirement to issue by our Company of any supplement or amendment to this prospectus (or to any other documents used in connection with the contemplated offer and sale of the Shares) pursuant to the Companies Ordinance or the Companies (Winding Up and Miscellaneous Provisions) Ordinance or the GEM Listing Rules or any requirement or request of the Stock Exchange, and/or the SFC; or

(q) an order or petition for the winding up of any member of the Group or any composition or arrangement made by any member of the Group with its creditors or a scheme of arrangement entered into by any member of the Group or any resolution for the winding-up of any member of the Group or the appointment of a provisional liquidator, receiver or manager over all or part of the material assets or undertaking of any member of the Group or anything analogous thereto occurring in respect of any member of the Group; or

(r) a valid demand by any creditor for repayment or payment of any indebtedness of any member of the Group or in respect of which any member of the Group is liable prior to its stated maturity,

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which, individually or in the aggregate, in the sole opinion of the Sole Global Coordinator (1) has or will have or may have material adverse change or (2) has or will have or may have a material adverse effect on the success of the Global Offering or the level of applications under the Hong Kong Public Offering or the level of interest under the International Placing or dealings in the Shares in the secondary market; or (3) makes or will make or may make it inadvisable or inexpedient or impracticable for the Global Offering to proceed or to market the Global Offering or dealings in the Shares in the secondary market; or (4) has or will have or may have the effect of making any part of the Hong Kong Underwriting Agreement (including underwriting) incapable of performance in accordance with its terms or preventing or delaying the processing of applications and/or payments pursuant to the Global Offering or pursuant to the underwriting thereof; or

(B) there has come to the notice of the Sole Global Coordinator:

(s) that any statement contained in any of this prospectus and the Application Forms, and/or any notices, announcements, advertisements, communications or other documents including any supplement or amendment thereto, issued by or on behalf of our Company in connection with the Hong Kong Public Offering (collectively, the “Offer Related Documents”) was, when it was issued, or has become, untrue, incorrect or misleading in any material respect, or that any forecast, estimate, expression of opinion, intention or expectation contained in any of the Offer Related Documents is not fair and honest and based on reasonable assumptions; or

(t) that any matter has arisen or has been discovered which would, had it arisen or been discovered immediately before the date of this prospectus, constitute a material omission from any of the Offer Related Documents (including any supplement or amendment thereto); or

(u) any breach of any of the obligations imposed upon any party to the Hong Kong Underwriting Agreement or the International Underwriting Agreement (other than upon any of the Hong Kong Underwriters or the International Underwriters) which is considered by the Sole Global Coordinator (for itself and on behalf of the other Underwriters) in its sole absolute opinion to be material; or

(v) any material adverse change; or

(w) any breach of, or any event or circumstance rendering untrue, incorrect or misleading in any respect, any of the warranties given by our Company or the Controlling Shareholders in the Hong KongUnderwriting Agreement; or

(x) the grant of the approval by the Stock Exchange the listing of, and permission to deal in, the Shares (including any additional Shares that may be issued upon the exercise of the Over-allotment Option) is refused or not granted, on or before the Listing Date, or if granted, the approval is subsequently withdrawn, qualified (other than by customary conditions) or withheld; or

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(y) any event, act or omission which gives or may give rise to any liability of any of our Company or the Controlling Shareholders pursuant to the indemnity clause in the Hong Kong Underwriting Agreement; or

(z) our Company withdraws any of the Offer Related Documents and/or any other documents issued or used in connection with the Global Offering or the Global Offering; or

(aa) any person (other than the Sole Sponsor) has withdrawn or sought to withdraw its consent to being named in this prospectus or to the issue of any of this prospectus and the Application Forms; or

(bb) any loss or damage has been sustained by any members of the Group (howsoever caused and whether or not the subject of any insurance or claim against any person) which is considered by the Sole Global Coordinator (for itself and on behalf of the other Underwriters) in its sole absolute opinion to be material; or

(cc) that a material portion of the orders placed or confirmed in the book-building process, or of the investment commitments made by any cornerstone investors under agreements signed with such cornerstone investors, have been withdrawn, terminated or cancelled.

Undertakings Given to the Stock Exchange Pursuant to the GEM Listing Rules

(A) Undertaking by our Company

Pursuant to Rule 17.29 of the GEM Listing Rules, we have undertaken to the Stock Exchange that no further Shares or securities convertible into our equity securities (whether or not of a class already listed) may be issued by us or form the subject of any agreement to such an issue by us within six months from the Listing Date (whether or not such issue of Shares or our securities will be completed within six months from the commencement of dealing), except in certain circumstances prescribed by Rule 17.29 of the GEM Listing Rules.

(B) Undertaking by our Controlling Shareholders

Pursuant to Rule 13.16A(1) of the GEM Listing Rules, each of the Controlling Shareholders immediately before the completion of the Global Offering, has undertaken to the Stock Exchange that except pursuant to the Global Offering, he/it will not, and will procure that any other registered holder (if any) of our Shares in which he/it has a beneficial interest will not, without the prior written consent of the Stock Exchange or unless otherwise in compliance with the requirements of the GEM Listing Rules:

(a) in the period commencing on the date by reference to which disclosure of his/its shareholding is made in this prospectus and ending on the date which is six months from

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the date on which dealings in our Shares commence on the Stock Exchange (“First Six-month Period”), dispose of, or enter into any agreement to dispose of, or otherwise create any options, rights, interests or encumbrances in respect of any of our Shares in respect of which he/she/it is shown in this prospectus to be the beneficial owner; and

(b) in the six-month period commencing from the expiry of the First Six-month Period (“Second Six-month Period”) dispose of, or enter into any agreement to dispose of, or otherwise create any options, rights, interests or encumbrances in respect of any of the Shares referred to in paragraph (a) above, and to such extent that immediately following such disposal, or upon the exercise or enforcement of such options, rights, interests or encumbrances, he/she/it would then cease to be a controlling shareholder of the Company.

Each of our Controlling Shareholders has also undertaken to the Stock Exchange and us that, within the period commencing on the date by reference to which disclosure of its/his/her Shareholding in our Company is made in this prospectus and ending on the date which is 12 months from the Listing Date, he/it will:

(a) when he/it pledges or charges any Shares or other securities of our Company beneficially owned by him/it in favor of an authorized institution (as defined in the Banking Ordinance (Chapter 155 of the Laws of Hong Kong)) pursuant to Rule 13.18(1) of the GEM Listing Rules, immediately inform us of such pledge or charge together with the number of such Shares or other securities so pledged or charged; and

(b) when he/it receives any indications, either verbal or written, from any pledgee or charge of any Shares or other securities of our Company pledged or charged that any of such Shares or securities will be disposed of, immediately inform us in writing of any such indications.

We will inform the Stock Exchange as soon as we have been informed of the above matters (if any) by any of the Controlling Shareholders and disclose such matters by way of an announcement published in accordance with Rule 2.07(1) of the GEM Listing Rules as soon as possible after being so informed by any of the Controlling Shareholders.

Undertakings Pursuant to the Hong Kong Underwriting Agreement

(A) Undertaking by our Company

Except for the offer and sale of the Offer Shares pursuant to the Global Offering (including pursuant to the Over-allotment Option), the Shares to be issued pursuant to the exercise of any option that has been granted under the Pre-IPO Share Option Scheme and otherwise pursuant to the GEM Listing Rules, during the period commencing on the date of the Hong Kong Underwriting Agreement and ending on, and including, the expiry date of the First Six-Month Period, our Company hereby undertakes to each of the Sole Global Coordinator, the Joint Bookrunners, the Hong Kong Underwriters and the Sole Sponsor not to, and to procure each other member of the Group not to,

— 288 — UNDERWRITING without the prior written consent of the Sole Sponsor and the Sole Global Coordinator (for itself and on behalf of the Hong Kong Underwriters) and unless in compliance with the requirements of the GEM Listing Rules:

(a) allot, issue, sell, accept subscription for, offer to allot, issue or sell, contract or agree to allot, issue or sell, mortgage, charge, pledge, hypothecate, lend, grant or sell any option, warrant, contract or right to subscribe for or purchase, grant or purchase any option, warrant, contract or right to allot, issue or sell, or otherwise transfer or dispose of or create an encumbrance over, or agree to transfer or dispose of or create an encumbrance over, either directly or indirectly, conditionally or unconditionally, any Shares or other securities of our Company or any shares or other securities of such other member of the Group, as applicable, or any interest in any of the foregoing (including, without limitation, any securities convertible into or exchangeable or exercisable for or that represent the right to receive, or any warrants or other rights to purchase, any Shares or other securities of our Company or any shares of such other member of the Group, as applicable or any interest in any of the foregoing), or deposit any Shares or other securities of our Company or any shares or other securities of such other member of the Group, as applicable, with a depositary in connection with the issue of depositary receipts; or

(b) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Shares or other securities of our Company or any shares or other securities of such other member of the Group, as applicable, or any interest in any of the foregoing (including, without limitation, any securities convertible into or exchangeable or exercisable for or that represent the right to receive, or any warrants or other rights to purchase, any Shares or other securities of our Company or any shares of such other member of the Group, as applicable or any interest in any of the foregoing); or

(c) enter into any transaction with the same economic effect as any transaction specified in sub-paragraph (a), (b) above; or

(d) offer to or agree to or announce any intention to effect any transaction specified in sub-paragraph (a), (b) or (c) above, in each case, whether any of the transactions specified in sub-paragraph (a), (b) or (c) above is to be settled by delivery of Shares or other securities of our Company or shares or other securities of such other member of the Group, as applicable, or in cash or otherwise (whether or not the issue of such Shares or other shares or securities will be completed within the First Six-Month Period). In the event our Company enters into any of the transactions specified in sub-paragraph (a), (b) or (c) above or offers to or agrees to or announces any intention to effect any such transaction, our Company shall take all reasonable steps to ensure that it will not create a disorderly or false market in the securities of our Company. The Controlling Shareholders undertakes to each of the Sole Global Coordinator, the Hong Kong Underwriters and the Sole Sponsor to use their best endeavours to procure our Company to comply with the undertakings herein.

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(B) Undertaking by the Controlling Shareholders

Save as pursuant to the Stock Borrowing Agreement, each of the Controlling Shareholders hereby undertakes to each of our Company, the Sole Global Coordinator, the Joint Bookrunners, the Hong Kong Underwriters and the Sole Sponsor that, without the prior written consent of the Sole Sponsor and the Sole Global Coordinator (for itself and on behalf of the Hong Kong Underwriters) and unless in compliance with the requirements of and/or exemptions permitted under the GEM Listing Rules:

(a) it will not, at any time during the First Six-Month Period, (i) sell, offer to sell, contract or agree to sell, mortgage, charge, pledge, hypothecate, lend, grant or sell any option, warrant, contract or right to purchase, grant or purchase any option, warrant, contract or right to sell, or otherwise transfer or dispose of or create an encumbrance over, or agree to transfer or dispose of or create an encumbrance over, either directly or indirectly, conditionally or unconditionally, any Shares or other securities of our Company or any interest therein (including, without limitation, any securities convertible into or exchangeable or exercisable for or that represent the right to receive, or any warrants or other rights to purchase, any Shares or any such other securities, as applicable or any interest in any of the foregoing), or deposit any Shares or other securities of our Company with a depositary in connection with the issue of depositary receipts, or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Shares or other securities of our Company or any interest therein (including, without limitation, any securities convertible into or exchangeable or exercisable for or that represent the right to receive, or any warrants or other rights to purchase, any Shares or any such other securities, as applicable or any interest in any of the foregoing), or (iii) enter into any transaction with the same economic effect as any transaction specified in sub-paragraph (i) or (ii) above, or (iv) offer to or agree to or announce any intention to effect any transaction specified in sub-paragraph (i), (ii) or (iii) above, in each case, whether any of the transactions specified in sub-paragraph (i), (ii) or (iii) above is to be settled by delivery of Shares or other securities of our Company or in cash or otherwise (whether or not the issue of such Shares or other securities will be completed within the First Six-Month Period);

(b) it will not, during the Second Six-Month Period, enter into any of the transactions specified in sub-paragraph (i), (ii) or (iii) above or offer to or agree to or announce any intention to effect any such transaction if, immediately following any sale, transfer or disposal or upon the exercise or enforcement of any option, right, interest or encumbrance pursuant to such transaction, it will cease to be a “controlling shareholder” (as the term is defined in the GEM Listing Rules) of our Company; and

(c) until the expiry of the Second Six-Month period, in the event that it enters into any of the transactions specified in sub-paragraph (i), (ii) or (iii) above or offers to or agrees to or announce any intention to effect any such transaction, it will take all steps to ensure that it will not create a disorderly or false market in the securities of our Company.

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For the avoidance of doubt, the foregoing restrictions shall not prevent any of the Controlling Shareholders from purchasing additional Shares and selling any such additional Shares so purchased, subject to compliance with the requirements of the GEM Listing Rules to maintain an open market in the securities and a sufficient public float.

Commission and Expenses

The Hong Kong Underwriters will receive an underwriting commission of 3.5% of the aggregate Offer Price payable for the Hong Kong Offer Shares initially offered under the Hong Kong Public Offering. For unsubscribed Hong Kong Offer Shares reallocated to the International Placing, we will pay an underwriting commission at the rate applicable to the International Placing and such commission will be paid to the International Underwriters and not the Hong Kong Underwriters. The commissions payable to the Underwriters will be borne by our Company in relation to the new Shares to be issued in relation to the Global Offering. Our Company may also at its sole discretion to pay Jefferies Hong Kong Limited an additional incentive fee of up to 0.5% of the gross aggregate sale proceeds of the Offer Shares.

The aggregate commissions and fees, together with the listing fees, SFC transaction levy, the Stock Exchange trading fee, legal and other professional fees, printing and other expenses paid and payable by us relating to the Global Offering are estimated to amount to approximately RMB50.7 million in total (based on the mid-point of our indicative price range for the Global Offering).

The commission and expenses were determined after arm’s length negotiation between the Company and the Hong Kong Underwriters or other parties by reference to the current market conditions.

Indemnity

Our Company and the Controlling Shareholders have agreed to severally indemnify the Hong Kong Underwriters against certain losses which they may suffer, including losses arising from their performance of their obligations under the Hong Kong Underwriting Agreement and any breach by us and the Controlling Shareholders of the Hong Kong Underwriting Agreement as the case may be.

Hong Kong Underwriters’ Interests in Our Company

Save as disclosed in this prospectus and other than pursuant to the Hong Kong Underwriting Agreement, none of the Hong Kong Underwriters has any shareholding interests in any member of our Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of our Group.

Following the completion of the Global Offering, the Hong Kong Underwriters and their affiliated companies may hold a certain portion of the Shares as a result of fulfilling their obligations under the Hong Kong Underwriting Agreement.

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Stamp Taxes

Buyers of Offer Shares sold by the Underwriters may be required to pay stamp taxes and other charges in accordance with the laws and practice of the country of purchase in addition to the Offer Price.

International Placing

In connection with the International Placing, the Company expects to enter into the International Underwriting Agreement with, among others, the International Underwriters and other parties named therein. Under the International Underwriting Agreement, the International Underwriters will, subject to certain conditions, severally agree to procure purchasers for such International Offer Shares. It is expected that pursuant to the International Underwriting Agreement, our Company and the Controlling Shareholders will give undertakings similar to those given pursuant to the Hong Kong Underwriting Agreement in the paragraph headed “—Underwriting Arrangements and Expenses—Undertakings Pursuant to the Hong Kong Underwriting Agreement.”

The Company will grant to the International Underwriters the Over-allotment Option, exercisable by the Sole Global Coordinator (on behalf of the International Underwriters), at any time from the day on which trading of our Shares commences on the Stock Exchange until 30 days after the last day for lodging of applications under the Hong Kong Public Offering, to require the Company to allot and issue up to an aggregate of 23,250,000 Shares at the Offer Price, in connection with over-allocations in the International Placing.

Over-allotment and Stabilization

Stabilization is a practice used by underwriters in some markets to facilitate the distribution of securities. To stabilize, the underwriters may bid for, or purchase, the newly issued securities in the secondary market, during a specified period of time, to retard, and if possible, prevent any decline in the market price of the securities below the Offer Price. In Hong Kong and certain other jurisdictions, the price at which stabilization is effected is not permitted to exceed the Offer Price.

In connection with the Global Offering, Jefferies Hong Kong Limited, its affiliates or any person acting for it, as the Stabilization Manager, on behalf of the Underwriters, may over-allocate or effect any other transactions with a view to stabilizing or maintaining the market price of the Shares at a level higher than that which might otherwise prevail in the open market for a limited period after the commencement of trading in the Shares on the Stock Exchange. Such market purchases of Offer Shares will be effected in compliance with all applicable laws and regulatory requirements. However, there is no obligation on the Stabilization Manager or any person acting for it to conduct any such stabilizing activity, which if commenced, will be done at the absolute discretion of the Stabilization

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Manager and may be discontinued at any time. Any such stabilizing activity is required to be brought to an end within 30 days of the last day for the lodging of applications under the Hong Kong Public Offering.

Stabilizing action permitted in Hong Kong pursuant to the Securities and Futures (Price Stabilizing) Rules (Chapter 571 of the Laws of Hong Kong) includes (i) over-allocation for the purpose of preventing or minimizing any reduction in the market price, (ii) selling or agreeing to sell Offer Shares so as to establish a short position in them for the purpose of preventing or minimizing any reduction in the market price, (iii) subscribing, or agreeing to subscribe, for Shares pursuant to the Over-allotment Option (exercisable by the Sole Global Coordinator on behalf of the International Underwriters) in order to close out any position established under (i) or (ii) above, (iv) purchasing, or agreeing to purchase, Offer Shares for the sole purpose of preventing or minimizing any reduction in the market price, (v) selling Offer Shares to liquidate a long position held as a result of those purchases and (vi) offering or attempting to do anything described in (ii), (iii), (iv) or (v). The number of Shares that may be over-allocated will not exceed the number of Shares that may be sold under the Over-allotment Option, namely 23,250,000 Shares, which is 15% of the Offer Shares initially available under the Global Offering.

Stabilizing actions by the Stabilization Manager, or any person acting for it, will be entered into in accordance with the laws, rules and regulations in Hong Kong on stabilization.

As a result of effecting transactions to stabilize or maintain the market price of our Shares, the Stabilization Manager, or any person acting for it, may maintain a long position in our Shares. The size of the long position, and the period for which the Stabilization Manager, or any person acting for it, will maintain the long position is at the discretion of the Stabilization Manager and is uncertain. Investors should be warned that, in the event that the Stabilization Manager liquidates this long position by making sales in the open market, this may lead to a decline in the market price of our Shares.

Stabilizing action by the Stabilization Manager, or any person acting for it, is not permitted to support the price of the Shares for longer than the stabilizing period, which begins on the Listing Date and ends on the 30th day after the last day for the lodging of applications under the Hong Kong Public Offering. The stabilizing period is expected to end on July 20, 2016. As a result, demand for the Shares, and their market price, may fall after the end of the stabilizing period.

Any stabilizing action taken by the Stabilization Manager, or any person acting for them, may not necessarily result in the market price of the Shares staying at or above the Offer Price either during or after the stabilizing period. Stabilizing bids for or market purchases of the Shares by the Stabilization Manager, or any person acting for it, may be made at or below the Offer Price and can therefore be made at or below the price paid for the Offer Shares by applicants for, or investors in, the Offer Shares.

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In connection with the Global Offering, the Stabilization Manager may over-allocate up to and not more than an aggregate of 23,250,000 additional Shares and cover such over-allocations by making purchases in the secondary market at prices that do not exceed the Offer Price, or through stock borrowing arrangements, or acquiring Shares from other sources, including the exercise of the Over-allotment Option by the Sole Global Coordinator (on behalf of the International Underwriters), or a combination of these means.

SOLE SPONSOR’S INDEPENDENCE

The Sole Sponsor satisfies the independence criteria applicable to sponsors set out in Rule 6A.07 of the GEM Listing Rules.

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THE GLOBAL OFFERING

This prospectus is published in connection with the Hong Kong Public Offering as part of the Global Offering. The Global Offering comprises:

(a) the Hong Kong Public Offering of initially 15,500,000 Shares (subject to reallocation) in Hong Kong as described below in the section beaded “—The Hong Kong Public Offering” in this section; and

(b) the International Placing of initially 139,500,000 Shares (subject to reallocation and the Over-allotment Option) outside the United States in reliance on Regulation S and in the United States to QIBs in reliance on Rule 144A or other available exemption from the registration requirements of the U.S. Securities Act.

Investors may apply for the Hong Kong Offer Shares under the Hong Kong Public Offering or indicate an interest, if qualified to do so, for the International Offer Shares under the International Placing, but may not do both. The Hong Kong Public Offering is open to members of the public in Hong Kong as well as to institutional and professional investors in Hong Kong. The International Placing will involve selective marketing of the International Offer Shares to institutional and professional investors and other investors expected to have a sizeable demand for the International Offer Shares in Hong Kong and other jurisdictions outside the United States in accordance with Regulation S and in the United States to QIBs in reliance on Rule 144A or any other available exemption from the registration requirements of the U.S. Securities Act. The International Underwriters are soliciting from prospective investors indications of interest in acquiring the International Offer Shares. Prospective investors will be required to specify the number of International Offer Shares under the International Placing they would be prepared to acquire either at different prices or at a particular price. References in this prospectus to applications, Application Forms, application monies or the procedure for application relate solely to the Hong Kong Public Offering.

THE HONG KONG PUBLIC OFFERING

Number of Shares Initially Offered

We are initially offering 15,500,000 Hong Kong Offer Shares, representing 10% of the total number of Offer Shares initially available under the Global Offering, at the Offer Price for subscription by the public in Hong Kong. Subject to the reallocation of Shares between (i) the International Placing, and (ii) the Hong Kong Public Offering, the Hong Kong Offer Shares will represent approximately 2.5% of our Company’s enlarged issued share capital immediately after completion of the Global Offering assuming that the Over-allotment Option is not exercised.

— 295 — STRUCTURE OF THE GLOBAL OFFERING

The Hong Kong Public Offering is open to members of the public in Hong Kong as well as to institutional and professional investors. Professional investors generally include brokers, dealers and companies (including fund managers) whose ordinary business involves dealing in shares and other securities, and corporate entities which regularly invest in shares and other securities.

Completion of the Hong Kong Public Offering is subject to the conditions as set out in the paragraph headed “—Conditions of the Global Offering” in this section.

Allocation

Allocation of Shares to investors under the Hong Kong Public Offering will be based solely on the level of valid applications received under the Hong Kong Public Offering. The basis of allocation may vary, depending on the number of Hong Kong Offer Shares validly applied for by applicants. Such allocation could, where appropriate, consist of balloting, which would mean that some applicants may receive a higher allocation than others who have applied for the same number of Hong Kong Offer Shares, and those applicants who are not successful in the ballot may not receive any Hong Kong Offer Shares.

The total number of Hong Kong Offer Shares available under the Hong Kong Public Offering (after taking account of any reallocation referred to below) will be divided into two pools for allocation purposes:

• Pool A : The Hong Kong Offer Shares in Pool A will be allocated on an equitable basis to applicants who have applied for Hong Kong Offer Shares with a total subscription price of HK$5 million (excluding the brokerage, SFC transaction levy and the Stock Exchange trading fee payable) or less.

• Pool B: The Hong Kong Offer Shares in Pool B will be allocated on an equitable basis to applicants who have applied for Hong Kong Offer Shares with a total subscription price of more than HK$5 million (excluding the brokerage, SFC transaction levy and the Stock Exchange trading fee payable) and up to the total value of Pool B.

For the purpose of this sub-section only, the “subscription price” for Hong Kong Offer Shares means the price payable on application (without regard to the Offer Price as finally determined).

Applicants should be aware that applications in Pool A and applications in Pool B may receive different allocation ratios. If Hong Kong Offer Shares in one (but not both) of the two pools are undersubscribed, the surplus Hong Kong Offer Shares will be transferred to the other pool to satisfy demand in that other pool and be allocated accordingly.

Applicants can only receive an allocation of Hong Kong Offer Shares from either Pool A or Pool B, but not from both pools. Multiple or suspected multiple applications and any application for more than 7,750,000 Hong Kong Offer Shares (being 50% of the 15,500,000 of the Hong Kong Offer Shares initially comprised in the Hong Kong Public Offering) will be rejected.

— 296 — STRUCTURE OF THE GLOBAL OFFERING

Reallocation

In the event of over-applications in the Hong Kong Public Offering, the Sole Global Coordinator shall apply a clawback mechanism, which would have the effect of increasing the number of Hong Kong Offer Shares to certain percentages of the total number of the Offer Shares offered in the Global Offering if certain prescribed total demand levels in the Hong Kong Public Offering are reached, following the closing of the application lists on the following basis:

• If the number of the Offer Shares validly applied for under the Hong Kong Public Offering represents 15 times or more but less than 50 times the number of the Offer Shares initially available for subscription under the Hong Kong Public Offering, then the Offer Shares will be reallocated to the Hong Kong Public Offering from the International Placing, so that the total number of the Offer Shares available under the Hong Kong Public Offering will be 46,500,000 Shares, representing 30% of Offer Shares initially available under the Global Offering.

• If the number of the Offer Shares validly applied for under the Hong Kong Public Offering represents 50 times or more but less than 100 times the number of the Offer Shares initially available for subscription under the Hong Kong Public Offering, then the number of Offer Shares to be reallocated to the Hong Kong Public Offering from the International Placing will be increased so that the total number of the Offer Shares available under the Hong Kong Public Offering will be 62,000,000 Shares, representing 40% of the Offer Shares initially available under the Global Offering.

• If the number of the Offer Shares validly applied for under the Hong Kong Public Offering represents 100 times or more the number of the Offer Shares initially available for subscription under the Hong Kong Public Offering, then the number of Offer Shares to be reallocated to the Hong Kong Public Offering from the International Placing will be increased, so that the total number of Offer Shares available under the Hong Kong Public Offering will be 77,500,000 Shares, representing 50% of Offer Shares initially available under the Global Offering.

The Offer Shares to be offered in the Hong Kong Public Offering and the International Offer may, in certain circumstances, be reallocated as between these offerings at the discretion of the Sole Global Coordinator. Subject to the foregoing paragraph, the Sole Global Coordinator may in its discretion reallocate Shares from the International Placing to the Hong Kong Public Offering to satisfy valid applications under the Hong Kong Public Offering. In addition, if the Hong Kong Public Offering is not fully subscribed, the Sole Global Coordinator will have the discretion (but shall not be under any obligation) to reallocate to the International Placing all or any unsubscribed Hong Kong Offer Shares in such amounts as they deem appropriate.

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Applications

Each applicant under the Hong Kong Public Offering will also be required to give an undertaking and confirmation in the application submitted by him that he and any person(s) for whose benefit he is making the application has not applied for or taken up, or indicated an interest in, and will not apply for or take up, or indicate an interest in, any International Offer Shares, and such applicant’s application is liable to be rejected if the said undertaking and/or confirmation is breached and/or untrue (as the case may be) or it has been or will be placed or allocated International Offer Shares.

Applicants under the Hong Kong Public Offering are required to pay, on application, the maximum price of HK$2.57 per Offer Share in addition to the brokerage, SFC transaction levy and the Stock Exchange trading fee payable on each Offer Share, equal to a total of HK$5,191.80 for one board lot of 2,000 Shares. If the Offer Price, as finally determined in the manner described in the paragraph headed “—Pricing and Allocation” below, is less than the maximum price of HK$2.57 per Offer Share, appropriate refund payments (including the brokerage, SFC transaction levy and the Stock Exchange trading fee attributable to the surplus application monies) will be made to successful applicants, without interest. Further details are set out below in the section beaded “How to Apply for Hong Kong Offer Shares” in this prospectus.

THE INTERNATIONAL PLACING

Number of Offer Shares Offered

Subject to the reallocation as described above, the number of Offer Shares to be initially offered under the International Placing will be 139,500,000 Offer Shares representing 90% of the total number of Offer Shares initially available under the Global Offering. Subject to the reallocation of the Offer Shares between the International Placing and the Hong Kong Public Offering, the number of Offer Shares initially offered under the International Placing will represent approximately 22.5% of our Company’s enlarged issued share capital immediately after completion of the Global Offering, assuming that the Over-allotment Option is not exercised.

Allocation

Pursuant to the International Placing, the International Offer Shares will be conditionally placed on behalf of our Company by the International Underwriters or through selling agents appointed by them. International Offer Shares will be selectively placed with certain professional and institutional investors and other investors anticipated to have a sizeable demand for such Offer Shares in Hong Kong and other jurisdictions outside the United States in offshore transactions in reliance on Regulation S and in the United States to QIBs as defined in Rule 144A.The International Placing is subject to the Hong Kong Public Offering being unconditional.

Allocation of Offer Shares pursuant to the International Placing will be effected in accordance with the “book-building” process described in the paragraph beaded “—Pricing and Allocation” below and based on a number of factors, including the level and timing of demand, total size of the relevant investor’s invested assets or equity assets in the relevant sector and whether or not it is expected that

— 298 — STRUCTURE OF THE GLOBAL OFFERING the relevant investor is likely to buy further, and/or bold or sell, Shares, after the listing of our Shares on the Stock Exchange. Such allocation is intended to result in a distribution of the Shares on a basis which would lead to the establishment of a solid shareholder base to the benefit of our Company and our shareholders as a whole.

The Sole Global Coordinator (for itself and on behalf of the Underwriters) may require any investor who has been offered International Offer Shares and who has made an application under the Hong Kong Public Offering, to provide sufficient information to the Sole Global Coordinator so as to allow them to identify the relevant applications under the Hong Kong Public Offering and to ensure that they are excluded from any application of Offer Shares under the Hong Kong Public Offering.

Reallocation

The total number of International Offer Shares to be issued or sold may change as a result of the clawback arrangement described in the paragraph headed “—The Hong Kong Public Offering—Reallocation” above, the exercise of the Over-allotment Option in whole or in part described in the paragraph headed “—Over-allotment Option” below, and any reallocation of unsubscribed Offer Shares originally included in the Hong Kong Public Offering and/or any International Offer Shares to the Hong Kong Public Offering at the discretion of the Sole Global Coordinator.

OVER-ALLOTMENT OPTION

In connection with the Global Offering, we expect to grant the Over-allotment Option to the Sole Global Coordinator, which will be exercisable by the Sole Global Coordinator on behalf of the International Underwriters.

Pursuant to the Over-allotment Option, the Sole Global Coordinator have the right, exercisable by the Sole Global Coordinator on behalf of the International Underwriters at any time from the Listing Date to the 30th day after the last day for lodging applications under the Hong Kong Public Offering, to require us to issue up to 23,250,000 Shares, representing 15% of the total number of Offer Shares initially available under the Global Offering, at the Offer Price under the International Placing, to, among other things, cover over-allocations in the International Placing, if any.

If the Over-allotment Option is exercised in full, the additional International Offer Shares to be issued pursuant thereto will represent approximately 3.6% of our Company’s enlarged issued share capital immediately following the completion of the Global Offering and the exercise of the Over-allotment Option. In the event that the Over-allotment Option is exercised, a public announcement will be made.

STABILIZATION ACTION

Stabilization is a practice used by underwriters in some markets to facilitate the distribution of securities. To stabilize, the underwriters may bid for, or purchase, the new securities in the secondary market during a specified period of time to retard and, if possible, prevent any decline in the market price of the securities below the offer price. Such transactions may be effected in all jurisdictions

— 299 — STRUCTURE OF THE GLOBAL OFFERING where it is permitted to do so, in each case in compliance with all applicable laws, rules and regulations, including those of Hong Kong. In Hong Kong, activity aimed at reducing the market price is prohibited and the price at which stabilization is effected is not permitted to exceed the Offer Price.

The Sole Global Coordinator has been appointed by us as the Stabilizing Manager for the purposes of the Global Offering in accordance with the Securities and Futures (Price Stabilizing) Rules made under the SFO. In connection with the Global Offering, the Stabilizing Manager, its affiliates or any person acting for it, on behalf of the Underwriters, may, to the extent permitted by applicable laws of Hong Kong or elsewhere, over-allocate or effect any other transactions with a view to stabilizing or maintaining the market price of our Shares at a level higher than that which might otherwise prevail in the open market for a limited period beginning on the Listing Date and expected to end on the 30th day after the last day for lodging of applications under the Hong Kong Public Offering. Such transactions may be effected in all jurisdictions where it is permissible to do so, in each case in compliance with all applicable laws and regulatory requirements, including the Securities and Futures (Price Stabilizing) Rules, as amended, made under the SFO. Any market purchases of the Shares may be effected on any stock exchange, including the Stock Exchange, any over-the-counter market or otherwise, provided that they are made in compliance with all applicable laws and regulatory requirements. However, there is no obligation on the Stabilizing Manager, its affiliates or any person acting for it to conduct any such stabilizing action, which if commenced, will be conducted at the sole and absolute discretion of the Stabilizing Manager, its affiliates or any person acting for it and may be discontinued at any time. Any such stabilizing activity is required to be brought to an end on the 30th day after the last day for the lodging of applications under the Hong Kong Public Offering. The number of Shares that may be over-allocated will not exceed the number of Shares that may be allotted and issued by our Company under the Over-allotment Option, namely 23,250,000 Shares in aggregate, which is 15% of the Shares initially available under the Global Offering.

Stabilizing action permitted in Hong Kong pursuant to the Securities and Futures (Price Stabilizing) Rules under the SFO includes (i) over-allocation for the purpose of preventing or minimizing any reduction in the market price of our Shares; (ii) selling or agreeing to sell our Shares so as to establish a short position in them for the purpose of preventing or minimizing any reduction in the market price of our Shares; (iii) subscribing, or agreeing to subscribe, for our Shares pursuant to the Over-allotment Option in order to close out any position established under (i) or (ii) above; (iv) purchasing, or agreeing to purchase, any of our Shares for the sole purpose of preventing or minimizing any reduction in the market price of our Shares; (v) selling, or agreeing to sell, our Shares in order to liquidate any position established as a result of those purchases; and (vi) offering or attempting to do anything described in (ii), (iii), (iv) or (v) above. The Stabilizing Manager, its affiliates or any person acting for it, may take all or any of the above stabilizing action in Hong Kong during the stabilization period.

Specifically, prospective applicants for and investors in the Shares should note that:

• the Stabilizing Manager, its affiliates or any person acting for it, may, in connection with the stabilizing action, maintain a long position in the Shares, and there is no certainty regarding the extent to which and the time period for which the Stabilizing Manager, its

— 300 — STRUCTURE OF THE GLOBAL OFFERING

affiliates or any person acting for it, will maintain such a position. Investors should be warned of the possible impact of any liquidation of such long position by the Stabilizing Manager, its affiliates or any other person acting for them, may have an adverse impact on the market price of the Shares;

• stabilizing action cannot be used to support the price of the Shares for longer than the stabilizing period which will begin on the Listing Date following announcement of the Offer Price, and is expected to expire on the 30th day after the last date for lodging applications under the Hong Kong Public Offering. After this date, when no further stabilizing action may be taken, demand for the Shares, and therefore the price of the Shares, could fall;

• the price of the Shares cannot be assured to stay at or above the Offer Price either during or after the stabilizing period by taking of any stabilizing action; and

• stabilizing bids may be made or transactions effected in the course of the stabilizing action at any price at or below the Offer Price, which means that stabilizing bids may be made or transactions effected at a price below the price paid by applicants for, or investors in, the Shares.

Our Company will ensure or procure that a public announcement in compliance with the Securities and Futures (Price Stabilizing) Rules will be made within seven days of the expiration of the stabilizing period.

In connection with the Global Offering, the Sole Global Coordinator may over-allocate up to and not more than an aggregate of 23,250,000 additional Shares and cover such over-allocations by exercising the Over-allotment Option, which will be exercisable by the Sole Global Coordinator (on behalf of the International Underwriters) at its sole discretion, or by making purchases in the secondary market at prices that do not exceed the Offer Price or through stock borrowing arrangements or a combination of these means.

OVER-ALLOCATION

Following any over-allocation of Shares in connection with the Global Offering, the Sole Global Coordinator, its affiliates or any person acting for it may cover such over-allocation by (among other methods) using Shares purchased by the Sole Global Coordinator, its affiliates or any person acting for it in the secondary market and/or exercising the Over-allotment Option in full or in part. Any such purchases will be made in accordance with the laws, rules and regulations in place in Hong Kong, including in relation to stabilization, the Securities and Futures (Price Stabilizing) Rules, as amended, made under the SFO. The number of Shares which can be over-allocated will not exceed the number of Shares which may be issued upon exercise of the Over-allotment Option, being 23,250,000 Shares, representing 15% of the Offer Shares initially available under the Global Offering.

— 301 — STRUCTURE OF THE GLOBAL OFFERING

STOCK BORROWING AGREEMENT

In order to facilitate the settlement of over-allocations in connection with the Global Offering, the Stabilization Manager may choose to borrow up to 23,250,000 Shares from Wing Success pursuant to the Stock Borrowing Agreement. The stock borrowing arrangements under the Stock Borrowing Agreement will comply with the requirements set out in Rule 13.15(5)(a) of the GEM Listing Rules.

PRICING AND ALLOCATION

Determining the Offer Price

The International Underwriters will be soliciting from prospective investors’ indications of interest in acquiring International Offer Shares. Prospective professional and institutional investors will be required to specify the number of International Offer Shares they would be prepared to acquire either at different prices or at a particular price. This process, known as “book-building”, is expected to continue up to, and to cease on or around, the last day for lodging applications under the Hong Kong Public Offering.

Pricing for the Offer Shares for the purpose of the various offerings under the Global Offering will be fixed on the Price Determination Date, which is expected to be on or about June 20, 2016 and in any event on or before June 22, 2016, by agreement between the Sole Global Coordinator, on behalf of the Underwriters, and our Company and the number of Offer Shares to be allocated under the various offerings will be determined shortly thereafter.

Offer Price Range

The Offer Price per Offer Share under the Hong Kong Public Offering will be identical to the Offer Price per International Offer Share based on the Hong Kong dollar price per International Offer Share, as determined by the Sole Global Coordinator, on behalf of the Underwriters, and our Company.

The Offer Price will not be more than HK$2.57 per Offer Share and is expected to be not less than HK$1.90 per Offer Share, unless otherwise announced no later than the morning of the last day for lodging applications under the Hong Kong Public Offer, as further explained below. Prospective investors should be aware that the Offer Price to be determined on the Price Determination Date may be, but is not expected to be, lower than the indicative Offer Price range stated in this prospectus.

Price Payable on Application

Applicants under the Hong Kong Public Offering are required to pay, on application, the maximum Offer Price of HK$2.57 per each Hong Kong Offer Share (plus 1% brokerage, 0.0027% SFC transaction levy and 0.005% Stock Exchange trading fee). If the Offer Price is less than HK$2.57, appropriate refund payments (including the brokerage, SFC transaction levy and the Hong Kong Stock Exchange trading fee attributable to the surplus application monies, without any interest) will be made to successful applications.

— 302 — STRUCTURE OF THE GLOBAL OFFERING

If, for any reason, our Company and the Sole Global Coordinator (for itself and on behalf of the Underwriters) are unable to reach agreement on the Offer Price on or before June 22, 2016, the Global Offering will not proceed and will lapse.

Reduction in Indicative Offer Price Range and/or Number of Offer Shares

The Sole Global Coordinator, on behalf of the Underwriters, may, where considered appropriate, based on the level of interest expressed by prospective professional and institutional investors during the book-building process, and with the consent of our Company, reduce the number of Offer Shares and/or the indicative Offer Price range below that stated in this prospectus at any time on or prior to the morning of the last day for lodging applications under the Hong Kong Public Offering. In such case, we will, as soon as practicable following the decision to make such reduction, and in any event not later than the morning of the day which is the last day for lodging applications under the Hong Kong Public Offering, cause to be published on the website of the Stock Exchange at www.hkexnews.hk and the Company at www.cdv.com, notices of the reduction. Upon issue of such a notice, the revised number of Offer Shares and/or indicative Offer Price range will be final and conclusive and the Offer Price, if agreed upon by the Sole Global Coordinator, for itself and on behalf of the Underwriters, and our Company, will be fixed within such a revised Offer Price range. Such notice will also include confirmation or revision, as appropriate, of the working capital statement and the Global Offering statistics as currently set out in the prospectus, use of proceeds, and any other financial information which may change materially as a result of such reduction.

In the absence of any such notice so published, the number of Offer Shares will not be reduced and/or the Offer Price, if agreed upon by the Sole Global Coordinator, for itself and on behalf of the Underwriters, and our Company, will under no circumstances be set outside the offer price range as stated in this prospectus.

In the event of a reduction in the number of Offer Shares, the Sole Global Coordinator may, at their discretion, reallocate the number of Offer Shares to be offered in the Hong Kong Public Offering and the International Placing, provided that the number of Offer Shares comprised in the Hong Kong Public Offering shall not be less than 10% of the total number of Offer Shares available under the Global Offering (assuming the Over-allotment Option is not exercised). The Offer Shares to be offered in the Hong Kong Public Offering and the Offer Shares to be offered in the International Placing may, in certain circumstances, be reallocated between these offerings at the discretion of the Sole Global Coordinator.

If applications for the Offer Shares have been submitted prior to the day which is the last day for lodging applications under the Hong Kong Public Offering, such application can be subsequently withdrawn if the number of Offer Shares and/or the indicative Offer Price range is so reduced.

Announcement of Offer Price and Basis of Allocations

The final Offer Price, the level of indications of interest in the Global Offering, the results of allocations and the basis of allotment of the Hong Kong Offer Shares are expected to be announced on June 24, 2016 on the website of the Stock Exchange at www.hkexnews.hk and on the website of our Company at www.cdv.com.

— 303 — STRUCTURE OF THE GLOBAL OFFERING

UNDERWRITING

The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters under the terms of the Hong Kong Underwriting Agreement and is subject to our Company and the Sole Global Coordinator, for itself and on behalf of the Underwriters, agreeing on the Offer Price.

We expect to enter into the International Underwriting Agreement relating to the International Placing on the Price Determination Date.

These underwriting arrangements, and the Hong Kong Underwriting Agreement and the International Underwriting Agreement, are summarized in the section beaded “Underwriting” in this prospectus.

CONDITIONS OF THE GLOBAL OFFERING

Acceptance of all applications for Offer Shares will be conditional on:

(a) the Listing Committee of the Stock Exchange granting approval for the listing of, and permission to deal in, the Shares in issue and to be issued pursuant to the Global Offering, the Capitalization Issue, the Global Offering and the exercise of any options that may be granted under our Pre-IPO Share Option Scheme;

(b) the Offer Price having been duly agreed between us and the Sole Global Coordinator (for itself and on behalf of the Underwriters);

(d) the obligations of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement and the obligations of the International Underwriters under the International Underwriting Agreement becoming and remaining unconditional and not having been terminated in accordance with the terms of the respective agreements, in each case on or before the dates and times specified in the Hong Kong Underwriting Agreement or the International Underwriting Agreement (unless and to the extent such conditions are validly waived on or before such dates and times).

If, for any reason, the Offer Price is not agreed between our Company and the Sole Global Coordinator (for itself and on behalf of the Underwriters) on or before June 22, 2016, the Global Offering will not proceed and will lapse.

The consummation of each of the Hong Kong Public Offering and the International Placing is conditional upon, among other things, the other offering becoming unconditional and not having been terminated in accordance with their respective terms.

— 304 — STRUCTURE OF THE GLOBAL OFFERING

If the above conditions are not fulfilled or waived prior to the times and dates specified, the Global Offering will lapse and the Stock Exchange will be notified immediately. Notice of the lapse of the Hong Kong Public Offering will be published by our Company on the websites of Stock Exchange at www.hkexnews.hk and our Company at www.cdv.com on the next Business Day following such lapse. In such event, all application monies will be returned, without interest, on the terms set out in the paragraph headed “How to Apply for Hong Kong Offer Shares—14. Dispatch/Collection of Share Certificates and Refund Monies.” In the meantime, all application monies will be held in separate bank account(s) with the receiving bankers or other bank(s) in Hong Kong licensed under the Banking Ordinance (Chapter 155 of the Laws of Hong Kong) (as amended).

Share certificates for the Offer Shares will only become valid certificates of title at 8:00 a.m. on the Listing Date provided that (i) the Global Offering has become unconditional in all respects, and (ii) the right of termination as described in the section beaded “Underwriting—Underwriting Arrangements and Expenses—Hong Kong Public Offering—Grounds for termination” has not been exercised.

SHARES WILL BE ELIGIBLE FOR CCASS

All necessary arrangements have been made enabling the Shares to be admitted into the Central Clearing and Settlement System, or CCASS, established and operated by the Hong Kong Securities Clearing Company Limited, or HKSCC.

If the Hong Kong Stock Exchange grants the listing of, and permission to deal in, the Shares and our Company complies with the stock admission requirements of HKSCC, the Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the date of commencement of dealings in the Shares on the Hong Kong Stock Exchange or any other date HKSCC chooses. Settlement of transactions between participants of the Hong Kong Stock Exchange is required to take place in CCASS on the second business day after any trading day.

All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

DEALING ARRANGEMENTS

Assuming that the Hong Kong Public Offering becomes unconditional at or before 8:00 a.m. in Hong Kong on June 27, 2016, it is expected that dealings in the Shares on the Stock Exchange will commence at 9:00a.m. on June 27, 2016.

The Shares will be traded in board lots of 2,000 Shares each.

— 305 — HOW TO APPLY FOR HONG KONG OFFER SHARES

1. HOW TO APPLY

If you apply for Hong Kong Offer Shares, then you may not apply for or indicate an interest for International Offer Shares.

To apply for Hong Kong Offer Shares, you may:

• use a WHITE or YELLOW Application Form;

• apply online via the White Form eIPO service at www.eipo.com.hk; or

• electronically cause HKSCC Nominees to apply on your behalf.

None of you or your joint applicant(s) may make more than one application, except where you are a nominee and provide the required information in your application.

The Company, the Joint Bookrunners, the White Form eIPO Service Provider and their respective agents may reject or accept any application in full or in part for any reason at their discretion.

2. WHO CAN APPLY

You can apply for Hong Kong Offer Shares on a WHITE or YELLOW Application Form if you or the person(s) for whose benefit you are applying:

• are 18 years of age or older;

• have a Hong Kong address;

• are outside the United States, and are not a United States Person (as defined in Regulation S under the U.S. Securities Act); and

• are not a legal or natural person of the PRC.

If you apply online through the White Form eIPO service, in addition to the above, you must also: (i) have a valid Hong Kong identity card number and (ii) provide a valid e-mail address and a contact telephone number.

If you are a firm, the application must be in the individual members’ names. If you are a body corporate, the application form must be signed by a duly authorized officer, who must state his representative capacity, and stamped with your corporation’s chop.

If an application is made by a person under a power of attorney, the Company and the Sole Global Coordinator may accept it at their discretion and on any conditions they think fit, including evidence of the attorney’s authority.

— 306 — HOW TO APPLY FOR HONG KONG OFFER SHARES

The number of joint applicants may not exceed four and they may not apply by means of White Form eIPO service for the Hong Kong Offer Shares.

Unless permitted by the GEM Listing Rules, you cannot apply for any Hong Kong Offer Shares if you are:

• an existing beneficial owner of Shares in the Company and/or any its subsidiaries;

• a Director or chief executive officer of the Company and/or any of its subsidiaries;

• a connected person (as defined in the GEM Listing Rules) of the Company or will become a connected person of the Company immediately upon completion of the Global Offering;

• an associate or a close associate (both as defined in the GEM Listing Rules) of any of the above; and

• have been allocated or have applied for any International Offer Shares or otherwise participate in the International Placing.

3. APPLYING FOR HONG KONG OFFER SHARES

Which Application Channel to Use

For Hong Kong Offer Shares to be issued in your own name, use a WHITE Application Form or apply online through www.eipo.com.hk.

For Hong Kong Offer Shares to be issued in the name of HKSCC Nominees and deposited directly into CCASS to be credited to your or a designated CCASS Participant’s stock account, use a YELLOW Application Form or electronically instruct HKSCC via CCASS to cause HKSCC Nominees to apply for you.

Where to Collect the Application Forms

You can collect a WHITE Application Form and a prospectus during normal business hours between 9:00 a.m. on Wednesday, June 15, 2016 and 12:00 noon on Monday, June 20, 2016 from:

(i) any of the following offices of the Joint Bookrunners:

Jefferies Hong Kong Limited 22/F, Cheung Kong Center 2 Queen’s Road Central Central Hong Kong

— 307 — HOW TO APPLY FOR HONG KONG OFFER SHARES

Ping An of China Securities (Hong Kong) Company Limited 28/F, 169 Electric Road North Point Hong Kong

(ii) any of the following branches of Wing Lung Bank Limited:

District Branch Name Address Hong Kong Island Head Office 45 Des Voeux Road Central Johnston Road Branch 118 Johnston Road Kennedy Town Branch 28 Catchick Street North Point Branch 361 King’s Road Kowloon Mongkok Branch B/F Wing Lung Bank Centre, 636 Nathan Road Tsim Sha Tsui Branch 4 Carnarvon Road Sham Shui Po Branch 111 Tai Po Road New Territories Tsuen Wan Branch 251 Sha Tsui Road

You can collect a YELLOW Application Form and a prospectus during normal business hours from 9:00 a.m. on Wednesday, June 15, 2016 until 12:00 noon on Monday, June 20, 2016 from the Depository Counter of HKSCC at 1/F, One & Two Exchange Square, 8 Connaught Place, Central, Hong Kong or from your stockbroker.

Time for Lodging Application Forms

Your completed WHITE or YELLOW Application Form, together with a cheque or a banker’s cashier order attached and marked payable to “Wing Lung Bank (Nominees) Limited — CDV Holdings Public Offer” for the payment, should be deposited in the special collection boxes provided at any of the branches of the receiving bank listed above, at the following times:

• Wednesday, June 15, 2016 — 9:00 a.m. to 5:00 p.m. • Thursday, June 16, 2016 — 9:00 a.m. to 5:00 p.m. • Friday, June 17, 2016 — 9:00 a.m. to 5:00 p.m. • Monday, June 20, 2016 — 9:00 a.m. to 12:00 noon

The application lists will be open from 11:45 a.m. to 12:00 noon on June 20, 2016, the last application day or such later time as described in “10. Effect of Bad Weather on the Opening of the Applications Lists” in this section.

4. TERMS AND CONDITIONS OF AN APPLICATION

Follow the detailed instructions in the Application Form carefully; otherwise, your application may be rejected.

By submitting an Application Form or applying through the White Form eIPO service, among other things, you:

— 308 — HOW TO APPLY FOR HONG KONG OFFER SHARES

(i) undertake to execute all relevant documents and instruct and authorize the Company and/or the Sole Global Coordinator (or their agents or nominees), as agents of the Company, to execute any documents for you and to do on your behalf all things necessary to register any Hong Kong Offer Shares allocated to you in your name or in the name of HKSCC Nominees as required by the Articles of Association;

(ii) agree to comply with the Companies (Winding Up and Miscellaneous Provisions) Ordinance and the Articles of Association;

(iii) confirm that you have read the terms and conditions and application procedures set out in this prospectus and in the Application Form and agree to be bound by them;

(iv) confirm that you have received and read this prospectus and have only relied on the information and representations contained in this prospectus in making your application and will not rely on any other information or representations except those in any supplement to this prospectus;

(v) confirm that you are aware of the restrictions on the Global Offering in this prospectus;

(vi) agree that none of the Company, the Sole Global Coordinator, the Joint Bookrunners, the Underwriters, their respective directors, officers, employees, partners, agents, advisers and any other parties involved in the Global Offering is or will be liable for any information and representations not in this prospectus (and any supplement to it);

(vii) undertake and confirm that you or the person(s) for whose benefit you have made the application have not applied for or taken up, or indicated an interest for, and will not apply for or take up, or indicate an interest for, any Offer Shares under the International Placing nor participated in the International Placing;

(viii) agree to disclose to the Company, our Hong Kong Share Registrar, receiving bank, the Sole Global Coordinator, the Joint Bookrunners, the Underwriters and/or their respective advisers and agents any personal data which they may require about you and the person(s) for whose benefit you have made the application;

(ix) if the laws of any place outside Hong Kong apply to your application, agree and warrant that you have complied with all such laws and none of the Company, the Sole Global Coordinator, the Joint Bookrunners and the Underwriters nor any of their respective officers or advisers will breach any law outside Hong Kong as a result of the acceptance of your offer to purchase, or any action arising from your rights and obligations under the terms and conditions contained in this prospectus and the Application Form;

(x) agree that once your application has been accepted, you may not rescind it because of an innocent misrepresentation;

(xi) agree that your application will be governed by the laws of Hong Kong;

— 309 — HOW TO APPLY FOR HONG KONG OFFER SHARES

(xii) represent, warrant and undertake that (i) you understand that the Hong Kong Offer Shares have not been and will not be registered under the U.S. Securities Act; and (ii) you and any person for whose benefit you are applying for the Hong Kong Offer Shares are outside the United States (as defined in Regulation S) or are a person described in paragraph (h)(3) of Rule 902 of Regulation S;

(xiii) warrant that the information you have provided is true and accurate;

(xiv) agree to accept the Hong Kong Offer Shares applied for, or any lesser number allocated to you under the application;

(xv) authorize the Company to place your name(s) or the name of the HKSCC Nominees, on the Company’s register of members as the holder(s) of any Hong Kong Offer Shares allocated to you, and the Company and/or its agents to send any Share certificate(s) and/or any e-Refund payment instructions and/or any refund cheque(s) to you or the first named applicant for joint application by ordinary post at your own risk to the address stated on the application, unless you have fulfilled the criteria mentioned in “Personal Collection” section in the Prospectus to collect the Share certificate(s) and/or refund cheque(s) in person;

(xvi) declare and represent that this is the only application made and the only application intended by you to be made to benefit you or the person for whose benefit you are applying;

(xvii) understand that the Company and the Sole Global Coordinator will rely on your declarations and representations in deciding whether or not to make any allotment of any of the Hong Kong Offer Shares to you and that you may be prosecuted for making a false declaration;

(xviii) (if the application is made for your own benefit) warrant that no other application has been or will be made for your benefit on a WHITE or YELLOW Application Form or by giving electronic application instructions to HKSCC or to the White Form eIPO Service Provider by you or by any one as your agent or by any other person; and

(xix) (if you are making the application as an agent for the benefit of another person) warrant that (i) no other application has been or will be made by you as agent for or for the benefit of that person or by that person or by any other person as agent for that person on a WHITE or YELLOW Application Form or by giving electronic application instructions to HKSCC; and (ii) you have due authority to sign the Application Form or give electronic application instructions on behalf of that other person as their agent.

5. APPLYING THROUGH WHITE FORM eIPO SERVICE

General

Individuals who meet the criteria in “2. Who can apply” section, may apply through the White Form eIPO service for the Offer Shares to be allotted and registered in their own names through the designated website at www.eipo.com.hk.

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Detailed instructions for application through the White Form eIPO service are on the designated website. If you do not follow the instructions, your application may be rejected and may not be submitted to the Company. If you apply through the designated website, you authorize the White Form eIPO Service Provider to apply on the terms and conditions in this prospectus, as supplemented and amended by the terms and conditions of the White Form eIPO service.

Time for Submitting Applications under the White Form eIPO service

You may submit your application to the White Form eIPO Service Provider at www.eipo.com.hk (24 hours daily, except on the last application day) from 9:00 a.m., Wednesday, June 15, 2016 until 11:30 a.m., Monday, June 20, 2016 and the latest time for completing full payment of application monies in respect of such applications will be 12:00 noon on Monday, June 20, 2016 or such later time under the “10. Effects of Bad Weather on the Opening of the Applications Lists” in this section.

No Multiple Applications

If you apply by means of White Form eIPO service, once you complete payment in respect of any electronic application instruction given by you or for your benefit through the White Form eIPO service to make an application for Hong Kong Offer Shares, an actual application shall be deemed to have been made. For the avoidance of doubt, giving an electronic application instruction under White Form eIPO service more than once and obtaining different application reference numbers without effecting full payment in respect of a particular reference number will not constitute an actual application.

If you are suspected of submitting more than one application through the White Form eIPO service or by any other means, all of your applications are liable to be rejected.

Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance

For the avoidance of doubt, the Company and all other parties involved in the preparation of this prospectus acknowledge that each applicant who gives or causes to give electronic application instructions is a person who may be entitled to compensation under Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (as applied by Section 342E of the Companies (Winding Up and Miscellaneous Provisions) Ordinance).

Environmental Protection

The obvious advantage of White Form eIPO is to save the use of papers via the self-serviced and electronic application process. Computershare Hong Kong Investor Services Limited, being the designated White Form eIPO Service Provider, will contribute HK$2 for each “China Digital Video Holdings Limited” White Form eIPO application submitted via the website www.eipo.com.hk to support the funding of “Source of Dong Jiang — Hong Kong Forest” project initiated by Friends of the Earth (HK).

—311— HOW TO APPLY FOR HONG KONG OFFER SHARES

6. APPLYING BY GIVING ELECTRONIC APPLICATION INSTRUCTIONS TO HKSCC VIA CCASS

General

CCASS Participants may give electronic application instructions to apply for the Hong Kong Offer Shares and to arrange payment of the money due on application and payment of refunds under their participant agreements with HKSCC and the General Rules of CCASS and the CCASS Operational Procedures.

If you are a CCASS Investor Participant, you may give these electronic application instructions through the CCASS Phone System by calling 2979 7888 or through the CCASS Internet System https://ip.ccass.com (using the procedures in HKSCC’s “An Operating Guide for Investor Participants” in effect from time to time).

HKSCC can also input electronic application instructions for you if you go to:

Hong Kong Securities Clearing Company Limited Customer Service Center 1/F, One & Two Exchange Square 8 Connaught Place, Central Hong Kong and complete an input request form.

You can also collect a prospectus from this address.

If you are not a CCASS Investor Participant, you may instruct your broker or custodian who is a CCASS Clearing Participant or a CCASS Custodian Participant to give electronic application instructions via CCASS terminals to apply for the Hong Kong Offer Shares on your behalf.

You will be deemed to have authorized HKSCC and/or HKSCC Nominees to transfer the details of your application to the Company, the Sole Global Coordinator and our Hong Kong Share Registrar.

Giving Electronic Application Instructions to HKSCC via CCASS

Where you have given electronic application instructions to apply for the Hong Kong Offer Shares and a WHITE Application Form is signed by HKSCC Nominees on your behalf:

(i) HKSCC Nominees will only be acting as a nominee for you and is not liable for any breach of the terms and conditions of the WHITE Application Form or this prospectus;

(ii) HKSCC Nominees will do the following things on your behalf:

• agree that the Hong Kong Offer Shares to be allotted shall be issued in the name of HKSCC Nominees and deposited directly into CCASS for the credit of the CCASS Participant’s stock account on your behalf or your CCASS Investor Participant’s stock account;

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• agree to accept the Hong Kong Offer Shares applied for or any lesser number allocated;

• undertake and confirm that you have not applied for or taken up, will not apply for or take up, or indicate an interest for, any Offer Shares under the International Placing;

• (if the electronic application instructions are given for your benefit) declare that only one set of electronic application instructions has been given for your benefit;

• (if you are an agent for another person) declare that you have only given one set of electronic application instructions for the other person’s benefit and are duly authorized to give those instructions as their agent;

• confirm that you understand that the Company, the Directors and the Sole Global Coordinator will rely on your declarations and representations in deciding whether or not to make any allotment of any of the Hong Kong Offer Shares to you and that you may be prosecuted if you make a false declaration;

• authorize the Company to place HKSCC Nominees’ name on the Company’s register of members as the holder of the Hong Kong Offer Shares allocated to you and to send Share certificate(s) and/or refund monies under the arrangements separately agreed between us and HKSCC;

• confirm that you have read the terms and conditions and application procedures set out in this prospectus and agree to be bound by them;

• confirm that you have received and/or read a copy of this prospectus and have relied only on the information and representations in this prospectus in causing the application to be made, save as set out in any supplement to this prospectus;

• agree that none of the Company, the Sole Global Coordinator, the Joint Bookrunners, the Underwriters, their respective directors, officers, employees, partners, agents, advisers and any other parties involved in the Global Offering, is or will be liable for any information and representations not contained in this prospectus (and any supplement to it);

• agree to disclose your personal data to the Company, our Hong Kong Share Registrar, receiving bank, the Sole Global Coordinator, the Joint Bookrunners, the Underwriters and/or its respective advisers and agents;

• agree (without prejudice to any other rights which you may have) that once HKSCC Nominees’ application has been accepted, it cannot be rescinded for innocent misrepresentation;

• agree that any application made by HKSCC Nominees on your behalf is irrevocable before the fifth day after the time of the opening of the application lists (excluding any day which is Saturday, Sunday or public holiday in Hong Kong), such agreement to

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take effect as a collateral contract with us and to become binding when you give the instructions and such collateral contract to be in consideration of the Company agreeing that it will not offer any Hong Kong Offer Shares to any person before the fifth day after the time of the opening of the application lists (excluding any day which is Saturday, Sunday or public holiday in Hong Kong), except by means of one of the procedures referred to in this prospectus. However, HKSCC Nominees may revoke the application before the fifth day after the time of the opening of the application lists (excluding for this purpose any day which is a Saturday, Sunday or public holiday in Hong Kong) if a person responsible for this prospectus under Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance gives a public notice under that section which excludes or limits that person’s responsibility for this prospectus;

• agree that once HKSCC Nominees’ application is accepted, neither that application nor your electronic application instructions can be revoked, and that acceptance of that application will be evidenced by the Company’s announcement of the Hong Kong Public Offering results;

• agree to the arrangements, undertakings and warranties under the participant agreement between you and HKSCC, read with the General Rules of CCASS and the CCASS Operational Procedures, for the giving electronic application instructions to apply for Hong Kong Offer Shares;

• agree with the Company, for itself and for the benefit of each Shareholder (and so that the Company will be deemed by its acceptance in whole or in part of the application by HKSCC Nominees to have agreed, for itself and on behalf of each of the Shareholders, with each CCASS Participant giving electronic application instructions) to observe and comply with the Companies (Winding Up and Miscellaneous Provisions) Ordinance and the Articles of Association; and

• agree that your application, any acceptance of it and the resulting contract will be governed by the Laws of Hong Kong.

Effect of Giving Electronic Application Instructions to HKSCC via CCASS

By giving electronic application instructions to HKSCC or instructing your broker or custodian who is a CCASS Clearing Participant or a CCASS Custodian Participant to give such instructions to HKSCC, you (and, if you are joint applicants, each of you jointly and severally) are deemed to have done the following things. Neither HKSCC nor HKSCC Nominees shall be liable to the Company or any other person in respect of the things mentioned below:

• instructed and authorized HKSCC to cause HKSCC Nominees (acting as nominee for the relevant CCASS Participants) to apply for the Hong Kong Offer Shares on your behalf;

• instructed and authorized HKSCC to arrange payment of the maximum Offer Price, brokerage, SFC transaction levy and the Stock Exchange trading fee by debiting your

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designated bank account and, in the case of a wholly or partially unsuccessful application and/or if the Offer Price is less than the maximum Offer Price per Offer Share initially paid on application, refund of the application monies(including brokerage, SFC transaction levy and the Stock Exchange trading fee) by crediting your designated bank account; and

• instructed and authorized HKSCC to cause HKSCC Nominees to do on your behalf all the things stated in the WHITE Application Form and in this prospectus.

Minimum Purchase Amount and Permitted Numbers

You may give or cause your broker or custodian who is a CCASS Clearing Participant or a CCASS Custodian Participant to give electronic application instructions for a minimum of 2,000 shares Hong Kong Offer Shares. Instructions for more than 2,000 Hong Kong Offer Shares must be in one of the numbers set out in the table in the Application Forms. No application for any other number of Hong Kong Offer Shares will be considered and any such application is liable to be rejected.

Time for Inputting Electronic Application Instructions

CCASS Clearing/Custodian Participants can input electronic application instructions at the following times on the following dates:

• Wednesday, June 15, 2016 — 9:00 a.m. to 8:30 p.m.(1) • Thursday, June 16, 2016 — 8:00 a.m. to 8:30 p.m.(1) • Friday, June 17, 2016 — 8:00 a.m. to 8:30 p.m.(1) • Saturday, June 18, 2016 — 8:00 a.m. to 1:00 p.m.(1) • Monday, June 20, 2016 — 8:00 a.m. to 12:00 noon(1)

Note: (1) These times are subject to change as HKSCC may determine from time to time with prior notification to CCASS Clearing/Custodian Participants.

CCASS Investor Participants can input electronic application instructions from 9:00 a.m. on Wednesday, June 15, 2016 until 12:00 noon on Monday, June 20, 2016 (24 hours daily, except on the last application day).

The latest time for inputting your electronic application instructions will be 12:00 noon on Monday, June 20, 2016, the last application day or such later time as described in “10. Effect of Bad Weather on the Opening of the Application Lists” in this section.

No Multiple Applications

If you are suspected of having made multiple applications or if more than one application is made for your benefit, the number of Hong Kong Offer Shares applied for by HKSCC Nominees will be automatically reduced by the number of Hong Kong Offer Shares for which you have given such instructions and/or for which such instructions have been given for your benefit. Any electronic application instructions to make an application for the Hong Kong Offer Shares given by you or for

— 315 — HOW TO APPLY FOR HONG KONG OFFER SHARES your benefit to HKSCC shall be deemed to be an actual application for the purposes of considering whether multiple applications have been made.

Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance

For the avoidance of doubt, the Company and all other parties involved in the preparation of this prospectus acknowledge that each CCASS Participant who gives or causes to give electronic application instructions is a person who may be entitled to compensation under Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (as applied by Section 342E of the Companies (Winding Up and Miscellaneous Provisions) Ordinance).

Personal Data

The section of the Application Form headed “Personal Data” applies to any personal data held by the Company, the Hong Kong Share Registrar, the receiving bank, the Sole Global Coordinator, the Joint Bookrunners, the Underwriters and any of their respective advisers and agents about you in the same way as it applies to personal data about applicants other than HKSCC Nominees.

7. WARNING FOR ELECTRONIC APPLICATIONS

The subscription of the Hong Kong Offer Shares by giving electronic application instructions to HKSCC is only a facility provided to CCASS Participants. Similarly, the application for Hong Kong Offer Shares through the White Form eIPO service is also only a facility provided by the White Form eIPO Service Provider to public investors. Such facilities are subject to capacity limitations and potential service interruptions and you are advised not to wait until the last application day in making your electronic applications. The Company, the Directors, the Joint Bookrunners, the Sole Sponsor, the Sole Global Coordinator and the Underwriters take no responsibility for such applications and provide no assurance that any CCASS Participant or person applying through the White Form eIPO service will be allotted any Hong Kong Offer Shares.

To ensure that CCASS Investor Participants can give their electronic application instructions, they are advised not to wait until the last minute to input their instructions to the systems. In the event that CCASS Investor Participants have problems in the connection to CCASS Phone System/CCASS Internet System for submission of electronic application instructions, they should either (i) submit a WHITE or YELLOW Application Form, or (ii) go to HKSCC’s Customer Service Centre to complete an input request form for electronic application instructions before 12:00 noon, Monday, June 20, 2016.

8. HOW MANY APPLICATIONS CAN YOU MAKE

Multiple applications for the Hong Kong Offer Shares are not allowed except by nominees. If you are a nominee, in the box on the Application Form marked “For nominees” you must include:

• an account number; or

• some other identification code,

— 316 — HOW TO APPLY FOR HONG KONG OFFER SHARES for each beneficial owner or, in the case of joint beneficial owners, for each joint beneficial owner. If you do not include this information, the application will be treated as being made for your benefit.

All of your applications will be rejected if more than one application on a WHITE or YELLOW Application Form or by giving electronic application instructions to HKSCC or through White Form eIPO service, is made for your benefit (including the part of the application made by HKSCC Nominees acting on electronic application instructions). If an application is made by an unlisted company and:

• the principal business of that company is dealing in securities; and

• you exercise statutory control over that company, then the application will be treated as being for your benefit.

“Unlisted company” means a company with no equity securities listed on the Stock Exchange.

“Statutory control” means you:

• control the composition of the board of directors of the company;

• control more than half of the voting power of the company; or

• hold more than half of the issued share capital of the company (not counting any part of it which carries no right to participate beyond a specified amount in a distribution of either profits or capital).

9. HOW MUCH ARE THE HONG KONG OFFER SHARES

The WHITE and YELLOW Application Forms have tables showing the exact amount payable for Shares. You must pay the maximum Offer Price, brokerage, SFC transaction levy and the Stock Exchange trading fee in full upon application for Hong Kong Offer Shares under the terms set out in the Application Forms.

You may submit an application using a WHITE or YELLOW Application Form or through the White Form eIPO service in respect of a minimum of 2,000 Hong Kong Offer Shares. Each application or electronic application instruction in respect of more than 2,000 Hong Kong Offer Shares must be in one of the numbers set out in the table in the Application Form, or as otherwise specified on the designated website at www.eipo.com.hk.

If your application is successful, brokerage will be paid to the Exchange Participants, and the SFC transaction levy and the Stock Exchange trading fee are paid to the Stock Exchange (in the case of the SFC transaction levy, collected by the Stock Exchange on behalf of the SFC). For further details on the Offer Price, see the section headed “Structure of the Global Offering—Pricing and Allocation.”

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10. EFFECT OF BAD WEATHER ON THE OPENING OF THE APPLICATION LISTS

The application lists will not open if there is:

• a tropical cyclone warming signal number 8 or above; or

• a “black” rainstorm warning, in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Monday, June 20, 2016. Instead they will open between 11:45 a.m. and 12:00 noon on the next Business Day which does not have either of those warnings in Hong Kong in force at any time between 9:00 a.m. and 12:00 noon.

If the application lists do not open and close on June 20, 2016 or if there is a tropical cyclone warning signal number 8 or above or a “black” rainstorm warning signal in force in Hong Kong that may affect the dates mentioned in the section headed “Expected Timetable”, an announcement will be made in such event.

11. PUBLICATION OF RESULTS

The Company expects to announce the final Offer Price, the level of indication of interest in the International Placing, the level of applications in the Hong Kong Public Offering and the basis of allocation of the Hong Kong Offer Shares on Friday, June 24, 2016 on the Company’s website at www.cdv.com and the website of the Stock Exchange at www.hkexnews.hk.

The results of allocations and the Hong Kong identity card/passport/Hong Kong business registration numbers of successful applicants under the Hong Kong Public Offering will be available at the times and date and in the manner specified below:

• in the announcement to be posted on the Company’s website at www.cdv.com and the Stock Exchange’s website at www.hkexnews.hk by no later than 9:00 a.m., Friday, June 24, 2016;

• from the designated results of allocations website at www.iporesults.com.hk with a “search by ID” function on a 24-hour basis from 8:00 a.m., Friday, June 24, 2016 to 12:00 midnight, on Thursday, June 30, 2016;

• by telephone enquiry line by calling 2862 8669 between 9:00 a.m. and 10:00 p.m. from Friday, June 24, 2016 to Monday, June 27, 2016;

• in the special allocation results booklets which will be available for inspection during opening hours from Friday, June 24, 2016, Saturday, June 25 and Monday, June 27, 2016 at all the designated receiving bank branches.

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If the Company accepts your offer to purchase (in whole or in part), which it may do by announcing the basis of allocations and/or making available the results of allocations publicly, there will be a binding contract under which you will be required to purchase the Hong Kong Offer Shares if the conditions of the Global Offering are satisfied and the Global Offering is not otherwise terminated. Further details are contained in the section headed “Structure of the Global Offering.”

You will not be entitled to exercise any remedy of rescission for innocent misrepresentation at any time after acceptance of your application. This does not affect any other right you may have.

12. CIRCUMSTANCES IN WHICH YOU WILL NOT BE ALLOTTED OFFER SHARES

You should note the following situations in which the Hong Kong Offer shares will not be allotted to you:

(i) If your application is revoked:

By completing and submitting an Application Form or giving electronic application instructions to HKSCC or to White Form eIPO Service Provider, you agree that your application or the application made by HKSCC Nominees on your behalf cannot be revoked on or before the fifth day after the time of the opening of the application lists (excluding for this purpose any day which is Saturday, Sunday or public holiday in Hong Kong). This agreement will take effect as a collateral contract with the Company.

Your application or the application made by HKSCC Nominees on your behalf may only be revoked on or before such fifth day if a person responsible for this prospectus under Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (as applied by Section 342E of the Companies (Winding Up and Miscellaneous Provisions) Ordinance) gives a public notice under that section which excludes or limits that person’s responsibility for this prospectus.

If any supplement to this prospectus is issued, applicants who have already submitted an application will be notified that they are required to confirm their applications. If applicants have been so notified but have not confirmed their applications in accordance with the procedure to be notified, all unconfirmed applications will be deemed revoked.

If your application or the application made by HKSCC Nominees on your behalf has been accepted, it cannot be revoked. For this purpose, acceptance of applications which are not rejected will be constituted by notification in the press of the results of allocation, and where such basis of allocation is subject to certain conditions or provides for allocation by ballot, such acceptance will be subject to the satisfaction of such conditions or results of the ballot respectively.

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(ii) If the Company or its agents exercise their discretion to reject your application:

The Company, the Sole Global Coordinator, the White Form eIPO Service Provider and their respective agents and nominees have full discretion to reject or accept any application, or to accept only part of any application, without giving any reasons.

(iii) If the allotment of Hong Kong Offer Shares is void:

The allotment of Hong Kong Offer Shares will be void if the Listing Committee of the Stock Exchange does not grant permission to list the Shares either:

• within three weeks from the closing date of the application lists; or

• within a longer period of up to six weeks if the Listing Committee notifies the Company of that longer period within three weeks of the closing date of the application lists.

(iv) If:

• you make multiple applications or suspected multiple applications;

• you or the person for whose benefit you are applying have applied for or taken up, or indicated an interest for, or have been or will be placed or allocated (including conditionally and/or provisionally) Hong Kong Offer Shares and International Offer Shares;

• your Application Form is not completed in accordance with the stated instructions;

• your electronic application instructions through the White Form eIPO service are not completed in accordance with the instructions, terms and conditions on the designated website at www.eipo.com.hk;

• your payment is not made correctly or the cheque or banker’s cashier order paid by you is dishonoured upon its first presentation;

• the Underwriting Agreements do not become unconditional or are terminated;

• the Company or the Sole Global Coordinator believe that by accepting your application, it or they would violate applicable securities or other laws, rules or regulations; or

• your application is for more than 50% of the Hong Kong Offer Shares initially offered under the Hong Kong Public Offering.

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13. REFUND OF APPLICATION MONIES

If an application is rejected, not accepted or accepted in part only, or if the Offer Price as finally determined is less than the maximum offer price of HK$2.57 per Offer Share (excluding brokerage, SFC transaction levy and the Stock Exchange trading fee thereon), or if the conditions of the Hong Kong Public Offering are not fulfilled in accordance with “Structure of the Global Offering—Conditions of the Global Offering” in this prospectus or if any application is revoked, the application monies, or the appropriate portion thereof, together with the related brokerage, SFC transaction levy and the Stock Exchange trading fee, will be refunded, without interest or the cheque or banker’s cashier order will not be cleared.

Any refund of your application monies will be made on or before Friday, June 24, 2016.

14. DISPATCH/COLLECTION OF SHARE CERTIFICATES AND REFUND MONIES

You will receive one Share certificate for all Hong Kong Offer Shares allotted to you under the Hong Kong Public Offering (except pursuant to applications made on YELLOW Application Forms or by electronic application instructions to HKSCC via CCASS where the Share certificates will be deposited into CCASS as described below).

No temporary document of title will be issued in respect of the Shares. No receipt will be issued for sums paid on application. If you apply by WHITE or YELLOW Application Form, subject to personal collection as mentioned below, the following will be sent to you (or, in the case of joint applicants, to the first-named applicant) by ordinary post, at your own risk, to the address specified on the Application Form:

• Share certificate(s) for all the Hong Kong Offer Shares allotted to you (for YELLOW Application Forms, Share certificates will be deposited into CCASS as described below); and

• refund cheque(s) crossed “Account Payee Only” in favor of the applicant (or, in the case of joint applicants, the first-named applicant) for (i) all or the surplus application monies for the Hong Kong Offer Shares, wholly or partially unsuccessfully applied for; and/or (ii) the difference between the Offer Price and the maximum Offer Price per Offer Share paid on application in the event that the Offer Price is less than the maximum Offer Price (including brokerage, SFC transaction levy and the Stock Exchange trading fee but without interest). Part of the Hong Kong identity card number/passport number, provided by you or the first-named applicant (if you are joint applicants), may be printed on your refund cheque, if any. Your banker may require verification of your Hong Kong identity card number/passport number before encashment of your refund cheque(s). Inaccurate completion of your Hong Kong identity card number/passport number may invalidate or delay encashment of your refund cheque(s).

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Subject to arrangement on dispatch/collection of Share certificates and refund monies as mentioned below, any refund cheques and Share certificates are expected to be posted on or before Friday, June 24, 2016. The right is reserved to retain any Share certificate(s) and any surplus application monies pending clearance of cheque(s) or banker’s cashier’s order(s).

Share certificates will only become valid at 8:00 a.m., Monday, June 27, 2016 provided that the Global Offering has become unconditional and the right of termination described in the “Underwriting” section in this prospectus has not been exercised. Investors who trade shares prior to the receipt of Share certificates or the Share certificates becoming valid do so at their own risk.

Personal Collection

(i) If you apply using a WHITE Application Form

If you apply for 1,000,000 or more Hong Kong Offer Shares and have provided all information required by your Application Form, you may collect your refund cheque(s) and/or Share certificate(s) from the Hong Kong Share Registrar, Computershare Hong Kong Investor Services Limited, at Shop 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, from 9:00 a.m. to 1:00 p.m. on June 24, 2016 or such other date as notified by us in the newspapers.

If you are an individual who is eligible for personal collection, you must not authorize any other person to collect for you. If you are a corporate applicant which is eligible for personal collection, your authorized representative must bear a letter of authorization from your corporation stamped with your corporation’s chop. Both individuals and authorized representatives must produce, at the time of collection, evidence of identity acceptable to the Hong Kong Share Registrar.

If you do not collect your refund cheque(s) and/or share certificate(s) personally within the time specified for collection, they will be dispatched promptly to the address specified in your Application Form by ordinary post at your own risk.

If you apply for less than 1,000,000 Hong Kong Offer Shares, your refund cheque(s) and/or share certificate(s) will be sent to the address on the relevant Application Form on or before June 24, 2016, by ordinary post and at your own risk.

(ii) If you apply using a YELLOW Application Form

If you apply for 1,000,000 Hong Kong Offer Shares or more, please follow the same instructions as described above. If you have applied for less than 1,000,000 Hong Kong Offer Shares, your refund cheque(s) will be sent to the address on the relevant Application Form on or before Friday, June 24, 2016, by ordinary post and at your own risk.

If you apply by using a YELLOW Application Form and your application is wholly or partially successful, your Share certificate(s) will be issued in the name of HKSCC Nominees and deposited into CCASS for credit to your or the designated CCASS Participant’s stock account as stated in your Application Form on Friday, June 24, 2016, or upon contingency, on any other date determined by HKSCC or HKSCC Nominees.

— 322 — HOW TO APPLY FOR HONG KONG OFFER SHARES

• If you apply through a designated CCASS participant (other than a CCASS investor participant)

For Hong Kong Offer Shares credited to your designated CCASS participant’s stock account (other than CCASS Investor Participant), you can check the number of Hong Kong Offer Shares allotted to you with that CCASS participant.

• If you are applying as a CCASS investor participant

The Company will publish the results of CCASS Investor Participants’ applications together with the results of the Hong Kong Public Offering in the manner described in “11. Publication of Results” above. You should check the announcement published by the Company and report any discrepancies to HKSCC before 5:00 p.m. on Friday, June 24, 2016 or any other date as determined by HKSCC or HKSCC Nominees. Immediately after the credit of the Hong Kong Offer Shares to your stock account, you can check your new account balance via the CCASS Phone System and CCASS Internet System.

(iii) If you apply through the White Form eIPO service

If you apply for 1,000,000 Hong Kong Offer Shares or more and your application is wholly or partially successful, you may collect your Share certificate(s) from Hong Kong Share Registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, from 9:00 a.m. to 1:00 p.m. on Friday, June 24, 2016, or such other date as notified by the Company in the newspapers as the date of dispatch/collection of Share certificates/e-Refund payment instructions/refund cheques.

If you do not collect your Share certificate(s) personally within the time specified for collection, they will be sent to the address specified in your application instructions by ordinary post at your own risk.

If you apply for less than 1,000,000 Hong Kong Offer Shares, your Share certificate(s) (where applicable) will be sent to the address specified in your application instructions on or before Friday, June 24, 2016 by ordinary post at your own risk.

If you apply and pay the application monies from a single bank account, any refund monies will be dispatched to that bank account in the form of e-Refund payment instructions. If you apply and pay the application monies from multiple bank accounts, any refund monies will be dispatched to the address as specified in your application instructions in the form of refund cheque(s) on or before Friday, June 24, 2016 by ordinary post at your own risk.

— 323 — HOW TO APPLY FOR HONG KONG OFFER SHARES

(iv) If you apply via Electronic Application Instructions to HKSCC

Allocation of Hong Kong Offer Shares

For the purposes of allocating Hong Kong Offer Shares, HKSCC Nominees will not be treated as an applicant. Instead, each CCASS Participant who gives electronic application instructions or each person for whose benefit instructions are given will be treated as an applicant.

Deposit of Share Certificates into CCASS and Refund of Application Monies

• If your application is wholly or partially successful, your Share certificate(s) will be issued in the name of HKSCC Nominees and deposited into CCASS for the credit of your designated CCASS Participant’s stock account or your CCASS Investor Participant stock account on Friday, June 24, 2016, or, on any other date determined by HKSCC or HKSCC Nominees.

• The Company expects to publish the application results of CCASS Participants (and where the CCASS Participant is a broker or custodian, the Company will include information relating to the relevant beneficial owner), your Hong Kong identity card number/passport number or other identification code (Hong Kong business registration number for corporations) and the basis of allotment of the Hong Kong Public Offering in the manner specified in “11. Publication of Results” above on Friday, June 24, 2016. You should check the announcement published by the Company and report any discrepancies to HKSCC before 5:00 p.m. on Friday, June 24, 2016 or such other date as determined by HKSCC or HKSCC Nominees.

• If you have instructed your broker or custodian to give electronic application instructions on your behalf, you can also check the number of Hong Kong Offer Shares allotted to you and the amount of refund monies (if any) payable to you with that broker or custodian.

• If you have applied as a CCASS Investor Participant, you can also check the number of Hong Kong Offer Shares allotted to you and the amount of refund monies (if any) payable to you via the CCASS Phone System and the CCASS Internet System (under the procedures contained in HKSCC’s “An Operating Guide for Investor Participants” in effect from time to time) on Friday, June 24, 2016. Immediately following the credit of the Hong Kong Offer Shares to your stock account and the credit of refund monies to your bank account, HKSCC will also make available to you an activity statement showing the number of Hong Kong Offer Shares credited to your CCASS Investor Participant stock account and the amount of refund monies (if any) credited to your designated bank account.

• Refund of your application monies (if any) in respect of wholly and partially unsuccessful applications and/or difference between the Offer Price and the maximum Offer Price per Offer Share initially paid on application (including brokerage, SFC transaction levy and the Stock Exchange trading fee but without interest) will be credited to your designated bank account or the designated bank account of your broker or custodian on Friday, June 24, 2016.

— 324 — HOW TO APPLY FOR HONG KONG OFFER SHARES

15. ADMISSION OF THE SHARES INTO CCASS

If the Stock Exchange grants the listing of, and permission to deal in, the Shares and we comply with the stock admission requirements of HKSCC, the Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the date of commencement of dealings in the Shares or any other date HKSCC chooses. Settlement of transactions between Exchange Participants (as defined in the GEM Listing Rules) is required to take place in CCASS on the second Business Day after any trading day.

All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

Investors should seek the advice of their stockbroker or other professional adviser for details of the settlement arrangement as such arrangements may affect their rights and interests.

All necessary arrangements have been made enabling the Shares to be admitted into CCASS.

— 325 — APPENDIX I ACCOUNTANT’S REPORT

The following is the text of a report received from the Company’s reporting accountant, Grant Thornton Hong Kong Limited, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this prospectus. It is prepared and addressed to the directors of the Company and to the Sole Sponsor pursuant to the requirements of Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the Hong Kong Institute of Certified Public Accountants.

June 15, 2016

The Directors China Digital Video Holdings Limited

Jefferies Hong Kong Limited

Dear Sirs,

We report on the financial information of China Digital Video Holdings Limited (the “Company”, formerly known as China Digital Video Limited) and its subsidiaries (together, the “Group”), which comprises the consolidated statements of financial position as at December 31, 2013, 2014 and 2015, the statements of financial position of the Company as at December 31, 2013, 2014 and 2015 and the consolidated statements of comprehensive income, the consolidated statements of changes in equity and the consolidated statements of cash flows for each of the years ended December 31, 2013, 2014 and 2015 (the “Relevant Periods”), and a summary of significant accounting policies and other explanatory information. This financial information has been prepared by the directors of the Company and is set out in Sections I to III below for inclusion in Appendix I to the prospectus of the Company dated June 15, 2016 (the “Prospectus”) in connection with the initial listing of shares of the Company on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the “Listing”).

The Company was incorporated in the Cayman Islands on January 8, 2007 as an exempted company with limited liability under the Companies Law (as consolidated and revised) of the Cayman Islands.

As at the date of this report, the Company has direct and indirect interests in the subsidiaries and joint ventures as set out in Note 1 and Note 13 of Section II below. All of these companies are private companies or, if incorporated or established outside Hong Kong, have substantially the same characteristics as a Hong Kong incorporated private company.

No audited financial statements have been prepared by the Company since its date of incorporation as there is no statutory audit requirement in the Cayman Islands. The audited financial

— I-1 — APPENDIX I ACCOUNTANT’S REPORT statements of the other companies now comprising the Group as at the date of this report for which there are statutory audit requirements have been prepared in accordance with the relevant accounting principles generally accepted in their place of incorporation. The details of the statutory auditors of these companies are set out in Note 1 of Section II.

The directors of the Company have prepared the consolidated financial statements of the Company for the Relevant Periods, in accordance with International Financial Reporting Standards (“IFRSs”) issued by the International Accounting Standards Board (the “Underlying Financial Statements”). The directors of the Company are responsible for the preparation of the Underlying Financial Statements that gives a true and fair view in accordance with IFRSs. We have audited the Underlying Financial Statements in accordance with International Standards on Auditing (the “ISAs”) issued by the International Auditing and Assurance Standards Board (“IAASB”) pursuant to separate terms of engagement with the Company.

The financial information has been prepared based on the Underlying Financial Statements, with no adjustment made thereon.

Directors’ Responsibility for the Financial Information

The directors of the Company are responsible for the preparation of the financial information that gives a true and fair view in accordance with IFRSs, and for such internal control as the directors determine is necessary to enable the preparation of financial information that is free from material misstatement, whether due to fraud or error.

Reporting Accountant’s Responsibility

Our responsibility is to express an opinion on the financial information and to report our opinion to you. We carried out our procedures in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

Opinion

In our opinion, the financial information gives, for the purpose of this report, a true and fair view of the financial position of the Company and the Group as at December 31, 2013, 2014 and 2015 and of the Group’s financial performance and cash flows for the Relevant Periods.

— I-2 — APPENDIX I ACCOUNTANT’S REPORT

I. FINANCIAL INFORMATION

The following is the financial information of the Group prepared by the directors of the Company as at December 31, 2013, 2014 and 2015 and for each of the years ended December 31, 2013, 2014 and 2015 (the “Financial Information”).

(A) CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Year ended December 31,

Notes 2013 2014 2015

RMB’000 RMB’000 RMB’000

Revenue ...... 4 502,964 406,369 605,983 Cost of sales...... (366,276) (287,363) (393,812) Gross profit ...... 136,688 119,006 212,171 Other income ...... 5 42,535 33,213 77,586 Selling and marketing expenses...... (65,626) (74,815) (62,005) Administrative expenses...... (32,200) (46,960) (66,298) Share-based compensation expense...... 25 (2,190) (886) (3,835) Research and development expenses...... (57,765) (61,106) (56,230) Finance costs ...... 6 (5,103) (870) (16,349) Fair value (loss)/gain on redeemable convertible preferred shares...... 23(iii) (26,696) (28,079) 70,820 Loss on extinguishment of redeemable convertible preferred shares...... 23(iii) — (14,724) (21,969) Share of losses of joint ventures ...... 14 — (1,285) (6,521) (Loss)/Profit before income tax...... (10,357) (76,506) 127,370 Income tax (expense)/credit ...... 7 (1,833) 7,106 (13,256) (Loss)/Profit for the year ...... 6 (12,190) (69,400) 114,114 Other comprehensive income/(loss) Items that may be subsequently reclassified to profit or loss: Exchange difference arising on the translation of foreign operation ...... 13,972 (1,614) (34,832) Total comprehensive income/(loss) for the year ...... 1,782 (71,014) 79,282

(Loss)/Profit for the year attributable to: Equity holders of the Company...... (12,190) (66,582) 120,219 Non-controlling interests...... — (2,818) (6,105) (12,190) (69,400) 114,114

— I-3 — APPENDIX I ACCOUNTANT’S REPORT

Year ended December 31,

Notes 2013 2014 2015

RMB’000 RMB’000 RMB’000

Total comprehensive income/(loss) for the year attributable to: Equity holders of the Company...... 1,782 (68,196) 85,387 Non-controlling interests...... — (2,818) (6,105) 1,782 (71,014) 79,282

(Loss)/Earnings per share for (loss)/profit attributable to ordinary equity holders of the Company (expressed in RMB cents per share) 8 Basic ...... (26.53) (94.83) 137.11

Diluted ...... (26.53) (94.83) 40.13

— I-4 — APPENDIX I ACCOUNTANT’S REPORT

(B) CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As at December 31,

Notes 2013 2014 2015

RMB’000 RMB’000 RMB’000

Non-current assets Property, plant and equipment...... 10 26,350 13,584 6,677 Intangible assets ...... 11 75,156 70,436 67,978 Goodwill...... 12 74,220 74,220 74,220 Interests in joint ventures...... 14 — — 3,647 Other financial assets...... 17 — — 3,461 Deferred tax assets...... 21 4,313 4,924 8,327 180,039 163,164 164,310 Current assets Inventories...... 15 103,748 64,985 32,749 Trade and other receivables...... 16 264,871 330,849 420,206 Other financial assets...... 17 — 3,084 — Pledged bank deposits...... 18 21,368 3,582 6,359 Bank balances and cash ...... 18 178,235 147,372 181,085 568,222 549,872 640,399 Current liabilities Trade and other payables ...... 19 304,524 276,287 222,230 Income tax liabilities ...... 3,778 87 17,493 Redeemable convertible preferred shares...... 23 563,829 633,255 — Other interest-bearing borrowings ...... 20 5,000 8,900 70,946 877,131 918,529 310,669 Net current (liabilities)/assets ...... (308,909) (368,657) 329,730 Total assets less current liabilities ...... (128,870) (205,493) 494,040 Non-current liabilities Redeemable convertible preferred shares...... 23 — — 607,832 Other interest-bearing borrowings ...... 20 — — 4,363 Deferred tax liabilities ...... 21 12,971 6,476 5,729 12,971 6,476 617,924 Net liabilities ...... (141,841) (211,969) (123,884) EQUITY Share capital — Ordinary shares...... 22 6 6 6 Share capital — Non-redeemable convertible preferred shares ...... 23 26,235 26,235 26,235 Reserves ...... 24 (168,082) (235,392) (146,170) Equity attributable to equity holders of the Company ...... (141,841) (209,151) (119,929) Non-controlling interests...... — (2,818) (3,955) Capital deficiency...... (141,841) (211,969) (123,884)

— I-5 — APPENDIX I ACCOUNTANT’S REPORT

As at December 31,

Notes 2013 2014 2015

RMB’000 RMB’000 RMB’000

Non-current assets Interests in subsidiaries...... 13 322,355 324,411 452,541 Other financial assets...... 17 — — 3,461 322,355 324,411 456,002 Current assets Other receivables ...... 16 69,815 96,932 7,154 Other financial assets...... 17 — 3,084 — Bank balances ...... 18 44,499 38,316 725 114,314 138,332 7,879 Current liabilities Other payables ...... 19 852 627 6,198 Redeemable convertible preferred shares...... 23 563,829 633,255 — 564,681 633,882 6,198 Net current (liabilities)/assets ...... (450,367) (495,550) 1,681 Total assets less current liabilities ...... (128,012) (171,139) 457,683 Non-current liabilities Redeemable convertible preferred shares...... 23 — — 607,832 Net liabilities ...... (128,012) (171,139) (150,149)

EQUITY Share capital — Ordinary shares...... 22 6 6 6 Share capital — Non-redeemable convertible preferred shares ...... 23 26,235 26,235 26,235 Reserves ...... 24 (154,253) (197,380) (176,390) Capital deficiency...... (128,012) (171,139) (150,149)

— I-6 — (D) CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY REPORT ACCOUNTANT’S I APPENDIX

Equity attributable to equity holders of the Company

Share capital — Non- Share redeemable capital — convertible Share Non- Ordinary preferred Statutory Translation option Accumulated controlling Capital Shares shares reserve reserve reserve losses Sub-total interests deficiency

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Balance at January 1, 2013 ...... 6 — 7,701 25,339 16,396 (221,490) (172,048) — (172,048) Comprehensive income/(loss) for

- — I-7 — the year Loss for the year...... —————(12,190) (12,190) — (12,190) Other comprehensive income...... — — — 13,972 — — 13,972 — 13,972 Total comprehensive income/(loss) for the year...... — — — 13,972 — (12,190) 1,782 — 1,782 Transactions with owners Lapse of redemption option of preferred shares (Note 23(i)(d))...... — 26,235 ————26,235 — 26,235 Share-based compensation (Note 25) ...... ————2,190 — 2,190 — 2,190 Transfer upon forfeiture of share options...... ————(219) 219 — — — Appropriation to statutory reserve...... — — 2,090 — — (2,090) — — — Total transactions with owners... — 26,235 2,090 — 1,971 (1,871) 28,425 — 28,425 Balance at December 31, 2013 .. 6 26,235 9,791 39,311 18,367 (235,551) (141,841) — (141,841) PEDXIACUTN’ REPORT ACCOUNTANT’S I APPENDIX Equity attributable to equity holders of the Company

Share capital — Non- Share redeemable capital — convertible Share Non- Ordinary preferred Statutory Translation option Accumulated controlling Capital shares shares reserve reserve reserve losses Sub-total interests deficiency

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Balance at January 1, 2014 ...... 6 26,235 9,791 39,311 18,367 (235,551) (141,841) — (141,841) Comprehensive loss for the year Loss for the year...... —————(66,582) (66,582) (2,818) (69,400) Other comprehensive loss...... — — — (1,614) — — (1,614) — (1,614) - — I-8 — Total comprehensive loss for the year...... — — — (1,614) — (66,582) (68,196) (2,818) (71,014) Transactions with owners Share-based compensation (Note 25) ...... ————886—886—886 Transfer upon forfeiture of share options...... ————(1,099) 1,099 — — — Total transactions with owners...————(213) 1,099 886 — 886 Balance at December 31, 2014.... 6 26,235 9,791 37,697 18,154 (301,034) (209,151) (2,818) (211,969) PEDXIACUTN’ REPORT ACCOUNTANT’S I APPENDIX Equity attributable to equity holders of the Company

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Balance at January 1, 2015 ...... 6 26,235 9,791 37,697 18,154 (301,034) (209,151) (2,818) (211,969) Comprehensive (loss)/income for the year Profit for the year ...... —————120,219 120,219 (6,105) 114,114

- — I-9 — Other comprehensive income ...... — — — (34,832) — — (34,832) — (34,832) Total comprehensive (loss)/income for the year...... — — — (34,832) — 120,219 85,387 (6,105) 79,282 Transactions with owners Share-based compensation (Note 25) ...... ————3,835 — 3,835 — 3,835 Transfer upon forfeiture of share options...... ————(266) 266 — — — Appropriation to statutory reserve...... — — 9,940 — — (9,940) — — — Capital contribution from a non-controlling shareholder...... ———————3,000 3,000 Disposal of a subsidiary (Note 27) ...... ———————1,968 1,968 Total transactions with owners... — — 9,940 — 3,569 (9,674) 3,835 4,968 8,803 Balance at December 31, 2015.... 6 26,235 19,731 2,865 21,723 (190,489) (119,929) (3,955) (123,884) APPENDIX I ACCOUNTANT’S REPORT

(E) CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended December 31, Notes 2013 2014 2015 RMB’000 RMB’000 RMB’000

Cash flows from operating activities (Loss)/Profit before income tax...... (10,357) (76,506) 127,370 Adjustments for: Depreciation of property, plant and equipment ...... 15,152 16,451 11,289 Amortisation of intangible assets ...... 6,808 14,265 14,242 Interest income...... (2,430) (2,192) (1,491) Finance costs...... 5,103 870 16,349 Bad debt written off ...... — 4,580 1,314 Provision for doubtful trade and other receivables ...... 3,857 7,806 14,005 Reversal of provision for doubtful trade and other receivables ...... (857) (1,983) (16,650) Provision for inventory obsolescence ...... 1,214 2,236 1,629 Loss on disposal of property, plant and equipment ...... 334 167 538 Gain on disposal of intangible assets ...... — — (10,800) Fair value gain on financial assets at fair value through profit or loss ...... — (24) (181) Fair value loss/(gain) on redeemable convertible preferred shares...... 26,696 28,079 (70,820) Loss on extinguishment of redeemable convertible preferred shares...... — 14,724 21,969 Share-based compensation expense ...... 2,190 886 3,835 Share of losses of joint ventures...... — 1,285 6,521 Gain on dilution of interest in a joint venture...... — — (653) Gain on disposal of a subsidiary...... 27 — — (7,872) Operating profit before working capital changes ...... 47,710 10,644 110,594 Decrease in inventories ...... 69,164 36,207 29,032 Increase in trade and other receivables...... (4,062) (53,654) (136,887) (Decrease)/Increase in trade and other payables ...... (40,030) (61,435) 24,728 Cash generated from/(used in) operations...... 72,782 (68,238) 27,467 Income tax paid ...... (1,992) (3,691) — Income tax refunded ...... 3,217 — — Net cash from/(used in) operating activities.. 74,007 (71,929) 27,467

— I-10 — APPENDIX I ACCOUNTANT’S REPORT

Year ended December 31, Notes 2013 2014 2015 RMB’000 RMB’000 RMB’000

Cash flows from investing activities Interest received ...... 2,290 1,941 103 Purchase of property, plant and equipment ...... (12,568) (3,962) (4,391) Proceeds from disposal of property, plant and equipment...... 34 430 334 Purchase of intangible assets...... (333) (58) (20) Addition in development costs through internal development ...... (9,098) (9,487) (11,764) Proceeds from disposal of available-for-sale financial assets ...... 4,000 — — Purchase of financial assets at fair value through profit or loss...... — (3,060) — Acquisition of a business, net of cash acquired...... 26 (112,337) — — Proceeds from sale of a subsidiary, net of cash disposed of ...... 27 — — 7,776 Addition in amount due from a director ...... (6,822) (22) — Repayment/(Addition) in amounts due from related parties...... 4,407 (19,300) (3,220) Increase in amounts due from joint ventures .... — (3,266) (9,513) Decrease/(Increase) in pledged bank deposits... 16,407 17,786 (2,777) (Increase)/Decrease in time deposits with original maturities exceeding three months ... (27,965) 37,678 (100,150) Net cash (used in)/from investing activities... (141,985) 18,680 (123,622) Cash flows from financing activities Interest paid...... (6,432) (762) (17,246) Proceeds from issuance of redeemable convertible preferred shares...... — 100,000 — Redemption of redeemable convertible preferred shares ...... (12,627) (75,019) (12,703) Addition/(Decrease) in amounts due to related parties ...... 43,085 31,807 (6,791) Capital contribution from non-controlling interest ...... — — 3,000 Payment for deferred IPO costs...... — — (4,312) Proceeds from bank borrowings ...... 5,000 8,900 50,537 Repayment of bank borrowings ...... (85,851) (5,000) (13,210) Addition of other borrowings ...... — — 47,900 Repayment of other borrowings...... — — (17,499) Net cash (used in)/from financing activities .. (56,825) 59,926 29,676 Net (decrease)/increase in cash and cash equivalents ...... (124,803) 6,677 (66,479) Cash and cash equivalents at beginning of year ...... 216,741 90,557 97,372 Effect of foreign exchange rate changes on cash and cash equivalents held...... (1,381) 138 42 Cash and cash equivalents at end of year ..... 18 90,557 97,372 30,935

— I-11 — APPENDIX I ACCOUNTANT’S REPORT

II. NOTES TO THE FINANCIAL INFORMATION

1. CORPORATE INFORMATION

China Digital Video Holdings Limited (the “Company”, formerly known as China Digital Video Limited) was incorporated in the Cayman Islands on January 8, 2007 as an exempted company with limited liability under the Companies Law (as consolidated and revised) of the Cayman Islands. The address of the Company’s registered office is P.O. Box 309, Ugland House, Grand Cayman KY1-1104, Cayman Islands.

The Company is an investment holding company and its subsidiaries (collectively, the “Group”) are principally engaged in research, development and sales of video-related and broadcasting equipment and software and provision of related technical services (the “Business”) in the People’s Republic of China (the “PRC”).

As at the date of this report and during the Relevant Periods, the directors regard the immediate and the ultimate holding company of the Company is Wing Success Holdings Limited (“Wing Success”), a company incorporated in the British Virgin Islands and 100% owned by Mr. Zheng Fushuang (“Mr. Zheng” or the “Founder”).

The Financial Information is presented in Renminbi (“RMB”), unless otherwise stated.

As at the date of this report, the Company had direct or indirect interests in the following subsidiaries and joint ventures:

Country/Place and date of Issued and incorporation/ paid-up capital/ Equity Principal activities and Name of company establishment registered capital interest held place of operation Note

Directly held by the Company Subsidiaries China Digital Video PRC/ US$50,000,000 100% Research, (a) (Beijing) Limited June 21, 2007 development and 新奧特(北京)視頻技 sales of 術有限公司 (“CDV video-related and WFOE”) broadcasting equipment and software and provision of related technical service, in PRC

— I-12 — APPENDIX I ACCOUNTANT’S REPORT

Country/Place and date of Issued and incorporation/ paid-up capital/ Equity Principal activities and Name of company establishment registered capital interest held place of operation Note

Indirectly held by the Company Subsidiaries ZhengQi (Beijing) PRC/ RMB20,000,000 100% Research, (b) Video Technology October 23, development and Co., Ltd 北京正奇 2012 sales of 聯訊科技有限公司 video-related and (“Beijing Zhengqi”) broadcasting equipment and software and provision of related technical service, in PRC

Beijing Meicam PRC/ RMB25,000,000 40% Mobile application (c) Network October 23, development and Technology Co., 2014 operation, in PRC Ltd 北京美攝網絡科技有限公司 (“Beijing Meicam”) (Formerly known as Beijing Meicam Network Co., Ltd 北京美攝網絡有限公司)

Joint ventures Beijing Hermit PRC/ RMB10,000,000 40% Provision of virtual (d) Culture & Media September 17, advertising Co., Ltd 北京海米 2014 service, in PRC 文化傳媒有限公司 (“Beijing Hermit”)

— I-13 — APPENDIX I ACCOUNTANT’S REPORT

Country/Place and date of Issued and incorporation/ paid-up capital/ Equity Principal activities and Name of company establishment registered capital interest held place of operation Note

Beijing Yue Ying PRC/ RMB11,363,636 35.2% Development and (d) Technology Co., December 9, provision of video Ltd 北京悅影科技 2014 related 有限公司 (“Beijing application, in Yueying”) PRC

CDV (Beijing) Yun PRC/ RMB25,000,000 40% Mobile application (d) Duan Technology December 29, development and Co., Ltd 新奥特(北 2014 operation, in PRC 京)雲端科技有限公司 (“Xin’aote Cloud”)

Notes:

(a) The statutory financial statements of CDV WFOE for the years ended December 31, 2013, 2014 and 2015 were audited by Beijing Zhongqixin Certified Public Accountants 北京中齊信會計師事務所有限公司 (“Beijing Zhongqixin”), Beijing Zhongqixin and 北京永恩力合會計師事務所有限公司, respectively. (b) The statutory financial statements of Beijing Zhengqi for the years ended December 31, 2013, 2014 and 2015 were audited by Beijing Zhongqixin, Beijing Zhongqixin and 北京永恩力合會計師事務所有限公司, respectively. (c) On December 16, 2014, the name of the company was changed from Beijing Meicam Network Co., Ltd to Beijing Meicam Network Technology Co., Ltd. The financial statements of Beijing Meicam for the period from October 23, 2014 (date of incorporation) to December 31, 2014 and for the year ended December 31, 2015 were audited by 北京永恩力合會計師事務所有限公司. Although the Group owns less than half of the equity interests in Beijing Meicam, it is able to control Beijing Meicam through its power over more than one half (i.e. 60%) of the voting rights (excluding any potential voting rights stated below) by virtue of an agreement with another investor in Beijing Meicam. In addition, within the three years after the date of incorporation of Beijing Meicam, the Group can exercise its option to acquire an additional 40% equity interest in Beijing Meicam from another investor at a price to be determined subsequently. Consequently, the Group consolidate Beijing Meicam to its Financial Information.

(d) No statutory audited financial statements have been prepared for these companies for the period ended December 31, 2015 as such financial statements are not yet due for audit under the statutory requirements of their respective places of incorporation. Under the shareholders agreements entered with other investors, within the three years after the date of incorporation of these companies, the Group can exercise its option to acquire an additional 40% equity interest in each of these companies from another investor at a price to be determined subsequently.

The English names of certain companies referred herein represent management’s best effort at translating the Chinese names of these companies as no English name has been registered.

All companies comprising the Group have adopted 31 December as their financial year end date.

— I-14 — APPENDIX I ACCOUNTANT’S REPORT

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of the Financial Information are set out below. These policies have been consistently applied throughout the Relevant Periods, unless otherwise stated.

2.1 Basis of preparation

The Financial Information of the Group has been prepared in accordance with all applicable International Financial Reporting Standards (“IFRSs”). The Financial Information has been prepared under the historical cost basis, except for financial assets/liabilities at fair value through profit or loss which are carried at fair value.

All new standards, amendments to standards and interpretations, which are mandatory for the financial year beginning January 1, 2015 are consistently applied to the Group for the Relevant Periods.

In preparing the Financial Information, the directors of the Company have given consideration to the future liquidity of the Group in light of its net current liabilities of RMB308,909,000 and RMB368,657,000 as at December 31, 2013 and 2014 respectively and its net liabilities/capital deficiency of RMB141,841,000, RMB211,969,000 and RMB123,884,000 as at December 31, 2013, 2014 and 2015 respectively. The net liabilities were mainly attributable to the redeemable convertible preferred shares of RMB563,829,000, RMB633,255,000 and RMB607,832,000 as at December 31, 2013, 2014 and 2015 respectively. As detailed in Note 23(i), the holders of the redeemable convertible preferred shares of the Company can choose to redeem their shares should the Company has not effected a closing of a Qualified IPO by March 31, 2017.

Taking into account that the Group has obtained consent letters from the holders of the redeemable convertible preferred shares of the Company in July 2015 that they would not redeem their shares on or before March 31, 2017, and as detailed in Note 23(i)(c), the Group has obtained written confirmations from holders of the redeemable convertible preferred shares of the Company to deem the Listing as a Qualified IPO (the “Waiver”) in December 2015 and January 2016 and after assessing the Group’s current and forecasted cash positions, the directors of the Company are of the opinion that the Group will have sufficient cash resources to satisfy its future working capital and other financing requirements as they fall due for at least the next twelve months from the end of the reporting period. Accordingly, the Financial Information have been prepared on a going concern basis. Should the Group be unable to operate as a going concern, adjustments would have to be made to write down the values of the assets to their recoverable amounts, to provide for any further liabilities which might arise, and to reclassify non-current assets and liabilities as current assets and liabilities respectively. The effects of these adjustments have not been reflected in the Financial Information.

The preparation of the Financial Information in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the accounting policies of the Group. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Financial Information are disclosed in Note 3 below.

— I-15 — APPENDIX I ACCOUNTANT’S REPORT

2.2 Issued but not effective IFRSs

A number of new standards and amendments to standards and interpretations have been issued but not yet effective for annual periods beginning after January 1, 2015, and have not been applied in preparing these Financial Information. None of these is expected to have a significant effect on the results of operation and financial position of the Group, except the following set out below:

IFRS 9, “Financial instruments”, addresses the classification, measurement and recognition of financial assets and financial liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through other comprehensive income and fair value through profit or loss. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in other comprehensive income not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the “hedged ratio” to be the same as the one management actually use for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under IAS 39. The standard is effective for accounting periods beginning on or after January 1, 2018. Early adoption is permitted. The Group is yet to assess IFRS 9’s full impact.

IFRS 15, “Revenue from contracts with customers” deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18 “Revenue” and IAS 11 “Construction contracts” and related interpretations. The standard is effective for annual periods beginning on or after January 1, 2018 and earlier application is permitted. The Group is assessing the impact of IFRS 15.

The Group is a lessee of various offices and residential properties, which are currently classified as operating leases. IFRS 16, “Leases” provides new provisions for the accounting treatment of leases and will in the future no longer allow lessees to recognise certain leases outside of the statement of financial position. Instead, all non-current leases must be recognised in the form of an asset (for the right of use) and a financial liability (for the payment obligation). Thus each lease will be mapped in the Group’s consolidated statement of financial position. Short-term leases of less than twelve months and leases of low-value assets are exempt from the reporting obligation. The new standard will therefore result in an increase in property, plant and equipment and an increase in financial liabilities in the consolidated statement of financial position. In the consolidated statement of comprehensive income, leases will be recognised in the future as capital expenditure on the purchasing side and will

— I-16 — APPENDIX I ACCOUNTANT’S REPORT no longer be recorded as an operating expense. As a result, the operating expenses under otherwise identical circumstances will decrease, while depreciation and amortisation and the interest expense will increase. IFRS 16 is effective for annual periods beginning on or after January 1, 2019 and earlier application is permitted if IFRS 15 has also been applied. The Group is yet to assess IFRS 16’s full impact.

2.3 Consolidation

(a) Subsidiaries

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

(i) Business combination

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.

The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis. Non-controlling interests in the acquiree that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation are measured at either fair value or the present ownership interests’ proportionate share in the recognised amounts of the acquiree’s identifiable net assets. All other components of non-controlling interests are measured at their acquisition date fair value, unless another measurement is required by IFRS.

Acquisition-related costs are expensed as incurred.

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in profit or loss.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.

— I-17 — APPENDIX I ACCOUNTANT’S REPORT

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If the total of consideration transferred, non-controlling interest recgonised and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised in profit or loss.

Intra-group transactions, balances and unrealised gains and losses on transactions between group companies are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

(ii) Changes in ownership interest in subsidiaries without change in control

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

(iii) Disposal of subsidiaries

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

(b) Separate financial statements

In the Company’s statement of financial position, subsidiaries are carried at cost less any impairment loss. Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments. Cost also includes direct attributable costs of investment. The results of subsidiaries are accounted for by the Company on the basis of dividends received and receivable at the reporting date. All dividends whether received out of the investee’s pre or post-acquisition profits are recognised in the Company’s profit or loss.

2.4 Joint arrangements

The Group has applied IFRS 11 to all joint arrangements. Under IFRS 11 investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations each investor. The Group has assessed the nature of its joint arrangements and determined them to be joint ventures. Joint ventures are accounted for using the equity method.

— I-18 — APPENDIX I ACCOUNTANT’S REPORT

Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses and movements in other comprehensive income. The Group’s investments in joint ventures including goodwill identified on acquisition. Upon the acquisition of the ownership interest in a joint venture, any difference between the cost of the joint venture and the Group’s share of the net fair value of the joint venture’s identifiable assets and liabilities is accounted for as goodwill. When the Group’s share of losses in a joint venture equals or exceeds its interests in the joint ventures (which includes any long-term interests that, in substance, form part of the Group’s net investment in the joint ventures), the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint ventures.

Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group.

2.5 Segment reporting

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

2.6 Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The functional currency of the Company is United States dollars (“USD”). The Company’s primary subsidiaries were incorporated in the PRC and these subsidiaries considered RMB as their functional currency. As the development and operation of the Group during the Relevant Periods are within the PRC, the Group determined to present the Financial Information in RMB, unless otherwise stated.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated statements of comprehensive income.

— I-19 — APPENDIX I ACCOUNTANT’S REPORT

Translation differences on monetary items that forms part of the Company’s net investment in a foreign operation that is a subsidiary are recognised in the statements of comprehensive income in the separate financial statements of the Company. In the consolidated financial information, such foreign exchange differences are recognised in other comprehensive income.

The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

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

• income and expenses for each statement of comprehensive income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

• all resulting currency translation differences are recognised in other comprehensive income.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are recognised in other comprehensive income.

(d) Disposal of foreign operation

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

2.7 Property, plant and equipment

Property, plant and equipment are stated at historical cost less accumulated depreciation and impairment loss. Cost includes expenditures that are directly attributable to the acquisition of the asset.

— I-20 — APPENDIX I ACCOUNTANT’S REPORT

Depreciation is provided to write off the cost less their residual values over their estimated useful lives, using the straight-line method, as follows:

The asset’s residual values, depreciation methods and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting date.

The gain or loss arising on retirement or disposal is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

Subsequent costs are included in the asset’s carrying amount or recognised as separate assets, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other costs, such as repairs and maintenance, are charged to profit or loss during the financial period in which they are incurred.

2.8 Goodwill

Goodwill arises on the acquisition of subsidiaries represents the excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identified net assets acquired. Goodwill is stated at cost less accumulated impairment losses. Goodwill is allocated to cash-generating units and is tested annually for impairment (see Note 2.21). Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

2.9 Intangible assets (other than goodwill)

(a) Video-related and broadcasting intellectual properties, patents, trademarks and licenses

Separately acquired video-related and broadcasting intellectual properties, patents, trademarks and licenses are initially recorded at cost and include internally generated intangible assets (i.e. capitalised development costs as detailed in Note 2.9(c) below) that are available-for-use. Video-related and broadcasting intellectual properties, patents, trademarks and licenses acquired in a business combination are recognised at fair value at the acquisition date. These intangible assets have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated on a straight-line basis over the shorter of their license periods or estimate useful lives (ranged from 2 to 10 years).

— I-21 — APPENDIX I ACCOUNTANT’S REPORT

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives of 1 to 10 years.

(b) Unfinished contracts

Unfinished contracts acquired in a business combination are recognised at fair value at the acquisition date. Unfinished contracts are carried at cost less accumulated amortisation. Amortisation is calculated on a straight-line basis over the estimated useful lives of 1 to 2 years.

Costs associated with research activities are expensed in profit or loss as they occur. Costs that are directly attributable to development activities (relating to the design and testing of new or improved products) are recognised as intangible assets provided they meet the following recognition requirements:

(i) demonstration of technical feasibility of the prospective product for internal use or sale;

(ii) there is intention to complete the intangible asset and use or sell it;

(iii) the Group’s ability to use or sell the intangible asset is demonstrated;

(iv) the intangible asset will generate probable economic benefits through internal use or sale;

(v) sufficient technical, financial and other resources are available for completion; and

(vi) the expenditure attributable to the intangible asset can be reliably measured.

Direct costs include employee costs incurred on development activities. The costs of development of internally generated software, products or knowhow that meet the above recognition criteria are recognised as intangible assets. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Capitalised development costs are recorded as intangible assets and are transferred to “Video-related and broadcasting intellectual properties, patents, trademarks and licenses” (Note 2.9(a)) once the asset is available for use. Amortisation commences when the intangible assets are available for use and are calculated on a straight-line basis over its estimated useful lives (ranged from 2 to 4 years).

All other development costs are expensed as incurred.

(d) Club membership

Club memberships with indefinite useful life are stated at cost less any impairment losses.

— I-22 — APPENDIX I ACCOUNTANT’S REPORT

2.10 Financial assets

The Group’s accounting policies for financial assets other than investments in subsidiaries and joint ventures are set out below. Financial assets of the Group are classified into loans and receivables, available-for-sale financial assets and financial assets at fair value through profit or loss. Management determines the classification of its financial assets at initial recognition depending on the purpose for which the financial assets were acquired and where allowed and appropriate, re-evaluates this designation at every reporting date.

All financial assets are recognised when, and only when, the Group becomes a party to the contractual provisions of the instrument. Regular way purchases of financial assets are recognised on trade date (the date on which the Group commits to purchase or sell the asset). When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.

Derecognition of financial assets occurs when the rights to receive cash flows from the investments expire or are transferred and substantially all of the risks and rewards of ownership have been transferred.

At each reporting date, financial assets are reviewed to assess whether there is objective evidence of impairment. If any such evidence exists, an impairment loss is determined and recognised based on the classification of the financial asset.

(a) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition as at fair value through profit or loss.

Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term, or it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent pattern of short-term profit-taking. Derivatives, including separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments or financial guarantee contracts.

Where a contract contains one or more embedded derivatives, the entire hybrid contract may be designated as a financial asset at fair value through profit or loss, except where the embedded derivative does not significantly modify the cash flows or it is clear that separation of the embedded derivative is prohibited.

Financial assets may be designated at initial recognition as at fair value through profit or loss if the following criteria are met:

- the designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the assets or recognising gains or losses on them on a different basis; or

— I-23 — APPENDIX I ACCOUNTANT’S REPORT

- the assets are part of a group of financial assets which are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management strategy and information about the group of financial assets is provided internally on that basis to the key management personnel; or

- the financial asset contains an embedded derivative that would need to be separately recorded.

Subsequent to initial recognition, the financial assets included in this category are measured at fair value with changes in fair value recognised in profit or loss. Fair value is determined by reference to active market transactions or using a valuation technique where no active market exists. Fair value gain or loss does not include any dividend or interest earned on these financial assets, except otherwise stated. Dividend and interest income is recognised in accordance with the Group’s policies in Notes 2.18 and 2.19 to the Financial Information.

The Group has designated its investment in convertible promissory notes at fair value through profit or loss in order to avoid the need to recognise separately embedded derivatives which were not closely related to the host debt contract.

(b) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the reporting date, which are classified as non-current assets. Loans and receivables are subsequently measured at amortised cost using the effective interest method, less any impairment losses. Amortised cost is calculated taking into account any discount or premium on acquisition and includes fees that are an integral part of the effective interest rate and transaction cost.

Non-derivative financial assets that do not qualify for inclusion in any of the other categories of financial assets are classified as available-for-sale financial assets. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months after the reporting date.

All financial assets within this category are subsequently measured at fair value. Gain or loss arising from a change in the fair value excluding any dividend and interest income is recognised in other comprehensive income and accumulated separately in the revaluation reserve in equity, except for impairment losses (see the policy below) and foreign exchange gains and losses on monetary assets, until the financial asset is derecognised, at which time the cumulative gain or loss is reclassified from equity to profit or loss. Interest calculated using the effective interest method is recognised in profit or loss.

Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are stated at cost less an identified impairment losses at each reporting date subsequent to initial recognition.

— I-24 — APPENDIX I ACCOUNTANT’S REPORT

Impairment of financial assets

At each reporting date, financial assets other than at fair value through profit or loss are reviewed to determine whether there is any objective evidence of impairment.

Objective evidence of impairment of individual financial assets includes observable data that comes to the attention of the Group about one or more of the following loss events:

• significant financial difficulty of the debtor;

• a breach of contract, such as a default or delinquency in interest or principal payments;

• it becoming probable that the debtor will enter bankruptcy or other financial reorganisation;

• significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor;

• the disappearance of an active market for that financial asset because of financial difficulties; and

• a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

Loss events in respect of a group of financial assets include observable data indicating that there is a measurable decrease in the estimated future cash flows from the group of financial assets. Such observable data includes but not limited to adverse changes in the payment status of debtors in the group and, national or local economic conditions that correlate with defaults on the assets in the group.

If any such evidence exists, an impairment loss is measured and recognised as follows:

(a) Financial assets carried at amortised cost

If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The amount of the loss is recognised in profit or loss of the period in which the impairment occurs.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that it does not result in a carrying amount of the financial asset exceeding what the amortised cost would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognised in profit or loss of the period in which the reversal occurs.

— I-25 — APPENDIX I ACCOUNTANT’S REPORT

(b) Available-for-sale financial assets

When a decline in the fair value of an available-for-sale financial asset has been recognised in other comprehensive income and accumulated in equity and there is objective evidence that the asset is impaired, an amount is removed from equity and recognised in profit or loss as an impairment loss. That amount is measured as the difference between the asset’s acquisition cost (net of any principal repayment and amortisation) and current fair value, less any impairment loss on that asset previously recognised in profit or loss.

Reversals in respect of investment in equity instruments classified as available-for-sale and stated at fair value are not recognised in the profit or loss. The subsequent increase in fair value is recognised in other comprehensive income. Impairment losses in respect of debt securities are reversed if the subsequent increase in fair value can be objectively related to an event occurring after the impairment loss was recognised. Reversal of impairment losses in such circumstances are recognised in profit or loss.

The amount of impairment loss is measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed in subsequent periods.

Impairment losses on financial assets other than financial assets at fair value through profit or loss and trade and other receivables that are stated at amortised cost, are written off against the corresponding assets directly. Where the recovery of trade and other receivables is considered doubtful but not remote, the impairment losses for doubtful receivables are recorded using an allowance account. When the Group is satisfied that recovery of trade and other receivables is remote, the amount considered irrecoverable is written off against trade and other receivables directly and any amounts held in the allowance account in respect of that receivable are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognised in profit or loss.

Impairment losses recognised in an interim period in respect of available-for-sale equity securities are not reversed in a subsequent period. Consequently, if the fair value of an available-for-sale equity security increases in the remainder of an annual period, or in a subsequent period, the increase is recognised in other comprehensive income.

2.11 Inventories

Inventories are stated at the lower of cost and net realisable value. Cost, which comprises all costs of purchase and, where applicable, cost of conversion and other costs that have been incurred in bringing the inventories to their present location and condition, is calculated using the weighted average method. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

— I-26 — APPENDIX I ACCOUNTANT’S REPORT

2.12 Derivative financial instruments

Derivative financial instruments, in individual contracts or separated from hybrid financial instruments, are initially recognised at fair value on the date the derivative contract is entered into and subsequently remeasured at fair value. Derivatives that are not designated as hedging instruments are accounted for as financial assets or financial liabilities at fair value through profit or loss. Gains or losses arising from changes in fair value are taken directly to profit or loss for the year.

2.13 Cash and cash equivalents

Cash and cash equivalents include cash at bank and in hand, demand deposits with banks and short-term highly liquid investments with original maturities of three months or less that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

2.14 Financial liabilities

The Group’s financial liabilities included bank loans, redeemable convertible preferred shares, derivatives and trade and other payables. Financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument. All interest related charges are expensed when incurred. A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amount is recognised in profit or loss.

Borrowings

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

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

Trade and other payables

Trade and other payables are recognised initially at their fair value and subsequently measured at amortised cost, using the effective interest method. Trade and other payables are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.

— I-27 — APPENDIX I ACCOUNTANT’S REPORT

Redeemable convertible preferred shares

Financial liabilities are classified as at fair value through profit or loss when the financial liability is either held for trading or it is designated as at fair value through profit or loss on initial recognition.

A financial liability other than a financial liability held for trading may be designated as at fair value through profit or loss upon initial recognition if:

• such designation eliminated or significant reduces a measurement or recognition inconsistency that would otherwise arise; or

• the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

• it forms part of a contract containing one or more embedded derivatives, and IAS 39 “Financial Instruments: Recognition and Measurement” permits the entire combined contract (asset or liability) to be designated as at fair value through profit or loss.

Redeemable convertible preferred shares issued by the Company comprise the host debt instrument and the embedded derivatives (including the redemption option and conversion option) and are designated as financial liabilities at fair value through profit or loss on initial recognition. The conversion option allows the holder to convert the preferred shares into ordinary shares and will be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Company’s own equity instruments, and therefore it does not meet the equity classification. At the end of each reporting period subsequent to initial recognition, the entire redeemable convertible preferred shares are measured at fair value, with changes in fair value arising on remeasurement recognised directly in profit or loss in the period in which they arise. The net gain or loss recognised in profit or loss includes any interest paid on the financial liabilities.

Transaction costs that relate to the issue of the redeemable convertible preferred shares designated as financial liabilities at fair value through profit or loss are recognised as an expense immediately.

Other derivatives

Derivatives including separated embedded derivatives are measured at fair value (see Note 2.12).

2.15 Leases

An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the Group determines that the arrangement conveys a right to use a specific asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based on an evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of a lease.

— I-28 — APPENDIX I ACCOUNTANT’S REPORT

(a) Classification of assets leased to the Group

Assets that are held by the Group under leases which transfer to the Group substantially all the risks and rewards of ownership are classified as being held under finance leases. Leases which do not transfer substantially all the risks and rewards of ownership to the Group are classified as operating leases.

(b) Operating lease charges as the lessee

Where the Group has the right to use of assets held under operating leases, payments made under the leases are charged to profit or loss on a straight-line basis over the lease terms except where an alternative basis is more representative of the time pattern of benefits to be derived from the leased assets.

2.16 Provisions, contingent liabilities and contingent assets

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. Where the time value of money is material, provisions are stated at the present value of the expenditure expected to settle the obligation. All provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future uncertain events not wholly within the control of the Group, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

Contingent liabilities assumed in a business combination which are present obligations at the date of acquisition are initially recognised at fair value, provided the fair value can be reliably measured. After the initial recognition at fair value, such contingent liabilities are recognised at the higher of the amount initially recognised, less accumulated amortisation where appropriate, and the amount that would be recognised in a comparable provision as described above. Contingent liabilities assumed in a business combination that cannot be reliably fair valued or were not present obligations at the date of acquisition are disclosed as per above.

Probable inflows of economic benefits to the Group that do not yet meet the recognition criteria of an asset are considered contingent assets.

2.17 Share capital

Ordinary shares are classified as equity. Share capital is determined using the nominal value of shares that have been issued.

— I-29 — APPENDIX I ACCOUNTANT’S REPORT

Preferred shares are classified as equity if it is non-redeemable and any dividends are discretionary. Dividends on preferred share capital classified as equity are recognised as distributions within equity. Redeemable convertible preferred shares are classified as liabilities (Note 2.14).

Any transaction costs associated with the issuing of shares are deducted from share premium (net of any related income tax benefit) to the extent they are incremental costs directly attributable to the equity transaction.

2.18 Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services and the use by others of the Group’s assets yielding dividends, net of value-added tax, rebates and discounts. Provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognised as follows:

The Group’s turnover includes, separately or in combination, the sale of application solution services with equipments, the provision of consultancy services, professional services, maintenance services, customer support services, extended warranty and other services.

(a) Products

Sale of products, including software and hardware equipments, are recognised upon transfer of the significant risks and rewards of ownership to the customers. This is usually taken as the time when the goods are delivered and the customer has accepted the products.

(b) Solutions

The Group uses the “percentage of completion method” to determine the appropriate amount of revenue to recognise in a given period for the solutions sales. The stage of completion is measured by reference to the costs incurred up to the end of the reporting period as a percentage of total estimated costs.

When the outcome of a contract can be estimated reliably and it is probable that the contract will be profitable, revenue is recognised as services are provided. When it is probable that total costs to service the contract will exceed total revenue allocated to solutions sales, the expected loss is recognised as an expense immediately. When the outcome of a solutions sales contract cannot be estimated reliably, revenue is recognised only to the extent of costs incurred that are likely to be recoverable. The Group recognises a liability upon the receipt in advance of the consideration of revenue recognition. Progress billings not yet paid by customers and revenue recognized from completed solution sales but are not yet contractually able to issue invoices to customers (based on payment terms stipulated in the relevant solution sales contract) are included within “trade and other receivables” as billed and unbilled receivables respectively.

Services, being maintenance and other professional services, are provided in the form of fixed-price contracts. Sales are recognised in the period the services are provided, using a straight-line basis over the terms of the contract.

— I-30 — APPENDIX I ACCOUNTANT’S REPORT

(d) Multiple element arrangements

The Group offers certain arrangements whereby a customer can purchase equipments together with certain of the related solutions sales. When such multiple element arrangements exist, the total arrangement consideration is allocated to each element based on their relative fair values, as determined based on the current market price of each of the elements when sold separately.

Where the Group is unable to determine the fair value of each of the elements in an arrangement, it uses the residual value method. Under this method, the Group determines the fair value of the delivered element by deducting the fair value of the undelivered element from the total contract consideration.

To the extent that there is a discount on the arrangement, such discount is allocated between the elements of the contract in such a manner as to reflect the fair value of the elements.

(e) Dividend income

Dividend income is recognised when the right to receive payment is established.

2.19 Interest income

Interest income mainly represents interest income from bank deposits and is recognised using effective interest method.

2.20 Government grants

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

Government grants relating to the purchase of assets are included in liabilities as deferred government grants in the statement of financial position and are recognised in profit or loss on a straight-line basis over the expected lives of the related assets.

Government grants relating to income is presented in gross under “Other income” in the statement of comprehensive income.

2.21 Impairment of non-financial assets

Goodwill arising on business acquisition, property, plant and equipment, intangible assets and interests in joint ventures are subject to impairment testing. Goodwill and intangible assets with indefinite useful life or those not yet available for use are tested for impairment at least annually, irrespective of whether there is any indication that they are impaired. All other assets are tested for impairment whenever there are indications that the asset’s carrying amount may not be recoverable.

— I-31 — APPENDIX I ACCOUNTANT’S REPORT

An impairment loss is recognised as an expense immediately for the amount by which the asset’s carrying amount exceeds its recoverable amount. Recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessment of time value of money and the risk specific to the asset.

For the purposes of assessing impairment, where an asset does not generate cash inflows largely independent from those from other assets, the recoverable amount is determined for the smallest group of assets that generate cash inflows independently (i.e. a cash-generating unit). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Goodwill in particular is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which the goodwill is monitored for internal management purpose and not be larger than an operating segment.

Impairment losses recognised for cash-generating units, to which goodwill has been allocated, are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash generating unit, except that the carrying value of an asset will not be reduced below its individual fair value less cost of disposal, or value in use, if determinable.

An impairment loss on goodwill is not reversed in subsequent periods. In respect of other assets, an impairment loss is reversed if there has been a favourable change in the estimates used to determine the asset’s recoverable amount and only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Impairment losses recognised in an interim period in respect of goodwill are not reversed in a subsequent period. This is the case even if no loss, or a smaller loss, would have been recognised had the impairment been assessed only at the end of the financial year to which the interim period relates.

2.22 Employee benefits

(a) Pension obligations

The Group has various defined contribution plans in accordance with the local conditions and practices in the municipalities and provinces in which they operate. Defined contribution plans are pension and/or other social benefit plans under which the Group pay fixed contributions into a separate entity (a fund) and will have no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees benefits relating to employee service in the current and prior periods. The contributions are recognised as labour costs when they are due.

(b) Bonus entitlements

The expected cost of bonus payments is recognised as a liability when the Group has a present contractual or constructive obligation as a result of services rendered by employees and a reliable estimate of the obligation can be made. Liabilities for bonus are expected to be settled within twelve months and are measured at the amounts expected to be paid when they are settled.

— I-32 — APPENDIX I ACCOUNTANT’S REPORT

The Group operates an equity-settled, share-based compensation plan, under which the entity receives services from employees as consideration for equity instruments (options) of the Group. The fair value of the services received in exchange for the grant of the equity instruments is recognised as expense.

In terms of share options, the total amount to be expensed is determined by reference to the fair value of the equity instruments granted including any market performance conditions; excluding the impact of any service and non-market performance vesting conditions; and including the impact of any non-vesting conditions.

Non-market performance and service conditions are included in assumptions about the number of options and shares that are expected to vest. The total expense is recognised over the vesting period over which all of the specified vesting conditions are to be satisfied.

At the end of each reporting period, the Group revises its estimates of the number of options and shares that are expected to vest based on the non-marketing performance and service conditions. The Group recognises the impact of the revision to original estimates, if any, in the profit or loss, with a corresponding adjustment to equity.

When the options are excercised, the Company issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium.

(d) Share-based payment transactions among group entities

The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity (share option reserve) in the separate financial statements of the Company.

2.23 Accounting for income taxes

Income tax comprises current tax and deferred tax.

Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting period, that are unpaid at the reporting date. They are calculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable profit for the year/period. All changes to current tax assets or liabilities are recognised as a component of tax expense in profit or loss.

Deferred tax is calculated using the liability method on temporary differences at the reporting date between the carrying amounts of assets and liabilities in the financial statements and their respective tax bases. Deferred tax liabilities are generally recognised for all taxable temporary

— I-33 — APPENDIX I ACCOUNTANT’S REPORT differences. Deferred tax assets are recognised for all deductible temporary differences, tax losses available to be carried forward as well as other unused tax credits, to the extent that it is probable that taxable profit, including existing taxable temporary differences, will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised.

Deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither taxable nor accounting profit or loss.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and joint ventures, except where the Group is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax is calculated, without discounting, at tax rates that are expected to apply in the period the liability is settled or the asset realised, provided they are enacted or substantively enacted at the reporting date.

Changes in deferred tax assets or liabilities are recognised in profit or loss, or in other comprehensive income or directly in equity if they relate to items that are charged or credited to other comprehensive income or directly in equity.

Current tax assets and current tax liabilities are presented in net if, and only if,

(a) the Group has the legally enforceable right to set off the recognised amounts; and

(b) intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

The Group presents deferred tax assets and deferred tax liabilities in net if, and only if,

(a) the entity has a legally enforceable right to set off current tax assets against current tax liabilities; and

(b) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either:

(i) the same taxable entity; or

(ii) different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

— I-34 — APPENDIX I ACCOUNTANT’S REPORT

2.24 Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

2.25 Dividend distribution

Dividend distribution to the Company’s ordinary and preferred shareholders is recognised as a liability in the Group’s and the Company’s Financial Information in the period in which the dividends are approved by the Company’s shareholders or board of directors, where appropriate.

2.26 Related parties

(a) A person, or a close member of that person’s family, is related to the Group if that person:

(i) has control or joint control over the Group;

(ii) has significant influence over the Group; or

(iii) is a member of the key management personnel of the Group or the Group’s parent.

(b) An entity is related to the Group if any of the following conditions applies:

(i) the entity and the Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

(ii) one entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

(iii) both entities are joint ventures of the same third-party.

(iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity.

(v) the entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group.

(vi) the entity is controlled or jointly controlled by a person identified in (a).

(vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.

— I-35 — APPENDIX I ACCOUNTANT’S REPORT

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

3.1 Critical accounting estimates and assumptions

The Group makes accounting estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal to the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(a) Provision for impairment of trade and other receivables

The Group determines the provision for impairment of trade and other receivables (Note 16). This estimate is based on the credit history of the customers and the current market condition. Management reassesses the adequacy of provision on a regular basis by reviewing the individual account based on past credit history and any prior knowledge of debtor insolvency or other credit risk which might not be easily accessible public information and market volatility might bear a significant impact which might not be easily ascertained.

(b) Allowance for inventories

The management reviews the condition of inventories (Note 15) at each reporting date, and makes allowance for inventories that are identified as obsolete, slow-moving or no longer recoverable or suitable for use for production or maintenance. The Group carries out the inventory review on a product-by-product basis and makes allowances by reference to the latest market prices and current market conditions.

As detailed in Note 23, the Company has issued redeemable convertible preferred shares designated as financial liabilities at fair value through profit or loss. The directors, with the assistance of an independent professional valuer, have used valuation techniques including the discounted cash flow method and option pricing model to determine the fair value of these redeemable convertible preferred shares. Significant estimate on assumptions, such as underlying equity value, time to expiration, risk-free interest rate, expected volatility and dividend yield, is required to be made by the directors in applying the valuation models.

— I-36 — APPENDIX I ACCOUNTANT’S REPORT

(d) Impairment of goodwill

Determining whether goodwill (Note 12) is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value.

(e) Percentage of completion of solutions sales

The Group recognises revenue and costs according to the stage of completion for its solutions sales contracts. The stage of completion is measured by reference to the costs incurred to date compared to the total estimated costs for the contract. Because of the nature of the activity undertaken in the solutions sales contracts, the date at which the contract activity is entered into and the date when the activity is completed may fall into different accounting periods. Management reviews and revises the estimates of both contract revenue and contract costs for each contract as the contract progresses. Management estimates the amount of foreseeable losses of solutions sales contracts based on the budgets prepared for the solutions sales contracts.

(f) Capitalisation of development costs

Development costs are capitalised in accordance with the accounting policy for research and development costs in Note 2.9(c) to the Financial Information. Determining the amounts to be capitalised requires management to make assumptions regarding the expected future cash generation of the assets, discount rates to be applied and the expected period of benefits. At December 31, 2013, 2014 and 2015, the best estimate of the carrying amount of capitalised development cost were RMB6,418,000, RMB9,577,000 and RMB12,168,000, respectively.

(g) Depreciation, amortisation and impairment assessment of property, plant and equipment and intangible assets

Property, plant and equipment (Note 10) and intangible assets (Note 11) with finite useful lives are depreciated or amortised on a straight-line basis over the estimated useful lives of the assets, after taking into account the estimated residual value, if any. The Group reviews the estimated useful lives of the assets regularly in order to determine the amount of depreciation and amortisation expense to be recorded during any reporting period. The useful lives are based on the Group’s historical experience with similar assets and taking into account anticipated technological changes. The depreciation and amortisation expense for future periods is adjusted if there are significant changes from previous estimates.

Property, plant and equipment and intangible assets with finite useful lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The recoverable amounts of the assets have been determined based on the higher of fair value and value-in-use calculations. These calculations require the use of judgement and estimates.

— I-37 — APPENDIX I ACCOUNTANT’S REPORT

(h) Current and deferred income taxes

As detailed in Note 7, the Group is subject to income taxes in several jurisdictions. There are many transactions and events for which the ultimate tax determination is uncertain during the ordinary course of business. Significant judgement is required from the Group in determining the provision for income taxes in each of these jurisdictions. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

(i) Recognition of share-based compensation expense

As detailed in Note 25, the Company has granted share options to the key employees of the Group during the year ended December 31, 2015. The directors, with the assistance of an independent professional valuer, have used the discounted cash flow method and market approach to determine the underlying share value of the Company and have used the Binomial option-pricing model to determine the total fair value of the options granted, which is to be expensed over the vesting period as appropriate. Significant estimate on assumptions, such as underlying equity value, risk-free interest rate, expected volatility and dividend yield, is required to be made by the directors in applying the Binomial option-pricing model.

3.2 Critical judgement in applying the entity’s accounting policies

(a) Consolidation of Beijing Meicam in which the Group owns less than 50%

As detailed in Note 1, although the Group owns less than half of the equity interests in Beijing Meicam, it is able to gain power and hence control over more than one half of the voting rights by virtual of contractual agreement with another investor in Beijing Meicam in which the investor must consult and vote in the same way as the Group.

4. REVENUE AND SEGMENT INFORMATION

The Group’s operating activities are attributable to a single reportable and operating segment focusing primarily on the research, development and sales of video-related and broadcasting equipment and software and provision of related technical services in the PRC. This operating segment has been identified on the basis of internal management reports reviewed by the chief operating decision-makers (the “CODM”), being the executive directors of the Group. The CODM mainly reviews revenue derived from sale of products, solutions and services, which are measured in accordance with the Group’s accounting policies. However, other than revenue information, no operating results and other discrete financial information is available for the assessment of performance of the respective type of revenue. The CODM reviews the overall results of the Group

— I-38 — APPENDIX I ACCOUNTANT’S REPORT as a whole to make decisions about resources allocation. Accordingly, no segment information is presented. An analysis of the Group’s revenue is as follows:

Year ended December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

Solutions...... 385,253 303,159 454,334 Services ...... 59,626 60,573 77,096 Products...... 58,085 42,637 74,553 502,964 406,369 605,983

Geographical information

The Group primarily operates in the PRC. As of December 31, 2013, 2014 and 2015, substantially all of the non-current assets (other than financial instruments and deferred tax assets) of the Group were located in the PRC.

Information about major customers

During the Relevant Periods, one customer located in the PRC accounted for greater than 10% of the Group’s total revenue:

Year ended December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

Customer A...... 54,195 N/A N/A

— I-39 — APPENDIX I ACCOUNTANT’S REPORT

5. OTHER INCOME

Year ended December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

Other revenue Interest income ...... 2,430 2,192 1,491 Reversal of provision for doubtful debt...... 857 1,983 16,650 Value-added tax (“VAT”) refunds (note a) ...... 19,685 16,295 23,886 22,972 20,470 42,027 Other net income/gain Gain on disposal of intangible assets (Note 29) ...... — — 10,800 Gain on disposal of a subsidiary (Note 27) ...... — — 7,872 Gain on dilution of interest in a joint venture (Note 14) ...... — — 653 Subsidy income from government (note b) ...... 17,948 12,393 15,347 Sundry income ...... 1,615 350 887 19,563 12,743 35,559 42,535 33,213 77,586

Notes:

(a) The sales of software products in the PRC are subject to VAT calculated at 17%. Companies which develop their own software products and have the software products registered with the relevant authorities in the PRC are entitled to a refund of VAT equivalent to the excess over 3% of the sales invoice amount paid in the month when output VAT exceeds input VAT.

(b) Subsidy income mainly relates to cash subsidies in respect of operating and development activities from governments which are either unconditional grants or grants with conditions having been satisfied.

— I-40 — APPENDIX I ACCOUNTANT’S REPORT

6. (LOSS)/PROFIT FOR THE YEAR

(Loss)/Profit for the year has been arrived at after charging/(crediting):

Year ended December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

Finance costs Interest on bank and other borrowings, wholly repayable within five years...... 5,103 870 6,951 Loss on non-recourse factoring of trade receivables (Note 16)...... — — 9,398 5,103 870 16,349

Employee benefit expenses Salaries, bonus and allowances ...... 97,995 111,789 105,119 Retirement benefit scheme contributions ...... 26,252 27,002 24,154 Severance payments ...... 18 112 583 Share-based compensation expense...... 2,190 886 3,835 126,455 139,789 133,691

Other items Auditors’ remuneration...... 135 146 470 Listing-related expenses ...... — — 15,209 Operating lease charges on premises ...... 14,733 16,473 14,716 Cost of software and hardware equipments recognised as an expense, including ...... 275,460 199,077 298,664 - Provision for inventory obsolescence ...... 1,214 2,236 1,629 Depreciation of property, plant and equipment ...... 15,152 16,451 11,289 Amortisation of intangible assets ...... 6,808 14,265 14,242 Bad debt written off...... — 4,580 1,314 Provision for doubtful trade and other receivables ...... 3,857 7,806 14,005 Loss on disposal of property, plant and equipment ...... 334 167 538 Fair value gain on financial assets at fair value through profit or loss ...... — (24) (181) Net foreign exchange (gain)/loss...... (108) 511 3,108

— I-41 — APPENDIX I ACCOUNTANT’S REPORT

7. INCOME TAX EXPENSE/(CREDIT)

Year ended December 31,

2013 2014 2015

Notes RMB’000 RMB’000 RMB’000

Current tax - PRC enterprise income tax Current year...... 2,552 — 17,406 Deferred tax Origination and reversal of temporary differences...... 21 (719) (1,917) (1,688) Effect on deferred tax balances resulting from changes in tax rates ...... 21 — (5,189) (2,462) (719) (7,106) (4,150) Income tax expense/(credit) ...... 1,833 (7,106) 13,256

The difference between the actual income tax charge/credit in the consolidated statements of comprehensive income and the amounts which would result from applying the enacted tax rate to (loss)/profit before income tax can be reconciled as follows:

Year ended December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

(Loss)/Profit before income tax...... (10,357) (76,506) 127,370

Tax on profit/(loss) before income tax, calculated at the statutory rates applicable to profits in the tax jurisdiction concerned ...... 5,203 (5,785) 23,124 Tax effect on non-deductible expenses ...... 1,068 693 6,336 Tax effect on preferential income tax rates applicable to certain subsidiaries ...... (3,257) 2,026 (10,375) Tax effect on super deduction in research and development activities...... (1,459) (2,628) (2,612) Tax effect of tax losses not recognised...... 278 3,777 568 Utilisation of tax losses previously not recognised...... — — (1,323) Effect on deferred tax balances resulting from changes in tax rates ...... — (5,189) (2,462) Income tax expense/(credit) ...... 1,833 (7,106) 13,256

— I-42 — APPENDIX I ACCOUNTANT’S REPORT

Notes:

(a) Cayman Islands income tax

The Company is incorporated in the Cayman Islands as an exempted company with limited liability under the Companies Law of the Cayman Islands and accordingly, is exempted from Cayman Islands income tax.

(b) Hong Kong profits tax

Hong Kong profits tax rate is 16.5% for the Relevant Periods. Hong Kong profits tax has not been provided as the companies within the Group had no estimated assessable profits in Hong Kong during the Relevant Periods.

Singapore profits tax rate is 17% for the Relevant Periods. Singapore profits tax has not been provided as the companies within the Group had no estimated assessable profits in Singapore during the Relevant Periods.

(d) PRC enterprise income tax

The income tax provision of the Group in respect of its operations in the PRC has been calculated at the applicable tax rate on the estimated assessable profits for the Relevant Periods based on the existing legislation, interpretations and practices in respect thereof. The applicable income tax rate for the Relevant Periods is 25%.

Pursuant to the relevant laws and regulations in the PRC, CDV WFOE obtained the “High and New Technology Enterprise” qualification (“HNTE”) in 2012 and renewed its qualification in 2015. CDV WFOE was also accredited as a “Key Software Enterprise under the National Plan” (國家規劃佈局內重點軟件企業) and enjoys a preferential income tax rate of 10% for each of the years ended December 31, 2013 and 2014. In 2015, CDV WFOE enjoyed preferential income tax rate of 15%.

Pursuant to the relevant laws and regulations in the PRC, Beijing Zhengqi obtained the HNTE in 2014 and accordingly, enjoyed preferential income tax rate of 15% for the years ended December 31, 2014 and 2015.

According to relevant laws and regulations in the PRC, enterprises engaging in research and development activities are entitled to claim 150% of the research and development expenses so incurred as tax deductible expenses when determining their assessable profits for that year (“Super Deduction”). CDV WFOE and Beijing Zhengqi have claimed such Super Deduction in ascertaining its tax assessable profits for each of the years ended December 31, 2013, 2014 and 2015. China Digital Video Cloud (Beijing) Technology Co., Ltd (北京新奧特雲視科技有限公司, “CDV Cloud”) has claimed such Super Deduction for the years ended December 31, 2013 and 2014.

(e) PRC withholding tax

According to the relevant laws and regulations in the PRC, the Group is also liable to a 10% withholding tax on dividends to be distributed from the Group’s foreign-invested enterprises in the PRC in respect of its profits generated from January 1, 2008. If a foreign investor incorporated in Hong Kong meets the conditions and requirements under the double taxation treaty arrangement entered into between the PRC and Hong Kong, the relevant withholding tax rate will be reduced from 10% to 5%.

— I-43 — APPENDIX I ACCOUNTANT’S REPORT

8. (LOSS)/EARNINGS PER SHARE

(a) Basic (loss)/earnings per share

Basic (loss)/earnings per share is calculated by dividing the adjusted (loss)/profit attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year.

Year ended December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

(Loss)/Earnings (Loss)/Profit attributable to equity holders of the Company . (12,190) (66,582) 120,219 Undeclared dividend of preferred shares ...... (9,036) (9,278) (10,529) (Loss)/Profit used to determine basic (loss)/earnings per share ...... (21,226) (75,860) 109,690

Year ended December 31,

2013 2014 2015

Number of shares (in thousands) Weighted average number of ordinary shares outstanding for basic earnings per share...... 80,000 80,000 80,000

— I-44 — APPENDIX I ACCOUNTANT’S REPORT

(b) Diluted (loss)/earnings per share

Diluted (loss)/earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares and are calculated as follows:

Year ended December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

(Loss)/Earnings (Loss)/Profit attributable to ordinary equity holders of the Company used to determine basic (loss)/earnings per share ...... (21,226) (75,860) 109,690 Change in fair value on redeemable convertible preferred shares ...... — — (67,013) Undeclared dividend of preferred shares ...... — — 8,564 (Loss)/Profit used to determine diluted (loss)/earnings per share ...... (21,226) (75,860) 51,241

Year ended December 31,

2013 2014 2015

Number of shares (in thousands) Weighted average number of ordinary shares used to determine basic (loss)/earnings per share ...... 80,000 80,000 80,000 Effect of deemed conversion of preferred shares ...... — — 47,495 Effect of deemed issue of shares under the 2010 Share Option Plan ...... — — 178 80,000 80,000 127,673

For each of the years ended December 31, 2013, 2014 and 2015, the Company has the following three categories of dilutive potential ordinary shares: non-redeemable convertible Series A-1 Preferred Shares, redeemable convertible preferred shares (including Series A Preferred Shares, Series A-1 Preferred Shares, Series B Preferred Shares and Series C Preferred Shares) and the 2010 Share Option Plan of the Company. For the years ended December 31, 2013 and 2014, the computation of diluted loss per share does not assume the conversion of the Company’s outstanding redeemable or non-redeemable convertible preferred shares since their conversion would result in a decrease in loss per share. For the year ended December 31, 2015, the computation of diluted earnings per share has assumed the conversion of non-redeemable convertible Series A-1 Preferred Shares and redeemable convertible Series B and Series C Preferred Shares, but not on the remaining preferred shares since their conversion would result in an increase in earnings per share. Share options of the Company

— I-45 — APPENDIX I ACCOUNTANT’S REPORT granted in 2011 are considered as anti-dilutive for the years ended December 31, 2013, 2014 and 2015 as the estimated market price of the ordinary shares of the Company, determined with the assistance of an independent professional valuer, is less than the exercise price of the share options at the end of each reporting periods.

(c) The basic and diluted (loss)/earnings per share as presented on the consolidated statements of comprehensive income have not taken into account the proposed capitalisation issue as described in Note 33.

9. DIRECTORS’ REMUNERATION AND EMPLOYEES’ EMOLUMENTS

(a) Directors’ remuneration

The emoluments of the individual director of the Company during the Relevant Periods which were included in the employee benefit expenses are set out below:

Basic Retirement Share- salaries and Discretionary benefit based Name of director Fees allowances bonus contribution compensation Total

Notes RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Year ended December 31, 2013 Executive directors: Mr. Liu Baodong ...... (i) — 958 120 — 444 1,522 Mr. Zheng Fushuang...... — 484 60 — — 544 Mr. Guo Langhua ...... — 484 60 — 501 1,045 Non-executive director: Mr. Sun Zhuang...... (v) ——————

Independent non-executive directors: Mr. Du Baichuan ...... (iv) 168 ————168 Mr. Choong Chow Siong ...... (ii) 198 ————198 Mr. Frank Christiaens .... 186 — — — 14 200 Mr. Zhang Yaqin...... 186 — — — 14 200

738 1,926 240 — 973 3,877

— I-46 — APPENDIX I ACCOUNTANT’S REPORT

Basic Retirement Share- salaries and Discretionary benefit based Name of director Fees allowances bonus contribution compensation Total

Notes RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Year ended December 31, 2014 Executive directors: Mr. Liu Baodong ...... (i) — 966 — — 189 1,155 Mr. Zheng Fushuang...... — 484 — — — 484 Mr. Guo Langhua ...... — 482 — — 213 695 Non-executive directors: Mr. Sun Zhuang...... (v) —————— Mr. Xie Yang...... (iii) ——————

Independent non-executive directors: Mr. Du Baichuan ...... (iv) 76————76 Mr. Choong Chow Siong ...... (ii) 49————49 Mr. Frank Christiaens .... 183 ————183 Mr. Zhang Yaqin...... 183 ————183

491 1,932 — — 402 2,825

Year ended December 31, 2015 Executive directors: Mr. Liu Baodong ...... (i) — 984 — — — 984 Mr. Zheng Fushuang...... — 498 — — — 498 Mr. Guo Langhua ...... — 498 — — — 498

Non-executive directors: Mr. Sun Zhuang...... (v) —————— Mr. Xie Yang...... (iii) ——————

Independent non-executive directors: Mr. Du Baichuan ...... (iv) —————— Mr. Frank Christiaens .... 187 ————187 Mr. Zhang Yaqin...... 187 ————187

374 1,980 — — — 2,354

Notes: (i) Mr. Liu Baodong is also the chief executive officer of the Group. (ii) Resigned on March 31, 2014.

— I-47 — APPENDIX I ACCOUNTANT’S REPORT

(iii) Appointed on October 27, 2014 and resigned on July 23, 2015. (iv) Resigned on May 15, 2015. (v) Resigned on July 23, 2015.

There were no arrangements under which a director of the Company waived or agreed to waive any remuneration during the Relevant Periods.

(b) Five highest paid individuals

For the years ended December 31, 2013, 2014 and 2015, the five individuals whose emoluments were the highest in the Group include 2, 2 and 1 directors, respectively, whose emoluments are reflected in the analysis presented above. The emoluments paid to the remaining 3, 3 and 4 individuals are as follows:

Year ended December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

Basic salaries and allowances ...... 1,520 1,624 1,931 Discretionary bonus ...... 220 — — Retirement benefit scheme contributions ...... 201 222 234 Share-based compensation expense...... 142 60 3,835 2,083 1,906 6,000

The aggregate of the emoluments in respect of the remaining 3, 3 and 4 individuals for the years ended December 31, 2013, 2014 and 2015 fell within the following bands:

Year ended December 31,

2013 2014 2015

Emolument bands Nil - HK$1,000,000 ...... 2 2 2 HK$1,000,001 - HK$1,500,000 ...... 1 1 — HK$2,000,001 - HK$2,500,000 ...... — — 1 HK$3,000,001 - HK$3,500,000 ...... — — 1

During the Relevant Periods, no emoluments were paid by the Group to any of the directors or the five highest paid individuals as an inducement to join or upon joining the Group or as compensation for loss of office.

— I-48 — APPENDIX I ACCOUNTANT’S REPORT

10. PROPERTY, PLANT AND EQUIPMENT

Furniture and Leasehold Computer office improvements equipment equipment Motor vehicle Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

At January 1, 2013 Cost...... 10,049 34,836 1,980 2,174 49,039 Accumulated depreciation ...... (5,889) (15,604) (743) (468) (22,704) Net book amount ...... 4,160 19,232 1,237 1,706 26,335 Year ended December 31, 2013 Opening net book amount ...... 4,160 19,232 1,237 1,706 26,335 Acquisition of business (Note 26)...... 170 377 173 4 724 Additions ...... 414 14,047 163 187 14,811 Disposals ...... — (368) — — (368) Depreciation ...... (2,133) (12,256) (401) (362) (15,152) Closing net book amount ...... 2,611 21,032 1,172 1,535 26,350 At December 31, 2013 Cost...... 10,663 51,104 2,316 2,365 66,448 Accumulated depreciation ...... (8,052) (30,072) (1,144) (830) (40,098) Net book amount ...... 2,611 21,032 1,172 1,535 26,350 Year ended December 31, 2014 Opening net book amount ...... 2,611 21,032 1,172 1,535 26,350 Additions ...... 317 3,877 88 — 4,282 Disposals ...... — (398) — (199) (597) Depreciation ...... (1,623) (14,016) (473) (339) (16,451) Closing net book amount ...... 1,305 10,495 787 997 13,584 At December 31, 2014 Cost...... 10,980 53,384 2,404 2,055 68,823 Accumulated depreciation ...... (9,675) (42,889) (1,617) (1,058) (55,239) Net book amount ...... 1,305 10,495 787 997 13,584 Year ended December 31, 2015 Opening net book amount ...... 1,305 10,495 787 997 13,584 Additions ...... 148 5,717 62 — 5,927 Disposal...... — (869) (3) — (872) Disposal of a subsidiary (Note 27)...... (170) (503) — — (673) Depreciation ...... (715) (9,936) (312) (326) (11,289) Closing net book amount ...... 568 4,904 534 671 6,677 At December 31, 2015 Cost...... 10,900 53,535 2,460 2,055 68,950 Accumulated depreciation ...... (10,332) (48,631) (1,926) (1,384) (62,273) Net book amount ...... 568 4,904 534 671 6,677

— I-49 — APPENDIX I ACCOUNTANT’S REPORT

Depreciation charges recognised is analysed as follows:

Year ended December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

Cost of sales...... 552 42 21 Selling and marketing expenses...... 4,914 4,796 2,575 Administrative expenses...... 3,199 3,734 2,645 Research and development expenses...... 6,487 7,879 6,048 15,152 16,451 11,289

11. INTANGIBLE ASSETS

Video-related and broadcasting intellectual properties, patents, trademarks Development Unfinished Club and licenses costs contracts membership Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

At January 1, 2013 Cost...... 13,225 4,551 — 2,266 20,042 Accumulated amortisation ...... (2,919) — — — (2,919) Net book amount ...... 10,306 4,551 — 2,266 17,123

Year ended December 31, 2013 Opening net book amount ...... 10,306 4,551 — 2,266 17,123 Transfers...... 7,231 (7,231) — — — Acquisition of business (Note 26)...... 49,810 — 5,600 — 55,410 Additions ...... 333 9,098 — — 9,431 Amortisation ...... (4,941) — (1,867) — (6,808) Closing net book amount ...... 62,739 6,418 3,733 2,266 75,156

At December 31, 2013 Cost...... 70,599 6,418 5,600 2,266 84,883 Accumulated amortisation ...... (7,860) — (1,867) — (9,727) Net book amount ...... 62,739 6,418 3,733 2,266 75,156

— I-50 — APPENDIX I ACCOUNTANT’S REPORT

Video-related and broadcasting intellectual properties, patents, trademarks Development Unfinished Club and licenses costs contracts membership Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Year ended December 31, 2014 Opening net book amount ...... 62,739 6,418 3,733 2,266 75,156 Transfers...... 6,328 (6,328) — — — Additions ...... 58 9,487 — — 9,545 Amortisation ...... (10,532) — (3,733) — (14,265) Closing net book amount ...... 58,593 9,577 — 2,266 70,436

At December 31, 2014 Cost...... 76,985 9,577 5,600 2,266 94,428 Accumulated amortisation ...... (18,392) — (5,600) — (23,992) Net book amount ...... 58,593 9,577 — 2,266 70,436

Year ended December 31, 2015 Opening net book amount ...... 58,593 9,577 — 2,266 70,436 Transfers...... 9,173 (9,173) — — — Additions ...... 20 11,764 — — 11,784 Amortisation ...... (14,242) — — — (14,242) Closing net book amount ...... 53,544 12,168 — 2,266 67,978

At December 31, 2015 Cost...... 86,178 12,168 — 2,266 100,612 Accumulated amortisation ...... (32,634) — — — (32,634) Net book amount ...... 53,544 12,168 — 2,266 67,978

— I-51 — APPENDIX I ACCOUNTANT’S REPORT

The development costs represented all direct costs incurred in the development of software products. Amortisation charges recognised is analysed as follows:

Year ended December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

Cost of sales...... 6,632 13,982 13,997 Selling and marketing expenses...... 40 60 24 Administrative expenses...... 16 50 52 Research and development expenses...... 120 173 169 6,808 14,265 14,242

12. GOODWILL

The carrying amount of goodwill arose from the acquisition of the digital broadcasting business in 2013 (Note 26). The net carrying amount of goodwill can be analysed as follows:

RMB’000

Year ended December 31, 2013 Opening net book amount ...... — Acquisition of business (Note 26) ...... 74,220 Closing net book amount ...... 74,220

At December 31, 2013, 2014 and 2015 Cost and net book amount...... 74,220

The carrying amount of goodwill is allocated to the research and sales of video-related and broadcasting equipment and software and provision of related technical services in the PRC. The recoverable amount of goodwill was determined based on value-in-use calculations, using an annual cash flow budget plan covering a 5-year period with estimated long-term growth rate of 3.0% per annum (for cash flows beyond the five-year period) for the operation for the years ended December 31, 2013, 2014 and 2015. A discount factor of 20.0%, 20.0% and 20.0% for the years ended December 31, 2013, 2014 and 2015 was applied in the value in use model, respectively. The key assumptions include stable profit margins, which have been determined based on the expectations for market share after taking into consideration current economic environment and market forecast. The directors believe that any reasonably possible change in the key assumptions on which the recoverable amount is based would not cause the carrying amount of the unit to exceed the aggregate recoverable amount.

— I-52 — APPENDIX I ACCOUNTANT’S REPORT

13. INTERESTS IN SUBSIDIARIES/AMOUNT DUE FROM A SUBSIDIARY — COMPANY

As at December 31,

Notes 2013 2014 2015

RMB’000 RMB’000 RMB’000

Unlisted shares, at cost ...... (a) 307,799 308,914 327,818 Deemed investments arising from share-based compensation ...... (b) 17,503 18,454 19,583 Amount due from a subsidiary ...... (c) — — 108,278 Less: Provision for impairment ...... (2,947) (2,957) (3,138) 322,355 324,411 452,541

Notes:

(a) Except for Beijing Meicam which was incorporated in 2014, the details of the principal subsidiaries of the Group at December 31, 2013, 2014 and 2015 are set out in Note 1 of Section II. During the year ended December 31, 2015, the Group has disposed its entire 80% interest in CDV Cloud, a non-wholly owned subsidiary incorporated in the PRC on April 25, 2014. For details, please refer to Note 27.

In addition, the Group has commenced the deregistration process of China Digital Video (Singapore) Pte. Ltd., a wholly owned subsidiary incorporated in Singapore, during the year ended December 31, 2015. The deregistration has no significant impact on the Group’s Financial Information and was completed in April 2016.

(b) The amount represents share-based compensation expense arising from the grant of share options of the Company to certain management (Note 25) in exchange for their services provided to certain subsidiaries of the Group, which were deemed to be investment made by the Company to these subsidiaries.

(c) The amount due is unsecured, interest-free and has no fixed terms of repayment. During the year ended December 31, 2015, the directors of the Company considered the settlement is neither planned nor likely to occur in the foreseeable future, accordingly the balance was transferred from other receivables (Note 16) and accounted for as part of the Company’s investment in the subsidiary.

Material non-controlling interests

The total non-controlling interests as at December 31, 2013 and 2014 was nil and RMB2,818,000 respectively, of which they represent non-controlling shareholders’ interests in CDV Cloud and Beijing Meicam. Subsequent to the disposal of CDV Cloud during 2015 (Note 27), non-controlling interests as at December 31, 2015 of RMB3,955,000 represent non-controlling shareholders’ interests in Beijing Meicam. No summarised financial information on these companies are presented as its inclusion, for the purpose of this report, is not considered meaningful as the amounts are not material.

— I-53 — APPENDIX I ACCOUNTANT’S REPORT

14. INTERESTS IN JOINT VENTURES

As at December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

Share of net assets ...... — — 3,647

The Group’s interest in the joint ventures, which is accounted for using the equity method in the Financial Information, represents its investments in Beijing Hermit, Beijing Yueying and Xin’aote Cloud (collectively, the “Joint Ventures”) as detailed in Note 1 of Section II, all of which are unlisted corporate entities whose quoted market price is not available.

During the year ended December 31, 2014, the Group and other investors have established the Joint Ventures in the PRC. The Group has invested in the Joint Ventures by contributing the Group’s intangible assets during the year ended December 31, 2015. The Joint Ventures are strategic partnerships of the Group, providing access to new video-related and broadcasting technologies and processes on mobile applications and the internet and for further expansion in the PRC market. The Group has not incurred any contingent liabilities or other commitments relating to its investments in the Joint Ventures.

During the year ended December 31, 2015, the Group’s interest in Beijing Yueying was diluted from 40.0% to 35.2% upon the additional contributions by a new investor and a gain on dilution of interest in a joint venture of RMB653,000 was recognised in profit or loss.

— I-54 — Summarised financial information of the Joint Ventures as at December 31, 2014 and 2015 and REPORT ACCOUNTANT’S for the period from its respective date of I APPENDIX incorporation to December 31, 2014 and 2015, adjusted for any differences in accounting policies, and reconciled to the carrying amounts in the consolidated financial information, are disclosed below:

Beijing Hermit Beijing Yueying Xin’aote Cloud

Period from Period from Period from September 17, December 9, 2014 December 29, 2014 (date of (date of 2014 (date of incorporation) to Year ended incorporation) to Year ended incorporation) to Year ended December 31, December 31, December 31, December 31, December 31, December 31, 2014 2015 2014 2015 2014 2015

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Gross amounts of the joint venture -5— I-55 — Current assets ...... — 7,515 — 1,012 — 104 Non-current assets ...... 54 4,911 — 4,114 — 10,315 Current liabilities...... (342) (12,361) (428) (634) (2,497) (8,717) Non-current liabilities ...... —————— Equity...... (288) 65 (428) 4,492 (2,497) 1,702 Included in the above assets and liabilities: Cash and cash equivalents...... — 7,515 — 1,012 — 104

Revenue...... —————— Loss and other comprehensive loss for the period/ year...... (288) (4,647) (428) (3,080) (2,497) (8,801)

Included in the above loss: Depreciation and amortisation...... — 135 — 39 — 66 Interest income ...... — 5 — 3 — 257 PEDXIACUTN’ REPORT ACCOUNTANT’S I APPENDIX Beijing Hermit Beijing Yueying Xin’aote Cloud

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Reconciled to the Group’s interests in joint ventures Gross amounts of net (liabilities)/assets of the joint ventures...... (288) 65 (428) 4,492 (2,497) 1,702 -6— I-56 — Capital contribution not yet injected by other investors (note). — 5,000 — 5,000 — 12,000 Group’s effective interest held ...... 40.0% 40.0% 40.0% 35.2% 40.0% 40.0% Group’s effective interest ...... (115) 2,026 (171) 3,341 (999) 5,480 Share of loss recognised in other payables ...... 115 — 171 — 999 — Unrealised gain on intangible assets contributed to the joint ventures .. — (1,600) — (1,600) — (4,000) Carrying amount in the Financial Information...... — 426 — 1,741 — 1,480

Note: In accordance with the relevant agreements, the other investors agreed to share all profits/losses of the joint venture based on the subscribed registered capital, and the remaining capital contributions by other investors will be paid in 2016 and 2017. APPENDIX I ACCOUNTANT’S REPORT

15. INVENTORIES

As at December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

Equipments and parts...... 35,379 36,137 24,019 Work-in-progress...... 68,369 28,848 8,730 103,748 64,985 32,749

16. TRADE AND OTHER RECEIVABLES Group

As at December 31,

Notes 2013 2014 2015

RMB’000 RMB’000 RMB’000

Trade and bills receivables From third parties ...... 184,902 232,374 337,723 From related parties ...... 30(e) 490 1,250 6,842 185,392 233,624 344,565 Less: provision for impairment of trade receivables...... (17,660) (23,483) (18,050) (a) 167,732 210,141 326,515 Other receivables (b) Deposits, prepayments and other receivables.... 16,103 17,304 35,520 Deposit for guarantee certificate over tendering and performance...... 14,197 13,790 14,111 Amounts due from customers for contract work ...... 205 3,013 — Amount due from a director...... 30(d) 6,097 6,119 — Amounts due from related parties ...... 30(e) 47,792 66,981 9,526 Amounts due from joint ventures ...... — 3,266 12,779 VAT receivables ...... 8,348 7,212 11,501 Advances to employees ...... 5,737 4,363 7,690 Deferred IPO costs...... — — 6,192 98,479 122,048 97,319 Less: provision for impairment of other receivables...... (1,340) (1,340) (3,628) 97,139 120,708 93,691 264,871 330,849 420,206

— I-57 — APPENDIX I ACCOUNTANT’S REPORT

The directors of the Group considered that the fair values of trade and other receivables which are expected to be recovered within one year are not materially different from their carrying amounts because these amounts have short maturity periods on their inception.

Included in trade and other receivables are the following amounts that are expected to be recovered after more than one year:

As at December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

Trade receivables ...... 22,394 21,326 7,914 Deposit for guarantee certificate over tender and performance...... 4,101 3,271 5,815 26,495 24,597 13,729

The fair values of trade and other receivables which are expected to be recovered after more than one year are not materially different from their carrying amounts.

(a) Trade and bills receivables

Invoices issued to customers are in accordance with the payment terms stipulated in the contracts and payable on issuance. Deposits are normally required upon signing of the contract. For customers with good credit history and selected large television stations in the PRC with sound financial standing, its settlement may be longer than 180 days after issuance of invoices. As at December 31, 2013, 2014 and 2015, trade and bills receivables contained retention money receivables (net of provisions) of RMB28,544,000, RMB39,753,000 and RMB42,990,000, respectively. Retention money receivables are normally collected within one to three years after the completion of the relevant

— I-58 — APPENDIX I ACCOUNTANT’S REPORT solution sales. Ageing analysis based on invoiced date of the trade and bills receivables and net of provisions at the respective reporting dates is as follows:

As at December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

Billed: ...... 0 to 90 days ...... 35,529 36,855 149,951 91 to 180 days...... 3,675 8,580 50,437 181 to 365 days...... 20,762 30,574 19,435 1 to 2 years ...... 10,905 6,348 2,300 70,871 82,357 222,123 Unbilled*...... 96,861 127,784 104,392 167,732 210,141 326,515

* The unbilled balance was mainly attributable to completed solutions sales which will be billed within the next twelve months from the end of the reporting dates in accordance with the payment terms stipulated in the relevant solutions sales contracts entered into between the Group and the contract customers. These receivables were neither past due nor impaired and relate to a number of customers for whom there was no recent history of default.

The movement in the provision for impairment of trade receivables is as follows:

Year ended December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

As at December 31, 2013, 2014 and 2015, the Group reviews for evidence of impairment on both an individual and collective basis. As at December 31, 2013, 2014 and 2015, the Group has determined trade receivables of RMB3,517,000, RMB12,386,000 and RMB13,031,000 respectively as individually impaired. Based on this assessment, provision for impairment loss of RMB3,517,000, RMB7,806,000 and RMB11,717,000 respectively has been recognised, and bad debts written off of nil, RMB4,580,000 and RMB1,314,000 respectively has been made during the years ended December 31, 2013, 2014 and 2015. Provision for impairment loss and bad debts written off have been included in “administrative expenses” in the consolidated statements of comprehensive income. The impaired

— I-59 — APPENDIX I ACCOUNTANT’S REPORT trade receivables are due from customers experiencing financial difficulties that were in default or delinquency of payments. The Group did not hold any collateral as security or other credit enhancements over the impaired trade receivables, whether determined on an individual or collective basis.

During the year ended December 31, 2015, the Group has entered into a non-recourse factoring arrangement with an independent third party in respect of its trade receivables of which provision for impairment amounted to RMB16,603,000 was made in prior years. Accordingly, the Group has made a reversal of such provision for impairment and the difference between the gross carrying amount of these trade receivables and the factoring proceeds of RMB9,398,000 was recognised as finance costs (Note 6) during the year ended December 31, 2015.

The ageing analysis of the Group’s billed trade and bills receivables that are neither individually nor collectively considered to be impaired, based on due date is as follows:

As at December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

Neither past due nor impaired...... — — — 1 to 90 days past due...... 35,529 36,855 149,951 91 to 180 days past due ...... 3,675 8,580 50,437 181 to 360 days past due ...... 20,762 30,574 19,435 1 to 2 years past due ...... 10,905 6,348 2,300 70,871 82,357 222,123

Trade receivables that were past due but not impaired related to a number of customers that had a good track record of credit with the Group. Based on past credit history, management believe that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered to be fully recoverable. The Group does not hold any collateral in respect of trade receivables past due but not impaired.

As at December 31, 2013, 2014 and 2015, 17%, 11% and 24% of trade receivables are due from 5 major customers in cooperation with the Group’s business, respectively.

(b) Other receivables

Deposit for guarantee certificate

Deposit for guarantee certificate over tendering and performance are placed with third parties for performing the contracts and the deposits are interest-free and will be returned when the contracts are completed.

— I-60 — APPENDIX I ACCOUNTANT’S REPORT

Amounts due from customers for contract work

Amounts due from customers for contract work represented the balance of aggregate cost incurred and recognised profits for the service component of the solutions sales which are recognised based on the percentage of completion method. The net balance sheet position for ongoing contracts is as follows:

As at December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

Aggregate costs incurred plus recognised profits less recognised losses to date ...... 2,593 9,390 6 Less: Progress billings ...... (7,095) (10,198) (1,325) (4,502) (808) (1,319)

Analysed for reporting purposes as: Amounts due from customers for contract work ...... 205 3,013 — Amounts due to customers for contract work (Note 19) ...... (4,707) (3,821) (1,319) (4,502) (808) (1,319)

Amounts due from joint ventures

The amounts due are unsecured, interest-free and repayable on demand.

Advances to employees

Advances to employees mainly represent advances for various expenses to be incurred in the ordinary course of business. These advances are unsecured, interest-free and repayable on demand.

Provision for impairment of other receivables

The movement in the provision for impairment of other receivables is as follows:

Year ended December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

Balance at the beginning of the year ...... 1,000 1,340 1,340 Provision for impairment ...... 340 — 2,288 Balance at the end of the year...... 1,340 1,340 3,628

— I-61 — APPENDIX I ACCOUNTANT’S REPORT

Company

As at December 31,

Notes 2013 2014 2015

RMB’000 RMB’000 RMB’000

Other receivables Deposits, prepayments and other receivables ... 430 431 962 Amounts due from subsidiaries...... 20,133 28,101 — Amount due from a director ...... 30(d) 6,097 6,119 — Amounts due from related parties...... 30(e) 43,155 62,281 — Deferred IPO costs...... — — 6,192 69,815 96,932 7,154

The amounts due from subsidiaries, related parties and a director are unsecured, interest-free and repayable on demand.

17. OTHER FINANCIAL ASSETS — GROUP AND COMPANY

As at December 31,

Notes 2013 2014 2015

RMB’000 RMB’000 RMB’000

Current assets Financial assets at fair value through profit or loss - Unlisted convertible promissory note designated at fair value through profit or loss ...... (a) — 3,084 —

Non-current assets Available-for-sale financial assets - Unlisted equity investments, at cost less impairment losses ...... (b) — — 3,461

(a) As at December 31, 2014, the Group held an unlisted convertible promissory note (the “Convertible Promissory Note”) with a principal amount of US$500,000 issued by People Power Company (“PPC”) and bears interest at a rate of 7.25% per annum, with all principal and accrued interest payable on the maturity date. The Convertible Promissory Note is due on the earlier of (i) April 30, 2016; (ii) the closing of the next equity financing by PPC in one transaction or series of related transactions for an aggregate gross purchase price paid to PPC of no less than US$1 million (the “Next Financing”); and (iii) upon the event of default as defined. In addition, if PPC has not paid the entire principal plus all then accrued but unpaid interest (the “Balance”) before

— I-62 — APPENDIX I ACCOUNTANT’S REPORT

the closing of the Next Financing, the Group (within three days from the written notice of the Next Financing served by PPC) can elect to convert the entire Balance into fully paid ordinary shares of PPC at a conversion price equal to 90% of the lowest per share selling price of the shares sold by PPC in the Next Financing. The Group designated the entire Convertible Promissory Note as financial assets at fair value through profit or loss at initial recognition. During the year ended December 31, 2014, the Next Financing has not occurred and there were no conversion of the Convertible Promissory Note.

During the year ended December 31, 2015, the Next Financing has occurred and the Company has exercised its conversion option to convert its Convertible Promissory Note into preferred shares of PPC. Accordingly, the unlisted convertible promissory note were derecognised upon conversion. The unlisted preferred shares of PPC were classified as available-for-sale financial assets (note b).

With the assistance of an independent professional valuer, the fair value of the debt component of the Convertible Promissory Note was determined by the directors based on the present value of the estimated future cash flows discounted at the prevailing market rate of interest of similar instruments. The fair value of the embedded option attached to the convertible portion was calculated using the binomial model. The fair value of the embedded option as at December 31, 2014 and before its conversion in 2015 is considered to be insignificant. The reconciliation of the carrying amount of the financial assets at fair value through profit or loss is as follows:

As at December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

At the beginning of the year ...... — — 3,084 Purchase...... — 3,060 — Changes in fair value recognised in profit or loss ...... — 24 181 Currency translation differences ...... — — 196 Derecognised upon conversion ...... — — (3,461) At the end of the year ...... — 3,084 —

(b) The unlisted equity investments are stated at cost less impairment losses because the range of reasonable fair value estimates is so significant that the directors of the Company are of the opinion that its fair value cannot be measured reliably.

— I-63 — APPENDIX I ACCOUNTANT’S REPORT

18. PLEDGED BANK DEPOSITS AND BANK BALANCES AND CASH

Group

As at December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

Cash at bank and on hand ...... 111,925 100,954 37,294 Short-term time deposits ...... 87,678 50,000 150,150 199,603 150,954 187,444 Pledged bank deposits ...... (21,368) (3,582) (6,359) Bank balances and cash per the consolidated statements of financial position ...... 178,235 147,372 181,085 Time deposits with banks with original maturities exceeding 3 months ...... (87,678) (50,000) (150,150) Cash and cash equivalents per the consolidated statements of cash flows ...... 90,557 97,372 30,935

Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term time deposits are made for varying periods of between 3 months to 12 months depending on the immediate cash requirements of the Group, and earn interest at the respective short-term time deposit rates.

As at December 31, 2013, 2014 and 2015, included in bank balances and cash of the Group are restricted deposits held at bank for the purpose of contract related deposits or payments and guarantees issued for trade finance facilities of RMB21,368,000, RMB3,582,000 and RMB6,359,000 respectively.

The Group’s major subsidiaries are based in the PRC and majority of their transactions are denominated in RMB. As at December 31, 2013, 2014 and 2015, included in bank balances and cash and pledged bank deposits of the Group is RMB154,684,000, RMB112,547,000 and RMB185,327,000 respectively of bank balances denominated in Renminbi placed with banks in the PRC. The conversion of RMB into foreign currencies is subject to the rules and regulations of foreign exchange control promulgated by the PRC government. As at December 31, 2013, 2014 and 2015, other than the restriction from exchange control regulations, there is no significant restriction on the Group.

— I-64 — APPENDIX I ACCOUNTANT’S REPORT

The carrying amount of the bank balances and cash and pledged bank deposits are denominated in the following currencies:

As at December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

RMB ...... 154,684 112,547 185,327 USD...... 44,878 38,397 2,115 Others ...... 41 10 2 199,603 150,954 187,444

Company

As at December 31, 2013, 2014 and 2015, all of the bank balances of the Company are denominated in United States Dollars (“USD”).

19. TRADE AND OTHER PAYABLES

Group

As at December 31,

Notes 2013 2014 2015

RMB’000 RMB’000 RMB’000

Trade and bills payables To third parties ...... (a) 121,507 91,120 104,960 Other payables Amounts due to customers for contract work...... 16(b) 4,707 3,821 1,319 Advances from customers...... 88,487 55,212 11,009 Other payables and accrued charges ...... 11,520 11,357 20,986 Other tax liabilities ...... 2,839 15,353 62,716 Staff costs and welfare accruals ...... 15,056 10,165 8,198 Amounts due to related parties ...... 30(f) 43,085 74,892 — Deferred income related to government grants...... 17,323 14,367 13,042 183,017 185,167 117,270 304,524 276,287 222,230

All amounts are short-term and hence the carrying values of the Group’s and the Company’s trade and other payables as at December 31, 2013, 2014 and 2015 were considered to be a reasonable approximation of its fair value.

— I-65 — APPENDIX I ACCOUNTANT’S REPORT

(a) Trade payables

The Group was granted by its suppliers credit periods ranging from 30-180 days. The ageing analysis of trade payables based on recognition date is as follows:

As at December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

0 to 90 days ...... 84,777 47,621 76,543 91 to 180 days ...... 5,948 12,355 8,658 181 to 365 days ...... 10,815 9,489 6,782 1 to 2 years...... 6,563 6,091 5,096 2 to 3 years...... 10,985 3,467 1,264 Over 3 years ...... 2,419 12,097 6,617 121,507 91,120 104,960

Company

As at December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

Other payables Other payables and accrued charges ...... 844 619 6,198 Amount due to a subsidiary...... 8 8 — 852 627 6,198

The amount due to a subsidiary is unsecured, interest-free and repayable on demand.

— I-66 — APPENDIX I ACCOUNTANT’S REPORT

20. OTHER INTEREST-BEARING BORROWINGS

As at December 31,

Notes 2013 2014 2015

RMB’000 RMB’000 RMB’000

Non-current Other borrowings, secured...... (a) — — 4,363 Current Short-term bank borrowings, unsecured ...... (b) 5,000 8,900 46,227 Other borrowings, secured...... (a) — — 24,719 5,000 8,900 70,946 5,000 8,900 75,309

At the reporting dates, the Group’s other interest-bearing borrowings were repayable as follows:

As at December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

Within one year...... 5,000 8,900 70,946 In the second year...... — — 4,363 5,000 8,900 75,309

The carrying amounts of other interest-bearing borrowings are considered to be a reasonable approximate of their fair values.

(a) Other borrowings

As at December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

Secured ...... — — 29,082

On January 23, 2015, the Group has entered into agreements with a third party (the “Buyer”) for (1) the transfer of certain of the Group’s patent rights (with nil carrying amount at the date of transfer) for a consideration of RMB50,000,000; (2) leasing back of the same assets from the Buyer for a lease period from 2015 to 2017 at a fixed interest rate; and (3) a repurchase agreement to buyback the same assets at a consideration equates to the total lease payments in (2) above. The Group considered the

— I-67 — APPENDIX I ACCOUNTANT’S REPORT substance of the above transactions and has determined that it is of a collateralised borrowing as the Group has retained effective control over the leased assets through the repurchase agreement. Accordingly, the Group has initially recognised a borrowing of RMB47,900,000 (net of directly attributable transaction costs of RMB2,100,000).

As at December 31, 2015, the borrowing is secured by the Group’s intangible assets with nil carrying amount and guaranteed by Mr. Zheng and Xinxin Holding. The amount carries an effective interest rate of 3.70% per annum and is repayable by quarterly installments till 2017.

(b) Short-term bank borrowings, unsecured

At December 31, 2013, 2014 and 2015, the Group’s short-term bank borrowings were denominated in RMB or USD and bears interest at floating rates.

As at December 31, 2013, 2014 and 2015, the unsecured bank borrowings of RMB5,000,000, RMB8,900,000 and RMB13,759,000 respectively were guaranteed by the followings:

As at December 31, 2013 2014 2015 RMB’000 RMB’000 RMB’000

Personal guarantee by Mr. Zheng ...... 5,000 5,000 — Cross-guarantee by Mr. Zheng and Xinxin Holding ...... — — 9,959 Cross-guarantee by a director of the Group and a third party ...... — — 3,800 Guarantee by a minority shareholder of a subsidiary of the Group ...... — 900 — Guarantee by a third party...... — 3,000 — 5,000 8,900 13,759

In addition, during the year ended December 31, 2015, the Group has obtained a one-year standby letter of credit issued by a bank for a maximum of US$5.0 million in favour of another bank, which has granted to the Group an unsecured bank borrowings of RMB32,468,000 (equivalent to US$5.0 million) as at December 31, 2015.

The effective interest rate of the short-term bank borrowings as at December 31, 2013, 2014 and 2015 was 7.80%, 7.54% and 3.70% respectively.

All of the Group’s banking facilities are subject to the fulfillment of certain financial and non-financial covenants relating to certain of the Group’s subsidiaries, as are commonly found in lending arrangements with financial institutions. If the Group was to breach the covenants, the drawn down facilities would become payable on demand.

— I-68 — APPENDIX I ACCOUNTANT’S REPORT

The Group regularly monitors its compliance with these covenants, is up to date with the scheduled repayments of the loans and does not consider it probable that the banks will exercise its discretion to demand repayment for so long as the Group continues to meet these requirements. Further details of the Group’s management of liquidity risk are set out in Note 31(f).

21. DEFERRED TAXATION

The analysis of deferred tax assets and deferred tax liabilities are as follows:

As at December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

Deferred tax assets...... (4,313) (4,924) (8,327) Deferred tax liabilities ...... 12,971 6,476 5,729 8,658 1,552 (2,598)

The net movement of deferred tax liabilities/(assets) are as follows:

Year ended December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

At the beginning of the year ...... (4,476) 8,658 1,552 Acquisition of business (Note 26) ...... 13,853 — — Recognised in profit or loss (Note 7) ...... (719) (1,917) (1,688) Effect from changes in tax rates (Note 7) ...... — (5,189) (2,462) At the end of the year...... 8,658 1,552 (2,598)

— I-69 — APPENDIX I ACCOUNTANT’S REPORT

The movement in deferred tax assets and liabilities during the Relevant Periods, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:

Deferred tax liabilities

Fair value adjustment on business combination

RMB’000

Year ended December 31, 2013 At the beginning of the year ...... — Acquisition of business (Note 26) ...... 13,853 Recognised in profit or loss ...... (882) At the end of the year...... 12,971

Year ended December 31, 2014 At the beginning of the year ...... 12,971 Attributable to change in tax rate (Note 7)...... (5,189) Recognised in profit or loss ...... (1,306) At the end of the year...... 6,476

Year ended December 31, 2015 At the beginning of the year ...... 6,476 Recognised in profit or loss ...... (747) At the end of the year...... 5,729

— I-70 — APPENDIX I ACCOUNTANT’S REPORT

Deferred tax assets

Provision for impairment loss on trade Provision for and other inventories receivables obsolescence Others Total

RMB’000 RMB’000 RMB’000 RMB’000

Year ended December 31, 2013 At the beginning of the year ...... 1,600 560 2,316 4,476 Recognised in profit or loss ...... 300 121 (584) (163) At the end of the year...... 1,900 681 1,732 4,313

Year ended December 31, 2014 At the beginning of the year ...... 1,900 681 1,732 4,313 Recognised in profit or loss ...... 582 224 (195) 611 At the end of the year...... 2,482 905 1,537 4,924

Year ended December 31, 2015 At the beginning of the year ...... 2,482 905 1,537 4,924 Attributable to change in tax rate (Note 7)...... 1,241 452 769 2,462 Recognised in profit or loss ...... (740) 214 1,467 941 At the end of the year...... 2,983 1,571 3,773 8,327

As at December 31, 2013, 2014 and 2015, the Group had unused tax losses of approximately RMB12,792,000, RMB29,911,000 and RMB7,032,000 respectively to carry forward against future taxable income. As at December 31, 2013, 2014 and 2015, no deferred tax asset has been recognised in respect of these losses due to the unpredictability of future profit streams.

These tax losses do not expire under current legislation except the losses as detailed below which will expires as follows:

As at December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

Year of expiry: 2018 ...... 9,507 9,507 — 2019 ...... — 15,536 7,032 9,507 25,043 7,032

— I-71 — APPENDIX I ACCOUNTANT’S REPORT

As at December 31, 2013, 2014 and 2015, no deferred tax liability had been provided for the PRC withholding tax that would be payable on the unremitted earnings of approximately nil, nil and RMB28,755,000 respectively. Such earnings are expected to be retained by the PRC subsidiaries to operate and expand its business in the PRC and not to be remitted to a foreign investor in the foreseeable future.

22. SHARE CAPITAL — GROUP AND COMPANY

Nominal value of Notes Number of shares shares

US$

Authorised:

Ordinary shares of the Company: As at January 1, 2013 and December 31, 2013, at US$0.00001 each...... 4,897,666,667 48,977 Re-designation and reclassification ...... (i) (10,151,453) (102) As at December 31, 2014 and 2015...... 4,887,515,214 48,875

Redeemable convertible preferred shares: (ii) - Series A As at January 1, 2013, December 31, 2013, 2014 and 2015, at US$0.00001 each...... 40,000,000 400 - Series A-1 As at January 1, 2013, December 31, 2013, 2014 and 2015, at US$0.00001 each...... 27,500,000 275 - Series B As at January 1, 2013, December 31, 2013, 2014 and 2015, at US$0.00001 each...... 34,833,333 348 - Series C As at January 1, 2013 and December 31, 2013 ...... — — Re-designation and reclassification ...... (i) 10,151,453 102 As at December 31, 2014 and 2015 ...... 10,151,453 102 Total redeemable convertible preferred shares As at January 1, 2013 and December 31, 2013, at US$0.00001 each...... 102,333,333 1,023 Re-designation and reclassification ...... (i) 10,151,453 102 As at December 31, 2014 and 2015...... 112,484,786 1,125

— I-72 — APPENDIX I ACCOUNTANT’S REPORT

Nominal value Notes Number of shares of shares

US$

Issued and fully paid: Ordinary shares of the Company: Ordinary shares as at January 1, 2013, December 31, 800 2013, 2014 and 2015, at US$0.00001 each ...... (Equivalent to 80,000,000 RMB6,000) Non-redeemable convertible preferred shares: - Series A-1 As at January 1, 2013 ...... — — Lapse of redemption option of preferred shares during the year* ...... 23(i) 6,250,000 62 As at December 31, 2013, 2014 and 2015 ...... 6,250,000 62

Redeemable convertible preferred shares: (iii)

- Series A As at January 1, 2013, December 31, 2013 and 2014, at US$0.00001 each ...... 23(i) 40,000,000 400 Full redemption completed during the year ...... 23(ii) (17,600,000) (176) As at December 31, 2015...... 22,400,000 224 - Series A-1 As at January 1, 2013, at US$0.00001 each ...... 23(i) 27,500,000 275 Lapse of redemption option of preferred shares during the year ...... 23(i) (6,250,000) (62) As at December 31, 2013 and 2014...... 21,250,000 213 Full redemption completed during the year ...... 23(ii) (7,250,000) (73) As at December 31, 2015...... 14,000,000 140 - Series B As at January 1, 2013, December 31, 2013, 2014 and 2015, at US$0.00001 each...... 23(i) 34,833,333 348 - Series C As at January 1, 2013 and December 31, 2013...... — — Issued during the year...... 23(i) 10,151,453 102 As at December 31, 2014 and 2015...... 10,151,453 102 Total redeemable convertible preferred shares As at December 31, 2013 ...... 96,083,333 961

As at December 31, 2014 ...... 106,234,786 1,063

As at December 31, 2015 ...... 81,384,786 814

— I-73 — APPENDIX I ACCOUNTANT’S REPORT

* As at December 31, 2013, 2014 and 2015, the amount represents the 6,250,000 shares held by Federal Hong Kong Investment Limited (“Federal Hong Kong”) which are non-redeemable convertible preferred shares. Please refer to Note 23(i)(d) for details.

Notes:

(i) Reclassification and re-designation of the share capital of the Company

On October 27, 2014, the board of directors of the Company and shareholders approved a re-designation and re-classification of authorised share capital into 4,887,515,214 ordinary shares of par value of US$0.00001 each, and 112,484,786 redeemable convertible preferred shares of a par value of US$0.00001 each, among which, 40,000,000 redeemable convertible preferred shares are designated as Series A Preferred Shares, 27,500,000 redeemable convertible preferred shares are designated as Series A-1 Preferred Shares, 34,833,333 redeemable convertible preferred shares are designated as Series B Preferred Shares and 10,151,453 redeemable convertible preferred shares are designated as Series C Preferred Shares. The key terms of the preferred shares are summarised in Note 23 below.

(ii) For details of the preferred shares, please refer to Note 23 below.

(iii) Redeemable convertible preferred shares of the Company are designated as financial liabilities at fair value through profit or loss (Note 23). The movement in the number of issued and fully paid preferred shares during the Relevant Periods as shown in the table above are disclosed in accordance with the Company’s register of members. Based on the terms of the redemption notices served by the preferred share holders and other supplementary agreements as detailed in Note 23(ii), the preferred shares will be cancelled when the redemption amounts were fully paid.

— I-74 — APPENDIX I ACCOUNTANT’S REPORT

23. REDEEMABLE CONVERTIBLE PREFERRED SHARES — GROUP AND COMPANY

The movement in the redeemable and non-redeemable convertible preferred shares during the Relevant Periods, including the movement of the redeemed shares but not yet cancelled, are as follows.

Nominal value of Notes Number of shares shares US$

Redeemable convertible preferred shares

- Series A As at January 1, 2013, at US$0.00001 each ...... (i) 40,000,000 400 Redemption during the year...... (ii) (40,000,000) (400) As at December 31, 2013 ...... — — Modification during the year ...... (ii) 14,000,000 140 As at December 31, 2014 ...... 14,000,000 140 Modification during the year ...... (ii) 8,400,000 84 As at December 31, 2015 ...... 22,400,000 224 - Series A-1 As at January 1, 2013, at US$0.00001 each ...... (i) 27,500,000 275 Redemption during the year...... (ii) (21,250,000) (213) Lapse of redemption option of preferred shares during the year...... (i) (6,250,000) (62) As at December 31, 2013 ...... — — Modification during the year ...... (ii) 8,750,000 87 As at December 31, 2014 ...... 8,750,000 87 Modification during the year ...... (ii) 5,250,000 53 As at December 31, 2015 ...... 14,000,000 140 - Series B As at January 1, 2013, December 31, 2013, 2014 and 2015, at US$0.00001 each...... (i) 34,833,333 348 - Series C As at January 1, 2013 and December 31, 2013 ...... — — Issued during the year ...... (i) 10,151,453 102 As at December 31, 2014 and 2015 ...... 10,151,453 102 Aggregate redeemable convertible preferred shares As at December 31, 2013...... 34,833,333 348 As at December 31, 2014...... 67,734,786 677 As at December 31, 2015...... 81,384,786 814

Non-redeemable convertible preferred shares - Series A-1 As at January 1, 2013...... — — Lapse of redemption option of preferred shares during the year* ...... (i) 6,250,000 62 As at December 31, 2013, 2014 and 2015...... 6,250,000 62

— I-75 — APPENDIX I ACCOUNTANT’S REPORT

* As at December 31, 2013, 2014 and 2015, the amount represents the 6,250,000 shares held Federal Hong Kong which are non-redeemable convertible preferred shares. Please refer to Note 23(i)(d) for details.

Notes:

(i) Issue of preferred shares

On January 8, 2008, the Company issued 33,333,334 Series A redeemable convertible preferred shares (“Series A Preferred Shares”) of par value of US$0.00001 each at a price of US$0.30 per share at an aggregate purchase price of US$10,000,000 (equivalent to approximately RMB72,540,000) to third-party investors. The holders of the Series A Preferred Shares also received 6,666,666 warrants to purchase the Company’s Series A Preferred Shares of par value of US$0.00001 each at an exercise price of US$0.30 each, in which the holders have fully exercised on January 8, 2011 at a an aggregate consideration of US$2,000,000 (equivalent to approximately RMB13,236,000). As at January 1, 2013, the holders of Series A Preferred Shares comprised of International Finance Corporation (“IFC”), Intel Capital Corporation (“Intel Capital”), Vertex Technology Fund (III) Ltd. (“Vertex Tech”) and Vertex Asia Growth Ltd (“Vertex Asia”).

On August 18, 2009, the Company issued 27,500,000 Series A-1 redeemable convertible preferred shares (“Series A-1 Preferred Shares”) of par value of US$0.00001 each at a price of US$0.40 per share at an aggregate purchase price of US$11,000,000 (equivalent to approximately RMB74,982,930) to IFC, Intel Capital, Vertex Tech and Federal Hong Kong.

On November 23, 2011, the Company issued 34,833,333 Series B redeemable convertible preferred shares (“Series B Preferred Shares”) of par value of US$0.00001 each at a price of US$1.4354 per share at an aggregate purchase price of US$50,000,000 (equivalent to approximately RMB318,320,000) to Carvillo Success Limited (“Carvillo”).

On October 27, 2014, the Company issued 10,151,453 Series C redeemable convertible preferred shares (“Series C Preferred Shares”) of par value of US$0.00001 each at a price of approximately US$1.6018 per share at an aggregate purchase price of US$16,285,319 (equivalent to RMB100,000,000) to Founder Group (Hong Kong) Limited (“Founder Hong Kong”).

The major terms of the Series A, Series A-1, Series B and Series C Preferred Shares (collectively, the “Preferred Shares”) are summarised below:

(a) Dividend rights

The holders of the Preferred Shares shall be entitled to receive dividends, out of any funds legally available therefor, cumulative dividends at the rate of 2% of the applicable issuance price (as adjusted) per annum when and if declared by the board of directors of the Company (the “Board”). No dividends or other distributions shall be made or declared, whether in cash, in property, or in any other shares of the Company, with respect to any other class or series of shares of the Company, unless and until dividends in like amount have been paid in full on the Preferred Shares or declared and set apart for payment.

In the event the Company shall declare a dividend or similar distribution to the holders of ordinary shares (other than a distribution on liquidation rights as described below), then, in each such case, the holders of Preferred Shares shall be entitled to a proportionate share of any such dividend or distribution as though the holders of Preferred Shares were holders of the number of ordinary shares into which their Preferred Shares are convertible.

(b) Voting rights

Each holder of the Preferred Shares may vote at general meetings of the Company in the same manner as holders of ordinary shares of the Company on an as-converted basis and not as a separate class.

— I-76 — APPENDIX I ACCOUNTANT’S REPORT

Each holder of Preferred Shares shall have the right, at such holder’s sole discretion, to convert all or part of its Preferred Shares at any time into such number of fully paid ordinary shares. The number of ordinary shares to which a holder shall be entitled upon conversion of any Preferred Shares shall be the quotient of the applicable original purchase price divided by the then effective conversion price. The conversion price is subject to adjustment, including payment of share dividend and distributions, consolidation or subdivision of ordinary shares. In addition, in the event that any time after the original issue date, the Company issues new securities without consideration or for a consideration per share less than the applicable conversion price, then the applicable conversion price in effect shall be reduced, concurrently with such issue, to a price equal to the price per share of such new securities.

For Series A, Series A-1 and Series B Shares, the initial conversion price shall equal one and a third (11/3) of the applicable original purchase price. For Series B Shares, the initial conversion price was further adjusted to one and one fiftheenth (11/15) of the applicable original purchase price with effect from July 15, 2013. For the Series C Shares, the initial conversion price shall equal to its applicable original purchase price. For the avoidance of doubt, the initial conversion ratio of Series A, Series A-1, Series B and Series C Preferred Shares as at December 31, 2014 and 2015 were 1:0.75, 1:0.75, 1:0.9375 and 1:1 respectively.

All Preferred Shares will automatically be converted into the appropriate number of ordinary shares at the applicable then-effective conversion price upon the completion of a Qualified IPO (an IPO on a qualified exchange that values the Company at no less than US$250 million immediately prior to such IPO, and upon consummation of which at least 25% of the outstanding ordinary shares are tradable without restriction). The Group has obtained written confirmations from all holders of the redeemable convertible preferred shares of the Company to deem the Listing as a Qualified IPO in December 2015 and January 2016.

(d) Redemption rights

The Preferred Shares are subject to redemption, in whole or in part, at the option of the holders of the Preferred Shares as follows:

• at any time, at a price equal to the respective original purchase price (as adjusted for any share splits, share dividends, combination, recapitalisation and similar transactions), together with any accrued and unpaid dividends, following the occurrence of any PRC regulatory development that, in the reasonable judgement of the holders holding at least 82.5% of the then outstanding Preferred Shares on an as-converted basis voting together as a single class (“Majority-in-Interest”), materially and adversely affects (i) the prospectus obtaining the necessary approvals from PRC Governmental Authorities in relation to the achievement of an Exit Transaction by the Company (being a Qualified IPO, or a transaction including a sale of the Company pursuant to which each of the holders of the Preferred Shares may sell all of its Preferred Shares (or ordinary shares issued upon conversion thereof) on terms acceptable to the holders of the Preferred Shares), or (ii) CDV WFOE’s right to engage in the Business as presently conducted.

• in the case of the Series A and Series A-1 Preferred Shares, on or within 90 days after July 8, 2013, at a price equal to two times of its respective original purchase price (as adjusted for any share splits, share dividends, combination, recapitalisation and similar transactions), together with any accrued and unpaid dividends if (i) the Company has not effected a closing of a Qualified IPO on or before January 8, 2013; and (ii) an independent financial advisor hired by a Majority-In-Interest of the holders at the reasonable cost of the Company, fails to sell, during the period from January 8, 2013 to July 7, 2013, all of the holders of Series A and Series A-1 Preferred Shares at a price reasonably satisfactory to a majority-in-interest of the holders, provided further that, such shares shall be sold at a price not less than twice of the respective original purchase price, as adjusted for any share splits, share dividends, combination, recapitalisation and other similar capital events occurring or declared prior to the sale.

— I-77 — APPENDIX I ACCOUNTANT’S REPORT

As detailed in Note 23(ii) below, except for Federal Hong Kong, all the then holders of Series A and Series A-1 Preferred Shares have exercised their redemption rights on September 23, 2013 and have further agreed the terms of the settlement in 2014. As Federal Hong Kong has not exercised its redemption right on its Series A-1 Preferred Shares on or within 90 days after July 8, 2013, therefore with effect from October 7, 2013, the 6,250,000 Series A-1 Preferred Shares held by Federal Hong Kong becomes non-redeemable convertible preferred shares, an equity instrument of the Company. Accordingly, the financial liability is derecognised at its closing carrying amount of RMB26,235,000 and reclassified to equity.

The terms of redemption of Series A and Series A-1 Preferred Shares (excluding the non-redeemable convertible preferred shares) were amended along with the issuance of Series C Preferred Shares. Pursuant to the amended agreements, with effect from October 27, 2014, Series A and Series A-1 Preferred Shares are subject to redemption as follows: (i) at any time on or after January 28, 2016, at a price equal to two times of the Series A and Series A-1 original purchase price i.e. US$0.60 per share for Series A Preferred Shares and US$0.80 for Series A-1 Preferred Shares (as adjusted for any share splits, share dividends, combination, recapitalisation and similar transactions), together with the accrued and unpaid dividends; or (ii) automatically upon the exercise by any shareholder of the Company of any redemption or repurchase rights of any shares of the Company.

As detailed in Note 23(ii), the holders of Series A and Series A-1 Preferred Shares entered into an agreement with the Company in July 2015 that the preferred shares would not be redeemed unless there is no Qualified IPO by March 31, 2017.

• in the case of the Series B Preferred Shares, at any time after November 23, 2014, at a price equal to one point six (1.6) times of the Series B Preferred Shares original purchase price (as adjusted for any share splits, share dividends, combination, recapitalisation and similar transactions), together with the accrued and unpaid dividends if the Company has not effected a closing of a Qualified IPO on or before November 23, 2014. On July 23, 2015, a consent letter was provided to the Company by the holder of Series B Preferred Shares to amend the effect closing date of a Qualified IPO to March 31, 2017.

• in the case of the Series C Preferred Shares, at a price equal to the Series C original purchase price (as adjusted for any share splits, share dividends, combination, recapitalisation and similar transactions) plus a 12% uncompounded annual interest rate, together with the accrued and unpaid dividends, upon the occurrence of any of the following events: (A) if an application for a Qualified IPO cannot be accepted by relevant stock exchange or government authority on or before December 31, 2016; (B) the Company, the Founder or Wing Success make misrepresentations in material respects in certain section of the Series C Securities Purchase Agreement dated October 27, 2014, or materially breaches of the agreement, and fails to cure such breach within twenty (20) days after receiving a written notice from the holders of the Series C Preferred Shares for such breach; (C) the 2014 actual Net Profit is less than 60% of the 2014 Target Net Profit, or the 2015 actual Net Profit is less than 60% of the 2015 Target Net Profit. The 2014 and 2015 Target Net Profit is RMB92,000,000 and RMB105,800,000 respectively. Net Profit means the annual audited consolidated net profit of the Company prepared in IFRS after adjustments of (a) non-recurring items (both operating and non-operating in nature), and (b) the effect of changes in accounting policies or significant accounting estimates and adding back, to the extent deducted in the calculation of such net income, without double counting, (a) any charges or expenses resulting from the option and other derivative features of Preferred Shares, options and warrants issued or granted by the Company; and (b) interest expenses resulting from the amortisation of the liability part of Preferred Shares; (D) the Founder no longer controls the Group or the holders of Series C Preferred Shares reasonably believes that the Founder or Wing Success will no longer control the Group by presenting solid evidence to the Company.

On July 21, 2015, a consent letter was provided to the Company by the holder of Series C Preferred Shares to amend the date of Qualified IPO as set out in (A) above to March 31, 2017; and the requirements under (B), (C) and (D) be removed.

— I-78 — APPENDIX I ACCOUNTANT’S REPORT

(e) Liquidation rights

In the event of any liquidation, dissolution or winding up of the Company or any deemed liquidation event as defined, each holder of the Preferred Shares is entitled to receive, prior to and in preference to holders of ordinary shares, an amount equal to 100% of the applicable original purchase price plus any declared and unpaid dividends (the “Liquidation Preference”). If, upon any such liquidation events, there are insufficient assets of the Company available for payment in full on all Preferred Shares, then the assets of the Company shall be distributed ratably to the holders of the Preferred Shares in proportion to the full Liquidation Preference amounts to which they would otherwise be respectively entitled thereon.

After the full Liquidation Preference on all outstanding Preferred Shares has been paid, the remaining assets of the Company available for distribution to shareholders shall be distributed ratably among the holders of the then outstanding Preferred Shares on an as-converted basis, together with the holders of the then outstanding holders of the ordinary shares of the Company.

(ii) Redemption and settlement of Series A and Series A-1 Preferred Shares

Series A and Series A-1 Preferred Shares held by Vertex Funds

On September 23, 2013, the Company received a notice from Vertex Funds (being Vertex Tech and Vertex Asia) in which Vertex Tech has exercised its right to redeem 6,000,000 Series A Preferred Shares (at a redemption price of US$0.60 per share) and 3,750,000 Series A-1 Preferred Shares (at a redemption price of US$0.80 per share) at a total redemption price of US$6,600,000 (equivalent to approximately RMB40,574,000), and Vertex Asia has exercised its right to redeem 6,000,000 Series A Preferred Shares (at a redemption price of US$0.60 per share) at a total redemption price of US$3,600,000 (equivalent to approximately RMB22,131,000). The total redemption prices were due within twenty (20) days of the date of the redemption notice.

Subsequent to the date of redemption notice and up to March 4, 2014, the Group has made payments to Vertex Funds of US$3,060,000 (equivalent to approximately RMB18,719,000). On March 5, 2014, the Company has entered into a settlement agreement and release with Vertex Funds, in which the Company shall pay to Vertex Funds the remaining redemption price of US$7,140,000 divided into equal monthly instalments of US$510,000 (the “Settlement Payment”) commencing from March 31, 2014 to April 30, 2015. The Company shall also reimburse Vertex Funds a further Settlement Payment not exceeding US$20,000 (equivalent to approximately RMB123,000) for legal and professional fees by end of March 2014. If any Settlement Payment is not made on or before its due date in accordance with the repayment schedule, the Company shall pay, on or before a date not exceeding 59 days from the original due date of that Settlement Payment (the “Cure Date”), the amount of that Settlement Payment plus interest of 2% per month on the amount of that Settlement Payment from the original due date to the Cure Date.

During the years ended December 31, 2014 and 2015, the Group has made payments in accordance with the repayment schedule. As at December 31, 2013, 2014 and 2015, the amounts due to Vertex Funds were US$8,160,000 (equivalent to approximately RMB49,751,000), US$2,040,000 (equivalent to approximately RMB12,496,000) and nil respectively.

On June 26, 2015, the Board approved the cancellation of 12,000,000 Series A Preferred Shares and 3,750,000 Series A-1 Preferred Shares upon the redemption amounts to Vertex Funds were fully paid by the Group during the year ended December 31, 2015.

Series A and Series A-1 Preferred Shares held by IFC and Intel Capital

On September 23, 2013, the Company received a notice from IFC to redeem its 20,000,000 Series A Preferred Shares (at a redemption price of US$0.60 per share) and 12,500,000 Series A-1 Shares (at a redemption price of US$0.80 per share) at a total redemption price of US$22,000,000 (equivalent to approximately RMB135,245,000). On the same date, the Company received a notice from Intel Capital to redeem its 8,000,000 Series A Preferred Shares and 5,000,000 Series A-1 Shares at a total redemption price of US$8,800,000 (equivalent to approximately RMB54,098,000). The total redemption prices were due within twenty (20) days of the date of the redemption notice.

— I-79 — APPENDIX I ACCOUNTANT’S REPORT

Subsequent to the date of redemption notice and up to July 27, 2014, the Company has not made any payments to IFC and Intel Capital. On July 28, 2014, IFC, Intel Capital and the Company (the “Parties”) have entered into a settlement agreement to modify the redemption arrangements. The Parties agreed that the Company will redeem from IFC its 10,000,000 Series A Preferred Shares and 6,250,000 Series A-1 Preferred Shares at a total redemption price of US$11,000,000 (equivalent to approximately RMB67,783,000). For Intel Capital, the Company will redeem its 4,000,000 Series A Preferred Shares and 2,500,000 Series A-1 Preferred Shares at a total redemption price of US$4,400,000 (equivalent to approximately RMB26,880,000). It was also agreed that the Company will not be required to redeem the remaining 10,000,000 Series A Preferred Shares and 6,250,000 Series A-1 Preferred Shares held by IFC and the remaining 4,000,000 Series A Preferred Shares and 2,500,000 Series A-1 Preferred Shares held by Intel Capital within eighteen (18) months after the date of the settlement agreement i.e. January 28, 2016.

The redemption of the redeemed shares shall take place on a date (the “Closing Date”) designated by the Company which shall be no later than six months after the date of the settlement agreement. The total redemption consideration of US$15,400,000 (equivalent to approximately RMB94,896,000) shall be paid to IFC and Intel Capital as follows: (a) within 10 days from the settlement agreement, without any deduction, IFC will be paid the sum of US$4,400,000 (equivalent to approximately RMB27,113,000) and Intel Capital will be paid the sum of US$1,760,000 (equivalent to approximately RMB10,845,000); (b) on the Closing Date, without any deduction, IFC will be paid the sum of US$6,600,000 (equivalent to approximately RMB40,670,000) and Intel Capital will be paid the sum of US$2,640,000 (equivalent to approximately RMB16,268,000). During the year ended December 31, 2014, the Company has made payments to IFC and Intel Capital of US$4,400,000 (equivalent to approximately RMB26,880,000) and US$1,760,000 (equivalent to approximately RMB10,752,000) respectively. During the year ended December 31, 2015, the Company has not made any payments to IFC and Intel Capital.

On July 28, 2015, the Parties entered into an amended and restated settlement agreement to modify the redemption arrangements. The Parties agreed that (a) the partial redemption payments made by the Company to IFC in prior years totalling US$4,400,000 (equivalent to approximately RMB27,073,000) will be deemed as the full redemption payment of 4,000,000 Series A Preferred Shares and 2,500,000 Series A-1 Preferred Shares, and the partial redemption payments made by the Company to Intel Capital in prior years totalling US$1,760,000 (equivalent to approximately RMB10,829,000) will be deemed as the full redemption payment of 1,600,000 Series A Preferred Shares and 1,000,000 Series A-1 Preferred Shares. The redemption is deemed to have occurred on July 23, 2015; (b) IFC and Intel Capital withdrawn the redemption notice given to the Company on September 23, 2013 and will not require the Company to redeem any of the remaining preferred shares until and unless the Company fails to effect a closing of a Qualified IPO on or before March 31, 2017; and (c) in lieu of redeeming the 13,650,000 Series A and Series A-1 Preferred Shares (including 6,000,000 Series A Preferred Shares and 3,750,000 Series A-1 Preferred Shares held by IFC and 2,400,000 Series A Preferred Shares and 1,500,000 Series A-1 Preferred Shares held by Intel Capital), such shares were sold by IFC and Intel Capital to Hong Kong Aoxin Share Limited, an independent third party.

(iii) Accounting for Preferred Shares

The Preferred Shares are designated as financial liabilities at fair value through profit or loss on initial recognition. The Preferred Shares are measured at fair value with changes in fair value recognised in the profit or loss. Upon the exercise of the redemption option by the holders of the Preferred Shares, the financial liabilities are measured at amortised costs.

— I-80 — APPENDIX I ACCOUNTANT’S REPORT

The analysis of the Group’s redeemable convertible preferred shares is as follows:

As at December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

Financial liabilities at amortised cost Current liabilities...... 237,535 69,022 —

Financial liabilities at fair value through profit or loss* Current liabilities...... 326,294 564,233 — Non-current liabilities ...... — — 607,832

326,294 564,233 607,832

563,829 633,255 607,832

* As detailed in Note 23(i)(d) and 23(ii), the Group has obtained consent letters from the existing holders of the redeemable convertible preferred shares of the Company in July 2015 in relation to an agreement that they would not redeem their shares on or before March 31, 2017. Accordingly, the redeemable convertible preferred shares as at December 31, 2015 was classified as non-current liabilities.

The Preferred Shares were valued at fair value by the Company with reference to an independent valuation provided by an independent firm of professional valuers. The fair value of equity value at December 31, 2013, 2014 and 2015 was determined by using valuation technique of discounted cash flow analysis. The fair value of equity value is then considered for the lack of marketability. The fair value of the Preferred Shares was determined by option pricing method. The present value of the estimated future cash flow is discounted at the weighted average cost of capital (“WACC”) of 18.0%, 16.0% and 15.5% at December 31, 2013, 2014 and 2015 respectively.

No dividend was declared or paid to the Preferred Shares shareholders during the Relevant Periods.

— I-81 — APPENDIX I ACCOUNTANT’S REPORT

The assumptions and key parameters adopted for the valuation of the Preferred Shares are as follows:

As at December 31,

2013 2014 2015

Methodology...... Option- Option- Option- pricing pricing pricing method method method Estimated probability of Preferred Shares - for liquidation...... 20.0% 10.0% 2.5% - for redemption ...... 35.0% 35.0% 17.5% - for conversion...... 45.0% 55.0% 80.0% Risk-free rate - for liquidation...... 0.4% 0.7% 0.7% - for redemption ...... 0.4% 0.7% 0.7% Time to expiration (number of years)...... 2 years 2 years 1.3 years Preferred shares dividend yield ...... Nil Nil Nil Volatility - for liquidation...... 36.0% 39.0% 42.0% - for redemption ...... 36.0% 39.0% 42.0%

— I-82 — APPENDIX I ACCOUNTANT’S REPORT

The movement of the Series A, Series A-1, Series B and Series C Preferred Shares are set out below:

Redeemable convertible preferred shares

Non- redeemable Financial convertible liabilities at Financial preferred fair value liabilities at shares through amortised included in profit or loss cost Total equity

RMB’000 RMB’000 RMB’000 RMB’000 Note (d)

At January 1, 2013 ...... 593,697 — 593,697 — Redemption during the year (Note 23(ii))...... (252,048) 252,048 — — Lapse of redemption option of preferred shares during the year (Note 23(i)(d)) ...... (26,235) — (26,235) 26,235 Changes in fair value recognised in profit or loss ...... 26,696 — 26,696 — Repayment during the year ...... — (12,627) (12,627) — Currency translation differences...... (15,816) (1,886) (17,702) —

At December 31, 2013 ...... 326,294 237,535 563,829 26,235 Modification during the year (Note 23(ii)) - Extinguishment of the original preferred shares (note a).. — (94,079) (94,079) — - Deemed issuance of new preferred shares (note a)...... 108,803 — 108,803 — Issuance of Series C preferred shares (Note 23(i)) ...... 100,000 — 100,000 — Changes in fair value recognised in profit or loss ...... 28,079 — 28,079 — Repayment during the year ...... — (75,019) (75,019) — Currency translation differences...... 1,057 585 1,642 —

At December 31, 2014 ...... 564,233 69,022 633,255 26,235 Modification during the year (Note 23(ii)) - Extinguishment of the original preferred shares (note c).. — (57,537) (57,537) — - Deemed issuance of new preferred shares (note c)...... 79,506 — 79,506 — Changes in fair value recognised in profit or loss ...... (70,820) — (70,820) — Repayment during the year ...... — (12,703) (12,703) — Currency translation differences...... 34,913 1,218 36,131 —

At December 31, 2015 ...... 607,832 — 607,832 26,235

Notes: (a) As detailed in Note 23(ii), on July 28, 2014, the Parties have modified the redemption arrangements and extended the redemption period of the remaining redeemable convertible Series A and Series A-1 Preferred Shares to January 28, 2016. The Company assessed whether the net present value of the cash flows under the new terms discounted at the original effective interest rate is at least 10% different from the discounted present value of the remaining cash flows of the original debt instrument. A change exceeding 10% would be accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. A change not exceeding 10% would be treated as a modification and the resulted fair value changes are recognised in profit or loss. The directors, with the assistance of an independent professional valuer, treated the modification of the redemption arrangement as an extinguishment as the change in net present value of the cash flows exceeded 10% and resulted to a loss on extinguishment of preferred shares of RMB14,724,000 during the year ended December 31, 2014.

— I-83 — APPENDIX I ACCOUNTANT’S REPORT

(b) As detailed in Note 23(i)(c), the initial conversion price of Series B Preferred Shares was amended from one and a third (11/3) of the applicable original purchase price to one and one fiftheenth (11/15) of the applicable original purchase price. The directors, with the assistance of an independent professional valuer, treated the modification of the conversion price as a modification as the change in net present value of the cash flows did not exceed 10%. (c) As detailed in Note 23(ii), on July 28, 2015, the Parties entered into an amended and restated settlement agreement to modify certain redemption arrangements and extended the redemption period of the remaining redeemable convertible Series A and Series A-1 Preferred Shares to March 31, 2017. The directors, with the assistance of an independent professional valuer, treated the modification of the redemption arrangement as an extinguishment as the change in net present value of the cash flows exceeded 10% and resulted to a loss on extinguishment of preferred shares of RMB21,969,000 during the year ended December 31, 2015. (d) As at December 31, 2013 and 2014, the preferred shares have not been cancelled as the redemption amounts of the preferred shares were not fully paid at the respective reporting dates.

24. RESERVES

(a) Statutory reserve

In accordance with the relevant laws and regulations for the companies incorporated in the PRC now comprising the Group, it is required to appropriate 10% of its annual net profit determined in accordance with China Accounting Standards for Enterprises issued by the Ministry of Finance of PRC, after offsetting any prior years’ losses, to the statutory reserve. When the balance of such a reserve reaches 50% of the registered capital of the respective company, any further appropriation is at the discretion of shareholders. The statutory reserve can be used to offset prior years’ losses, if any, and may be converted into share capital by issuing new shares to shareholders in proportion to their existing share holding or by increasing the par value of the shares currently held by them, provided that the remaining balance of the reserve after such an issue is not less than 25% of registered capital. The statutory reserve is non-distributable.

(b) Share option reserve

Share option reserve represents the fair value of share options granted by the Company to employees recognised and is dealt with in accordance with the accounting policy set out in Note 2.22.

— I-84 — APPENDIX I ACCOUNTANT’S REPORT

Translation Share option Accumulated reserve reserve losses Total reserves

RMB’000 RMB’000 RMB’000 RMB’000

As at January 1, 2013 ...... 10,634 16,396 (159,870) (132,840) Loss for the year...... — — (27,141) (27,141) Currency translation differences...... 3,538 — — 3,538 Share-based compensation (Note 25)...... — 2,190 — 2,190 Transfer upon forfeiture of share options ...... — (219) 219 — As at December 31, 2013 and January 1, 2014. 14,172 18,367 (186,792) (154,253) Loss for the year...... — — (43,479) (43,479) Currency translation differences...... (534) — — (534) Share-based compensation (Note 25)...... — 886 — 886 Transfer upon forfeiture of share options ...... — (1,099) 1,099 — As at December 31, 2014 and January 1, 2015. 13,638 18,154 (229,172) (197,380) Profit for the year...... — — 26,339 26,339 Currency translation differences...... (9,184) — — (9,184) Share-based compensation (Note 25)...... — 3,835 — 3,835 Transfer upon forfeiture of share options ...... — (266) 266 — As at December 31, 2015...... 4,454 21,723 (202,567) (176,390)

As at December 31, 2013, 2014 and 2015, there were no reserves available for distribution to equity holders of the Company.

25. SHARE-BASED COMPENSATION TRANSACTIONS — GROUP AND COMPANY

Equity-settled share option scheme

Pursuant to unanimous written resolution of the Board on December 20, 2010 (the “Effective Date”), a share option scheme was adopted by the Company and is valid and effective for a period of ten years from December 20, 2010 (the “2010 Share Option Plan”).

The purpose of the 2010 Share Option Plan is to provide eligible participants to acquire and maintain share ownership, thereby strengthening their commitment to the welfare of the Group and promoting and identify of interest between shareholders and these eligible participants. All directors, employees, consultant or advisor to the Group who, in the sole discretion of the remuneration committee of the Board (“Committee”), or if no such committee has yet been established, the Board, have contributed or will contribute to the Group are eligible to participate in the 2010 Share Option Plan. Without limiting to the foregoing, at the time of grant of options, any holder of 5% or more of the outstanding ordinary shares of the Company shall not be eligible to be granted, or to receive any ordinary shares of the Company under, any options under the 2010 Share Option Plan.

— I-85 — APPENDIX I ACCOUNTANT’S REPORT

The maximum number of ordinary shares of the Company to be issued (from time to time) upon exercise of all outstanding options granted and yet to be exercised under the 2010 Share Option Plan must not in aggregate exceed 26,000,000 (subject to adjustment, such as bonus issue, extraordinary cash dividends, share splits, reverse share splits, recapitalisation, reorganisations, mergers, consolidations, combinations occurring after the date of grant of options). The aggregate number of outstanding ordinary shares of the Company as of the Effective Date is 80,000,000 ordinary shares of US$0.00001 each.

The period within which the options must be exercised will be specified by the Company at the time of grant and not to exceed 10 years. The options may be exercised according to the vesting schedule established by the Company. At the time of grant of the options, the Company may specify a minimum period for which an option must be held before the option can be exercised in whole or in part.

The subscription price of the shares (the “Option Price”) under the 2010 Share Option Plan will be specified by the Company at the time of grant. The Option Price shall be payable in cash or by the sale by the participant to the Company, and the repurchase by the Company, for an aggregate consideration of US$1.00, of ordinary shares of the Company held by the participant having an aggregate fair market value at the time the option is exercised equal to the Option Price.

The offer and acceptance of a grant of share options shall be evidenced by a share option agreement. No options may be granted under the 2010 Share Option Plan after the date of the tenth anniversary of its adoption.

In the event a participant’s employment or service with the Group is terminated for any reason, for a period of 360 days after such termination (the “Repurchase Period”) the Company shall have a right but not an obligation, to repurchase any or all ordinary shares of the Company purchased by such participant upon exercise of his or her options (the “Right of Repurchase”), at a price equal to the fair market value of the ordinary shares on the date the Company exercises its Right of Repurchase.

On January 1, 2011, 26,000,000 options were granted by the Company for nil consideration with estimated fair value of approximately US$3,129,000 (approximately RMB20,720,000) (note). Each option gives the holder the right to subscribe for one ordinary share in the Company at an exercise price of US$1.16 per share. The share options are valid for a period of 10 years from January 1, 2011. Included in the 26,000,000 options, (i) 25,700,000 options are subject to a vesting scale in which 30%, 30%, 20% and 20% of options granted shall vest on January 1, 2012, January 1, 2013, January 1, 2014 and January 1, 2015 respectively; and (ii) 300,000 options are subject to a vesting scale in which 1/3, 1/3 and 1/3 of the options granted shall vest on January 1, 2012, January 1, 2013 and January 1, 2014 respectively. All options granted are exercisable from January 1, 2012 to December 31, 2021.

Note: As detailed above, as the participant can choose the method of settlement, the Company is considered to have issued a compound financial instrument, an instrument with a debt component (to the extent that the participant has a right to demand cash) and an equity component (to the extent that the counterparty has a right to demand settlement in equity instruments by giving up their right to cash). However, as the exercise price of the options of US$1.16 per share is higher than the agreed repurchase price of US$1.00 per share, the Group considered the debt component is of no value in respect of all the share options granted, thus the fair value of the equity component was approximately US$3,129,000 (approximately RMB20,720,000) at the date of grant.

— I-86 — APPENDIX I ACCOUNTANT’S REPORT

On October 1, 2015, 2,935,000 options were granted by the Company to the key employees of the Group under the 2010 Share Option Plan with estimated total fair value of approximately US$3,000,000 (equivalent to approximately RMB19,195,000). The exercise price of the share options granted is US$0.00001 per share. The share options are valid for a period of 10 years from October 1, 2015. Included in the 2,935,000 options, 1,435,000 options granted will vest on the October 1, 2016, and the remaining 1,500,000 options are subject to a vesting scale in which 40%, 30% and 30% of options granted shall vest on October 1, 2016, October 1, 2017 and October 1, 2018 respectively. The options granted are exercisable from October 1, 2016 to September 30, 2025.

The directors have used the discounted cash flow method and market approach to determine the underlying equity fair value of the Company and adopted equity allocation method to determine the fair value of the underlying share value of the Company and the key assumption on valuation at the grant date includes the discount rate of 15.5% and projections of future performance. Based on the fair value of the underlying share value of the Company, the directors have used the Binomial option-pricing model to determine the fair value of the options granted. The weighted average fair value of options granted during the period was US$1.02 (equivalent to approximately RMB6.52) per option. The inputs into the model were as follows:

October 1, 2015 Exercise price ...... US$0.00001 Expected volatility ...... 54.3% Expected life...... 10 years Risk-free rate...... 2.05% Expected dividend yield...... —

— I-87 — APPENDIX I ACCOUNTANT’S REPORT

The following table discloses details of the Company’s share options under the 2010 Share Option Plan held by directors and senior employees and movements in such holdings:

Year ended December 31,

2013 2014 2015

Average Average Average exercise exercise exercise price in US$ Number of price in US$ Number of price in US$ Number of per share share per share share per share share option options option options option options

Directors At beginning and end of year...... 1.16 10,300,000 1.16 10,300,000 1.16 10,300,000

Employees At beginning of year...... 1.16 15,680,000 1.16 15,130,000 1.16 13,100,000 Granted during the year ... — — — — 0.00001 2,935,000 Forfeited during the year . 1.16 (550,000) 1.16 (2,030,000) 1.16 (355,000) At end of year ...... 1.16 15,130,000 1.16 13,100,000 0.94 15,680,000

Total At beginning of year...... 1.16 25,980,000 1.16 25,430,000 1.16 23,400,000 Granted during the year ... — — — — 0.00001 2,935,000 Forfeited during the year . 1.16 (550,000) 1.16 (2,030,000) 1.16 (355,000) At end of year ...... 1.16 25,430,000 1.16 23,400,000 1.03 25,980,000

Exercisable at the end of year...... 1.16 15,278,000 1.16 18,780,000 1.16 23,045,000

None of the above share options were exercised during the Relevant Periods. The weighted average remaining contractual life of options outstanding at December 31, 2013, 2014 and 2015 was 7.0 years, 6.0 years and 5.5 years respectively.

The Group recognised a total expense of RMB2,190,000, RMB886,000 and RMB3,835,000 for each of the years ended December 31, 2013, 2014 and 2015 in relation to the above share options granted by the Company, and the share-based compensation expense were shown as a separate item on the face of the consolidated statements of comprehensive income.

26. BUSINESS COMBINATION

On March 11, 2013, CDV WFOE entered into an agreement with Beijing Founder Electronics Co., Ltd. (北京北大方正電子有限公司, “Founder Electronics”), a wholly owned subsidiary of Peking University Founder Group Company Limited (北大方正集團有限公司, “Peking Founder”), whereby Founder Electronics agreed to transfer its digital broadcasting business (the “Transferred Business”)

— I-88 — APPENDIX I ACCOUNTANT’S REPORT and employees to CDV WFOE. No cash consideration was stated in the agreement. Instead, CDV WFOE made several commitments to Founder Electronics (the “Commitments”), including (1) For contracts already completed by Founder Electronics before the transfer: CDV WFOE will assist Founder Electronics to urge repayment of their trade receivables of approximately RMB36,029,000, if the trade debtors did not settle at least 90% of the above debts to Founder Electronics within two years from the date of agreement i.e. March 10, 2015, CDV WFOE will pay the difference to Founder Electronics within three working days from March 10, 2015; (2) For contracts in progress and not yet completed by Founder Electronics before the transfer: CDV WFOE agreed to complete the contracts at its own expense and will assist Founder Electronics to recover the costs it previously spent on these contracts of approximately RMB46,426,000. If Founder Electronics is unable to recover these costs within three years from the date of contract, CDV WFOE will pay the difference to Founder Electronics; and (3) For contracts entered before the transfer but no work has been commenced, CDV WFOE will provide all the agreed services and bear the relevant costs, and Founder Electronics will deduct 1.5% of the contracts sum as management fee and return the remaining amount to CDV WFOE. The fair value of the Commitments are insignificant.

On March 11, 2013, CDV WFOE entered into agreements with Founder Electronics and Beijing Founder Easiprint Co., Ltd (北京方正印捷數碼技術有限公司, “Founder Easiprint”) to acquire their respective 60% and 40% interests in Beijing Zhengqi at a cash consideration of RMB2,400,000 and RMB1,600,000 respectively. As at March 11, 2013, Beijing Zhengqi has no operation and has registered capital and bank balances and cash of RMB4,000,000. The consideration was paid in April 2013. The disposal of Beijing Zhengqi by Founder Electronics and Founder Easiprint requires the approval by the State-owned Assets Administration Department of the PRC and the approval was obtained in 2013. The Transferred Business has been injected into Beijing Zhengqi and the transfer was completed in 2013.

On March 18, 2013, CDV WFOE entered into the intellectual properties transfer agreement ( the “IP Transfer Agreement”) with Peking Founder and Founder Electronics pursuant to which, subject to the approval by the independent shareholders at a special general meeting of Founder Holdings Limited (方正控股有限公司, “Founder Holdings”), the intermediate holding company of Founder Electronics and a non-wholly owned subsidiary of Peking Founder, and the approval by the State-owned Assets Administration Department of the PRC, (i) Peking Founder and Founder Electronics, as joint owners of certain patens and rights to the applications for the patents (the “First Patents and Patent Application Rights”), conditionally agreed to jointly transfer all their title and interest in the First Patents and Patent Application Rights; and (ii) Founder Electronics conditionally agreed to transfer all its title and interest in certain trademarks (the “Trademarks”) and certain computer software copyrights (the “Software Copyrights”) to CDV WFOE at an aggregate consideration of RMB101,475,970, out of which RMB46,500,000 and RMB54,975,970 were payable to Peking Founder and Founder Electronics respectively. Full consideration was paid to Peking Founder and Founder Electronics in May 2013. The above transaction was approved by the independent shareholders of Founder Electronics at the special general meeting held on May 3, 2013. The approval by the State-owned Assets Administration Department of the PRC was obtained in 2013.

On March 18, 2013, CDV WFOE entered into the patents licence agreement ( the “Patent Licence Agreement”) with Peking Founder, Founder Electronics and Peking University (北京大學) pursuant to which, subject to the approval by the independent shareholders at a special general meeting of Founder

— I-89 — APPENDIX I ACCOUNTANT’S REPORT

Holdings, Founder Electronics and Peking University, as joint owners of certain patents and rights to the applications for the patents to be licensed for use under the Patent Licence Agreement (the “Second Patents and Patent Application Rights”), conditionally agreed to grant the exclusive rights to use the Second Patents and Patent Application Rights for the entire validity period of the Second Patents and Patent Application Rights to CDV WFOE at a consideration of RMB7,000,000, out of which RMB1,000,000, RMB3,000,000 and RMB3,000,000 was payable to Peking Founder, Founder Electronics and Peking University respectively. Full consideration was paid to Peking Founder, Founder Electronics and Peking University in May 2013. The above transaction was approved by the independent shareholders of Founder Electronics at the special general meeting held on May 3, 2013.

The above transactions were made as part of the Group’s strategy to expand its market share in the video-related and broadcasting business in the PRC. The Group considered the terms and conditions of above transactions as a whole and has determined that it is a business combination under IFRS 3 and completed on September 10, 2013. The intellectual properties, patents licence acquired and the employees and management are critical for the operation of the Transferred Business and Beijing Zhengqi is use to carry on the Transferred Business.

The following summarises the consideration transferred and the recognised amounts of assets acquired and liabilities assumed at the acquisition date:

Fair value of net identifiable assets and liabilities acquired

RMB’000

Property, plant and equipment...... 724 Intangible assets ...... 55,410 Inventories...... 4,773 Trade and other receivables...... 1,010 Bank balances and cash ...... 139 Trade and other payables ...... (9,947) Deferred tax liabilities ...... (13,853) Net identifiable assets acquired...... 38,256 Goodwill...... 74,220 Fair value of cost of investment...... 112,476

Satisfied by: Cash ...... 112,476

Goodwill arose in the above business combination as the cost of combination included a control premium. In addition, the consideration paid for the combination effectively included amounts in relation to the benefit of expected synergies, revenue growth, future market development and the assembled workforce of the Transferred Business. These benefits are not recognised separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets. None of the goodwill arising on these acquisition is expected to be deductible for tax purposes.

— I-90 — APPENDIX I ACCOUNTANT’S REPORT

The transaction costs incurred by the Group for this acquisition are not material. These transaction costs have been expensed and included in administrative expenses for the year ended December 31, 2013.

An analysis of the cash flows in respect of the acquisition is as follows:

Year ended December 31, 2013

RMB’000

Cash consideration paid ...... 112,476 Less: Bank balances and cash acquired ...... (139) Net outflow of cash and cash equivalents included in the cash flows from investing activities...... 112,337

Since the acquisition, Beijing Zhengqi and the Transferred Business in aggregate contributed revenue of RMB18,706,000 and net profit of RMB215,000 to the Group for the period from September 11, 2013 to December 31, 2013.

Had the combination taken place on January 1, 2013, the revenue and net loss of the Group for the year ended December 31, 2013 would have been RMB509,830,000 and RMB19,480,000 respectively. These pro forma information are for illustrative purposes only and are not necessarily an indication of revenue and result of operations of the Group that actually would have been achieved had the acquisition been completed on January 1, 2013, nor are they intended to be a projection of future results.

— I-91 — APPENDIX I ACCOUNTANT’S REPORT

27. DISPOSAL OF A SUBSIDIARY IN 2015

During the year ended December 31, 2015, the Group disposed of its entire 80% interest in CDV Cloud, a non-wholly owned subsidiary of CDV WFOE, to Mr. Zheng and a third party at a total consideration of RMB8,000,000, out of which 60% interest is sold to Mr. Zheng for a cash consideration of RMB6,000,000. The disposal was completed in May 2015.

RMB’000

Net liabilities disposed of: Property, plant and equipment...... 673 Inventories...... 39 Trade and other receivables...... 364 Bank balances and cash ...... 224 Trade and other payables ...... (3,140) (1,840)

Net gain on disposal of a subsidiary: Cash consideration ...... 8,000 Net liabilities disposed of ...... 1,840 Non-controlling interests...... (1,968) 7,872

Net cash inflow arising on disposal: Cash consideration received ...... 8,000 Bank balances and cash disposed of...... (224) 7,776

28. COMMITMENTS

(a) Capital commitments

At the end of each reporting period, the Group had the following capital commitments:

As at December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

Contracted but not provided for in the Financial Information: Expenditure in respect of investment in a subsidiary...... — 10,000 — Expenditure in respect of investments in joint ventures.... — 22,000 — — 32,000 —

— I-92 — APPENDIX I ACCOUNTANT’S REPORT

(b) Operating lease commitments

The Group leases its office and various residential properties under non-cancellable operating lease agreements, ranging from 1 to 3 years (2013 and 2014: ranging from 1 to 10 years). The leases have varying lease terms and renewal rights. At the end of each reporting period, the total future minimum lease payments payable by the Group under non-cancellable operating leases are as follows:

As at December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

Within one year ...... 12,915 13,381 7,079 In the second to fifth year inclusive (note) ...... 44,598 44,226 — 57,513 57,607 7,079

Note: During the year ended December 31, 2015, the Group has terminated certain long-term office lease agreements with its related companies without compensation, and renewed the office lease agreements with one year term.

29. SIGNIFICANT NON-CASH TRANSACTIONS

During each of the years ended December 31, 2013, 2014 and 2015, addition of property, plant and equipment of RMB2,243,000, RMB320,000 and RMB1,536,000 respectively was transferred from inventories of the Group.

During the year ended December 31, 2015, the Group has invested in the Joint Ventures by contributing the Group’s intangible assets with nil carrying amount at date of transfer. A gain on disposal of intangible assets of RMB10,800,000 was recognised in profit or loss of the Group, after eliminating the unrealised profit to extent of the Group’s interest in the Joint Ventures. In addition, during the year ended December 31, 2015, the Group has assigned or set off certain current account balances with its related parties, details of which are stated in Note 30(b).

— I-93 — APPENDIX I ACCOUNTANT’S REPORT

30. SIGNIFICANT RELATED PARTY TRANSACTIONS

The Group’s accounting policies on related parties are disclosed in Note 2.26. In addition to the transactions/information disclosed elsewhere in these financial information, during the Relevant Periods, the Group had the following material transactions with related parties:

(a) During the Relevant Periods, the related parties that had transactions with the Group were as follows:

Name of related parties Relationship with the Group

Mr. Zheng Substantial shareholder of the Company and director of the Company Mr. Liu Baodong Director of the Company CDV Cloud Company in which Mr. Zheng can exercise significant influence since May 2015 Xinxin Holding Controlled by Mr. Zheng throughout the Relevant Periods and up to January 25, 2016. Mr. Zheng can exercise significant influence in the company with effect from January 25, 2016. Xin’aote Silicon Valley Video Technology Controlled by Mr. Zheng Co., Ltd. (“Xin’aote Video”) Shining Wisdom Group Limited (“Wisdom Controlled by Mr. Zheng Group Limited”)

(b) During the Relevant Periods, the transactions with related parties of the Group were as follows:

Year ended December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

Xinxin Holding Rental expenses and property management fee...... 12,308 13,861 12,868 Xin’aote Video Rental expenses and property management fee...... — 1,397 1,948 Xin’aote Video Sales of goods and provision of service ... 487 2,132 7,377 CDV Cloud Sales of goods and provision of service ... — — 3,477 CDV Cloud Purchase of services...... — — 292 Mr. Zheng Sale of a subsidiary (Note 27) ...... — — 6,000 Beijing Hermit Disposal of property, plant and equipment...... — — 277 Beijing Yueying Disposal of property, plant and equipment...... — — 148 Xin’aote Cloud Disposal of property, plant and equipment...... — — 352

— I-94 — APPENDIX I ACCOUNTANT’S REPORT

In addition to the above, during year ended December 31, 2015, CDV WFOE has assigned the amounts due from Mr. Zheng and Wisdom Group of approximately RMB6,114,000 and RMB3,048,000 respectively to Xinxin Holding (the “Assignment”). Accordingly, CDV WFOE has set off an aggregate amount of RMB9,162,000 against its amounts due to Xinxin Holding. Subsequent to the Assignment, CDV WFOE, Xinxin Holding and the Company have entered into an agreement in which CDV WFOE has assigned its amounts due to Xinxin Holding of RMB68,101,000 to the Company. Accordingly, the Company has set off the same amount against its amounts due from Xinxin Holding.

In addition to the guarantees provided by Mr. Zheng and Xinxin Holding as disclosed in Note 20(b), Mr. Zheng and Xinxin Holding have also provided guarantees to banks in respect of unutilised banking facilities granted to the Group of RMB30,000,000, RMB35,000,000 and nil for the years ended December 31, 2013, 2014 and 2015 respectively.

(d) Amount due from a director

Group and Company

As at January 1, As at December 31,

2013 2013 2014 2015

RMB’000 RMB’000 RMB’000 RMB’000

Mr. Zheng ...... — 6,097 6,119 —

The amount due from a director is unsecured, interest-free and repayable on demand.

The maximum outstanding of amount due from a director during the year is as follows:

Year ended December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

Mr. Zheng ...... 6,097 6,249 12,114

— I-95 — APPENDIX I ACCOUNTANT’S REPORT

(e) Trade and other receivables from related parties

Group

As at January 1, As at December 31,

2013 2013 2014 2015

RMB’000 RMB’000 RMB’000 RMB’000

Trade receivables Xin’ aote Video...... 203 490 1,250 3,533 CDV Cloud...... — — — 3,309 203 490 1,250 6,842 Other receivables Xinxin Holding ...... 33,281 24,865 62,281 7,552 Xin’ aote Video ...... 1,561 1,588 1,652 1,630 CDV Cloud...... ———344 Wisdom Group Limited...... 21,905 21,339 3,048 — 56,747 47,792 66,981 9,526 56,950 48,282 68,231 16,368

The amounts due from related parties are unsecured, interest free and are repayable on demand. No balance due from related companies is past due or impaired.

The maximum outstanding of trade and other receivables from related parties during the year is as follows:

Year ended December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

Xinxin Holding ...... 33,281 62,281 67,052 Xin’aote Video ...... 4,516 2,902 7,125 Wisdom Group Limited...... 21,905 21,339 3,048 CDV Cloud...... — — 3,653

— I-96 — APPENDIX I ACCOUNTANT’S REPORT

Company

As at January 1, As at December 31,

2013 2013 2014 2015

RMB’000 RMB’000 RMB’000 RMB’000

Xinxin Holding ...... — 24,865 62,281 — Wisdom Group Limited...... 18,857 18,290 — — 18,857 43,155 62,281 —

The maximum outstanding of trade and other receivables from related parties during the year is as follows:

Year ended December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

Xinxin Holding ...... 24,865 62,281 67,052 Wisdom Group Limited...... 18,290 18,290 —

(f) Trade and other payables to related parties

Group

As at December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

Xinxin Holding ...... 43,085 73,830 — Xin’aote Video ...... — 1,062 — 43,085 74,892 —

The amounts due to related parties are unsecured, interest free and are repayable on demand.

— I-97 — APPENDIX I ACCOUNTANT’S REPORT

(g) Key management personnel remuneration

Key management of the Group are members of the board of directors and senior management. Included in employee benefit expenses are key management personnel remuneration which includes the following expenses:

Year ended December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

Basic salaries and allowances ...... 2,638 2,638 3,553 Discretionary bonus ...... 282 — — Retirement benefit scheme contributions ...... — 46 171 Share-based compensation expense...... 973 402 3,835 3,893 3,086 7,559

31. FINANCIAL RISK MANAGEMENT AND FAIR VALUE MEASUREMENTS

The Group is exposed to financial risks through its use of financial instruments in its ordinary course of operations and in its investment activities. The financial risks include market risk (including foreign currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management strategy seeks to minimise potential adverse effects on the Group’s financial performance. Risk management is carried out by the senior management of the Group and approved by the Board of Directors.

(a) Categories of financial assets and liabilities

The carrying amounts presented in the consolidated statements of financial position relate to the following categories of financial assets and financial liabilities.

As at December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

Financial assets Loans and receivables Trade and other receivables...... 255,309 315,246 403,484 Pledged bank deposits...... 21,368 3,582 6,359 Bank balances and cash ...... 178,235 147,372 181,085 Financial assets designated at fair value through profit or loss...... — 3,084 — Available-for-sale financial assets...... — — 3,461 454,912 469,284 594,389

— I-98 — APPENDIX I ACCOUNTANT’S REPORT

As at December 31,

2013 2014 2015

RMB’000 RMB’000 RMB’000

Financial liabilities Financial liabilities at amortised cost Trade and other payables ...... 194,098 202,887 134,144 Other interest-bearing borrowings ...... 5,000 8,900 75,309 Redeemable convertible preferred shares...... 237,535 69,022 — Financial liabilities designated at fair value through profit or loss Redeemable convertible preferred shares...... 326,294 564,233 607,832 762,927 845,042 817,285

(b) Foreign currency risk

The transactions of the Company are denominated and settled in its functional currency, USD. The majority of the assets and liabilities of the Company, including bank balances and Preferred Shares, were denominated in USD. The Group’s subsidiaries mainly operate in the PRC and majority of the transactions are settled in RMB, except for certain bank balances and bank borrowings which are denominated in USD.

Foreign currency risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the entity’s functional currency. As at December 31, 2013 and 2014, the Group and the Company did not have significant foreign currency risk from its operations. As at December 31, 2015, the Group has short-term bank borrowings and bank balances denominated in USD of RMB42,427,000 and RMB2,115,000 respectively. If RMB had strengthened/weakened by 5% against USD with all other variables held constant, the profit after income tax and accumulated loss would have been approximately RMB2,015,000 higher/lower and RMB2,015,000 lower/higher respectively for the year ended December 31, 2015.

The Group does not hedge its foreign currency risk. However, management monitors the foreign currency exposure and will consider hedging significant foreign currency exposure should the need arise.

Interest rate risk relates to the risk that the fair value or cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s interest rate risk arises primarily from its bank balances which carry interest at effective market rates and interest-bearing borrowings. Borrowings bearing variable rates expose the Group to cash flow interest rate risk. As at December 31, 2013 and 2014, it is estimated that a general increase/decrease of 100 basis points in interest rates, with all other variables held constant, would have decreased the Group’s loss after income tax and

— I-99 — APPENDIX I ACCOUNTANT’S REPORT accumulated losses by approximately RMB1,946,000 and RMB1,420,000 respectively. As at December 31, 2015, it is estimated that a general increase/decrease of 100 basis points in interest rates, with all other variables held constant, would have increased the Group’s profit after income tax and decreased the Group’s accumulated losses by approximately RMB1,412,000 respectively.

Interest rate risk also arose from redeemable convertible preferred shares, the valuation of which is affected by market interest rate. The estimated fair value of redeemable convertible preferred shares as at December 31, 2013, 2014 and 2015 would have been approximately RMB11,800,000 lower/RMB13,637,000 higher, RMB27,791,000 lower/RMB27,920,000 higher, and RMB37,943,000 lower/RMB44,842,000 higher, should the discount rate used in the discount cash flow analysis were higher/lower by 100 basis point from management’s estimates.

(d) Price risk

The Group is mainly exposed to price risk in relation to the Group’s Preferred Shares carried at fair value through profit or loss. Fair value of Preferred Shares is mainly affected by changes in the Group’s equity value and key market risk variables such as discount rate (Note 31(c)). The Group is not exposed to commodity price risk.

If the Group’s equity value had increased/decreased by 10% with all other variables held constant, the loss after income tax for the years ended December 31, 2013 and 2014 would have been RMB17,257,000 higher/RMB18,451,000 lower and RMB55,882,000 higher/RMB56,897,000 lower, respectively and the profit after income tax for the year ended December 31, 2015 would have been RMB46,860,000 lower/RMB49,073,000 higher, respectively.

(e) Credit risk

The Group is exposed to credit risk in relation to its cash and bank deposits and trade and other receivables.

The carrying amounts of each class of the financial assets as summarised in Note 31(a) above represent the Group’s maximum exposure to credit risk in relation to financial assets. To manage this risk arising from cash and deposits, the Group only transacts with state-owned financial institutions and reputable commercial banks which are all high-credit-quality financial institutions. There has been no recent history of default in relation to these financial institutions.

In respect of trade and other receivables, individual credit evaluations are performed on all customers and counterparties. These evaluations focus on the counterparties’ past history of making payments when due and current ability to pay, and take into account information specific to the counterparties as well as pertaining to the economic and business environment in which the counterparties operates. Monitoring procedures have been implemented to ensure the following-up action is taken to recover overdue debts.

In addition, the Group reviews the recoverable amount of each individual trade and other receivables balance at the end of each reporting periods to ensure adequate impairment losses are made for irrecoverable amounts. Given the constant repayment history, the directors are of the view that the risk of default by these counterparties is low.

— I-100 — APPENDIX I ACCOUNTANT’S REPORT

(f) Liquidity risk

Liquidity risk relates to the risk that the Group will not be able to meet its obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group is exposed to liquidity risk in respect of settlement of trade payables and its financing obligations, and also in respect of its cash flow management. The Group’s policy is to regularly monitor current and expected liquidity requirements and its compliance with lending covenants and its relationship with its bankers and related parties to ensure that the Group maintain sufficient reserves of cash and cash equivalents and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and longer term.

Analysed below is the Group’s remaining contractual maturities for its non-derivative financial liabilities as at December 31, 2013, 2014 and 2015. When the creditor has a choice of when the liability is settled, the liability is included on the basis of the earliest date on when the Group can be required to pay. Where the settlement of the liability is in instalments, each instalment is allocated to the earliest period in which the Group is committed to pay.

The contractual maturity analysis below is based on the undiscounted cash flows of the financial liabilities.

Group

Total Over 1 year contractual Within 1 year but within 5 undiscounted Carrying or on demand years amount amount

RMB’000 RMB’000 RMB’000 RMB’000

At December 31, 2013 Trade and other payables ...... 194,098 — 194,098 194,098 Other interest-bearing borrowings ...... 5,285 — 5,285 5,000 Redeemable convertible preferred shares...... 725,285 — 725,285 563,829 924,668 — 924,668 762,927

At December 31, 2014 Trade and other payables ...... 202,887 — 202,887 202,887 Other interest-bearing borrowings ...... 9,423 — 9,423 8,900 Redeemable convertible preferred shares...... 754,286 — 754,286 633,255 966,596 — 966,596 845,042

At December 31, 2015 Trade and other payables ...... 134,144 — 134,144 134,144 Other interest-bearing borrowings ...... 73,828 4,528 78,356 75,309 Redeemable convertible preferred shares...... — 779,566 779,566 607,832 207,972 784,094 992,066 817,285

— I-101 — APPENDIX I ACCOUNTANT’S REPORT

The maximum exposure of the redemption of the Group’s and the Company’s Series A, Series A-1, Series B and Series C Preferred Shares is described in Note 23. All redeemable convertible preferred shares as at December 31, 2013 and 2014 were classified as current liabilities as the holders can exercise its redemption right within 12 months after the end of the reporting period or the holders can immediately exercise its redemption right at its option. As of December 31, 2015, the redeemable convertible preferred shares of the Company were classified as non-current liabilities as the Group has obtained consents from the existing holders of the redeemable convertible preferred shares of the Company in July 2015 in relation to an agreement that they would not redeem their shares until March 31, 2017.

Company

Other than the redeemable convertible preferred shares as described above, as at December 31, 2013, 2014 and 2015, the Company’s contractual maturity for its non-derivative financial liabilities were within one year or on demand. The carrying amounts of its financial liabilities approximate their contractual undiscounted cash flows.

(g) Fair value measurements recognised in the consolidated statements of financial position

The following table presents financial assets and liabilities measured at fair value in the consolidated statements of financial position in accordance with the fair value hierarchy. The hierarchy groups financial assets and liabilities into three levels based on the relative reliability of significant inputs used in measuring the fair value of these financial assets and liabilities. The fair value hierarchy has the following levels:

Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities;

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The level in the fair value hierarchy within which the financial asset or liability is categorised in its entirety is based on the lowest level of input that is significant to the fair value measurement.

— I-102 — APPENDIX I ACCOUNTANT’S REPORT

The financial assets and liabilities measured at fair value in the consolidated statements of financial position on a recurring basis are grouped into the fair value hierarchy as follows:

Level 3

RMB’000

As at December 31, 2013 Financial liabilities Financial liabilities designated at fair value through profit or loss — Redeemable convertible preferred shares ...... 326,294

As at December 31, 2014 Financial assets Financial assets designated at fair value through profit or loss — Unlisted convertible promissory note...... 3,084 Financial liabilities Financial liabilities designated at fair value through profit or loss — Redeemable convertible preferred shares...... 564,233

As at December 31, 2015 Financial assets Financial assets designated at fair value through profit or loss — Unlisted convertible promissory note ...... — Financial liabilities Financial liabilities designated at fair value through profit or loss — Redeemable convertible preferred shares...... 607,832

The Group’s financial instruments classified within Level 3 of the fair value hierarchy represent the redeemable convertible preferred shares and convertible promissory note, the valuation process and the reconciliation of its carrying amount for the Relevant Periods are disclosed in Notes 17 and 23. During the years ended December 31, 2013, 2014 and 2015, included in profit or loss were unrealised losses for the redeemable convertible preferred shares of RMB13,172,000, RMB28,079,000 and unrealized gain of RMB70,820,000, respectively.

32. CAPITAL MANAGEMENT

The objectives of the Group when managing capital are to safeguard the ability of the Group in continuing as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to enhance shareholders’ value in the long term.

— I-103 — APPENDIX I ACCOUNTANT’S REPORT

The Group monitors capital by regularly reviewing the capital structure. As part of this review, the directors of the Company consider the cost of capital and the risks associated with the issued share capital. The Group may adjust the amount of dividends paid to shareholders, issue new shares or sell assets to reduce debts.

33. SUBSEQUENT EVENTS

Save as disclosed elsewhere in this report, the following significant events took place subsequent to December 31, 2015:

(i) Pursuant to a shareholders resolution dated May 23, 2016, and conditional on the share premium account of the Company being credited as a result of the offer shares pursuant to the proposed share offering described in the Prospectus, the Company will capitalise an amount approximately of US$3,100, standing to the credit of its share premium account and to appropriate such amount as capital to pay up 310,204,797 shares in full at par.

III. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Company or any of the companies now comprising the Group in respect of any period subsequent to December 31, 2015. Save as disclosed in this report, no dividend or distribution has been declared or paid by the Company or any of the companies now comprising of the Group in respect of any period subsequent to December 31, 2015.

Yours faithfully, Grant Thornton Hong Kong Limited Certified Public Accountants Level 12 28 Hennessy Road Wanchai Hong Kong

Lin Ching Yee Daniel Practising Certificate No.: P02771

— I-104 — APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following information does not form part of the Accountant’s Report from the Company’s reporting accountant, Grant Thornton Hong Kong Limited, Certified Public Accountants, Hong Kong, as set out in Appendix I to this prospectus, and is included herein for information purposes only. The unaudited pro forma financial information should be read in conjunction with the section headed “Financial Information” in this prospectus and the Accountant’s Report set out in Appendix I to this prospectus.

A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED NET TANGIBLE ASSETS

The following unaudited pro forma statement of adjusted net tangible assets of the Group prepared in accordance with Rule 7.31 of the GEM Listing Rules is for illustrative purposes only, and is set out below to illustrate the effect of the Global Offering on the net tangible liabilities of the Group attributable to equity holders of the Company as at December 31, 2015 as if the Global Offering had taken place on that date.

The unaudited pro forma statement of adjusted net tangible assets of the Group has been prepared for illustrative purposes only and, because of its hypothetical nature, it may not give a true picture of the consolidated net tangible assets of the Group as at December 31, 2015 or at any future date. The unaudited pro forma statement of adjusted net tangible assets of the Group is prepared based on the audited consolidated net tangible liabilities of the Group attributable to equity holders of the Company as at December 31, 2015 as set out in the Accountant’s Report of the Company, the text of which is set out in Appendix I to this prospectus, and adjusted as described below. The unaudited pro forma statement of adjusted net tangible assets does not form part of the Accountant’s Report.

Audited consolidated net tangible Unaudited liabilities of Estimated pro forma the Group impact to the adjusted net attributable net assets tangible assets to equity Estimated upon the of the Group holders of net proceeds conversion of attributable to the Company as from the the preferred equity holders Unaudited pro forma at December Global shares of the of the adjusted net tangible 31, 2015 Offering Company Company assets per Share

RMB’000 RMB’000 RMB’000 RMB’000 RMB HK$ (Note 1) (Note 2) (Note 3) (Note 4)

Based on the Offer Price of HK$1.90 per Share .. (262,127) 212,872 607,832 558,577 0.90 1.07

Based on the Offer Price of HK$2.57 per Share .. (262,127) 300,362 607,832 646,067 1.04 1.23

— II-1 — APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

Notes:

(1) The audited consolidated net tangible liabilities of the Group attributable to equity holders of the Company as at December 31, 2015 is extracted from the Accountant’s Report of the Company as set out in Appendix I to this prospectus, which is based on the audited consolidated net liabilities of the Group attributable to equity holders of the Company as at December 31, 2015 of RMB119,929,000 with an adjustment for the intangible assets and goodwill as at December 31, 2015 of RMB67,978,000 and RMB74,220,000 respectively.

(2) The estimated net proceeds from the Global Offering are based on 155,000,000 Offer Shares at the Offer Price of HK$1.90 and HK$2.57 per Share after deduction of the underwriting fees and commissions and other estimated listing-related expenses (excluding listing-related expenses of approximately RMB15,209,000 which have been accounted for prior to December 31, 2015) payable by the Company and takes no account of any Shares which may be allotted and issued upon the exercise of the Over-allotment Option or any Shares which may be allotted and issued or repurchased by the Company under the general mandates granted to the Directors or any Shares which may be issued upon the exercise of the options which were granted under the Pre-IPO Share Option Scheme.

(3) Pursuant to the terms and conditions of the redeemable or non-redeemable convertible preferred shares of the Company (the “Preferred Shares”), as disclosed in Note 23 to Section II of the Accountant’s Report set out in Appendix I to this prospectus, all the Preferred Shares will automatically be converted into the appropriate number of ordinary shares at the applicable then-effective conversion price upon the completion of a Qualified IPO (an IPO on a qualified exchange that values the Company at no less than US$250 million immediately prior to such IPO, and upon consummation of which at least 25% of the outstanding ordinary shares are tradable without restriction).

Taking into account that the Group has obtained written confirmations (the “Waivers”) from these holders in December 2015 and January 2016 to deem the Listing as a Qualified IPO, hence, upon the Global Offering, 67,289,333 Series A Preferred Shares, 60,829,333 Series A-1 Preferred Shares, 104,637,867 Series B Preferred Shares and 30,495,000 Series C Preferred Shares will be automatically converted to ordinary shares of the Company at their respective conversion rates (being 1:0.75; 1:0.75; 1:0.9375 and 1:1 for Series A Preferred Shares, Series A-1 Preferred Shares, Series B Preferred Shares and Series C Preferred Shares respectively) and the carrying amounts of the above preferred shares of RMB607,832,000 as at December 31, 2015 recorded as liabilities of the Company will be transferred to the Company’s equity.

(4) The unaudited pro forma adjusted net tangible assets per Share is arrived at after the adjustments referred to in the preceding paragraphs and on the basis of 620,000,000 Shares (being the number of ordinary shares expected to be in issue immediately after completion of the Global Offering). No account has been taken of the Shares which may be allotted and issued upon the exercise of the Over-allotment Option or any Shares which may be allotted and issued or repurchased by the Company under the general mandates granted to the Directors or any Shares which may be issued upon the exercise of the options which were granted under the Pre-IPO Share Option Scheme.

(5) Except for the Waivers obtained in January 2016 as mentioned in note 3 in this Appendix, no adjustment has been made to reflect any trading result or other transactions of the Group entered into subsequent to December 31, 2015.

(6) For the purpose of this unaudited pro forma statement of adjusted net tangible assets, the balances stated in Renminbi are converted into Hong Kong dollars at the rate of HK$1.00 to RMB0.84331.

— II-2 — APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

B. REPORT FROM THE REPORTING ACCOUNTANT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following is the text of a report received from Grant Thornton Hong Kong Limited, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this prospectus.

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

TO THE DIRECTORS OF CHINA DIGITAL VIDEO HOLDINGS LIMITED

We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information of China Digital Video Holdings Limited (the “Company”, formerly known as China Digital Video Limited) and its subsidiaries (collectively the “Group”) by the directors for illustrative purposes only. The unaudited pro forma financial information consists of the unaudited pro forma statement of adjusted net tangible assets of the Group as at December 31, 2015, and related notes (the “Unaudited Pro Forma Financial Information”) as set out on pages II-1 to II-2 of the Company’s prospectus dated June 15, 2016, in connection with the proposed initial public offering of the shares of the Company. The applicable criteria on the basis of which the directors have compiled the Unaudited Pro Forma Financial Information are described on page II-2.

The Unaudited Pro Forma Financial Information has been compiled by the directors to illustrate the impact of the proposed initial public offering on the Group’s financial position as at December 31, 2015 as if the proposed initial public offering had taken place at December 31, 2015. As part of this process, information about the Group’s financial position has been extracted by the directors from the Group’s financial information for the year ended December 31, 2015, on which an accountant’s report has been published.

Directors’ Responsibility for the Unaudited Pro Forma Financial Information

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

— II-3 — APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

Our Independence and Quality Control

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

The firm applies Hong Kong Standard on Quality Control 1 “Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements” and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Reporting Accountant’s Responsibilities

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

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

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

The purpose of unaudited pro forma financial information included in a prospectus is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the entity as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the proposed initial public offering at December 31, 2015 would have been as presented.

A reasonable assurance engagement to report on whether the unaudited pro forma financial information has been properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the directors in the compilation of the unaudited pro forma financial information provide a reasonable basis for presenting the significant

— II-4 — APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:

• The related pro forma adjustments give appropriate effect to those criteria; and

• The unaudited pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.

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

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

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

Our work has not been carried out in accordance with auditing standards or other standards and practices generally accepted in the United States of America or auditing standards of the Public Company Accounting Oversight Board (United States) and accordingly should not be relied upon as if it had been carried out in accordance with those standards and practices.

Opinion

In our opinion:

(a) the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated;

(b) such basis is consistent with the accounting policies of the Group; and

(c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 7.31(1) of the Listing Rules.

Grant Thornton Hong Kong Limited Certified Public Accountants Level 12 28 Hennessy Road Wanchai Hong Kong

June 15, 2016

Lin Ching Yee Daniel Practising Certificate No.: P02771

— II-5 — APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

SUMMARY OF THE CONSTITUTION OF THE COMPANY

1 Memorandum of Association

The Memorandum of Association of the Company will be conditionally adopted and states, inter alia, that the liability of the members of the Company is limited, that the objects for which the Company is established are unrestricted and the Company shall have full power and authority to carry out any object not prohibited by the Companies Law or any other law of the Cayman Islands.

The Memorandum of Association is available for inspection at the address specified in Appendix V in the section headed “Documents Delivered to the Registrar of Companies and Available for Inspection”.

2 Articles of Association

The Articles of Association of the Company will be conditionally adopted and include provisions to the following effect:

2.1 Classes of Shares

The share capital of the Company consists of ordinary shares. The capital of the Company at the date of adoption of the Articles is US$50,000 divided into 5,000,000,000 shares of US$0.00001 each.

2.2 Directors

(a) Power to allot and issue Shares

Subject to the provisions of the Companies Law and the Memorandum and Articles of Association, the unissued shares in the Company (whether forming part of its original or any increased capital) shall be at the disposal of the Directors, who may offer, allot, grant options over or otherwise dispose of them to such persons, at such times and for such consideration, and upon such terms, as the Directors shall determine.

Subject to the provisions of the Articles of Association and to any direction that may be given by the Company in general meeting and without prejudice to any special rights conferred on the holders of any existing shares or attaching to any class of shares, any share may be issued with or have attached thereto such preferred, deferred, qualified or other special rights or restrictions, whether in regard to dividend, voting, return of capital or otherwise, and to such persons at such times and for such consideration as the Directors may determine. Subject to the Companies Law and to any special rights conferred on any shareholders or attaching to any class of shares, any share may, with the sanction of a special resolution, be issued on terms that it is, or at the option of the Company or the holder thereof, liable to be redeemed.

— III-1 — APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

(b) Power to dispose of the assets of the Company or any subsidiary

The management of the business of the Company shall be vested in the Directors who, in addition to the powers and authorities by the Articles of Association expressly conferred upon them, may exercise all such powers and do all such acts and things as may be exercised or done or approved by the Company and are not by the Articles of Association or the Companies Law expressly directed or required to be exercised or done by the Company in general meeting, but subject nevertheless to the provisions of the Companies Law and of the Articles of Association and to any regulation from time to time made by the Company in general meeting not being inconsistent with such provisions or the Articles of Association, provided that no regulation so made shall invalidate any prior act of the Directors which would have been valid if such regulation had not been made.

Payment to any Director or past Director of any sum by way of compensation for loss of office or as consideration for or in connection with his retirement from office (not being a payment to which the Director is contractually entitled) must first be approved by the Company in general meeting.

(d) Loans to Directors

There are provisions in the Articles of Association prohibiting the making of loans to Directors or their respective close associates which are equivalent to the restrictions imposed by the Companies Ordinance.

(e) Financial assistance to purchase Shares

Subject to all applicable laws, the Company may give financial assistance to Directors and employees of the Company, its subsidiaries or any holding company or any subsidiary of such holding company in order that they may buy shares in the Company or any such subsidiary or holding company. Further, subject to all applicable laws, the Company may give financial assistance to a trustee for the acquisition of shares in the Company or shares in any such subsidiary or holding company to be held for the benefit of employees of the Company, its subsidiaries, any holding company of the Company or any subsidiary of any such holding company (including salaried Directors).

(f) Disclosure of interest in contracts with the Company or any of its subsidiaries

No Director or proposed Director shall be disqualified by his office from contracting with the Company either as vendor, purchaser or otherwise nor shall any such contract or any contract or arrangement entered into by or on behalf of the Company with any person, company or partnership of or in which any Director shall be a member or otherwise interested be capable on that account of being avoided, nor shall any Director so contracting or being any member or so interested be liable to account to the Company for any profit so realised by any such contract or arrangement by reason only of such Director holding that office or the fiduciary relationship thereby established, provided that such Director shall, if his interest in such contract or arrangement is material, declare the nature

— III-2 — APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW of his interest at the earliest meeting of the board of Directors at which it is practicable for him to do so, either specifically or by way of a general notice stating that, by reason of the facts specified in the notice, he is to be regarded as interested in any contracts of a specified description which may be made by the Company.

A Director shall not be entitled to vote on (nor shall be counted in the quorum in relation to) any resolution of the Directors in respect of any contract or arrangement or any other proposal in which the Director or any of his close associates (or, if required by the Listing Rules, his other associates) has any material interest, and if he shall do so his vote shall not be counted (nor is he to be counted in the quorum for the resolution), but this prohibition shall not apply to any of the following matters, namely:

(i) the giving to such Director or any of his close associates of any security or indemnity in respect of money lent or obligations incurred or undertaken by him or any of them at the request of or for the benefit of the Company or any of its subsidiaries;

(ii) the giving of any security or indemnity to a third party in respect of a debt or obligation of the Company or any of its subsidiaries for which the Director or any of his close associates has himself/themselves assumed responsibility in whole or in part and whether alone or jointly under a guarantee or indemnity or by the giving of security;

(iii) any proposal concerning an offer of shares, debentures or other securities of or by the Company or any other company which the Company may promote or be interested in for subscription or purchase where the Director or any of his close associates is/are or is/are to be interested as a participant in the underwriting or sub-underwriting of the offer;

(iv) any proposal or arrangement concerning the benefit of employees of the Company or any of its subsidiaries including:

(A) the adoption, modification or operation of any employees’ share scheme or any share incentive scheme or share option scheme under which the Director or any of his close associates may benefit; or

(B) the adoption, modification or operation of a pension or provident fund or retirement, death or disability benefits scheme which relates both to Directors, their close associates and employees of the Company or any of its subsidiaries and does not provide in respect of any Director or any of his close associates, as such any privilege or advantage not generally accorded to the class of persons to which such scheme or fund relates; and

(v) any contract or arrangement in which the Director or any of his close associates is/are interested in the same manner as other holders of shares or debentures or other securities of the Company by virtue only of his/their interest in shares or debentures or other securities of the Company.

— III-3 — APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

(g) Remuneration

The Directors shall be entitled to receive by way of remuneration for their services such sum as shall from time to time be determined by the Directors, or the Company in general meeting, as the case may be, such sum (unless otherwise directed by the resolution by which it is determined) to be divided amongst the Directors in such proportions and in such manner as they may agree, or failing agreement, equally, except that in such event any Director holding office for less than the whole of the relevant period in respect of which the remuneration is paid shall only rank in such division in proportion to the time during such period for which he has held office. Such remuneration shall be in addition to any other remuneration to which a Director who holds any salaried employment or office in the Company may be entitled by reason of such employment or office.

The Directors shall also be entitled to be paid all expenses, including travel expenses, reasonably incurred by them in or in connection with the performance of their duties as Directors including their expenses of travelling to and from board meetings, committee meetings or general meetings or otherwise incurred whilst engaged on the business of the Company or in the discharge of their duties as Directors.

The Directors may grant special remuneration to any Director who shall perform any special or extra services at the request of the Company. Such special remuneration may be made payable to such Director in addition to or in substitution for his ordinary remuneration as a Director, and may be made payable by way of salary, commission or participation in profits or otherwise as may be agreed.

The remuneration of an executive Director or a Director appointed to any other office in the management of the Company shall from time to time be fixed by the Directors and may be by way of salary, commission or participation in profits or otherwise or by all or any of those modes and with such other benefits (including share option and/or pension and/or gratuity and/or other benefits on retirement) and allowances as the Directors may from time to time decide. Such remuneration shall be in addition to such remuneration as the recipient may be entitled to receive as a Director.

(h) Retirement, appointment and removal

The Directors shall have power at any time and from time to time to appoint any person to be a Director, either to fill a casual vacancy or as an addition to the existing Directors. Any Director so appointed shall hold office only until the next general meeting of the Company and shall then be eligible for re-election at that meeting.

The Company may by ordinary resolution remove any Director (including a Managing Director or other executive Director) before the expiration of his period of office notwithstanding anything in the Articles of Association or in any agreement between the Company and such Director (but without prejudice to any claim for compensation or damages payable to him in respect of the termination of his appointment as Director or of any other appointment of office as a result of the termination of this appointment as Director). The Company may by ordinary resolution appoint another person in his place. Any Director so appointed shall hold office during such time only as the Director in whose place he is appointed would have held the same if he had not been removed. The Company may also by

— III-4 — APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW ordinary resolution elect any person to be a Director, either to fill a casual vacancy or as an addition to the existing Directors. Any Director so appointed shall hold office only until the next following general meeting of the Company and shall then be eligible for re-election but shall not be taken into account in determining the Directors who are to retire by rotation at such meeting. No person shall, unless recommended by the Directors, be eligible for election to the office of Director at any general meeting unless, during the period, which shall be at least seven days, commencing no earlier than the day after the dispatch of the notice of the meeting appointed for such election and ending no later than seven days prior to the date of such meeting, there has been given to the Secretary of the Company notice in writing by a member of the Company (not being the person to be proposed) entitled to attend and vote at the meeting for which such notice is given of his intention to propose such person for election and also notice in writing signed by the person to be proposed of his willingness to be elected.

There is no shareholding qualification for Directors nor is there any specified age limit for Directors.

The office of a Director shall be vacated:

(i) if he resigns his office by notice in writing to the Company at its registered office or its principal office in Hong Kong;

(ii) if an order is made by any competent court or official on the grounds that he is or may be suffering from mental disorder or is otherwise incapable of managing his affairs and the Directors resolve that his office be vacated;

(iii) if, without leave, he is absent from meetings of the Directors (unless an alternate Director appointed by him attends) for 12 consecutive months, and the Directors resolve that his office be vacated;

(iv) if he becomes bankrupt or has a receiving order made against him or suspends payment or compounds with his creditors generally;

(v) if he ceases to be or is prohibited from being a Director by law or by virtue of any provision in the Articles of Association;

(vi) if he is removed from office by notice in writing served upon him signed by not less than three-fourths in number (or, if that is not a round number, the nearest lower round number) of the Directors (including himself) for the time being then in office; or

(vii) if he shall be removed from office by an ordinary resolution of the members of the Company under the Articles of Association.

At every annual general meeting of the Company one-third of the Directors for the time being, or, if their number is not three or a multiple of three, then the number nearest to, but not less than, one-third, shall retire from office by rotation, provided that every Director (including those appointed

— III-5 — APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW for a specific term) shall be subject to retirement by rotation at least once every three years. A retiring Director shall retain office until the close of the meeting at which he retires and shall be eligible for re-election thereat. The Company at any annual general meeting at which any Directors retire may fill the vacated office by electing a like number of persons to be Directors.

(i) Borrowing powers

The Directors may from time to time at their discretion exercise all the powers of the Company to raise or borrow or to secure the payment of any sum or sums of money for the purposes of the Company and to mortgage or charge its undertaking, property and assets (present and future) and uncalled capital or any part thereof.

(j) Proceedings of the Board

The Directors may meet together for the dispatch of business, adjourn and otherwise regulate their meetings and proceedings as they think fit in any part of the world. Questions arising at any meeting shall be determined by a majority of votes. In the case of an equality of votes, the chair of the meeting shall have a second or casting vote.

2.3 Alteration to constitutional documents

No alteration or amendment to the Memorandum or Articles of Association may be made except by special resolution.

2.4 Variation of rights of existing shares or classes of shares

If at any time the share capital of the Company is divided into different classes of shares, all or any of the rights attached to any class of shares for the time being issued (unless otherwise provided for in the terms of issue of the shares of that class) may, subject to the provisions of the Companies Law, be varied or abrogated either with the consent in writing of the holders of not less than three-fourths in nominal value of the issued shares of that class or with the sanction of a special resolution passed at a separate meeting of the holders of the shares of that class. To every such separate meeting all the provisions of the Articles of Association relating to general meetings shall mutatis mutandis apply, but so that the quorum for the purposes of any such separate meeting and of any adjournment thereof shall be a person or persons together holding (or representing by proxy or duly authorized representative) at the date of the relevant meeting not less than one-third in nominal value of the issued shares of that class.

The special rights conferred upon the holders of shares of any class shall not, unless otherwise expressly provided in the rights attaching to or the terms of issue of such shares, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.

— III-6 — APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

2.5 Alteration of capital

The Company may, from time to time, whether or not all the shares for the time being authorized shall have been issued and whether or not all the shares for the time being issued shall have been fully paid up, by ordinary resolution, increase its share capital by the creation of new shares, such new capital to be of such amount and to be divided into shares of such respective amounts as the resolution shall prescribe.

The Company may from time to time by ordinary resolution:

(a) consolidate and divide all or any of its share capital into shares of a larger amount than its existing shares. On any consolidation of fully paid shares and division into shares of larger amount, the Directors may settle any difficulty which may arise as they think expedient and in particular (but without prejudice to the generality of the foregoing) may as between the holders of shares to be consolidated determine which particular shares are to be consolidated into each consolidated share, and if it shall happen that any person shall become entitled to fractions of a consolidated share or shares, such fractions may be sold by some person appointed by the Directors for that purpose and the person so appointed may transfer the shares so sold to the purchaser thereof and the validity of such transfer shall not be questioned, and so that the net proceeds of such sale (after deduction of the expenses of such sale) may either be distributed among the persons who would otherwise be entitled to a fraction or fractions of a consolidated share or shares rateably in accordance with their rights and interests or may be paid to the Company for the Company’s benefit;

(b) cancel any shares which at the date of the passing of the resolution have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled subject to the provisions of the Companies Law; and

(c) sub-divide its shares or any of them into shares of smaller amount than is fixed by the Memorandum of Association, subject nevertheless to the provisions of the Companies Law, and so that the resolution whereby any share is sub-divided may determine that, as between the holders of the shares resulting from such sub-division, one or more of the shares may have any such preferred or other special rights, over, or may have such deferred rights or be subject to any such restrictions as compared with the others as the Company has power to attach to unissued or new shares.

The Company may by special resolution reduce its share capital or any capital redemption reserve in any manner authorized and subject to any conditions prescribed by the Companies Law.

— III-7 — APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

2.6 Special resolution — majority required

A “special resolution” is defined in the Articles of Association to have the meaning ascribed thereto in the Companies Law, for which purpose, the requisite majority shall be not less than three-fourths of the votes of such members of the Company as, being entitled to do so, vote in person or, in the case of corporations, by their duly authorized representatives or, where proxies are allowed, by proxy at a general meeting of which notice specifying the intention to propose the resolution as a special resolution has been duly given and includes a special resolution approved in writing by all of the members of the Company entitled to vote at a general meeting of the Company in one or more instruments each signed by one or more of such members, and the effective date of the special resolution so adopted shall be the date on which the instrument or the last of such instruments (if more than one) is executed.

In contrast, an “ordinary resolution” is defined in the Articles of Association to mean a resolution passed by a simple majority of the votes of such members of the Company as, being entitled to do so, vote in person or, in the case of corporations, by their duly authorized representatives or, where proxies are allowed, by proxy at a general meeting held in accordance with the Articles of Association and includes an ordinary resolution approved in writing by all the members of the Company aforesaid.

2.7 Voting rights

Subject to any special rights, privileges or restrictions as to voting for the time being attached to any class or classes of shares, at any general meeting on a poll every member present in person (or, in the case of a member being a corporation, by its duly authorized representative) or by proxy shall have one vote for each share registered in his name in the register of members of the Company.

Where any member is, under the Listing Rules, required to abstain from voting on any particular resolution or restricted to voting only for or only against any particular resolution, any votes cast by or on behalf of such member in contravention of such requirement or restriction shall not be counted.

In the case of joint registered holders of any share, any one of such persons may vote at any meeting, either personally or by proxy, in respect of such share as if he were solely entitled thereto; but if more than one of such joint holders be present at any meeting personally or by proxy, that one of the said persons so present being the most or, as the case may be, the more senior shall alone be entitled to vote in respect of the relevant joint holding and, for this purpose, seniority shall be determined by reference to the order in which the names of the joint holders stand on the register in respect of the relevant joint holding.

A member of the Company in respect of whom an order has been made by any competent court or official on the grounds that he is or may be suffering from mental disorder or is otherwise incapable of managing his affairs may vote by any person authorized in such circumstances to do so and such person may vote by proxy.

— III-8 — APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

Save as expressly provided in the Articles of Association or as otherwise determined by the Directors, no person other than a member of the Company duly registered and who shall have paid all sums for the time being due from him payable to the Company in respect of his shares shall be entitled to be present or to vote (save as proxy for another member of the Company), or to be reckoned in a quorum, either personally or by proxy at any general meeting.

At any general meeting a resolution put to the vote of the meeting shall be decided by way of a poll save that the chair of the meeting may allow a resolution which relates purely to a procedural or administrative matter as prescribed under the Listing Rules to be voted on by a show of hands.

If a recognized clearing house (or its nominee(s)) is a member of the Company it may authorize such person or persons as it thinks fit to act as its proxy(ies) or representative(s) at any general meeting of the Company or at any general meeting of any class of members of the Company provided that, if more than one person is so authorized, the authorization shall specify the number and class of shares in respect of which each such person is so authorized. A person authorized pursuant to this provision shall be entitled to exercise the same rights and powers on behalf of the recognized clearing house (or its nominee(s)) which he represents as that recognized clearing house (or its nominee(s)) could exercise as if it were an individual member of the Company holding the number and class of shares specified in such authorization, including, where a show of hands is allowed, the right to vote individually on a show of hands.

2.8 Annual general meetings

The Company shall hold a general meeting as its annual general meeting each year, within a period of not more than 15 months after the holding of the last preceding annual general meeting (or such longer period as the Stock Exchange may authorize). The annual general meeting shall be specified as such in the notices calling it.

2.9 Accounts and audit

The Directors shall cause to be kept such books of account as are necessary to give a true and fair view of the state of the Company’s affairs and to show and explain its transactions and otherwise in accordance with the Companies Law.

The Directors shall from time to time determine whether, and to what extent, and at what times and places and under what conditions or regulations, the accounts and books of the Company, or any of them, shall be open to the inspection of members of the Company (other than officers of the Company) and no such member shall have any right of inspecting any accounts or books or documents of the Company except as conferred by the Companies Law or any other relevant law or regulation or as authorized by the Directors or by the Company in general meeting.

— III-9 — APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

The Directors shall, commencing with the first annual general meeting, cause to be prepared and to be laid before the members of the Company at every annual general meeting a profit and loss account for the period, in the case of the first account, since the incorporation of the Company and, in any other case, since the preceding account, together with a balance sheet as at the date to which the profit and loss account is made up and a Director’s report with respect to the profit or loss of the Company for the period covered by the profit and loss account and the state of the Company’s affairs as at the end of such period, an auditor’s report on such accounts and such other reports and accounts as may be required by law. Copies of those documents to be laid before the members of the Company at an annual general meeting shall not less than 21 days before the date of the meeting, be sent in the manner in which notices may be served by the Company as provided in the Articles of Association to every member of the Company and every holder of debentures of the Company provided that the Company shall not be required to send copies of those documents to any person of whose address the Company is not aware or to more than one of the joint holders of any shares or debentures.

The Company shall at every annual general meeting appoint an auditor or auditors of the Company who shall hold office until the next annual general meeting. The remuneration of the auditors shall be fixed by the Company at the annual general meeting at which they are appointed provided that in respect of any particular year the Company in general meeting may delegate the fixing of such remuneration to the Directors.

2.10 Notice of meetings and business to be conducted thereat

An annual general meeting shall be called by not less than 21 days’ notice in writing and any extraordinary general meeting shall be called by not less than 14 days’ notice in writing. The notice shall be exclusive of the day on which it is served or deemed to be served and of the day for which it is given, and shall specify the time, place and agenda of the meeting, particulars of the resolutions and the general nature of the business to be considered at the meeting. The notice convening an annual general meeting shall specify the meeting as such, and the notice convening a meeting to pass a special resolution shall specify the intention to propose the resolution as a special resolution. Notice of every general meeting shall be given to the auditors and all members of the Company (other than those who, under the provisions of the Articles of Association or the terms of issue of the shares they hold, are not entitled to receive such notice from the Company).

Notwithstanding that a meeting of the Company is called by shorter notice than that mentioned above, it shall be deemed to have been duly called if it is so agreed:

(a) in the case of a meeting called as an annual general meeting, by all members of the Company entitled to attend and vote thereat or their proxies; and

(b) in the case of any other meeting, by a majority in number of the members having a right to attend and vote at the meeting, being a majority together holding not less than 95% in nominal value of the shares giving that right.

— III-10 — APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

2.11 Transfer of shares

Transfers of shares may be effected by an instrument of transfer in the usual common form or in such other form as the Directors may approve which is consistent with the standard form of transfer as prescribed by the Stock Exchange.

The instrument of transfer shall be executed by or on behalf of the transferor and, unless the Directors otherwise determine, the transferee, and the transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the register of members of the Company in respect thereof. All instruments of transfer shall be retained by the Company.

The Directors may refuse to register any transfer of any share which is not fully paid up or on which the Company has a lien. The Directors may also decline to register any transfer of any shares unless:

(a) the instrument of transfer is lodged with the Company accompanied by the certificate for the shares to which it relates (which shall upon the registration of the transfer be cancelled) and such other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer;

(b) the instrument of transfer is in respect of only one class of shares;

(d) in the case of a transfer to joint holders, the number of joint holders to whom the share is to be transferred does not exceed four;

(e) the shares concerned are free of any lien in favor of the Company; and

(f) a fee of such amount not exceeding the maximum amount as the Stock Exchange may from time to time determine to be payable (or such lesser sum as the Directors may from time to time require) is paid to the Company in respect thereof.

If the Directors refuse to register a transfer of any share they shall, within two months after the date on which the transfer was lodged with the Company, send to each of the transferor and the transferee notice of such refusal.

The registration of transfers may, on 10 business days’ notice (or on 6 business days’ notice in the case of a rights issue) being given by advertisement published on the Stock Exchange’s website, or, subject to the Listing Rules, by electronic communication in the manner in which notices may be served by the Company by electronic means as provided in the Articles of Association or by advertisement published in the newspapers, be suspended and the register of members of the Company

— III-11 — APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW closed at such times for such periods as the Directors may from time to time determine, provided that the registration of transfers shall not be suspended or the register closed for more than 30 days in any year (or such longer period as the members of the Company may by ordinary resolution determine provided that such period shall not be extended beyond 60 days in any year).

2.12 Power of the Company to purchase its own shares

The Company is empowered by the Companies Law and the Articles of Association to purchase its own shares subject to certain restrictions and the Directors may only exercise this power on behalf of the Company subject to the authority of its members in general meeting as to the manner in which they do so and to any applicable requirements imposed from time to time by the Stock Exchange and the Securities and Futures Commission of Hong Kong. Shares which have been repurchased will be treated as cancelled upon the repurchase.

2.13 Power of any subsidiary of the Company to own shares

There are no provisions in the Articles of Association relating to the ownership of shares by a subsidiary.

2.14 Dividends and other methods of distribution

Subject to the Companies Law and Articles of Association, the Company in general meeting may declare dividends in any currency but no dividends shall exceed the amount recommended by the Directors. No dividend may be declared or paid other than out of profits and reserves of the Company lawfully available for distribution, including share premium.

Unless and to the extent that the rights attached to any shares or the terms of issue thereof otherwise provide, all dividends shall (as regards any shares not fully paid throughout the period in respect of which the dividend is paid) be apportioned and paid pro rata according to the amounts paid up on the shares during any portion or portions of the period in respect of which the dividend is paid. For these purposes no amount paid up on a share in advance of calls shall be treated as paid up on the share.

The Directors may from time to time pay to the members of the Company such interim dividends as appear to the Directors to be justified by the profits of the Company. The Directors may also pay half-yearly or at other intervals to be selected by them at a fixed rate if they are of the opinion that the profits available for distribution justify the payment.

The Directors may retain any dividends or other monies payable on or in respect of a share upon which the Company has a lien, and may apply the same in or towards satisfaction of the debts, liabilities or engagements in respect of which the lien exists. The Directors may also deduct from any dividend or other monies payable to any member of the Company all sums of money (if any) presently payable by him to the Company on account of calls, instalments or otherwise.

No dividend shall carry interest against the Company.

— III-12 — APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

Whenever the Directors or the Company in general meeting have resolved that a dividend be paid or declared on the share capital of the Company, the Directors may further resolve: (a) that such dividend be satisfied wholly or in part in the form of an allotment of shares credited as fully paid up on the basis that the shares so allotted are to be of the same class as the class already held by the allottee, provided that the members of the Company entitled thereto will be entitled to elect to receive such dividend (or part thereof) in cash in lieu of such allotment; or (b) that the members of the Company entitled to such dividend will be entitled to elect to receive an allotment of shares credited as fully paid up in lieu of the whole or such part of the dividend as the Directors may think fit on the basis that the shares so allotted are to be of the same class as the class already held by the allottee. The Company may upon the recommendation of the Directors by ordinary resolution resolve in respect of any one particular dividend of the Company that notwithstanding the foregoing a dividend may be satisfied wholly in the form of an allotment of shares credited as fully paid without offering any right to members of the Company to elect to receive such dividend in cash in lieu of such allotment.

Any dividend, interest or other sum payable in cash to a holder of shares may be paid by cheque or warrant sent through the post addressed to the registered address of the member of the Company entitled, or in the case of joint holders, to the registered address of the person whose name stands first in the register of members of the Company in respect of the joint holding or to such person and to such address as the holder or joint holders may in writing direct. Every cheque or warrant so sent shall be made payable to the order of the holder or, in the case of joint holders, to the order of the holder whose name stands first on the register of members of the Company in respect of such shares, and shall be sent at his or their risk and the payment of any such cheque or warrant by the bank on which it is drawn shall operate as a good discharge to the Company in respect of the dividend and/or bonus represented thereby, notwithstanding that it may subsequently appear that the same has been stolen or that any endorsement thereon has been forged. The Company may cease sending such cheques for dividend entitlements or dividend warrants by post if such cheques or warrants have been left uncashed on two consecutive occasions. However, the Company may exercise its power to cease sending cheques for dividend entitlements or dividend warrants after the first occasion on which such a cheque or warrant is returned undelivered. Any one of two or more joint holders may give effectual receipts for any dividends or other monies payable or property distributable in respect of the shares held by such joint holders.

Any dividend unclaimed for six years from the date of declaration of such dividend may be forfeited by the Directors and shall revert to the Company.

The Directors may, with the sanction of the members of the Company in general meeting, direct that any dividend be satisfied wholly or in part by the distribution of specific assets of any kind, and in particular of paid up shares, debentures or warrants to subscribe securities of any other company, and where any difficulty arises in regard to such distribution the Directors may settle it as they think expedient, and in particular may disregard fractional entitlements, round the same up or down or provide that the same shall accrue to the benefit of the Company, and may fix the value for distribution of such specific assets and may determine that cash payments shall be made to any members of the Company upon the footing of the value so fixed in order to adjust the rights of all parties, and may vest any such specific assets in trustees as may seem expedient to the Directors.

— III-13 — APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

2.15 Proxies

Any member of the Company entitled to attend and vote at a meeting of the Company shall be entitled to appoint another person who must be an individual as his proxy to attend and vote instead of him and a proxy so appointed shall have the same right as the member to speak at the meeting. A proxy need not be a member of the Company.

Instruments of proxy shall be in common form or in such other form as the Directors may from time to time approve provided that it shall enable a member to instruct his proxy to vote in favor of or against (or in default of instructions or in the event of conflicting instructions, to exercise his discretion in respect of) each resolution to be proposed at the meeting to which the form of proxy relates. The instrument of proxy shall be deemed to confer authority to vote on any amendment of a resolution put to the meeting for which it is given as the proxy thinks fit. The instrument of proxy shall, unless the contrary is stated therein, be valid as well for any adjournment of the meeting as for the meeting to which it relates provided that the meeting was originally held within 12 months from such date.

The instrument appointing a proxy shall be in writing under the hand of the appointor or his attorney authorized in writing or if the appointor is a corporation either under its seal or under the hand of an officer, attorney or other person authorized to sign the same.

The instrument appointing a proxy and (if required by the Directors) the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of such power or authority, shall be delivered at the registered office of the Company (or at such other place as may be specified in the notice convening the meeting or in any notice of any adjournment or, in either case, in any document sent therewith) not less than 48 hours before the time appointed for holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote or, in the case of a poll taken subsequently to the date of a meeting or adjourned meeting, not less than 48 hours before the time appointed for the taking of the poll and in default the instrument of proxy shall not be treated as valid. No instrument appointing a proxy shall be valid after the expiration of 12 months from the date named in it as the date of its execution. Delivery of any instrument appointing a proxy shall not preclude a member of the Company from attending and voting in person at the meeting or poll concerned and, in such event, the instrument appointing a proxy shall be deemed to be revoked.

2.16 Calls on shares and forfeiture of shares

The Directors may from time to time make calls upon the members of the Company in respect of any monies unpaid on their shares (whether on account of the nominal amount of the shares or by way of premium or otherwise) and not by the conditions of allotment thereof made payable at fixed times and each member of the Company shall (subject to the Company serving upon him at least 14 days’ notice specifying the time and place of payment and to whom such payment shall be made) pay to the person at the time and place so specified the amount called on his shares. A call may be revoked or postponed as the Directors may determine. A person upon whom a call is made shall remain liable on such call notwithstanding the subsequent transfer of the shares in respect of which the call was made.

— III-14 — APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

A call may be made payable either in one sum or by instalments and shall be deemed to have been made at the time when the resolution of the Directors authorizing the call was passed. The joint holders of a share shall be jointly and severally liable to pay all calls and instalments due in respect of such share or other monies due in respect thereof.

If a sum called in respect of a share shall not be paid before or on the day appointed for payment thereof, the person from whom the sum is due shall pay interest on the sum from the day appointed for payment thereof to the time of actual payment at such rate, not exceeding 15% per annum, as the Directors may determine, but the Directors shall be at liberty to waive payment of such interest wholly or in part.

If any call or instalment of a call remains unpaid on any share after the day appointed for payment thereof, the Directors may at any time during such time as any part thereof remains unpaid serve a notice on the holder of such shares requiring payment of so much of the call or instalment as is unpaid together with any interest which may be accrued and which may still accrue up to the date of actual payment.

The notice shall name a further day (not being less than 14 days from the date of service of the notice) on or before which, and the place where, the payment required by the notice is to be made, and shall state that in the event of non-payment at or before the time and at the place appointed, the shares in respect of which such call was made or instalment is unpaid will be liable to be forfeited.

If the requirements of such notice are not complied with, any share in respect of which such notice has been given may at any time thereafter, before payment of all calls or instalments and interest due in respect thereof has been made, be forfeited by a resolution of the Directors to that effect. Such forfeiture shall include all dividends and bonuses declared in respect of the forfeited shares and not actually paid before the forfeiture. A forfeited share shall be deemed to be the property of the Company and may be re-allotted, sold or otherwise disposed of.

A person whose shares have been forfeited shall cease to be a member of the Company in respect of the forfeited shares but shall, notwithstanding the forfeiture, remain liable to pay to the Company all monies which at the date of forfeiture were payable by him to the Company in respect of the shares, together with (if the Directors shall in their discretion so require) interest thereon at such rate not exceeding 15% per annum as the Directors may prescribe from the date of forfeiture until payment, and the Directors may enforce payment thereof without being under any obligation to make any allowance for the value of the shares forfeited, at the date of forfeiture.

2.17 Inspection of register of members

The register of members of the Company shall be kept in such manner as to show at all times the members of the Company for the time being and the shares respectively held by them. The register may, on 10 business days’ notice (or on 6 business days’ notice in the case of a rights issue) being given by advertisement published on the Stock Exchange’s website, or, subject to the Listing Rules, by electronic communication in the manner in which notices may be served by the Company by electronic means as provided in the Articles of Association or by advertisement published in the

— III-15 — APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW newspapers, be closed at such times and for such periods as the Directors may from time to time determine either generally or in respect of any class of shares, provided that the register shall not be closed for more than 30 days in any year (or such longer period as the members of the Company may by ordinary resolution determine provided that such period shall not be extended beyond 60 days in any year).

Any register of members kept in Hong Kong shall during normal business hours (subject to such reasonable restrictions as the Directors may impose) be open to inspection by any member of the Company without charge and by any other person on payment of a fee of such amount not exceeding the maximum amount as may from time to time be permitted under the Listing Rules as the Directors may determine for each inspection.

2.18 Quorum for meetings and separate class meetings

No business shall be transacted at any general meeting unless a quorum is present when the meeting proceeds to business, but the absence of a quorum shall not preclude the appointment, choice or election of a chair which shall not be treated as part of the business of the meeting.

Two members of the Company present in person or by proxy shall be a quorum provided always that if the Company has only one member of record the quorum shall be that one member present in person or by proxy.

A corporation being a member of the Company shall be deemed for the purpose of the Articles of Association to be present in person if represented by its duly authorized representative being the person appointed by resolution of the directors or other governing body of such corporation or by power of attorney to act as its representative at the relevant general meeting of the Company or at any relevant general meeting of any class of members of the Company.

The quorum for a separate general meeting of the holders of a separate class of shares of the Company is described in paragraph 2.4 above.

2.19 Rights of minorities in relation to fraud or oppression

There are no provisions in the Articles of Association concerning the rights of minority shareholders in relation to fraud or oppression.

2.20 Procedure on liquidation

If the Company shall be wound up, and the assets available for distribution amongst the members of the Company as such shall be insufficient to repay the whole of the paid-up capital, such assets shall be distributed so that, as nearly as may be, the losses shall be borne by the members of the Company in proportion to the capital paid up, or which ought to have been paid up, at the commencement of the winding up on the shares held by them respectively. If in a winding up the assets available for distribution amongst the members of the Company shall be more than sufficient to repay the whole

— III-16 — APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW of the capital paid up at the commencement of the winding up, the excess shall be distributed amongst the members of the Company in proportion to the capital paid up at the commencement of the winding up on the shares held by them respectively. The foregoing is without prejudice to the rights of the holders of shares issued upon special terms and conditions.

If the Company shall be wound up, the liquidator may with the sanction of a special resolution of the Company and any other sanction required by the Companies Law, divide amongst the members of the Company in specie or kind the whole or any part of the assets of the Company (whether they shall consist of property of the same kind or not) and may, for such purpose, set such value as he deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the members or different classes of members of the Company. The liquidator may, with the like sanction, vest the whole or any part of such assets in trustees upon such trusts for the benefit of the members of the Company as the liquidator, with the like sanction and subject to the Companies Law, shall think fit, but so that no member of the Company shall be compelled to accept any assets, shares or other securities in respect of which there is a liability.

2.21 Untraceable members

The Company shall be entitled to sell any shares of a member of the Company or the shares to which a person is entitled by virtue of transmission on death or bankruptcy or operation of law if: (a) all cheques or warrants, not being less than three in number, for any sums payable in cash to the holder of such shares have remained uncashed for a period of 12 years; (b) the Company has not during that time or before the expiry of the three month period referred to in (d) below received any indication of the whereabouts or existence of the member; (c) during the 12 year period, at least three dividends in respect of the shares in question have become payable and no dividend during that period has been claimed by the member; and (d) upon expiry of the 12 year period, the Company has caused an advertisement to be published in the newspapers or subject to the Listing Rules, by electronic communication in the manner in which notices may be served by the Company by electronic means as provided in the Articles of Association, giving notice of its intention to sell such shares and a period of three months has elapsed since such advertisement and the Stock Exchange has been notified of such intention. The net proceeds of any such sale shall belong to the Company and upon receipt by the Company of such net proceeds it shall become indebted to the former member for an amount equal to such net proceeds.

SUMMARY OF CAYMAN ISLANDS COMPANY LAW AND TAXATION

1 Introduction

The Companies Law is derived, to a large extent, from the older Companies Acts of England, although there are significant differences between the Companies Law and the current Companies Act of England. Set out below is a summary of certain provisions of the Companies Law, although this does not purport to contain all applicable qualifications and exceptions or to be a complete review of all matters of corporate law and taxation which may differ from equivalent provisions in jurisdictions with which interested parties may be more familiar.

— III-17 — APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

2 Incorporation

The Company was incorporated in the Cayman Islands as an exempted company with limited liability on January 8, 2007 under the Companies Law. As such, its operations must be conducted mainly outside the Cayman Islands. The Company is required to file an annual return each year with the Registrar of Companies of the Cayman Islands and pay a fee which is based on the size of its authorized share capital.

3 Share Capital

The Companies Law permits a company to issue ordinary shares, preference shares, redeemable shares or any combination thereof.

The Companies Law provides that where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount of the value of the premia on those shares shall be transferred to an account called the “share premium account”. At the option of a company, these provisions may not apply to premia on shares of that company allotted pursuant to any arrangement in consideration of the acquisition or cancellation of shares in any other company and issued at a premium. The Companies Law provides that the share premium account may be applied by a company, subject to the provisions, if any, of its memorandum and articles of association, in such manner as the company may from time to time determine including, but without limitation:

(a) paying distributions or dividends to members;

(b) paying up unissued shares of the company to be issued to members as fully paid bonus shares;

(d) writing-off the preliminary expenses of the company;

(e) writing-off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company; and

(f) providing for the premium payable on redemption or purchase of any shares or debentures of the company.

No distribution or dividend may be paid to members out of the share premium account unless immediately following the date on which the distribution or dividend is proposed to be paid the company will be able to pay its debts as they fall due in the ordinary course of business.

The Companies Law provides that, subject to confirmation by the Grand Court of the Cayman Islands, a company limited by shares or a company limited by guarantee and having a share capital may, if so authorized by its articles of association, by special resolution reduce its share capital in any way.

— III-18 — APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

Subject to the detailed provisions of the Companies Law, a company limited by shares or a company limited by guarantee and having a share capital may, if so authorized by its articles of association, issue shares which are to be redeemed or are liable to be redeemed at the option of the company or a shareholder. In addition, such a company may, if authorized to do so by its articles of association, purchase its own shares, including any redeemable shares. The manner of such a purchase must be authorized either by the articles of association or by an ordinary resolution of the company. The articles of association may provide that the manner of purchase may be determined by the directors of the company. At no time may a company redeem or purchase its shares unless they are fully paid. A company may not redeem or purchase any of its shares if, as a result of the redemption or purchase, there would no longer be any member of the company holding shares. A payment out of capital by a company for the redemption or purchase of its own shares is not lawful unless immediately following the date on which the payment is proposed to be made, the company shall be able to pay its debts as they fall due in the ordinary course of business.

There is no statutory restriction in the Cayman Islands on the provision of financial assistance by a company for the purchase of, or subscription for, its own or its holding company’s shares. Accordingly, a company may provide financial assistance if the directors of the company consider, in discharging their duties of care and to act in good faith, for a proper purpose and in the interests of the company, that such assistance can properly be given. Such assistance should be on an arm’s-length basis.

4 Dividends and Distributions

With the exception of section 34 of the Companies Law, there are no statutory provisions relating to the payment of dividends. Based upon English case law which is likely to be persuasive in the Cayman Islands in this area, dividends may be paid only out of profits. In addition, section 34 of the Companies Law permits, subject to a solvency test and the provisions, if any, of the company’s memorandum and articles of association, the payment of dividends and distributions out of the share premium account (see paragraph 3 above for details).

5 Shareholders’ Suits

The Cayman Islands courts can be expected to follow English case law precedents. The rule in Foss v. Harbottle (and the exceptions thereto which permit a minority shareholder to commence a class action against or derivative actions in the name of the company to challenge (a) an act which is ultra vires the company or illegal, (b) an act which constitutes a fraud against the minority where the wrongdoers are themselves in control of the company, and (c) an action which requires a resolution with a qualified (or special) majority which has not been obtained) has been applied and followed by the courts in the Cayman Islands.

— III-19 — APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

6 Protection of Minorities

In the case of a company (not being a bank) having a share capital divided into shares, the Grand Court of the Cayman Islands may, on the application of members holding not less than one-fifth of the shares of the company in issue, appoint an inspector to examine into the affairs of the company and to report thereon in such manner as the Grand Court shall direct.

Any shareholder of a company may petition the Grand Court of the Cayman Islands which may make a winding up order if the court is of the opinion that it is just and equitable that the company should be wound up.

Claims against a company by its shareholders must, as a general rule, be based on the general laws of contract or tort applicable in the Cayman Islands or their individual rights as shareholders as established by the company’s memorandum and articles of association.

The English common law rule that the majority will not be permitted to commit a fraud on the minority has been applied and followed by the courts of the Cayman Islands.

7 Disposal of Assets

The Companies Law contains no specific restrictions on the powers of directors to dispose of assets of a company. As a matter of general law, in the exercise of those powers, the directors must discharge their duties of care and to act in good faith, for a proper purpose and in the interests of the company.

8 Accounting and Auditing Requirements

The Companies Law requires that a company shall cause to be kept proper books of account with respect to:

(a) all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place;

(b) all sales and purchases of goods by the company; and

Proper books of account shall not be deemed to be kept if there are not kept such books as are necessary to give a true and fair view of the state of the company’s affairs and to explain its transactions.

— III-20 — APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

9 Register of Members

An exempted company may, subject to the provisions of its articles of association, maintain its principal register of members and any branch registers at such locations, whether within or without the Cayman Islands, as its directors may from time to time think fit. There is no requirement under the Companies Law for an exempted company to make any returns of members to the Registrar of Companies of the Cayman Islands. The names and addresses of the members are, accordingly, not a matter of public record and are not available for public inspection.

10 Inspection of Books and Records

Members of a company will have no general right under the Companies Law to inspect or obtain copies of the register of members or corporate records of the company. They will, however, have such rights as may be set out in the company’s articles of association.

11 Special Resolutions

The Companies Law provides that a resolution is a special resolution when it has been passed by a majority of at least two-thirds of such members as, being entitled to do so, vote in person or, where proxies are allowed, by proxy at a general meeting of which notice specifying the intention to propose the resolution as a special resolution has been duly given, except that a company may in its articles of association specify that the required majority shall be a number greater than two-thirds, and may additionally so provide that such majority (being not less than two-thirds) may differ as between matters required to be approved by a special resolution. Written resolutions signed by all the members entitled to vote for the time being of the company may take effect as special resolutions if this is authorized by the articles of association of the company.

12 Subsidiary Owning Shares in Parent

The Companies Law does not prohibit a Cayman Islands company acquiring and holding shares in its parent company provided its objects so permit. The directors of any subsidiary making such acquisition must discharge their duties of care and to act in good faith, for a proper purpose and in the interests of the subsidiary.

13 Mergers and Consolidations

The Companies Law permits mergers and consolidations between Cayman Islands companies and between Cayman Islands companies and non-Cayman Islands companies. For these purposes, (a) “merger” means the merging of two or more constituent companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company, and (b) “consolidation” means the combination of two or more constituent companies into a consolidated company and the vesting of the undertaking, property and liabilities of such companies to the consolidated company. In order to effect such a merger or consolidation, the directors of each constituent company must approve a written plan of merger or consolidation, which must then be authorized by (a) a special resolution of each constituent company and (b) such other authorization,

— III-21 — APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW if any, as may be specified in such constituent company’s articles of association. The written plan of merger or consolidation must be filed with the Registrar of Companies of the Cayman Islands together with a declaration as to the solvency of the consolidated or surviving company, a list of the assets and liabilities of each constituent company and an undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors of each constituent company and that notification of the merger or consolidation will be published in the Cayman Islands Gazette. Dissenting shareholders have the right to be paid the fair value of their shares (which, if not agreed between the parties, will be determined by the Cayman Islands court) if they follow the required procedures, subject to certain exceptions. Court approval is not required for a merger or consolidation which is effected in compliance with these statutory procedures.

14 Reconstructions

There are statutory provisions which facilitate reconstructions and amalgamations approved by a majority in number representing 75% in value of shareholders or creditors, depending on the circumstances, as are present at a meeting called for such purpose and thereafter sanctioned by the Grand Court of the Cayman Islands. Whilst a dissenting shareholder would have the right to express to the Grand Court his view that the transaction for which approval is sought would not provide the shareholders with a fair value for their shares, the Grand Court is unlikely to disapprove the transaction on that ground alone in the absence of evidence of fraud or bad faith on behalf of management and if the transaction were approved and consummated the dissenting shareholder would have no rights comparable to the appraisal rights (i.e. the right to receive payment in cash for the judicially determined value of his shares) ordinarily available, for example, to dissenting shareholders of United States corporations.

15 Take-overs

Where an offer is made by a company for the shares of another company and, within four months of the offer, the holders of not less than 90% of the shares which are the subject of the offer accept, the offeror may at any time within two months after the expiration of the said four months, by notice require the dissenting shareholders to transfer their shares on the terms of the offer. A dissenting shareholder may apply to the Grand Court of the Cayman Islands within one month of the notice objecting to the transfer. The burden is on the dissenting shareholder to show that the Grand Court should exercise its discretion, which it will be unlikely to do unless there is evidence of fraud or bad faith or collusion as between the offeror and the holders of the shares who have accepted the offer as a means of unfairly forcing out minority shareholders.

16 Indemnification

Cayman Islands law does not limit the extent to which a company’s articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy (e.g. for purporting to provide indemnification against the consequences of committing a crime).

— III-22 — APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

17 Liquidation

A company may be placed in liquidation compulsorily by an order of the court, or voluntarily (a) by a special resolution of its members if the company is solvent, or (b) by an ordinary resolution of its members if the company is insolvent. The liquidator’s duties are to collect the assets of the company (including the amount (if any) due from the contributories (shareholders)), settle the list of creditors and discharge the company’s liability to them, rateably if insufficient assets exist to discharge the liabilities in full, and to settle the list of contributories and divide the surplus assets (if any) amongst them in accordance with the rights attaching to the shares.

18 Stamp Duty on Transfers

No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands companies except those which hold interests in land in the Cayman Islands.

19 Taxation

Pursuant to section 6 of the Tax Concessions Law (2011 Revision) of the Cayman Islands, the Company may obtain an undertaking from the Governor in Cabinet:

(a) that no law which is enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or appreciations shall apply to the Company or its operations; and

(b) in addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax shall be payable:

(i) on or in respect of the shares, debentures or other obligations of the Company; or

(ii) by way of the withholding in whole or in part of any relevant payment as defined in section 6(3) of the Tax Concessions Law (2011 Revision).

The Cayman Islands currently levy no taxes on individuals or corporations based upon profits, income, gains or appreciations and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to the Company levied by the Government of the Cayman Islands save certain stamp duties which may be applicable, from time to time, on certain instruments executed in or brought within the jurisdiction of the Cayman Islands. The Cayman Islands are not party to any double tax treaties that are applicable to any payments made by or to the Company.

20 Exchange Control

There are no exchange control regulations or currency restrictions in the Cayman Islands.

— III-23 — APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

21 General

Maples and Calder, the Company’s legal advisors on Cayman Islands law, have sent to the Company a letter of advice summarizing aspects of Cayman Islands company law. This letter, together with a copy of the Companies Law, is available for inspection as referred to in the section headed “Documents Delivered to the Registrar of Companies and Available for Inspection” in Appendix V. Any person wishing to have a detailed summary of Cayman Islands company law or advice on the differences between it and the laws of any jurisdiction with which he/she is more familiar is recommended to seek independent legal advice.

— III-24 — APPENDIX IV STATUTORY AND GENERAL INFORMATION

A. FURTHER INFORMATION ABOUT OUR GROUP

1. Incorporation of our Company

We were incorporated under the laws of Cayman Islands as an exempted company with limited liability on January 8, 2007. Our registered office is situated at P.O. Box 309, Ugland House, Grand Cayman KY1-1104, Cayman Islands. We have been registered with the Registrar of Companies in Hong Kong as a non-Hong Kong company under Part 16 of the Companies Ordinance on September 2, 2015. Mr. Au Wai Keung (區偉強) has been appointed as the authorized representatives of our Company for the acceptance of service of process and notices on behalf of our Company in Hong Kong. The address for acceptance of service of process in Hong Kong is Room 606-607, 6/F, China Merchants Building, 152-155 Connaught Road Central, Hong Kong.

As we are incorporated in the Cayman Islands, our operations are subject to the Cayman Companies Law and to its constitution, which is comprised of a memorandum of association and the articles of association. A summary of certain aspects of its constitution and the Cayman Companies Law is set out in the section headed “Appendix III—Summary of the Constitution of the Company and Cayman Islands Companies Law” in this prospectus.

2. Changes in the Share Capital of our Company

As of the date of incorporation of our Company, our Company had an authorized share capital of US$50,000 divided into 50,000 Shares of a nominal or par value of US$1.00 each.

The following changes in the share capital of our Company during the two years immediately preceding the date of this prospectus:

(a) on October 27, 2014, 10,151,453 authorized but unissued ordinary shares in our Company of a par value of US$0.00001 each were re-designated as series C shares. Upon such re-designation, our Company had the authorized share capital of US$50,000 divided into 4,887,515,214 ordinary shares and 112,484,786 redeemable convertible preferred shares, among which, 40,000,000 redeemable convertible preferred shares were designated series A shares, 27,500,000 redeemable convertible preferred shares were designated series A-1 shares, 34,833,333 redeemable convertible preferred shares were designated series B shares and 10,151,453 redeemable convertible preferred shares were designated series C shares;

(b) on October 27, 2014, the Company issued 10,151,453 series C preferred shares of par value US$0.00001 each to Founder Hong Kong at a price of approximately US$1.6018 per Share. The aggregate purchase price such shares was US$16,285,319 which is equivalent to RMB100,000,000 calculated based on the then prevailing exchange rate. As a result, Founder Hong Kong held 10,151,453 series C preferred shares of our Company;

(c) on June 26, 2015, Vertex Tech redeemed all its 6,000,000 series A preferred shares and all its 3,750,000 series A-1 preferred shares for a total redemption price of US$6,600,000.

— IV-1 — APPENDIX IV STATUTORY AND GENERAL INFORMATION

Upon completion of such redemption, Vertex Tech ceased to hold any share in our Company. On the same day, Vertex Asia redeemed all of its 6,000,000 series A preferred shares for a total redemption price of US$3,600,000. Upon completion of such redemption, Vertex Asia ceased to hold any share in our Company; and

(d) on July 23, 2015, IFC redeemed its 4,000,000 series A shares and 2,500,000 series A-1 preferred shares for a total consideration of US$4,400,000. Upon completion of such redemption, IFC held 16,000,000 series A preferred shares and 10,000,000 series A-1 preferred shares. On the same day, Intel Capital redeemed its 1,600,000 series A preferred shares and 1,000,000 series A-1 preferred shares for a total consideration of US$1,760,000. Upon completion of such redemption, Intel Capital held 6,400,000 series A preferred shares and 4,000,000 series A-1 preferred shares.

Save as disclosed above and in the section headed “History, Reorganization and Group Structure” in this prospectus, there has been no alteration in the share capital of our Company during the two years immediately preceding the date of this prospectus.

3. Resolutions in writing of the Shareholders of our Company passed on May 23, 2016

Pursuant to the resolutions in writing passed by our Shareholders on May 23, 2016, among other matters:

(a) immediately prior to the closing of the Global Offering, 22,400,000 series A preferred shares, 20,250,000 series A-1 preferred shares, 34,833,333 series B preferred shares, 10,151,453 series C preferred shares of par value US$0.00001 each, being all the series A preferred shares, series A-1 preferred shares, series B preferred shares and series C preferred shares of the Company in issue, will be redeemed by the Company and the Company will issue 36,611,000, 14,644,000, 14,081,000, 30,753,000, 98,098,000, and 30,495,000 ordinary Shares of par value US$0.00001 each, to IFC, Intel Capital, Federal HK, HK Aoxin, Carvillo and Founder Hong Kong, respectively, pursuant to the automatic conversion provisions as set out in the Company’s the then articles of association(the “Conversion”); and

(b) immediately after the Conversion, all the 40,000,000 series A preferred shares, 27,500,000 series A-1 preferred shares, 34,833,333 series B preferred shares and 10,151,453 series C preferred shares in issue of par value US$0.00001 each, be redesignated as ordinary Shares of par value US$0.00001 each, so that the authorised share capital of the Company is US$50,000 divided into 5,000,000,000 ordinary Shares of US$0.00001 each, each having the rights and privileges set out in the Articles;

(c) conditional upon the share premium account of the Company having sufficient balance, or otherwise being credited as a result of the allotment and issue of the Offer Shares by the Company pursuant to the Global Offering, the Directors were authorized to allot and issue (the “Capitalisation Issue”) a total of 310,204,797 Shares credited as fully paid at par value, to the Shareholders whose name(s) appear(s) on the register of members of the Company as at the date of close of business on May 23, 2016 (or to such other person(s) as each of them may direct) to their then existing shareholders in our Company and such Shares to be allotted and issued shall rank pari passu in all respects with existing issued shares.

— IV-2 — APPENDIX IV STATUTORY AND GENERAL INFORMATION

(d) conditional on (i) the Listing Committee granting approval for the listing of, and permission to deal in, the Shares in issue and to be issued pursuant to the Capitalization Issue and the Offer Shares as mentioned in this prospectus (including any Shares that may be issued pursuant to the exercise of the Over-allotment Option and the Options which have been granted under the Pre-IPO Share Option Scheme), and any Shares which may be issued pursuant to the exercise of any options granted under the Pre-IPO Share Option Scheme; (ii) the entering into, execution and delivery of the International Underwriting Agreement and the Price Determination Agreement on or around the Price Determination Date; and (iii) the obligations of the Underwriters under the Underwriting Agreements becoming unconditional and the Underwriting Agreements not being terminated in accordance with the terms of such agreements or otherwise:

(i) the Global Offering be approved and the Directors be authorized to allot and issue the new Shares pursuant to the Global Offering;

(ii) the proposed Listing of the Shares on the GEM be approved and the Directors be authorized to implement such Listing; and

(iii) the Over-allotment Option be approved and our Directors be authorized to effect the same and to allot and issue the Over-allotment Shares upon the exercise of the Over-allotment Option.

(e) that conditional upon and with effect prior to the closing of the Global Offering, the new Memorandum and Articles of Association of our Company be adopted, the terms of which are summarized in the section headed “Appendix III—Summary of the Constitution of the Company and Cayman Islands Company Law” in this prospectus;

(f) a general unconditional mandate (“Repurchase Mandate”) was given to the Directors to allot, issue or otherwise deal with the Shares (otherwise than pursuant to, or in consequence of, the Global Offering, the Over-allotment Option, a rights issue, the exercise of any subscription rights which may be granted under any scrip dividend scheme or similar arrangements, any adjustment of rights to subscribe for shares under options and warrants or a special authority granted by the Company’s Shareholders) with an aggregate nominal value not exceeding the sum of 20% of the aggregate nominal amount of the share capital of the Company in issue immediately following completion of the Global Offering;

(g) the Repurchase Mandate was given to the Directors authorizing them to exercise all powers of the Company to repurchase for cancellation the Shares representing up to 10% of its share capital in issue, immediately following completion of the Global Offering (excluding any Shares which may be issued upon the exercise of the Over-allotment Option or any options which have been granted under the Pre-IPO Share Option Scheme); and

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(h) the Repurchase Mandate as mentioned in paragraph (f) and (g) above was extended by the addition to the aggregate nominal value of the Shares which may be allotted and issued or agreed to be allotted and issued by the Directors pursuant to such general mandate of an amount representing the aggregate nominal value of the Shares repurchased by our Company pursuant to the mandate to repurchase Shares referred to in paragraph (e) above.

Each of the general mandates referred to in paragraphs (f), (g) and (h) above will remain in effect until the earlier of (i) the conclusion of the next annual general meeting of the Company, unless renewed by an ordinary resolution of the Shareholders in a general meeting, either unconditionally or subject to conditions; or (ii) the time when such mandate is revoked or varied by an ordinary resolution of the Shareholders in a general meeting.

4. Reorganization

The companies comprising our Group underwent the Reorganization in preparation for the Listing. Please refer to the section headed “History, Reorganization and Group Structure — Reorganization” in this prospectus for further details.

5. Changes in the share capital of our subsidiaries

Our subsidiaries are referred to in the Accountant’s Report, the text of which is set out in Appendix I to this prospectus. Save for the subsidiaries mentioned in the Accountant’s Report, we do not have any other subsidiaries.

Save as disclosed in the section headed “History, Reorganization and Group Structure” in this prospectus, there has been no change to the share capital of any of the subsidiaries of our Company within the two years immediately preceding the date of this prospectus.

6. Further information about our PRC establishment

We have three subsidiaries in the PRC. A summary of the corporate information of such subsidiaries as at the Latest Practicable Date is set out as follow:

(a) Name: Beijing Meicam Date of Incorporation: October 23, 2014 Place of Incorporation: PRC Business Nature: Limited liability company Registered Capital: RMB25,000,000

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(b) Name: Beijing Zhengqi Date of Incorporation: October 23, 2012 Place of Incorporation: PRC Business Nature: Limited liability company Registered Capital: RMB20,000,000

(c) Name: CDV WFOE Date of Incorporation: June 21, 2007 Place of Incorporation: PRC Business Nature: Limited liability company Registered Capital: US$50,000,000

7. Repurchase of our own Shares

The GEM Listing Rules permit companies with a primary listing on the Stock Exchange to repurchase their securities on the Stock Exchange. This section includes information relating to the repurchase by us of our own Shares, including information required by the Stock Exchange to be included in this prospectus concerning the repurchase.

(a) Shareholders’ approval

All proposed repurchases of securities, which must be fully paid up in the case of shares, by a company with its primary listing on GEM must be approved in advance by an ordinary resolution of the Shareholders, either by way of general mandate or by specific approval of a particular transaction.

Note: Pursuant to the written resolutions of all the Shareholder passed on May 23, 2016, the Repurchase Mandate will be given to the Directors authorizing any repurchase by the Company of Shares as described above in the paragraph headed “A. Further Information about our Group — 3. Resolutions in writing of the Shareholders of our Company passed on May 23, 2016” in this appendix.

(b) Number of shares which may be repurchased

Exercising in full of the Repurchase Mandate, on the basis of 620,000,000 Shares in issue immediately after completion of the Global offering, but taking no account of any Shares which may be allotted and issued upon the exercise of the Over-allotment Option or any options granted under the Pre-IPO Share Option Scheme, could accordingly result in up to 620,000,000 Shares being repurchased by us during the course of the period prior to the date on which such Repurchase Mandate expires or terminates as mentioned in the section headed “7. Repurchase of our own Shares—(a) Shareholders’ approval” in this appendix.

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Our Directors believe that it is in the best interests of our Company and our Shareholders as a whole for our Directors to have a general authority from our Shareholders to enable us to repurchase Shares in the market. Such Share repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net value of our Company and our assets and/or our earnings per Share and will only be made where our Directors believe that such repurchases will benefit our Company and our Shareholders.

(d) Funding of repurchase

Repurchases by our Company must be funded out of funds legally available for such purpose in accordance with the Memorandum and Articles of Association, the Cayman Companies Law, the applicable laws and regulations of the Cayman Islands and the GEM Listing Rules. A listed company is prohibited from repurchasing 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.

We will make repurchases pursuant to the Repurchase Mandate out of funds legally available for such purpose, including out of profits of our Company, out of the share premium account of our Company or out of the proceeds of a fresh issue of shares made for such purpose or, if authorized by the Articles and subject to the Cayman Companies Law, out of capital. Any premium payable on a purchase over the par value of the Shares to be purchased must be provided for out of either or both of the profits of our Company or out of sums standing to the credit of the share premium account of our Company or, if authorized by the Articles and subject to the Cayman Companies Law, out of capital.

On the basis of our current financial position as disclosed in this prospectus and taking into account our current working capital position, our Directors consider that, if the Repurchase Mandate were to be exercised in full, it might have a material adverse effect on our working capital and/or the gearing position as compared with the position disclosed in this prospectus. However, our Directors do not propose to exercise the Repurchase Mandate to such an extent as would, in the circumstances, have a material adverse effect on our working capital requirements or the gearing levels which in the opinion of our Directors are from time to time appropriate for us.

(e) Status of repurchase Shares

The listing of all repurchased Shares (whether effected on the Stock Exchange or otherwise) will be automatically cancelled and the certificates for those securities must be cancelled and destroyed. Under the laws of the Cayman Islands, the repurchased Shares (which are not held by the Company as treasury shares) shall be treated as cancelled and the amount of our Company’s issued share capital shall be reduced by the aggregate nominal value of the repurchased Shares accordingly, although the authorized share capital of our Company will not be reduced.

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(f) Trading restrictions

The total number of Shares which our Company may repurchase is up to 10% of the total number of our Shares in issue immediately after the completion of the Global Offering (without taking into account any Shares which may be issued upon the exercise of the Over-allotment Option or Shares which may be issued pursuant to the exercise of any options granted under the Pre-IPO Share Option Scheme). Our Company may not issue or announce a proposed issue of Shares for a period of 30 days immediately following a repurchase of Shares, without the prior approval of the Stock Exchange. Our Company is also prohibited from repurchasing Shares on the Stock Exchange if the repurchase would result in the number of listed Shares which are in the hands of the public falling below the relevant prescribed minimum percentage as required by the Stock Exchange.

Our Company is required to procure that the broker (appointed by our Company to effect a repurchase of Shares) will disclose to the Stock Exchange such information with respect to the repurchase as the Stock Exchange may require. As required by the prevailing requirements of the Listing Rules, an issuer shall not purchase its shares on the Stock Exchange if the purchase price is higher by 5% or more than the average closing market price for the five preceding trading days on which its shares were traded on the Stock Exchange.

(g) Suspension of repurchase

Pursuant to the GEM Listing Rules, our Company may not make any repurchase of Shares after a price sensitive development has occurred or has been the subject of a decision until such time when the price sensitive information has been made publicly available. In particular, under the requirements of the GEM Listing Rules in force as of the date hereof, during the period of one month immediately preceding the earlier of: (i) the date of our board meeting (as such date is first notified to the Stock Exchange in accordance with the GEM Listing Rules) for the approval of our Company’s results for any year, half year, quarterly or any other interim period (whether or not required under the GEM Listing Rules); and (ii) the deadline for our Company to publish an announcement of our Company’s results for any year or half-year under the GEM Listing Rules, or quarterly or any other interim period (whether or not required under the GEM Listing Rules), and in each case ending on the date of the results announcement, our Company may not repurchase Shares on the Stock Exchange unless the circumstances are exceptional. In addition, the Stock Exchange may prohibit a repurchase of the Shares on the Stock Exchange if our Company has breached the GEM Listing Rules.

(h) Procedural and reporting requirements

As required by the GEM Listing Rules, repurchases of Shares on the Stock Exchange or otherwise must be reported to the Stock Exchange not later than 30 minutes before the earlier of the commencement of the morning trading session or any pre-opening session on the following Business Day. The report must state the total number of Shares purchased the previous day, the purchase price per Share or the highest and lowest prices paid for such purchases. In addition, our Company’s annual report is required to disclose details regarding repurchases of Shares made during the year, including a monthly analysis of the number of shares repurchased, the purchase price per Share or the highest and lowest price paid for all such purchases, where relevant, and the aggregate prices paid.

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(i) Director’s undertakings

Our 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 GEM Listing Rules and the applicable laws and regulations of the Cayman Islands and our Memorandum and Articles of Association.

(j) Takeovers Code

If, as a result of any repurchase of Shares, a Shareholder’s proportionate interest in the voting rights of our Company increases, such increase will be treated as an acquisition for the purposes of the Takeovers Code. Accordingly, a Shareholder or a group of Shareholders acting in concert, depending on the level of increase of such Shareholders’ interest, could obtain or consolidate control of our Company and may become obliged to make a mandatory offer in accordance with Rule 26 of the Takeovers Code and the provisions may apply as a result of any such increase. Save as aforesaid, our Directors are not aware of any consequences which would arise under the Takeovers Code as a result of any repurchases pursuant to the Repurchase Mandate.

(k) Connected parties

Our Company is prohibited from knowingly purchasing Shares on the Stock Exchange from a core connected person (as defined under the GEM Listing Rules), and a core connected person shall not knowingly sell his or her or its shares to our Company on the Stock Exchange.

As of the Latest Practicable Date, none of our Directors, to the best of their knowledge having made all reasonable enquiries, nor any of their respective associates (as defined in the GEM Listing Rules) has any present intention to sell any Shares to us or any of our subsidiaries if the Repurchase Mandate is exercised. As of the Latest Practicable Date, no connected person of our Company has notified us that he, she or it has a present intention to sell any Shares to us or any of our subsidiaries, if the Repurchase Mandate is exercised.

B. FURTHER INFORMATION ABOUT OUR BUSINESS

1. Summary of material contracts

The following contracts (not being contracts entered into in the ordinary course of business) were entered into by our Company or any member of our Group within the two years preceding the date of this prospectus and are or may be material:

(a) a capital contribution agreement for Beijing Hermit dated September 30, 2014 among CDV WFOE, Synergetic Innovation Fund and Ren Leshi (任樂時), pursuant to which Beijing Hermit was established and CDV WFOE, Synergetic Innovation Fund and Ren Leshi (任樂時) contributed to 40%, 40% and 20% of the registered capital of Beijing Hermit, respectively;

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(b) a capital contribution agreement for Beijing Yueying dated September 30, 2014 among CDV WFOE, Synergetic Innovation Fund and Wang Wei (王威), pursuant to which Beijing Yueying was established and CDV WFOE, Synergetic Innovation Fund and Wang Wei (王威) contributed to 40%, 40% and 20% of the registered capital of Beijing Yueying, respectively;

(c) a capital contribution agreement for Xin’aote Cloud dated September 30, 2014 among CDV WFOE, Synergetic Innovation Fund and Yang Zhao (楊朝), pursuant to which Xin’aote Cloud was established and CDV WFOE, Synergetic Innovation Fund and Yang Zhao (楊朝) contributed to 40%, 40% and 20% of the registered capital of Xin’aote Cloud, respectively;

(d) a capital contribution agreement for Beijing Meicam dated September 30, 2014 among CDV WFOE, Synergetic Innovation Fund and Zheng Pengcheng (鄭鵬程), pursuant to which Beijing Meicam was established and CDV WFOE, Synergetic Innovation Fund and Zheng Pengcheng (鄭鵬程) contributed to 40%, 40% and 20% of the registered capital of Beijing Meicam, respectively;

(e) a series C securities purchase agreement dated October 27, 2014 among the Company, CDV WFOE, Founder Hong Kong, Zheng Fushuang (鄭福雙) and Wing Success, pursuant to which the Company agreed to sell and issue, and Founder Hong Kong agreed to purchase 10,151,453 series C preferred shares for an aggregate purchase price of the US$ equivalent of RMB100,000,000;

(f) an equity interest transfer agreement dated May 13, 2015 between CDV WFOE and Zheng Fushuang (鄭福雙), pursuant to which CDV WFOE agreed to transfer 60% of its equity interest in CDV Cloud to Zheng Fushuang (鄭福雙) for a consideration of RMB6,000,000;

(g) an equity interest transfer agreement dated May 13, 2015 between CDV WFOE and Gao Yunhao (高雲浩), pursuant to which CDV WFOE agreed to transfer 20% of its equity interest in CDV Cloud to Gao Yunhao (高雲浩) for a consideration of RMB2,000,000;

(h) a supplemental agreement to the capital contribution agreement for Beijing Meicam dated June 29, 2015 among CDV WFOE, Synergetic Innovation Fund and Zheng Pengcheng (鄭鵬程) revising certain clauses of the capital contribution agreement for Beijing Meicam dated September 30, 2014;

(i) a voting rights proxy agreement dated June 29, 2015 between CDV WFOE and Zheng Pengcheng (鄭鵬程), pursuant to which Zheng Pengcheng (鄭鵬程) irrevocably authorised CDV WFOE or any person nominated by CDV WFOE or any person who succeeds the power and duties of CDV WFOE to exercise his voting rights at the shareholders’ and directors’ meetings of Beijing Meicam;

(j) a capital increase agreement dated July 8, 2015 entered into among Beijing Yueying, CDV WFOE, Synergetic Innovation Fund, Wang Wei (王威) and Xu Junkui (許俊魁), pursuant to which Xu Junkui (許俊魁) agreed to subscribe for 12% of the enlarged share capital of Beijing Yueying by cash consideration of RMB3,000,000;

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(k) an amended and restated settlement agreement dated July 30, 2015 among the Company, IFC and Intel Capital regarding the amendments of the arrangements in relation to the redemption of the series A shares and series A-1 shares of the Company;

(l) a securities purchase agreement dated July 30, 2015 among IFC, Intel Capital, the Company and HK Aoxin, pursuant to which IFC agreed to sell 6,000,000 series A shares and 3,750,000 series A-1 shares to HK Aoxin for a total consideration of US$6,600,000 and Intel Capital agreed to sell 2,400,000 series A shares and 1,500,000 series A-1 shares to HK Aoxin for a total consideration of US$2,640,000;

(m) a capital increase agreement dated September 16, 2015 entered into among Beijing Hermit, CDV WFOE, Synergetic Innovation Fund, Li Lecheng (李樂成), Jiaxing Zhiping Qingyan Investment Limited Partnership (嘉興治平清晏投資合夥企業(有限合夥)) (“Jiaxing Zhiping”) and Wang Ning (王寧), pursuant to which, Jiaxing Zhiping, Wang Ning (王寧) and Synergetic Innovation agreed to subscribe for 33.33% of the total enlarged share capital of Beijing Hermit, for a total cash consideration of RMB15,000,000;

(n) the Non-competition Deed;

(o) the Deed of Indemnity;

(p) a cornerstone investment agreement dated June 2, 2016 and entered into among Qi Yan (祁燕), Jefferies Hong Kong Limited and the Company, pursuant to which Qi Yan (祁燕) agreed to subscribe for the investor shares in the amount of US$5,000,000 which is equivalent to HK$38,850,000, the details of which are set out in the section headed “Cornerstone Investors — Our Cornerstone Investors” in this prospectus;

(q) a cornerstone investment agreement dated June 2, 2016 and entered into among Skyworth TV Holdings Limited (創維電視控股有限公司)(“Skyworth TV”), Jefferies Hong Kong Limited and the Company, pursuant to which Skyworth TV agreed to subscribe for the investor shares in the amount of US$5,000,000 which is equivalent to HK$38,850,000, the details of which are set out in the section headed “Cornerstone Investors — Our Cornerstone Investors” in this prospectus;

(r) a cornerstone investment agreement dated June 6, 2016 and entered into among Wilson Energy Investment Limited (禾平能源投資有限公司)(“Wilson Energy”), Jefferies Hong Kong Limited and the Company, pursuant to which Wilson Energy agreed to subscribe for the investor shares in the amount of US$6,000,000 which is equivalent to HK$46,620,000, the details of which are set out in the section headed “Cornerstone Investors — Our Cornerstone Investors” in this prospectus; and

(s) the Hong Kong Underwriting Agreement;

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2. Intellectual property rights of our Group

As of the Latest Practicable Date, our Group has registered or have applied for the registration of the following intellectual property rights which are material to our business.

(a) Trademarks

As of the Latest Practicable Date, our Group has registered the following trademarks in the PRC:

No. Trademark Class Registered Owner Registration Number Expiry Date

1 42 CDV WFOE 7074017 October 27, 2020

2 42 CDV WFOE 9656476 November 27, 2022

As of the Latest Practicable Date, our Group has registered the following trademark in Hong Kong:

No. Trademark Class Registered Owner Registration Number Expiry Date

1 9 and 42 CDV WFOE 303448693 June 18, 2025

(b) Domain names

As of the Latest Practicable Date, our Group has registered the following domain names:

No. Domain Names Registration Owner Date of Registration Expiry Date

1 cdv.com CDV WFOE October 10, 1995 October 9, 2019 2 cdv.com.cn CDV WFOE October 1, 2009 October 1, 2019 3 chinadigitalvideo.cn CDV WFOE April 16, 2008 April 16, 2017 4 chinadigitalvideo.com.cn CDV WFOE April 7, 2013 April 7, 2017 5 chinadigitalvideo.com CDV WFOE April 16, 2008 April 16, 2017 6 Zqvideo.com Beijing Zhengqi March 8, 2013 March 8, 2018 7 Zqvideo.com.cn Beijing Zhengqi March 8, 2013 March 8, 2018 8. vcloudtec.com Beijing Zhengqi December 31, 2013 December 31, 2016 9. cdvcloud.com Beijing Zhengqi March 3, 2014 March 3, 2017

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As of the Latest Practicable Date, our Group has registered the following invention patents in the PRC which are material to our business:

No. Title of Invention Registered Owner Registration Number Registration Date

1 Color image noise channel CDV WFOE 201010525961.6 October 25, 2010 extraction method based on bounding box (一種基於包圍盒的彩色圖像噪聲通道提取方法) 2 Method for rapidly CDV WFOE 201010525964.X October 25, 2010 eliminating image noise (一種圖像噪聲快速去除方法) 3 Intelligent buffer method CDV WFOE 201010617692.6 December 31, on flow chart and time 2010 line (流程圖和時間線上的智能緩存方法) 4 SSE2-based image mixing CDV WFOE 201110126932.7 May 17, 2011 processing method (一種基於SSE2的圖像混合處理方法) 5 Method and system for CDV WFOE 201110126860.6 May 17, 2011 realizing dynamic two-dimensional caption by filter conversion (一種通過濾鏡變換實現動態二維字幕的方法及系統) 6 Method and device for CDV WFOE 201010127694.7 March 17, 2010 implementing scrolling of scrolling contents on screen (一種滾屏內容上屏滾動的實現方法和裝置) 7 Method for obtaining and CDV WFOE 201010116480.X February 26, 2010 editing user-defined graph and subtitle graph fabricating system (一種應用多線程創建三維雲圖的方法和裝置)

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No. Title of Invention Registered Owner Registration Number Registration Date

8 Method for obtaining and CDV WFOE 200910238541.7 November 25, editing user-defined graph 2009 and subtitle graph fabricating system (一種獲取、編輯自定義圖形的方法和字幕圖形製作系統) 9 Method for judging CDV WFOE 201010124243.8 March 11, 2010 graphic element information in modelling process of vector word triangular plate (一種矢量字三角片建模過程中圖形元素信息的判斷方法) 10 Method for realizing CDV WFOE 201110121669.2 May 11, 2011 object rotation operation in three dimensional scene (一種三維場景中實現物體旋轉操作的方法)

(d) Utility patents

As of the Latest Practicable Date, our Group has registered the following utility patents in the PRC which are material to our business:

No Title of Utility Registered Owner Registration Number Registration Date

1 Synchronous output device CDV WFOE 201120378837.1 September 28, for on-site acquired data 2011 in match (一種比賽現場數據採集的同步輸出裝置) 2 Multi-client side data CDV WFOE 201120377983.2 September 29, refreshing device in 2011 competitive game (一種競技比賽多客戶端數據刷新的裝置) 3 Device for live CDV WFOE 201120372593.6 September 28, broadcasting of sports 2011 event (一種體育賽事直播的裝置)

— IV-13 — APPENDIX IV STATUTORY AND GENERAL INFORMATION

No Title of Utility Registered Owner Registration Number Registration Date

4 Rotatable anti-jamming CDV WFOE 201120399241.X October 19, 2011 hub of scoring system (一種打分系統的可旋轉抗干擾集線裝置) 5 Multi-client CDV WFOE 201120378316.6 September 29, synchronization device for 2011 competitions (一種實現競技比賽中多客戶端同步的裝置) 6 Athletic-competition CDV WFOE 201120378694.4 September 28, information instant 2011 generating device (一種競技比賽信息即時生成裝置) 7 Supporting H.264 CDV WFOE 201120445120.4 November 11, programs editing device 2011 based on Browser/Server (B/S) framework (基於B/S 架構支持H.264的節目編輯裝置) 8 Score generation and CDV WFOE 201120378692.5 September 28, backup device for athletic 2011 competition (一種競技比賽比分生成備份的裝置) 9 Manuscript and making CDV WFOE 201120377867.0 September 29, information interaction 2011 system applied in inside and outside network environment (一種應用於內外網環境下的文稿和製作信息的交互系統) 10 Main-standby acquisition CDV WFOE 201220184199.4 April 26, 2012 and editing system (一種主備採編系統) 11 Slave-standby acquisition CDV WFOE 201220184297.8 April 26, 2012 and editing system (一種從備採編系統) 12 Acquisition and editing CDV WFOE 201220184306.3 April 26, 2012 system having independent disk arrays (一種帶獨立盤陣的採編系統)

— IV-14 — APPENDIX IV STATUTORY AND GENERAL INFORMATION

No Title of Utility Registered Owner Registration Number Registration Date

13 Apparatus for realizing CDV WFOE 201220183886.4 April 26, 2012 multiple display device interaction (一種實現多顯示器交互的設備) 14 Device for synchronous CDV WFOE 201220184298.2 April 26, 2012 display (一種同步顯示的裝置) 15 Device whose acquisition CDV WFOE 201220184299.7 April 26, 2012 and editing slave devices are provided with switching benches (一種採編從機帶切換台的裝置) 16 Acquisition and editing CDV WFOE 201220184296.3 April 26, 2012 system whose slave devices can be screened (一種從機可篩選的採編系統) 17 Acquisition and editing CDV WFOE 201220184200.3 April 26, 2012 system which can be screened (一種可篩選的採編系統) 18 Multichannel acquisition CDV WFOE 201220183521.1 April 26, 2012 and editing system (一種多通道的採編系統) 19 United-backup collecting CDV WFOE 201220184300.6 April 26, 2012 and editing system (一種統一備份的採編系統) 20 High resolution video CDV WFOE 201220221747.6 May 16, 2012 display system (一種高分辨率視頻顯示系統) 21 Scene changing displayer CDV WFOE 201220254843.0 May 31, 2012 (一種轉場顯示器) 22 Split-level scene changing CDV WFOE 201220254806.X May 31, 2012 displayer (一種錯層轉場顯示器) 23 Displayer with overlying CDV WFOE 201220254871.2 May 31, 2012 images (一種畫面疊加的顯示器)

— IV-15 — APPENDIX IV STATUTORY AND GENERAL INFORMATION

No Title of Utility Registered Owner Registration Number Registration Date

24 System for controlling file CDV WFOE 201220255349.6 May 31, 2012 access right (一種控制文件訪問權限的系統) 25 System for synchronous CDV WFOE 201220265867.6 June 6, 2012 acquisition of 3D data (一種同步採集3D資料的系統) 26 Split-level halation display CDV WFOE 201220254503.8 May 31, 2012 (一種錯層光暈顯示器) 27 System for transmitting CDV WFOE 201220254297.0 May 31, 2012 real-time competition data used in trampoline competition (一種用於蹦床比賽傳遞實時比賽數據的系統) 28 Device for displaying CDV WFOE 201220317619.1 June 29, 2012 multichannel data in single window body (一種單個窗體顯示多路數據的裝置) 29 Halation display (一種光 CDV WFOE 201220254453.3 May 31, 2012 暈顯示器) 30 Surround sound to stereo CDV WFOE 201220317124.9 June 29, 2012 transformation apparatus (一種環繞聲到立體聲變換的裝置) 31 Surround sound 7.1 to CDV WFOE 201220317610.0 June 29, 2012 surround sound 5.1 and stereo transformation device (一種環繞聲7.1到環繞聲5.1和立體聲變換的裝置) 32 Trick adjusting device CDV WFOE 201220314825.7 June 29, 2012 (一種調節特技的裝置) 33 Apparatus realizing CDV WFOE 201220316353.9 June 29, 2012 accurate video frame positioning (一種實現視頻幀精確定位的裝置)

— IV-16 — APPENDIX IV STATUTORY AND GENERAL INFORMATION

No Title of Utility Registered Owner Registration Number Registration Date

34 3D image processing CDV WFOE 201220731011.3 December 26, system (一種3D圖像處理 2012 系統) 35 System of information CDV WFOE 201220749322.2 December 31, interaction between buses 2012 based on multistage enterprise service bus (ESB) (一種基於多級ESB 總線間信息交互的系統) 36 Document modification CDV WFOE 201220729887.4 December 26, system (一種文件修正系 2012 統) 37 System for displaying data CDV WFOE 201220729905.9 December 26, streams (一種對數據流進 2012 行展示的系統) 38 System for editing CDV WFOE 201220730989.8 December 26, material file (一種編輯素 2012 材文件的系統)

(e) Copyrights

As of the Latest Practicable Date, our Group has registered the following copyrights in the PRC which are material to and still in use in our business:

No Title of Product Registered Owner Registration Number Registration Date

1 Himalaya Series High CDV WFOE 00095521 June 20, 2013 Standard Definition Non-linear Editing System Interface (喜瑪拉雅 (Himalaya)系列高標清非線性編輯系統介面) 2 Mariana 5D Core CDV WFOE 2008SR17840 September 2, 2008 Three-dimensional Rendering Engine Software (Mariana 5D核心三維渲染引擎軟體)

— IV-17 — APPENDIX IV STATUTORY AND GENERAL INFORMATION

No Title of Product Registered Owner Registration Number Registration Date

3 CDV A10 StudioLive CDV WFOE 2009SR015003 April 21, 2009 Studio Integrated Graphics System (新奧特A10 StudioLive演播室綜合圖文制播系統) 4 CDV Automatic Media CDV WFOE 2009SR015935 April 29, 2009 Data Management Centre System (新奧特Auto.DMC 媒體資料管理中心系統) 5 CDV Himalaya Cutter CDV WFOE 2010SR034726 July 14, 2010 High Standard Definition Non-linear Editing System(新奧特Himalaya Cutter高標清非線性草編系統) 6 CDV Himalaya Series CDV WFOE 2010SR037399 July 28, 2010 High Standard Definition Non-linear Editing System (新奧特喜瑪拉雅 (Himalaya)系列高標清非線性編輯系統) 7 Dunhuang Visual Effects CDV WFOE 2011SR006288 February 12, 2011 Composing System (敦煌視覺效果合成系統) 8 AutoSports Sports Field CDV WFOE 2011SR006274 February 12, 2011 Competition Management System (AutoSports體育賽事現場競賽管理系統) 9 AutoSports Sports CDV WFOE 2011SR010055 March 3, 2011 Commentator Information System (AutoSports體育賽事評論員信息系統) 10 AutoSports Sports CDV WFOE 2011SR010433 March 7, 2011 Operation Control System (AutoSports體育賽事操作控制系統) 11 Mariana. VG Virtual CDV WFOE 2011SR010184 March 3, 2011 Graphic Package System (Mariana.VG虛擬圖文包裝系統)

— IV-18 — APPENDIX IV STATUTORY AND GENERAL INFORMATION

No Title of Product Registered Owner Registration Number Registration Date

12 AutoSports Sports Report CDV WFOE 2011SR010185 March 3, 2011 Printing Distribution System (AutoSports體育賽事報表列印分發系統) 13 AutoSports Sports CDV WFOE 2011SR010186 March 3, 2011 Big-screen Display System (AutoSports體育賽事大屏顯示系統) 14 AutoSports Sports CDV WFOE 2011SR010437 March 7, 2011 Graphics Broadcasting Server System (AutoSports體育賽事圖文播出服務器系統) 15 Mariana. VS True CDV WFOE 2011SR009996 March 3, 2011 Three-dimensional Virtual Studio System (Mariana.VS 真三維虛擬演播室系統) 16 Mariana. VW Virtual CDV WFOE 2011SR010183 March 3, 2011 Weather Production System (Mariana.VW 虛擬氣象製作系統) 17 NASET 3D Virtual Studio CDV WFOE 2011SR010598 March 7, 2011 System (NASET 3D 三維虛擬演播室系統) 18 Auto. IBC Events CDV WFOE 2011SR022333 April 21, 2011 Information Sharing System Auto.IBC(賽事資料共用系統) 19 Auto. AD Advertising CDV WFOE 2011SR022682 April 22, 2011 Serial-editing Production Management System (Auto.AD廣告串編製作管理系統) 20 Auto. Catalog Media Asset CDV WFOE 2011SR022330 April 21, 2011 Cataloging System (Auto.Catalog媒體資產編目系統)

— IV-19 — APPENDIX IV STATUTORY AND GENERAL INFORMATION

No Title of Product Registered Owner Registration Number Registration Date

21 Auto. NET Non-linear CDV WFOE 2011SR022349 April 21, 2011 Editing Production Network System (Auto.NET非線性編輯製作網路系統) 22 Auto. Sitecore Whole CDV WFOE 2011SR022306 April 21, 2011 Station Network Application Integration Backbone Platform System (Auto.Sitecore全台網應用集成主幹平台系統) 23 Auto. Studio Studio CDV WFOE 2011SR022305 April 21, 2011 System (Auto.Studio演播室系統) 24 Auto. IP Media Data CDV WFOE 2011SR022681 April 22, 2011 Exchange System (Auto.IP 媒體數據交換系統) 25 Auto. RMS Copyrights CDV WFOE 2011SR022683 April 22, 2011 Management System (Auto.RMS版權管理系統) 26 Auto. VAS Value CDV WFOE 2011SR022351 April 21, 2011 Accounting System (Auto.VAS價值核算系統) 27 ASFS Intelligent Media CDV WFOE 2011SR022304 April 21, 2011 File System (ASFS智能媒體文件系統) 28 Himalaya Upload CDV WFOE 2011SR022684 April 22, 2011 Professional Uploading System (Himalaya Upload專業上載系統) 29 AVXA10 High Standard CDV WFOE 2011SR022484 April 21, 2011 Definition Graphics Caption Plug-in System (AVXA10高標清圖文字幕插件系統) 30 Himalaya StreamCutter CDV WFOE 2011SR022345 April 21, 2011 Code Stream Editing System (Himalaya StreamCutter碼流剪輯系統)

— IV-20 — APPENDIX IV STATUTORY AND GENERAL INFORMATION

No Title of Product Registered Owner Registration Number Registration Date

31 Media Ingest All Media CDV WFOE 2012SR015954 March 2, 2012 Uploading System (Media Ingest 全媒體上載系統) 32 Van Gogh Color System CDV WFOE 2012SR017468 March 7, 2012 (梵古調色系統) 33 Auto. VIM Data Stream CDV WFOE 2012SR044802 May 29, 2012 Tape Media Content Management System (Auto.VIM數據流程磁帶媒體內容管理系統) 34 Auto. NET High Standard CDV WFOE 2013SR009027 January 28, 2013 Definition Non-linear Editing Production Network System (Auto.NET高標清非線性編輯製作網路系統) 35 Himalaya Non-linear CDV WFOE 2013SR008974 January 28, 2013 Editing System Inserting Caption System (喜瑪拉雅 (Himalaya)非線性編輯系統內插字幕系統) 36 Auto. Studio System CDV WFOE 2013SR010993 February 1, 2013 (Auto.Studio演播室系統) 37 Auto. Ingest Intelligence CDV WFOE 2013SR011200 February 4, 2013 Gathering Central System (Auto.Ingest智慧採集收錄中心系統) 38 Auto. CM Multimedia CDV WFOE 2013SR010774 February 1, 2013 Content Management System (Auto.CM多媒體內容管理系統) 39 Himalaya Series High CDV WFOE 2013SR011197 February 4, 2013 Standard Non-linear Editing System (喜瑪拉雅 (Himalaya)系列高標清非線性編輯系統)

— IV-21 — APPENDIX IV STATUTORY AND GENERAL INFORMATION

No Title of Product Registered Owner Registration Number Registration Date

40 NVS Ingest High Standard CDV WFOE 2013SR010830 February 1, 2013 Definition Gathering Server System (NVS Ingest高標清收錄服務器系統) 41 NVS UDP High Standard CDV WFOE 2013SR010832 February 1, 2013 Definition Gathering Server System (NVS UDP 高標清收錄服務器系統) 42 Himalaya Dub CDV WFOE 2013SR010772 February 1, 2013 Professional Dubbing System (Himalaya Dub專業配音系統) 43 Himalaya Review CDV WFOE 2013SR010826 February 1, 2013 Professional Film Review System (Himalaya Review專業審片系統) 44 Himalaya MixDown CDV WFOE 2013SR010989 February 1, 2013 Synthesis Rendering Composing Server System (Himalaya MixDown集群渲染合成服務器系統) 45 Himalaya X8000 CDV WFOE 2013SR010997 February 1, 2013 Advanced Packaging Non-linear Editing System (Himalaya X8000高端包裝非線性編輯系統) 46 Mariana 5D Caption CDV WFOE 2013SR015875 February 22, 2013 Packaging Plug-in Module (馬裡亞納5D字幕包裝插件) 47 Mariana RainbowStudio CDV WFOE 2013SR015722 February 22, 2013 Mariana Rainbow Virtual Studio System (Mariana RainbowStudio彩虹虛擬演播室系統) 48 CreaStudio Multi-channel CDV WFOE 2013SR019052 March 1, 2013 Non-linear Editing System (CreaStudio 多通道非線性採編系統)

— IV-22 — APPENDIX IV STATUTORY AND GENERAL INFORMATION

No Title of Product Registered Owner Registration Number Registration Date

49 Pandora MAM Media CDV WFOE 2013SR030504 April 1, 2013 Information System (Pandora MAM 潘朵拉媒資系統) 50 AES Video and Audio CDV WFOE 2013SR040674 May 4, 2013 Content Technology Review System (AES視頻內容技術審查系統) 51 NSC Video and Audio CDV WFOE 2013SR040966 May 6, 2013 Transcoding Central System (NSC視頻轉碼中心系統) 52 Himalaya AVS Video and CDV WFOE 2013SR038022 April 26, 2013 Audio Editing and Services System (Himalaya AVS視頻編輯及服務系統) 53 Auto. IMS Intelligence All CDV WFOE 2013SR038188 April 26, 2013 Media Services Platform (Auto.IMS智慧化全媒體服務平台) 54 Auto. AO All Media Asset CDV WFOE 2013SR038017 April 26, 2013 Operation System (Auto.AO全媒體資產運營系統) 55 Shenyu Automatic CDV WFOE 2013SR055326 June 6, 2013 Broadcasting Software System (神馭自動播出軟體系統) 56 Dunhuang Visual Effects CDV WFOE 2013SR099288 September 12, Editing System (敦煌視覺 2013 效果編輯系統) 57 Shenzhou 8000 CDV WFOE 2014SR126120 August 22, 2014 Broadcasting System (神舟8000播控系統) 58 Feitian Editing Synthesis CDV WFOE 2014SR137622 September 12, System 2014 (飛天編輯合成系統)

— IV-23 — APPENDIX IV STATUTORY AND GENERAL INFORMATION

No Title of Product Registered Owner Registration Number Registration Date

59 CS xLOG Multi-channel CDV WFOE 2014SR182655 November 27, Electronic Log System 2014 (CS xLOG多通道電子場記系統) 60 Meicam Phone Video CDV WFOE 2014SR205312 December 22, Capturing and Editing 2014 Software (美攝手機視頻拍攝與編輯軟體) 61 Tianqin News Cloud CDV WFOE 2015SR089347 May 25, 2015 Editing System (天琴新聞雲快編系統) 62 F.A.S.T File Secure CDV WFOE 2015SR089549 May 25, 2015 Transmission System (F.A.S.T文件安全傳輸系統) 63 Founder Wuyou Digital CDV WFOE 2013SR143657 December 11, Broadcasting 2013 (Broadcasting) Systemic Software (方正無憂數字播出(播控)系統軟體) 64 Founder Wuyou Intelligent CDV WFOE 2013SR143715 December 11, Mater Control Monitoring 2013 System (方正無憂智能總控監控系統) 65 Founder Wuyou Digital CDV WFOE 2013SR143647 December 11, Broadcasting System 2013 (方正無憂數字播控系統) 66 Newsphere Media CDV WFOE 2015SR155931 August 12, 2015 Convergence Service Platform System (Newsphere 媒體融合服務平台系統) 67 Aquila Cloud Non-editing CDV WFOE 2015SR289508 December 30, System (天鷹雲非編系統) 2015 68 Karajan Studio Integrated CDV WFOE 2016SR016638 January 22, 2016 Scheduling System (Karajan演播室綜合調度系統)

— IV-24 — APPENDIX IV STATUTORY AND GENERAL INFORMATION

C. FURTHER INFORMATION ABOUT OUR DIRECTORS AND SUBSTANTIAL SHAREHOLDERS

1. Disclosure of interest

(a) Interests of the Directors and the chief executive of our Company

Immediately following completion of the Capitalization Issue and the Global Offering and without taking into account of any Shares which may be allotted and issued pursuant to the exercise of the Over-allotment Option or any options which have been granted under the Pre-IPO Share Option Scheme or the interests or short positions of our Directors or the chief executive of our Company in the Shares, underlying Shares or debentures of our Company or any of its associated corporations (within the meaning of Part XV of the SFO) which will have to be notified to our Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including any interests and short positions which they are taken or deemed to have under such provisions of the SFO) or which will be required, pursuant to section 352 of the SFO, to be entered in the register as referred to therein, or will be required, or pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules, to be notified to our Company and the Stock Exchange will be as follows:

Long position in the Shares, underlying Shares and debentures of the Company

Approximate Percentage of Number of Interest in the Name of Director Capacity/Nature of Interest Underlying Shares Company

Mr. Zheng Fushuang (鄭福雙)...... Founder of a 240,318,000 38.76% discretionary trust(1) Mr. Guo Langhua (郭朗華) ...... Beneficial owner(2) 15,920,996 2.57% Mr. Liu Baodong (劉保東) ...... Beneficial owner(2) 14,118,619 2.28% Mr. Zhang Yaqin (張亞勤)...... Beneficial owner(2) 450,594 0.07% Mr. Frank Christiaens ...... Beneficial owner(2) 450,594 0.07%

Notes: (1) Mr. Zheng is the settlor and a beneficiary of Future Success Trust. Future Success Trust holds the entire issued share capital of ZFS Holdings, which in turn holds the entire issued share capital of Wing Success. Therefore, Mr. Zheng is deemed to be interested in the Shares held by Wing Success. (2) Interests in options granted pursuant to the Pre-IPO Share Option Scheme.

(b) Interest of the Substantial Shareholders

Save as disclosed in the section headed “Substantial Shareholders” in this prospectus, our Directors are not aware of any other person who will, immediately following completion of the Global Offering (assuming no exercise of the Over-allotment Option and any option granted under the Pre-IPO Share Option Scheme), have an interest or a short position in the Shares or underlying Shares

— IV-25 — APPENDIX IV STATUTORY AND GENERAL INFORMATION which will be required to be disclosed to our Company and the Stock Exchange under the provisions of Division 2 and 3 of Part XV of the SFO or will be, directly or indirectly, interested in 10% or more of the number of any class of share capital carrying rights to vote in all circumstances at general meeting of our Company or any other member of the Group. Our Directors are not aware of any arrangement which may at a subsequent date result in a change of control of our Company.

Please refer to the section headed “Substantial Shareholders” in this prospectus for details of the interest and/or short positions of the substantial shareholders in the Shares or the underlying Shares of the Company.

2. Directors’ service contacts

Executive Directors

Each of our Executive Directors has entered into a service agreement with our Company for an initial term of three years with effect from their respective date of appointment unless terminated by not less than three months’ notice in writing served by either the executive Directors or our Company.

Under their service contracts, each executive Director will be entitled to a fixed basic salary, and any bonus and other non-cash benefits are only payable at the discretion of our Company. In certain other circumstances, the agreement can also be terminated by our Company, including but not limited to certain breaches of the Directors’ obligations under the agreement or certain misconducts. The appointments of the executive Directors are also subject to the provisions of retirement and rotation of Directors under the Articles. The executive Directors are officially stationed in the PRC, but may be required to work in Hong Kong or in other places, as may be determined by the board of Directors from time to time.

Independent Non-Executive Directors

Each of our independent non-executive Directors has signed an appointment letter with our Company for a term of three years with effect from their respective date of appointment.

Under their respective appointment letters, each of our independent non-executive Director is entitled to a fixed director’s fee. The appointments are subject to the provisions of retirement and rotation of Directors under the Articles.

Save as disclosed above, none of our Directors has or is proposed to enter into any service contract with any member of our Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation other than statutory compensation).

3. Director’s remuneration

The aggregate amount of remuneration our Directors have received (including fees, salaries, contributions to pension schemes, discretionary bonuses, housing and other allowances and other benefits in kind) for 2013, 2014 and 2015 was approximately RMB3,877,000, RMB2,825,000 and RMB2,354,000, respectively.

— IV-26 — APPENDIX IV STATUTORY AND GENERAL INFORMATION

No remuneration was paid by us to our Directors (a) as an inducement to join or upon joining any member of our Group or (b) as a compensation for loss of officer as director of any member of our Group or any other office in connection with the management affairs of any member of our Group in respect of each of the two years ended December 31, 2014 and 2015. Further, none of our Directors waived any remuneration during the same period.

Further information regarding our Directors’ remuneration during the Track Record Period can be found in Note 9 to the Accountant’s Report set out in Appendix I in this prospectus.

4. Directors’ competing interests

None of our Directors is interested in any business, apart from our Group’s business, which competes or is likely to compete, directly or indirectly, with the business of our Group.

5. Disclaimers

Saved as disclosed in this prospectus:

(a) taking no account of any Shares which may be taken up or acquired under the Global Offering or any options which may be granted under the Pre-IPO Share Option Scheme, our Directors are not aware of any person (not being a Director or chief executive of our Company) who will, immediately following the completion of the Global Offering and the Capitalization Issue, have an interest or short position in the Shares and underlying Shares which would fall to be disclosed to our Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or who is, either directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of our Group;

(b) none of our Directors or chief executive of our Company has any interest or short position in any of the Shares, underlying Shares or debentures of our Company or any associated corporation within the meaning of Part XV of the SFO, which will have to be notified to our Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which any of them is deemed to have under such provisions of the SFO) or which will be required, pursuant to section 352 of the SFO, to be entered in the register referred to therein or which will be required to be notified to our Company and the Stock Exchange pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules, in each case once the Shares are listed;

(c) none of our Directors or experts named in paragraph headed “—E. Other Information—6. Qualification of experts” in this appendix has been directly or indirectly interested in the promotion of, or in any assets which have been, within the two years immediately preceding

— IV-27 — APPENDIX IV STATUTORY AND GENERAL INFORMATION

the date of this prospectus, acquired or disposed of by or leased to our Company or any of its subsidiaries, or are proposed to be acquired or disposed of by or leased to our Company or any other member of our Group nor will any Director apply for the Offer Shares either in his own name or in the name of a nominee;

(d) none of our Directors or the experts named in the paragraph headed “—E. Other Information—6. Qualification of experts” in this appendix is materially interested in any contract or arrangement subsisting at the date of this prospectus which is significant in relation to the business of our Group taken as a whole;

(e) none of the Directors or experts named in paragraph headed “—E. Other Information—6. Qualification of experts” in this appendix (i) has any shareholding in any company in our Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of our Group; or (ii) is legally or beneficially interested in any securities of any member of our Group;

(f) none of our Directors has any existing or proposed service contracts with our Company (excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation));

(g) no remuneration or other benefits in kind have been paid by our Company to any Director since the date of incorporation of our Company, nor are any remuneration or benefits in kind payable by our Company to any Director in respect of the current financial year under any arrangement in force as of the Latest Practicable Date; and

(h) none of our Directors or their respective associates (as defined under the GEM Listing Rules), or the existing Shareholders (who, to the knowledge of our Directors, own more than 5% of the issued share capital of our Company) has any interest in any of the five largest customers or the five largest suppliers of our Group.

D. PRE-IPO SHARE OPTION SCHEME

We have adopted the Pre-IPO Share Option Scheme on December 20, 2010. The purpose of the Pre-IPO Share Option Scheme is to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentives to selected employees, directors and consultants and to promote the success of our business. The Pre-IPO Share Option Scheme permits the grant of options to purchase our ordinary shares to our employees, directors and consultants.

Summary of terms

The principal terms of the Pre-IPO Share Option Scheme are set out below:

Administration: Our remuneration committee administers the Pre-IPO Share Option Scheme and determines the provisions and terms and conditions of each award grant. It shall also have discretionary power to interpret the terms of the scheme.

— IV-28 — APPENDIX IV STATUTORY AND GENERAL INFORMATION

Share Option Agreement: Options granted under the Pre-IPO Share Option Scheme are evidenced by a share option agreement that sets forth terms, conditions and limitations for each option.

Eligibility: We may grant options to our employees, consultants and all our Directors under the Pre-IPO Share Option Scheme.

Acceleration of Options upon Change in Control: In the event of a change in control transaction, including a transfer (whether by way of merger, reorganization or otherwise) in which in excess of 50% of our outstanding voting power is transferred, sale of all or substantially of all our assets, liquidations, dissolutions or winding up, amalgamation or consolidation in which we are not the surviving entity, 50% of all unvested options shall automatically become fully vested and exercisable, provided that the grantee remains employed on that date. In addition, in the event of a change in control transaction, our remuneration committee may cancel any outstanding options and cause each of grantees of such outstanding options to be paid in the amount of the aggregate fair market value of the ordinary shares cover by his or her options over the aggregate exercise price of such ordinary shares.

Maximum number of Shares Subject to the Pre-IPO Share Option Scheme: Subject to the adjustment at the discretion of the remuneration committee in the event of any change in the capital structure of our Company by reasons of, among others, a bonus issue, share split or capitalization, the aggregate number of outstanding ordinary shares in respect of which options may be granted under the Pre-IPO Share Option Scheme shall not exceed 26,000,000. In the event any option shall be surrendered, terminate, expire or be forfeited, the number of ordinary shares no longer subject to such option shall be released and shall thereafter be available for new grants under the Pre-IPO Share Option Scheme.

Exercise Price and Term of the Options: Our remuneration committee shall determine the exercise price, time and the terms of the exercise of the options. The term of each option may not be more than ten years from the date of the grant (the “Option Period”). Unless otherwise stated in the applicable share option agreement, the option shall expire earlier than the end of the Option Period in the following circumstances:

(a) If, prior to the end of the Option Period, the option holder’s employment or service with us is terminated or otherwise ceases other than for cause or due to death or disability, (i) the portion of the option that is not vested at the time of such termination of employment or service shall expire on such date; and (ii) the portion of the option which is vested at the date of such termination of employment or service shall expire on the earlier of the last day of the Option Period or the date that is three months after the date of such termination of employment or service; and

(b) If, prior to the end of the Option Period, the option holder dies or incurs a disability while still in the employment or service with us, or if the option holder dies within three months following a termination of employment or service with us other than for cause, (i) the portion of the option that is not vested on the date of such termination shall expire on such date; and (ii) the portion of the option which is vested at the date of such termination shall

— IV-29 — APPENDIX IV STATUTORY AND GENERAL INFORMATION

expire on the earlier of the last day of the Option Period or the date that is twelve months after the date of such termination. In such event, the vested portion of the option may be exercised as described above by the option holder’s personal representative or executor, or by the person or persons to whom the option holder’s rights under the option pass by will or the applicable laws of succession until its expiration.

(c) If, prior to the end of the Option Period, the option holder is terminated from the employment or service with us, the vested or unvested option shall expire immediately upon such cessation of employment or service.

Termination of the Pre-IPO Share Option Scheme: Unless terminated earlier, the Pre-IPO Share Option Scheme will expire on the tenth anniversary of December 20, 2010. Our Board has the authority to amend or terminate the scheme to the extent necessary and desirable to comply with the applicable laws.

Non-exclusivity: The adoption of the Pre-IPO Share Option Scheme does not create any limitations on the power of our Board to adopt any other incentive arrangements as it may deem desirable.

Outstanding options

As of the Latest Practicable Date, options to subscribe for an aggregate of 25,930,000 Shares have been granted by our Company to a total of 110 employees of our Group under the Pre-IPO Share Option Scheme and remained outstanding. Such grantees include two executive Director, two independent non-executive Directors, three members of the senior management (other than our Directors) of our Company and one director of our subsidiary (other than directors and senior management of our Company) as set out in the section headed “Directors and Senior Management” of this prospectus. We have adjusted, pursuant to the authority granted to our Board under the Pre-IPO Share Option Scheme, the total number of Shares subject to options granted under the Pre-IPO Share Option Scheme to 77,893,000 as a result the Capitalization Issue. Upon completion of such grant and adjustment, no further options will be granted under the Pre-IPO Share Option Scheme.

Among the options outstanding as of the Latest Practicable Date entitling the holders to subscribe for an aggregate of 25,930,000 Shares, the exercise price for (i) the options to subscribe for an aggregate of 22,995,000 Shares is equivalent to the fair market value of the ordinary share as of December 31, 2010 as appraised by an independent valuer, being US$1.16 per Share; and (ii) the options to subscribe for an aggregate of 2,935,000 Share is US$0.00001 per Share.

Among the options granted by our Company under the Pre-IPO Share Option Scheme, (i) options to subscribe for an aggregate of 23,035,000 Shares have been vested; (ii) options to subscribe for an aggregate of 1,435,000 Shares will be vested on October 1, 2016; and (iii) options to subscribe for an aggregate of 1,500,000 options will be vested in a three-year period, namely, 40%, 30% and 30% on October 1, 2016, 2017 and 2018, respectively. Pursuant to the share option agreement entered into between our Company and such option holders, each of the option holders have agreed not to sell, contract to sell, grant any option to purchase, transfer the economic risk of ownership in, make any

— IV-30 — APPENDIX IV STATUTORY AND GENERAL INFORMATION short sale of, pledge or otherwise transfer or dispose of any interest in any option during the 180-day period following the effective date of registration statement of the Company under U.S. Securities Act (the “Lock-up Period”).

Subject to the early expiration due to the termination of employment with us, the options granted under the Pre-IPO Share Option Scheme shall expire on the day preceding the tenth anniversary of January 1, 2011, being December 31, 2021.

As of the Latest Practicable Date, none of the options granted under the Pre-IPO Share Option Scheme has been exercised by any grantee. The Shares subject to the options granted under the Pre-IPO Share Option Scheme after adjustment, being an aggregate of 77,893,000 Shares, represent (i) approximately 12.56% of our issued share capital immediately upon completion of the Global Offering (excluding all Shares which may be allotted and issued upon the exercise of the Over-allotment Option or any option granted under the Pre-IPO Share Option Scheme); and (ii) approximately 11.16% of our issued share capital immediately upon completion of the Global Offering (assuming all options granted under the Pre-IPO Share Option Scheme are exercised, but without taking into account any Share which may be allotted and issued upon the exercise of the Over-allotment Option).

Exercise in full of all options granted under the Pre-IPO Share Option Scheme would result in an increase in the total number of Shares in issue by approximately 11.16% to 697,893,000 Shares, being the total number of Shares in issue immediately upon completion of the Global Offering and Capitalization Issue (assuming there will be no further issue of Shares pursuant to the exercise of the Over-allotment Option).

Further, assuming our Company had been listed on the Stock Exchange since January 1, 2015 with 620,000,000 Shares in issue, the diluted earnings per Share for profit attributable to ordinary equity holder of our Company for the year ended December 31, 2015 would be approximately RMB11.51 cents. Based on the same assumption and further assuming all the options granted under the Pre-IPO Share Option Scheme in respect of 77,893,000 Shares were exercised in full on January 1, 2015, the diluted earnings per Share for profit attributable to ordinary equity holder of our Company for the year ended December 31, 2015 would be approximately RMB10.23 cents.

— IV-31 — APPENDIX IV STATUTORY AND GENERAL INFORMATION

Summary of grantees

A summary of the grantees who have been granted options under the Pre-IPO Share Option Scheme after adjustment is set out below:

Percentage of enlarged issued share capital of our Company immediately upon completion of the Global Offering (assuming no exercise of the Over-allotment Option and full Number of shares to exercise of the be issued upon full options granted exercise of the option under the Pre-IPO under the pre-IPO Share Option Grantee Address Share Option Scheme Scheme)

Directors of our Company Guo Langhua (郭朗華) Floor 6, Silicon Valley Plaza, 15,921,053 2.28% Haidian District, Beijing 100080, PRC Liu Baodong (劉保東) 4188-1383, Wang Jing Xi 14,118,669 2.02% Yuan, Si Qu, Chao Yao District, Beijing, PRC Zhang Yaqin (張亞勤) Baidu Campus, 450,596 0.06% No. 10, Shangdi 10th Street, Haidian District, Beijing 100085, China Frank Christiaens Floor 6, 123 Cambie Street, 450,596 0.06% Vancouver, BCV6B 1B8, Canada Senior Management of our Company Sun Jichuan (孫季川) Room 302, Unite 2, Building 450,596 0.06% 3, Tianxiu Garden Qiu Shui Yuan, Haidian District, Beijing, PRC

— IV-32 — APPENDIX IV STATUTORY AND GENERAL INFORMATION

Qian Yiyue (錢禕玥) 6-2, No.12 Xingmin Street, 4,761,302 0.68% Xigang District, Dalian, Liaoning Province, PRC David Cui (崔大偉) No. 6387 Capital Paradise 4,505,958 0.59% Villa, Houshayu Town, Shunyi District, Beijing, PRC Director of a subsidiary of our Group not mentioned above Zheng Pengcheng (鄭鵬程) Room 402, No.1 150,199 0.02% Jianxiangyuan, North Sihuan Central Road, Haidian District, Beijing, PRC Other employees of our Group A total of 102 employees — 37,084,031 5.31%

Total 77,893,000 11.16%

Save and except as set out above, no other option has been granted or agreed to be granted by our Company under the Pre-IPO Share Option Scheme. No option is held by a connected person of our Company other than those granted to our Directors and the directors of the subsidiaries of our Company under the Pre-IPO Share Option Scheme as set out above. If a grantee is a connected person of our Company, such grantee shall not exercise any option granted under the Pre-IPO Share Option Scheme to the extent that our public float will as a result of such exercise be less than the minimum requirements under the GEM Listing Rules.

— IV-33 — APPENDIX IV STATUTORY AND GENERAL INFORMATION

E. OTHER INFORMATION

1. Estate duty, tax and other indemnity

The Controlling Shareholders entered into a deed of indemnity with and in favor of our Company for itself and as trustee for each of our Company’s present subsidiaries to provide indemnities on a joint and several basis in respect of, among other mattes:

(a) any liability for Hong Kong estate duty which might be incurred by any member of our Group by reason of any transfer of property (within the meaning of sections 35 and 43 of the Estate Duty Ordinance (Chapter 11 of the Laws of Hong Kong) or the equivalent or similar thereof under the laws of any jurisdictions outside Hong Kong) to an member of our Group on or before the Listing; and

(b) any tax liabilities (including all fines, penalties, costs, charges, liabilities, expenses and interests incidental or relating to taxation) which might be payable by any member of our Group resulting from or by reference to any income, profits or gains earned, accrued or received on or before the Listing Date or any event or transaction entered into or occurring on or before the Listing Date whether alone or in conjunction with any circumstances whenever occurring and whether or not such taxation is chargeable against or attributable to any other person, firm or company.

The Controlling Shareholders are under no liability under the deed of indemnity of our Group in respect of any taxation:

(a) to the extent that provision has been made for such taxation in the audited consolidated accounts of the Company and its subsidiaries as set out in the Accountant’s Report set out in Appendix I to this prospectus or in the audited accounts of the relevant members of our Group for the three financial years ended December 31, 2013, 2014 and 2015;

(b) to the extent for which any member of our Group is liable as a result of any event occurring or income, profits earned, accrued or received or alleged to have been earned, accrued or received or transactions entered into in the ordinary course of business or in the ordinary course of acquiring and disposing of capital assets after the Listing Date; and

(c) to the extent that such claim arises or is incurred as a consequence of any retrospective change in the law or the interpretation or practice thereof by the Hong Kong Inland Revenue Department or the tax authorities or any other authority in the Cayman Islands or the PRC coming into force after the Listing Date or to the extent such claim arises or is increased by an increase in the rates of taxation after the Listing Date with retrospective effect.

— IV-34 — APPENDIX IV STATUTORY AND GENERAL INFORMATION

2. Litigation

As of the Latest Practicable Date, save as disclosed in the section headed “Business—Legal Proceedings and Compliance” in this prospectus, no member of our Group was involved in any litigation, arbitration or administrative proceedings which had a material adverse effect on our financial conditions or results of operations, and no litigation, arbitration or administrative proceedings was known to the Directors to be pending or threatened by or against our Group, that would have a material adverse effect on our financial condition or results of operations.

3. Sole Sponsor

The Sole Sponsor satisfies the independence criteria applicable to sponsors as set out in Rule 6A.07 of the GEM Listing Rules and has made an application on behalf of our Company to the Listing Division of the Stock Exchange for listing of, and permission to deal in, the Shares in issue and to be issued as mentioned in this prospectus and any Shares which may fall to be issued pursuant to the exercise the Options which may be granted under the Pre-IPO Share Option Scheme. The sponsor’s fee in relation to the Listing is approximately US$500,000.

4. Shares will be eligible for CCASS

Our Company will apply to the Listing Committee of the Stock Exchange for the granting of the listing of, and permission to deal in, the Shares.

All necessary arrangements will be made to enable such Shares to be admitted into CCASS.

5. No material adverse change

Our Directors confirm that there has been no material adverse change in our financial or trading position since December 31, 2015 (being the date on which our latest audited consolidated financial statements was made up) up to the Latest Practicable Date.

6. Qualification of experts

The following are the qualifications of the experts who have given opinions or advice which are contained in this prospectus:

Name Qualification Jefferies Hong Kong Limited Licensed to carry on Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities) and Type 6 (advising on corporate finance) regulated activities under the SFO

— IV-35 — APPENDIX IV STATUTORY AND GENERAL INFORMATION

Name Qualification Grant Thornton Hong Kong Limited Certified Public Accountants Maples and Calder Legal advisors to the Company as to Cayman Islands laws King & Wood Mallesons Legal advisors to the Company as to PRC law Frost & Sullivan Independent Industry Consultant ValueLink Management Consultants Independent Property Valuer Limited

7. Consents of experts

Each of the experts whose names are set out in the paragraph headed “E. Other Information—6. Qualification of Experts” in this appendix has given and has not withdrawn their respective consents to the issue of this prospectus with the inclusion of its report and/or letter and/or summary of valuations and/ or valuation certificates and/or legal opinion (as the case may be) and references to its name included in the form and context in which it respectively appears.

As of the Latest Practicable Date and save as disclosed in this prospectus, none of the experts named in the paragraph headed “E. Other Information—6. Qualification of Experts” in this appendix has any shareholding interests in any of our Company or any of our subsidiaries or the right or option (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in our Company or any of our subsidiaries.

8. Agency fees or commissions received

Save as disclosed in the section headed “Underwriting” in this prospectus, no commissions, discounts, brokerages or other special terms have been granted in connection with the issue or sale of any Share or loan capital of our Company or any of our subsidiaries within the two years preceding the date of this prospectus.

9. Promoter

Our Company has no promoter for the purpose of the GEM Listing Rules. No cash, securities or other benefit has been paid, allotted or given within the two years preceding the date of this prospectus to any promoter of our Company nor is any cash, securities or benefit intended to be paid, allotted or given in connection with the Global Offering or the related transactions described in this prospectus.

10. Preliminary expenses

The preliminary expenses incurred by our Company in relation to our incorporation were approximately HK$51,000 and have been paid by our Company.

— IV-36 — APPENDIX IV STATUTORY AND GENERAL INFORMATION

11. Binding effect

This prospectus shall have the effect, if an application is made in pursuance of this prospectus, of rendering all persons concerned bound by all of the provisions (other than the penal provisions) of Sections 44A and 44B of the Companies Ordinance so far as applicable.

12. Taxation of holders of Shares

(a) Hong Kong

Dealings in Shares registered on the Company’s Hong Kong branch register of members will be subject to Hong Kong stamp duty, the current rate charged on each of the purchaser and seller is 0.1% of the consideration or, if higher, the fair value of the Shares being sold or transferred. Profits from dealings in the Shares arising in or generated from Hong Kong may also be subject to Hong Kong profits tax.

(b) The Cayman Islands

Under the Cayman Islands law currently in force, there is no stamp duty payable in the Cayman Islands on transfers of our Shares, save for those which hold interests in land in the Cayman Islands.

Intending holders of the Shares are recommended to consult their professional advisors if they are in doubt as to the taxation implications of subscribing for, purchasing, holding or disposing of or dealing in the Shares or exercising rights attached to them. It is emphasized that none of our Company, our Directors or the other parties, involved in the Global Offering will accept responsibility for any tax effect on, or liabilities of, holders of Shares resulting from their subscription for, purchase, holding or disposal of or dealing in Shares or exercise of any rights attached to them.

13. Bilingual Prospectus

The English language and Chinese language versions of this prospectus are being published separately in reliance upon the exemption provided by section 4 of the Companies Ordinance (Exemption of Companies and Prospectus from Compliance with Provisions) Notice, Chapter 32L of the Laws of Hong Kong.

14. Miscellaneous

Saved as disclosed herein:

(a) within the two years immediately preceding the date of this prospectus, no Share or loan capital of our Company or any of our subsidiaries has been issued or agreed to be issued fully or partly paid either for cash or for a consideration other than cash;

(b) no Share or loan capital of our Company or any of our subsidiaries is under option or is agreed conditionally or unconditionally to be put under option;

— IV-37 — APPENDIX IV STATUTORY AND GENERAL INFORMATION

(c) within the two years immediately preceding the date of this prospectus, no commissions, discounts, brokerage or other special terms have been granted in connection with the issue or sale of any Shares or loan capital of our Company or any of our subsidiaries;

(d) within the two years immediately preceding the date of this prospectus, no commission has been paid or payable (except commission to underwriters) to any persons for subscription, agreeing to subscribe, procuring subscription or agreeing to procure subscription of any Shares in our Company;

(e) no founder shares, management shares or deferred shares of our Company or any of our subsidiaries have been issued or agreed to be issued;

(f) there is no arrangement under which future dividends are waived or agreed to be waived;

(g) there has not been any interruption in the business of our Company which may have or have had a material adverse effect on the financial position of our Company in the 24 months immediately preceding the date of this Prospectus;

(h) our Company has no outstanding convertible debt securities or debentures; and

(i) none of the equity and debt securities of our Company is listed or dealt with in any other stock exchange nor is any listing or permission to deal being or proposed to be sought.

— IV-38 — APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES AND AVAILABLE FOR INSPECTION

DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES

The documents attached to a copy of this prospectus delivered to the Registrar of Companies in Hong Kong for registration were, among others: (a) copies of WHITE, YELLOW AND GREEN Application Forms; (b) the written consents referred to in the paragraph headed “E. Other Information—7. Consents of experts” of Appendix IV to this prospectus; and (c) copies of the material contracts referred to in the paragraph headed “B. Further Information about Our Business—1. Summary of material contracts” of Appendix IV to this prospectus.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the office of King & Wood Mallesons, 13/F, Gloucester Tower, The Landmark, 15 Queen’s Road Central, Central, Hong Kong, during normal business hours up to and including the date which is 14 days from the date of this prospectus:

(a) the Memorandum and Articles of Association of our Company;

(b) the Accountant’s Report prepared by Grant Thornton, the texts of which is set out in Appendix I to this prospectus;

(c) the report on the unaudited pro forma financial information from Grant Thornton, the text of which is set out in Appendix II to this prospectus;

(d) the two legal opinions issued by King & Wood Mallesons, our PRC legal advisors, in respect of certain aspects of our Group and the property interests of our Group in the PRC, respectively;

(e) the material contracts referred to in the section headed “Statutory and General Information—B. Further Information About Our Business—1. Summary of material contracts” in Appendix IV to this prospectus;

(f) the written consents referred to in the section headed “Statutory and General Information—E. Other Information—7. Consents of Experts” in Appendix IV to this prospectus;

(g) the service contracts and letters of appointment referred to in the section headed “Statutory and General Information—C. Further Information About Our Directors and Substantial Shareholders—2. Directors’ service contracts” in Appendix IV to this prospectus;

(h) the rules of the Pre-IPO Share Option Scheme and the details of the grantees holding options under the Pre-IPO Share Option Scheme; and

(i) the Cayman Companies Law.

— V-1 — CHINA DIGITAL VIDEO HOLDINGS LIMITED 中國數字視頻控股有限公司

CHINA DIGITAL VIDEO HOLDINGS LIMITED 中國數字視頻控股有限公司

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